Compendium of Insurance Law 9781843117018, 9780203796474

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COMPENDIUM OF INSURANCE LAW

LLOYD’S I N S U R A N C E L AW L I B R A RY

Editor-in-Chief Malcolm A Clarke The Law of Insurance Contracts by Malcolm A Clarke (Looseleaf) Reinsurance Practice and the Law Barlow Lyde & Gilbert (Looseleaf) Insurance Broking Practice and the Law CMS Cameron McKenna (Looseleaf) Private International Law of Reinsurance and Insurance edited by Raymond Cox, Louise Merrett and Marcus Smith (2006) The Law of Insurance Contracts 5th edition by Malcolm A Clarke (2006) Good Faith and Insurance Contracts 2nd edition by Peter MacDonald Eggers, Patrick Foss and Simon Picken (2004) Insurance Disputes 2nd edition edited by Rt. Hon Lord Justice Mance, Ian Goldrein and Robert Merkin (2004) Product Liability: Law and Insurance edited by Mark Mildred (2001)

COMPENDIUM OF I N S U R A N C E L AW EDITED BY

ROBERT MERKIN, LLB, LLM Lloyd’s Law Reports Professor of Commercial Law Southampton University

Consultant BARLOW LYDE & GILBERT

AND

JOHANNA HJALMARSSON, juris kandidat, LLM Informa Law Research Fellow in Maritime and Commercial Law Southampton University

LONDON

2007

First published 2007 by Informa Law Published 2013 by Informa Law from Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN 711 Third Avenue, New York, NY, 10017, USA Informa Law is an imprint of the Taylor & Francis Group, an informa business Copyright © 2007 Robert Merkin, Johanna Hjalmarsson and Informa Law from Routledge. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Product or corporate names may be trademarks or registered trademarks and are used only for identification and explanation without intent to infringe. Whilst every effort has been made to ensure that the information contained in this work is correct, neither the authors nor Informa Law can accept any responsibility for any errors or omissions or for any consequences arising therefrom.

Lloyd’s is the registered trade mark of the Society incorporated by the Lloyd’s Act 1871 by the name of Lloyd’s. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN: 978–1–84311–701–8 (hbk) Set in 10/12 pt Times by Interactive Sciences Ltd, Gloucester

PREFACE

Insurance remains an area of law which has primarily been developed by the courts. Historically, statutory intervention has been minimal. Limited Parliamentary activity in the eighteenth century sought to stamp out the worst excesses of gambling in the guise of insurance, but thereafter and until comparatively recently there has been little or no legislation which concerns the operation of insurance contracts other than occasional interventions aimed at correcting perceived injustices: the Third Parties (Rights against Insurers) Act 1930 stands out here. The Marine Insurance Act 1906 was itself never intended to be more than a codification of existing principles. In modern times there has been greater intervention in the pure contractual process. Compulsory liability insurance is now a feature of many activities, and harmonised rules have been developed in Europe for the resolution of disputes over choice of law and jurisdiction. However, the main area of activity has been regulation of the solvency of insurers. This began as a fairly gentle exercise in 1870, but developed rapidly in the first three quarters of the twentieth century as successive Acts proved to be inadequate to protect the public. The regulatory process has changed out of all recognition in the last two decades, with the development of the Single European Market for financial services, including insurance and the activities of insurance intermediaries. The European Union’s Directives, combined with preexisting principles operating in England have now been combined in the Financial Services and Markets Act 2000, a measure accompanied by a mass of complex statutory instruments and by a Handbook published by the Financial Services Authority and containing both hard law and guiding principles. In this work we have attempted to reproduce the consolidated versions of all relevant primary and secondary material relating to insurance contracts and to insurance regulation. The material consists of statutes, statutory instruments, European Union Directives and European Regulations and Conventions. We have also reproduced the latest versions of the Motor Insurers Bureau Agreements. Those materials which have been heavily litigated have comprehensive annotations to them, while others have the origins of amendments indicated. We have not attempted to reproduce the FSA Handbook: it is online, changes almost weekly and the word ‘‘Handbook’’ is perhaps one of the most spectacular misnomers of all time. We have aimed to reproduce and state the law as of September 2007, although it has been possible to incorporate some minor changes to the legislation and some case references at the slightly later proof stage. In the summer of 2007 the European Union published the draft of its Solvency 2 measure, which when implemented will repeal and replace all existing EU Directives on regulation. Solvency 2 is unlikely to be implemented for some years, and it is therefore to be hoped that in terms of major changes this volume will remain more or less current for some time. v

Preface Our thanks go to Informa for their efficiency and assistance in the preparation of this work. ˚ and Andrea for their support We owe a debt of gratitude to Barbara, Elisabeth, Ake throughout. 30 October 2007 Sidmouth, Devon Southampton

ROBERT MERKIN JOHANNA HJALMARSSON

vi

CONTENTS

v xiii

Preface Table of Cases

Para (Page) C H A P T E R O N E — R E G U L AT I O N O F I N S U R E R S Domestic Law The Impact of the EC Lloyd’s Act 1871 Lloyd’s Act 1888 Lloyd’s Signal Stations Act 1888 Lloyd’s Act 1911 Lloyd’s Act 1925 Lloyd’s Act 1951 Friendly Societies Act 1974 Lloyd’s Act 1982 Friendly Societies Act 1992 Disability Discrimination Act 1995 Financial Services and Markets Act 2000 Part I The Regulator Part II Regulated and Prohibited Activities Part III Authorisation and Exemption Part IV Permission to Carry on Regulated Activities Part V Performance of Regulated Activities Part VII Control of Business Transfers Part IX Hearings and Appeals Part X Rules and Guidance Part XI Information Gathering and Investigations Part XII Control Over Authorised Persons Part XIII Incoming Firms: Intervention by Authority Part XIV Disciplinary Measures Part XV The Financial Services Compensation Scheme Part XVI The Ombudsman Scheme Part XIX Lloyd’s Part XXI Mutual Societies Part XXII Auditors and Actuaries Part XXIII Public Record, Disclosure of Information and Co-operation Part XXIV Insolvency Part XXV Injunctions and Restitution Part XXVI Notices Part XXVII Offences Part XXVIII Miscellaneous Part XXIX Interpretation Part XXX Supplemental Schedule 1 The Financial Services Authority Schedule 2 Regulated Activities Schedule 3 EEA Passport Rights Schedule 4 Treaty Rights

vii

1.1 (1) 1.9 (3) 1.20 (5) 1.21 (12) 1.22 (12) 1.23 (13) 1.24 (17) 1.25 (17) 1.26 (19) 1.27 (28) 1.28 (48) 1.29 (162) 1.30 (165) 1.30 (167) 1.30 (169) 1.30 (173) 1.30 (177) 1.30 (185) 1.30 (192) 1.30 (198) 1.30 (201) 1.30 (209) 1.30 (217) 1.30 (223) 1.30 (229) 1.30 (231) 1.30 (238) 1.30 (245) 1.30 (249) 1.30 (251) 1.30 (253) 1.30 (259) 1.30 (268) 1.30 (272) 1.30 (278) 1.30 (282) 1.30 (283) 1.30 (290) 1.30 (292) 1.30 (299) 1.30 (303) 1.30 (316)

Contents Schedule 6 Threshold Conditions Schedule 12 Transfer Schemes: Certificates Schedule 13 The Financial Services and Markets Tribunal Schedule 15 Information and Investigations: Connected Persons Schedule 17 The Ombudsman Scheme Schedule 18 Mutuals Insurance (Lloyd’s) Regulations 1983 Insurance (Lloyd’s) Regulations 1996 Insurance (Lloyd’s) Regulations 1997 The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001 No 544) The Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001 (SI 2001 No 1177) The Financial Services and Markets Act 2000 (Exemption) Order 2001 (SI 2001 No 1201) The Financial Services and Markets Act 2000 (Variation of Threshold Conditions) Order 2001 (SI 2001 No 2507) The Financial Services and Markets Act 2000 (Consultation with Competent Authorities) Regulations 2001 (SI 2001 No 2509) The Financial Services and Markets Act 2000 (EEA Passport Rights) Regulations 2001 (SI 2001 No 2511) The Financial Services and Markets Act 2000 (Insolvency) (Definition of ‘‘Insurer’’) Order 2001 (SI 2001 No 2634) Financial Services and Markets Act 2000 (Treatment of Assets of Insurers on Winding Up) Regulations 2001 (SI 2001 No 2968) The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2001 (SI 2001 No 3623) The Financial Services and Markets Act 2000 (Control of Business Transfers) (Requirements on Applicants) Regulations 2001 (SI 2001 No 3625) The Financial Services and Markets Act 2000 (Control of Transfers of Business Done at Lloyd’s) Order 2001 (SI 2001 No 3626) The Insurers (Winding Up) Rules 2001 (SI 2001 No 3635) The Financial Services and Markets Act 2000 (Administration Orders Relating to Insurers) Order 2002 (SI 2002 No 1242) The Financial Services and Markets Act 2000 (Variation of Threshold Conditions) Order 2002 (SI 2002 No 2707) The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2003 (SI 2003 No 47) The Insurers (Reorganisation and Winding Up) Regulations 2003 (SI 2003 No 1102) The Financial Services and Markets Act 2000 (Exemption) (Amendment) (No 2) Order 2003 (SI 2003 No 1675) The Insurers (Reorganisation and Winding Up) Regulations 2004 (SI 2004 No 353) The Financial Conglomerates and Other Financial Groups Regulations 2004 (SI 2004 No 1862) The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2005 (2005 No 592) The Financial Services and Markets Act 2000 (Variation of Threshold Conditions) (Amendment) Order 2005 (SI 2005 No 680) The Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) (Amendment) Order 2005 (SI 2005 No 922) The Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005 (SI 2005 No 1998) The Disability Discrimination (Service Providers and Public Authorities Carrying Out Functions) Regulations 2005 (SI 2005 No 2901) The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2007 (SI 2007 No 125) First Council Directive of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct insurance other than life assurance (73/239/EEC) Council Directive of 24 July 1973 abolishing restrictions on freedom of establishment in the business of direct insurance other than life assurance (73/240/EEC) Council Directive 76/580/EEC of 29 June 1976 amending Directive 73/239/EEC on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct insurance other than life assurance

viii

1.30 1.30 1.30 1.30 1.30 1.30 1.31 1.32 1.33

(317) (321) (324) (328) (329) (334) (334) (335) (335)

1.34 (335) 1.35 (378) 1.36 (382) 1.37 (392) 1.38 (394) 1.39 (399) 1.40 (401) 1.41 (401) 1.42 (401) 1.43 (401) 1.44 (403) 1.45 (404) 1.46 (418) 1.47 (420) 1.48 (420) 1.49 (421) 1.50 (421) 1.51 (421) 1.52 (448) 1.53 (456) 1.54 (456) 1.55 (456) 1.56 (456) 1.57 (482) 1.58 (484) 1.59 (485) 1.60 (518) 1.61 (521)

Contents Council Directive of 30 May 1978 on the coordination of laws, regulations and administrative provisions relating to Community co-insurance (78/473/EEC) Council Directive of 10 December 1984 amending, particularly as regards tourist assistance, the First Directive 73/239/EEC on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance (84/641/EEC) Council Directive of 22 June 1987 on the coordination of laws, regulations and administrative provisions relating to legal expenses insurance (87/344/EEC) Second Council Directive of 22 June 1988 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and laying down provisions to facilitate the effective exercise of freedom to provide services and amending Directive 73/239/EEC (88/357/EEC) Third Council Directive of 18 June 1992 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and amending Directives 73/239/EEC and 88/357/EEC (third non-life insurance Directive) (92/49/EEC) Directive 98/78/EC of the European Parliament and of the Council of 27 October 1998 on the supplementary supervision of insurance and reinsurance undertakings in an insurance or reinsurance group Directive 2001/17/EC of the European Parliament and of the Council of 19 March 2001 on the reorganisation and winding-up of insurance undertakings Directive 2002/13/EC of the European Parliament and of the Council of 5 March 2002 amending Council Directive 73/239/EEC as regards the solvency margin requirements for non-life insurance undertakings Directive 2007/44/EC of the European Parliament and of the Council of 5 September 2007 amending Council Directive 92/49/EEC and Directives 2002/83/EC, 2004/39/EC, 2005/68/EC and 2006/48/EC as regards procedural rules and evaluation criteria for the prudential assessment of acquisitions and increase of holdings in the financial sector

1.62 (521)

1.63 (524) 1.64 (527)

1.65 (532)

1.66 (545) 1.67 (568) 1.68 (576) 1.69 (589)

1.70 (589)

CHAPTER TWO—REINSURANCE Overview Council Directive 64/225/EEC of 25 February 1964 on the Abolition of Restrictions on Freedom of Establishment and Freedom to Provide Services in Respect of Reinsurance and Retrocession Directive 2005/68/EC of the European Parliament and of the Council of 16 November 2005 on Reinsurance and Amending Council Directives 73/239/EEC, 92/49/EEC as well as Directives 98/78/EC and 2002/83/EC

2.1 (591) 2.20 (591) 2.21 (593)

CHAPTER THREE—LIFE ASSURANCE Overview Insurable Interest Life Assurance Act 1774 Policies of Assurance Act 1867 Married Women’s Property Act 1882 Life Assurance Companies (Payment into Court) Act 1896 Insurance Companies Amendment Act 1973 Income and Corporation Taxes Act 1988 Civil Procedure Rules, Practice Direction 37 The Life Assurance and Other Policies (Keeping of Information and Duties of Insurers) Regulations 1997 (SI 1997 No 265) The Life Assurance Consolidation Directive (Consequential Amendments) Regulations 2004 SI 2004 No 3379 Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance

3.1 3.3 3.20 3.21 3.22 3.23 3.24 3.25 3.26

(625) (625) (626) (628) (631) (632) (633) (634) (637)

3.27 (638) 3.28 (641) 3.29 (641)

C H A P T E R F O U R — P R O P E RT Y I N S U R A N C E Insurable Interest Rights of Third Parties Recovery for Riot Damage Insurance in Time of War Fires Prevention (Metropolis) Act 1774

4.2 4.3 4.5 4.6 4.20

ix

(695) (695) (696) (696) (697)

Contents Marine Insurance Act 1788 Riot (Damages) Act 1886 Law of Property Act 1925 Restriction of Advertisement (War Risks Insurance) Act 1939 Liability For War Damage (Miscellaneous Provisions) Act 1939 Landlord And Tenant Act 1985 Reinsurance (Acts Of Terrorism) Act 1993 Gambling Act 2005

4.21 4.22 4.23 4.24 4.25 4.26 4.27 4.28

(698) (699) (702) (705) (708) (709) (714) (716)

5.20 5.21 5.22 5.23

(717) (802) (803) (809)

6.1 6.20 6.21 6.22 6.23 6.24 6.25 6.26 6.27 6.28 6.29 6.30 6.31 6.32

(811) (812) (818) (824) (850) (855) (857) (862) (863) (889) (890) (904) (904) (906)

CHAPTER FIVE—MARINE INSURANCE Marine Insurance Act 1906 Marine Insurance (Gambling Policies) Act 1909 Marine and Aviation Insurance (War Risks) Act 1952 Public Order Act 1986 CHAPTER SIX—LIABILITY INSURANCE Overview Third Parties (Rights Against Insurers) Act 1930 Riding Establishments Act 1964 Nuclear Installations Act 1965 Employers’ Liability (Compulsory Insurance) Act 1969 Solicitors Act 1974 Estate Agents Act 1979 Supreme Court Act 1981 Merchant Shipping Act 1995 Merchant Shipping And Maritime Security Act 1997 Health and Social Care (Community Health and Standards) Act 2003 Merchant Shipping (Pollution) Act 2006 Companies Act 2006 Employers’ Liability (Compulsory Insurance) General Regulations 1971 (SI 1971 No 1117) Employers’ Liability (Compulsory Insurance) Exemption Regulations 1971 (SI 1971 No 1933) Employers’ Liability (Compulsory Insurance) (Amendment) Regulations 1974 (SI 1974 No 208) Employers’ Liability (Compulsory Insurance) (Amendment) Regulations 1975 (SI 1975 No 194) Offshore Installations (Application of the Employers’ Liability (Compulsory Insurance) Act 1969) Regulations 1975 (SI 1975 No 1289) Employers’ Liability (Compulsory Insurance) (Offshore Installations) Regulations 1975 (SI 1975 No 1443) Oil Pollution (Compulsory Insurance) Regulations 1981 (SI 1981 No 912) Employers’ Liability (Compulsory Insurance) (Amendment) Regulations 1981 (SI 1981 No 1489) Oil Pollution (Compulsory Insurance) (Amendment) Regulations 1982 (SI 1982 No 287) Oil Pollution (Compulsory Insurance) (Amendment No 2) Regulations 1990 (SI 1990 No 2345) Employers’ Liability (Compulsory Insurance) (Amendment) Regulations 1992 (SI 1992 No 3172) Employers’ Liability (Compulsory Insurance) Exemption (Amendment) Regulations 1994 (SI 1994 No 520) Employers’ Liability (Compulsory Insurance) (Amendment) Regulations 1994 (SI 1994 No 3301) Offshore Installations and Pipeline Works (Management and Administration) Regulations 1995 (SI 1995 No 738) Oil Pollution (Compulsory Insurance) Regulations 1997 (SI 1997 No 1820) Employers’ Liability (Compulsory Insurance) Regulations 1998 (SI 1998 No 2573) General Osteopathic Council (Professional Indemnity Insurance Rules) Order of Council 1998 (SI 1998 No 1329) Merchant Shipping (Oil Pollution) (Supplementary Fund Protocol) Order 2006 (SI 2006 No 1265) Personal Injuries (NHS) Charges (General) and Road Traffic (NHS Charges) (Amendment) Regulations 2006 (SI 2006 No 3388)

x

6.33 (907) 6.34 (907) 6.35 (907) 6.36 (907) 6.37 (907) 6.38 (908) 6.39 (908) 6.40 (908) 6.41(908) 6.42 (908) 6.43 (909) 6.44 (909) 6.45 (909) 6.46 (913) 6.47 (914) 6.48 (920) 6.49 (922) 6.50 (922)

Contents Personal Injuries (NHS Charges) (Reviews And Appeals) and Road Traffic (NHS Charges) (Reviews and Appeals) (Amendment) Regulations 2006 (SI 2006 No 3398)

6.51 (927)

CHAPTER SEVEN—MOTOR VEHICLE INSURANCE Compulsory Insurance Under Domestic Law Compulsory Insurance in the EU The Single Market for Insurance Services Road Traffic Act 1988 Motor Vehicles (International Motor Insurance Card) Regulations 1971 (SI 1971 No 792) Motor Vehicles (Third Party) Risks Regulations 1972 (SI 1972 No 1217) Motor Vehicles (Compulsory Insurance) (No 2) Regulations 1973 (SI 1973 No 2143) Motor Vehicles (Compulsory Insurance) Regulations 1992 (SI 1992 No 3036) Motor Vehicles (Third-Party Risk Deposit) Regulations 1992 (SI 1992 No 1284) Motor Vehicles (Third Party Risks) (Amendment) Regulations 1997 (SI 1997 No 97) Motor Vehicles (Third Party Risks) (Amendment) Regulations 1999 (SI 1999 No 2392) Motor Vehicles (Third Party Risks) (Amendment) Regulations 2001 (SI 2001 No 2266) Financial Services and Markets Act 2000 (Fourth Motor Insurance Directive) Regulations 2002 (SI 2002 No 2706) European Communities (Rights Against Insurers) Regulations 2002 (SI 2002 No 3061) Motor Vehicles (Compulsory Insurance) (Information Centre and Compensation Body) Regulations 2003 (SI 2003 No 37) Motor Vehicles (Compulsory Insurance) Regulations 2007 (SI 2007 No 1426) Financial Services and Markets Act 2000 (Motor Insurance) Regulations 2007 (SI 2007 No 2403) Motor Insurers’ Bureau Agreement on the Compensation of Victims of Uninsured Drivers (13 August 1999) Motor Insurers’ Bureau Article 75 Regulations Motor Insurers Bureau Agreement on the Compensation of Victims of Untraced Drivers (7 February 2003) Council Directive of 24 April 1972 on the Approximation of the Laws of the Member States Relating to Insurance Against Civil Liability in Respect of the Use of Motor Vehicles, and to the Enforcement of the Obligation to Insure Against Such Liability—The First Motor Insurance Directive (72/166/EEC) Council Directive of 19 December 1972 Amending Council Directive 72/166 of 24 April 1972 on the Approximation of the Laws of the Member States Relating to Insurance Against Civil Liability in Respect of the Use of Motor Vehicles and to the Enforcement of the Obligation to Insure Against Such Liability (72/430/EEC) Council Directive of 30 December 1983 on the Approximation of the Laws of the Member States Relating to Insurance Against Civil Liability in Respect of the Use of Motor Vehicles—The Second Motor Insurance Directive (84/5/EEC) Council Directive of 14 May 1990 on the Approximation of the Laws of the Member States Relating to Insurance Against Civil Liability in Respect of the Use of Motor Vehicles —Third Motor Insurance Directive (90/232/EEC) Council Directive of 8 November 1990 Amending, Particularly as Regards Motor Vehicle Liability Insurance, Directive 73/239/EEC and Directive 88/357/EEC Which Concern the Co-Ordination of Laws, Regulations and Administrative Provisions Relating to Direct Insurance Other Than Life Assurance (90/618/EEC) European Parliament and Council Directive of 16 May 2000 on the Approximation of the Laws of the Member States Relating to Insurance Against Civil Liability in Respect of the Use of Motor Vehicles and Amending Council Directives 73/239/EEC And 88/357/EEC—The Fourth Motor Insurance Directive (2002/26/EC) European Parliament and Council Directive of 11 May 2005 Amending Council Directives 71/266/EEC, 85/5/EEC, 88/357/EEC and 90/232/EEC, and European Parliament and Council Directive 2000/26/EC Relating to Insurance Against Civil Liability in Respect of the Use of Motor Vehicles—The Fifth Motor Insurance Directive (2005/14/EC) Commission Decision of 28 July 2003 on the Application of Council Directive 71/266/EEC Relating to Checks on Insurance Against Civil Liability in Respect of Motor Vehicles (Commission Decision 2003/564/EC)

7.1 7.6 7.8 7.20 7.21 7.22 7.23 7.24 7.25 7.26 7.27 7.28

(933) (935) (936) (936) (957) (967) (974) (977) (977) (979) (979) (979)

7.29 (979) 7.30 (980) 7.31 (982) 7.32 (989) 7.33 (990) 7.34 (990) 7.35 (998) 7.36 (1002)

7.37 (1020)

7.38 (1025) 7.39 (1025) 7.40 (1030)

7.41 (1035)

7.42 (1035)

7.43 (1044) 7.44 (1049)

CHAPTER EIGHT—INSURANCE INTERMEDIARIES Classes of Insurance Intermediary Intermediaries and the Common Law

8.1 (1061) 8.2 (1062)

xi

Contents Regulation of Intermediaries Financial Services and Markets Act 2000 Financial Services and Markets Act 2000 (Appointed Representatives) Regulations 2001 (SI 2001 No 1217) Insurance Mediation Directive (Miscellaneous Amendments) Regulations 2003 (SI 2003 No 1473) Financial Services and Markets Act 2000 (Regulated Activities) Amendment (No 2) Order 2003 (SI 2003 No 1476) Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on Insurance Mediation ([2003] OJ L3)

8.8 (1064) 8.20 (1065) 8.21 (1066) 8.22 (1069) 8.23 (1071) 8.24 (1081)

CHAPTER NINE—INSURANCE CONTRACTS Sources of Insurance Law Consumer Protection International Aspects of Insurance Law Law of Property Act 1925 Rehabilitation of Offenders Act 1974 Limitation Act 1980 Supreme Court Act 1981 Forfeiture Act 1982 Civil Jurisdiction and Judgments Act 1982 Access to Medical Reports Act 1988 Contracts (Applicable Law) Act 1990 The Rome Convention on the Law Applicable to Contractual Obligations Financial Services and Markets Act 2000 (Law Applicable to Contracts of Insurance) Regulations 2001 (SI 2001 No 2635) Council Regulation No 44/2001 on the Recognition and Enforcement of Judgments in Civil and Commercial Matters Statement of Long-Term Insurance Practice 1986 Civil Procedure Rules 1999

9.1 9.10 9.12 9.20 9.21 9.22 9.23 9.24 9.25 9.26 9.27 9.28

(1093) (1095) (1095) (1098) (1099) (1110) (1111) (1112) (1114) (1115) (1120) (1123)

9.29 (1136) 9.30 (1140) 9.31 (1144) 9.32 (1146)

CHAPTER TEN—COMPETITION Overview 10.1 (1149) Council Regulation (EEC) No 1534/91 of 31 May 1991 on the Application of Article 85(3) of the Treaty to Certain Categories of Agreements, Decisions and Concerted Practices in The Insurance Sector 10.20 (1149) Commission Regulation (EC) No 358/2005 of 27 February 2003 on the Application of Article 81(3) of the Treaty to Certain Categories of Agreements, Decisions and Concerted Practices in the Insurance Sector 10.21 (1153) Index

1155

xii

TABLE OF CASES (All references are to page number.)

A v. B, 1996, unreported ........................................................................................................................ 770, 773 A A Mutual Insurance Co v. Bradstock Blunt & Crawley Ltd [1996] LRLR 161 .................................... 759 A/S Ocean v. Black Sea & Baltic General Insurance Co Ltd (1935) 51 Ll LR 305 ............................... 743 Abrahams v. Mediterranean Insurance and Reinsurance Co Ltd [1991] 1 Lloyd’s Rep 216 ................ 743 Absalom v. TCRU Ltd [2005] Lloyd’s Rep 735 .......................................................................................... 760 Adams v. Andrews [1964] 2 Lloyd’s Rep 347 ............................................................................................. 1002 Adams v. Cape Industries plc [1991] 1 All ER 929 .................................................................................... 1114 Adams v. Dunne [1978] RTR 281 ................................................................................................................ 937 Adams v. Mackenzie (1863) 13 CBNS 442 .................................................................................................. 766 Adcock v. Co-operative Insurance Society Ltd [2000] Lloyd’s Rep IR 657 ............................................. 777 Adelaide SS Co v. R, ‘The Warilda (1923) 14 Ll LR 41 ............................................................................ 762 Afia Worldwide Insurance Co v. D R Versicherungs AG 1985, unreported ............................................ 1127 Agapitos v. Agnew (No 2) [2003] Lloyd’s Rep IR 55 .......................................................................... 745, 746 Agapitos v. Agnew, The Aegeon [2002] Lloyd’s Rep IR 573 ..................................................................... 730 Agenoria SS Co v. Merchants’ Marine Insurance Co (1903) 8 Com Cas 212 ......................................... 778 Agnew v. Lansforsakringsbolagens AB [1996] 4 All ER 978; [2000] Lloyd’s Rep IR 317; [2001] Lloyd’s Rep IR 483 ................................................................................................................................... 1140, 1141 Agra Trading Ltd v. McAuslin, The Frio Chile [1995] 1 Lloyd’s Rep 182 .............................................. 720 Aguilar v. Rodgers (1797) 7 TR 421 ............................................................................................................ 790 Aiden Shipping Co v. Interbulk [1986] 1 AC 965 ..................................................................................... 863 AIG Group (UK) Ltd v. The Ethniki [2000] Lloyd’s Rep IR 343 .................................................. 1128, 1141 Airy v. Bland (1774) 2 Park 811 .................................................................................................................. 759 Aitchison v. Lohre (1879) 4 App Cas 755 ............................................................................775, 778, 783, 784 Ajum Goolam Hossen & Co v. Union Marine Insurance Co [1901] AC 362 ......................................... 749 Akers v. MIB [2003] Lloyd’s Rep IR 427 ..................................................................................................... 994 Alba Life Ltd, Re [2006] EWHC 3507 (Ch) ................................................................................................ 195 Albeko Schuhmaschinen v. Kamborian Shoe Machine Co (1961) 111 SJ 519 ....................................... 1130 Albert v. Motor Insurers’ Bureau [1972] AC 301 ....................................................................................... 944 Aldrich v. Norwich Union Life Insurance Co Ltd [2000] Lloyd’s Rep IR 1 ........................................... 731 Aldridge v. Bell (1816) 1 Stark 498 ............................................................................................................. 773 Alfred McAlpine plc v. BAI (Run-off) Ltd [2000] Lloyd’s Rep IR 352 ..................................... 729, 772, 815 Allabrogia Steamship Corporation, Re [1978] 3 All ER 423 ..................................................................... 813 Allagar Rubber Estates Ltd v. National Benefit Assurance Co (1922) 10 Ll LR 564 ....................... 718, 752 Allden v. Raven, ‘The Kylie [1983] 2 Lloyd’s Rep 444 .............................................................. 734, 736, 1099 Allen v. Sugrue (1828) 8 B & C 561 ............................................................................................................ 770 Allgemeine Versicherungs-Gesellschaft Helvetia v. Administrator of German Property [1931] 1 KB 672 ........................................................................................................................................................... 774 Allied Dunbar Assurance plc, Re [2005] EWHC 28 (Ch) ................................................................... 194, 195 Allison v. Bristol Marine Insurance Co (1876) 1 App Cas 209 ........................................................... 723, 725 Allkins v. Jupe (1877) 2 CPD 375 ................................................................................................................ 791 Alluvials Mining Machinery Co v. Stowe (1922) 10 Ll LR 96 ................................................................... 733 Alps, The [1893] P 109 ................................................................................................................................. 762 Alsace Lorraine, The [1893] P 209 ............................................................................................................. 801 Alston v. Campbell (1779) 4 Bro Parl Cas 476 ........................................................................................... 726 American Airlines Inc v. Hope [1974] 2 Lloyd’s Rep 301 ........................................................................ 793 American Motorists Insurance Co v. Cellstar Corporation [2003] Lloyd’s Rep IR 295 .... 1125, 1126, 1128, 1136, 1139 American Tobacco Co v. Guardian Assurance Co (1925) 22 Ll LR 37 ................................................... 763 Amey Properties v. Cornhill Insurance plc [1996] LRLR 259 .................................................................. 943

xiii

Table of Cases Amin Rasheed Shipping Corporation v. Kuwait Insurance Co, The Al Wahab [1983] 2 All ER 884 .........1125, 1133 Anders & Kern Ltd v. CGU Insurance plc [2007] Lloyd’s Rep IR 555 .................................................... 731 Anderson v. Edie (1795) 2 Park 914 ........................................................................................................... 627 Anderson v. Equitable Assurance Society of the United States [1926] All ER Rep 93 .......................... 1125 Anderson v. Marten [1908] 1 AC 334 ......................................................................................................... 769 Anderson v. Martin [1908] AC 334 ............................................................................................................. 752 Anderson v. Morice (1875) LR 10 CP 609; (1876) 1 App Cas 713 ........................... 720, 721, 723, 724, 802 Anderson v. Pacific Fire and Marine Insurance Co (1872) LR 7 CP 65 .................................................. 738 Anderson v. Pitcher (1800) 2 Bos & P 164 ................................................................................................. 745 Anderson v. Royal Exchange Assurance Co (1805) 7 East 38 .................................................... 767, 773, 782 Anderson v. Thornton (1853) 8 Exch 425 ........................................................................................... 733, 791 Anderson v. Wallis (1813) 2 M & S 240 ................................................................................................ 769, 770 Andreas Lemos, The [1983] 1 All ER 591 .................................................................................................. 799 Andree v. Fletcher (1789) 3 TR 266 ............................................................................................................ 791 Andrew v. Robinson (1812) 3 Camp 199 .................................................................................................... 759 Andrews v. Patriotic Assurance Co (1868) 18 LR Ir 355 ........................................................................... 698 Aneco Reinsurance Underwriting Ltd v. Johnson & Higgins Ltd [1998] 1 Lloyd’s Rep 565; [2002] Lloyd’s Rep IR 91 .......................................................................................................................... 729, 1063 Angel v. Merchants’ Marine Insurance Co [1903] 1 KB 811 .................................................................... 770 Anghelatos v. Northern Assurance Co (1924) 19 Ll LR 255 .................................................................... 764 Annen v. Woodman (1810) 3 Taunt 299 ..............................................................................749, 750, 791, 797 Anon (1699) 12 Mod Rep 325 ..................................................................................................................... 734 Ansoleaga Y Cia v. Indemnity Mutual Marine Insurance Co (1922) 13 Ll LR 231 ................................ 763 Anstey v. Ocean Marine Insurance Co (1913) 19 Com Cas 8 .................................................................. 779 Apollinaris Co v. Nord Deutsche Insurance Co [1904] 1 KB 252 ............................................................ 802 Arab Bank v. Zurich Insurance Co [1999] 1 Lloyd’s Rep 262 ................................... 728, 732, 737, 745, 746 Arab Monetary Fund v. Hashim [1993] 1 Lloyd’s Rep 543 ...................................................................... 1131 Aradora Occidental SA v. Mann Insurance Co [1977] 2 Lloyd’s Rep 406 .............................................. 1125 Arbory Group Ltd v. West Craven Insurance Services [2007] Lloyd’s Rep IR 491 ................................ 1064 Arcangelo v. Thompson (1811) 2 Camp 620 ............................................................................................. 800 Ard Coasters v. Attorney General [1921] 2 AC 141 ................................................................................... 762 Argonaut Marine Insurance Co Ltd, Re [1932] 2 Ch 34 ........................................................................... 718 Armadora Occidental SA v. Mann Insurance Co [1977] 2 Lloyd’s Rep 406 ...................... 1125, 1126, 1127 Aron & Co Inc v. Miall (1928) 34 Com Cas 18 .......................................................................................... 757 Arrow Shipping Co v. Tyne Improvement Commissioners [1894] AC 508 ............................................. 774 Asfar & Co v. Blundell [1896] 1 QB 123 ...................................................................................... 720, 736, 767 Ashley v. Ashley (1829) 3 Sim 149 ............................................................................................................... 627 Ashmore v. Society of Lloyd’s (No 2) [1992] 2 Lloyd’s Rep 620 ........................................................... 14, 39 Ashton v. Turner [1981] QB 137 ................................................................................................................. 945 Assicurazioni Generali SpA v. Arab Insurance Group [2003] Lloyd’s Rep IR 131 ................... 729, 732, 739 Assicurazioni Generali SpA v. Ege Sigorta AS [2002] Lloyd’s Rep IR 480 .................................... 1125, 1128 Associated Oil Carriers Ltd v. Union Insurance Society of Canton Ltd [1917] 2 KB 184 .............. 734, 773 Astrovlanis Compania Naviera SA v. Linard, The Gold Sky [1972] 2 Lloyd’s Rep 187 ................... 764, 785 Athenian Tankers Management SA v. Pyrena Shipping Inc, The Arianna [1987] 2 Lloyd’s Rep 376 ....... 749 Athens Maritime Enterprises Corporation v. Hellenic Mutual War Risks Association (Bermuda) Ltd, The Andreas Lemos [1983] 1 All ER 591 ..................................................................................... 700, 799 Atkinson v. Abbott (1809) 11 East 135 ........................................................................................................ 751 Atlantic Maritime Co Inc v. Gibbon [1953] 2 Lloyd’s Rep 294; [1954] 1 QB 88 .................... 765, 770, 784 Atlantic Transport Co v. R, The Maryland (1921) 9 Ll LR 208 ............................................................... 762 Atlas Shipping Agency (UK) Ltd v. Suisse Atlantique Soci´et´e d’Armement Maritime SA [1995] 2 Lloyd’s Rep 188 ...................................................................................................................................... 1140 Attaleia Marine Co Ltd v. Iran Insurance Co, The Zeus [1993] 2 Lloyd’s Rep 497 ............................... 773 Attorney General v. Glen Line (1930) 37 Ll LR 55 ................................................................................... 786 Attorney-General v. Murray [1904] 1 KB 165 ...................................................................................... 627, 628 Atty v. Lindo (1805) 1 Bos & PNR 236 ....................................................................................................... 767 Audley v. Duff (1800) 2 Bos & P 111 .......................................................................................................... 790 Austin v. Zurich General Accident & Liability Insurance Co Ltd [1945] KB 250 .................................. 944 Australasian Steam Navigation Co v. Morse (1872) LR 4 PC 222 ............................................................ 762 Australia and New Zealand Bank Ltd v. Colonial and Eagle Wharves Ltd [1960] 2 Lloyd’s Rep 241 ........ 732 Australian Insurance Co v. Jackson (1875) 33 LT 286 ........................................................................ 751, 800 Axa Equity and Law [2001] 2 BCLC 447 .................................................................................................... 195 Axa Insurance Co v. Gottlieb [2005] Lloyd’s Rep IR 369 ......................................................................... 730 Axa Insurance UK plc v Norwich Union Insurance Ltd [2007] EWHC 1046 (Comm) ........................ 941 B v. Knight [1981] RTR 136 ......................................................................................................................... 937

xiv

Table of Cases Bah Lias Tobacco and Rubber Estates v. Volga Insurance Co (1920) 3 Ll LR 155 .......................... 752, 753 Bain v. Case (1829) 3 C & P 496 ................................................................................................................. 755 Bainbridge v. Nielson (1808) 10 East 329 ............................................................................................ 770, 773 Baines v. Holland (1855) 10 Exch 802 ........................................................................................................ 746 Baker v. Adam (1910) 15 Com Cas 227 ...................................................................................................... 757 Baker v. Black Sea and Baltic General Insurance Co [1995] LRLR 261 ................................................. 1111 Baker v. Towry (1816) 1 Stark 436 .............................................................................................................. 801 Baker-Whiteley Coal Co v. Marten (1910) 26 TLR 314 ............................................................................. 801 Ballantyne v. Mackinnon [1896] 2 QB 455 .................................................................................. 761, 775, 784 Ballast plc, Re, St Paul Travellers Insurance Co Ltd v. Dargan [2007] BCC 620 .................................... 786 Baltic Insurance Group v. Jordan Grand Prix Ltd [1999] Lloyd’s Rep IR 93 .............................. 1142, 1143 Bamburi, The [1982] 1 Lloyd’s Rep 312 .............................................................................................. 769, 771 Banco Atlantico SA v. British Bank of the Middle East [1990] 2 Lloyd’s Rep 504 ................................. 1126 Banco de Barcelona v. Union Marine Insurance Co Ltd (1925) 22 Ll LR 209 ............................... 764, 800 Bank Leumi Le Israel BM v. British National Insurance Co Ltd [1988] 1 Lloyd’s Rep 71 ................... 729 Bank of America National Trust and Savings Association v. Chrismas, The Kyriaki [1993] 1 Lloyd’s Rep 137 ........................................................................................................................................... 766, 771, 1111 Bank of Athens v. Royal Exchange Assurance (1937) 59 Ll LR 67 .......................................................... 764 Bank of New South Wales v. South British Insurance Co Ltd (1920) 4 Ll LR 266 ................................ 757 Bank of Nova Scotia v. Hellenic Mutual War Risks Association (Bermuda) Ltd, The Good Luck [1991] 3 All ER 1 ................................................................................................................................................ 746 Bankers Insurance Co Ltd v. South [2004] Lloyd’s Rep IR 1 ................................................................. 772 Banque Financi`ere de la Cit´e v. Parc (Battersea) Ltd [1998] 1 All ER 737 ............................................ 785 Banque Keyser Ullmann SA v. Skandia (UK) Insurance Co Ltd [1990] 1 QB 665 ................................ 728 Banque Monetaca v. Motor Union Insurance Co Ltd (1923) 14 Ll LR 48 ............................................. 799 Barber v. Fleming (1869) LR 5 QB 59 ........................................................................................................ 723 Barber v. Fletcher (1779) 1 Doug KB 305 .................................................................................................. 729 Barber v. Morris (1831) 1 M & Rob 62 ....................................................................................................... 627 Barclay v. Cousins (1802) 2 East 544 ........................................................................................................... 720 Barclay v. Stirling (1816) 5 M & S 6 ............................................................................................................ 774 Baring Brothers & Co v. Marine Insurance Co (1894) 10 TLR 276 .................................................. 781, 794 Baring v. Christie (1804) 5 East 398 ............................................................................................................ 748 Baring v. Claggett (1802) 3 Bos & P 201 .................................................................................................... 748 Baring v. Stanton (1876) 3 Ch D 502 .......................................................................................................... 1063 Barker v. Blakes (1808) 9 East 283 ........................................................................................................ 770, 773 Barker v. Janson (1868) LR 3 CP 303 ...................................................................................741, 767, 777, 782 Barlee Marine Corporation v. Mountain, The Leegas [1987] l Lloyd’s Rep 471 ................................... 793 Barnet Group Hospital Management Committee v. Eagle Star Insurance Co Ltd [1960] 1 QB 107 ...940, 952 Barque Robert S Besnard Co Ltd v. Murton (1909) 14 Com Cas 267 .................................................... 771 Barraclough v. Brown [1897] AC 615 ......................................................................................................... 774 Barrow v. Bell (1825) 4 B & C 736 .............................................................................................................. 801 Bartlett v. Pentland (1830) 10 B & C 760 ................................................................................................... 759 Barzillai v. Lewis (1782) 3 Doug KB 126 ..................................................................................................... 748 Base, Re, Rees and Rees v. Mabco (102) Ltd and Eagle Star Insurance Co 1998, unreported ............. 815 Bates v. Hewitt (1867) LR 2 QB 595 ..................................................................................................... 733, 735 Baugh v. Crago [1976] 1 Lloyd’s Rep 563 .................................................................................................. 937 Baxendale v. Fane, The Lapwing (1940) 66 Ll LR 174 ............................................................................. 798 Bazias 3, The [1993] 1 Lloyd’s Rep 101 ...................................................................................................... 1115 Bean v. Stupart (1778) 1 Doug 11 ............................................................................................................... 745 Beatson v. Haworth (1796) 6 TR 531 .......................................................................................................... 755 Becker, Gray & Co v. London Assurance Corporation [1918] AC 101 ..................................... 762, 769, 770 Beckett v. West of England Marine Insurance Co Ltd (1871) 25 LT 739 ............................................... 797 Beckwaite v. Nalgrove (1810) 3 Taunt 41n ................................................................................................. 733 Bedouin, The [1894] P 1 .......................................................................................................734, 735, 738, 765 Bee v. Jenson (No 2) [2007] EWCA Civ 923 .............................................................................................. 787 Bell v. Bell (1810) 2 Camp 475 .................................................................................................................... 797 Bell v. Bromfield (1812) 15 East 364 ........................................................................................................... 748 Bell v. Carstairs (1810) 2 Camp 543; (1811) 14 East 374 ................................................................... 729, 748 Bell v. Gibson (1798) 1 Bos & P 345 ........................................................................................................... 739 Bell v. Hobson (1812) 16 East 240 .............................................................................................................. 797 Bell v. Nixon (1816) Holt NP 423 ............................................................................................................... 767 Bennett v. Axa Insurance plc [2004] Lloyd’s Rep IR 615 ......................................................................... 746 Bennett v. Richardson [1980] RTR 358 ...................................................................................................... 937 Bennett SS Co v. Hull Mutual SS Protecting Society [1914] 3 KB 57 ..................................................... 720 Benson v. Chapman (1849) 2 HLC 496 ...................................................................................................... 784

xv

Table of Cases Bensuade & Co v. Thames & Mersey Marine Insurance Co [1897] AC 609 .................................... 747, 765 Beresford v. Royal Insurance Co Ltd [1938] AC 586 ................................................................................ 1113 Berger and Light Diffusers Pty Ltd v. Pollock [1973] 2 Lloyd’s Rep 442 ................................. 727, 733, 767 Berger v. Pollock [1973] 2 Lloyd’s Rep 442 ................................................................................. 731, 732, 734 Berisford v. New Hampshire Insurance Co [1990] 1 Lloyd’s Rep 454 .................................................... 1142 Berk & Co Ltd v. Style [1955] 2 Lloyd’s Rep 382 ................................................................................ 765, 784 Berk v. Style [1955] 2 Lloyd’s Rep 383 ....................................................................................................... 802 Bermon v. Woodbridge (1781) 2 Doug KB 781 ................................................................................... 750, 791 Bernadone v. Pall Mall Services Group [1999] IRLR 617 ......................................................................... 851 Bernaldez Case C–129/94 [1996] All ER (EC) 741, ......................................................................... 943, 1023 Berthon v. Loughman (1817) 2 Stark 258 .................................................................................................. 732 Bhopal v. Sphere Drake Insurance plc [2002] Lloyd’s Rep IR 413 ......................................................... 747 Biccard v. Shepherd (1861) 14 Moo PCC 471 ..................................................................................... 749, 750 Biddle v. Johnston [1965] 2 Lloyd’s Rep 121 ............................................................................................. 942 Biddle, Sawyer & Co Ltd v. Peters [1957] 2 Lloyd’s Rep 339 ................................................................... 765 Bier v. Mines de Potasse d’Alsace Case C-21/76, [1976] ECR 1735 ........................................................ 1142 Bird’s Cigarette Manufacturing Co Ltd v. Rouse (1924) 19 L1 LR 301 ............................................ 733, 765 Birrell v. Dryer (1884) 9 App Cas 345 ........................................................................................................ 754 Bishop v. Pentland (1827) 7 B & C 219 ............................................................................................... 764, 801 Blaaupot v. Da Costa (1758) 1 Eden 130 .................................................................................................... 786 Black King Shipping Co v. Massie, The Litsion Pride [1985] 1 Lloyd’s Rep 437 ................................... 730 Blackburn Low & Co v. Haslam (1888) 21 QBD 144 .......................................................................... 732, 737 Blackburn Low & Co v. Vigors (1887) 12 App Cas 531 ............................................................................ 732 Blackburn Rovers Football Athletic Club Ltd v. Avon Insurance plc [2005] Lloyd’s Rep IR 447 ........ 763 Blackburn v. Liverpool, Brazil and River Plate Steam Navigation Co [1902] 1 KB 290 ........................ 764 Blackenhagen v. London Assurance Co (1808) 1 Camp 454 ............................................................. 756, 784 Blackett v. National Benefit Insurance Co (1921) 8 Ll LR 293 ................................................................ 751 Blackett v. Royal Exchange Assurance Co (1832) 2 Cr & J 244 ................................................. 733, 743, 782 Blackhurst v. Cockell (1789) 3 TR 360 ................................................................................................. 745, 748 Blane Steamships Ltd v. Minister of Transport [1951] 2 KB 965 ............................................................. 774 Blankaert and Willems PVBA v. Trost Case 139/80 [1981] ECR 819 ...................................................... 1141 Blower v. Great Western Railway Co (1872) LR 7 CP 655 ........................................................................ 765 Boag v. Economic Insurance Co Ltd [1954] 2 Lloyd’s Rep 581 ............................................................... 744 Boag v. Standard Marine Insurance Ltd [1937] 1 All ER 714 .................................................................. 787 Boddington v. Castelli (1853) 1 E & B 879 ................................................................................................ 776 Boehm v. Bell (1799) 8 TR 154 ................................................................................................................... 791 Bollom & Co Ltd v. Byas Moseley & Co Ltd [2000] Lloyd’s Rep IR 136 ................................................ 1064 Bolton Metropolitan Borough Council v. Municipal Mutual Insurance Ltd [2006] Lloyd’s Rep IR 15 .... 744 Bolton v. Gladstone (1809) 2 Taunt 85 ....................................................................................................... 748 Bond v. Commercial Union Assurance Co Ltd (1930) 36 Ll LR 107 ...................................................... 1099 Bond v. Nutt (1777) 2 Cowp 601 ................................................................................................................. 746 Bondrett v. Hentigg (1816) Holt NP 149 ................................................................................................... 799 Bonner v. Cox Dedicated Corporate Member [2006] Lloyd’s Rep IR 385 ....................................... 733, 739 Booth v. Gair (1863) 15 CBNS 291 ............................................................................................................. 784 Boss Group plc v. Boss France SA [1996] 4 All ER 970 ............................................................................ 1140 Boston Corporation v. Fenwick & Co Ltd (1923) 15 Ll LR 85 ................................................................. 774 Boston Fruit Co v. British and Foreign Marine Insurance Co [1905] 1 KB 637; [1906] AC 336 ... 739, 792 Bottomley v. Bovill (1826) 5 B & C 210 ......................................................................................... 754 798, 800 Bouillon v. Lupton (1863) 33 LJCP 37; (1863) 15 CBNS 113 .................................................... 750, 753, 756 Bousfield v. Barnes (1815) 4 Camp 228 ....................................................................................... 741, 744, 745 Bowden v. Vaughan (1809) 10 East 415 ...................................................................................................... 738 Bowring & Co Ltd v. Amsterdam London Insurance Co Ltd (1930) 36 Ll LR 309 ............................... 765 Bowring v. Elmslie (1790) 7 TR 216n ................................................................................................... 763, 801 Boyd v. Dubois (1811) 3 Camp 133 ............................................................................................................. 765 Boyfield v. Brown (1736) 2 Str 1065 ............................................................................................................ 770 BP Exploration Operating Co Ltd v. Kvaerner Oilfield Products Ltd [2005] 1 Lloyd’s Rep 307 ......... 787 BP plc v Aon Ltd Ltd [2006] Lloyd’s Rep IR 577; [2006] 1 Lloyd’s Rep 549 .............................. 1064, 1131 Bradford v. Levy (1825) 2 C & P 137 .......................................................................................................... 800 Bradford v. Symondson (1881) 7 QBD 456 .......................................................................................... 724, 791 Bradley v. Eagle Star Insurance Co [1989] 2 WLR 568 ...................................................................... 814, 904 Brandeis, Goldschmidt & Co Ltd v. Economic Insurance Co Ltd (1922) 11 Ll LR 42 ......................... 776 Brandon v. Curling (1803) 4 East 410 ........................................................................................................ 751 Branford v. Saunders (1877) 25 WR 650) ................................................................................................... 627 Braunstein v. Accidental Death Insurance Co (1861) 1 B & S 782 .......................................................... 24 Bretton v Hancock [2005] Lloyd’s Rep IR 454 .................................................................................... 937, 938

xvi

Table of Cases Brewster v. National Life (1892) 8 TLR 648 ............................................................................................... 627 Bridges v. Hunter (1813) 1 M & S 15 ......................................................................................................... 733 Briggs v. Merchant Traders Association (1849) 13 QB 167 ...................................................................... 723 Bright v. Ashfold [1932] 2 KB 153 .............................................................................................................. 943 Brine v. Featherstone (1813) 4 Taunt 869 ............................................................................................ 729, 738 Bristol and West plc v. Bhadresa [1999] Lloyd’s Rep IR 138 .................................................................... 863 Britain Steamship Co v. R [1921] AC 99 .................................................................................................... 761 Britannia Steamship Insurance Association Ltd v. Ausonia Assicurazioni SpA [1984] 2 Lloyd’s Rep 98 ................................................................................................................................................... 1127, 1130 British & Burmese Steam Navigation Co Ltd v. Liverpool & London War Risks Association Ltd (1917) 34 TLR 140 ............................................................................................................................................. 768 British American Tobacco v. Poland (1921) 7 Ll LR 108 ......................................................................... 755 British and Foreign Insurance Co v. Wilson Shipping Co Ltd [1921] 1 AC 188 .................................... 782 British and Foreign Marine Insurance Co v. Gaunt [1921] 2 AC 41 .................................719, 720, 735, 763 British and Foreign Marine Insurance Co v. Samuel Sanday & Co [1916] 1 AC 650 ..................... 754, 770 British and Foreign Marine Insurance Co Ltd v. Sturge (1897) 2 Com Cas 244 ................................... 794 British Equitable Insurance Co v. Great Western Railway Co (1869) 38 LJ Ch 314 ............................... 629 British Workman’s & General Assurance Co Ltd v. Cunliffe (1902) 18 TLR 502 .................................. 627 Brooks v. MacDonnell (1835) 1 Y & C Ex 500 ............................................................................. 773, 774, 788 Brotherston v. Barber (1816) 5 M & S 418 ................................................................................................. 770 Brotherton v. Aseguradora Coseguros SA (No 2) [2003] Lloyd’s Rep IR 746 ...............731, 734, 735, 1099 Brotherton v. Aseguradora Colseguros SA (No 3) [2003] Lloyd’s Rep IR 762 ........................ 729, 734, 735 Brough v. Whitmore (1791) 4 TR 206 .................................................................................................. 727, 743 Brown Bros v. Fleming (1902) 7 Com Cas 245 .................................................................................... 779, 802 Brown v. Abbott (1965) 109 Sol Jo 437 ....................................................................................................... 955 Brown v. Carstairs (1811) 3 Camp 161 ........................................................................................................ 797 Brown v. Roberts [1963] 2 All ER 263 ........................................................................................................ 937 Brown v. Smith (1813) 1 Dow 349 ................................................................................................ 769, 799, 800 Brown v. Tayleur (1835) 4 A & E 241 ................................................................................................... 754, 797 Brown v. Vigne (1810) 12 East 283 ............................................................................................................. 752 Browne, Re [1903] 1 Ch 188 ........................................................................................................................ 632 Bruce v. Jones (1863) 1 H & C 769 ...................................................................................................... 744, 745 Bryant & May Ltd v. London Assurance Corporation (1886) 2 TLR 591 ............................................... 801 Buchanan & Co v. Faber (1899) 4 Com Cas 223 .................................................................720, 721, 723, 750 Buchanan v. Motor Insurers Bureau [1954] 2 Lloyd’s Rep 519 ............................................................... 957 Bucks Printing Press Ltd v. Prudential Assurance Co, 1991, unreported ................................................ 730 Bunney v. Burns Anderson [2007] EWHC 1240 (Ch) ............................................................................... 242 Burges v. Wickham (1863) 33 LJCP 17; (1863) 3 B & S 669 ............................................................. 750, 758 Burnand v. Rodocanachi Sons & Co (1882) 7 App Cas 33 ....................................................................... 786 Burnett v. Kensington (1797) 7 TR 210 ...................................................................................................... 801 Burns v. Currell [1963] 2 QB 433 ............................................................................................................... 955 Bushell v. Faith (1850) 15 QB 649 .............................................................................................................. 752 Busk v. Royal Exchange Assurance Co (1818) 2 B & Ald 73 ...................................................... 719, 749, 764 Butler v. Wildman (1820) 3 B & Ald 398 ..................................................................................... 719, 784, 801 Byas v. Miller (1897) 3 Com Cas 39 ............................................................................................................ 792 Byrne v. Motor Insurers Bureau [2007] 3 All ER 499 ....................................................................... 990, 1003 Byrne v. Schiller (1871) LR 6 Ex 319 .......................................................................................................... 767 Cahill v. Cahill (1883) 8 App Cas 420 ......................................................................................................... 632 Caledonia North Sea Ltd v. British Telecommunications plc [2002] Lloyd’s Rep IR 26 ................ 786, 788 Callaghan and Hedges v. Thompson [2000] Lloyd’s Rep IR 125 ............................................................ 728 Callaghan v. Dominion Insurance [1997] 2 Lloyd’s Rep 541 ........................................................... 766, 1111 Cambridge v. Anderton (1824) 2 B & C 691 .............................................................................................. 767 Cambridge v. Callaghan (1997) The Times, 21 March ................................................................................ 995 Camden v. Cowley (1763) 1 Wm Bl 417 ..................................................................................................... 797 Camelo v. Britten (1820) 4 B & Ald 184 ..................................................................................................... 751 Cammell v. Sewell (1858) 3 H & N 617 ...................................................................................................... 774 Campbell v. Christie (1817) 2 Stark 64 ....................................................................................................... 793 Campbell v. Innes (1821) 4 B & Ald 423 .................................................................................................... 734 Campbell v. Rickards (1833) 5 B & Ad 840 ................................................................................................ 732 Canada Rice Mills Ltd v. Union Marine & General Insurance Co Ltd [1940] 4 All ER 169; [1941] AC 55 ....................................................................................................................................................... 763, 798 Canning v. Maritime Insurance Co Ltd (1936) 56 Ll LR 91 .................................................................... 764 Cantiere Meccanico Brindisino v. Janson [1912] 3 KB 452 ........................................................ 735, 736, 750 Cantieri Navali Riunita SpA v. NV Omne Justitia [1985] 2 Lloyd’s Rep 428 .......................................... 1127 Cape plc v. Iron Trades Employers Insurance Association Ltd [2004] Lloyd’s Rep IR 75 .............. 728, 736

xvii

Table of Cases Caple v. Sewell [2002] Lloyd’s Rep IR 627 ................................................................................................. 781 Captain J A Cates Tug & Wharfage Co Ltd v. Franklin Insurance Co [1927] AC 698 ............ 767, 769, 773 Captain Panagos, The [1985] 1 Lloyd’s Rep 625; [1986] 2 Lloyd’s Rep 470 ................................... 727, 730 Carisbrook Steamship Co Ltd v. London and Provincial Marine and General Insurance Co Ltd (1901) 6 Com Cas 291 ....................................................................................................................................... 776 Carlill v. Carbolic Smokeball Co Ltd [1893] 1 QB 256 ............................................................................. 626 Carnill v. Rowland [1953] 1 Lloyd’s Rep 99 ............................................................................................... 937 Caroline, The (1921) 7 Ll LR 56 ................................................................................................................. 762 Carr v. Montefiore (1864) 5 B & S 408 ....................................................................................................... 797 Carras v. London and Scottish Assurance Corporation Ltd [1936] 1 KB 291 .......................... 765, 767, 770 Carruthers v. Gray (1811) 3 Camp 142 ....................................................................................................... 748 Carruthers v. Sheddon (1815) 6 Taunt 14 .................................................................................................. 721 Carruthers v. Sydebotham (1815) 4 M & S 77 ........................................................................................... 801 Carstairs v. Allnutt (1813) 3 Camp 497 ....................................................................................................... 751 Carter v. Boehm (1766) 3 Burr 1905 ............................................................................................ 728, 731, 732 Carvill America Inc v. Camperdown UK Ltd [2005] Lloyd’s Rep IR 55; [2006] Lloyd’s Rep IR 1 .......743, 760, 1063 Castellain v. Preston (1883) 11 QBD 380 ................................................................................................... 703 Castle Insurance Co Ltd v. Hong Kong Islands Shipping Co Ltd [1983] 2 Lloyd’s Rep 376 ......... 766, 773 Catariba, The [1997] 2 Lloyd’s Rep 749 ..................................................................................................... 778 Cator v. Great Western Insurance Co of New York (1873) LR 8 CP 5528 779 Cecom Trade BV v. Bishop (1995) Lloyd’s List, 14 October ............................................................ 752 Centrax Ltd v. Citibank NA [1999] 1 All ER (Comm) 557 ...................................................................... 1125 Centre Reinsurance International Co v. Freakley [2005] Lloyd’s Rep IR 303 .................................. 814, 815 Cepheus Shipping Corp v. Guardian Royal Exchange Assurance plc [1995] 1 Lloyd’s Rep 622 ... 723, 761 Ceylon Motor Insurance Association Ltd v. Thambugala [1953] AC 584 ............................................... 949 CGU International Insurance plc v. AstraZeneca Insurance Co Ltd [2006] Lloyd’s Rep IR 409 ......... 1126 CGU International Insurance plc v. Szabo [2002] Lloyd’s Rep IR 196 ......................................... 1125, 1126 Chalgray Ltd v. Apsley (1965) 109 Sol Jo 437 ............................................................................................ 955 Chandler v. Blogg [1898] 1 QB 32 .............................................................................................................. 720 Chandris v. Argo Insurance Co Ltd [1963] 2 Lloyd’s Rep 65 .......................................................... 766, 1111 Charente SS Co v. Director of Transport (1922) 10 Ll LR 514 ................................................................ 762 Charlton v. Fisher [2001] Lloyd’s Rep IR 387 ............................................................ 940, 944, 947, 957, 991 Charman v. WOC Offshore BV [1993] 2 Lloyd’s Rep 551 ........................................................................ 1144 Charter Reinsurance Co Ltd v. Fagan [1996] 2 Lloyd’s Rep 113 ............................................................. 1111 Chartered Trust & Executor Co v. London & Scottish Assurance Corp Ltd (1923) 39 TLR 608 ........ 726 Chaurand v. Angerstein (1791) Peake 43 ................................................................................................... 738 Cheshire & Co v. Thompson (1919) 24 Com Cas 198 .............................................................................. 733 Cheshire & Co v. Vaughan Bros & Co [1920] 3 KB 240 ........................................................................... 721 Chief Constable of Avon and Somerset v. Fleming [1987] 1 All ER 318 ................................................ 955 China Traders Insurance Co v. Royal Exchange Assurance [1898] 2 QB 187 ........................................ 730 Chitty v. Selwyn & Martyn (1742) 2 Atk 359 .............................................................................................. 752 Christie v. Secretan (1799) 8 TR 192 .......................................................................................................... 749 Chubb Insurance Co of Europe SA v. Davies [2005] Lloyd’s Rep IR 1 ................................................... 814 Citadel Insurance Co v. Atlantic Union Insurance Co SA [1982] 2 Lloyd’s Rep 543 ............................ 1127 Citibank v. Excess Insurance Co [1999] Lloyd’s Rep IR 122 .................................................................... 863 Citizens’ Insurance Co of Canada v. Parsons (1881) 7 App Cas 96 ......................................................... 793 City of Gotha v. Sothebys 1998, unreported ............................................................................................... 1131 Clan Line Steamers Ltd v. Board of Trade, The Clan Matheson [1929] AC 514 ................................... 762 Clapham v. Cologan (1813) 3 Camp 382 ..................................................................................... 737, 748, 793 Clapham v. Langton (1864) 5 B & S 729 .................................................................................................... 750 Clarke v. Kato [1997] 1 WLR 208; [1998] 4 All ER 417 ........................................ 933, 938, 957, 1023, 1032 Clarke v. Vedel [1979] RTR 26 .................................................................................................................... 991 Clason v. Simmons (1741) 6 TR 533n .................................................................................................. 755, 756 Clay, Re [1937] 2 All ER 548 ........................................................................................................................ 632 Clay v. Harrison (1829) 10 B & C 99 .......................................................................................................... 724 Cleaver v. Mutual Reserve Fund Life Association [1892] 1 QB 147 ................................................ 632, 1113 Cleland v. London General Insurance Co Ltd (1935) 51 Ll LR 156 .............................................. 815, 1099 Clifford v. Hunter (1827) 3 C & P 16 ......................................................................................................... 749 Cobb & Jenkins v. Volga Insurance Co Ltd of Petrograd (1920) 4 Ll LR 130 ........................................ 763 Cobb v. Wharton [1971] RTR 392 ............................................................................................................... 955 Cobb v. Williams [1973] RTR 113 ............................................................................................................... 937 Cobequid Marine Insurance Co v. Barteaux (1875) LR 6 PC 319 ........................................................... 773 Cockey v. Atkinson (1819) 2 B & Ald 460 .................................................................................................. 797 Cocking v. Foster (1785) 4 Doug KB 295 ................................................................................................... 767

xviii

Table of Cases Cockrane v. Fisher (1835) 1 C, M & R 809 ................................................................................................ 753 Cohen Sons & Co v. Standard Marine Insurance Co Ltd (1925) 21 Ll LR 30 ................................. 749, 773 Cohen v. Hinkley (1809) 2 Camp 51 ........................................................................................................... 768 Cohen, Sons & Co v. National Benefit Assurance Co Ltd (1924) 18 Ll LR 199 .............................. 764, 799 Coker v. Bolton [1912] 3 KB 315 .......................................................................................................... 721, 774 Colby v. Hunter (1827) 3 C & P 7 ........................................................................................................ 745, 791 Colledge v. Harty (1851) 6 Exch 205 .......................................................................................................... 745 Collett v. Morrison (1851) 9 Hare 162 ........................................................................................................ 794 Cologan v. London Assurance Co (1816) 5 M & S 447 ...................................................................... 767, 770 Colonia Versicherung AG v. Amoco Oil Co [1995] 1 Lloyd’s Rep 570 affirmed [1997] 1 Lloyd’s Rep 261 ..................................................................................................................................................... 757, 786 Colonial Fire and General Insurance Co Ltd v. Harry [2006] UKPC 53 ................................................ 949 Colonial Insurance Co of New Zealand v. Adelaide Marine Insurance Co (1886) 12 App Cas 128 .....723, 724 Colonial Mutual General Insurance Co. Ltd v. ANZ Banking Group (New Zealand) Ltd [1995] 2 Lloyd’s Rep 433 ............................................................................................................................. 705, 1098 Comatra Ltd v. Lloyd’s Underwriters, The Abt Rasha [2000] 2 Lloyd’s Rep 575 .................................. 776 Commercial Union Assurance Co Ltd v. Hayden [1977] QB 804 ............................................................ 789 Commercial Union Assurance Co v. Lister (1874) LR 9 Ch App 483 ............................................... 786, 788 Commercial Union Co plc v. Simat Helliesen & Eichner Inc [2001] Lloyd’s Rep IR 172 .................... 1128 Commission v. Denmark Case 252/83, [1987] 2 CMLR 169 .................................................................. 3, 532 Commission v. France Case 220/83, [1987] 2 CMLR 113 ...................................................................... 3, 532 Commission v. Germany Case 205/84, [1987] 2 CMLR 69 .................................................................... 3, 532 Commission v. Ireland Case 206/84, [1987] 2 CMLR 140 ..................................................................... 3, 532 Commonwealth, The [1907] P 216 ............................................................................................................. 787 Commonwealth Smelting Ltd v. Guardian Royal Exchange Assurance Ltd [1984] 2 Lloyd’s Rep 608 ..... 719 Comninos and National Justice Compania Naviera SA v. Prudential Assurance Co Ltd, The Ikarian Reefer (No 2) [2000] 1 Lloyd’s Rep 129 .................................................................................... 863, 1142 Companhia de Seguros Imperio v. Heath (REBX) Ltd [1999] Lloyd’s Rep IR 571 .............................. 1110 Compania Columbiana de Seguros v. Pacific Steam Navigation Co [1965] 1 QB 101 .......................... 786 Compania Maritima of Barcelona v. Wishart (1918) 23 Com Cas 264 .................................................... 768 Compania Maritima San Basilio SA v. Oceanus Mutual Underwriting Association (Bermuda) Ltd, The Eurysthenes [1976] 2 Lloyd’s Rep 171 .......................................................................................... 740, 750 Compania Martiartu v. Royal Exchange Assurance [1923] 1 KB 650 ................................................ 764, 768 Compania Merabello San Nicholas SA, Re [1973] Ch 75 .......................................................................... 813 Compania Naviera Bachi v. Henry Hosegood & Co Ltd [1938] 2 All ER 189 ....................................... 800 Compania Naviera Martiartu v. Royal Exchange Assurance Corporation (1924) 18 Ll LR 247 ........... 764 Compania Naviera Santi SA v. Indemnity Mutual Marine Assurance Co Ltd, The Tropaioforos [1960] 2 Lloyd’s Rep 469 ................................................................................................................................... 764 Compania Naviera Vascongada v. British and Foreign Marine Insurance Co Ltd (1936) 54 Ll LR 35 ........750, 764 Company of African Merchants v. British Insurance Co (1873) LR 8 Ex 154 .................................. 755, 756 Comunidad Naviera Baracaldo v. Norwich Union Fire Insurance Society (1923) 16 Ll LR 45 ............ 764 Constable v. Noble (1810) 2 Taunt 403 ...................................................................................................... 797 Container Transport International Inc v. Oceanus Mutual Underwriting Association (Bermuda) Ltd [1982] 2 Lloyd’s Rep 178; [1984] 1 Lloyd’s Rep 476 .......................................................... 728, 732, 734 Continental Grain Co Inc v. Twitchell (1945) 78 Ll LR 251 .............................................................. 761, 766 Continental Illinois National Bank and Trust Co of Chicago v. Bathurst, The Captain Panagos DP [1985] 1 Lloyd’s Rep 625 ................................................................................................................ 721, 741 Continental Illinois National Bank of Chicago v. Alliance Assurance Co Ltd [1986] 2 Lloyd’s Rep 470 ....764, 800 Contingency Insurance Co v. Lyons (1939) 65 L1 LR 53 ......................................................................... 949 Contrast Vacuum Oil Co v. Union Insurance Society of Canton (1925) 24 Ll LR 188 ......................... 802 Cooper v. Motor Insurers’ Bureau [1985] 1 All ER 449 ........................................................................... 940 Co-operative Retail Services Ltd v. Taylor Young Partnership [2002] Lloyd’s Rep IR 555 .................... 787 Copernicus, The [1896] P 237 ..................................................................................................................... 797 Corcoran v. Gurney (1853) 1 E & B 456 .................................................................................................... 801 Corfield v. Groves [1950] 1 All ER 488 ....................................................................................................... 938 Cormack v. Gladstone (1809) 11 East 347 .................................................................................................. 754 Cornfoot v. Royal Exchange Assurance Corporation [1904] 1 KB 40 ..................................................... 752 Cory v. Burr (1883) 8 App Cas 393 ............................................................................................................. 761 Cory v. Patton (1872) LR 7 QB 304; (1874) LR 9 QB 577 ........................................................ 729, 793, 794 Cossman v. West (1887) 13 App Cas 160 .............................................................................................. 767, 768 Coulouras v. British General Insurance Co Ltd (1922) 12 Ll LR 220 ..................................................... 763 Court Line v. R, The Lavington Court (1945) 78 Ll LR 390 .................................................................... 769 Court v. Martineau (1782) 2 Doug KB 161 ................................................................................................ 736

xix

Table of Cases Cousins & Co v. D & C Carriers Ltd [1970] 2 Lloyd’s Rep 397; [1971] 2 QB 230 .......................... 718, 786 Cousins v. Sun Life Assurance Co [1933] Ch 126 ...................................................................................... 632 Coven SpA v. Hong Kong Chinese Insurance Co [1999] Lloyd’s Rep IR 565 ........................................ 767 Coward v. Motor Insurers’ Bureau [1963] 1 QB 259 ................................................................................. 990 Cox v. Bankside Members’ Agency Ltd [1995] 2 Lloyd’s Rep 437 ....................................814, 815, 816, 111 Cox v. Deeny [1996] LRLR 288 ................................................................................................................... 814 Coxe v. Employers’ Liability Insurance Corporation [1916] 2 KB 629 .................................................... 763 Craft Enterprises (International) Ltd v. Axa Insurance Co [2005] Lloyd’s Rep IR 14 .......................... 1126 Craufurd (1806) 2 Bos & PNR 269 .............................................................................................................. 722 Credit Lyonnais v. New Hampshire Insurance Co [1997] 2 Lloyd’s Rep 1 ............................................. 1139 Crisp v. Marshall [1997] 8 CL 482 ............................................................................................................... 992 Crocker v. General Insurance Co Ltd (1897) 3 Com Cas 22 .................................................................... 752 Crocker v. Sturge [1897] 1 QB 330 ............................................................................................................. 752 Crofts v. Marshall (1836) 7 C & P 597 ........................................................................................................ 765 Cross v. British Oak Insurance Co Ltd (1938) 60 L1 LR 46 ..................................................................... 949 Crossley v. City of Glasgow Life Assurance Co (1876) 4 Ch D 421 .......................................................... 628 Crouan v. Stanier [1904] 1 KB 87 ............................................................................................................... 784 Crowley v. Cohen (1832) 3 B & Ad 478 ............................................................................................... 721, 726 Cruickshank v. Janson (1810) 2 Taunt 301 ................................................................................................. 797 CTN Cash Carry v. General Accident Fire and Life Assurance Corporation [1989] 1 Lloyd’s Rep 299 .... 747 Cullen v. Butler (1816) 5 M & S 461 ........................................................................................................... 801 Cunard SS Co v. Marten [1902] 2 KB 624; [1903] 2 KB 511 ............................................................. 780, 783 Cunard v. Hyde (1859) 29 LJQB 6; (1859) 2 E & E 1 .............................................................................. 751 Currie & Co v. Bombay Native Insurance Co (1869) LR 3 PC 72 ............................................. 772, 784, 785 Custom Made Commercial Ltd v. Stawa Metallbau GmbH Case 288/92 [1994] ILPr 516 ................... 1141 Cutter v. Eagle Star [1997] 2 All ER 311; [1998] 4 All ER 417 ............................ 933, 938, 957, 1023, 1032 CVG Siderugicia del Orinoco SA v. London Steamship Owners’ Mutual Insurance Association, The Vainqueur Jose [1979] 1 Lloyd’s Rep 557 ........................................................................................... 815 Czarnikow Ltd v. Java Sea and Fire Insurance Co Ltd (1941) 70 Ll LR 319; [1941] 3 All ER 256 ...... 769 D R Insurance v. Seguros America Banamex [1993] 1 Lloyd’s Rep 120 ................................................. 1062 Da Costa v. Edmonds (1815) 4 Camp 142 ........................................................................................... 735, 736 Da Costa v. Firth (1766) 4 Burr 1966 .......................................................................................................... 773 Da Costa v. Newnham (1788) 2 TR 407 ...................................................................................................... 778 Da Costa v. Scandret (1723) 2 P Wms 170 ........................................................................................... 733, 734 Dakin v. Oxley (1864) 15 CBNS 646 ........................................................................................................... 723 Dalby v. India & London Life Assurance Co (1854) 15 CB 365 ........................................625, 627, 628, 629 Daley v. Hargreaves [1961] 1 All ER 552 .................................................................................................... 955 Dalgleish v. Brooke (1812) 15 East 295 ...................................................................................................... 746 Dalzell v. Mair (1808) 1 Camp 532 .............................................................................................................. 760 Danepoint Ltd v Underwriting Insurance Ltd [2006] Lloyd’s Rep IR 429 ............................................. 730 Daniels v. Harris (1874) LR 10 CP 1 .................................................................................................... 749, 751 Daniels v. Vaux [1938] 2 KB 203 ................................................................................................................. 938 Dann v. Hamilton [1939] 1 KB 509 ............................................................................................................. 945 Davenport v. Corinthian Motor Policies at Lloyd’s (1991) The Times, 12 August ................................... 1115 Davidson v. Burnand (1868) LR 4 CP 117 ................................................................................................. 749 Davidson v. Case (1820) 2 Brod & Bing 379 .............................................................................................. 774 Davidson v. Willasey (1813) 1 M & S 313 ................................................................................................... 797 Davies, Re [1892] 1 Ch 90 ............................................................................................................................. 632 Davis v. Garrett (1830) 6 Bing 716 .............................................................................................................. 754 Davitt v. Titcumb [1989] 3 All ER 417 ........................................................................................................ 1113 Dawson v. Atty (1806) 7 East 367 ................................................................................................................. 748 De Bloos SPRL v. Bouyer Case 14/76 [1976] ECR 1497 ................................................................ 1140, 1141 De Cuadra v. Swann (1864) 16 CBNS 772 ........................................................................................... 767, 768 De Hahn v. Hartley (1786) 1 TR 343 ........................................................................................... 745, 746, 747 De Mattos v. Saunders (1872) LR 7 CP 570 .................................................................................. 767 770, 801 De Monchy v. Phoenix Insurance Co of Hartford (1929) 34 Ll LR 201 ................................................. 765 De Vaux v. J’Anson (1839) 5 Bing NC 519 ................................................................................................. 767 De Vaux v. Salvador (1836) 4 Ad & El 420 ................................................................................................. 778 De Wolf v. Archangel Insurance Co (1874) LR 9 QB 451 ........................................................................ 752 Dean v. Hornby (1854) 3 E & B 180 ........................................................................................................... 799 Dearle v. Hall (1828) 3 Russ 1 ..................................................................................................................... 629 Decorum Investments Ltd v. Atkin, The Elena G [2002] Lloyd’s Rep IR 450 ................................. 734, 735 Dee Conservancy Board v. McConnell [1928] 2 KB 159 ........................................................................... 774 Deeny v. Gooda Walker Ltd (No 2) 1995, unreported .............................................................................. 35 Deepak Fertilisers & Petrochemical Corporation v. Davy McKee [1999] 1 Lloyd’s Rep 387 ................ 722

xx

Table of Cases Delany v. Stoddart (1785) 1 TR 22 .............................................................................................................. 756 Demetriades & Co v. Northern Assurance Co, The Spathari (1926) 21 Ll LR 265 ............................... 734 Denney v. Bellamy [1938] 2 All ER 262 ...................................................................................................... 815 Dennistoun v. Lillie (1821) 3 Bli 202 .......................................................................................................... 738 Denoon v. Home and Colonial Assurance Co (1872) LR 7 CP 341 .......................................... 741, 778, 801 Dent v. Smith (1869) LR 4 QB 414 ....................................................................................................... 748, 799 Deutsch-Australische Dampfschiffsgesellschaft v. Sturge (1913) 109 LT 905 .................................... 718, 797 Deutsche Genossenschaftsbank v. Burnhope [1995] 4 All ER 717 .......................................................... 799 Deutsche Ruckversicherung Akt v. Walbrook Insurance Co Ltd [1996] 1 Lloyd’s Rep 345 .................. 735 Devaux v. Steele (1840) 6 Bing NC 358 ...................................................................................................... 723 Devco Holder Ltd v. Legal and General Insurance Society Ltd [1993] 2 Lloyd’s Rep 567 ................... 943 Dibbens, Re [1990] BCLC 677 ..................................................................................................................... 726 Dickinson v. Jardine (1868) LR 3 CP 639: Steamship Balmoral Co v. Marten [1901] 2 KB 896 .......... 776 Difiori v. Adams (1884) 53 LJQB 437 ......................................................................................................... 754 Dimskal Shipping Co SA v. International Transport Workers Federation, The Evida Luck [1991] 4 All ER 871 ..................................................................................................................................................... 1131 Dino Services Ltd v. Prudential Assurance Co Ltd [1989] 1 Lloyd’s Rep 379 ........................................ 799 Direct Line v. Khan [2002] Lloyd’s Rep IR 364 .................................................................................. 730, 764 Dixon v. Reid (1822) 5 B & Ald 597 ........................................................................................................... 800 Dixon v. Sadler (1839) 5 M & W 405; (1841) 8 M & W 895 ...................................................... 749, 750, 764 Dixon v. Whitworth (1880) 49 LJQB 408 ............................................................................................. 783, 784 Dobson v. General Accident Fire and Theft Assurance Co [1989] 3 All ER 927 ................................... 799 Dodson v. Peter H Dodson Insurance Services [2001] Lloyd’s Rep IR 278 ................................... 758, 1099 Dodwell & Co Ltd v. British Dominions General Insurance Co Ltd [1955] 2 Lloyd’s Rep 391n ......... 765 Doheny v. New India Assurance Co Ltd [2005] Lloyd’s Rep IR 251 ................................................. 736, 738 Domicrest Ltd v. Swiss Bank Corporation [1999] 1 Lloyd’s Rep 80 .............................................. 1141, 1142 Domingo Mumbru SA v. Laurie (1924) 20 Ll LR 122 .............................................................................. 764 Dora, The [1989] 1 Lloyd’s Rep 69 ............................................................................................. 734, 736, 1110 Dora Foster, The [1900] P 241 ..................................................................................................................... 782 Dorigo Y Sanudo v. Royal Exchange Assurance Corporation (1922) 13 Ll LR 126 ............................... 763 Dornoch Ltd v. Mauritius Union Assurance Co Ltd [2006] 2 Lloyd’s Rep 475; affirmed [2006] EWCA Civ 389 ................................................................................................................................ 1126, 1127, 1128 Douglas v. Scougall (1816) 4 Dow 276 .................................................................................................. 749, 750 Downes v. Green (1844) 12 M & W 481 ..................................................................................................... 628 Doyle v. Powell (1832) 4 B & Ad 267 .......................................................................................................... 755 DPP v. Fisher [1992] RTR 93 ....................................................................................................................... 938 DPP v. Vivier [1991] 4 All ER 18 ........................................................................................................... 938, 957 Drake Insurance plc v. Provident Insurance plc [2004] 1 Lloyd’s Rep 268; [2004] Lloyd’s Rep IR 277 .....728, 731, 733, 735, 789, 943, 948, 1099 Driscol v. Bovil (1798) 1 Bos & P 313 ......................................................................................................... 756 Driscol v. Passmore (1798) 1 Bos & P 200 .................................................................................................. 753 Droege v. Stuart, The Varnak (1869) LR 2 PC 505 ................................................................................... 725 DST mbH v. Ras Al Khaimah National Oil Co [1987] 2 All ER 769 ............................................. 1125, 1126 Du Gaminide v. Pigou (1812) 4 Taunt 246 ................................................................................................ 760 Dudgeon v. Pembroke (1874) LR 9 QB 581; (1877) 2 App Cas 284 ................................743, 750, 751, 761 Duff v. Mackenzie (1857) 3 CBNS 16 ................................................................................................... 781, 802 Duffell v. Wilkinson (1808) 1 Camp 401 .................................................................................................... 791 Dunbar v. Plant [1997] 4 All ER 289 ................................................................................................ 1113, 1114 Dunbeth, The [1897] P 133 ......................................................................................................................... 755 Dunlop Brothers v. Townend [1919] 2 KB 127 ................................................................................... 741, 743 Dunthorne v. Bentley [1996] RTR 428 ....................................................................................................... 940 Durrant v. Maclaren [1956] 2 Lloyd’s Rep 70 ............................................................................................ 937 Durrell v. Bederley (1816) Holt NP 283 ..................................................................................................... 734 Duthie v. Hilton (1868) LR 4 CP 138 ......................................................................................................... 767 Dyson v. Rowcroft (1803) 3 Bos & P 474 .................................................................................................... 767 Eagle Star and British Dominions Insurance Co Ltd v. Reiner (1927) 27 Ll LR 173 ............................ 794 Eagle Star Insurance Co v. Cresswell [2004] Lloyd’s Rep IR 602 ............................................................. 731 Eagle Star Insurance Co Ltd v. Games Video Co, The Game Boy [2004] Lloyd’s Rep IR 867 .....730, 734, 738, 745 Eagle Star Insurance Co Ltd v. Provincial Insurance plc [1993] 2 Lloyd’s Rep 143 .............................. 789 Eagle Star Insurance Co Ltd v. Spratt [1971] 2 Lloyd’s Rep 116 ............................................................. 793 Eagle Star Insurance Co Ltd, Re [2006] EWHC 1850 (Ch) ...................................................................... 195 Eagle Star Life Assurance Co Ltd v. Griggs and Miles [1998] 1 Lloyd’s Rep 256 .................................. 1063 Earle v. Harris (1780) 1 Doug KB 357 .................................................................................................. 746, 753 Earle v. Rowcroft (1806) 8 East 126 ............................................................................................................ 800

xxi

Table of Cases Ebsworth v. Alliance Marine Co (1873) LR 8 CP 596 ............................................................................... 726 Ecclesiastical Commissioners v. Royal Exchange Assurance Corporation (1895) 11 TLR 476 .............. 1099 Economides v. Commercial Union [1997] 3 All ER 636; [1998] QB 587 ......................................... 732, 738 Eden v. Mitchell [1975] RTR 425 ................................................................................................................ 937 Eden v. Parkinson (1781) 2 Doug KB 732 .................................................................................................. 748 Edgar v. Bumstead (1809) 1 Camp 411 ...................................................................................................... 759 Edgar v. Fowler (1803) 3 East 222 ............................................................................................................... 759 Edmunds v. Lloyd Italico [1986] 2 All ER 249 ........................................................................................... 1112 Edwards v. Footner (1808) 1 Camp 530 ............................................................................................... 733, 738 Edwards v. Minster Insurance Co Ltd 1994, unreported ........................................................................... 815 Edwards & Co v. Motor Union Insurance Co [1922] 2 KB 249 ............................................................... 722 Effer SpA v. Kantner Case 38/81 [1982] ECR 825 .................................................................................... 1141 Egan v. Bower (1939) 63 L1 LR 266 ........................................................................................................... 937 Egon Oldendorff v. Libera Corporation (No 1) [1995] 2 Lloyd’s Rep 64 .............................................. 1130 Egon Oldendorff v. Libera Corporation (No 2) [1996] 1 Lloyd’s Rep 380 ............................................ 1125 Eide UK Ltd v. Lowndes Lambert Group Ltd, The Sun Tender [1998] 1 Lloyd’s Rep 389 ........... 739, 759 Elf Enterprises (Caledonia) Ltd v. London Bridge Engineering Ltd [2000] Lloyd’s Rep IR 249 ........786, 788 Elfie A Issaias v. Marine Insurance Co Ltd (1923) 15 Ll LR 186 ............................................................. 800 Elgood v. Harris [1896] 2 QB 491 ............................................................................................................... 787 Ella, The [1915] P 111 .................................................................................................................................. 774 Elliot v. Wilson (1766) 4 Bro PC 470 .......................................................................................................... 754 Elliott v. Gray [1960] 1 QB 367 ................................................................................................................... 937 Ellis Ltd v. Hinds [1947] KB 475 ................................................................................................................. 937 Elson v. Crookes (1911) 106 LT 462 ........................................................................................................... 627 Elton v. Brogden (1747) 2 Str 1264 ...................................................................................................... 756, 800 Elton v. Larkins (1832) 8 Bing 198 ............................................................................................................. 736 Emperor Goldmining Co v. Switzerland General Insurance Co [1964] 1 Lloyd’s Rep 348 .................. 783 Empire SS Co Inc v. Threadneedle Insurance Co (1925) 22 Ll LR 437 ................................................. 764 Empress Assurance Corporation v. Bowring (1905) 11 Com Cas 107 ..................................................... 794 Engel v. Lancashire General Insurance Co Ltd (1925) 21 Ll LR 327 ..................................................... 726 Engelbach, Re [1924] 2 Ch 348 ................................................................................................................... 632 England v. Guardian Insurance Ltd [2000] Lloyd’s Rep IR 404 ........................................................ 786, 787 Enimont Supply SA v. Chesapeake Shipping Inc, The Surf City [1995] 2 Lloyd’s Rep 242 ................. 788 Entwisle v. Ellis (1857) 2 H & N 549 ........................................................................................................... 782 Equitable Life Assurance of the United States v. Mitchell (1911) 27 TLR 213 ...................................... 632 Equitable Life Assurance Society, Re Canada Life Ltd, Re 14 February 2007, unreported .................... 195 ERC Frankona Reinsurance v. American National Insurance Co [2006] Lloyd’s Rep IR 157 .....729, 732, 737, 738, 739, 747 Erich Gasser GmbH v. MISAT Srl Case C-116/02, [2004] 1 Lloyd’s Rep 222 ........................................ 1141 Esposito v. Bowden (1857) 7 E & B 763 ..................................................................................................... 746 Esso Petroleum Co Ltd v. Hall Russell & Co [1988] 3 WLR 730 ............................................................. 786 Euro-Diam Ltd v. Bathurst [1988] 2 All ER ............................................................................... 746, 751, 1131 Europe Mortgage Ltd v. Halifax Estate Agencies, 1996, unreported ....................................................... 787 Euterpe SS Co Ltd v. North of England Protecting & Indemnity Association Ltd (1917) 33 TLR 540 ..... 768 Evans v. Secretary of State for the Environment, Transport and the Regions Case C-63/01, [2004] Lloyd’s Rep IR 1 ..................................................................................................................................... 990 Evans v. Bignold (1859) LR 4 QB 622 ........................................................................................................ 628 Evans v. Lewis [1964] 1 Lloyd’s Rep 258 .................................................................................................... 937 Evans v. Secretary of State for the Environment, Transport and the Regions 2005, unreported ......... 936 Evans v. Secretary of State for the Environment, Transport and the Regions 2006, unreported ......... 990 Evans v. Secretary of State for the Environment, Transport and the Regions [2002] Lloyd’s Rep IR 1 .... 1002 Evans v. Secretary of State for the Environment, Transport and the Regions Case C-63/01, [2004] Lloyd’s Rep IR 391 ........................................................................................................................ 936, 1002 Evans v. Clarke [2007] Lloyd’s Rep IR 16 ................................................................................................... 957 Evanson v. Crooks (1911) 106 LT 264 ......................................................................................................... 627 Everth v. Hannam (1815) 6 Taunt 375 ....................................................................................................... 800 Everth v. Smith (1814) 2 M & S 278 ..................................................................................................... 768, 778 Dever, Ex parte (1887) 18 QBD 667 ............................................................................................................. 1125 Gorely, Ex parte (1864) 4 De G J & Sm 477 ................................................................................................ 698 Eyre v. Glover (1812) 16 East 218 ................................................................................................................ 721 Fairfield Shipbuilding & Engineering Co Ltd v. Gardner, Mountain & Co Ltd (1912) 104 LT 288 .... 759 Fairlie v. Christie (1817) 7 Taunt 416 ......................................................................................................... 793 Falkner v. Ritchie (1814) 2 M & S 290 ........................................................................................................ 800 Fanti, The [1990] 2 All ER 705 .................................................................................................................... 815 Farmer v. Legg (1797) 7 TR 186 ................................................................................................................. 751

xxii

Table of Cases Farnworth v. Hyde (1865) 18 CBNS 835; (1866) LR 2 CP 204 .................................................. 767, 770, 773 Farrell v. Whitty and Motor Insurers Bureau of Ireland Case C-356/05, April 2007 ............................. 940 Farrell v. Federated Employers’ Insurance Association Ltd [1970] 3 All ER 632 ................................... 815 Fawcus v. Sarsfield (1856) 6 E & B 192 ................................................................................................ 750, 799 Feasey v. Sun Life Assurance Corporation of Canada [2002] Lloyd’s Rep IR 807; [2003] Lloyd’s Rep IR 637 ...................................................................................................................... 627, 722, 723, 724, 738 Federation General Insurance Co v. Knott Becker Scott Ltd [1990] 1 Lloyd’s Rep 98 ......................... 1064 Feise v. Parkinson (1812) 4 Taunt 640 .................................................................................................. 733, 791 Felicie, The [1990] 2 Lloyd’s Rep 21 .......................................................................................................... 815 Fenton Insurance Co Ltd v. Gothaer Verischerungsbank VVag [1991] 1 Lloyd’s Rep 172 ................... 758 Fenwick v. Robinson (1828) 3 C & P 323 ................................................................................................... 778 Ferrymaster v. Adams [1980] RTR 139 ....................................................................................................... 937 Field SS Co v. Burr [1899] 1 QB 579 .......................................................................................................... 778 Field v. Metropolitan Police Receiver [1907] 2 KB 853 ...................................................................... 700, 809 Figre Ltd v. Mander [1999] Lloyd’s Rep IR 193 ........................................................................................ 758 Fillis v. Bruton (1782) 1 Park’s Marine Insurances 414 ............................................................................ 733 Firma C-Trade SA v. Newcastle Protection and Indemnity Association, The Fanti, Socony Mobil Oil Co Inc v. West of England Shipowners Mutual Insurance Association Ltd, The Padre Island [1990] 2 All ER 705; [1990] 2 Lloyd’s Rep 191 ........................................................................................... 792, 814 Fisher v. Cochran (1835) 5 Tyr 496 ............................................................................................................. 753 Fisher v. Liverpool Marine Insurance Co (1874) LR 9 QB 418 ............................................................... 739 Fisher v. Smith (1878) 4 App Cas 1 ............................................................................................................. 760 Fisher v. Unione Italian de Riassicurazione SpA [1999] Lloyd’s Rep IR 215 .......................................... 1141 Fisk v. Masterman (1841) 8 M & W 165 ..................................................................................................... 791 Fitzgerald v. Pole (1754) 4 Bro Parl Cas 439 .............................................................................................. 721 Fitzherbert v. Mather (1785) 1 TR 12 ......................................................................................................... 732 Fleetwood, Re [1926] Ch 48 ......................................................................................................................... 632 Fleming v. Smith (1848) 1 HL Cas 513 ................................................................................................ 771, 773 Fletcher v. Inglis (1819) 2 B & Ald 315 ...................................................................................................... 798 Flint v. Flemyng (1830) 1 B & Ad 45 .................................................................................................... 723, 801 Floyd v. Bush [1953] 1 Lloyd’s Rep 64 ........................................................................................................ 955 FNCB Ltd v. Barnet Devanney (Harrow) Ltd [1999] Lloyd’s Rep IR 459 .............................................. 728 Foley v. Moline (1814) 5 Taunt 430 ............................................................................................................ 733 Foley v. Tabor (1861) 2 F & F 663 ........................................................................................................ 746, 749 Foley v. United Fire and Marine Insurance Co of Sydney (1870) LR 5 CP 155 ..................................... 797 Fooks v. Smith [1924] 2 KB 508 ............................................................................................................ 769, 782 Forbes v. Aspinall (1811) 13 East 323 ...................................................................................727, 778, 781, 791 Forbes v. Cowie (1808) 1 Camp 520 ............................................................................................................ 778 Ford v. Metropolitan Police District Receiver [1921] 2 KB 344 ............................................................... 701 Forder v. Great Western Railway Co [1905] 2 KB 532 .............................................................................. 763 Forgan v. Pearl Life Assurance Co (1907) 51 Sol Jo 230 .......................................................................... 628 Forrester v. Pigou (1813) 1 M & S 9 ........................................................................................................... 729 Forsakringsaktiebolaget Skandia, Re Case C-241/97 [1999] ECR I-1879 ................................................. 504 Forsakringsaktieselskapet Vesta v. Butcher [1989] 1 Lloyd’s Rep 331 ...................................................... 746 Forshaw v. Chabert (1821) 3 Brod & Bing 158; (1821) 6 Moo CP 369 ............................746, 749, 750, 793 Forsikrings Vesta v. Butcher [1986] 2 All ER 588; [1989] 1 All ER 402 ........................................ 1110, 1125 Forster v. Christie (1809) 11 East 205 ........................................................................................... 762, 769, 784 Fort v. Lee (1811) 3 Taunt 381 .................................................................................................................... 733 Foster, Re [1938] 3 All ER 357 ..................................................................................................................... 632 Foster v. Wilmer (1746) 2 Str 1249 ............................................................................................................. 755 Fournier v. van Werven Case C–73/89 [1992] ECR I-5621 ....................................................................... 1022 Fowkes v. Manchester & London Life Assurance Co (1863) 3 B & S 917 .............................................. 747 Fowler v. English & Scottish Marine Insurance Co Ltd (1865) 18 CBNS 818 .................................. 770, 771 France, Fenwick & Co Ltd v. Merchants’ Marine Insurance Co Ltd [1915] 3 KB 290 .......................... 720 France, Fenwick & Co Ltd v. North of England Protection and Indemnity Association [1917] 2 KB 522 ........................................................................................................................................................... 762 Francis v. Boulton (1895) 65 LJQB 153; (1895) 1 Com Cas 217 ............................................... 767, 779, 783 Francovich v. Italian Republic [1991] ECR I–5337 .............................................................................. 936, 990 Frangos v. Sun Life Insurance Office Ltd (1934) 49 Ll LR 354 ............................................................... 750 Frans Maas (UK) Ltd v. Sun Alliance & London Insurance plc [2004] Lloyd’s Rep 649 ..................... 736 Fraser Shipping Ltd v. Colton [1997] 1 Lloyd’s Rep 586 ....................................................733 754, 767, 773 Freeland v. Glover (1806) 7 East 457 .......................................................................................................... 736 French Marine v. Compagnie Napolitaine d’Eclairage et de Chauffage par le Gaz [1921] 2 AC 494 ....... 767 Frenkel v. MacAndrews & Co Ltd [1929] AC 545 ...................................................................................... 755 Freshwater v. Western Australia Assurance Co Ltd [1933] 1 KB 515 ................................................ 815, 944

xxiii

Table of Cases Friends Provident Life and Pensions Ltd v. Sirius International Insurance Corporation [2006] Lloyd’s Rep IR 45 ......................................................................................................................................... 736, 772 Friere v. Woodhouse (1817) Holt NP 572 .................................................................................................. 736 Froom v. Butcher [1976] QB 286 ................................................................................................................ 945 Fuerst Day Lawson Ltd v. Orion Insurance Co Ltd [1980] 1 Lloyd’s Rep 656 ........................ 718, 720, 724 Fuji Finance Inc. v. Aetna Life Insurance Ltd [1996] 4 All ER 608; [1997] Ch 173 ....................... 626, 627 Furness Withy & Co Ltd v. Duder [1936] 2 KB 461 .................................................................................. 720 G H Renton & Co Ltd v. Black Sea and Baltic General Insurance Co Ltd [1941] 1 KB 206 ............... 718 Gabay v. Lloyd (1825) 3 B & C 793 ...................................................................................................... 743, 798 Gagniere Co Ltd v. Eastern Co of Warehouses Insurance (1921) 8 Ll LR 365 ...................................... 794 Gairdner v. Senhouse (1810) 3 Taunt 16 ............................................................................................. 755, 798 Gale v. Laurie (1826) 5 B & C 156 .............................................................................................................. 727 Gale v. Mitchell (1781) Park on Insurance 797 ......................................................................................... 791 Galloway v. Guardian Royal Exchange (UK) Ltd [1999] Lloyd’s Rep IR 209 ......................................... 730 Gamba v. Le Mesurier (1803) 4 East 407 .................................................................................................... 751 Gambles v. Ocean Insurance Co (1876) 1 Ex D 141 ................................................................................. 740 Gamelstaden plc v. Casa de Suecia SA [1994] 1 Lloyd’s Rep 433 ............................................................ 1140 Gan Insurance Co Ltd v. Tai Ping Insurance Co Ltd [1999] Lloyd’s Rep IR 229 ............. 1125, 1127, 1128 Gan Insurance Co Ltd v. Tai Ping Insurance Co Ltd (Nos 2 and 3) [2001] Lloyd’s Rep IR 667 ........ 731 Gan Insurance Co v. Tai Ping Insurance Co Ltd [1999] Lloyd’s Rep IR 472 ......................................... 1127 Gandy v. Adelaide Insurance Co (1871) LR 6 QB 746 ....................................................................... 735, 736 Gardiner v. Croasdale (1760) 2 Burr 904 ................................................................................................... 766 Gardiner v. Moore [1984] AC 548 ............................................................................................................... 991 Gardner v. Salvador (1831) 1 Moo & Rob 116 .................................................................................... 769, 770 Garrels v. Kensington (1799) 8 TR 230 ...................................................................................................... 748 Garrett v. Melhuish (1858) 4 Jur NS 943 .................................................................................................... 767 GE Frankona Reinsurance Ltd v. CMM Trust No 1400 ............................................................................ 745 GE Reinsurance Corporation v. New Hampshire Insurance Co [2004] Lloyd’s Rep IR 404 ................ 747 Gedge v. Royal Exchange Assurance Corporation [1900] 2 QB 214 .................................626, 721, 747, 751 Gee & Garnham Ltd v. Whittall [1955] 2 Lloyd’s Rep 562 ...................................................................... 765 General Accident Fire and Life Assurance Corporation v. Midland Bank [1940] 2 KB 388 ................. 764 General Accident Fire and Life Assurance Corporation v. Shuttleworth (1938) 60 LR 301 ................. 943 General Accident Fire and Life Assurance Corporation v. Tanter, The Zephyr [1984] 1 Lloyd’s Rep 58; [1985] 2 Lloyd’s Rep 529 ................................................................................................................ 729, 793 General Insurance Co Ltd of Trieste v. Royal Exchange Assurance (1897) 2 Com Cas 144 ................. 782 General Insurance Co Ltd of Trieste v. Cory [1897] 1 QB 335 ............................................................... 746 General Reinsurance Corporation v. Forskringsaktiebolaget Fennia Patria [1983] 2 Lloyd’s Rep 287 .... 793 General Shipping and Forwarding Co v. British General Insurance Co Ltd (1923) 15 Ll LR 175 .......741, 746 General Steam Navigation Co Ltd v. Commercial Union Assurance Co Ltd (1915) 31 TLR 630 ........ 768 Genforsikrings & Co v. Da Costa [1911] 1 KB 137 .................................................................................... 739 George Cohen Sons & Co v. Standard Marine Insurance Co Ltd (1924) 20 Ll LR 133; (1925) 21 Ll LR 30 ............................................................................................................................................... 735, 750, 767 George Hunt Cranes Ltd v. Scottish Boiler and General Insurance Co [2002] Lloyd’s Rep IR 178 .......... 815 Gerling-Konzern General Insurance Co v. Polygram Holdings, 1998, 2 Lloyd’s Rep 544 ..................... 745 Gernon v. Royal Exchange Assurance (1815) 6 Taunt 383 ....................................................................... 773 Geupratte v. Young (1854) 4 De G & Sm 217 ............................................................................................ 1131 Gibson v. Small (1853) 4 HL Cas 353 ................................................................................................... 724, 750 GIE Groupe Concorde v. Master of the Vessel Suhadiwarno Panjan Case C–440/97, [1999] 2 All ER (Comm) 700 ........................................................................................................................................... 1141 GIE v. Zurich Espana & Soptrans Case C-77/04, [2006] Lloyd’s Rep IR 215 ......................................... 1142 Gladitz, Re [1937] Ch 588 ............................................................................................................................. 632 Gladstone v. Clay (1813) 1 M & S 418 ........................................................................................................ 797 Gladstone v. King (1813) 1 M & S 35 ......................................................................................................... 732 Glafki Shipping Co SA v. Pinios Shipping Co, The Maria [1984] 1 Lloyd’s Rep 660 ............................ 721 Glasgow Assurance Corporation Ltd v. William Symondson & Co (1911) 16 Com Cas 109 .......... 735, 742 Gledstanes v. Royal Exchange Assurance Corporation (1864) 34 LJQB 30; (1864) 5 B & S 797 ... 724, 743 Glencore International AG v. Alpina Insurance Co Ltd [2004] 1 Lloyd’s Rep 111 ......................... 736, 742 Glencore International AG v. Ryan, The Beursgracht [2002] Lloyd’s Rep IR 335 .......................... 742, 772 Glenlivet, The [1894] P 48 ..................................................................................................................... 719, 781 Glenmuir v. Norwich Union 1995, unreported .......................................................................................... 943 Glennie v. London Assurance Co (1814) 2 M & S 371 ....................................................................... 767, 770 Gloucestershire Health Authority v. M A Torpy & Partners [1999] Lloyd’s Rep IR 203 ....................... 863 Glowrange Ltd v. CGU Insurance 2001, unreported ................................................................... 749, 763, 798 GMA v. Unistorebrand [1995] LRLR 333 ................................................................................................... 736 Goddard v. Garrett (1692) 2 Vern 269 ........................................................................................................ 721

xxiv

Table of Cases Godin v. London Assurance Co (1758) 1 Burr 489 ............................................................................ 744, 759 Godsall v. Boldero (1807) 9 East 72 ............................................................................................................ 627 Goldschmidt v. Whitmore (1811) 3 Taunt 508 ........................................................................................... 800 Goldsmid v. Gillies (1813) 4 Taunt 803 ........................................................................................ 772, 774, 779 Goodbarne v. Buck [1940] 1 KB 771 .......................................................................................................... 937 Gooding v. White (1913) 29 TLR 312 ......................................................................................................... 734 Goole and Hull Steam Towing Co Ltd v. Ocean Marine Insurance Co Ltd (1927) 29 Ll LR 242; [1928] 1 KB 589 ........................................................................................................................................... 777, 786 Gordon v. Rimmington (1807) 1 Camp 123 ........................................................................................ 719, 784 Gorsedd SS Co Ltd v. Forbes (1900) 5 Com Cas 413 ................................................................................ 790 Goshawk Dedicated Ltd v. Tyser & Co Ltd [2005] Lloyd’s Rep IR 379; [2006] 1 Lloyd’s Rep 566 ......737, 743, 759, 1063 Gosling v. Howard [1975] RTR 429 ............................................................................................................. 937 Goss v. Withers (1758) 2 Burr 683 .............................................................................................................. 769 Grace v. Leslie & Godwin Ltd [1995] LRLR 472 ............................................................................... 760, 1064 Graham Joint Stock Shipping Co Ltd v. Merchants’ Marine Insurance Co Ltd (1923) 17 Ll LR 44 .......... 757 Graham Joint Stock Shipping Co Ltd v. Motor Union Insurance Co [1922] 2 KB 563 ........................ 730 Graham v. Barras (1834) 5 B & Ad 1011 .................................................................................................... 753 Graham v. Entec Europe Ltd [2004] Lloyd’s Rep IR 661 ......................................................................... 787 Grainger v. Martin (1863) 4 B & S 9 .................................................................................................... 770, 773 Granada UK Rental & Retail v. Fareway [1995] 9 Cl 356 ......................................................................... 995 Grand Union Insurance Co Ltd v. Evans-Lombe Ashton & Co 1989, unreported ................................. 760 Grand Union Shipping Ltd v. London SS Owners’ Mutual Insurance Association Ltd, The Bosworth [1962] 1 Lloyd’s Rep 483 ...................................................................................................................... 775 Grant Smith & Co v. Seattle Construction & Dry Dock Co [1920] AC 162 ............................................ 799 Grant v. Aetna Insurance Co (1862) 15 Moo PC 516 ................................................................................ 738 Grant v. Hill (1812) 4 Taunt 380 ................................................................................................................. 792 Grant v. King (1802) 4 Esp 175 ............................................................................................................. 752, 755 Grant, Smith & Co & McDonnell v. Seattle Construction & Dry Dock Co [1920] AC 162 .................. 761 Gray v. Blackmore [1934] 1 KB 95 .............................................................................................................. 943 Gray v. Lloyd (1812) 4 Taunt 136 ................................................................................................................ 751 Great Indian Peninsula Railway Co v. Saunders (1862) 2 B & S 266 ................................................ 781, 784 Great North Eastern Railway v. Avon Insurance [2001] Lloyd’s Rep IR 793 .......................................... 794 Great Western Insurance Co Ltd, Re [1999] Lloyd’s Rep IR 377 ............................................................. 1062 Grecoair Inc v. Tilling [2005] Lloyd’s Rep IR 151 ..................................................................................... 724 Green Star Shipping Co Ltd v. London Assurance [1933] 1 KB 378 ...................................................... 776 Green v. British India Steam Navigation Co, The Matiana [1921] 1 AC 99 ..................................... 762, 784 Green v. Brown (1743) 2 Str 1199 ............................................................................................................... 768 Green v. Royal Exchange Assurance Co (1815) 6 Taunt 68 ............................................................... 768, 773 Green v. Young (1702) 2 Ld Raym 840 ....................................................................................................... 754 Greenfield, Re , Jackson v. Greenfield 1997, unreported .......................................................................... 814 Greenfield, Re, Jackson v. Greenfield 1998, unreported ........................................................................... 817 Greenhill v. Federal Insurance Co [1927] 1 KB 65 ................................................................................... 733 Greenock SS Co v. Maritime Insurance Co [1903] 2 KB 657; The Vortigern [1899] P 140 ... 744, 749, 750 Greenslade v. London & Manchester Industrial Insurance Co Ltd (1913) 48 Sol JO 330 .................... 627 Greer v. Poole (1880) 5 QBD 272 ....................................................................................................... 763, 1127 Gregory v. Christie (1784) 3 Doug 419 ....................................................................................................... 754 Gregson v. Gilbert (1783) 3 Doug KB 232 ................................................................................................. 765 Griffin v. Squires [1958] 3 All ER 468 ........................................................................................................ 957 Griffiths, Re [1903] 1 Ch 739 ....................................................................................................................... 632 Griffiths v. Bramley-Moore (1878) 4 QBD 70 ............................................................................................. 724 Griffiths v. Fleming [1909] 1 KB 805 .................................................................................................... 627, 632 Grouds v. Dearsley (1935) 51 Ll LR 203 ..................................................................................................... 764 Group Josi Re v. Walbrook Insurance Co Ltd [1996] 1 Lloyd’s Rep 345 ......................................... 732, 737 Group Josi Reinsurance Co SA v. Universal General Insurance Co Case C-412/98, [2001] Lloyd’s Rep IR 483 ...................................................................................................................................................... 1141 Groupama Navigation et Transports Continent SA v. Catatumbo Ca Seguros [2001] Lloyd’s Rep IR 141 ........................................................................................................................................................... 746 Grover and Grover Ltd v. Matthews [1910] 2 KB 401 ............................................................................... 792 Guardian Assurance Co Ltd v. Sutherland [1939] 2 All ER 246; (1939) 63 L1 LR 220 .................. 944, 949 Gulf & Southern SS Co Inc v. British Traders Insurance Co Ltd [1930] 1 KB 451 ............................... 801 Gunns v. Par Insurance Brokers [1997] 1 Lloyd’s Rep 173 ................................................................ 732, 735 Gunter v. Metropolitan Police District Receiver (1888) 5 TLR 88 ........................................................... 700 Gurtner v. Circuit [1968] 2 QB 587 ...................................................................................................... 990, 991 Guthrie v. North China Insurance Co Ltd (1902) 7 Com Cas 130 .......................................................... 768

xxv

Table of Cases Hadkinson v. Robinson (1803) 3 Bos & P 388 .................................................................................... 762, 784 Hagedorn v. Oliverson (1814) 2 M & S 485 ............................................................................................... 792 Hagedorn v. Whitmore (1816) 1 Stark 157 ................................................................................................ 798 Hahn v. Corbett (1824) 2 Bing 205 ...................................................................................................... 764, 799 Haigh v. De La Cour (1812) 3 Camp 319 ................................................................................................... 741 Hain SS Co v. Board of Trade [1929] AC 534 ........................................................................................... 762 Halford v. Kymer (1830) 10 B & C 724 ...................................................................................................... 627 Halhead v. Young (1856) 6 E & B 312 ................................................................................................. 720, 723 Hall Brothers SS Co Ltd v. Young, The Trident [1939] 1 KB 748 ........................................................... 720 Hall v. Hayman [1912] 2 KB 5 ..................................................................................................................... 770 Hamilton & Co v. Eagle Star and British Dominions Insurance Co Ltd (1924) 19 Ll LR 242 ............. 738 Hamilton v. Pandorf (1887) 12 App Cas 518 ............................................................................................. 765 Hamilton v. Sheddon (1837) 3 M & W 49 ................................................................................................. 755 Hamilton, Fraser & Co v. Pandorf & Co (1887) 12 App Cas 518 ............................................................ 799 Hammond v. Reid (1820) 4 B & Ald 72 ..................................................................................................... 798 Hampshire Land, Re [1896] 2 Ch 743 .................................................................................................. 732, 737 Handtre & Co GmbH v. Soci´et´e Traitements Mecano-chimiques des Surfaces Case 26/91 [1992] ECR I-3967 ....................................................................................................................................................... 1140 Hansen v. Dunn (1906) 11 Com Cas 100 ................................................................................................... 768 Harding Maughan Hambly v. CECAR [2000] Lloyd’s Rep IR 293 ........................................................... 760 Hardy v. Motor Insurers’ Bureau [1964] 2 QB 745 ................................................................... 990, 991, 1113 Hare v. Travis (1827) 7 B & C 14 .......................................................................................................... 753, 754 Harford v. Maynard (1785) 1 Park on Marine Insurance 36 ........................................................................ 799 Harman v. Kingston (1811) 3 Camp 150 .................................................................................................... 743 Harman v. Vaux (1813) 3 Camp 429 ........................................................................................................... 801 Harmonides, The [1903] P 1 ....................................................................................................................... 770 Harocopos v. Mountain (1934) 49 Ll LR 267 ...................................................................................... 749, 750 Harper & Co Ltd v. Mackechnie & Co (1925) 22 Ll LR 514) .................................................................. 733 Harrington v. Halkeld (1778) 2 Park on Marine Insurance 639 .................................................................. 756 Harrington v. Link Motor Policies at Lloyd’s [1989] 2 Lloyd’s Rep 310 ................................................. 949 Harrington Motor Co, Re [1928] Ch 105 ................................................................................................... 812 Harris and Dixon (Insurance Brokers) Ltd v. Graham (Run-Off) Ltd, 1989, unreported .................... 759 Harrison v. Alliance Assurance Co [1903] 1 KB 184 ................................................................................. 632 Harrison v. Shipping Controller, The Inkonka [1921] 1 KB 122 ............................................................. 762 Harrison v. Universal Marine Insurance Co (1862) 3 F & F 190 ............................................................. 765 Harrison v. Hill 1932 JC 13 .......................................................................................................................... 957 Harrower v. Hutchinson (1870) LR 5 QB 584 ........................................................................................... 733 Harse v. Pearl Assurance Co [1904] 1 KB 558 ........................................................................................... 627 Hart v. Standard Marine Insurance Co (1889) 22 QBD 499 .................................................................... 746 Hartley v. Buggin (1781) 3 Doug KB 39) ................................................................................................... 754 Hassett v. Legal and General Assurance Society (1939) 63 Ll LR 278 .................................................... 815 Hatton v. Hall [1997] RTR 167 ............................................................................................................. 937, 994 Haughton v. Empire Marine Insurance Co (1866) LR 1 Ex 206 ............................................................. 797 Havelock v. Hancill (1789) 3 TR 277 .......................................................................................................... 800 Haversham Grange, The [1905] P 307 ........................................................................................................ 782 Haworth v. Dawson (1946) 80 L1 LR 19 ..................................................................................................... 947 Haycock’s Policy, Re (1876) 1 Ch D 611 ............................................................................................. 629, 1111 Haywood v. Rodgers (1804) 4 East 590 ....................................................................................................... 736 Hazel v Whitlam [2005] Lloyd’s Rep IR 168 ...................................................................................... 736, 1063 Hearne v. Edmunds (1819) 1 Brod & Bing 388 ......................................................................................... 801 Heath Lambert Ltd v. Sociedad de Corretage de Seguros (No 2) [2006] Lloyd’s Rep IR 797 ............ 760 Heath Lambert Ltd v. Sociedad de Corretage de Seguros [2004] 1 Lloyd’s Rep 495; [2004] Lloyd’s Rep IR 905 .............................................................................................................................747, 758, 759, 1126 Hebdon v. West (1863) 3 B & S 579 ........................................................................................................... 627 Hedburg v. Pearson (1816) 7 Taunt 154 .................................................................................................... 782 Heesens Yacht Builders BV v. Cox Syndicate Management Ltd, The Red Sapphire [2006] Lloyd’s Rep IR 476 ...................................................................................................................................................... 719 Heinrich Hirdes GmbH v. Edmunds, The Kiel [1991] 2 Lloyd’s Rep 546 .............................................. 752 Hellenic Industrial Development Bank SA v. Atkin, The Julia [2003] Lloyd’s Rep IR 365 ................... 777 Helmville Ltd v. Yorkshire Insurance Co Ltd, The Medina Princess [1965] 1 Lloyd’s Rep 361 ...742, 766, 778 Hemmings v. Sceptre Life Association [1905] 1 Ch 365 ........................................................................... 747 Henchman v. Offley (1782) 3 Doug KB 135 .............................................................................................. 743 Henderson Brothers v. Shankland & Co [1896] 1 QB 525 ................................................................ 776, 778 Henderson v. Merrett Syndicates Ltd [1994] 3 All ER 506 ....................................................................... 1110 Henkle v. Royal Exchange Assurance Co (1749) 1 Ves Sen 317 ........................................................ 791, 794

xxvi

Table of Cases Henry v. Geoprosco International Ltd [1976] QB 726 ............................................................................. 1115 Henson v. Blackwell (1845) 4 Hare 434 ...................................................................................................... 627 Hepburn v. Tomlinson (Hauliers) [1966] AC 451 .............................................................................. 726, 780 Herbert v. Carter (1787) 1 TR 745) ............................................................................................................ 722 Herbert v. Railway Passengers Assurance Co (1938) 60 L1 LR 143 ......................................................... 949 Herring v. Janson (1895) 1 Com Cas 177 .................................................................................... 727, 734, 741 Heselton v. Allnutt (1813) 1 M & S 46 ....................................................................................................... 755 Hewitt v. London General Insurance Co Ltd (1925) 23 Ll LR 243 .......................................... 744, 753, 755 Heyman v. Parrish (1809) 2 Camp 149 ....................................................................................................... 800 Hibbert v. Martin (1808) 1 Camp 538; (1808) Park’s Marine Insurances 473 ................................. 750, 800 Hibbert v. Pigou (1783) 3 Doug KB 224 ..................................................................................................... 745 Hibernia Foods plc v. McAuslin, The Joint Frost [1998] 1 Lloyd’s Rep 310 ............................ 718, 720, 798 Hickie & Borman v. Rodocanachi (1859) 4 H & N 455 ........................................................................... 774 Hicks v. Shield (1857) 26 LJQB 205 ............................................................................................................ 725 Hide v. Bruce (1783) 3 Doug 213 ............................................................................................................... 746 Highlands Insurance Co v. Continental Insurance Co [1987] 1 Lloyd’s Rep 109n ............................... 738 HIH Casualty and General Insurance Ltd v. Axa Corporate Solutions [2002] Lloyd’s Rep IR 325, affirmed [2003] Lloyd’s Rep IR 1 ........................................................................................................ 747 HIH Casualty and General Insurance Ltd v. Chase Manhattan Bank [2003] Lloyd’s Rep IR 230 .......728, 729, 736, 737, HIH Casualty and General Insurance Ltd v. JTL Risk Solutions [2007] 2 Lloyd’s Rep 278 ................. 1063 HIH Casualty and General Insurance Ltd v. New Hampshire Insurance Co [2001] Lloyd’s Rep IR 596 ....747, 794 Hill v. Patten (1807) 8 East 373 ................................................................................................................... 727 Hill v. Scott [1895] 2 QB 713 ....................................................................................................................... 721 Hills v. London Assurance Corporation (1839) 5 M & W 569 ................................................................. 782 Hindustan SS Co v. Admiralty Commissioners (1921) 8 Ll LR 230 ......................................................... 762 Hine Bros v. Steamship Insurance Syndicate Ltd, The Netherholme (1895) 72 LT 79 ......................... 759 Hobbs v. Hannam (1811) 3 Camp 93 ........................................................................................... 722, 726, 800 Hodgson v. Glover (1805) 6 East 316 .......................................................................................................... 721 Hodgson v. Malcolm (1806) 2 Bos & PNR 336 .......................................................................................... 799 Hodson v. Observer Life Assurance Society (1857) 8 E & B 40 ............................................................... 628 Hoffmann & Co v. British General Insurance Co (1922) 10 Ll LR 434 .................................................. 749 Hogarth v. Walker [1900] 2 KB 283 ............................................................................................................ 727 Hogg v. Horner (1797) 2 Park on Marine Insurance 782 ............................................................................ 791 Holdsworth v. Wise (1828) 7 B & C 794 ............................................................................................... 749, 750 Holland v. Russell (1863) 4 B & S 14 .......................................................................................................... 773 Hollingworth v. Brodrick (1837) 7 Ad & E 40 ........................................................................................... 750 Hong Kong Borneo Services Ltd v. Pilcher [1992] 2 Lloyd’s Rep 593 ................................................... 717 Hong Kong Fir Shipping Co v. Kawasaki Kisen Kaisha [1962] 2 QB 26 ................................................. 749 Hood v. West End Motor Car Packing Co [1917] 2 KB 38 ................................................................ 733, 802 Hood’s Trustees v. Southern Union General Insurance Co of Australasia [1928] Ch 739 ................... 812 Hopper v. Wear Marine Insurance Co (1882) 46 LT 107 ......................................................................... 797 Hore v. Whitmore (1778) 2 Cowp 784 ................................................................................................. 746, 753 Horncastle v. Suart (1807) 7 East 400 ......................................................................................................... 767 Horneyer v. Lushington (1812) 15 East 46 .......................................................................................... 752, 797 Hoskins v. Pickersgill (1783) 3 Dougl 222 .................................................................................................. 727 Hough & Co v. Head (1885) 55 LJQB 43 ................................................................................................... 752 Houghton and Mancon Ltd v. Sunderland Marine Mutual Insurance Co, The Ny-Eeasteyr [1988] 1 Lloyd’s Rep 60 ........................................................................................................................................ 800 Houstman v. Thornton (1816) Holt NP 242 ........................................................................................ 768, 774 Howard v. Jones [1975] RTR 150 ................................................................................................................ 937 Howard v. Refuge Friendly Society (1886) 54 LT 644 ............................................................................... 627 Hubbard v. Glover (1812) 3 Camp 313 ....................................................................................................... 738 Hucks v. Thornton (1815) Holt NP 30 ....................................................................................................... 800 Hudson v. Bilton (1856) 2 Jur NS 784 ........................................................................................................ 753 Hudson v. Harrison (1821) 3 B & B 97 ...................................................................................................... 773 Hughes v. Liverpool Victoria Friendly Society [1916] 2 KB 482 .............................................................. 627 Hull v. Cooper (1811) 14 East 479 .............................................................................................................. 752 Hunt v. Royal Exchange Assurance (1816) 5 M & S 47 ............................................................................ 773 Hunter v. Potts (1815) 4 Camp 203 ............................................................................................................ 765 Hunter v. Wright (1830) 10 B & C 714 ....................................................................................................... 790 Hunting & Son v. Boulton (1895) 1 Com Cas 120 .................................................................................... 752 Hurry v. Royal Exchange Assurance (1801) 3 Esp 289; (1802) 3 Bos & P 308 ................................ 779, 797 Hussain v. Brown [1996] 1 Lloyd’s Rep 627 ............................................................................................... 745

xxvii

Table of Cases Hussain v. Brown (No 2) unreported .......................................................................................................... 730 Hutchins Bros v. Royal Exchange Corporation [1911] 2 KB 398 ............................................................. 766 Hutchinson v. Wright (1858) 25 Beav 444 .................................................................................................. 726 Hydarnes SS Co v. Indemnity Mutual Marine Assurance Co [1895] 1 QB 500 ...................................... 797 Hyderabad (Deccan) Co v. Willoughby [1899] 2 QB 530 .................................................................. 718, 755 Ide and Christie v. Chalmers and White (1900) 5 Com Cas 212 ............................................................. 718 If P Insurance Ltd (Publ) v. Silversea Cruises Ltd [2004] Lloyd’s Rep IR 696 ................................ 761, 763 Ikarian Reefer, The [1995] 1 Lloyd’s Rep 445 ........................................................................................... 764 Imperial Marine Insurance Co v. Fire Insurance Corporation (1879) 4 CPD 166 ................................. 743 Inglis v. Stock (1885) 10 App Cas 263 .................................................................................................. 720, 724 Inman SS Co v. Bischoff (1882) 7 App Cas 670 .................................................................................. 736, 762 Insurance Corporation of the Channel Islands v. Royal Hotel [1998] Lloyd’s Rep IR 151 ............ 728, 734 Integrated Container Service Inc v. British Traders Insurance Co Ltd [1981] 2 Lloyd’s Rep 460; [1984] 1 Lloyd’s Rep 154 ............................................................................................................................ 783, 784 International Lottery Management v. Dumas [2002] Lloyd’s Rep IR 237 ................................ 729, 733, 738 International Management Group (UK) Ltd v. Simmonds [2004] Lloyd’s Rep IR 247 .......... 729, 734, 745 Interpart Comerciao e Gestao SA v. Lexington Insurance Co [2004] Lloyd’s Rep IR 690 ................... 730 Inversiones Manria SA v. Sphere Drake Insurance Co plc, The Dora [1989] 1 Lloyd’s Rep 69 ... 733, 735, 1099, 1108 Investors Compensation Scheme v. West Bromwich Building Society [1998] 1 WLR 896 .................... 743 Ioakimidis, Re [1925] 1 Ch 403 .................................................................................................................... 632 Ionides v. Pacific Fire and Marine Insurance Co Ltd (1871) LR 6 QB 674; (1872) LR 7 QB 517 ........729, 733, 738, 741, 743, 793, 794, Ionides v. Pender (1872) 27 LT 244; (1874) LR 9 QB 531 ................................................................ 734, 800 Ionides v. Universal Marine Insurance Association (1863) 14 CBNS 259 ............................................... 763 Irish Shipping Ltd v. Commercial Union Assurance Co plc [1989] 2 Lloyd’s Rep 144 ........................ 814 Iron Trades Mutual Insurance Co Ltd v. Buckenham Ltd [1989] 2 Lloyd’s Rep 85 ............................. 1110 Iron Trades Mutual Insurance Co Ltd v. Companhia de Seguros Imperio [1991] 1 Re LR 225 ......... 728 Irvin v. Hine [1949] 2 All ER 1089; [1950] 1 KB 555 ................................................................. 770, 778, 785 Irving v. Manning (1847) 1 HL Cas 287 ...............................................................................741, 742, 770, 779 Irving v. Richardson (1831) 2 B & Ad 193 ................................................................................... 721, 726, 745 Islamic Arab Insurance Co v. Saudi Egyptian American Reinsurance Co [1987] 1 Lloyd’s Rep 315 ......... 1127 Islander Trucking Ltd v. Hogg Robinson & Gardner Mountain (Marine) Ltd [1990] 1 All ER 808 ......... 1110 Issaias (Elfie) v. Marine Insurance Co Ltd (1923) 15 Ll LR 186 ............................................................. 764 J A & Co Ltd v. Kadirga Denizcilik Ve Ticaret [1998] Lloyd’s Rep IR 377 ............................................. 746 J A Chapman & Co Ltd v. Kadirga Denizcilik Ve Ticaret [1998] Lloyd’s Rep IR 377 ..................... 759, 791 J Kirkaldy & Sons Ltd v. Walker [1999] Lloyd’s Rep IR 410 ...................................................... 736, 747, 749 J R M (Plant) Ltd v. Hodgson [1960] 1 Lloyd’s Rep 538 ......................................................................... 937 Jackson v. Mumford (1904) 9 Com Cas 114 ......................................................................................... 719, 766 Jackson v. Union Marine Insurance Co (1874) LR 10 CP 125 ........................................................... 765, 767 Jacob v. Gaviller (1902) 7 Com Cas 116 ...................................................................................................... 719 James v. CGU Insurance plc [2002] Lloyd’s Rep IR 206 .................................................................... 734, 745 James Miller & Partners Ltd v. Whitworth Street Estates (Manchester) Ltd [1970] AC 583 ................ 1125 James W Elwell, The [1921] P 351 .............................................................................................................. 725 James Yachts Ltd v. Thames and Mersey Marine Insurance Co Ltd [1977] 1 Lloyd’s Rep 206 ............ 751 Jamieson and Newcastle SS Freight Insurance Association, Re [1895] 2 QB 90 ..................................... 765 Janson v. Driefontein Consolidated Gold Mines Ltd [1902] AC 484 ....................................................... 751 Janson v. Poole (1915) 20 Com Cas 232 ..................................................................................................... 741 Jardine v. Leathley (1863) 32 LJQB 132 ..................................................................................................... 773 Jell v. Pratt (1817) 2 Stark 67 ....................................................................................................................... 759 Jester-Barnes v. Licences and General Insurance Co Ltd (1934) 49 Ll LR 231 ...................................... 1099 John Edwards & Co v. Motor Union Insurance Co Ltd [1922] 2 KB 249 ............................................... 786 John Martin v. Russell [1960] 1 Lloyd’s Rep 554 ....................................................................................... 752 Johnson & Co Ltd v. Bryant (1896) 1 Com Cas 363 ................................................................................. 752 Johnson v. Sheddon (1802) 2 East 581 ....................................................................................................... 779 Johnston v. Sutton (1779) Doug 254 ........................................................................................................... 751 Jones v. Birch Brothers Ltd (1933) 46 Ll LR 277 ...................................................................................... 944 Jones v. Crawley Colosso [1996] 2 Lloyd’s Rep 619 ................................................................................... 1064 Jones v. DPP [1999] RTR 1 .......................................................................................................................... 937 Jones v. Neptune Marine Insurance Co (1872) LR 7 QB 702 .................................................................. 797 Jones v. Nicholson (1854) 10 Ex 28 ............................................................................................................ 800 Jones v. Trollope & Colls Cementation Overseas Ltd (1990) The Times, 26 January .............................. 1131 Jones v. Welsh Insurance Corporation Ltd (1937) 59 L1 LR 13 .............................................................. 943 Jordan Nicolov, The [1990] 2 Lloyd’s Rep 11 ............................................................................................ 815 Joyce v. Kennard (1871) LR 7 QB 78 ................................................................................................... 726, 780

xxviii

Table of Cases Joyce v. Swann (1864) 13 CBNS 84 ............................................................................................................. 723 K/S Merc-Skandia XXXXII v. Lloyd’s Underwriters, The Mercandian Continent [2001] Lloyd’s Rep IR 802 ............................................................................................................................ 723, 729, 730, 772, 815 Kacianoff v. China Traders Insurance Co Ltd [1914] 3 KB 1121 ............................................................. 762 Kallis Manufacturers v. Success Insurance [1985] 2 Lloyd’s Rep 8 .......................................................... 753 Kaltenbach v. Mackenzie (1878) 3 CPD 467 ................................................................................ 762, 772, 773 Kastor Navigation Co Ltd v. AGF MAT, The Kastor Too [2004] Lloyd’s Rep IR 481 ..... 771, 773, 778, 782, 798 Kausar v. Eagle Star Insurance Co Ltd [2000] Lloyd’s Rep IR 154 ................................................... 729, 733 Keevil and Keevil Ltd v. Boag (1940) 67 L1 LR 263 .................................................................................. 730 Keighley, Maxsted & Co v. Durant [1901] AC 240 .................................................................................... 792 Keith v. Burrows (1877) 2 App Cas 636 ...................................................................................................... 774 Kelly v. Cornhill Insurance Co Ltd [1964] 1 Lloyd’s Rep 1 ..................................................................... 944 Kelly v. Walton (1808) 2 Camp 155 ............................................................................................................. 773 Kemp v. Halliday (1865) LR 1 QB 520 ................................................................................................. 767, 770 Kent v. Bird (1777) 2 Cowp 583 .................................................................................................................. 721 Kenyon v. Berthon (1778) 1 Doug 12n ....................................................................................................... 745 Kerridge v. Rush [1952] 2 Lloyd’s Rep 305 ................................................................................................ 937 Kewley v. Ryan (1794) 2 H Bl 343 ......................................................................................................... 743, 755 Kidston v. Empire Marine Insurance Co (1866) LR 1 CP 535; (1867) LR 2 CP 357 ......775, 782, 783, 784 Kin Yuen Co Pte Ltd v. Lombard Insurance Co Ltd (1995) Lloyd’s List, 26 April; [1995] 1 SLR 643 ....... 740 King, Re (1879) 14 Ch D 179 ....................................................................................................................... 629 King v. Brandywine Reinsurance Co (UK) Ltd [2005] Lloyd’s Rep IR 509; [2004] Lloyd’s Rep IR 554 .....783, 1126 King v. Victoria Insurance Co [1896] AC 250 ............................................................................................ 786 King v. Walker (1864) 2 H & C 384; (1864) 3 H & C 209 ......................................................... 766, 772, 773 Kingscroft v. Nissan Fire and Marine Insurance Co Ltd (No 2) [1999] Lloyd’s Rep IR 596 .......... 735, 738 Kingscroft v. Nissan Fire and Marine Insurance Co Ltd [1999] Lloyd’s Rep IR 371 ............................. 732 Kingsford v. Marshall (1832) 8 Bing 458 .................................................................................................... 801 Kingston v. Knibbs (1808) 1 Camp 508n .............................................................................................. 733, 797 Kingston v. Phelps (1793) 1 Peake 299; (1795) 7 TR 165n ................................................................ 755, 756 Kirby v. Smith (1818) 1 B & Ald 672 .......................................................................................................... 733 Kiriacoulis Lines SA v. Compagnie d’Assurances Maritime Ariennes et Terrestres, The Demetra K [2002] Lloyd’s Rep IR 795 ...................................................................................................... 761, 763, 794 Kleinwort Benson Ltd v. Glasgow City Council [1997] 1 All ER 153; [1996] 2 All ER 257 .................. 1140 Kleinwort v. Shepherd (1859) 1 E & E 447 ................................................................................................ 799 Kler Knitwear Ltd v. Lombard General Insurance Co Ltd [2000] Lloyd’s Rep IR 47 ........................... 745 Knapp v. Ecclesiastical Insurance Group [1998] Lloyd’s Rep IR 390 ...................................................... 1110 Knight v. Cambridge (1724) 1 Str 581 ........................................................................................................ 800 Knight v. Faith (1850) 15 QB 649 ......................................................................................................... 762, 782 Knight of St Michael, The [1898] P 30 ......................................................................................... 719, 762, 784 Knox v. Wood (1808) 1 Camp 543 .............................................................................................................. 721 Koebel v. Saunders (1864) 33 LJCP 310; (1864) 17 CBNS 71 ........................................................... 751, 765 Komimnos S, The [1991] 1 Lloyd’s Rep 371 .............................................................................................. 1131 Konkola Copper Mines plc v. Coromin [2006] Lloyd’s Rep IR 71 .......................................................... 1141 Koster v. Reed (1826) 6 B & C 19 ............................................................................................................... 768 Kronhofer v. Maier Case C-168/02 [2005] 1 Lloyd’s Rep 284 .................................................................. 1142 Kulukundis v. Norwich Union Fire Insurance Society [1937] 1 KB 1 ..................................................... 767 Kumar v. AGF Insurance Ltd [1999] Lloyd’s Rep IR 147 ........................................................... 736, 746, 747 Kusel v. Atkin, The Catariba [1997] 2 Lloyd’s Rep 749 ...................................................................... 778, 782 Kuwait Airways Corporation v. Kuwait Insurance Co SAK [1996] 1 Lloyd’s Rep 664, [1999] 1 Lloyd’s Rep 803 ............................................................................................................ 761, 763, 769, 783, 784, 787 Kuwait Airways Corporation v. Kuwait Insurance Co SAK (No 3) [2000] Lloyd’s Rep IR 678 ............. 777 Kynance SS Co v. Young (1911) 16 Com Cas 123 ............................................................................... 752, 755 Kyriaki, The [1993] 1 Lloyd’s Rep 137 ................................................................................................. 772, 782 Kyzuna Investments Ltd v. Ocean Marine Mutual Insurance Assoc (Europe) [2000] 1 Lloyd’s Rep 505 ........................................................................................................................................................... 741 La Banque Financi`ere de la Cit´e v. Westgate Insurance Co [1990] 2 All ER 947 .................................. 731 La Fabrique de Produits Chimiques SA v. Large (1922) 13 Ll LR 269; [1923] 1 KB 203 .............. 782, 799 Labroke v. Lee (1850) 4 De G & Sm 106 ................................................................................................... 726 Laing v. Glover (1813) 5 Taunt 49 .............................................................................................................. 746 Laing v. Union Marine Insurance Co Ltd (1895) 1 Com Cas 11 ...................................................... 733, 756 Laird v. Robertson (1791) 4 Bro Parl Cas 488 ........................................................................................... 793 Lake, Re [1903] 1 KB 151 ............................................................................................................................. 629 Lamb Head Shipping Co Ltd v. Jennings, The Marel [1992] 1 Lloyd’s Rep 402; [1994] 1 Lloyd’s Rep 624 ............................................................................................................................................. 749, 763, 799

xxix

Table of Cases Lancashire County Council v. Municipal Mutual Insurance Ltd [1995] LRLR 293 ............................... 780 Landcatch Ltd v. The Braer Corporation [1999] 2 Lloyd’s Rep 316 ....................................................... 868 Lane v. Nixon (1866) LR 1 CP 412 ............................................................................................................. 750 Lang v. Anderdon (1824) 3 B & C 495 ....................................................................................................... 753 Langhorn v. Allnutt (1812) 4 Taunt 511 .................................................................................................... 755 Langhorn v. Hardy (1812) 4 Taunt 628 ...................................................................................................... 797 Lanyon v. Blanchard (1811) 2 Camp 597 ................................................................................................... 760 Laurie v. West Hartlepool SS Thirds Indemnity Association and David (1899) 4 Com Cas 322 .......... 757 Lavabre v. Wilson (1779) 1 Doug KB 284 ................................................................................................... 756 Laveroni v. Drury (1852) 22 LJ Ex 2 ........................................................................................................... 765 Law v. London Indisputable Life Policy Co (1855) 1 K & J 2233 ............................................................ 627 Law v. Thomas (1964) 108 Sol Jo 158 ......................................................................................................... 955 Lawrence v. Aberdein (1821) 5 B & Ald 107 ..................................................................................... 743, 7989 Lawrence v. Howlett [1952] 2 All ER 74 ..................................................................................................... 955 Lawrence v. Sydebotham (1805) 6 East 45 ................................................................................................. 756 Lawther v. Black (1901) 6 Com Cas 196 ............................................................................................... 720, 781 Le Cheminant v. Pearson (1812) 4 Taunt 367 ..................................................................................... 748, 782 Le Mesurier v. Vaughan (1805) 6 East 382 ................................................................................................. 741 Le Pypre v. Farr (1716) 2 Vern 516 ............................................................................................................. 721 Lea v. Hinton (1854) 5 De G M & G 823 ................................................................................................... 627 Leathertex Divisione Sintetici SpA v. Bodetex BVBA Case C–420/97, [1999] 2 All ER (Comm) 769 ....... 1140 Leathley v. Hunter (1831) 7 Bing 517 ........................................................................................................ 755 Leathley v. Tatton [1980] RTR 21 ............................................................................................................... 937 Lebon & Co v. Straits Insurance Co (1894) 10 TLR 517 .......................................................................... 735 Lee v. Southern Insurance Co (1870) LR 5 CP 397 .................................................................................. 783 Lees v. Motor Insurers Bureau [1952] 2 Lloyd’s Rep 210; [1952] 2 TLR 356 ................................. 937, 941 Lefevre v. White [1990] 1 Lloyd’s Rep 569 ........................................................................................ 815, 1111 Legal & General Assurance Society v. Drake Insurance Co Ltd [1992] 1 All ER 283; [1992] 1 All ER 283 ......................................................................................................................................745 789, 943, 948 Leigh v. Adams (1871) 25 LT 566 ............................................................................................................... 733 Lemos v. British and Foreign Marine Insurance Co Ltd (1931) 39 Ll LR 275 ....................................... 764 Leon v. Casey [1932] 2 KB 576 .............................................................................................................. 718, 730 Leroux v. Brown (1852) 12 CB 801 ............................................................................................................. 1130 Letchford v. Oldham (1880) 5 QBD 538 .................................................................................................... 801 Levy & Co v. Merchants’ Marine Insurance Co (1885) Cab & Ell 474 .................................................... 726 Levy v. Barnard (1818) 8 Taunt 149 ............................................................................................................ 759 Lewis v. Rucker (1761) 2 Burr 1167 ...................................................................................................... 741, 779 Leyland Shipping Co Ltd v. Norwich Union Fire Insurance Society Ltd [1918] AC 350 ............... 761, 799 Liberian Insurance Agency v. Mosse [1977] 2 Lloyd’s Rep 560 ................................................. 729, 733, 744 Libyan Arab Foreign Bank v. Manufacturers Hanover Trust Co [1989] 1 Lloyd’s Rep 608 .................. 1125 Lidgett v. Secretan (1870) LR 5 CP 190; (1871) LR 6 CP 616 ................................. 752, 777, 778, 782, 797 Limbrick v. French & Farley [1990] CLY 2709 ........................................................................................... 940 Lincoln National Life Insurance Co v. Employers Reinsurance Corp [2002] Lloyd’s Rep IR 853 ....... 1128 Lind v. Mitchell (1928) 32 Ll LR 70 ............................................................................................. 764, 769, 798 Lindsay v. Janson (1859) 4 H & N 699 ....................................................................................................... 752 Lindsay Blee Depots Ltd v. Motor Union Insurance Co Ltd (1930) 37 Ll LR 220 ................................ 797 Linelevel Ltd v. Powszechny Zaklad Ubezpieczen SA, The Nore Challenger [2005] 2 Lloyd’s Rep 534 .....723, 757, 784, 785, 798 Lishman v. Northern Maritime Insurance Co (1875) LR 10 CP 179 ................................................ 729, 746 Lister v. Romford Ice & Cold Storage Co Ltd [1957] AC 555 ................................................................. 957 Liverpool & London War Risks Insurance Association v. Marine Underwriters of SS Richard de Larringa [1921] 2 AC 144 ..................................................................................................................... 762 Liverpool Corporation v. Roberts & Marsh [1964] 2 Lloyd’s Rep 219 .................................................... 943 Livie v. Janson (1810) 12 East 648 ............................................................................................................... 782 Lloyd Instruments Ltd v. Northern Star Insurance Co Ltd, The Miss Jay Jay [1987] 1 Lloyd’s Rep 32 .......761, 763, 799 Lloyd v. Fleming (1872) LR 7 QB 299 .................................................................................................. 757, 758 Lloyd v. Singleton [1953] 1 QB 357 ............................................................................................................ 937 Lloyd’s Register of Shipping v. Soci´et´e Campenon Bernard Case 439/93 [1995] All ER (EC) 531 .... 1141 Lloyd-Wolper v. Moore [2004] Lloyd’s Rep IR 730 .................................................................................... 948 Lockyer v. Offley (1786) 1 TR 252 ................................................................................................ 752, 797, 800 London & Midland Bank v. Mitchell [1899] 2 Ch 161 ............................................................................. 1111 London and Lancashire Fire Insurance Co v. Bolands [1924] AC 836 ............................................. 700, 809 London and Manchester Plate Glass Co v. Heath [1913] 1 KB 411 .................................................. 700, 809 London and Provincial Leather Processes Ltd v. Hudson [1939] 2 KB 724 ........................................... 769

xxx

Table of Cases London County Commercial Reinsurance Office Ltd, Re [1922] 2 Ch 67 .......................627, 718, 722, 791 London General Insurance Co v. General Marine Underwriters Association [1921] 1 KB 104 ..... 732, 736 London Steamship Owners Insurance Co v. Grampian Steamship Co (1890) 24 QB 663 .................... 720 London Steamship Owners’ Mutual Association Ltd v. Bombay Trading Ltd, The Felicie [1990] 2 Lloyd’s Rep 21 ........................................................................................................................................ 815 Lonrho Exports Ltd v. Export Credit Guarantee Department [1996] 4 All ER 673 .............................. 787 Loraine v. Thomlinson (1781) 2 Doug KB 585 .......................................................................................... 791 Lothian v. Henderson (1803) 3 Bos & P 499 ............................................................................................. 748 Lower Rhine Wurtenburg Insurance Association v. Sedgwick [1899] 1 QB 179 .................................... 794 Lowlands SS Co v. North of England Protecting and Indemnity Association (1921) 6 Ll LR 230 ....... 794 Lowry v. Bordieu (1780) 2 Doug KB 468 ................................................................................................... 791 Lozano v. Janson (1859) 2 E & E 160 ......................................................................................................... 770 Lubbock v. Potts (1806) 7 East 449 ............................................................................................................. 791 Lubbock v. Rowcroft (1803) 5 Esp 50 ................................................................................................... 762, 784 Lucena v. Craufurd (1806) 2 Bos & PNR 269; (1808) 1 Taunt 325 ..................................720, 724, 792, 802 Luke v. Lyde (1759) 2 Burr 882 .................................................................................................................. 774 Lynch v. Dalzell (1729) 4 Bro 431 ............................................................................................................... 1098 Lynch v. Dunsford (1811) 14 East 494 ................................................................................................. 733, 734 Lynch v. Hamilton (1810) 3 Taunt 37 .................................................................................................. 733, 734 Lyons v. May [1948] 2 All ER 1062 ............................................................................................................. 937 Lysaght Ltd v. Coleman [1895] 1 QB 49 .................................................................................................... 779 M’Andrew v. Bell (1795) 1 Esp 373 ............................................................................................................. 733 M’Andrews v. Vaughan (1793) 1 Park on Marine Insurance 252 ................................................................. 767 M’Carthy v. Abel (1804) 5 East 388 ............................................................................................................. 762 M’Cowan v. Baine & Johnson, The Niobe [1891] AC 401 ........................................................................ 720 M’Culloch v. Royal Exchange Assurance Co (1813) 3 Camp 406 ............................................................ 791 M’Dougle v. Royal Exchange Assurance Co (1816) 4 M & S 503 ............................................................ 801 M’Farlane v. Royal London Friendly Society (1886) 2 TLR 755 ........................................................ 625, 627 M’Iver v. Henderson (1816) 4 M & S 576 .................................................................................................. 770 M’Masters v. Shoolbred (1794) 1 Esp 236, ........................................................................................... 769, 772 Maanss v. Henderson (1801) 1 East 335 ..................................................................................................... 760 Macbeth & Co v. King (1916) 32 TLR 581 ................................................................................................. 768 Macbeth & Co v. Maritime Insurance Co Ltd [1908] AC 144 .................................................................. 770 Macdowell v. Fraser (1779) 1 Doug 260 ............................................................................................... 733, 745 Mackay v. London General Insurance Co Ltd (1935) 51 Ll LR 201 ....................................................... 1099 Mackenzie v. Coulson (1869) LR 8 Eq 368 ................................................................................................ 794 Mackenzie v. Shedden (1810) 2 Camp 431 .......................................................................................... 767, 797 Mackenzie v. Whitworth (1875) 1 Ex D 36; (1875) LR 1 Ex D 36 ............................................ 720, 721, 741 Mackintosh v. Marshall (1843) 11 M & W 116 .................................................................................... 736, 738 Magellan Pirates, The (1852) 1 Ecc & Ad 81 ............................................................................................. 799 Magnus v. Buttemer (1852) 11 CB 876 ................................................................................................. 798, 801 Maharanee of Baroda v. Wildenstein [1972] 2 QB 283 ............................................................................ 1114 Maignen & Co v. National Benefit Assurance Co Ltd (1922) 10 Ll LR 30 ............................................. 765 Main, The [1894] P 320 .........................................................................................................741, 742, 778, 791 Mainschiffahrts-Genossenschaft v. Les Gravi´eres Rh´enanes SARL Case C–106/95, [1999] All ER (EC) 385 ........................................................................................................................................................... 1141 Malhi v. Abbey Life Assurance Co Ltd [1996] LRLR 237 ................................................................... 728, 735 Man v. Shiffner (1802) 2 East 523 ......................................................................................................... 757, 760 Manby v. Gresham Life Insurance Co (1861) 4 LT 347 ............................................................................ 24 Manchester Liners Ltd v. British & Foreign Marine Insurance Co Ltd (1901) 7 Com Cas 26 ............. 762 Mancomunidad del Vapor Frumiz v. Royal Exchange Assurance [1927] 1 KB 567 ............................... 798 Manfield v. Maitland (1821) 4 B & Ald 582 ......................................................................................... 723, 725 Manifest Shipping & Co Ltd v. Uni-Polaris Shipping Co Ltd, The Star Sea [1995] 1 Lloyd’s Rep 651; [2001] Lloyd’s Rep IR 247 ..............................................................................................730, 749, 750, 778 Mann v. Forrester (1814) 4 Camp 60 .......................................................................................................... 760 Mann, MacNeal and Steeves Ltd v. General Marine Underwriters Ltd [1921] 2 KB 300 ..................... 736 Mansell & Co v. Hoade (1903) 20 TLR 150 ............................................................................................... 770 Maori King, The [1895] 2 QB 550 .............................................................................................................. 751 Marc Rich & Co AG v. Portman [1996] 1 Lloyd’s Rep 430 ....................................... 728, 732, 733, 734, 736 Marc Rich & Co AG v Societa Italiana Impianti, The Atlantic Emperor [1989] 1 Lloyd’s Rep 548; [1992] 1 Lloyd’s Rep 624 ............................................................................................................ 1130, 1140 Marc Rich Agriculture Trading SA v. Fortis Corporate Insurance NV [2005] Lloyd’s Rep IR 396 ...... 730 March Cabaret Club and Casino Ltd v. London Assurance [1975] 1 Lloyd’s Rep 169 ......................... 1099 Marine Insurance Co v. China Transpacific SS Co (1886) 11 App Cas 573 ..................................... 778, 782 Margetts & Ocean Accident & Guarantee Corporation, Re [1901] 2 KB 792 .................................. 720, 798

xxxi

Table of Cases Maris v. London Assurance (1935) 52 Ll LR 211 ...................................................................................... 764 Maritime Insurance Co v. Alianza Insurance Co of Santander (1907) 13 Com Cas 46 ......................... 740 Maritime Insurance Co v. Assecuranz Union von 1865 (1935) 52 Ll LR 16 ........................................... 1125 Maritime Insurance Co v. Stearns [1901] 2 KB 912 .................................................................................. 752 Mark Rowlands Ltd v. Berni Inns Ltd [1985] 3 All ER 473; [1986] 1 QB 211 ........................ 626, 627, 787 Markel International Insurance Co Ltd v. La Republica Compania Argentine de Seguros [2005] Lloyd’s Rep IR 90 ................................................................................................................................... 737 Marryat v. Wilson (1799) 1 Bos & P 430 .................................................................................................... 751 Marsden v. Reid (1803) 3 East 572 .............................................................................................................. 755 Marstrand Fishing Co Ltd v. Beer, The Girl Pat (1937) 56 Ll LR 163 ...................................... 767, 769, 800 Marten v. Nippon Sea & Land Insurance Co Ltd (1898) 3 Com Cas 164 .............................................. 797 Marten v. Vestey Brothers Ltd [1920] AC 307 ..................................................................................... 752, 755 Martin Maritime Ltd v. Provident Capital Indemnity Fund Ltd, The Lydia Flag [1998] 2 Lloyd’s Rep 652 ........................................................................................................................................................... 750 Martin v. Crokatt (1811) 14 East 465 .................................................................................................... 771, 773 Martin v. Dean [1971] 2 QB 208 ................................................................................................................. 938 Martin v. Redshaw 65 DLR (4th) 476 (1990) ............................................................................................. 955 Martini Investments Ltd v. McGinn [2001] Lloyd’s Rep IR 374 ............................................................... 763 Mason v. Sainsbury (1782) 3 Doug 61 ........................................................................................................ 786 Matadeen v. Caribbean Insurance Co [2003] 1 WLR 670 ........................................................................ 815 Mathie v. Argonaut Insurance Ltd (1925) 21 Ll LR 145 ........................................................................... 734 Mayban General Insurance BHD v. Alstom Power Plants Ltd [2005] Lloyd’s Rep IR 18 ...................... 765 Maydhew v. Scott (1811) 3 Camp 205 ......................................................................................................... 746 Mazarakis Bros v. Furness, Withy & Co (1924) 17 Ll LR 113 ................................................................... 762 McBlain v. Dolan [2001] Lloyd’s Rep IR 309 ............................................................................................. 949 McCormick v. National Motor and Accident Insurance Union Ltd (1934) 40 Com Cas 76 ................. 815 McGoona v. Motor Insurers’ Bureau [1969] 2 Lloyd’s Rep 34 ................................................................. 949 McGowin Lumber & Export Co Inc v. Pacific Marine Insurance Co Ltd (1922) 12 Ll LR 496 ........... 759 McGurk & Dale v. Coster [1995] 10 CL 521 .............................................................................................. 957 McLeod v. Buchanan [1940] 2 All ER 179 ................................................................................................. 937 McMinn v. McMinn [2006] Lloyd’s Rep IR 802 .................................................................................. 947, 948 McNeill v. Law Union Rock Insurance Co Ltd (1925) 23 Ll LR 314 ...................................................... 760 Mead v. Davison (1835) 3 Ad & El 303 ................................................................................................ 724, 739 Medical Defence Union v. Department of Trade [1979] Ch 82 .............................................................. 813 Medina Princess, The[1965] 1 Lloyd’s Rep 361 ......................................................................................... 778 Medway Packaging v. Meurer Maschinen GmbH [1990] 2 Lloyd’s Rep 112 .......................................... 1140 Mellish v. Allnutt (1813) 2 M & S 166 ........................................................................................................ 797 Mellish v. Andrews (1812) 15 East 13 ........................................................................................... 767, 768, 782 Mentz, Decker & Co v. Maritime Insurance Co (1909) 15 Com Cas 17; [1910] 1 KB 132 ..... 744, 756, 800 Mercantile Marine Insurance Co v. Titherington (1864) 5 B & S 765 .................................................... 752 Mercantile Steamship Co v. Tyser (1881) 7 QBD 73 ........................................................................... 733, 762 Merchants’ and Manufacturers Insurance Co Ltd v. Hunt (1941) 68 L1 LR 117 .................................. 949 Merchants’ Marine Insurance Co Ltd v. Liverpool Marine and General Insurance Co Ltd (1928) 31 Ll LR 45 ....................................................................................................................................................... 763 Merchants’ Marine Insurance Co Ltd v. North of England Protecting and Indemnity Association (1926) 26 Ll LR 201 .............................................................................................................................. 720 Merrett v. Capitol Indemnity Corporation [1991] 1 Lloyd’s Rep 169 ..................................................... 759 Metcalf v. Parry (1814) 4 Camp 123 ........................................................................................................... 755 Metcalfe v. Britannia Iron Works Co (1877) 2 QBD 423 .......................................................................... 767 Meyer v. Gregson (1784) 3 Doug KB 402 ................................................................................................... 791 Meyer v. Ralli (1876) 1 CPD 358 ........................................................................................................... 770, 783 Miceli v. Union Marine and General Insurance Co Ltd (1938) 60 Ll LR 275 ....................................... 763 Michalos & Sons Maritime SA v. Prudential Assurance Co Ltd, The Zinovia [1984] 2 Lloyd’s Rep 264 .....764, 800 Micro Design Group Ltd v. Norwich Union Insurance Ltd [2006] Lloyd’s Rep IR 235 ....................... 735 Middlewood v. Blakes (1797) 7 TR 162 ................................................................................................ 733, 754 Midland Mainline Ltd v. Eagle Star Insurance Co Ltd [2004] Lloyd’s Rep IR 739 ............................... 763 Mighell v. Reading, Evans v. Motor Insurers Bureau and White v. White [1999] Lloyd’s Rep IR 30 ...936, 990, 994 Mildred, Goyeneche & Co v. Maspons (1883) 8 App Cas 874 .................................................................. 759 Miller v. Hales [2006] EWHC 1529 (QB); [2007] Lloyd’s Rep IR 54 ...................................................... 941 Miller v. Law Accident Insurance Co [1903] 1 KB 712 ............................................................................. 770 Miller v. Warre (1824) 1 C & P 237 ............................................................................................................ 723 Miller v. Woodfall (1857) 27 LJQB 120; Keith v. Burrows (1877) 2 App Cas 636 .................................. 774 Miller, Gibb & Co, Re [1957] 2 All ER 266 ................................................................................................. 787

xxxii

Table of Cases Milles v. Fletcher (1779) 1 Doug KB 231 ............................................................................................. 762, 768 Minett v. Anderson (1794) Peake 212 .................................................................................................. 752, 797 Mitchell v. Edie (1797) 1 TR 608 ................................................................................................................ 773 Mitsui Marine Fire Insurance Co v. Bayview Motors Ltd [2003] Lloyd’s Rep IR 117 ......752, 761, 769, 784 Moir v. Royal Exchange Assurance Co (1815) 3 M & S 461 ..................................................................... 753 Mollison v. Staples (1778) Park 640 ............................................................................................................ 627 Monk v. Warbey [1935] 1 KB 75 .................................................................................................................. 938 Montgomery & Co v. Indemnity Mutual Marine Insurance Co [1902] 1 KB 734 .................................. 776 Montgomery v. Eggington (1789) 3 TR 362 ............................................................................................... 797 Montoya v. London Assurance Co (1851) 6 Exch 451 ........................................................................ 767, 798 Montreal Light, Heat & Power Co v. Sedgwick [1910] AC 598 ................................................................ 767 Moor Line v. R (1920) 4 Ll LR 208 ............................................................................................................. 762 Moore Large Co Ltd v. Hermes Credit Guarantee plc [2003] Lloyd’s Rep IR 315 ............................... 728 Moore v. Crowe [1972] 2 Lloyd’s Rep 563 ................................................................................................. 949 Moore v. Evans [1918] AC 185 .............................................................................................................. 718, 766 Moore v. Secretary of State for Transport [2007] Lloyd’s Rep IR 469 .................................................... 990 Moran, Galloway & Co v. Uzielli [1905] 2 KB 555 .............................................................................. 721, 723 Morck v. Abel (1802) 3 Bos & P 35 ............................................................................................................. 791 Mordy v. Jones (1825) 4 B & C 394 ...................................................................................................... 762, 768 Morgan v. Price (1849) 4 Exch 615 ............................................................................................................. 744 Morison v. Universal Marine Insurance Co (1873) LR 8 Ex 197 ............................................................. 734 Morris v. Ford Motor Co [1973] QB 792 .................................................................................................... 785 Morrison (James) & Co Ltd v. Shaw, Savill and Albion Co Ltd [1916] 2 KB 783 .................................. 754 Morrison v. Universal Marine Insurance Co (1873) LR 8 Ex 194 ............................................................ 793 Moses v. Pratt (1815) 4 Camp 297 ............................................................................................................... 791 Moss v. Byrom (1795) 6 TR 379 ................................................................................................................... 800 Moss v. Smith (1850) 19 LJCP 225 .............................................................................................................. 770 Motor & General Insurance Co Ltd v. Cox [1990] 1 WLR 1443 ....................................................... 942, 947 Motor Insurers’ Bureau v. Meanen [1971] 2 Lloyd’s Rep 251 ................................................................. 944 Motteux v. London Assurance (1739) 1 Atk 545 ................................................................................. 756, 794 Mount v. Harrison (1827) 4 Bing 388 ......................................................................................................... 773 Mount v. Larkins (1831) 8 Bing 108 ..................................................................................................... 752, 755 Mountain v. Whittle [1921] 1 AC 615 ................................................................................................... 754, 798 Moxon v. Atkins (1812) 3 Camp 200 ............................................................................................ 735, 752, 797 Muirhead v. Forth & North Sea Steamboat Mutual Insurance Association [1894] AC 72 .............. 741, 746 Muller v. Thompson (1811) 2 Camp 610 ................................................................................................... 746 Mullett v. Shedden (1811) 13 East 304 ....................................................................................................... 767 Mumford v. Hardy [1956] 1 Lloyd’s Rep 173 ............................................................................................. 937 Munro, Brice & Co v. Marten [1920] 3 KB 94 ........................................................................................... 768 Munro, Brice & Co v. War Risks Association Ltd [1918] 2 KB 78 ........................................................... 763 Murphy v. Murphy [2004] Lloyd’s Rep IR 744 ........................................................................................... 764 Murray v. Legal and General Assurance Society Ltd [1970] 2 QB 495 ................................................... 815 Mutual Life v. Langley (1886) 32 Ch D 460 ............................................................................................... 629 Napier and Ettrick v. Hunter [1993] 1 All ER 385 ...................................................................... 785, 786, 787 Nassau Bay, The [1979] 1 Lloyd’s Rep 395 ................................................................................................. 763 National Benefit Assurance Co Ltd, Re [1931] 1 Ch 46; (1933) 45 Ll LR 147 ................719, 723. 739, 791 National Farmers’ Union Mutual Insurance Society Ltd v. Dawson (1941) 70 Ll LR 167 .................... 943 National Justice Compania Naviera SA v. Prudential Assurance Co, The Ikarian Reefer [1993] 2 Lloyd’s Rep 68; [1995] 1 Lloyd’s Rep 455 ............................................................................ 763, 798, 800 National Oil Co of Zimbabwe (Private) Ltd v. Sturge [1991] 2 Lloyd’s Rep 281 ................................... 761 National Oilwell (UK) Ltd v. Davy Offshore Ltd [1993] 2 Lloyd’s Rep 582 .. 719, 722, 735, 739, 740, 741, 763, 784, 785, 787, 788, 792, 1062 Naviera de Canarias SA v. Nacional Hispanica Asequradora SA [1978] AC 873 .................................... 765 Navone v. Hadden (1859) 9 CB 30 ....................................................................................................... 762, 767 Nawaz and Hussain v. Crow Insurance Group [2003] Lloyd’s Rep IR 471 ............................................. 949 Naylor v. Taylor (1829) 9 B & C 718 ........................................................................................................... 770 Near East Relief v. King, Chausseur & Co Ltd [1930] 2 KB 40) .............................................................. 760 Nelson v. Salvador (1829) Mood & M 309 ................................................................................................. 753 Nesbitt v. Lushington (1792) 4 TR 783 ....................................................................................................... 799 Neter & Co v. Licences and General Insurance Co Ltd (1944) 77 Ll LR 202 ........................................ 798 Netherlands Insurance Co (Est 1845) Ltd v. Karl Ljungberg Co AB [1986] 2 Lloyd’s Rep 19 ............ 783 Nettleship v. Weston [1971] 2 QB 691 ........................................................................................................ 945 Neue Fischmehl Vertriebs-Gesellschaft Haselhorst mbH v. Yorkshire Insurance Co Ltd (1934) 50 L1 LR 151 ..................................................................................................................................................... 733, 749 New England Reinsurance Corporation v. Messoghios Insurance Co [1992] 2 Lloyd’s Rep 251 ......... 739

xxxiii

Table of Cases New Hampshire Insurance Co v. MGN Ltd [1997] LRLR 24 ............................................................ 728, 730 New Hampshire Insurance Co v. Oil Refineries Ltd [2003] Lloyd’s Rep IR 386 ................................... 736 New Hampshire Insurance Co v. Strabag Bau AG [1992] 1 Lloyd’s Rep 361 .................... 1141, 1142, 1143 New Zealand Shipping Co Ltd v. Duke [1914] 2 KB 682 ......................................................................... 720 Newberry v. Simmonds [1961] 2 QB 345 ................................................................................................... 955 Newbury International Ltd v. Reliance National Insurance Co (UK) Ltd [1994] 1 Lloyd’s Rep 83 .... 721 Newbury v. Davis [1974] RTR 367 ............................................................................................................... 938 Newby v. Reed (1763) 1 W Bl 416 ............................................................................................................... 744 Newfoundland Explorer, The [2006] Lloyd’s Rep IR 704 ......................................................................... 745 Newman v. Newman (1885) 28 Ch D 674 ............................................................................................ 629, 630 Newsholme Brothers v. Road Transport and General Insurance Co Ltd [1929] 1 KB 356 .................. 1063 Nichol v. Leach [1972] RTR 476 ................................................................................................................. 955 Nicholson v. Power (1869) 20 LT 580 ......................................................................................................... 728 Nickels & Co v. London and Provincial Marine and General Insurance Co Ltd (1900) 6 Com Cas 15; (1906) 17 TLR 54 ............................................................................................................................ 762, 784 Nigel Upchurch Associates v. Aldridge Estates Investment Co Ltd [1993] 1 Lloyd’s Rep 535 ............. 818 Niger Co Ltd v. Guardian Assurance Co (1922) 12 Ll LR 175; (1922) 13 Ll LR 175 ..................... 729, 755 Nima SARL v. Deves Insurance plc [2002] Lloyd’s Rep IR 752 ......................................................... 753, 796 Nishina Trading Co Ltd v. Chiyoda Fire & Marine Insurance Co Ltd [1969] 2 QB 449 ...................... 799 Noble v. Kennaway (1780) 2 Doug 510 ................................................................................................ 735, 736 Noblebright Ltd v Sirius International Corporation 2007, unreported ................................................... 736 Nonnen v. Kettlewell (1812) 16 East 176 .................................................................................................... 738 Nonnen v. Reid (1812) 16 East 176 ............................................................................................................ 797 Norman v. Aziz [2000] Lloyd’s Rep IR 52 .................................................................................................. 938 Normhurst Ltd v. Dornoch Ltd [2005] Lloyd’s Rep IR 27 ....................................................................... 777 Normid Housing Association Ltd v. Ralphs [1989] 1 Lloyd’s Rep 265 ................................................... 817 Norreys (Lord) v. Hodgson (1897) 13 TLR 421 ........................................................................................ 760 Norske Atlas Insurance Co Ltd v. London General Insurance Co Ltd (1927) 43 TLR 541 .................. 1125 North Atlantic Insurance Co v. Bishopsgate Insurance Ltd [1998] 1 Lloyd’s Rep 459 ......................... 1111 North Atlantic SS Co Ltd v. Bure (1904) 9 Com Cas 164 ......................................................................... 770 North Britain, The [1894] P 77 ................................................................................................................... 721 North British & Mercantile Insurance Co v. London, Liverpool & Globe Insurance Co (1877) 5 Ch D 569 ............................................................................................................................................. 744, 788, 789 North British and Mercantile Insurance Co v. Moffatt (1871) LR 7 CP 25 ...................................... 722, 726 North British Fishing Boat Insurance Co v. Starr (1922) 13 Ll LR 206 .................................................. 735 North British Rubber Co v. Cheetham (1938) 61 L1 LR 337 ................................................................... 730 North of England Iron Steamship Insurance Association v. Armstrong (1870) LR 5 QB 244 ............. 787 North of England Oil Cake Co v. Archangel Insurance Co (1875) LR 10 QB 249 ................. 723, 727, 758 North Shipping Co Ltd v. Union Marine Insurance Co Ltd (1919) 24 Com Cas 161 ........................... 790 North Star Shipping Ltd v. Sphere Drake Insurance plc, The North Star [2005] Lloyd’s Rep IR 404; [2005] 2 Lloyd’s Rep 76, [2006] Lloyd’s Rep IR 519; [2006] 2 Lloyd’s Rep 183 ... 734, 735, 749, 763, 764, 783, 798, 800, 1099 Norwich Union Fire Insurance Co v. Colonial Mutual Fire Insurance Co Ltd (1922) 12 Ll LR 94 .... 793 Norwich Union Fire Insurance Society v. Price Ltd [1934] AC 455 ........................................................ 773 Norwich Union Life Insurance Society v. Qureshi [1999] Lloyd’s Rep IR 263 ...................................... 731 Norwich Union, Re [2004] EWHC 2802 (Ch) ............................................................................................ 194 Notara v. Henderson (1872) LR 7 QB 225 ................................................................................................. 784 Noten BV v. Harding [1990] 2 Lloyd’s Rep 527 ........................................................................................ 765 Nourse v. Liverpool SS Owners’ Mutual Protection and Indemnity Association [1896] 2 QB 21 ........ 775 Nutt v. Bordieu (1768) 1 TR 323 ................................................................................................................. 800 O’Brien v. Hughes-Gibb & Co Ltd [1995] LRLR 90 ................................................................................. 1064 O’Brien v. Trafalgar Insurance Co Ltd (1945) 78 L1 LR 223 .................................................................. 957 O’Connell v. Jackson [1972] 1 QB 270 ....................................................................................................... 945 O’Kane v. Jones, The Martin P [2005] Lloyd’s Rep IR 174 ......721, 722, 723, 726, 728, 735, 739, 741, 744, 789 O’Mahoney v. Joliffe [1999] Lloyd’s Rep IR 321 ................................................................................. 937, 994 Ocean Steamship Co Ltd v. Liverpool & London War Risks Insurance Association, The Priam [1948] AC 243 ..................................................................................................................................................... 762 Oceanic SS Co v. Faber (1907) 13 Com Cas 28 ......................................................................................... 766 Oceanic Steam Navigation Co Ltd v. Evans (1934) 50 Ll LR 1 ................................................................ 774 Olive v. Smith (1815) 5 Taunt 56 ................................................................................................................ 759 Oliverson v. Brightman (1846) 8 QB 781 ................................................................................................... 768 Oom v. Bruce (1810) 12 East 225 ............................................................................................................... 791 Ophthalmic Innovations International (UK) Ltd v. Ophthalmic Innovations International Inc [2005] I L Pr 10 .................................................................................................................................................. 1127 Orakpo v. Barclays Insurance Service Ltd [1995] LRLR 443 ................................................................... 730

xxxiv

Table of Cases Oswell v. Vigne (1812) 15 East 70 ............................................................................................................... 748 OT Computers, Re [2004] Lloyd’s Rep IR 669 ....................................................................813, 814, 816, 818 Otago Farmers Co-Operative Association of New Zealand v. Thompson [1910] 2 KB 145 .................. 781 Ougier v. Jennings (1808) 1 Camp 505n .................................................................................................... 754 Overseas Commodities Ltd v. Style [1958] 1 Lloyd’s Rep 546 ...........................................729, 741, 746, 765 Overseas Marine Insurance Co Ltd, Re (1930) 36 Ll LR 183 ................................................................... 722 Overseas Union Insurance Ltd v. Incorporated General Insurance [1992] 1 Lloyd’s Rep 439 ............ 1127 Owens v. Brimmell [1977] QB 859 .............................................................................................................. 945 Owusu v. Jackson Case C-281/02, [2005] Lloyd’s Rep 452 ....................................................................... 1141 Oxford v. Austin [1981] RTR 416 ................................................................................................................ 957 Pacific & General Insurance v. Hazell [1997] LRLR 65 ...................................................................... 758, 759 Padre Island, The [1990] 2 All ER 705 ....................................................................................................... 815 Page v. Fry (1800) 2 B & P 240 ................................................................................................................... 724 Palamisto General Enterprises SA v. Ocean Marine Insurance Co Ltd [1972] 2 QB 625 ..................... 764 Palmer v. Blackburn (1822) 1 Bing 61 ................................................................................................. 727, 778 Palmer v. Fenning (1833) 9 Bing 460 ......................................................................................................... 752 Palmer v. Marshall (1832) 8 Bing 317 ......................................................................................................... 752 Palmer v. Naylor (1854) 10 Exch 382 ......................................................................................................... 799 Palyart v. Leckie (1817) 6 M & S 290 .......................................................................................................... 791 Pan Atlantic Insurance Co Ltd v. Pine Top Insurance Co Ltd [1994] 3 All ER 581 ....... 723, 728, 732, 733, 737 Panamanian Oriental Steamship Corporation v. Wright, The Anita [1970] 2 Lloyd’s Rep 365; [1971] 1 Lloyd’s Rep 487 ........................................................................................... 762, 767, 769, 771, 772, 800 Pangood v. Barclay Brown [1999] Lloyd’s Rep IR 405 .............................................................................. 1064 Papademetriou v. Henderson (1939) 64 Ll LR 345 .................................................................... 741, 764, 767 Papera Traders Co Ltd v. Hyundai Merchant Marine Co Ltd, The Eurasian Dream [2002] Lloyd’s Rep 719 ........................................................................................................................................................... 749 Parfitt v. Thompson (1844) 13 M & W 392 ................................................................................................ 749 Parker, Re [1906] 1 Ch 526 .......................................................................................................................... 632 Parker & Heard Ltd v. Generali Assicurazioni SpA, 1988, unrep ............................................................. 730 Parker v. Potts (1815) 3 Dow 23 ............................................................................................................ 749, 750 Parkin v. Dick (1809) 11 East 502 ............................................................................................................... 751 Parkin v. Tunno (1809) 11 East 22 .............................................................................................................. 762 Parmeter v. Cousins (1809) 2 Camp 235 .............................................................................................. 750, 797 Parmeter v. Todhunter (1808) 1 Camp 541 ......................................................................................... 768, 773 Parouth, The [1982] 2 Lloyd’s Rep 351 ...................................................................................................... 1130 Parry v. Aberdein (1829) 9 B & C 411 ........................................................................................................ 770 Pateras v. Royal Exchange Assurance (1934) 49 Ll LR 400 ...................................................................... 764 Paterson v. Harris (1861) 1 B & S 336 ........................................................................................................ 798 Paterson v. Powell (1832) 9 Bing 320 .......................................................................................................... 627 Paterson v. Ritchie (1815) 4 M & S 393 ...................................................................................................... 770 Patrick v Royal London Mutual Insurance Society Ltd [2007] Lloyd’s Rep IR 85 ................................. 772 Patrick v. Eames (1813) 3 Camp 441 .......................................................................................................... 797 Paul Ltd v. Insurance Co of North America (1899) 15 TLR 534 ............................................................. 797 Pawson v. Watson (1778) 2 Cowp 785; (1778) 1 Doug KB 12n ................................................. 729, 738, 747 Payne v. Hutchinson (1810) 2 Taunt 405n ................................................................................................. 797 PCW Syndicates v. PCW Insurers [1996] 1 Lloyd’s Rep 241 ............................................................... 732, 737 Pearl Assurance (Unit Linked Pensions) Ltd, Re [2006] EWHC 2291 (Ch) ........................................... 195 Pearson v. Commercial Union Assurance Co (1876) 1 App Cas 498 ................................................ 754, 755 Pellas v. Neptune Marine Insurance Co Ltd (1879) 5 CPD 34 .......................................................... 757, 776 Pelton SS Co Ltd v. North of England Protecting and Indemnity Association, The Zelo (1925) 22 Ll LR 510 ..................................................................................................................................................... 720 Pendennis Shipyard Ltd v. Magrathea (Pendennis) Ltd [1998] 1 Lloyd’s Rep 315 ............................... 863 Peninsular and Oriental Branch Service v. Commonwealth Shipping Representative, The Geelong [1922] 1 KB 766 ..................................................................................................................................... 762 Perry v. Equitable Life Assurance Society of the United States of America (1929) 45 TLR 468 .......... 1126 Pesquerias y Secaderos de Bacalao de Espao` a SA v. Beer (1947) 80 Ll LR 318; [1949] 1 All ER 845 ..........761, 773 Peters v. General Accident Fire and Life Assurance Corporation [1937] 4 All ER 628; [1938] 2 All ER 267 ................................................................................................................................................... 937, 1098 Peters v. Zuid Nederlandse Aanemers Vereniging Case 34/82 [1983] ECR 987 .................................... 1140 Petrofina (UK) Ltd v. Magnaload Ltd [1984] QB 127 .............................................................................. 726 Petros M Nomikos Ltd v. Robertson [1939] AC 371 ................................................................... 765, 767, 771 Phelps v. Auldjo (1809) 2 Camp 350 .................................................................................................... 754, 756 Phillips v. Barber (1821) 5 B & Ald 161 ............................................................................................... 798, 801 Phillips v. Headlam (1831) 2 B & Ad 380 ................................................................................................... 749

xxxv

Table of Cases Phillips v. Irving (1884) 7 Man & G 325 ..................................................................................................... 755 Phillips v. Nairne (1847) 4 CB 343 ....................................................................................................... 750, 770 Phillips v. Rafiq [2006] Lloyd’s Rep IR 809 ................................................................................................ 994 Phillips v. Syndicate 992 Gunner [2004] Lloyd’s Rep IR 426 ................................................................... 744 Philpott v. Swann (1861) 11 CBNS 270 ....................................................................................................... 762 Phoenix Assurance Co of Hartford v. De Monchy (1929) 34 Ll LR 201 ................................................. 766 Phyn v. Royal Exchange Assurance Co (1798) 7 TR 505 .................................................................... 754, 800 Pick v. Manufacturers’ Life Insurance Co [1958] 2 Lloyd’s Rep 93 ......................................................... 1127 Pickersgill v. London and Provincial Marine Insurance Co [1912] 3 KB 614 .................................. 734, 757 Pickett v. Motor Insurers Bureau [2004] Lloyd’s Rep IR 513 ................................................................... 994 Pickup v. Thames & Mersey Marine Insurance Co Ltd (1878) 3 QBD 594 ...................................... 749, 750 Piermay Shipping Co SA v. Chester, The Michael [1979] 2 Lloyd’s Rep 1 ...................................... 730, 800 Pilkington United Kingdom Ltd v. CGU Insurance [2004] Lloyd’s Rep IR 891 .................................... 783 Pindos Shipping Corporation v. Raven, The Mata Hari [1983] 2 Lloyd’s Rep 449 ............................... 794 Pink v. Fleming (1890) 25 QBD 396 ........................................................................................................... 765 Pioneer Concrete (UK) Ltd v. National Employers’ Mutual General Insurance Association Ltd [1985] 2 All ER 395 ............................................................................................................................................ 815 Piper v. Royal Exchange Assurance (1932) 42 Ll LR 103 ........................................................... 723, 734, 764 Pipon v. Cope (1808) 1 Camp 434 ........................................................................................................ 751, 800 Piracy Jure Gentium, Re [1934] AC 586 ...................................................................................................... 799 Pitman v. Universal Marine Insurance Co (1882) 9 QBD 192 ................................................................. 778 Pittegrew v. Pringle (1832) 3 B & Ad 514 ................................................................................................... 753 Pitts v. Hunt [1990] 3 All ER 344 ................................................................................................................ 945 Planche v. Fletcher (1779) 1 Doug KB 251 .......................................................................................... 735, 751 Platamour v. Staples (1781) 3 Doug KB 1 .................................................................................................. 768 Poindestre v. Royal Exchange Corporation (1826) Ry & M 378 .............................................................. 778 Pole v. Fitzgerald (1754) Amb 214 .............................................................................................................. 800 Polpen Shipping Co Ltd v. Commercial Union Assurance Co Ltd [1943] KB 161 ................................ 720 Poltimore v. Quicke [1908] 1 Ch 887 ......................................................................................................... 697 Polurian Steamship Co v. Young (1913) 19 Com Cas 143; [1915] 1 KB 922 ...................769, 771, 778, 798 Pomeranian, The [1895] P 349 .................................................................................................................... 783 Popham v. St Petersburg Insurance Co (1904) 10 Com Cas 31 ............................................................... 798 Portavon Cinema Co Ltd v. Price [1939] 4 All ER 601 ............................................................................. 698 Porter v. Motor Insurers’ Bureau [1978] 2 Lloyd’s Rep 463 .................................................................... 947 Portvale SS Co Ltd v. Royal Exchange Assurance Corporation (1932) 43 Ll LR 161 ............................ 782 Post Office v. Norwich Union Fire Insurance Society [1967] 1 All ER 577 ..................................... 814, 815 Potter v. Campbell (1867) 17 LT 474; Currie v. Bombay Native Assurance Co (1869) LR 3 PC 72 .... 773 Powell v. Gudgeon (1816) 5 M & S 431 ...................................................................................................... 763 Power v. Butcher (1829) 10 B & C 329 ....................................................................................................... 759 Power v. Provincial Insurance Co plc 1997, unreported ................................................................. 1102, 1107 Powles v. Innes (1843) 11 M & W 10 ............................................................................................ 723, 727, 758 Powney v. Coxage (1988) The Times, 8 March ............................................................................................ 992 Prentis Donegan & Partners Ltd v. Leeds & Leeds Co Inc [1998] 2 Lloyd’s Rep 326 .......................... 759 President of India v. Lips Maritime Corporation, The Lips [1988] AC 395 ........................................... 776 Price & Co v. AI Ships Small Damage Insurance Association (1889) 22 QBD 580 ................................ 782 Price v. Livingstone (1882) 9 QBD 679 ....................................................................................................... 753 Price v. Maritime Insurance Co [1901] 2 KB 412 ................................................................................ 723, 767 Pride Valley Foods Ltd v. Independent Insurance Co Ltd [1999] Lloyd’s Rep IR 120 .......................... 777 Printpak v. AGF Insurance [1999] Lloyd’s Rep IR 542 ............................................................................. 745 Probatina Shipping Co Ltd v. Sun Insurance Office Ltd, The Sageorge [1974] QB 635 ...................... 730 Promet Engineering (Singapore) Pte Ltd v. Sturge, The Nukila [1996] 1 Lloyd’s Rep 85; [1997] 2 Lloyd’s Rep 146 ............................................................................................................................... 766, 784 Proudfoot v. Montefiore (1867) LR 2 QB 511 ........................................................................................... 732 Provincial Insurance Co of Canada v. Leduc (1874) LR 6 PC 224 ........................... 723, 726, 746, 747, 773 Provincial Insurance Co v. Morgan [1933] AC 240 ................................................................................... 745 Prudent Tankers Ltd SA v. Dominion Insurance Co Ltd, The Caribbean Sea [1980] 1 Lloyd’s Rep 338 ...765, 766 Prudential Staff Union v. Hall [1947] 1 KB 685 ........................................................................................ 628 Puckle, The Tiburon [1990] 2 Lloyd’s Rep 418 ......................................................................................... 748 Pumbien v. Vines [1996] RTR 37 ................................................................................................................ 955 Punjab National Bank v. De Boinville [1992] 3 All ER 104; [1992] 1 Lloyd’s Rep 7 .......... 794, 1110, 1064 Pyman v. Marten (1906) 13 Com Cas 64 .................................................................................................... 790 Pyman SS Co v. Lords Commissioners of the Admiralty [1919] 1 KB 49 ................................................ 784 Quebec Marine Insurance Co Ltd v. Commercial Bank of Canada (1870) LR 3 PC 234 ...... 746, 747, 749, 750 Quicke’s Trusts, Re [1908] 1 Ch 887 ........................................................................................................... 698

xxxvi

Table of Cases Quinta Communications SA v. Warrington [2000] Lloyd’s Rep IR 81 .............................................. 763, 794 Quorum AS v. Schramm (No 1) [2002] Lloyd’s Rep IR 293 .................................................................... 741 Quorum AS v. Schramm (No 2) [2002] Lloyd’s Rep IR 315 .................................................................... 777 R v. Society of Lloyd’s, ex parte Briggs (1992) The Times, 30 July .............................................................. 39 R v. Secretary of State for Transport, ex parte National Insurance Guarantee Corporation 1996, unreported .............................................................................................................................................. 940 R. v. Secretary of State for the Department of Transport, ex parte National Insurance Guarantee Corporation plc 1996, unreported ....................................................................................................... 941 Raiffeisen Zentralbank Osterreich AG v. Five Star General Trading LLC, The Mount I [2001] Lloyd’s Rep IR 460 .............................................................................................................................................. 757 Raiffeisen Zentralbank Osterreich Axt v. National Bank of Greece SA (1998) The Times, 25 September ............................................................................................................................................... 1140 Raine v. Bell (1808) 9 East 195 .................................................................................................................... 756 Ralli Bros v. Compania Naviera Sota y Anzar [1920] 1 KB 614 ................................................................ 1126 Ralli v. Janson (1856) 6 E & B 422 .............................................................................................................. 782 Ramco (UK) Ltd v. International Insurance Co of Hannover Ltd [2004] Lloyd’s Rep IR 606 ...... 726, 780 Randal v. Cockran (1748) 1 Ves Sen 98 ...................................................................................................... 786 Randall v. Motor Insurers’ Bureau [1969] 1 All ER 1 ............................................................................... 937 Rankin v. Potter (1873) LR 6 HL 83 .....................................................................................767, 770, 773, 782 Rayner v. Godmond (1821) 5 B & Ald 225 ................................................................................................ 801 Rayner v. Preston (1881) 18 Ch D 1 ........................................................................................................... 703 Reader v. Bunyard [1987] RTR 406 ............................................................................................................. 955 Reardon Smith Lines Ltd v. Black Sea and Baltic General Insurance Co Ltd, The Indian City [1939] AC 562 ..................................................................................................................................................... 755 Redman v. Lowdon (1814) 5 Taunt 462 ..................................................................................................... 755 Redman v. Wilson (1845) 14 M & W 476 ............................................................................................. 764, 798 Redmond v. Smith (1844) 7 Man & G 457 ................................................................................................. 751 Red Sea, The [1896] P 20 ............................................................................................................................ 774 Reed v. Royal Exchange Assurance Co (1795) Peake Ad Cas 70 ............................................................. 627 Refuge Assurance, Re [2000] All ER (D) 2219 .......................................................................................... 194 Regina Fur v. Bossom [1957] 2 Lloyd’s Rep 466 ....................................................................................... 1099 Reid v. Rush & Tompkins Group plc [1989] 3 All ER 228 ....................................................................... 852 Reid v. Standard Marine Insurance Co Ltd (1886) 2 TLR 807 ................................................................ 768 Reimer v. Ringrose (1851) 6 Exch 263 ....................................................................................................... 770 Reliance Marine Insurance Co v. Duder [1913] 1 KB 265 ....................................................................... 741 Rendall v. Combined Insurance Co of America [2006] Lloyd’s Rep IR 732 .................................... 736, 738 Renton & Co Ltd v. Cornhill Insurance Co Ltd (1933) 46 Ll LR 14 ...................................................... 781 Republic of Bolivia v. Indemnity Mutual Marine Assurance Co Ltd [1909] 1 KB 785 .................... 737, 799 Republic of India v. India Steamship Co, The Indian Grace [1993] 1 All ER 998 ................................ 1115 Revell v. London General Insurance Co Ltd (1934) 50 Ll LR 114 .......................................................... 1099 Reynolds v. Phoenix Assurance Co [1978] 2 Lloyd’s Rep 44; [1978] 2 Lloyd’s Rep 440 .... 698, 1099, 1110 Rhesa Shipping Co v. Edmunds, The Popi M [1985] 2 All ER 712; [1985] 2 Lloyd’s Rep 1 ......... 749, 763 Rich v. Parker (1798) 7 TR 705 ............................................................................................................. 745, 748 Richards v. Murdoch (1830) 10 B & C 527 ................................................................................................ 732 Richards v. Port of Manchester Insurance Co (1934) 50 L1 LR 88 ................................................... 937, 938 Richardson v. Baker [1976] RTR 56 ............................................................................................................ 937 Richardson v. Pitt-Stanley [1995] 1 All ER 460 .......................................................................................... 850 Rickards v. Forestal Land, Timber and Railway Co Ltd [1942] AC 50 ............. 754, 756, 769, 770, 774, 800 Rickman v. Carstairs (1833) 5 B & Ad 651 ........................................................................................... 781, 791 Ridsdale v. Newnham (1815) 3 M & S 456 ................................................................................................. 753 Rivaz v. Gerussi (1880) 6 QBD 222 ............................................................................................................. 791 Roadworks (1952) Ltd v. Charman [1994] 2 Lloyd’s Rep 99 ................................................................... 793 Roberts v. Plaisted [1989] 2 Lloyd’s Rep 341 ............................................................................................. 1063 Robertson v. Ewer (1786) 1 TR 127 ...................................................................................................... 778, 800 Robertson v. French (1803) 4 East 130 ................................................................................................ 743, 797 Robertson v. Hamilton (1811) 14 East 522 .......................................................................................... 724, 726 Robertson v. Marjoribanks (1819) 2 Stark 573 ........................................................................................... 729 Robinson v. Touray (1811) 3 Camp 158 ..................................................................................................... 743 Roddick v. Indemnity Mutual Marine Insurance Co [1895] 2 QB 380 ............................................. 727, 746 Rodocanachi v. Elliott (1874) LR 9 CP 518 ................................................................................. 718, 769, 770 Roebuck v. Hammerton (1778) 2 Cowp 737 .............................................................................................. 627 Rogerson v. Scottish Automobile and General Insurance Co Ltd [1931] All ER Rep 606 .................... 1099 Rohl v. Parr (1796) 1 Esp 445 ...................................................................................................................... 765 Ronson International Ltd v. Patrick [2006] Lloyd’s Rep IR 194 .............................................................. 772 Roscow v. Corson (1819) 8 Taunt 684 ........................................................................................................ 800

xxxvii

Table of Cases Roselodge v. Castle [1966] 2 Lloyd’s Rep 113 ............................................................................................ 1099 Rosetto v. Gurney (1851) 11 CB 176 ........................................................................................................... 770 Ross v. Hunter (1790) 4 TR 33 .............................................................................................................. 756, 800 Rossano v. Manufacturers’ Life Insurance Co [1963] 2 QB 352 .............................................................. 1127 Rotch v. Edie (1795) 6 TR 413 .................................................................................................................... 769 Rothschild v. Collyear [1999] Lloyd’s Rep IR 6 ......................................................................................... 736 Rothwell v. Cooke (1797) 1 Bos & P 172 .................................................................................................... 791 Roura & Forgas v. Townend [1919] 1 KB 189 ............................................................................. 765, 769, 770 Routh v. Thompson (1809) 11 East 428; (1812) 13 East 274 ............................................................. 791, 792 Roux v. Salvador (1836) 3 Bing NC 266 ............................................................................................... 762, 767 Rowatt Leaky & Co v. Scottish Provident Institution [1927] 1 Ch 55 ...................................................... 1131 Rowcroft v. Dunsmore (1810) 3 Taunt 228n .............................................................................................. 798 Rowe v. Kenway and United Friendly Insurance Co (1921) 8 Ll LR ....................................................... 817 Rowland & Marwood Steamship Co Ltd v. Maritime Insurance Co Ltd (1901) 6 Com Cas 160 ... 769, 770 Royal and Sun Alliance Insurance plc v. Dornoch Ltd [2005] Lloyd’s Rep IR 544 ............................... 743 Royal Bank of Scotland v. Cassa di Risparmio delle Provincie Lombard (1992) Financial Times, 21 January .................................................................................................................................................... 1140 Royal Boskalis Westminster NV v. Mountain [1997] 2 All ER 929 ............................................. 751, 783, 784 Royal Exchange Assurance v. M’Swiney (1850) 14 QB 646 ................................................................ 720, 802 Royal Exchange Assurance Corporation v. Sjoforsakrings Aktiebolaget Vega [1902] 2 KB 384 ..... 74, 1125 RSA Pursuit Test Cases, 27 May 2005, unreported ..................................................................................... 743 Ruabon Steamship Co v. London Assurance [1900] AC 6 ................................................................. 778, 782 Rucker v. London Assurance Co (1784) 2 Bos & P 432n ......................................................................... 797 Russell v. Bangley (1821) 4 B & Ald 395 .................................................................................................... 759 Russell v. Thornton (1860) 6 H & N 140 ...............................................................................................733,737 Russian Bank for Foreign Trade v. Excess Insurance Co [1918] 2 KB 123; [1919] 1 KB 39 .......... 765, 773 Ruys v. Royal Exchange Assurance Corporation [1897] 2 QB 135 .......................................................... 770 Ryedale International Ltd, Coakley v. Argent Credit Corporation plc 1998, unreported ..................... 1099 S (Deceased) , Re [1996] 1 WLR 235 .................................................................................................. 632, 1114 Safadi v. Western Assurance Co (1933) 46 Ll LR 140 ......................................................................... 752, 757 SAIL v. Farex Gie [1995] LRLR 116 ............................................................................................. 732, 737, 742 Sailing Ship Blaimore v. Macredie [1898] AC 593 .............................................................................. 770, 773 Salvador v. Hopkins (1765) 3 Burr 1707 .............................................................................................. 736, 754 Samuel & Co Ltd v. Dumas [1924] AC 431 ........................................................ 726, 746, 747, 764, 798, 799 Samuel v. Royal Exchange Assurance Co (1828) 8 B & C 119 ..........................................752, 755, 756, 797 Samuelson v. National Insurance and Guarantee Corporation [1985] 2 Lloyd’s Rep 541 .................... 943 Sanderson v. Busher (1814) 4 Camp 54n ............................................................................................. 745, 746 Sanderson v. M’Cullom (1819) 4 Moo CP 5 .............................................................................................. 793 Sanderson v. Symonds (1819) 4 Moo CP 42 .............................................................................................. 793 Sar Schotte GmbH v. Parfums Rothschild SARL Case 218/86 [1987] ECR 4905 .................................. 1141 Sarquy v. Hobson (1827) 4 Bing 131 .......................................................................................................... 763 Sassoon & Co Ltd v. Western Assurance Co [1921] AC 561 .............................................................. 761, 799 Sassoon & Co Ltd v. Yorkshire Insurance Co (1923) 16 Ll LR 129 ......................................................... 765 Sassoon & Co v. Western Assurance Co [1912] AC 561 ..................................................................... 798, 799 Saunders v. Baring (1876) 34 LT 419 .......................................................................................................... 767 Sawtell v. Loudon (1814) 5 Taunt 359 ........................................................................................................ 733 Scaramanga v. Stamp (1880) 5 CPD 295 .................................................................................................... 756 Schiffshypothekenbank Zu Luebeck AG v. Compton, The Alexion Hope [1988] 1 Lloyd’s Rep 311 ....... 798 Schloss Brothers v. Stevens [1906] 2 KB 665 ............................................................................... 719, 735, 765 Schoolman v. Hall [1951] 1 Lloyd’s Rep 139 ............................................................................................. 1099 Schroder v. Thompson (1817) 7 Taunt 462 ......................................................................................... 755, 756 Scindia Steamship (London) Ltd v. London Assurance (1936) 56 Ll LR 136 ....................................... 766 Scott v. Copenhagen Reinsurance Co (UK) Ltd [2003] Lloyd’s Rep IR 696 .......................................... 767 Scott v. Globe Marine Insurance Co (1896) 1 Com Cas 370 .............................................................. 726, 741 Scott v. Irving (1830) 1 B & Ad 605 ............................................................................................................ 759 Scott v. Thompson (1805) 1 Bos & PNR 181 ............................................................................................. 756 Scottish Marine Insurance Co v. Turner (1853) 4 HL Cas 312n ............................................................. 762 Scottish Metropolitan Assurance Co v. Samuel & Co [1923] 1 KB 348 ................................................... 773 Scottish Metropolitan Assurance Co v. Stewart (1923) 15 Ll LR 55 ........................................................ 794 Scottish Shire Line Ltd v. London and Provincial Marine and General Insurance Co [1912] 3 KB 51 ......733, 734 Sea Insurance Co of Scotland v. Gavin (1829) 4 Bli NS 578 .................................................................... 797 Sea Insurance Co v. Blogg [1898] 2 QB 398 ........................................................................................ 752, 753 Sea Insurance Co v. Hadden (1884) 13 QBD 706 ............................................................................... 774, 786 Sea Voyager Maritime Inc v. Bielecki [1999] Lloyd’s Rep IR 356 ............................................................ 813

xxxviii

Table of Cases Seagrave v. Union Marine Insurance Co (1866) LR 1 CP 305 ................................................................. 723 Seaman v. Fonnereau (1743) 2 Str 1183 .............................................................................................. 733, 734 Searle v. A R Hales & Co Ltd [1996] LRLR 68 .......................................................................................... 731 Seashore Marine SA v. Phoenix Assurance plc [2002] Lloyd’s Rep IR 51 ............... 763, 764, 775, 776, 798 Seavision Investment SA v. Evennett and Clarkson .................................................................................... 748 Seddons v. Binions [1978] 1 Lloyd’s Rep 381 ............................................................................................ 781 Sellar v. McVicar (1804) 1 B PNR 23 .......................................................................................................... 753 Severn Trent Water Authority v. Williams [1995] 10 CL 638 ............................................................. 957, 991 Shamil Bank of Bahrain v. Beximco Pharmaceuticals Ltd [2003] 2 All ER (Comm) 849 ..................... 1125 Sharp v. Gladstone (1805) 7 East 24 ........................................................................................................... 778 Sharp v. Pereira [1999] Lloyd’s Rep IR 242 ............................................................................................... 992 Sharp v. Sphere Drake Insurance Co Ltd, The Moonacre [1992] 2 Lloyd’s Rep 501 ............. 723, 733, 735 Shawe v. Felton (1801) 2 East 109 ......................................................................................................... 752, 797 Shee v. Clarkson (1810) 12 East 507 ........................................................................................................... 759 Shelbourne & Co v. Law Investment and Insurance Corporation [1898] 2 QB 626 ............................. 778 Sheldon Deliveries Ltd v. Willis [1972] RTR 217 ....................................................................................... 938 Shell International Petroleum Co Ltd v. Gibbs, The Salem [1982] QB 946; [1982] 1 Lloyd’s Rep 369; [1983] 2 AC 375 ...................................................................................................................... 761, 799, 800 Shenavai v. Kreischer case 266/85 [1987] 3 CMRL 782 ........................................................................... 1140 Shepherd v. Chewter (1808) 1 Camp 274 ................................................................................................... 773 Shepherd v. Henderson (1881) 7 App Cas 49 ..................................................................................... 770, 773 Shilling v. Accidental Death (1858) 1 F & F 116 ................................................................................. 627, 628 Shipton v. Thornton (1838) 9 A & E 314 ................................................................................................... 767 Shore v. Bentall (1828) 7 B & C 798n ........................................................................................................ 764 Sibbald v. Hill (1814) 2 Dow 263 .......................................................................................................... 734, 738 Sierra Leone Telecommunciations Co Ltd v. Barclays Bank plc [1998] 2 All ER 821 ........................... 1127 Silcock Sons Ltd v. Maritime Lighterage Co Ltd (1937) 57 Ll LR 78 ..................................................... 749 Silverton v. Goodall and the Motor Insurers’ Bureau [1997] PIQR P 451 ............................................. 995 Simcock v. Scottish Imperial Insurance Co 1902 10 SLT 286 ................................................................... 627 Simner v. New India Insurance Co [1995] LRLR 240 ........................................................................ 732, 737 Simon, Israel & Co v. Sedgwick [1893] 1 QB 303 ............................................................................... 718, 753 Simond v. Boydell (1779) 1 Doug KB 268 .................................................................................................. 790 Simonds v. Hodgson (1832) 3 B & Ad 50 ................................................................................................... 725 Simons v. Gale [1958] 2 All ER 504 ............................................................................................................ 746 Simpson Steamship Co Ltd v. Premier Underwriting Association Ltd (1905) 92 LT 730; (1905) 10 Com Cas 198 .............................................................................................................................................. 746, 754 Simpson v. Scottish Union Insurance Co (1863) 1 H & M 618 ............................................................... 698 Simpson v. Thompson (1877) 3 App Cas 279 ............................................................................................ 787 Sinclair, Re [1938] 1 Ch 799 ......................................................................................................................... 632 Singh v. Rathour[1988] 1 WLR 422 ............................................................................................................ 944 Sinnott v. Bowden [1912] 2 Ch 414 ...................................................................................................... 697, 698 Sirius International Insurance Co (Publ) v. FAI General Insurance Ltd [2005] Lloyd’s Rep IR 294 ........ 743 Sirius International Insurance Corporation v. Oriental Assurance Corporation [1999] Lloyd’s Rep IR 343 ............................................................................................................................................. 729, 732, 738 Siskina, The [1979] AC 210 .......................................................................................................................... 1115 Siu v. Eastern Insurance Co [1994] 1 All ER 213; [1994] 1 Lloyd’s Rep 616 ....... 626, 627, 735, 944, 1062 Slater v. Buckinghamshire County Council [2004] Lloyd’s Rep IR 432 .................................................. 940 Slattery v. Mance [1962] 1 Lloyd’s Rep 60 ................................................................................................. 734 Sleigh v. Tyser [1900] 2 QB 333 .................................................................................................... 747, 750, 751 Small v. United Kingdom Marine Mutual Insurance Association [1897] 2 QB 311 ........................ 726, 800 Smart v. Allan [1963] 1 QB 291 ................................................................................................................... 955 Smith v. Pearl Assurance Co [1939] 1 All ER 95 ....................................................................................... 815 Smith v. Ralph [1963] 2 Lloyd’s Rep 439 ................................................................................................... 944 Smith v. Robertson (1814) 2 Dow 474 ........................................................................................................ 773 Smith v. Scott (1811) 4 Taunt 126 ............................................................................................................... 798 Smith v. Surridge (1801) 4 Esp 25 ................................................................................................ 752, 755, 756 Snook v. Davidson (1809) 2 Camp 218 ....................................................................................................... 760 Soares v. Thornton (1817) 7 Taunt 627 ...................................................................................................... 800 Soci´et´e Belge des B’etons SA v. London and Lancashire Insurance Co Ltd (1938) 60 Ll LR 225 ...... 769 Soci´et´e d’Avances Commerciales v. Merchants’ Marine Insurance Co (1924) 20 Ll LR 74 .................. 764 Society of Lloyd’s v. Clementson (CA) [1995] LRLR 307 ......................................................................... 39 Sofi v. Prudential Assurance Co [1993] 2 Lloyd’s Rep 559 ................................................................ 764, 943 Somafer v. Saar-Ferngas Case 33/78 [1978] ECR 2183 ............................................................................. 1141 Somes v. Sugrue (1830) 4 C & P 276 .......................................................................................................... 762 Source Ltd v. TUV Rheinland Holding AG (1997) The Times, 28 March ................................................ 1140

xxxix

Table of Cases South Carolina Insurance Co v. Assurantie Maatschappij de Zeven Provincien NV [1987] AC 24 ...... 1131 Soya GmbH v. White [1983] 1 Lloyd’s Rep 122 ......................................................................................... 765 Spalding v. Crocker (1897) 13 TLR 396 ..................................................................................................... 794 Sparkes v. Marshall (1836) 2 Bing NC 761 ........................................................................................... 724, 757 Sparrow v. Carruthers (1745) 2 Stra 1236 .................................................................................................. 797 Spence v. Union Marine Insurance Co (1868) LR 3 CP 427 .................................................................... 766 Spencer v. Clarke (1878) 9 Ch D 137 ......................................................................................................... 629 Spinney’s (1948) Ltd v. Royal Insurance Co [1980] 1 Lloyd’s Rep 406 ............................................ 761, 763 Spitta v. Woodman (1810) 2 Taunt 416 ...................................................................................................... 797 Spriggs v. Wessington Court School [2005] Lloyd’s Rep IR 474 ........................................................ 728, 815 Sprung v. Royal Insurance Co (UK) [1999] Lloyd’s Rep IR 111 ............................................................. 776 Spurrier v. La Cloche [1902] AC 446 .......................................................................................................... 1125 SS Balmoral Co v. Marten [1902] AC 511 .................................................................................................. 780 St Margaret’s Trust Ltd v. Navigators and General Insurance Co Ltd (1949) 82 Ll LR 752 .........732, 765, 767, 783 St Paul Fire and Marine Insurance Co (UK) Ltd v. McConnell Dowell Constructors Ltd [1995] 2 Lloyd’s Rep 116 ...................................................................................................................................... 732 St Paul Fire and Marine Insurance Co v. Morice (1906) 22 TLR 449 ..................................................... 1131 Stainbank v. Fenning (1851) 11 CB 59 ....................................................................................................... 725 Stainbank v. Shepard (1853) 13 CB 418 ..................................................................................................... 725 Stamma v. Brown (1742) 2 Str 1173 ............................................................................................................ 800 Standard Steamship ‘Owners’ Protection and Indemnity Association (Bermuda) Ltd v. GIE Vision Bail [2005] Lloyd’s Rep IR 407 .................................................................................................................... 1144 Starkey v. Hall (1936) 55 L1 LR 24 ............................................................................................................. 942 Star Sea, The [1997] 1 Lloyd’s Rep 360 ............................................................................................... 730, 750 State of Netherlands v. Youell [1997] 2 Lloyd’s Rep 440; [1998] 1 Lloyd’s Rep 236 ......722, 764, 784, 785 Steamship Balmoral Co v. Marten [1902] AC 511 ............................................................................... 741, 777 Stearns v. Village Main Reef Gold Mining Co (1905) 21 TLR 236 .......................................................... 786 Steel v. Lacy (1810) 3 Taunt 285 ................................................................................................... 734, 748, 773 Steel v. State Line SS Co (1877) 3 App Cas 72 .......................................................................................... 750 Stemson v AMP General Insurance (NZ) Ltd [2006] Lloyd’s Rep IR 852 .............................................. 730 Stephen v. Scottish Boatowners Mutual Insurance Association, The Talisman [1989] 1 Lloyd’s Rep 535 ..................................................................................................................................................... 764, 784 Stephens v. Australasian Insurance Co (1872) LR 8 CP 18 ................................................723, 726, 741, 743 Stevenson v. Snow (1761) 3 Burr 1237 ....................................................................................................... 791 Stewart v. Aberdein (1838) 4 M & W 211 ................................................................................................... 759 Stewart v. Bell (1821) 5 B & Ald 238 ............................................................................................ 733, 735, 736 Stewart v. Greenock Insurance Co (1848) 2 HL Cas 159 .......................................................................... 774 Stewart v. Merchants’ Marine Insurance Co (1885) 16 QBD 619 ............................................................ 782 Stewart v. Wilson (1843) 2 M & W 11 ......................................................................................................... 749 Stinton v. Stinton [1995] RTR 157 ................................................................................................ 937, 949, 994 Stirling v. Vaughan (1809) 11 East 619 ....................................................................................................... 724 Stockdale v. Dunlop (1840) 6 M & W 224 ........................................................................................... 720, 723 Stone v. Marine Insurance Co of Gothenburg (1876) 1 Ex D 81 ...................................................... 752, 791 Stone v. Reliance Mutual Insurance Association [1972] 1 Lloyd’s Rep 469 ................................... 735, 1063 Stoomvaart Maatschappij Nederland v. P&O Steam Navigation Co (1882) 7 App Cas 795 .................. 720 Stott (Baltic) Steamers Ltd v. Marten [1916] 1 AC 304 ............................................................................ 766 Stowers v. G A Bonus plc [2003] Lloyd’s Rep IR 402 ......................................................................... 734, 736 Stribley v. Imperial Marine Insurance Co (1876) 1 QBD 507 ............................................................ 732, 733 Stringer v. English and Scottish Marine Insurance Co (1870) LR 5 QB 599 .......................................... 767 Strive Shipping Corporation v. Hellenic Mutual War Risks Association (Bermuda) Ltd, The Grecia Express [2002] Lloyd’s Rep IR 669 ................................... 728, 731, 734, 735, 736, 761, 764, 785, 1099 Sun Alliance & London Insurance plc v PT Asuraynsri Dayin Mitra TBK, The No 1 Dae Bu [2006] Lloyd’s Rep IR 860 .................................................................................................................. 747, 749, 796 Sun Alliance Pensions Life and Investment Services Ltd v. RJL and Associates [1991] 2 Lloyd’s Rep 410 ........................................................................................................................................................... 1063 Sun Insurance Office v. Galinsky [1914] 2 KB 545 .................................................................................... 697 Sun Life Assurance Co v. CX Reinsurance Co Ltd [2004] Lloyd’s Rep IR 58 ........................................ 739 Sunport Shipping Ltd v. Atkin, The Kleovoulos of Rhodes [2003] Lloyd’s Rep IR 27, affirmed [2003] Lloyd’s Rep IR 349 ................................................................................................................................. 762 Surf City, The [1995] 2 Lloyd’s Rep 242 .............................................................................................. 757, 785 Sutch v. Burns [1944] KB 406 ...................................................................................................................... 940 Sutherland v. Pratt (1843) 11 M & W 296; (1843) 12 M & W 16 .............................................. 723, 724, 739 Svenska Handelsbanken AB v. Dandridge, The Alicia Glazial [2003] Lloyd’s Rep IR 10 ............... 762, 763 Svenska Handelsbanken v. Sun Alliance & London Insurance plc [1996] 1 Lloyd’s Rep 519 .............. 728 736

xl

Table of Cases Swain v. Law Society [1982] 2 All ER 827 ................................................................................................... 857 Swan & Cleland’s Graving Dock & Slipway Co v. Maritime Insurance Co [1907] 1 KB 116 ................. 757 Swan v. Maritime Insurance Co [1907] 1 KB 116 ...................................................................................... 739 Sweeting v. Pearce (1861) 9 CBNS 534 ....................................................................................................... 759 Swiss Reinsurance Co v. United India Insurance Co Ltd [2005] Lloyd’s Rep IR 341 ..................... 729, 791 Symington & Co v. Union Insurance Society of Canton (1928) 34 Com Cas 23; (1928) 31 Ll LR 179 ........719, 763 T G A Chapman Ltd v. Christopher [1998] Lloyd’s Rep (IR) 1 .............................................................. 863 T&N Ltd (No 4), Re [2006] Lloyd’s Rep IR 817 .................................................................................. 817, 851 T&N Ltd v. Royal and Sun Alliance plc [2004] Lloyd’s Rep IR 106 ........................................................ 813 Tabbs v. Bendelack (1801) 3 Bos & P 207n ................................................................................................ 748 Tait v. Levi (1811) 14 East 481 ..............................................................................................749, 754, 756, 791 Talbot Underwriting Ltd v. Nausch, Hogan & Murray Inc [2006] Lloyd’s Rep IR 531 ........ 735, 740, 1062 Tanner v. Bennett (1825) Ry & M 182 ........................................................................................................ 762 Tarbuck v. Avon Insurance Ltd [2002] Lloyd’s Rep IR 393 ............................................................... 814, 818 Tasker v. Cunningham (1819) 1 Bligh HL 87 ............................................................................................ 754 Tate & Sons v. Hyslop (1885) 15 QBD 368 ................................................................................................ 788 Tate Gallery (Trustees) v. Duffy Construction Ltd [2007] 1 All ER (Comm) 1004 ............................... 787 Tate v. Hyslop (1885) 15 QBD 368 .............................................................................................................. 734 Tatham v. Hodgson (1796) 6 TR 656 .......................................................................................................... 765 Tatham, Bromage & Co v. Burr, The Engineer [1898] AC 382 ............................................................... 721 Tattersall v. Drysdale [1935] 2 KB 174 ........................................................................................................ 1099 Taylor v. Allon [1965] 1 Lloyd’s Rep 155 ................................................................................................... 940 Taylor v. Dewar (1864) 5 B & S 58 .............................................................................................................. 721 Taylor v. Dunbar (1869) LR 4 CP 206 .................................................................................................. 719, 765 Taylor v. Eagle Star Insurance Co Ltd (1940) 67 Ll LR 136 ..................................................................... 1099 Taylor v. Liverpool and Great Western Steam Co (1874) LR 9 QB 546 .................................................. 799 Tektrol Ltd v. International Insurance Co of Hanover Ltd [2005] 2 Lloyd’s Rep 701 ............ 720, 761, 763 Tennant v. Henderson (1813) 1 Dow 324 .................................................................................................. 736 Tessili v. Dunlop Case 12/76 [1976] ECR 1473 ......................................................................................... 1141 Thames & Mersey Marine Insurance Co v. British & Chilian SS Co [1916] 1 KB 30 ............................ 787 Thames & Mersey Marine Insurance Co v. Gunford Ship Co, The Gunford [1911] AC 529 ......... 720, 734 Thames & Mersey Marine Insurance Co Ltd v. Hamilton, Fraser & Co, The Inchmaree (1887) 12 App Cas 484 ..............................................................................................................................719, 765, 798, 801 Thames & Mersey Marine Insurance Co v. Pitts, Son & King [1893] 1 QB 476 .................................... 801 Thames & Mersey Marine Insurance Co v. Van Laun & Co [1917] 1 KB 48n ....................................... 754 Thelluson v. Fletcher (1793) 1 Esp 73 ........................................................................................................ 773 Thellusson v. Fergusson (1780) 1 Doug KB 360 ........................................................................................ 755 Theodorou v. Chester [1951] 1 Lloyd’s Rep 204 ....................................................................................... 719 Thomas & Co v. Brown (1891) 4 Com Cas 186 ......................................................................................... 788 Thomas & Son Shipping Co Ltd v. London & Provincial Marine & General Insurance Co Ltd (1914) 30 TLR 595 ....................................................................................................................................... 749, 750 Thomas v. Commissioner of Police for the Metropolis [1997] 2 WLR 593 ............................................ 1110 Thomas v. Harris [1947] 1 All ER 444 ........................................................................................................ 629 Thomas v. Tyne & Wear Insurance Association [1917] 1 KB 938 ...................................................... 749, 750 Thompson v. Adams (1889) 23 QBD 361 ............................................................................................. 793, 794 Thompson v. Gillespy (1855) 5 E & B 209 ................................................................................................. 753 Thompson v. Hopper (1856) 6 E & B 172; (1858) EB & E 1038 .............................................. 750, 754, 764 Thompson v. Lodwick [1983] RTR 76 ........................................................................................................ 937 Thompson v. Reynolds (1857) 26 LJQB 93 ................................................................................................ 742 Thompson v. Whitmore (1810) 3 Taunt 227 ....................................................................................... 798, 801 Thor Navigation Inc v. Ingosstrakh Insurance [2005] Lloyd’s Rep IR 490 ....................................... 727, 741 Thruscoe, The [1897] P 301 ........................................................................................................................ 762 Tidswell v. Ankerstein (1792) Peake 151 .................................................................................................... 627 Tioxide Europe Ltd v. CGU International plc [2006] Lloyd’s Rep IR 31 ............................................... 737 Tobin v. Harford (1863) 13 CBNS 791; (1864) 34 LJCP 37; (1864) 17 CBNS 528 ................. 779, 781, 791 Todd v. Reid (1821) 4 B & Ald 210 ............................................................................................................. 759 Todd v. Ritchie (1816) 1 Stark 240 .............................................................................................................. 800 Tonicstar Ltd v American Home Assurance Co [2005] Lloyd’s Rep IR 32 ................................... 1125, 1128 Toomey v. Banco Vitalicio de Espana [2005] Lloyd’s Rep IR 423 ............................................. 729, 733, 747 Toomey v. Eagle Star Insurance Co (No 2) [1995] 2 Lloyd’s Rep 88 ...................................................... 728 Touche Ross v. Baker [1992] 2 Lloyd’s Rep 207 ........................................................................................ 740 Toulmin v. Anderson (1808) 1 Taunt 227 .................................................................................................. 800 Toulmin v. Inglis (1808) 1 Camp 421 ......................................................................................................... 800 Tracomin SA v. Sudan Oil Seeds Co Ltd (No 1) [1983] 3 All ER 137 .................................................... 1115

xli

Table of Cases Trade Indemnity v. Forsakringsaktiebolaget Njord [1995] 1 All ER 796 ................................................. 1140 Traders & General Insurance Association Ltd v. Bankers & General Insurance Co Ltd (1921) 9 Ll LR 223; (1921) 38 TLR 94 .......................................................................................................................... 765 Trafalgar Insurance Co Ltd v. McGregor [1942] 1 KB 275 ...................................................................... 949 Transcontinental Underwriting Agency v. Grand Union Insurance Co Ltd [1987] 2 Lloyd’s Rep 409 .... 723 Transthene Packaging v. Royal Insurance (UK) Ltd [1996] LRLR 32 .................................................... 730 Travelers Casualty & Surety Co of Europe Ltd v. Sun Life Assurance Co of Canada (UK) Ltd [2004] Lloyd’s Rep IR 846 ..................................................................................................1125, 1126, 1136, 1139 Travelers Casualty and Surety Co of Europe Ltd v. Sun Life Assurance Co of Canada UK (No 2) [2007] Lloyd’s Rep IR 619 ..................................................................................................1126, 1128, 1136, 1139 Trinder Anderson & Co v. Thames and Mersey Marine Insurance Co [1898] 2 QB 114 ............... 764, 773 Truscott v. Christie (1820) 2 Brod & Bing 320 .......................................................................................... 797 Tryg Baltica Int (UK) Ltd v. Boston Compania de Seguros SA [2005] Lloyd’s Rep IR 40 ......... 1125, 1128 Tunno v. Edwards (1810) 12 East 488 ......................................................................................................... 774 Turnbull & Co v. Scottish Provident Institution (1896) 34 SLR 146 ....................................................... 627 Turnbull v. Janson (1877) 36 LT 635 .................................................................................................... 749, 750 Turnbull, Martin & Co v. Hull Underwriters Association [1900] 2 QB 242 ........................................... 765 Tyler v. Horne (1785) Marshall on Marine Insurances 525 ...................................................................... 791 Tyrie v. Fletcher (1777) 2 Cowp 666 ........................................................................................................... 791 Tyser v. Shipowners’ Syndicate [1896] 1 QB 135 ....................................................................................... 793 Tyson v. Gurney (1789) 3 TR 477 ............................................................................................................... 748 Union Insurance Society of Canton Ltd v. George Wills & Co [1916] 1 AC 281 ............742, 743, 746, 747 Union Marine Insurance Co v. Borwick [1895] 2 QB 279 ....................................................................... 720 Union Marine Insurance v. Martin (1866) 35 LJCP 181 ........................................................................... 744 Union Transport plc v. Continental Lines SA [1992] 1 Lloyd’s Rep 229 ................................................ 1140 Unipac (Scotland) Ltd v. Aegon Insurance Co [1999] Lloyd’s Rep IR 502 ..................................... 745, 747 Unirise Development Ltd and Noble Resources Ltd v. Greenwood, The Vasso [1993] 2 Lloyd’s Rep 309 ........................................................................................................................................................... 781 United Africa Co v. NV Tolten [1946] P 135n ........................................................................................... 799 United Kingdom Mutual SS Assurance v. Boulton (1898) 3 Com Cas 330 ............................................. 774 United Scottish Insurance Co Ltd v. British Fishing Vessels Mutual War Risks Association Ltd, The Braconbush (1944) 78 Ll LR 70 ........................................................................................................... 768 United States Shipping Co v. Empress Assurance Co [1907] 1 KB 259; [1908] 1 KB 115 ...... 725, 727, 778 Universal Marine Insurance Co v. Morrison (1873) LR 8 Exch 197 ................................................. 728, 736 Universities Superannuation Scheme Ltd v. Royal Insurance (UK) Ltd [2000] Lloyd’s Rep IR 524 ......... 766 Universo Insurance Co of Milan v. Merchants’ Marine Insurance Co [1897] 2 QB 93 ......................... 759 Unum Life Insurance Co of America v. Israel Phoenix Assurance Co Ltd [2002] Lloyd’s Rep IR 374 ..... 793 Upchurch (Nigel) Associates v. Aldridge Estates Investment Co Ltd [1993] 1 Lloyd’s Rep 535 .......... 816 Usher v. Noble (1810) 12 East 639 ....................................................................................................... 725, 727 Uzielli v. Boston Marine Insurance Co (1884) 15 QBD 11 ................................................................ 774, 785 Vacuum Oil Co v. Union Insurance Society of Canton (1926) 25 Ll LR 546 ......................................... 773 Vainquer Jose, The [1979] 1 Lloyd’s Rep 557 ............................................................................................ 815 Vallance v. Dewar (1808) 1 Camp 503 .................................................................................................. 736, 754 Vallejo v. Wheeler (1774) 1 Cowp 143 ........................................................................................................ 800 Van Grutten v. Digby (1862) 31 Beav 561 .................................................................................................. 1131 Vandepitte v. Preferred Accident Insurance Corporation of New York [1933] AC 70 .......................... 944 Vandyck v. Hewitt (1800) 1 East 96 ............................................................................................................. 791 Vaneetveld v. SA Le Foyer Case C-316/93 [1994] 2 CMLR 852 ............................................................... 1026 Vasso, The [1993] 2 Lloyd’s Rep 309 .......................................................................................................... 784 Velos Group Ltd v. Harbour Insurance Services Ltd [1997] 2 Lloyd’s Rep 461 ..................................... 790 Ventouris v. Mountain, The Italian Express [1992] 2 Lloyd’s Rep 281 ................................................... 776 Vernon v. Smith (1821) 5 B & Ald 1 ........................................................................................................... 697 Violett v. Allnutt (1813) 3 Taunt 419 .......................................................................................................... 755 Virk v. Gan Life Holdings Ltd [2000] Lloyd’s Rep IR 159 ............................................................... 766, 1111 Visscherij Maatschappij Nieuw Onderneming v. Scottish Metropolitan Assurance Co Ltd (1922) 27 Com Cas 198; 1922) 10 Ll LR 579 ......................................................................................... 734, 763, 800 Vita Food Products Inc v. Unus Shipping Co Ltd [1939] AC 277 ........................................................... 1126 Von Lindenau v. Desborough (1828) 3 C & P 353 .................................................................................... 627 Vrondissis v. Stevens [1940] 2 KB 90 .................................................................................................... 767, 768 Wadsworth Lighterage and Coaling Co Ltd v. Sea Insurance Co Ltd (1929) 35 Com Cas 1 ................ 765 Wainwright v. Bland (1835) 1 Moo & R 481 ........................................................................................ 627, 628 Wait & James v. British & Foreign Marine Insurance Co (1921) 9 Ll LR 552 ........................................ 781 Walker v. Maitland (1821) 5 B & Ald 171 ................................................................................................... 764 Walton v. Newcastle-on-Tyne Corporation [1957] 1 Lloyd’s Rep 412 ...................................................... 957 Waples v. Eames (1746) 2 Str 1243 .............................................................................................................. 797

xlii

Table of Cases Ward & Co v. Weir & Co (1899) 4 Com Cas 216 ....................................................................................... 720 Ward v. Beck (1863) 13 CBNS 668 .............................................................................................................. 726 Warre v. Miller (1825) 4 B & C 538 ...................................................................................................... 755, 797 Warwick v. Scott (1814) 4 Camp 62 ............................................................................................................ 745 WASA International (UK) Insurance Co Ltd v. WASA International Insurance Co Ltd [2002] EWHC 2698 (Ch) ............................................................................................................................................... 196 Waters v. Monarch Fire and Life Assurance Co (1856) 5 E & B 870 ....................................................... 726 Watkins v. O’Shaughnessy [1939] 1 All ER 385 ......................................................................................... 937 Watson & Son Ltd v. Firemen’s Fund Insurance Co of San Francisco [1922] 2 KB 355 ................ 719, 776 Watson v. Clark (1813) 1 Do 336 ................................................................................................................. 750 Watson v. Swann (1862) 11 CBNS 756 ........................................................................................................ 792 Waugh v. Morris (1873) LR 8 QB 202 ........................................................................................................ 751 Way v. Modigliani (1787) 2 TR 30 ................................................................................................. 740, 753, 754 Wayne Tank and Pump Co Ltd v. Employers Liability Assurance Corporation Ltd [1974] QB 57 ...... 763 Webb, Re [1941] 1 Ch 225 ............................................................................................................................ 632 Wedderburn v. Bell (1807) 1 Camp 1 ......................................................................................................... 749 Weir v. Aberdeen (1819) 2 B & Ald 320 ...............................................................................736, 747, 749, 756 Weissberg v. Lamb (1950) 84 Ll LR 509 ..................................................................................................... 784 Weldrick v. Essex and Suffolk Equitable Insurance Society (1949) 83 L1 LR 91 ................................... 949 Welex AG v. Rosa Maritime, The Epsilon Rosa [2003] 2 Lloyd’s Rep 509 .............................................. 1130 Wells v. Hopwood (1832) 3 B & Ad 20 ....................................................................................................... 801 Welsh Girl, The (1906) 22 TLR 475 ............................................................................................................ 787 Weniger’s Policy, Re [1910] 2 Ch 291 .......................................................................................................... 629 West Tankers Inc v. RAS Riunione Adriatica di Sicurta SpA [2007] UKHL 4 .............................. 1140, 1141 Westbury v. Aberdein (1837) 2 M & W 267 ............................................................................................... 733 Westerton, Re [1919] 2 Ch 104 .................................................................................................................... 629 Westminster Fire Office v. Glasgow Provident Investment Society (1888) 13 App Cas 699) ................. 698 Westwood v. Bell (1815) 4 Camp 349 .......................................................................................................... 760 White v. Dobinson (1844) 14 Sim 273 ........................................................................................................ 787 White v. Jones [1995] 1 All ER 691 ............................................................................................................. 855 White v. White [1999] Lloyd’s Rep IR 30, [2001] Lloyd’s Rep IR 493 .................................... 947, 994, 1029 Whiting v. New Zealand Insurance Co (1932) 44 Ll LR 179 ............................................................. 765, 779 Whittingham v. Thornburgh (1690) 2 Vern 206; Martin v. Sitwell (1691) 1 Show 156 ......................... 721 Whitwell v. Harrison (1848) 2 Exch 127) ................................................................................................... 752 Wilkie v. Geddes (1815) 3 Dow 57 .............................................................................................................. 749 Wilkinson v. Clay (1815) 6 Taunt 110 ......................................................................................................... 759 Wilkinson v. Hyde (1858) 3 CBNS 30 ......................................................................................................... 781 Williams, Re [1917] 1 Ch 1 ........................................................................................................................... 629 Williams & Co v. Canton Insurance Office Ltd [1901] AC 462 ............................................................... 762 Williams v. Atlantic Assurance Co Ltd [1933] 1 KB 81 .......................................................726, 727, 734, 757 Williams v. Baltic Insurance Association of London [1924] 2 KB 282 .............................................. 628, 944 Williams v. Jones [1975] RTR 433 ............................................................................................................... 937 Williams v. North China Insurance Co (1876) 1 CPD 757 ....................................................................... 792 Williamson v. Innes (1831) 8 Bing 81n ....................................................................................................... 797 Willmott v. General Accident Fire and Life Assurance Corporation (1935) 53 Ll LR 156 ................... 729 Wills & Sons v. World Marine Insurance Ltd, The Mermaid [1980] 1 Lloyd’s Rep 350n ..................... 766 Willyans v. Scottish Widows Fund Law Assurance Society (1888) 4 TLR 489 ......................................... 24 Wilmott v. General Accident Fire and Life Assurance Corporation Ltd (1935) 53 Ll LR 156 ............. 750 Wilson Bros Bobbin Co v. Green (1915) 31 TLR 605; [1917] 1 KB 860 .......................................... 770, 783 Wilson v. Forster (1815) 6 Taunt 25 ............................................................................................................ 769 Wilson v. Jones (1867) LR 2 Exch 139 ......................................................................................... 720, 722, 723 Wilson v. Martin (1856) 11 Exch 684 .......................................................................................................... 725 Wilson v. Nelson (1864) 33 LJQB 220 ........................................................................................................ 741 Wilson v. Rankin (1865) LR 1 QB 162 ........................................................................................................ 751 Wilson v. Salamandra Assurance Co of St Petersburg (1903) 88 LT 96 .................................................. 732 Wilson, Holgate & Co Ltd v. Lancashire & Cheshire Insurance Corporation Ltd (1922) 13 Ll LR 486 .....734, 765, 794 Wilson, Sons & Co v. Xantho, The Xantho (1887) 12 App Cas 503 ....................................................... 798 Wimbledon Park Golf Club Ltd v. Imperial Insurance Co Ltd (1902) 18 TLR 815 ........................ 697, 698 Windle v. Dunning [1968] 2 All ER 46 ....................................................................................................... 937 Wingate v. Foster (1878) 3 QBD 582 .......................................................................................................... 754 Winnick v. Dick 1984 SLT 185; Pitts v. Hunt [1990] 3 All ER 344 .......................................................... 945 Winter v. Director of Public Prosecutions [2003] RTR 14 ........................................................................ 955 Winter v. Haldimand (1831) 2 B & Ad 649 ................................................................................................ 801 WISE Underwriting Agency v. Grupo Nacional Provincial SA [2004] Lloyd’s Rep IR 962 ..... 728, 731, 736

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Table of Cases Wolff v. Horncastle (1798) 1 Bos & P 316 .................................................................................................. 723 Wood v. Law Society (1995) Independent, l March ................................................................................... 855 Wood v. Perfection Travel Ltd [1996] LRLR 233 ...................................................................................... 815 Wooding v. Monmouthshire and South Wales Mutual Indemnity Society Ltd [1939] 4 All ER 570 .... 813 Woodside v. Globe Marine Insurance Co Ltd [1896] 1 QB 105 ........................................................ 742, 782 Woodward v. James Young (Contractors) Ltd 1958 SC 28 ........................................................................ 955 Woolcott v. Sun Alliance and London Insurance Ltd [1978] 1 All ER 1253 .......................................... 1099 Woolf v. Claggett (1800) 3 Esp 257 ....................................................................................................... 749, 756 Woolmer v. Muilman (1763) 1 Wm Bl 427; (1763) 2 Burr 1419 ....................................................... 745, 746 Woolridge v. Boydell (1778) 1 Doug KB 16 ................................................................................. 753, 754, 755 Woolwich Building Society v. Brown, [1996] CLC 625 ....................................................................... 785, 787 Woolwich Building Society v. Taylor [1995] 1 BCLC 132 ................................................................... 816, 818 Worthington v. Curtis (1875) 1 Ch D 419 ............................................................................................ 627, 628 Wunsche International v. Tai Ping Insurance Co [1998] 2 Lloyd’s Rep 8 .............. 718, 721; 723, 752, 765, Wyatt v. Guildhall Insurance [1937] 1 KB 653; Coward v. Motor Insurers’ Bureau [1963] 1 QB 259 ....... 944 Xenos v. Fox (1868) LR 3 CP 630; (1869) LR 4 CP 665 .................................................................... 721, 783 Xenos v. Wickham (1867) LR 2 HL 296 ..................................................................................................... 794 Yangtse Insurance Association v. Lukmanjee [1918] AC 585 ............................................................. 720, 740 Yasin, The [1979] 2 Lloyd’s Rep 45 ............................................................................................................. 787 Yates v. White (1838) 1 Arnold 85 ............................................................................................................... 786 Yorkshire Dale Steamship Co v. Minister of War Transport, The Coxwold [1942] AC 691 .................. 762 Yorkshire Insurance Co Ltd v. Campbell [1917] AC 218 .................................................................... 745, 747 Yorkshire Insurance Co v. Nisbet Shipping Co [1962] 2 QB 330 ............................................................ 787 Yorkshire Water v. Sun Alliance & London Insurance [1997] 2 Lloyd’s Rep 21 ............................. 783, 784 Youell v. Bland Welch (No 1) [1990] 2 Lloyd’s Rep 423; [1992] 2 Lloyd’s Rep 127 .............. 719, 743, 794 Youell v. Bland Welch & Co (No 2) [1990] 2 Lloyd’s Rep 431; [1992] 2 Lloyd’s Rep 127 .........743, 1064, 1110 Young v. Turing (1841) 2 Man & G 593 ..................................................................................................... 770 Zachariessen v. Importers and Exporters Marine Insurance Co (1924) 29 Com Cas 202 ..................... 768 Zeus Tradition (Marine) v. Bell [1999] 1 Lloyd’s Rep 703 ....................................................................... 749 Zurich General Accident and Liability Insurance Co Ltd v. Morrison (1942) 72 L1 LR 167 ............... 949

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CHAPTER 1

REGULATION OF INSURERS

DOMESTIC LAW 1.1 This Chapter sets out the statutory framework for the regulation of insurers. The history of the regulation of insurance companies is long but not particularly glorious. Insurance appears to be as old as trading itself, and the practice of marine insurance seems to have spread to England in the twelfth and thirteenth centuries with the development of England as a maritime and trading power. The foundation of Lloyd’s in the seventeenth century secured England’s prominence as a provider of marine insurance for both domestic and foreign purchasers, and other forms of insurance followed. Fire insurance grew in the aftermath of the Great Fire of London in 1666, and life insurance—with its origins in the various forms of mutual assistance societies—had become of some significance by the end of the eighteenth century. The industrialisation of the first half of the nineteenth century, and the winning of the battle for corporate limited liability in 1847, opened the way to what has been termed the ‘‘Golden Age of British Insurance’’ in the second half of the nineteenth century. This period saw the consolidation of various new forms of insurance, including personal accident insurance (brought about by the increasing use of trains), reinsurance, livestock insurance and machinery insurance. As the law of liability expanded, most importantly at the workplace, liability insurance followed. Consumer mass insurances did not of course develop until the post-Second World War period. What can be seen, therefore, is a gradual move, over a period of three centuries, from insurance as a form of protection for merchants and the privileged few, to the growth of what is probably England’s pre-eminent financial industry. 1.2 The legislature, from the origins of insurance to the present day, has allowed the industry to prosper with intervention kept to a bare minimum. In its origins, regulation was concerned to prevent frauds and undesirable practices of various types: the Marine Insurance Act 1745 banned marine policies made without interest, thereby putting an end to institutionalised gambling on the fate of vessels; the Life Assurance Act 1774 banned the making of life policies without interest, stamping out the all too open gambling on the duration of the lives of public figures; and the Fires Prevention (Metropolis) Act 1774 inter alia sought to discourage the practice increasingly adopted by weekly tenants of wooden buildings of insuring the buildings for their full value and thereafter basking in the heat and benefits derived from their flames. These interventions aside, laissez faire remained the predominant philosophy until the last quarter of the nineteenth century. 1.3 Insurance regulation as we now know it had its origins in the Life Assurance Companies Act 1870. That Act introduced a financial deposit system, under which a life insurer had to deposit a fixed sum with the Board of Trade, as a guarantee of its solvency. In due course the crude deposit system was replaced with financial solvency guaranteed by prior approval and by appropriate accounting measures. Over the following decades the intensity of insurance regulation increased with the growth of the market and with successive failures of insurance companies, and the system expanded successively with the Insurance Companies Act 1958, the Companies Act 1967, the Insurance Companies Act 1974, the Insurance Companies Act 1982, and, in relation to certain forms of life

1

Regulation of Insurers insurance only, the Financial Services Act 1986. The 1982 Act was a long, complex and much amended piece of legislation, many of the amendments being required by EC law. In 1997 the vast majority of regulatory functions were transferred from the Department of Trade and Industry to the Treasury. In 1998 the Treasury itself delegated its supervisory functions to a non-statutory body, the Financial Services Authority, under the Contracting Out (Functions in Relation to Insurance) Order 1998, SI 1998 No 2842, made under the Deregulation and Contracting Out Act 1994. 1.4 The entire legislative structure affecting insurance companies was swept aside and replaced by the Financial Services and Markets Act 2000, although the separate legislation affecting Lloyd’s and friendly societies was retained albeit in amended form. The 2000 Act applies to all forms of financial service, and lays down detailed rules for authorisation, trading within the European Union, transfer of business, suitability of controllers and marketing. In this work we have reproduced the sections which affect insurance, many of which are of general application in the financial services sector but some of which are specific to insurance business. There is also a great deal of secondary legislation, the relevant parts of which are also reproduced. Much of the detail of the regulation of insurers is contained in the Handbook published online and in hard copy by the Financial Services Authority. The term ‘‘Handbook’’ is a misnomer of major proportions, as the Handbook is a substantial document which runs to many hundreds of pages. It has not been possible to reproduce the Handbook in this work, due both to its length and to the frequency of the amendments made to it. 1.5 Although the focus of UK legislation is on the prevention of insolvency, the law makes specific provision for the situation in which the legislation fails and an insurer becomes insolvent. The most important provision was the Policyholders Protection Act 1975, under which a private policyholder under a UK policy was able to recover from a fund set up by the insurance industry itself and administered by the Policyholders Protection Board all of the loss (in the case of compulsory insurance) or 90 per cent of the loss (for non-compulsory insurances). Test cases brought before the House of Lords in 1993 under the 1975 Act brought to light a number of problems with its application, indicating in particular that the Act was wider than at first thought in that it covered nonUK policyholders provided that their policies formed part of an insurer’s portfolio of UK insurance business. 1.6 Consequently, in 1994, the Department of Trade and Industry published a Consultative Document putting forward for discussion a series of proposed amendments. The recommendations were for the most part adopted by amending legislation, the Policyholders Protection Act 1997, but that Act was never brought into force. The FSMA 2000 repealed both the 1975 and 1997 Acts and replaced them with a new Financial Services Compensation Scheme. 1.7 Where an insurer has become insolvent, any policyholder who does not qualify for full payment under the Scheme may prove for his loss, or that part of it not met under the Scheme, in the insurer’s liquidation. In the case of a policyholder who has not suffered a loss under the policy, but has been deprived of the unexpired period of cover or (under a life policy) other accrued rights, the assured may prove in the insurer’s liquidation for such loss, as measured by the Insurers (Winding up) Rules 2001, SI 2001 No 3635. The distribution of an insolvent insurer’s assets has also been the subject of statutory intervention based on EU requirements, the Insurers (Reorganisation and Winding Up) Regulations 2004, SI 2004 No 353 (extended to Lloyd’s by the Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005, SI 2005 No 1998) giving priority to policyholders over other unsecured creditors. 1.8 It is perhaps an oversimplification, but one which nevertheless contains a good deal of truth, to say that much of the succeeding regulatory insurance legislation was in response to particular and spectacular collapses. Two points nevertheless emerge. The first is that the thrust of regulation was in 1870, and remains today under the FSMA 2000, the preservation of the solvency of insurers. The second, which follows logically from the first, is that—in line with the approach taken to other contracts—legislation has largely

2

Regulation of Insurers been unconcerned with how insurers treat their policyholders: insurers’ ability to pay, rather than their willingness to do so, has governed the legislature’s approach. Intervention into the contractual relationship has been isolated. Illustrations are: the Third Parties (Rights against Insurers) Act 1930, which requires the liability insurer of an insolvent assured to make payment to the assured’s victim; the Employers Liability (Compulsory Insurance) Act 1969, which makes employers’ liability insurance compulsory and regulates certain contract terms; and the Road Traffic Act 1988 (dating back to 1930), which makes motor vehicle insurance compulsory and in effect rewrites motor insurance contracts by stripping the insurer of most defences in respect of a loss incurred by a third party. The 2000 Act does, however, provide for limited intervention with the contractual relationship, the FSA Handbook setting out general principles of claimshandling which replace previous voluntary controls.

THE IMPACT OF THE EC 1.9 Although the system of insurance regulation was comparatively well developed in the UK by the 1970s perhaps the greatest influence on the modern development of regulation has been the European Community’s Single Insurance Market programme, which was initiated in 1973 and which was more or less completed on 1 July 1994. Two of the key principles underlying the concept of a single market and set out in the Treaty of Rome 1957, are: (a) the right of establishment, whereby a person located in one member state is entitled to become established and to trade in another member state; and (b) the freedom to provide services, whereby a person located in one member state is entitled to supply services to persons in other member states without having to become established in those states. The earliest attempts to introduce these principles into the insurance market back in the early 1970s were met by the problem that all member states operated a system of prior authorisation and subsequent financial supervision of insurers, which meant that an insurer located in one member state but which wished to operate in another member state either through an establishment or by provision by way of services, would have to comply with the domestic laws of every other member state in which it sought to trade. It thus became necessary to find a way of removing national barriers to freedom of trade. This was achieved by the EC over two decades, primarily by three distinct generations of insurance directives, non-life and life insurance being treated separately. 1.10 The development of the EC regime is traced in detail in the annotations in this chapter, and is summarised here. The First Non-Life Directive in 1973 and the First Life Directive in 1979 had the limited effect of securing freedom of establishment: an insurer with its head office in one member state was to be permitted to create an establishment in any other member state, provided that the establishment complied with the domestic rules of the host state, including authorisation. Before any further liberalisation could occur, in 1985 a series of four cases, collectively known as the Insurance Cases, came before the European Court of Justice: Commission v. Germany Case 205/84, [1987] 2 CMLR 69; Commission v. France Case 220/83, [1987] 2 CMLR 113; Commission v. Ireland Case 206/84, [1987] 2 CMLR 140; Commission v. Denmark Case 252/83, [1987] 2 CMLR 169. These cases arose from the Co-Insurance Directive of 1978, a relatively modest measure which extended to co-insurance the rules on technical reserves and matching rules applicable to non-life insurance. The issues which arose in these cases, and the replies of the European Court of Justice, were as follows. (a) Could the law of a member state provide that, where the risk was located in that member state, the leading insurer in any co-insurance arrangement had to be established and authorised in that member state? The Court held that the law could not so demand, and that it was enough for the leading co-insurer to be authorised and established in any EC member state. (b) Could the law of a member state provide that intermediaries in that member state could arrange risks located in that state only with an insurer authorised and established in that state? The Court held that:

3

Regulation of Insurers (1) an insurer established and authorised in a member state was entitled to become established in any other member state provided that it complied with the regulatory laws of that state; (2) an insurer authorised and established in one member state was entitled to sell insurance into another EC member state without becoming established in the host state by means of a branch or subsidiary; (3) an insurer authorised and established in one member state was entitled to sell insurance into another EC member state without the authorisation of the host state’s authorities, subject to the consideration that the host state had the right to impose an authorisation requirement to protect consumers. (c) Could a member state impose minimum financial threshold requirements for co-insurance arrangements. The Court ruled that this was permissible, and the Co-Insurance Directive was accordingly amended by the Second Non-Life Directive to permit this to occur. (d) Could a member state impose upon its own insurers an obligation to seek its authorisation for them to carry on insurance business elsewhere in the EC? The Court upheld this requirement. 1.11 The effect of these decisions was to prevent the Commission moving directly to a single insurance market whereby authorisation and establishment in any member state conferred a licence to sell insurance directly into, or to become established in, any other member state: this was so because of the Court’s ruling that consumer protection permitted the imposition of an authorisation requirement by any host state. To overcome this, the Commission’s Second Generation of Directives drew a distinction between consumer and other insurances. In the case of non-life insurance, a distinction was drawn between mass (consumer) risks and large (commercial) risks: a host state was permitted to impose an authorisation requirement in the former but not the latter case. In the case of life insurance, a distinction was drawn between ordinary policyholders and policyholders who had taken the initiative in seeking the commitment, ie, who had deliberately sought insurance from an insurer established and authorised elsewhere in the EC: in the latter case, the demonstrable sophistication of the policyholder rendered his protection unnecessary, and the host state could not impose an authorisation requirement upon an insurer selling into the territory. These difficult distinctions did not last long. The third generation of insurance directives swept them away in 1992, and on 1 July 1994 the single insurance market came into being, with the following features: (a) the regulatory structure affecting insurance companies as applied by each member state has been harmonised; (b) an insurer with its head office in an EC member state must seek authorisation from the regulatory authorities of that member state, and such authorisation operates as a Single European Licence, allowing that insurer to become established in any other member state or to sell insurance directly into that member state without seeking authorisation from its domestic regulatory authorities; (c) the EC-wide operations of an insurer are to be governed by the regulatory authorities of its home state—the solvency margin is, for example, to be looked at on an EC-wide basis and not merely on a purely home country basis; (d) regulation has been confined to solvency and its necessary attributes—those EC member states which previously exercised ‘‘material control’’ over insurers (regulating policy terms and premium levels) were required to abandon those controls, bringing them into line with the traditional UK approach to regulation. 1.12 The Single Market regime has been further strengthened by directives on: export credit insurance; the supervision of insurance undertakings in an insurance group; the insolvency of insurance companies; the rights of consumers entering into financial services contracts, including life policies, by means of negotiations at a distance (including electronic communications); and reinsurance. Also, the three Life Directives were consolidated in 2002.

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Lloyd’s Act 1871

1.20

1.13 The result of domestic UK initiatives, as modified by the requirements of the EC Single Market, has been highly complex legislation which has been subject to regular, frequent and difficult amendments to take account of the various transitional stages of EC law and, latterly, the expansion of the EC at the beginning of 1995 and the European Economic Area Agreement of 1994 between the EC and the European Free Trade Association countries. The EEA Agreement extends the Single Market to EFTA countries, including the effects of all three generations of insurance Directives. In addition, the EC concluded an agreement with the Swiss Federation in 1991, which in effect applied Single Market insurance principles to EC and Swiss non-life insurance companies operating in each other’s territories, an agreement which produced an EC Regulation and an EC Directive, both of which required modification to English law. This chapter sets out the UK primary and secondary legislation in full, followed by the EC legislation as reflected by implementation of the UK’s own legislation. 1.14 It should be noted that the numerous EC Directives are to be repealed and recast in amended and consolidated form in a single Directive under the European Commission’s ‘‘Solvency 2’’ initiative. This should be adopted by 2010. We have not reproduced the draft directive (published by the European Commission in June 2007) given that it will be some years before it becomes binding on member states. 1.20 LLOYD’S ACT 1871 (34 Vict. c. xxi) General Note Prior to the passing of the Lloyd’s Act 1871 Lloyd’s existed as a Society regulated by a deed of association dated 1811. The main purpose of the 1871 Act was to provide for the incorporation of Lloyd’s, giving the Society of Lloyd’s formal legal personality and thus enabling Lloyd’s to hold property and to sue and be sued. The first part of the Act is transitional, and the remainder establishes the Committee charged with the management of Lloyd’s, sets out disqualifications from membership of Lloyd’s, provides authority for the making of byelaws and confers various powers upon Lloyd’s. Much of the 1871 Act, including those provisions relating to the management of Lloyd’s and qualifications for membership, were altered by subsequent legislation.

An Act for incorporating the members of the Establishment or Society formerly held at Lloyd’s Coffee House in the Royal Exchange in the City of London, for the effecting of Marine Insurance, and generally known as Lloyd’s; and for other purposes. [25th May, 1871] there has long existed in the Royal Exchange in the City of London an Establishment or Society formerly held at Lloyd’s Coffee House in the Royal Exchange, for the effecting of marine insurance, and generally known as Lloyd’s: And whereas the Society is regulated by a deed of association, dated on or about the thirtieth day of August one thousand eight hundred and eleven, which deed, or a deed of accession referring thereto, has usually been from time to time executed by the several members of the Society, and the Society is governed by rules or regulations from time to time made under that deed: And whereas the affairs of the Society, and the business conducted by its members as such, are of large and increasing magnitude and importance, but the constitution of the Society is imperfect, and difficulties arise therefrom in relation to legal proceedings, and the management of the affairs of the Society and the incorporation of its members with proper powers would be of great benefit to the shipping and mercantile interests of the United Kingdom, and it is therefore expedient that they be incorporated, and that provision be made for the government of the Society and the conduct of its affairs: And whereas by section four hundred and forty-eight of the Merchant Shipping Act, 1854, it is enacted to the effect that any receiver of wreck, or in his absence any justice of the peace, shall, as soon as conveniently may be, examine on oath any person belonging to any ship which may be or may have been in distress on the coast of the United Kingdom, or any other person

WHEREAS

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1.20

Regulation of Insurers

who may be able to give an account thereof or of the cargo or stores thereof, as to the matters in that section specified, and that the receiver or justice shall take the examination down in writing, and shall make two copies of the same, of which he shall send one to the Board of Trade and the other to the Secretary of the Committee for managing the affairs of Lloyd’s in London, and such last-mentioned copy shall be placed by the said Secretary in some conspicuous situation for the inspection of persons desirous of examining the same: And whereas it will be necessary on the incorporation of the Society to secure the continuance of the operation of the said section: And whereas the capital stock of the Society consisted on the first day of December 1870 of the sum of forty-eight thousand pounds three pounds per centum consolidated annuities standing in the names of four persons being trustees for the Society: And whereas in or about the year 1799 a vessel of war of the royal navy, named the Lutine, was wrecked on the coast of Holland with a considerable amount of specie on board, insured by underwriters at Lloyd’s, being members of the Society, and others, and Holland being then at war with this country the vessel and cargo were captured, and some years afterwards the King of the Netherlands authorized certain undertakers to attempt the further salvage of the cargo on the conditions (among others) that they should pay all expenses, and that one half of all that should be recovered should belong to them, and that the other half should go to the Government of the Netherlands, and subsequently the King of the Netherlands ceded to King George the Fourth on behalf of the Society of Lloyd’s, the share in the cargo which had been so reserved to the Government of the Netherlands: And whereas from time to time operations of salving from the wreck of the Lutine have been carried on, and a portion of the sum recovered, amounting to about twenty-five thousand pounds, is by virtue of the cession aforesaid in the custody or under the control of the Committee for managing the affairs of Lloyd’s: And whereas, by reason of the mode in which the business of insurance has always been carried on by members of the Society, the names of those who underwrite a particular policy cannot, when a considerable time has elapsed, be traced with certainty, if at all, especially as regards policies anterior in date to one thousand eight hundred and thirty-eight, in which year the books and papers relating to the affairs of the Society were lost in the fire which destroyed the Royal Exchange: And whereas it is expedient that the operations of salving from the wreck of the Lutine be continued, and that provision be made for the application in that behalf, as far as may be requisite, of money that may hereafter be received from those operations, and for the application to public or other purposes of the aforesaid sum of twenty-five thousand pounds, and of the unclaimed residue of money to be hereafter received as aforesaid: And whereas it is expedient that various powers be conferred on the Society as incorporated, and that its functions be as far as may be defined: And whereas it is expedient that provision be made for the incorporation, from time to time, by agreement, with the Society, of other societies, associations, companies, or corporations instituted for purposes connected with shipping or marine insurance: And whereas the objects aforesaid cannot be attained without the authority of Parliament: May it therefore please Your Majesty that it may be enacted; and be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows; (that is to say), Short title 1. This Act may be cited as Lloyd’s Act, 1871. Cessor of existing constitution 2. On the passing of this Act, the deed of association, dated on or about the thirtieth day of August one thousand eight hundred and eleven, executed by members of the Establishment or Society of Lloyd’s as existing before the passing of this Act, and any deed executed by other members by way of accession thereto, shall be and the same are and each of them is hereby annulled. Incorporation of Lloyd’s 3. The Right Honourable George Joachim Goschen, William Simpson, James Leverton Wylie, William Young, Henry Casper Heintz, Frederic Bernstein Bernard Natusch, James Bischoff,

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Lloyd’s Act 1871

1.20

George Dorman Tyser, Michael Wills, William Wilson Saunders, Leonard Charles Wakefield, and Thomas Chapman, and all persons admitted as members of Lloyd’s before or after the passing of this Act, are hereby united into a Society and Corporation for the purposes of this Act, and for those purposes are hereby incorporated by the name of Lloyd’s, and by that name shall be one body corporate, with perpetual succession and a common seal, and with power to purchase, take, hold, and dispose, of lands and other property (which incorporated body is hereafter in this Act referred to as the Society). Property, &c., vested in Society 4. All property and rights of or to which the Committee for managing the affairs of Lloyd’s, or any person on their behalf, or any trustee for that Committee, or for the members of Lloyd’s, are or is possessed or entitled at law or in equity at the passing of this Act, shall by virtue of this Act belong to the Society to the same extent and for the same estate and interest as the same respectively is and are at the passing of this Act vested in that Committee, person, or trustee, and may be held used, and enjoyed accordingly; and all trustees for the Establishment or Society as it existed before the passing of this Act, or for that Committee, shall be and continue trustees for the Society, as nearly as may be as if this Act had not been passed. Contracts, &c., to remain in force 5. Notwithstanding the annulling by this Act of the aforesaid deeds of association and accession, and the incorporation by this Act of the Society, all deeds of trust, leases, mortgages, bonds, contracts, agreements, securities, transfers, and other acts and things before the passing of this Act made, entered into, executed, or done by or with the Committee for managing the affairs of Lloyd’s, or any person or trustee as aforesaid, shall be as good, valid, and effectual to all intents for, against, and with reference to the Society as they would have been for, against, or with reference to such Committee if this Act had not been passed, and may be proceeded on, executed, used, dealt with, and enforced accordingly, the Society being only substituted in or in relation thereto respectively for such Committee. Actions, &c., not to abate 6. Notwithstanding the annulling and incorporation aforesaid, any action, suit, prosecution, or other proceeding instituted before the passing of this Act by or against the Committee for managing the affairs of Lloyd’s, or any person or trustee as aforesaid, shall not abate or be discontinued or be prejudicially affected by this Act, but on the contrary, shall continue and take effect both in favour of and against the Society, as it would have done in favour of or against that Committee, or the members thereof, or any of them, or any person or trustee as aforesaid, if this Act had not been passed, the Society being only substituted in or in relation thereto respectively for that Committee or the members thereof, or any one or more of them, or such person or trustee. Debts to be paid and received by the Society 7. All debts due to the Committee for managing the affairs of Lloyd’s, or to any person or trustee as aforesaid, with all interest (if any) due or to accrue due thereon, shall be paid to the Society, and shall be recoverable by them, and all debts due by such Committee person, or trustee as aforesaid, with all interest (if any) due or to accrue due thereon, shall be paid by the Society and shall be recoverable from them. Officers continued 8. All officers of and persons employed by the Committee for managing the affairs of Lloyd’s, in office or employment at the passing of this Act, shall continue in their respective offices and employments, according to the tenure of their respective offices and employments, and as if they had been appointed by the Society, and be deemed to be officers of or persons employed by the Society, and they and their respective sureties shall be liable as if they respectively had been appointed by and had become bound to the Society. General saving for rights and liabilities 9. Notwithstanding the annulling and incorporation aforesaid, and except as by this Act otherwise expressly provided, everything before the passing of this Act done or suffered by or with reference to the Committee for managing the affairs of Lloyd’s, or any person or trustee

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Regulation of Insurers

as aforesaid, shall be as valid as if this Act had not been passed, and the annulling and incorporation aforesaid and this Act respectively shall accordingly be subject and without prejudice to everything so done or suffered, and to all rights, liabilities, claims, and demands, both present and future, which if this Act had not been passed would be incident to and consequent on any and everything so done or suffered, and with respect to all such rights, liabilities, claims and demands the Society shall to all intents represent and be deemed a continuation of the Establishment or Society constituted or regulated by the deeds of association and accession aforesaid, and the generality of this enactment shall not be restricted by any other provision of this Act. [Objects of the Society 10. The objects of the Society shall be:— The carrying on by Members of the Society of the business of insurance of every description including guarantee business; The advancement and protection of the interests of Members of the Society in connection with the business carried on by them as Members of the Society and in respect of shipping and cargoes and freight and other insurable property or insurable interests or otherwise; The collection publication and diffusion of intelligence and information; The doing of all things incidental or conducive to the fulfilment of the objects of the Society.] Notes This section was repealed and replaced by the Lloyd’s Act 1911, s 4.

Committee—number and quorum 11. [Repealed by Lloyd’s Act 1982, Sched 3.] First Committee 12. [Repealed by Lloyd’s Act 1982, Sched 3.] Retirement of Members of Committee 13. [Repealed by Lloyd’s Act 1925, s 4.] Rotation of Committeemen 14. [Repealed by Lloyd’s Act 1925, s 4.] Elections of Committeemen 15. [Repealed by Lloyd’s Act 1925, s 4.] Re-eligibility of members 16. [Repealed by Lloyd’s Act 1925, s 4.] Casual vacancies 17. [Repealed by Lloyd’s Act 1925.] Voting at meetings 18. [Repealed by Lloyd’s Act 1982, Sched 3.] Fundamental rules in schedule 19. [Repealed by Lloyd’s Act 1982, Sched 3.] Exclusion from membership for violation of fundamental rules, &c. 20. If any member of the Society— 1. Violates any of the fundamental rules of the Society; or,

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Lloyd’s Act 1871

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2. Is guilty of any act or default discreditable to him as an underwriter or otherwise in connexion with the business of [ . . . ] insurance— he shall be liable to be excluded from membership of the Society by the votes of four-fifths of such members of the Society as are present at a meeting of the Society specially convened for the purpose, with notice of the object by circular issued to every member six days at least before the day appointed for the meeting, there being present and voting at the meeting one hundred members at least, but a member shall not in any case be deemed for the purposes of this section to have violated any fundamental rule, or to be guilty of any act or default as aforesaid, unless the fact of such violation or guilt has been first ascertained and determined by the award of two arbitrators (each of them being a merchant or shipowner or underwriter, and one of them being nominated by the Committee and the other by the member complained of), or, in case of difference between the arbitrators, by the award of the Recorder of the City of London, or, failing the Recorder, then of one of Her Majesty’s Counsel nominated by him as umpire; and the provisions of [the Arbitration Act 1950 or any statutory modification or re-enactment thereof for the time being in force] shall apply in every such case, and the arbitrators and umpire respectively shall take into consideration all the circumstances of the case, moral as well as legal. Notes This section was amended by the Lloyd’s Act 1951, s 7(1) and was subsequently repealed by the Lloyd’s Act 1982, Sched 3, following a transitional period in force in accordance with the Lloyd’s Act 1982, Sched 4, para 11. The section was concerned with the expulsion of members for violation of the rules of Lloyd’s, and has since been replaced by byelaws made under s 6(2) of the 1982 Act.

Exclusion from membership for fraud, &c. 21. [Repealed by Lloyd’s Act 1982, Sched 3.] Exclusion from membership for bankruptcy, &c. 22. [Repealed by Lloyd’s Act 1982, Sched 3.] Exclusion from membership for non-payment of subscription, &c. 23. [Repealed by Lloyd’s Act 1982, Sched 3.] Power to make byelaws 24. [Repealed by Lloyd’s Act 1982, Sched 3.] No exclusion from membership by byelaws 25. [Repealed by Lloyd’s Act 1982, Sched 3.] Allowance of byelaws by Recorder 26. [Repealed by Lloyd’s Act 1982, Sched 3.] Printing and proof of byelaws 27. [Repealed by Lloyd’s Act 1982, Sched 3.] Continuance and annulling of existing byelaws 28. The general rules and regulations or byelaws for the management of the affairs of Lloyd’s, passed at a general meeting of the members of Lloyd’s held on the fourth and confirmed at a subsequent meeting held on the eleventh day of January one thousand eight hundred and seventy-one, may be annulled by byelaws under this Act, and, as far as the same are not inconsistent with this Act, the same (except those numbered ninety-three to ninety-nine inclusive) shall continue in force for four months after the passing of this Act (unless sooner so annulled), and no longer, and while so in force shall apply to the Society as incorporated by this Act, and the members thereof; but nothing in this Act shall give any validity or force to any such

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general rule, regulation, or byelaw as aforesaid, made before the passing of this Act, further or other than it would have had if this Act had not been passed. Notes This section preserves byelaws made prior to the passing of the Act. It no longer has any practical effect.

Powers to be exercised by Committee 29. [Repealed by Lloyd’s Act 1982, Sched 3.] Application of parts of Companies Clauses Act 30. Sections ninety-seven to one hundred of The Companies Clauses Consolidation Act, 1845, relating to contracts by and proceedings of and liabilities of directors, are hereby incorporated with this Act, and shall apply to the Committee, and the Society in like manner, mutatis mutandis, as they apply to directors and a company. Notes This section is of no practical relevance, and has been superseded by s 13 of the Lloyd’s Act 1982.

Penalty on limitation of stamp, &c. 31. If any person, without the authority of the Society, or without other lawful excuse (proof whereof respectively shall lie on him) does any of the following things (namely) imitates or copies any stamp, mark, or other thing for the time being used by the Society to distinguish forms of policies of [ . . . ] insurance underwritten by members of the Society or offers or utters or uses any form of policy bearing any such stamp, mark, or other thing as aforesaid, he shall for every such offence be liable, on summary conviction before two justices, to a penalty not exceeding twenty pounds. Notes This section was amended by the Lloyd’s Act 1911, s 5. It had previously been confined to marine insurance.

Provision respecting protection of interest of members in shipping, &c. 32. [Repealed by Lloyd’s Act 1982, Sched 3.] Publication of information under Merchant Shipping Act, &c. 33. Section four hundred and forty-eight of The Merchant Shipping Act, 1854, shall have effect as if the secretary of Lloyd’s were therein mentioned instead of the secretary of the Committee for managing the affairs of Lloyd’s, and the secretary of the Society shall accordingly continue to receive and publish in manner therein directed the documents therein mentioned, and shall also at all times receive and publish all such information relative to shipping and cargoes as is from time to time sent to him for the purpose by the Board of Trade or by their direction. Power to undertake recovery of wreck, &c. 34. The Society may from time to time aid in or undertake in such manner as to them seems fit the discovery, recovery, protection, and restoration or other disposal of property before or after the passing of this Act wrecked, sunk, lost, or abandoned, or found or recovered in, on, or beneath the sea or on the shore, at home or abroad. Salvage operations as to wreck of Lutine 35. The Society may from time to time do or join in doing all such lawful things as they think expedient with a view to further salving from the wreck of the Lutine, and hold, receive and apply for that purpose so much of the money to be received by means of salving therefrom as they from time to time think fit, and the net money produced thereby, and the said sum of twenty-five thousand pounds, shall be applied for purposes connected with shipping or marine insurance, according to a scheme to be prepared by the Society, and confirmed by Order of Her Majesty in Council, on the recommendation of the Financial Services Authority; after or subject

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Lloyd’s Act 1871

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to such public notice to claimants of any part of the money aforesaid to come in, and such investigation of claims, and such barring of claims not made or not proved, and such reservation of rights (if any), as the Financial Services Authority think fit. Notes The Lutine was lost in 1799. The relevance of this section is explained in some detail in the preamble to the 1871 Act. It was amended by the Transfer of Functions (Insurance) Order 1997, SI 1997 No 2781, Sched, para 94. Amended by The Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 264, to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Trusts of capital stock 36. [Repealed by Lloyd’s Act 1911, s 6.] Indemnity to trustees 37. [Repealed by Lloyd’s Act 1911, s 6.] Trustees individually responsible 38. [Repealed by Lloyd’s Act 1911, s 6.] Agreements for incorporation of other Societies, &c. 39. The Society, and any other society, association, or corporation instituted for purposes connected with shipping or [ . . . ] insurance, may from time to time enter into and carry into effect such agreements as they think fit for the incorporation with the Society of such other society, association, or corporation, and for the transfer to the Society of the property and funds, rights and liabilities, and officers and servants, of such other society, association, or corporation, and for other the incidents and consequences of such incorporation; but no such agreement shall have effect unless and until it is confirmed by Order of Her Majesty in Council, on the recommendation of the [Treasury], whereupon it shall have the like operation as if the terms thereof had been enacted in this Act; and no such agreement shall be recommended for confirmation as aforesaid if by virtue thereof the Society would acquire any power or authority different from the powers and authorities conferred on the Society by this Act. Notes This section was amended by the Lloyd’s Act 1911, s 5 and by the Transfer of Functions (Insurance) Order 1997, SI 1997 No 2781, Sched, para 94. It had previously been confined to marine insurance.

Saving for liability of members, &c. 40. Nothing in this Act shall confer limited liability on the members of the Society, or in any manner restrict the liability of any member thereof in respect of his individual undertakings, or make any member of the Society as such responsible in any manner for any of the undertakings, debts, or liabilities of any other member of the Society as such, or affect or interfere with or empower the Society or the Committee to interfere with any business whatever other than the business of [ . . . ] insurance carried on by any member of the Society. Notes This section was amended by the Lloyd’s Act 1911, s 5. It had previously been confined to marine insurance.

Saving for rights and powers of Crown, Board of Trade, &c., as to wreck 41. Nothing in this Act shall take away, abridge, or prejudicially affect any right, title, power, or authority vested in Her Majesty, her heirs or successors, or in any admiral, vice-admiral, or lord of a manor, or in any person or corporation, or in the Board of Trade, or in any receiver of wreck or other officer under The Merchant Shipping Act, 1854, or otherwise in relation to wreck, as defined in The Merchant Shipping Act, 1854, or any interest or right of dealing of any shipowner or other person in or with any property before or after the passing of this Act

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Regulation of Insurers

wrecked, sunk, lost, or abandoned, or found or recovered in, on, or beneath the sea or on the shore, at home or abroad. Savings respecting exclusion from membership 42. Nothing in this Act shall confer on the Society as incorporated by this Act any right or power to exclude, by or under any byelaw or resolution or otherwise, any person from membership of the Society by reason of anything done or omitted before the passing of this Act, or confirm or enlarge any such right or power, if existing at the passing of this Act, in the Establishment or Society of Lloyd’s, and on the other hand nothinig in this Act shall take away from the Society as incorporated by this Act any such right or power if so existing, or abridge or weaken the same, or prevent the Society as incorporated by this Act from exercising the same, but on the contrary such right or power if and as so existing shall remain in and be exercisable by the Society as incorporated by this Act, in the same cases and in like manner (if any) in which the same would have existed in and been exercisable by the Establishment or Society of Lloyd’s if this Act had not been passed, but not further or otherwise. Notes This section is purely transitional.

Expenses of Act 43. The costs, charges, and expenses preliminary to and of and incidental to the preparing, applying for, obtaining, and passing of this Act shall be paid by the Society. THE SCHEDULE T H E F U N D A M E N TA L R U L E S O F T H E S O C I E T Y 1. There shall be underwriting members and non-underwriting members. 2. A non-underwriting member shall not underwrite in his own name at Lloyd’s, or empower another person to underwrite for him at Lloyd’s. 3. All underwriting business transacted at Lloyd’s shall be conducted in the underwriting rooms, and not elsewhere. 4. An underwriting member shall not, by himself or by any partner or other substitute, directly or indirectly, underwrite in the city of London a policy of insurance as follows: (1) In the name of a partnership, or otherwise than in the name of one individual (being an underwriting member of the Society) for each separate sum subscribed; or, (2) For the account, benefit, or advantage, of any company or association, unless they are subscribers to the Society, nor unless every policy underwritten for their account, benefit, or advantage is underwritten in their ordinary place of business. 5. A member shall not open an insurance account in the name of any person not being a member or subscriber. Notes The schedule was repealed by the Lloyd’s Act 1982, Sched 3 with effect from 5 January 1993. It contained the ‘‘fundamental rules of the Society’’, restricting underwriting to underwriting members and to the underwriting rooms at Lloyd’s.

1.21 LLOYD’S ACT 1888 (51 Vict. c. ii) The Lloyd’s Act 1888 restated the objectives of Lloyd’s. It was repealed by and re-enacted in s 4 of the Lloyd’s Act 1911.

1.22 LLOYD’S SIGNAL STATIONS ACT 1888 (51 & 52 Vict. c. xxix) This Act was repealed by the Lloyd’s Act 1982, Sched 3.

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Lloyd’s Act 1911

1.23

1.23 LLOYD’S ACT 1911 (1 & 2 Geo. V, c. lxii) General Note The Lloyd’s Act 1911 extended the powers of Lloyd’s, in particular by restating its objects and in formally extending the right of Lloyd’s to conduct non-marine business.

An Act to Extend the Objects of and confer Further Powers on Lloyd’s and to Amend Lloyd’s Act 1871 [18th August, 1911] by Lloyd’s Act 1871 (in this Act referred to as ‘‘the Act of 1871’’) certain persons were united into a Society or Corporation for the purposes of that Act and were incorporated by the name of Lloyd’s (which incorporated body was in the Act of 1871 and is in this Act referred to as ‘‘the Society’’) and various powers were conferred on the Society by the said Act: And whereas by the Act of 1871 the objects of the Society were declared inter alia to be the carrying on of the business of marine insurance by Members of the Society and the protection of the interests of Members of the Society and the collection publication and diffusion of intelligence and information: And whereas further powers were conferred on the Society and further provisions made with reference to the Society by Lloyd’s Act 1888 and Lloyd’s Signal Stations Act 1888: And whereas the Members of the Society have in the past carried on at Lloyd’s insurance business other than marine insurance and it is expedient that the objects of the Society should be extended to the carrying on of the business of insurance other than marine insurance by Members of the Society and that further powers should be conferred on the Society and the Committee of Lloyd’s as hereinafter in this Act provided: And whereas by the Act of 1871 it was directed that the capital stock of the Society should be transferred to and kept in the names of four Members of the Society as Trustees for the Members of the Society and such capital stock now stands in the names of certain Members of the Society (hereinafter in this Act called ‘‘the Trustees of the capital stock’’) as Trustees for the Society and its Members as in the said Act mentioned and it is expedient that the capital stock should be transferred to and held by the Society: And whereas in pursuance of the Assurance Companies Act 1909 or the regulations or requirements for the time being of the Society or the Committee or otherwise Members of the Society furnish security in the form of either a deposit with a trust deed or a guarantee or guarantees or partly in the one form and partly in the other which security is available solely for the purpose of meeting their liabilities in respect of policies underwritten by them or on their account at Lloyd’s and the Society have in the past acted as Trustee of certain of such trust deeds and guarantees either solely or jointly with others and doubts have arisen as to the power of the Society to so act and it is expedient that the action of the Society in acting as such Trustee in the past should be confirmed and that the Society should be authorised to act as Trustee of any trust deed or guarantee furnished by any Member of the Society as aforesaid: And whereas it is expedient that the Society should be authorised itself to act as guarantor either solely or jointly with any other guarantor or guarantors as hereinafter in this Act provided and that the Society should in certain cases be authorised to make good any deficiency arising by reason of the default of any guarantor or the insufficiency of any security furnished by Members of the Society as aforesaid: And whereas the purposes aforesaid cannot be effected without the authority of Parliament: That it may be Enacted AND BE IT ENACTED by the King’s Most Excellent Majesty by and with the advice and consent of the Lords Spiritual and Temporal and Commons in this present Parliament assembled and by the authority of the same as follows:— WHEREAS

Short and collective titles 1. This Act may be cited as Lloyd’s Act 1911 and the Act of 1871 Lloyd’s Signal Stations Act 1888 and this Act may be cited and are hereinafter in this Act referred to as Lloyd’s Acts 1871 to 1911.

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Definition 2. In this Act the expression ‘‘the Committee’’ shall mean the Committee of Lloyd’s constituted under the Act of 1871. Extension of Objects 3. The objects of the Society are hereby extended so as to include the carrying on of the business of insurance of every description including guarantee business by Members of the Society and the Act of 1871 shall be read and have effect accordingly. Notes Under this section, Lloyd’s is formally given the right to conduct non-marine business.

Objects of Society 4. Section 10 of the Act of 1871 and Lloyd’s Act 1888 are hereby repealed and in lieu thereof the following provision is hereby enacted and shall have effect accordingly:— The objects of the Society shall be:— The carrying on by Members of the Society of the business of insurance of every description including guarantee business; The advancement and protection of the interests of Members of the Society in connection with the business carried on by them as Members of the Society and in respect of shipping and cargoes and freight and other insurable property or insurable interests or otherwise; The collection publication and diffusion of intelligence and information; The doing of all things incidental or conducive to the fulfilment of the objects of the Society. Notes This section restates the objects of the Society of Lloyd’s, re-enacting the Lloyd’s Act 1888 which had in turn amended s 10 of the Lloyd’s Act 1871. In Ashmore v. Society of Lloyd’s (No 2) (1992) Times, 17 July, it was held that this section does not give rise to any duty of care by the Society of Lloyd’s in favour of names, as such a duty would conflict with the overriding duty of Lloyd’s in its constitution to protect policyholders.

Amendment of Act of 1871 5. Sections 20 24 31 39 and 40 of the Act of 1871 shall be read and have effect as if the word ‘‘marine’’ had been omitted from such sections wherever the same occurs in such sections and as if the word ‘‘insurance’’ where the same occurs in those sections included guarantee business. Notes This section amends the Lloyd’s Act 1871, and is consequential upon the extension of the powers of Lloyd’s set out in s 3 of the Lloyd’s Act 1911.

Transfer to Society by Trustees of capital stock 6. Within six months after the passing of this Act the capital stock of the Society shall be transferred by the Trustees of the capital stock to the Society and such Trustees shall on the request of the Society execute and do all such acts and deeds as may be necessary to effect and carry out such transfer and on such transfer being duly made the said Trustees shall be released and discharged from their trust and cease to act as such Trustees and Sections 36 37 and 38 of the Act of 1871 shall be repealed. Purposes for which capital stock, &c. to be held by Society 7. The Society shall hold the funds and property of the Society and the income therefrom for all or any of the following purposes:— (a) for defraying the costs, charges and expenses incurred by the Society, the Council or otherwise in the execution and carrying out of Lloyd’s Acts 1871 to 1982; (b) for furthering the objects of the Society; (c) for making good any default by any member of the Society under any contract of insurance underwritten at Lloyd’s which in the opinion of the Council it is in the interests of the members of the Society to make good;

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Lloyd’s Act 1911

1.23

(d) for guaranteeing or securing, in such manner as the Council think fit, any debt or obligation of or binding on the Society, any of its subsidiaries or any other person; (e) for such other purposes (if any) as may from time to time be prescribed by byelaw; and subject thereto for the benefit of the members of the Society jointly. Notes This section was substituted by the Lloyd’s Act 1982, s 15(1)(b).

[Society may act as Trustee for certain purposes] 8.—(1) It shall be lawful and shall be deemed always to have been lawful for the Society to act as trustee either solely or jointly with any other person of any trust deed or guarantee or other document relating to the insurance business carried on at Lloyd’s by Members of or Annual Subscribers to the Society. (2) Any trustee or trustees of any such trust deed or guarantee or other document as aforesaid may transfer any trust fund subject to any such trust deed guarantee or document to the Society and assign to the Society the benefit or advantage to which he or they are entitled under any such trust deed guarantee or document and on the execution of such transfer or deed of assignment the Society shall be entitled to such trust fund and to all benefits and advantages under any such trust deed guarantee or document in the same manner and to the same extent and on the same trusts as such trustees held or were entitled to the same. Notes This section was repealed by s 5(3) of the Lloyd’s Act 1951. The power contained in s 8, permitting Lloyd’s to act as a guarantor, is re-enacted by s 5 of the Lloyd’s Act 1951.

Powers to Society with reference to guarantees 9. Without prejudice to the provisions of section 7 of this Act the Society may either by itself or jointly with any other guarantor or guarantors guarantee the payment of claims and demands upon contracts of insurance underwritten at Lloyd’s and the Society may for such purposes enter into contracts and may apply the funds and property of the Society and the income therefrom or any part thereof for the purpose of discharging any liabilities of the Society under any guarantees or contracts as aforesaid and the powers conferred on the Society by this section may be exercised by the Council in accordance with byelaws made under Lloyd’s Act, 1982. Notes This section was amended by the Lloyd’s Act 1951, s 6, and was subsequently substituted by the Lloyd’s Act 1982, s 15(1)(c).

Power to apply capital stock, &c., to meet deficiency of guarantors, &c. 10. [Amended by the Lloyd’s Act 1951, s 7(2), and subsequently repealed by the Lloyd’s Act 1982, Sched 3.] Provision respecting protection of interests of Members in Shipping, &c. 11. [Repealed by Lloyd’s Act 1982, Sched 3.] Power to Committee to temporarily suspend Members 12.—(1) If it be established to the satisfaction of the Committee at any meeting to be held by them in accordance with the Act of 1871 or the bye-laws made thereunder that any Member of the Society has been guilty of any act or default discreditable to him as an underwriter or otherwise in connection with the business of insurance including guarantee business the Committee may by a resolution of a majority of not less than five-sixths of the Members of the Committee present at any meeting duly convened for the purpose at which not less than ten Members of the Committee are present resolve that such Member shall for such period not exceeding two years as they shall determine be suspended from carrying on insurance business including guarantee business as a Member of the Society and on the passing of any such resolution and on notice in writing thereof being given to any such Member so suspended such Member shall cease to carry on as a Member of the Society any insurance business including

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Regulation of Insurers

guarantee business for such period as may be fixed by such resolution of the Committee Provided that any such Member so suspended may within seven days of receipt of notice of any such resolution give notice in writing to the Committee of his desire to appeal to a General Meeting of the Society against the resolution of the Committee under this section and if such notice of appeal be given by such Member the Committee shall summon a General Meeting of the Society to be held within forty-two days after the receipt of such notice of appeal but not before the expiration of a period of twenty-one days after the Committee shall have given notice of such General Meeting to such Member by letter delivered to him personally or addressed to him by post at Lloyd’s and the resolution of the Committee shall be submitted to the Meeting for confirmation and the Meeting shall have power to confirm the same and the decision of the Meeting shall be final and in the event of any such appeal and pending such confirmation the resolution of the Committee shall be inoperative. If within fifteen minutes after the time appointed for the Meeting one hundred Members of the Society are not present the Meeting shall be adjourned to a day and hour (not less than seven days nor more than fourteen days after the day of adjournment) to be fixed and declared by the Chairman of the Meeting and no further notice of the adjourned Meeting need be given and the adjourned Meeting shall be held on the day and at the hour so fixed and declared and if within fifteen minutes after the time appointed for the adjourned Meeting one hundred Members of the Society are not present then the resolution of the Committee shall be deemed not to have been confirmed and shall be inoperative in all respects as if it had never been passed by the Committee. (2) No resolution of the Meeting or adjourned Meeting confirming the resolution of the Committee shall be effective unless the same shall be passed at such Meeting or adjourned Meeting or on any ballot taken in pursuance of a demand made thereat (which demand may be made by the Member himself or by six or more Members present) by a majority of not less than three-fourths of the Members present and voting at such Meeting or on such ballot and if no effective resolution shall be passed at such Meeting or adjourned Meeting or on such ballot confirming the resolution of the Committee then such resolution of the Committee shall be deemed to be revoked and shall be inoperative in all respects as if it had never been passed by the Committee. (3) A declaration by the Chairman of any General Meeting or adjourned General Meeting held in pursuance or for the purposes of this section as to the number of Members of the Society present or as to the insufficiency of the number of those present to form a quorum or as to the passing or otherwise of a resolution at any such General Meeting shall be final and conclusive. (4) The Committee shall publish in the rooms at Lloyd’s the effect of any resolution passed by them under the provisions of this section after the date of the expiration of the time limited for appealing against such resolution and in the event of there being no such appeal and in the event of there being an appeal the Committee shall in like manner publish the confirmation or non-confirmation (as the case may be) of such resolution. Notes This section was repealed by the Lloyd’s Act 1982, Sched 3, with effect from 5 January 1983 (Lloyd’s Act 1982, Sched 4, para 11). It permitted the suspension of an underwriter for ‘‘discreditable’’ conduct. For the present disciplinary rules, see the Lloyd’s Act 1982, s 7.

Amendment of section 24 of Act of 1871 13. [Repealed by Lloyd’s Act 1982, Sched 3.] Notices to Members 14. All notices summoning General Meetings and other notices to Members of the Society under the provisions of Lloyd’s Acts 1871 to 1911 or of any bye-laws under any of such Acts not specially directed by any such Acts or bye-laws thereunder to be otherwise given shall be given by posting the same in the rooms at Lloyd’s or in such other manner as may be prescribed by the bye-laws of the Society. Costs of Act 15. The costs charges and expenses of and incidental to the preparing applying for obtaining and passing of this Act shall be borne and paid by the Society.

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Lloyd’s Act 1951

1.25

THE SCHEDULE Notes The Schedule was repealed by the Lloyd’s Act 1951, s 6(2).

1.24 LLOYD’S ACT 1925 (15 & 16 Geo. V, c.xxvi) This Act was repealed by the Lloyd’s Act 1982, Sched 3.

1.25 LLOYD’S ACT 1951 (14 & 15 Geo. VI, c. viii) General Note The main purpose of this Act, as explained in the preamble, was to confer upon Lloyd’s the necessary powers to borrow money to obtain larger premises. The legality of borrowing for this purpose had previously been in doubt.

An Act to confer further powers on Lloyd’s to amend Lloyd’s Acts 1871 and 1925 and for other purposes. [26th April 1951] by Lloyd’s Act 1871 (in this Act referred to as ‘‘the Act of 1871’’) certain persons were united into a society or corporation for the purposes of that Act and were incorporated by the name of Lloyd’s (which incorporated body was in the Act of 1871 and is in this act referred to as ‘‘the Society’’) and various powers were conferred upon the Society by the said Act: And whereas by Lloyd’s Act 1911 the objects of the Society were extended and now include the carrying on by members of the Society of the business of insurance of every description including guarantee business the advancement and protection of the interests of members of the Society in connection with the business carried on by them as members of the Society and in respect of shipping and cargoes and freight and other insurable property or insurable interests or otherwise the collection publication and diffusion of intelligence and information and the doing of all things incidental or conducive to the fulfilment of the objects of the Society: And whereas further powers were conferred on the Society and further provisions were made with reference to the Society by Lloyd’s Signal Stations Act 1888 Lloyd’s Act 1911 and Lloyd’s Act 1925: And whereas the number of and the business carried on by members of the Society and the activities of the Society have increased and are increasing and the Society desires to erect and fit up new premises for its accommodation and the accommodation of its members and for other purposes and to borrow money but doubts have arisen as to whether it has power to borrow for that or any other purpose and it is expedient that the provisions of this Act with respect thereto be enacted: And whereas in addition to members there are annual subscribers to and associates of the Society and others who may be granted admission to the rooms of the Society and who enjoy such privileges as the committee of the Society from time to time determine: And whereas under section 8 of Lloyd’s Act 1911 the Society may act as trustee either solely or jointly with any other person of any trust deed or guarantee or other document furnished to the Society by any member of the Society as security for meeting his liabilities under policies underwritten by him or on his account at Lloyd’s and it is expedient to extend the powers of the Society under that section in manner provided by this Act: And whereas under section 9 of Lloyd’s Act 1911 the Society may for the purposes mentioned in that section either by itself or jointly with any other guarantor or guarantors guarantee the payment of claims and demands upon policies of insurance including guarantees underwritten by members of the Society or on their account at Lloyd’s subject as mentioned in the said section and it is expedient to extend the powers of the Society under that section in manner provided by this Act:

WHEREAS

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Regulation of Insurers

And whereas it is expedient that the other provisions of this Act be enacted: And whereas the objects of this Act cannot be effected without the authority of Parliament: May it therefore please Your Majesty that it may be enacted and be it enacted by the King’s most Excellent Majesty by and with the advice and consent of the Lords Spiritual and Temporal and Commons in this present Parliament assembled and by the authority of the same as follows:— Short and collective titles 1.—(1) This Act may be cited as Lloyd’s Act 1951. (2) Lloyd’s Acts 1871 to 1925 and this Act may be cited together as Lloyd’s Acts 1871 to 1951. Interpretation 2. In this Act unless there is something in the subject or context repugnant to such construction— ‘‘the Act of 1871’’ means Lloyd’s Act 1871; ‘‘the Act of 1911’’ means Lloyd’s Act 1911; ‘‘the committee’’ means the Committee of Lloyd’s constituted under the Act of 1871; ‘‘the society’’ means the society incorporated by the Act of 1871 by the name of Lloyd’s. Powers of Society to borrow 3.—(1) The Society may raise or borrow money and secure the same and any interests thereon upon any property of the Society either in order to acquire any land or to develop and turn to account any land acquired by or in which the Society is interested (and in particular by constructing altering pulling down reconstructing decorating furnishing fitting up maintaining and improving buildings and whether the same shall be intended for occupation or part occupation of the Society or its members or subscribers or otherwise) or for any other purpose of the Society. (2) The powers conferred on the Society by this section may be exercised by the committee: [...] Notes Subs (2) was amended by the Lloyd’s Act 1982, Sched 3.

Saving for powers of Treasury 4. [Repealed by Lloyd’s Act 1982, Sched 3.] Society may act as trustee for certain purposes 5.—(1) It shall be lawful and shall be deemed always to have been lawful for the Society to act as trustee either solely or jointly with any other person of any trust deed or guarantee or other document [ . . . ]. (2) Any trustee or trustees of any such trust deed or guarantee or other document as aforesaid may transfer any trust fund subject to any such trust deed guarantee or document to the Society and assign to the Society the benefit or advantage to which he or they are entitled under any such trust deed guarantee or document and on the execution of such transfer or deed of assignment the Society shall be entitled to such trust fund and to all benefits and advantages under any such trust deed guarantee or document in the same manner and to the same extent and on the same trusts as such trustees held or were entitled to the same. (3) Section 8 (Society may act as trustee for certain purposes) of the Act of 1911 is hereby repealed. (4) (a) Notwithstanding the repeal of the said section 8 any trust deed guarantee document transfer deed of assignment or other instrument of whatsoever nature entered into or made under the powers of that section and in force immediately before the passing of this Act shall continue in full force and effect in every respect and may be enforced as fully and effectually as if that section had not been repealed.

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(b) The mention of particular matters in this subsection shall not be held to prejudice or affect the general application of section 38 (Effect of repeal in future Acts) of the Interpretation Act 1889 with regard to the effect of repeals. Notes Subs (1) was amended by the Lloyd’s Act 1982, s 15(1)(d).

Extension of powers of Society with reference to guarantees 6.—(1) Section 9 (Powers to Society with reference to guarantees) of the Act of 1911 shall have effect subject to the following amendments:— (a) In subsection (1) the following provisions shall be and are hereby repealed:— (i) the words from the beginning of the subsection to the words ‘‘member of the Society’’ where those words first occur; (ii) paragraphs (A) and (B) of the proviso; (b) The following subsection shall be substituted for subsection (3):— ‘‘(3) The Society shall notify the Board of Trade of any guarantee given by the Society pursuant to this section and shall furnish to the Board of Trade such further information (if any) in relation to such guarantee as the Board may at any time require.’’ (2) The schedule to the Act of 1911 is hereby repealed. Notes Subs (1) amended s 9 of the Lloyd’s Act 1911. That section, as amended, was subsequently substituted by the Lloyd’s Act 1982, s 15(1)(c). Subs (2) repealed the Schedule to the Lloyd’s Act 1911.

Miscellaneous amendments of Lloyd’s Acts 7.—(1) In section 20 (Exclusion from membership for violation of fundamental rules &c.) of the Act of 1871 the words ‘‘the Arbitration Act 1950 or any statutory modification or re-enactment thereof for the time being in force’’ shall be substituted for the words ‘‘the Common Law Procedure Act 1854 relative to arbitrations.’’ (2) In section 10 (Power to apply capital stock &c. to meet deficiency of guarantors &c.) of the Act of 1911 the words ‘‘and the Assurance Companies Act 1946 or any statutory modification or re-enactment thereof for the time being in force’’ shall be inserted after the words ‘‘the Assurance Companies Act 1909’’ wherever those words occur. Notes Subs (1) amended s 20 of the Lloyd’s Act 1871. That section was subsequently repealed by the Lloyd’s Act 1982, Sched 3. Subs (2) amended s 10 of the Lloyd’s Act 1911. That section was subsequently repealed by the Lloyd’s Act 1982, Sched 3.

Costs of Act 8. The costs charges and expenses of and incidental to the preparing applying for obtaining and passing of this Act shall be paid by the Society.

1.26 FRIENDLY SOCIETIES ACT 1974 General Note This Act repealed and consolidated most of the earlier legislation relating to friendly societies, including the Friendly Societies Act 1896, which up to the passing of the 1974 Act had been the most important statutory source. Those limited parts of the 1896 Act which were unrepealed by the 1974 Act were subsequently repealed by the Friendly Societies Act 1992. The Friendly Societies Act 1974 is concerned with the registration of friendly societies, and the various powers conferred on, and regulation of, friendly societies. The Friendly Societies Act 1992 allows for the incorporation of friendly societies, and modifies the regulatory regime to make it consistent with that applicable to insurance companies under the EC Directives. In many respects the regulatory provisions of the 1974 Act applicable to registered friendly societies are directly reflected in the provisions of the 1992

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Act, so that in many situations the law applicable to each class of society will be the same, and those provisions relating to insurance business are now found almost exclusively in the 1992 Act. Fresh registrations of friendly societies, other than branches of existing societies, are prohibited by s 93 of the Friendly Societies Act 1992, with the result that the 1974 Act remains applicable only to existing friendly societies which have chosen not to adopt the corporate form. In due course, therefore, the 1974 Act will cease to have any impact. Only those parts of the Friendly Societies Act 1974 which relate directly to insurance are reproduced below. The most important of the remaining sections are summarised only, and many have their counterparts as regards incorporated friendly societies in the Friendly Societies Act 1992 (as reflected in the annotations to the 1992 Act. Missing sections have been repealed. The various forms to be used for applications to the Registrar of Friendly Societies are set out in the Friendly Societies Regulations 1975, SI 1975 No 205: the Regulations are not set out in this work. Sections 1 to 6 continued the office of Chief Registrar of Friendly Societies, and specified his qualifications, term of office and salary. The Chief Registrar was required to make an annual report to Parliament. Section 4 was repealed by FSMA 2000, Sched 22 and ss 1, 2, 3, 5 and 6 were repealed by SI 2001/2617, art 2. Sections 8 to 16 set out the purposes for which friendly societies may be registered, and contain provision for the separate registration of branches. Those sections were to some extent repealed and modified by the Friendly Societies Act 1992.

Registration of societies and branches Societies which may be registered 7.—(1) Subject to subsections (2) and (3) below and also to section 9 below, the following societies [may remain] registered under this Act, that is to say,— (a) societies (in this Act called ‘‘friendly societies’’) for the purpose of providing by voluntary subscriptions of the members, with or without the aid of donations, for [any purpose falling within Schedule 2 to the 1992 Act]; (b) societies (in this Act called ‘‘cattle insurance societies’’) for the purpose of insurance to any amount against loss of cattle, sheep, lambs, swine, horses and other animals by death from disease or otherwise; (c) societies (in this Act called ‘‘benevolent societies’’) for any benevolent or charitable purpose; (d) societies (in this Act called ‘‘working men’s clubs’’) for purposes of social intercourse, mutual helpfulness, mental and moral improvement and rational recreation; (e) societies (in this Act called ‘‘old people’s home societies’’) for the purpose of providing homes for the members and others at any age after fifty; (f) societies (in this Act called ‘‘specially authorised societies’’) for any purpose which the Treasury may authorise as a purpose to which the provisions of this Act, or such of them as are specified in the authority, ought to be extended. [but no society may become registered under this Act after the commencement of section 93 of the 1992 Act]. (2) A society may not be registered under this Act unless— (a) the rules of the society contain provisions in respect of the several matters mentioned in Part I of Schedule 2 to this Act and, in the case of a friendly society or cattle insurance society, also contain provisions in respect of the several matters mentioned in Part II of that Schedule; and (b) the place which under the society’s rules is to be the society’s registered office is situated [in the United Kingdom, the Channel Islands or the Isle of Man]; and (c) the society consists of at least seven persons. (3) A friendly society or branch thereof may not be registered under this Act— (a) if it contracts with any person for the assurance under tax exempt life or endowment for business of more than £104 a year by way of annuity or more than £500 by way of gross sum; or (b) if it contracts with any person for the assurance of an annuity or of a gross sum in excess of the limits in section 64 below but nothing in this subsection shall apply with respect to— (a) policies issued in respect of insurances made on or after 19th March 1985; or (b) policies issued in respect of insurances made before that date which are varied on or after that date.

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(4) Where any provisions of this Act are specified in an authority given under paragraph (f) of subsection (1) above, those provisions only shall extend to a society which has been registered as a specially authorised society by virtue of that authority. (5) In this section ‘‘life or endowment business’’ and ‘‘tax exempt life or endowment business’’ have the meanings assigned to them by subsections (1) and (2) respectively of section 466 of the Income and Corporation Taxes Act 1988; and subsection (2) of section 64 below shall apply in relation to the limits in subsection (3) above (including, where applicable, those limits as modified by subsection (3A) above) as it applies in relation to the limits in section 64 below. Notes This section sets out the permitted purposes of a registered friendly society. Subs (1) was amended by the Friendly Societies Act 1992, s 95 and Sched 16. Subs (2) was amended by the Financial Services and Markets Act 2000, Sched 18 (I), para 2. Subs (3) was repealed by the Finance Act 1985, sched 27, having previously been substituted by the Finance (No 2) Act 1975, Sched 9. Subs (3A) was repealed by the Finance Act 1985, Sched 27, having previously been inserted by the Finance (No 2) Act 1975, Sched 9. Subs (5) was amended by the Income and Corporation Taxes Act 1988, Sched 29. Subs (5A) was repealed by the Finance Act 1985, Sched 27, having previously been inserted by the Finance (No 2) Act 1975, Sched 9. Provisions as to rules Sections 17 to 23 are concerned with the registration of a friendly society’s rules and amendments thereto.

Special provisions which may be included in rules 23.—(1) The rules of a registered society or branch may provide for the reinsurance, to such extent as may from time to time be approved by a qualified actuary, of risks of any class against which persons are, or are to be, insured by that society or branch. (2) The rules of a registered society which is a specially authorised society complying with the provisions of subsection (3) below may provide that it may receive deposits and borrow money at interest from its members or from other persons, and upon the registration of such a rule the same shall be valid. (3) A specially authorised society complies with the provisions of this subsection if it has for its object the creation of funds to be lent out to the members of the society or for their benefit, and has in its rules provisions— (a) that no part of its funds shall be divided by way of profit, bonus, dividend or otherwise among its members; and (b) that all money lent to members shall be applied to such purpose as the society or its committee may approve. Notes This section allows a friendly society to reinsure its liabilities to its members.

[Reinsurance Reinsurance 23A.—(1) The rules of a registered friendly society may provide for the carrying on by the society of any reinsurance business to which subsection (2) below applies but only to such extent or in such circumstances as may from time to time be approved by the appropriate actuary. (2) This subsection applies to business consisting of the effecting and carrying out of contracts of reinsurance which— (a) are insured or to be insured by any other registered society or any incorporated friendly society; and

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(b) are of a class or part of a class of insurance business which the society carrying on the reinsurance business itself carries on. (3) In this section ‘‘the appropriate actuary’’ has the same meaning as in the 1992 Act.] Notes This section was inserted by the Friendly Societies Act 1992, s 95 and Sched 16. It authorises a registered friendly society to carry on reinsurance business. Trustees and officers Sections 24 to 26 are concerned with the formalities of the appointment of trustees and officers, and prohibit the appointment of a minor. Accounts, audit and auditors Sections 29 and 30 are concerned with the form of a registered friendly society’s accounts and balance sheets. Sections 31 to 40 deal with the appointment of auditors, the powers of the auditor to inspect the society’s records and the auditor’s obligation to make an annual report to the society. Valuation and annual returns These sections require a registered friendly society, at least once every five years (three years in specified circumstances, under the Friendly Societies (Valuation) Regulations 1985, SI 1985 No 1919, as amended by SI 1988 No 1959), to undertake a valuation of its assets and liabilities. In addition, each society must produce an annual return consisting of a revenue account and balance sheet. Investment funds and property Sections 46 to 59 give a registered friendly society power to make various forms of investment and loans to members. They also govern the mortgaging of assets.

Loans to assured members 48.—(1) A registered society and, subject to the rules of the society of which it is a branch, a registered branch may advance to a member of at least one full year’s standing any sum not exceeding one-half of the amount of an assurance on his life, on the written security of himself and two satisfactory sureties or, in Scotland, cautioners for repayment. (2) The amount so advanced, with all interest thereon, may be deducted from the sum assured, without prejudice in the meantime to the operation of the security. Notes This section empowers a registered friendly society to make a loan to a member, within the financial limits specified in subs (1). Membership and rights of members Sections 60 to 63A allow a friendly society to admit minors as members, and entitle members to inspect the society’s books.

[Group insurance business 65A.—(1) If the rules of a registered friendly society expressly so direct, the society may carry on any group insurance business. (2) In this Act ‘‘group insurance business’’ means business (carried on in accordance with the society’s rules and subject to any regulations under section 11 of the 1992 Act) which— (a) is of a description falling within Head A, or class 2 of Head B, of Schedule 2 to the 1992 Act; and (b) is carried on as the business of providing benefits, in pursuance of a contract with a qualifying person, for or in respect of the members of a group scheme. (3) For the purposes of this section— ‘‘group scheme’’ means a scheme or other arrangement under which benefits are to be provided for or in respect of persons who are members of the scheme and who qualify for membership by virtue of— (a) being employees of a particular employer; or

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(b) being members of some other group of persons of a description specified in regulations under section 11 of the 1992 Act; ‘‘qualifying person’’ means a person who has established or is otherwise responsible for the operation of a group scheme or a trustee of such a scheme; and ‘‘member’’, in relation to a group scheme, includes any person for or in respect of whom benefits are to be provided under the scheme, whatever the terms in which such persons are described in the scheme. (4) Group insurance business may be carried on by a registered friendly society whether or not members of the group scheme are, or are required by the society to be, members of the society. (5) Where a registered friendly society carries on any group insurance business and the rules of the society so provide, any qualifying person with whom the society contracts (or his nominee) may be accorded the rights of a member of the society (including any right to vote) for the purpose of participating in the affairs of the society in the interests of the members of the group scheme with which he is concerned. (6) The rules of an incorporated friendly society may not prevent a person from being a member of the society in his private capacity by reason only of the fact that he has been accorded the rights of a member by virtue of subsection (5) above. (7) A person who is accorded the rights of a member of a society by virtue of subsection (5) above shall, for the purposes of any power which is conferred on the Authority by this Act or the 1992 Act and is exercisable in the interests of members of the society, be treated as if he were a member of the society. (8) The Treasury may make regulations under section 11(7) of the 1992 Act which apply to group insurance business carried on by registered friendly societies.] Notes This section was inserted by the Friendly Societies Act 1992, s 95 and Sched 16. It authorises a friendly society to carry on group insurance business if so permitted by its rules. Subs (2) for the permitted classes of group insurance business, see Friendly Societies Act 1992, Sched 2 in para 1.28. Subs (7) amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 24 to reflect the institutional setup under the Financial Services and Markets Act 2000. Subs (8) the relevant regulations are the Friendly Societies (Group Schemes) Regulations 1993, SI 1993 No 59. Amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 24 to reflect the institutional setup under the Financial Services and Markets Act 2000.

[Terms on which benefits are provided by friendly societies 65B.—(1) The terms on which a registered friendly society provides any benefit shall be— (a) specified in its rules; or (b) determined in a manner specified in its rules. (2) If they are not specified in the society’s rules, the society— (a) shall make copies of them available free of charge to members of the society at every office of the society; and (b) shall send, free of charge, copies of them to any member of the society who demands them. (3) If, on demand made of it under subsection (2) above, a society fails, in accordance with that subsection, to make available or, as the case may be within 7 days of the demand, to send to a person a copy of the terms on which a benefit is to be provided, the society shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the standard scale.] Notes This section was inserted by the Friendly Societies Act 1992, s 95 and Sched 16. It ensures that a policyholder is fully aware of the terms on which benefits are payable.

Power of member to nominate person to receive sums payable on his death 66.—(1) Subject to the following provisions of this section, a member of a registered society or of a branch thereof who is not under the age of sixteen years may, by writing under his hand

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delivered at or sent to the registered office of the society or branch, or made in a book kept at that office, nominate a person or persons to whom any sum of money payable by the society or branch on the death of that member or any specified amount of money so payable shall be paid at his decease. (2) The total amount which may be nominated under this section shall not exceed [£5,000] but where a nomination under this section does not specify the maximum sum of money which is to be payable by virtue of the nomination, and the sum to which the nomination relates exceeds [£5,000] but would not exceed that amount if any such increase as is mentioned in section 64(2)(c) were disregarded, the nomination shall not be invalidated by reason only of the excess. (3) The sum payable on the death of a member by a registered society or branch shall include sums of money contributed to or deposited in the separate loan fund and any sum of money accumulated for the use of the member under the provisions of this Act, together with interest thereon. (4) Any reference in subsections (1) to (3) above to a registered society does not include a benevolent society, a working men’s club or an old people’s home society. (5) A person nominated under this section must not at the date of the nomination be an officer or servant of the society or branch, unless that officer or servant is the husband, wife, father, mother, child, brother, sister, nephew or niece of the nominator. (6) A nomination so made may be revoked or varied by any similar document under the hand of the nominator delivered, sent or made as mentioned in subsection (1) above. (7) The marriage of a member of the society or branch shall operate as a revocation of any nomination previously made by that member under this section. [(7A) The formation of a civil partnership by a member of the society or branch revokes any nomination previously made by that member under this section.] (8) A nomination, or a variation or revocation of a nomination, by writing under the hand of a member of a registered branch and delivered at or sent to the registered office of that branch, or made in a book kept at that office, shall be effectual notwithstanding that the money to which the nomination relates, or some part thereof, is not payable by that branch but is payable by the society or some other branch. Notes This section is concerned with the nomination of the recipient of friendly society benefits on the death of a member. Subs (2) was amended by the Administration of Estates (Small Payments) (Increase in Limits) Order 1984, SI 1984 No 539. Subs (7A) was added by the Civil Partnership Act 2004, Sched 27, para 52(3).

Payment on death of a nominator 67.—(1) Subject to subsection (2) below, on receiving satisfactory proof of the death of a nominator, the society or branch shall pay to his nominee or nominees the amount due to the deceased or, as the case may be, the amount specified in the nomination. (2) Subject to paragraph 12 of Schedule 10 to this Act, the total amount paid by a registered society or branch by virtue of a nomination (whether in favour of one nominee or more) shall not exceed [£5,000] except that, in the circumstances referred to in subsection (2) of section 66 above, the amount payable shall include the excess referred to in that subsection. (3) The receipt of a nominee over sixteen years of age for any amount paid in accordance with this section shall be valid. Notes Subs (1) has to be read in accordance with the common law principle that an insurer cannot unreasonably reject proof of loss under a policy. For life illustrations, see: Manby v. Gresham Life Insurance Co (1861) 4 LT 347; Braunstein v. Accidental Death Insurance Co (1861) 1 B & S 782; Willyans v. Scottish Widows Fund Law Assurance Society (1888) 4 TLR 489. Subs (2) was amended by the Administration of Estates (Small Payments) (Increase in Limits) Order 1984, SI 1984 No 539. The reference to Sched 10 is a purely transitional matter.

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Devolution of sums due where no nomination 68.—(1) If any member of a registered society or branch entitled from the funds thereof to a sum not exceeding [£5,000] dies without having made any nomination thereof then subsisting, the society or branch may, without letters of administration or probate of any will or, in Scotland, without any grant of confirmation, distribute the sum among such persons as appear to the committee, upon such evidence as they may deem satisfactory, to be entitled by law to receive that sum. (2) If any such member is illegitimate, the society or branch may pay the sum of money which that member might have nominated to or among the persons who, in the opinion of the committee, would have been entitled thereto if that member had been legitimate, or if there are no such persons, the society or branch shall deal with the money as the Treasury may direct. (3) Where at the time of his death a member of a registered friendly society or branch is entitled from the funds thereof to a sum which exceeds [£5,000] but would not exceed that amount if any such increase as is mentioned in section 64(2)(c) were disregarded, subsection (1) above shall apply to the whole of that sum, notwithstanding that it exceeds [£5,000], and for the purposes of subsection (2) above the whole of that sum shall be taken to be the sum which he might have nominated. Notes Subs (1) was amended by the Administration of Estates (Small Payments) (Increase in Limits) Order 1984, SI 1984 No 539. Subs (3) was amended by the Administration of Estates (Small Payments) (Increase in Limits) Order 1984, SI 1984 No 539.

Validity of payments 69.—(1) A payment made by a registered society or branch under section 68 above shall be valid and effectual against any demand made upon the trustees or the society or branch by any other person, but the next of kin or personal representatives of the deceased member shall have a remedy for recovery of the money paid under that section against the person who has received that money. (2) Where a society or branch has paid money to a nominee in ignorance of a marriage subsequent to the nomination, the receipt of the nominee shall be a valid discharge to the society or branch. Disputes Sections 76 to 80 provide that any claim by a member against a friendly society has to be conducted in accordance with the society’s rules, and the court has no jurisdiction over the matter unless no decision has been reached within forty days running from the date of the application to the friendly society. Change of name, amalgamation and transfer of engagements and conversion of societies Sections 81, 82, 84, 84A, 85 and 86 permit a registered society to change its name, and allow registered (but not incorporated) societies to amalgamate subject to the right of any member to object to the amalgamation by referring the matter to the Financial Services Authority. A registered society may also forfeit its registered status and convert into a company. Section 83 was repealed and the other sections were amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, 2001 No 2617, Schedules 3 and 4 to reflect the institutional arrangements under the Financial Services and Markets Act. Further amendments were made to these provisions by the Financial Services and Markets Act (Consequential Amendments and Repeals) Order, SI 2001 No 3649. Winding up, suspension of business and inspection Sections 87 to 90 say that a registered friendly society may be wound up by the court on the application of the Financial Services Authority following an investigation by the Authority

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under s 65 of the Friendly Societies Act 1992. The ground for winding up is that it is in the interests of the members or of the public that the society be wound up. The members themselves may appoint an inspector to investigate a friendly society’s affairs. Amendments: The Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617 and the Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649. Cancellation and suspension of registration and dissolution Sections 91 to 97 state that the Financial Services Authority is empowered to cancel the registration of a society on a number of grounds, including wilful violation of the provisions of the 1974 Act. A society may dissolve itself if its purposes have been achieved, or otherwise in accordance with its rules. A society may also be dissolved by the FSA on the grounds of insolvency. The Financial Services Authority replaced the Chief Registrar of Friendly Societies as a result of amendments by the Financial Services and Markets Act (Mutual Societies) Order, SI 2001 No 2617, Schedule 3. Section 94 was partly repealed by the Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 189. Offences, penalties and legal proceedings Sections 98 to 103 create numerous offences, which may be committed by a friendly society itself or by its officers, for infringement of the legislation or the furnishing of false returns. Miscellaneous Sections 104A to 117 cover miscellaneous provisions. Section 104A was substituted for s 104 by the Financial Services and Markets Act (Mutual Societies) Order, SI 2001 No 2617, Schedule 3. Section 109 was partly repealed by the Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 188.

SCHEDULES General Note The Schedules to the 1974 Act have for the most part been repealed or are themselves concerned with amendments to and repeal of earlier legislation.

SCHEDULE 2 M AT T E R S T O B E P R O V I D E D F O R B Y T H E R U L E S O F S O C I E T I E S REGISTERED UNDER THIS ACT SECTION 7(2) PA RT I PROVISIONS APPLICABLE TO ALL SOCIETIES

1. The name of the society. 2. The place which is to be the registered office of the society, to which all communications and notices may be addressed. 3.—(1) Subject to [sub-paragraphs (2) and (3)] below, the whole of the objects for which the society is to be established, the purposes for which the funds thereof shall be applicable, the terms of admission of members, the conditions under which any member may become entitled to any benefit assured by the society, and . . . forfeitures to be imposed on any member and the consequences of non-payment of any subscription . . . (2) Nothing in sub-paragraph (1) above shall require the inclusion in the rules of a registered society of tables relating to the benefits payable to or in respect of any members of the society in pursuance of group insurance business. [(3) Nothing in sub-paragraph (1) above shall prevent a registered friendly society from specifying in its rules the manner in which the conditions under which any member may

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become entitled to any benefit assured by the society, are to be determined, instead of specifying the conditions themselves.] Notes Para 3(1) was amended by the Friendly Societies Act 1992, s 95 and Sched 16. Para 3(2) amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617. Para 3(3) was inserted by the Friendly Societies Act 1992, s 95 and Sched 16.

4. The mode of holding meetings and right of voting, and the manner of making, altering or rescinding rules. 5. The appointment and removal of a committee of management (by whatever name), of a treasurer and other officers and of trustees and, in the case of a society with branches, the composition and powers of the central body and the conditions under which a branch may secede from the society. 6. The investment of the funds, the keeping of the accounts and the audit of the accounts at least once a year. 7. Annual returns to the Authority relating to the affairs and numbers of members of the society. 8. The inspection of the books of the society by every person having an interest in the funds of the society. 9. The manner in which disputes shall be settled. 10. In the case of dividing societies, a provision for meeting all claims upon the society existing at the time of division before any such division takes place. 11.—(1) For the avoidance of doubt it is hereby declared that nothing in paragraph 3 above requires the rules of a society to contain tables in accordance with which obligations to provide benefits to members have been undertaken or policies of assurance have been issued by the society, if the rules of the society provide that no further obligations may be undertaken or (as the case may be) no further policies may be issued in accordance with any such tables. (2) Subject to sub-paragraph (1) above and sub-paragraph (3) below, the tables which the rules of a registered society are required to contain by virtue of paragraph 3 above and any tables contained in the rules of a branch shall, in the case of a society or branch which proposes to carry on long-term business, be tables which, in so far as they relate to that business, have been certified by a qualified actuary. (2A) In sub-paragraph (2) ‘‘long-term business’’ has the meaning given by section 117(2) of the Friendly Societies Act 1992. (3) Sub-paragraph (2) above does not apply— (a) to a society first registered before 26th July 1968, nor (b) to a branch of such a society, nor (c) to a society formed by the amalgamation of two or more such societies. Notes Sub-paragraph (2) amended by the Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 190. Sub-paragraph (2A) inserted by the Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 190.

PA RT I I P R O V I S I O N S A P P L I C A B L E T O F R I E N D LY S O C I E T I E S A N D C AT T L E I N S U R A N C E S O C I E T I E S

12. The keeping of proper accounts in accordance with section 29 of this Act and the keeping of a separate account of the expenses of management and of all contributions and other moneys which may be applied to those expenses. 13. Except with respect to cattle insurance societies, such periodic valuation or valuations (if any) of the assets and liabilities of the society as a whole, or of the assets and liabilities of the society in respect of any particular business or businesses conducted by the society, as may from time to time be required by law in the case of that society. 14. The voluntary dissolution of the society . . .

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Notes This paragraph was amended by the Friendly Societies Act 1992, s 120 and Sched 2.

15. The right of one-fifth of the total number of members, or of 100 members in the case of a society of not less than 1,000 members and not more than 10,000 or of 500 members in the case of a society of more than 10,000 members, to apply to the Authority for an investigation of the affairs of the society or for winding it up. Notes Paragraph 15 amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, Sched 3, para 49.

1.27 LLOYD’S ACT 1982 (Chapter XIV) General Note The Lloyd’s Act 1982 made fundamental changes to the constitution of Lloyd’s by establishing the Council as the governing body. As is explained in the preamble, the growth of the membership of Lloyd’s had rendered impracticable governance by an elected Committee and votes in general meeting. The 1982 Act also gave formal status to the Chairmen and Deputy Chairman of Lloyd’s, and established a Disciplinary Committee.

An Act to establish a Council of Lloyd’s; to define the functions and powers of the said Council; to amend and repeal certain provisions of Lloyd’s Acts 1871 to 1951; and for other purposes. [23 July, 1982] WHEREAS—

(1) By Lloyd’s Act 1871 certain persons were united into a society or corporation for the purposes of that Act and were incorporated by the name of Lloyd’s (hereinafter referred to as ‘‘the Society’’) and various powers were conferred upon the Society by the said Act: (2) By the said Act of 1871 there was established a committee of members of the Society called the Committee of Lloyd’s to have the management and superintendence of the affairs of the Society and to exercise all the powers of the Society (except as in the said Act provided), subject to control and regulation by a general meeting of the members of the Society: (3) By the said Act of 1871 the members of the Society in general meeting were empowered to make byelaws for the purposes provided in that Act and generally for the better execution of the Act and the furtherance of the objects of the Society, and byelaws have from time to time been so made: (4) Further powers were conferred on the Society and on the members of the Society in general meeting by Lloyd’s Act 1911, Lloyd’s Act 1925 and Lloyd’s Act 1951: (5) Since 1968 the number of persons resident outside the United Kingdom admitted as members of the Society and the total number of members of the Society have both greatly increased so that it is no longer practical or expedient for the members of the Society to exercise in general meeting the powers reserved to them by the Acts hereinbefore mentioned: (6) It is expedient in order to enable the Society to regulate the management of its affairs in accordance with both present-day requirements and practice and the interests of Lloyd’s policyholders that— (a) there should be established a Council of Lloyd’s to have control over the management and regulation of the affairs of the Society; (b) the said Council should have power to make byelaws for the purposes of such management and regulation, including byelaws making provision for and regulating the admission, suspension and disciplining of members of the Society, Lloyd’s brokers, underwriting agents and others; and (c) certain provisions in Lloyd’s Acts 1871 to 1951 should be amended or repealed: (7) It is expedient that the other provisions contained in this Act should be enacted: (8) The purposes of this Act cannot be achieved without the authority of Parliament:

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May it therefore please Your Majesty that it may be enacted, and be it enacted, by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:— Citation 1.—(1) This Act may be cited as Lloyd’s Act 1982. (2) Lloyd’s Acts 1871 to 1951 and this Act may be cited together as Lloyd’s Acts 1871 to 1982. Interpretation 2.—(1) In this Act, unless the context otherwise requires— ‘‘the Act of 1871’’ and ‘‘the Act of 1911’’ mean respectively Lloyd’s Act 1871 and Lloyd’s Act 1911; ‘‘annual subscriber’’ means a person admitted to the Room as an annual subscriber; ‘‘Appeal Tribunal’’ means the appeal tribunal established pursuant to section 7(1)(b) of this Act; ‘‘associate’’ means a person admitted to the Room as an associate; ‘‘the Committee’’ means the committee constituted by section 5 of this Act; ‘‘the Council’’ means the council constituted by section 3 of this Act; ‘‘director’’ includes any person occupying the position of director by whatever name called; ‘‘Disciplinary Committee’’ means a disciplinary committee established pursuant to section 7(1)(a) of this Act; ‘‘external member of the Council’’ means a member of the Council elected pursuant to section 3(2)(b) of this Act; ‘‘external member of the Society’’ means a member of the Society who is not a working member of the Society; ‘‘Lloyd’s broker’’ means a partnership or body corporate permitted by the Council to broke insurance business at Lloyd’s; ‘‘manager’’ in relation to a Lloyd’s broker or underwriting agent, means a person who exercises managerial functions under the immediate authority of the board of directors, or any member thereof, or of the partners, or any one of them, as the case requires, of the Lloyd’s broker or underwriting agent; ‘‘member of the Society’’ means a person admitted to membership of the Society; ‘‘nominated member of the Council’’ means a member of the Council appointed pursuant to section 3(2)(c) of this Act; ‘‘non-underwriting member’’ means a member of the Society who is not an underwriting member; ‘‘related company’’, in relation to any company, means any body corporate— (a) which is that company’s subsidiary; or (b) of which that company is a subsidiary; or (c) which is a subsidiary of that company’s holding company; and ‘‘holding company’’ shall have the meaning given by section 154 of the Companies Act 1948 which shall be construed with any necessary modifications where applied to a company incorporated under the law of a country outside the United Kingdom; ‘‘the Room’’ means the principal room or rooms in the Society’s premises in the city of London for the time being designated by the Council for the purposes of underwriting; ‘‘the Society’’ means the society incorporated by the Act of 1871 by the name of Lloyd’s; ‘‘special resolution’’ means a resolution of the Council passed by separate majorities of both— (a) all the working members of the Council for the time being; and (b) all the members for the time being of the Council who are not working members of the Council as aforesaid, that is to say, the external members of the Council and the nominated members of the Council;

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‘‘subsidiary’’ shall have the meaning given by section 154 of the Companies Act 1948 which shall be construed with any necessary modifications where applied to a company incorporated under the law of the country outside the United Kingdom; ‘‘underwriting agent’’ means a person permitted by the Council to act as an underwriting agent at Lloyd’s; ‘‘underwriting member’’ means a person admitted to the Society as an underwriting member; ‘‘working member of the Council’’ means a member of the Council elected pursuant to section 3(2)(a) of this Act; ‘‘working member of the Society’’ means— (a) a member of the Society who occupies himself principally with the conduct of business at Lloyd’s by a Lloyd’s broker or underwriting agent; or (b) a member of the Society who has gone into retirement but who immediately before his retirement so occupied himself. (2) For the purposes of this Act (except sections 10, 11 and 12)— (a) a person controls a partnership or body corporate if (i) the partners of the partnership, or the directors of the body corporate, or the directors of another company of which the body corporate is a subsidiary, are accustomed to act in accordance with that person’s directions or instructions (otherwise than by reason only that they act on advice given in a professional capacity); or (ii) in the case of a body corporate that person either alone or with any associate or associates (as defined in section 7(8) of the Insurance Companies Act 1982) is entitled to exercise or control the exercise of one-third or more of the voting power at any general meeting of the body corporate or of another company of which the body corporate is a subsidiary; (b) a partnership or body corporate is connected with Lloyd’s if it is a Lloyd’s broker or an underwriting agent, or controls or is controlled by a Lloyd’s broker or an underwriting agent, or is owned or controlled by a person who also controls a Lloyd’s broker or an underwriting agent. The Council 3.—(1) There shall be a Council of Lloyd’s. (2) Subject to subsection (3) below, the members of the Council shall be— (a) sixteen working members of the Council elected from among the working members of the Society by those members of the Society whose names are shown on Part I of the Register referred to in Schedule 1 to this Act as working members of the Society; (b) eight external members of the Council elected from among the external members of the Society by those members of the Society whose names are shown on Part II of such Register as external members of the Society; (c) three nominated members of the Council appointed by the Council by special resolution, whose appointments shall not take effect unless and until confirmed by the Governor for the time being of the Bank of England; Provided that a person who is a member of the Society or an annual subscriber or an associate shall not be eligible for appointment as a nominated member of the Council. (3) The Council may by byelaw increase or decrease the number of its members and specify the manner in which such increase or decrease may be effected: Provided that the number of places available to working members of the Society at any election to the Council shall be such that if filled by such members not more than two-thirds of the members of the Council would be working members of the Council. (4) The Council may by byelaw limit the number of places which at any election to the Council shall be available to working members of the Society who are— (a) engaged (as a partner, director or employee) or interested in any way (directly or indirectly) in any one partnership or body corporate which is connected with Lloyd’s, and for the purposes of this paragraph and any byelaw made hereunder—

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(i) a body corporate which is controlled by a partnership connected with Lloyd’s or by any partner or partners therein shall be deemed to form part of that partnership; and (ii) a related company of a body corporate connected with Lloyd’s shall be deemed to form part of that body corporate; (b) principally occupied with such class or classes of insurance business at Lloyd’s or in such capacities as the Council may by byelaw specify. (5) Subject to the provisions of this section, the Council shall by byelaw regulate— (a) the conduct of elections of members of the Council, including inter alia the system of voting at any such election; (b) the number of members of the Council to be elected at each election; (c) eligibility and nomination for membership of the Council; (d) the term of office of members of the Council; (e) any other matter connected with any of the aforesaid matters; Provided that— (i) the term of any duly elected or appointed member of the Council shall not be extended during the term of office of such member; (ii) subject to paragraph (iii) below, a working member of the Council shall not be eligible for re-election as a working member of the Council for a term commencing sooner than one year after the expiry of his last previous term as a working member of the Council; and (iii) the Chairman of Lloyd’s and each of the Deputy Chairmen of Lloyd’s shall, if the Council shall from time to time so determine in respect of any one (but not more) of their number, be eligible for immediate re-election once only. Notes This section establishes the Council of Lloyd’s, with membership as set out in subs (2). For the powers of the Council, see s 6 of this Act.

The Chairman and Deputy Chairmen of Lloyd’s 4. The council shall annually elect from among the working members of the Council a Chairman of the Council, who shall be called the ‘‘Chairman of Lloyd’s’’, and two or more Deputy Chairmen of the Council, each of whom shall be called a ‘‘Deputy Chairman of Lloyd’s’’. The Committee 5.—(1) There shall be a Committee of Lloyd’s. (2) The working members of the Council shall constitute the Committee. (3) The Committee shall annually elect— (a) the Chairman of the Council, or such other member of the Committee as it thinks fit, to be the Chairman of the Committee; and (b) the Deputy Chairmen of the Council, or such two or more members of the Committee as it thinks fit, to be the Deputy Chairmen of the Committee. Notes This section reconstitutes the Committee of Lloyd’s. For the powers of the Committee, see s 6 of this Act.

Powers of the Council and of the Committee 6.—(1) The Council shall have the management and superintendence of the affairs of the Society and the power to regulate and direct the business of insurance at Lloyd’s and it may lawfully exercise all the powers of the Society, but all powers so exercised by the Council shall be exercised by it in accordance with and subject to the provisions of Lloyd’s Acts 1871 to 1982 and the byelaws made thereunder. (2) The Council may—

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(a) make such byelaws as from time to time seem requisite or expedient for the proper and better execution of Lloyd’s Acts 1871 to 1982 and for the furtherance of the objects of the Society, including such byelaws as it thinks fit for any or all of the purposes specified in Schedule 2 to this Act; and (b) amend or revoke any byelaw made or deemed to have been made hereunder. (3) Any byelaw made under this Act and any amendment or revocation of any byelaw so made or deemed to have been so made shall be made by special resolution. (4) (a) If, within 60 days of the promulgation of any byelaw or the promulgation of any amendment to or revocation of any byelaw, or within such longer period as the Council may determine, a notice in writing signed by not less than 500 members of the Society is served upon the Council requesting that such byelaw, amendment of revocation be submitted to the members of the Society in general meeting, the Council shall convene a general meeting of the Society for that purpose. (b) If, at a meeting of the members of the Society convened pursuant to paragraph (a) above, a resolution to revoke such byelaw or amendment or to annul such revocation is passed by a majority of members voting in person or by proxy and the number of members voting in favour of such resolution represents at least one-third of the total membership of the Society, such byelaw, amendment or revocation shall thereby be revoked or annulled, as the case may be. (c) A resolution passed pursuant to paragraph (b) above shall not affect anything done or omitted to be done before the resolution is passed, and in particular— (i) in the case of a resolution revoking a byelaw or amendment, shall not affect the previous operation of the byelaw or amendment; (ii) in the case of a resolution annulling the revocation of a byelaw, shall revive the byelaw only from the date of the resolution. (d) The Council shall by byelaw regulate the calling and conduct of meetings convened pursuant to paragraph (a) above and the system of voting thereat. (5) Subject to subsections (6) and (10) of this section, the Council may, by special resolution, delegate the exercise of such of its powers or functions under this Act as are not required to be exercised by special resolution to any one or more of the following, that is to say:— (a) the Chairman of Lloyd’s; (b) a Deputy Chairman of Lloyd’s; (c) the Committee; (d) the Chairman of the Committee; (e) a Deputy Chairman of the Committee; (6) The Council may, be special resolution, delegate— (a) to the Committee but not otherwise— (i) the making of regulations regarding the business of insurance at Lloyd’s; and (ii) the carrying out or exercise of any duties, responsibilities, rights, powers or discretions imposed or conferred upon the Council by any enactment (other than an enactment in this Act) or regulation made in pursuance thereof or by any other instrument having the effect of law or by any other document or arrangement whatsoever, whether or not such enactment, regulation, instrument, document, or arrangement shall be in force or in existence on the day when this Act comes into force, in so far as such delegation is not prohibited by any enactment, regulation, instrument, document or arrangement; (b) to the Committee or to the Chairman of the Committee or to a Deputy Chairman of the Committee but not otherwise the giving of directions regarding the business of insurance at Lloyd’s to any member of the Society, Lloyd’s broker, underwriting agent, director or partner of a Lloyd’s broker or underwriting agent or person who works for a Lloyd’s broker or underwriting agent in such capacity as may be specified by the Council (whether or not the acts required to be done or not done by such direction are already required to be done or not done by the provisions of Lloyd’s Acts 1871 to 1982, or of byelaws made thereunder, or of such regulations as are referred to in paragraph (a)(i) above). (7) Nothing in subsections (5) and (6) above shall operate to limit the power of the Council or of the Committee to act by persons, committees, sub-committees or other bodies of persons,

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whose members may include persons who are not members of the Society, or by the employees of the Society. (8) (a) Within 7 days of the making of any regulation by the Committee in the exercise of powers delegated pursuant to subsection (6) above, the Committee shall give notice thereof to the Council and within 60 days of the making of such regulation a member of the Council may, by notice in writing to the Council, request that such regulation be ratified by the Council by special resolution, but, subject to the provisions of paragraph (b) below, such regulation shall remain in full force and effect and nothing done in pursuance of it shall be invalidated. (b) If, upon a vote of the Council pursuant to a request under paragraph (a) above, such regulation is not ratified by special resolution it shall thereupon cease to have effect provided that if no vote pursuant to such request is taken within 60 days following the receipt by the Council of such request such regulation shall upon the expiry of such period cease to have effect. (c) A regulation ratified by the Council by special resolution shall be deemed for the purposes of subsection (4) above to be a byelaw made by the Council in the exercise of its powers under subsection (2) above. (9) A direction given by the Chairman of the Committee or a Deputy Chairman of the Committee in the exercise of powers delegated pursuant to paragraph (b) of subsection (6) above shall cease to have effect after 7 days unless continued by the Committee. (10) A delegation under this section is revocable by special resolution of the Council and shall not prevent the exercise of a power or the performance of a function by the Council itself. (11) No act or proceeding of the Council or Committee shall be invalidated in consequence only of there being— (a) a vacancy or vacancies in the membership of the Council or Committee at the time of such act or proceeding being done or taken; or (b) some defect in the election or appointment of any member of the Council or Committee. Notes Section 6 is concerned with the powers of the Council and the Committee. It deals in particular with the making of regulations by the Council and the right of members to challenge those regulations. Subs (1) The Council is authorised under the general wording of this provision to make regulations for the conduct of business at Lloyd’s. This power may be delegated to the Committee by subs (6). The Council is also empowered to issue codes of practice. Subs (2) The general power of the Council to make byelaws in subs 6(2) is supplemented by an illustrative list of the subject-matter of byelaws in Sched 2 to this Act.

The Disciplinary Committee and the Appeal Tribunal 7.—(1) The Council shall by byelaw— (a) (i) establish, provide for the constitution of and define the powers of a Disciplinary Committee or Committees, provided that the majority of the members of any such Disciplinary Committee shall be members of the Society (who need not be members of the Council); and (ii) subject to subsection (3) below, specify the grounds upon which in furtherance of the objects of the Society disciplinary proceedings may be instituted against and penalties or sanctions may be imposed upon any member of the Society, annual subscriber, Lloyd’s broker, underwriting agent or such other class of persons as may be so specified; (b) (i) establish, provide for the constitution of and define the powers of an Appeal Tribunal to hear and determine appeals (whether or not in the exercise of its disciplinary powers and functions), provided that the President and Deputy President of such Appeal Tribunal, who shall both be appointed by the Council, shall not be members of the Society; and (ii) specify the class or classes of decisions, findings, orders, acts or omissions against which there shall lie a right of appeal to such Appeal Tribunal.

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(2) All disciplinary powers and functions of the Council, except the power to confirm, modify or grant dispensation in respect of any penalty or sanction imposed by a Disciplinary Committee or the Appeal Tribunal, shall be exercisable only by a Disciplinary Committee and, in respect of appeals which lie from decisions, findings, orders, acts or omissions of a Disciplinary Committee, only by the Appeal Tribunal. (3) The grounds upon which disciplinary proceedings may be instituted and penalties or sanctions may be imposed by virtue of byelaws made pursuant to subsection (1) above, may include breach of or failure to observe any regulation or direction made or given pursuant to subsection (6) of section 6 (Powers of the Council and of the Committee) of this Act, provided that: (a) no penalty or sanction shall be imposed for any breach of or failure to observe any regulation made by the Committee which has ceased to have effect in the circumstances specified in subsection (8) of the said section 6; (b) no penalty or sanction shall be imposed for any breach of or failure to observe any direction given by the Chairman of the Committee or a Deputy Chairman of the Committee unless and until such direction has been ratified by the Committee; (c) any person in relation to whom a direction is given may, by notice in writing to the Council, request that the same be ratified by the Council, by special resolution as soon as practicable, and in default of such ratification no penalty or sanction shall be imposed for such breach or failure, provided that pending such ratification the direction shall remain in full force and effect and nothing done in pursuance of it shall be invalidated. (4) (a) For the purpose of any proceedings before a Disciplinary Committee or the Appeal Tribunal the Disciplinary Committee or the Appeal Tribunal may administer oaths, and any party to the proceedings may sue out writs of subpoena ad testificandum and duces tecum, but no person shall be compelled under any such writ to produce any document which he could not be compelled to produce on the trial of any action. (b) The provisions of section 36 of the Supreme Court Act 1981 (which provide a special procedure for the issue of such writs so as to be in force throughout the United Kingdom) shall apply in relation to any proceedings before a Disciplinary Committee or the Appeal Tribunal as they apply in relation to causes or matters in the High Court. (5) Any person other than a member of the Society in respect of whom disciplinary proceedings are taken under this Act shall be deemed for the purposes of paragraph 8 of Part II of the Schedule to the Defamation Act 1952 to be a person who is subject by virtue of a contract to the control of the Society. Notes There are numerous byelaws made under the authority of this section. The full text of all of the byelaws is available on the Lloyd’s of London website, http://www.lloyds.com/Lloyds_Market/Tools_and_reference/Lloyds_ Acts_and_Byelaws/Lloyds_Byelaws/

Insurance business 8.—(1) An underwriting member shall be a party to a contract of insurance underwritten at Lloyd’s only if it is underwritten with several liability, each underwriting member for his own part and not one for another, and if the liability of each underwriting member is accepted solely for his own account. (2) An underwriting member (not being himself as underwriting agent) shall underwrite contracts of insurance at Lloyd’s only through an underwriting agent. (3) An underwriting member shall in the course of his underwriting business at Lloyd’s accept or place business only from or through a Lloyd’s broker or such other person as the Council may from time to time by byelaw permit. (4) Breach of any of subsections (1) to (3) above shall constitute an act or default in respect of which disciplinary proceedings may be brought in accordance with byelaws made under section 7 (The Disciplinary Committee and the Appeal Tribunal) of this Act.

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Notes Subs (1) states the principle of personal liability attaching to names. Subs (2) It was held in Deeny v. Gooda Walker Ltd (No 2) 1995, unreported, that this subsection is purely procedural and does not alter the position that a name carries on insurance business at Lloyd’s. Subs (3) restricts to Lloyd’s brokers access to Lloyd’s underwriters.

Cessation of membership on bankruptcy 9. In the event of a member of the Society being adjudicated bankrupt, or being adjudicated or declared insolvent, by the due process of law of a country within the European Economic Community the Council shall forthwith declare his membership to have ceased: Provided that if such adjudication or declaration is set aside on appeal or otherwise the Council shall take immediate action to cancel its declaration. Restrictions affecting Lloyd’s brokers 10.—(1) Save as provided in subsections (3) and (4) of this section, the Council shall not permit a person to act as a Lloyd’s broker if that person is a managing agent or is associated with a managing agent. (2) A person is for the purposes of this section associated with a managing agent if that person is a partner in or, subject to paragraph (h) of subsection (1) of section 12 (Interpretation of sections 10 and 11) of this Act, owns any interest in a managing agent or if that person supplies the services of any individual who works regularly or from time to time in a relevant capacity for a managing agent. (3) If at the date of commencement of this Act a person who is a Lloyd’s broker is associated with a managing agent subsection (1) above shall not apply by reason of such association to that Lloyd’s broker for five years from that date: Provided that if during such period of five years any change shall occur in the factors by reason of which the Lloyd’s broker is so associated (other than a change which results in a termination of such association), which the Council shall determine to be a change which is relevant for the purpose of this section, subsection (1) above shall thereupon apply to that Lloyd’s broker by reason of such association. (4) If at any time after the date of commencement of this Act a Lloyd’s broker becomes associated with a managing agent, the Council may permit the Lloyd’s broker to continue to broke insurance business at Lloyd’s for such period not exceeding six months as the Council may specify on terms that the Lloyd’s broker shall, on or before the expiry of such period, either cease to be associated with such managing agent or cease to be a Lloyd’s broker: Provided that in an exceptional case, in which a longer period than six months is shown to the satisfaction of the Council to be necessary for the purpose of the due administration of the estate of a deceased individual, the Council may permit a further continuance of the association only for such period as is necessary for such purpose. Notes This section seeks to eliminate conflicts of interest, by providing that a Lloyd’s broker may not be a managing agent. For the definitions of terms used in this section, see s 12 and the note thereto. The converse situation is dealt with by s 11.

Restrictions affecting managing agents 11.—(1) Save as provided in subsections (4) and (5) of this section, the Council shall not permit a person to act as a managing agent if that person is a Lloyd’s broker or is associated with a Lloyd’s broker. (2) A person being a partnership or body corporate is for the purposes of this section associated with a Lloyd’s broker if that person is a partner in, or, subject to paragraph (h) of subsection (1) of section 12 (Interpretation of sections 10 and 11) of this Act, owns any interest in a Lloyd’s broker. (3) A person being an individual is for the purposes of this section associated with a Lloyd’s broker if that individual is a partner in, or is a director of, or subject to paragraph (h) of subsection (1) of the said section 12, owns any interest in a Lloyd’s broker.

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(4) If at the date of commencement of this Act a person who is a managing agent is associated with a Lloyd’s broker subsection (1) above shall not apply by reason of such association to that managing agent for five years from that date: Provided that if during such period of five years any change shall occur in the factors by reason of which the managing agent is so associated (other than a change which results in a termination of such association), which the Council shall determine to be a change which is relevant for the purpose of this section, subsection (1) above shall thereupon apply to that managing agent by reason of such association. (5) If at any time after the date of commencement of this Act a managing agent becomes associated with a Lloyd’s broker, the Council may permit the managing agent to continue to act as such managing agent for such period not exceeding six months as the Council may specify on terms that the managing agent shall, on or before the expiry of such period, either cease to be associated with such Lloyd’s broker or cease to be a managing agent: Provided that in an exceptional case, in which a longer period than six months is shown to the satisfaction of the Council to be necessary for the purpose of the due administration of the estate of a deceased individual, the Council may permit a further continuance of the association only for such period as is necessary for such purpose. Notes See the note to s 10. For the definition of terms used in this section, see s 12 and the note thereto.

Interpretation of sections 10 and 11 12.—(1) For the purposes solely of section 10 (Restrictions affecting Lloyd’s brokers) and section 11 (Restrictions affecting managing agents) of this Act:— (a) ‘‘managing agent’’ shall mean a person who is permitted by the Council in the conduct of his business as an underwriting agent to perform for an underwriting member one or more of the following functions:— (i) underwriting contracts of insurance at Lloyd’s; (ii) reinsuring such contracts in whole or in part; (iii) paying claims on such contracts; and references to a ‘‘managing agent’’ shall include in addition— (A) if a managing agent is a body corporate, any holding company and any person who controls the managing agent or any holding company; (B) if a managing agent is a partnership, any person who is a partner in such partnership, and any person who controls such partnership or a partner in such partnership; (b) in addition to the meaning set out in section 2(1) of this Act, references to a ‘‘Lloyd’s broker’’ shall include— (i) if the Lloyd’s broker is a body corporate, any holding company and any person who controls the Lloyd’s broker or any holding company; (ii) if the Lloyd’s broker is a partnership, any person who is a partner in such partnership and any person who controls such partnership or a partner in such partnership; (c) references to ‘‘that person’’ when applied to a body corporate shall include, in addition to that body corporate— (i) any related company; (ii) any person who controls or is controlled by that body corporate or any related company; (iii) any director of that body corporate or of any related company; (d) references to ‘‘that person’’ when applied to a partnership shall include, in addition to that partnership— (i) any partner in that partnership; (ii) any person who controls or is controlled by that partnership; (iii) any body corporate which any partner in that partnership controls; (iv) any body corporate which is a related company of a partner in that partnership; (v) any director of any body corporate falling within sub-paragraph (iii) or (iv) of this paragraph;

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(e) references to ‘‘that individual’’ shall include, in addition to that individual— (i) the spouse of that individual; (ii) the minor children and step-children of that individual; (iii) the trustees of any settlement in relation to which that individual is a settlor; (iv) the trustees of any settlement of which that individual or that individual’s spouse or minor children or step-children is or are beneficiaries; (v) any body corporate which that individual or any of the persons specified in subparagraphs (i) to (iv) of this paragraph controls; Provided that in any particular case the Council may determine that this paragraph shall not apply so as to include the spouse of an individual where that spouse is or proposes to become, or works or proposes to work substantially full-time for, a person who is, or who by this section is included as, a Lloyd’s broker or a managing agent; (f) paragraph (e) above shall apply with all necessary modifications in relation to references to a ‘‘director’’ or to a ‘‘partner’’ where the director or partner is an individual; (g) subject to paragraph (h) below, a person owns an interest in a body corporate if he has a beneficial interest in, or being the trustee of a settlement has an interest in, any of the stock, shares or other securities of the body corporate; (h) a person shall not be treated as owning an interest in a body corporate by reason only of such person having an interest in not more than 5 per cent. in nominal amount of that body corporate’s stock, shares or other securities, or any class thereof, which are authorised to be dealt in on a stock exchange or are traded in any over-the-counter market, and in either case are so dealt in or traded regularly or from time to time and in ascertaining in any case whether this paragraph applies:— (i) a person being a body corporate shall be treated as also having an interest in any stocks, shares or securities in which any related company, or in which any person who controls or who is controlled by that body corporate or related company has an interest; (ii) a person being a partnership shall be treated as also having an interest in any stocks, shares or securities in which any person to whom in relation to such partnership reference is made in sub-paragraphs (i) to (iv) of paragraph (d) above has an interest; (iii) a person, being an individual, who is a director or a partner, shall be treated as also having an interest in any stocks, shares or securities in which anyone to whom reference is made in relation to such person in paragraph (e) above has an interest; (i) an individual works in a relevant capacity for a managing agent if he personally carries out one or more of the functions referred to in paragraph (a) above; (2) For the purposes of subsection (1) above— (a) ‘‘securities’’ in relation to any body corporate means any debentures, debenture stock, loan stock or bonds, and any other securities under which the consideration given by the body corporate for the use of the principal secured is to any extent dependent on the results of the body corporate’s business or any part of it, or under which the consideration so given represents more than a reasonable commercial return for the use of that principal: (b) ‘‘settlement’’ and ‘‘settlor’’ shall have the same meanings as in section 454(3) of the Income and Corporation Taxes Act 1970; (c) a person controls a partnership or body corporate if— (i) the partners in the partnership, or the directors of the body corporate, or the directors of another company of which the body corporate is a subsidiary are accustomed to act in accordance with the direction or instructions of such person or are accustomed or directed to act on the joint directions or instructions of such person and others (otherwise than by reason only that they act on advice given in a professional capacity); or (ii) in the case of a body corporate such person either alone or with any associate or associates is entitled to exercise or control the exercise of one-third or more of the voting power at any general meeting of the body corporate or of another company

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of which the body corporate is a subsidiary or such person has an associate or associates who are so entitled; and in this sub-paragraph— (A) ‘‘associate’’ in relation to any individual means any person referred to in paragraph (e) of subsection (1) above; (B) ‘‘associate’’ in relation to a body corporate means any related company of that body corporate, and any director of that body corporate or related company; and (d) in determining whether a person controls a body corporate for the purposes of subparagraphs (A) and (B) of paragraph (a) and sub-paragraphs (i) and (ii) of paragraph (b) of subsection (1) above the words in paragraph (c)(ii) of this subsection ‘‘or such person has an associate or associates who are so entitled’’ shall not apply to cause a person to be associated unless the person or a subsidiary of the person owns an interest in the company. (3) This section, section 10 (Restrictions affecting Lloyd’s brokers) and section 11 (Restrictions affecting managing agents) of this Act shall be applied and construed with any necessary modifications with respect to any partnership, body corporate or other entity whatsoever created, if incorporated, in or under the law of a country outside the United Kingdom. Notes This section is supplemented by the Information Relevant to the Operation of Sections 10, 11 and 12 of Lloyd’s Act 1982 Byelaw, No 1 of 1984.

Application of certain provisions of Companies Act 1948 13.—(1) Sections 34, 36 and 448 of the Companies Act 1948 (execution of deeds abroad, authentication of documents and relief for the liabilities of officers and auditors of a company) are hereby incorporated in this Act and shall apply to the Society, the Council, the Committee and officers and auditors of the Society in like manner mutatis mutandis as they apply to a company (as defined by the Companies Act 1948), its officers and auditors. (2) For the purpose of this Act any member of the Council and any person to whom (whether individually or collectively) any powers or functions are delegated under this Act is to be regarded as an officer of the Society. Notes The provisions of the Companies Act 1948 here referred to are now in the Companies Act 2006.

Liability of the Society, etc. 14.—(1) This section shall only exempt the Society from liability in damages at the suit of a member of the Lloyd’s community. (2) For the purposes of this section a member of the Lloyd’s community shall be— (a) a person who is— (i) a member of the Society; (ii) a Lloyd’s broker; (iii) an underwriting agent;(iv)an annual subscriber; (v) an associate; (vi) a director or partner of a Lloyd’s broker or an underwriting agent; (vii) a person who works for a Lloyd’s broker or underwriting agent as a manager; or (b) a person who has been a member of the Lloyd’s community in one or more of the capacities listed in paragraph (a) above; or (c) a person who is seeking or who has sought to become a member of the Lloyd’s community in one or more of the capacities listed in paragraph (a) above. (3) Subject to subsections (1), (4) and (5) of this section, the Society shall not be liable for damages whether for negligence or other tort, breach of duty or otherwise, in respect of any exercise of or omission to exercise any power, duty or function conferred or imposed by Lloyd’s Acts 1871 to 1982 or any byelaw or regulation made thereunder—

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(a) in so far as the underwriting business of any member of the Society or the costs of his membership or the business of any person as a Lloyd’s broker or underwriting agent may be affected; or (b) in so far as relates to the admission or non-admission to, or the continuance of, or the suspension or exclusion from, membership of the Society; or (c) in so far as relates to the grant, continuance, suspension, withdrawal or refusal of permission to carry on business at Lloyd’s as a Lloyd’s broker or an underwriting agent or in any capacity therewith; or (d) in so far as relates to the exercise of, or omission to exercise, disciplinary functions, powers and duties; or (e) in so far as relates to the exercise of, or omission to exercise, any powers, functions or duties under byelaws made pursuant to paragraphs (21), (22), (23), (24) and (25) of Schedule 2 to this Act; unless the act or omission complained of— (i) was done or omitted to be done in bad faith; or (ii) was that of an employee of the Society and occurred in the course of the employee carrying out routine or clerical duties, that is to say duties which do not involve the exercise of any discretion. (4) Nothing in this section shall affect any liability of the Society in respect of the death of or personal injury to any person, and for the purposes of this section the expression ‘‘personal injury’’ means bodily injury, any disease and any impairment of a person’s physical or mental condition. (5) Nothing in this section shall exempt the Society from liability for libel or slander. (6) For the purposes of this section ‘‘the Society’’ means the Society itself and also any of its officers and employees and any person or persons in or to whom (whether individually or collectively) any powers or functions are vested or delegated by or pursuant to Lloyd’s Acts 1871 to 1982. Notes The immunity of the Society of Lloyd’s from negligence suits was confirmed in Society of Lloyd’s v. Clementson (CA) [1995] LRLR 307, where it was held that s 14 was inconsistent with the imposition of a duty of care to supervise the Lloyd’s market with reasonable care and skill. It was also held in the Clementson case that the Society of Lloyd’s does not supply services and thus does not owe implied duties of care under the Supply of Goods and Services Act 1982. Section 14 applies to all actions initiated after its commencement date of 23 July 1982 even if the events giving rise to the action occurred before that date: Ashmore v. Society of Lloyd’s (No 2) [1992] 2 Lloyd’s Rep 620. Lloyd’s is not susceptible to judicial review proceedings, as it does not carry out public functions: R v. Society of Lloyd’s, Ex parte Briggs (1992) Times, 30 July.

Repeals and amendments 15.—(1) Subject to the provisions of Schedule 4 to this Act— (a) the enactments specified in Schedule 3 to this Act are hereby repealed to the extent specified in that Schedule; (b) for section 7 (Purposes for which capital stock &c. to be held by Society) of the Act of 1911 there shall be substituted the following section:— ‘‘7. The Society shall hold the funds and property of the society and the income therefrom for all or any of the following purposes:— (a) for defraying the costs, charges and expenses incurred by the Society, the Council or otherwise in the execution and carrying out of Lloyd’s Acts 1871 to 1982; (b) for furthering the objects of the Society; (c) for making good any default by any member of the Society under any contract of insurance underwritten at Lloyd’s which in the opinion of the Council it is in the interests of the members of the Society to make good; (d) for guaranteeing or securing, in such manner as the Council think fit, any debt or obligation of or binding on the Society, any of its subsidiaries or any other person;

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(e) for such other purposes (if any) as may from time to time be prescribed by byelaw; and subject thereto for the benefit of the members of the Society jointly.’’; (c) for section 9 (Powers to Society with reference to guarantees) of the Act of 1911 there shall be substituted the following section:— ‘‘9. Without prejudice to the provisions of section 7 of this Act the Society may either by itself or jointly with any other guarantor or guarantors guarantee the payment of claims and demands upon contracts of insurance underwritten at Lloyd’s and the Society may for such purposes enter into contracts and may apply the funds and property of the Society and the income therefrom or any part thereof for the purpose of discharging any liabilities of the Society under any guarantees or contracts as aforesaid and the powers conferred on the Society by this section may be exercised by the Council in accordance with byelaws made under Lloyd’s Act 1982.’’; (d) in subsection (1) of section 5 (Society may act as trustee for certain purposes) of Lloyd’s Act 1951 the words ‘‘relating to the insurance business carried on at Lloyd’s by members of or annual subscribers to the Society’’ shall be omitted. (2) Subject to the provisions of this Act— (a) any enactment (other than an enactment in this Act) or any other instrument having the effect of law; and (b) any other document or arrangement whatsoever; which is in existence before the first meeting of the Council held pursuant to paragraph 7 of Schedule 4 to this Act and which refers or relates to the Society or to the business carried on by persons as members of the Society or as Lloyd’s brokers or underwriting agents shall on and after such meeting have effect subject to any necessary modifications as if for any reference however worded and whether express or implied— (i) to the Committee of Lloyd’s constituted by the Act of 1871 there were substituted a reference to the Council; and (ii) to the Chairman or a Deputy Chairman of that Committee or to the Chairman or a Deputy Chairman of Lloyd’s there were substituted a reference to the Chairman of the Council or a Deputy Chairman of the Council, as the case may be: Provided that any such reference shall be a reference to the Committee of Lloyd’s constituted by this Act or to the Chairman or a Deputy Chairman of the Committee so constituted in any case where, having regard to the power or any exercise of the power of delegation conferred on the Council by this Act, the context so requires. Notes Subs (1) substitutes ss 7 and 9 of the Lloyd’s Act 1911, and amends s 5 of the Lloyd’s Act 1951.

Existing byelaws to continue in force 16. Any byelaw made under Lloyd’s Acts 1871 to 1951 shall be deemed to have been made by the Council in the exercise of its power under this Act and subject to the provisions of Schedule 4 to this Act such byelaws shall continue in full force and effect unless and until revoked by the Council pursuant to the said power. Transitional provisions 17. The transitional provisions contained in Schedule 4 to this Act shall have effect. Costs of Act 18. The costs, charges and expenses of and incidental to the preparing, applying for, obtaining and passing of this Act shall be paid by the Society.

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SCHEDULES SCHEDULE 1 C L A S S I F I C AT I O N O F M E M B E R S O F T H E S O C I E T Y 1. The Council shall keep and maintain a Register to be revised as at the first day of July in each year (or such other day or days as the Council may by byelaw provide) which shall be divided into two parts and shall show in Part I thereof the names of all those members of the Society who were classified as working members of the Society as at that date and in Part II thereof the names of all those members of the Society who were classified as external members of the Society as at that date. 2. A member of the Society may object to his or another member’s classification on the Register and the Council shall by byelaw make provision for the determination of such an objection. 3. A member of the Society may appeal against a determination under paragraph 2 above to a committee of the Council consisting of one working member, one external member and one nominated member of the Council whose decision shall be conclusive and the Council shall by byelaw make provision for the hearing and determination of such an appeal. 4. In any election to the Council a member of the Society shall be entitled and only entitled to vote as a working member of the Society or as an external member of the Society according to his classification on the Register on the date on which notice of such election is given. 5. Such Register shall be available for inspection by a member of the Society upon request at the premises of the Society in the city of London, or such other place as the Council shall specify. SCHEDULE 2 P U R P O S E S F O R W H I C H B Y E L AW S M AY B E M A D E Without prejudice to the generality of the powers vested in the Council by subsection (2) of section 6 (Powers of the Council and of the Committee) of this Act, the Council may pursuant to that section make byelaws for the following purposes:— (1) For regulating the admission to the Society of members as either underwriting members or non-underwriting members, for regulating continuing membership of the Society and for regulating the manner and circumstances in which members may be excluded from membership of the Society, and so that any byelaws made for such purposes may impose or provide for conditions and requirements to be satisfied or complied with on admission or during membership, which conditions and requirements— (a) may from time to time be added to, altered or withdrawn; (b) may include the requirement to give undertakings; (c) may apply to all or any class of underwriting members and as to the whole or any class of their underwriting business; and (d) may be imposed notwithstanding any inconsistency therein with any contract subsisting at the commencement of this Act between the Society and any member of the Society; Provided that, without prejudice to the powers of the Council to require an underwriting member to cease or reduce the level of his underwriting at Lloyd’s, a member of the Society shall not be excluded from membership for breach of a byelaw or failure to satisfy a condition, requirement or undertaking where such breach or failure consists solely of his inability to satisfy a financial qualification contained in such byelaw, conditions, requirement or undertaking, which was not applicable on the date he became an underwriting member or, where he has subsequently increased the level of his underwriting, on the date his application to do so was duly accepted; (2) For requiring an underwriting member to cease to be a member of the Society or to cease underwriting, temporarily or indefinitely, in the event that— (a) a receiving order in bankruptcy is made against such member by the due process of law of any country; or (b) such member makes or proposes any composition with his creditors or otherwise acknowledges his insolvency; or

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(c) by the due process of law of a country outside the European Economic Community such member is adjudicated bankrupt or is adjudicated or declared insolvent; and for regulating the procedure to be followed in such event; (3) For providing for admission to the Room of annual subscribers, associates, and other persons, for enabling the Council to impose conditions and requirements (including the requirement to give undertakings) as to admission and as to continuing right to admission to the Room and for the grant of tickets for the purpose of conducting business in the Room and the renewal and revocation of such tickets; (4) For regulating the fees, subscriptions and other sums to be paid by members of the Society, annual subscribers, associates, Lloyd’s brokers, underwriting agents and others; (5) For regulating the mode, time and place of summoning and holding general meetings of the Society and the mode of voting and the conduct of proceedings thereat; (6) For regulating the mode, time and place of summoning and holding meetings of the Council and of the Committee and the quorum and manner of proceedings at meetings of the Council and of the Committee; (7) For regulating:— (a) the manner in which byelaws and the amendment and revocation of byelaws shall be promulgated; and (b) the mode in which the Committee shall make regulations and the manner in which such regulations shall be promulgated; (8) For regulating the appointment, powers and functions of the Chairman and Deputy Chairmen of Lloyd’s and the Chairman and Deputy Chairmen of the Committee; (9) For regulating the remuneration and indemnification of all or any of the members of the Council; (10) For regulating:— (a) the appointment of other committees of the Council or of subcommittees of the Committee; (b) the appointment of any person or body of persons with a duty to report to the Council or the Committee; (c) the inclusion of persons who are not members of the Society, Lloyd’s brokers or underwriting agents in such committees, sub-committees or bodies of persons; (d) the functions of such committees, sub-committees, persons or bodies of persons and the manner in which such functions are to be executed; and (e) the mode, time and place of summoning, and holding meetings of such committees, sub-committees or bodies of persons, and the quorum and manner of proceedings thereat; (11) For determining and declaring the grounds upon which and for regulating the mode in which a member of the Council, the Committee or any other committee, sub-committee or other body of persons established by or pursuant to this Act shall cease to be a member thereof: (12) For regulating the grant and renewal of permission to broke insurance business at Lloyd’s as a Lloyd’s broker, for regulating the continuing right to broke such business and for regulating the manner and circumstances in which such permission may be withdrawn, and so that any byelaws made for such purposes may impose or provide for conditions and requirements to be satisfied or complied with on the grant and during the continuance of such permission, which conditions and requirements— (a) may from time to time be added to, altered or withdrawn; (b) may include the requirement to give undertakings; (c) may apply to all or any class of Lloyd’s brokers and as to the whole or any class of their business of broking insurance; and (d) may have the effect that a partnership or body corporate shall not be permitted after a date to be prescribed by the Council to broke insurance business at Lloyd’s so long as it (or any related company)— (i) is controlled by such person or class of persons as may be therein specified; or (ii) owns any interest in any underwriting agent or an underwriting agent of such class as may be specified by the Council; (13) For regulating the grant and renewal of permission to act as an underwriting agent for underwriting members in carrying on their underwriting business at Lloyd’s, for regulating the

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continuing right to act as such an underwriting agent and for regulating the manner and circumstances in which permission may be withdrawn, and so that any byelaws made for such purposes may impose or provide for conditions and requirements to be satisfied or complied with on the grant and during the continuance of such permission, which conditions and requirements— (a) may from time to time be added to, altered or withdrawn; (b) may include the requirement to give undertakings; (c) may apply to all or any class of underwriting agents and as to the whole or any class of their business as underwriting agents; and (d) may have the effect that a person shall not be permitted after a date to be prescribed by the Council to act as such agent so long as— (i) that person owns any interest in an insurance broker; or (ii) where that person is a body corporate, any related company owns any interest in an insurance broker; or (iii) where that person is a body corporate or a partnership, it or any related company is controlled by, or any interest in it is owned by, such person or class of person as may be therein specified; (14) For providing that permission to carry on business at Lloyd’s as a Lloyd’s broker or as an underwriting agent shall not be granted or renewed and that any such permission may be revoked unless the Council is satisfied as to all or any of the following matters:— (a) that the person having control of the Lloyd’s broker or underwriting agent (being a partnership or body corporate) is, by reason of his character and suitability, a person who should have control of a Lloyd’s broker or such an underwriting agent; (b) that each director or partner of the Lloyd’s broker or underwriting agent (being a partnership or body corporate) is, by reason of his character and suitability, a person who should be a director or partner of a Lloyd’s broker or such an underwriting agent; (c) that each person who works for the Lloyd’s broker or underwriting agent in such capacity as may be specified by the Council is, by reason of his character and suitability, a person who should work in such capacity for a Lloyd’s broker or underwriting agent; (15) For prescribing or regulating terms which are or are not to be included in agreements between underwriting agents and underwriting members or other underwriting agents; (16) For requiring that accounts of underwriting syndicates be audited and that reports and audited accounts be furnished to members of the syndicate and for regulating the form and content of such reports and accounts; (17) For prescribing or regulating information which is to be supplied by underwriting agents to persons applying to become members of the Society; (18) For empowering the Council to nominate and appoint an underwriting agent (in this paragraph referred to as the ‘‘substitute agent’’) to act as agent or sub-agent for an underwriting member as to the whole or any part of his underwriting business in any case where such member has no underwriting agent for the whole or such part of his underwriting business or where in the opinion of the Council— (a) such appointment is in the interests of such member; or (b) it is essential for the proper regulation of the business of insurance at Lloyd’s; and to give such directions to any underwriting agent already acting for such member as may be desirable in connection with the appointment of the substitute agent; (19) For regulating as among and between underwriting members, Lloyd’s brokers, underwriting agents and any other person transacting with underwriting members the business of insurance (whether as principal or agent) or interested therein, the mode in which insurance shall be effected with underwriting members and the periods at which settlements in respect of insurances so effected shall be made; (20) For empowering the Council to take steps and give undertakings required by or under the law of any country in order to secure authorisation for underwriting members to transact insurance business in or emanating from that country and to require underwriting members, Lloyd’s brokers and underwriting agents to comply with undertakings so given; (21) For requiring members of the Society, Lloyd’s brokers, underwriting agents, annual subscribers, associates and substitutes, or any director or partner of a Lloyd’s broker or

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underwriting agent or any person who works for a Lloyd’s broker or underwriting agent in such capacity as may be specified by the Council to supply such information to the Council as may be so specified; (22) (a) For empowering the Council to order any inquiry, including an inquiry concerning the affairs of any member of the Society or syndicate of members or any Lloyd’s broker or any underwriting agent; (b) For requiring any member of the Society or any director or partner of a Lloyd’s broker or underwriting agent or any person who works for a Lloyd’s broker or underwriting agent in such capacity as may be specified by the Council to give when required such information as may be in his or its possession or to produce such documents and material as may be in his or its possession or under his or its control relating to the subject-matter of the inquiry; (c) For requiring any person whose affairs have been the subject of any inquiry to pay the costs incurred in connection with the inquiry or to make a contribution thereto; (23) (a) For empowering the Council to order that in the course of any such inquiry as is referred to in paragraph (22) of this Schedule investigation be made into frauds or crimes, or circumstances having the appearance of frauds or crimes, practised or attempted or intended to be practised in connection with the business of insurance at Lloyd’s (b) For empowering the Council to take or facilitate the taking of proceedings with a view to the punishment of persons appearing to be responsible for or concerned in any such frauds or crimes; (c) For empowering the Council to supply to any police constable any information, documents or material in its possession, including any information, documents or material obtained pursuant to byelaws made for the purposes specified in paragraphs (21), (22) (b) and (24) of this Schedule; (24) For regulating the circumstances in which members of the Society, Lloyd’s brokers, underwriting agents, annual subscribers, associates and substitutes, or any director or partner of a Lloyd’s broker or underwriting agent or any person who works for a Lloyd’s broker or underwriting agent in such capacity as may be specified by the Council may (without being required so to do) give information or produce documents or material to the Council; (25) For requiring that, save in so far as the same may be used in disciplinary or criminal proceedings, due confidentiality is preserved with respect to any information supplied or documents or material produced pursuant to byelaws made for the purposes specified in paragraphs (21), (22)(b) and (24) of this Schedule, especially in so far as such information, documents or material relate to the affairs of any persons (including principals and clients of Lloyd’s brokers and of underwriting agents) other than those supplying or producing such information, documents or material; (26) For empowering the Council to suspend (for such maximum period as may be specified by byelaw) any of the following from transacting, or being concerned or interested in the transaction of, the business of insurance at Lloyd’s or any class or classes of such business, that is to say:— (a) a member of the Society; (b) a Lloyd’s broker; (c) an underwriting agent; or (d) any person who works for a Lloyd’s broker or an underwriting agent in such capacity as may be specified by the Council; (27) For regulating the grounds on which and the manner in which a member of the Society may by disciplinary proceedings be suspended or excluded from membership or required to cease underwriting temporarily, or indefinitely, or subjected to any lesser penalty prescribed by byelaws, including, but not limited to, a fine and the posting of a notice of censure in the Room; (28) For regulating the grounds on which and the manner in which permission to broke insurance business at Lloyd’s as a Lloyd’s broker may by disciplinary proceedings be revoked or suspended, or a Lloyd’s broker may be subjected to any lesser penalty prescribed by byelaws, including, but not limited to, a fine and the posting of a notice of censure in the Room;

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(29) For regulating the grounds on which and the manner in which permission to act as an underwriting agent may by disciplinary proceedings be revoked or suspended, or an underwriting agent may be subjected to any lesser penalty prescribed by byelaws, including, but not limited to, a fine and the posting of a notice of censure in the Room; (30) For regulating the grounds on which and the manner in which the right of admission to the Room of an annual subscriber may by disciplinary proceedings be withdrawn or suspended, or an annual subscriber may be subjected to any lesser penalty prescribed by byelaws, including, but not limited to, a fine and the posting of a notice of censure in the Room; (31) For requiring— (a) a partner or director of a Lloyd’s broker or underwriting agent; or (b) a person who works for a Lloyd’s broker or underwriting agent in such capacity as may be specified by byelaw; to undertake to submit to the jurisdiction of the Council and for regulating the grounds on and the manner in which such persons may by disciplinary proceedings be subjected to any penalty prescribed by byelaws including, but not limited to— (i) an order prohibiting or suspending him for being concerned in the conduct of business at Lloyd’s; (ii) a fine; or (iii) the posting of a notice of censure in the Room; (32) For providing for the recovery of any fine or costs imposed pursuant to byelaws as a civil debt; (33) For regulating the powers of a Disciplinary Committee and the Appeal Tribunal, including the power to— (a) subject to or join in proceedings before a Disciplinary Committee or the Appeal Tribunal and to subject to any penalty prescribed by byelaws, a director or partner of a Lloyd’s broker or underwriting agent or a person who works for a Lloyd’s broker or underwriting agent in such a capacity as may be specified by the Council; (b) require any such person as aforesaid (whether or not such person is a party to or otherwise concerned in the proceedings) to appear before a Disciplinary Committee or the Appeal Tribunal to give evidence, or to produce documents and material, or both; (c) award costs; (34) For regulating the procedures of a Disciplinary Committee and the Appeal Tribunal provided that such byelaws shall provide for a right to a hearing and legal representation if so desired for any person upon whom a penalty may be imposed or against whom an order may be made; (35) For regulating the procedure whereby the Council— (a) confirms, modifies or grants dispensation in respect of any penalty imposed by a Disciplinary Committee or the Appeal Tribunal; and (b) publishes its decision and any penalty imposed; (36) For providing for the establishment and constitution of an Arbitration Panel to hear and determine disputes relating to the business of insurance at Lloyd’s, for determining the matters to be referred for arbitration to the Arbitration Panel, for requiring parties to such disputes to refer them to the Arbitration Panel for arbitration and for regulating the conduct of any such arbitration proceedings; (37) For regulating the manner, terms and restrictions in, on and subject to which intelligence and information may be supplied to members of the Society and others; (38) For providing for the establishment and maintenance of a scheme for the protection of Lloyd’s policyholders, underwriting members and others in the event of the default of a Lloyd’s broker and for empowering the Council to require Lloyd’s brokers and others to be parties to and to contribute to such scheme as a condition or requirement of the grant or renewal of permission to broke insurance business at Lloyd’s as a Lloyd’s broker or otherwise; (39) For regulating the use of the Room by members of the Society and others; (40) For regulating the investment of the funds and other property of the Society; (41) For regulating the grant and operation of binding authorities, or any other means whereby authority to accept insurance on behalf of underwriting members is delegated;

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(42) For regulating the appointments and duties of agents or correspondents of the Society at ports and other places; (43) For regulating the appointment, terms of employment and remuneration of a Secretary General and other officers and employees of the Society. Notes This Schedule, in setting out a list of matters which may be regulated by byelaw, is not exhaustive and is subject to the general power of the Council in s 6(2) of the 1982 Act to make byelaws.

SCHEDULE 3 REPEALS Chapter

Short Title

Extent of repeal

34 & 35 Vict. c. xxi.

Lloyd’s Act 1871.

51 & 52 Vict. c. 29. 1 & 2 Geo. 5. c. lxii. 15 & 16 Geo 5. c. xxvi. 14 & 15 Geo 6. c. viii.

Lloyd’s Lloyd’s Lloyd’s Lloyd’s

Sections 11 and 12. Sections 18 to 27. Section 29. The Schedule. The whole Act. Sections 10 to 13. The whole Act. The proviso to section 3(2). Section 4.

Signal Stations Act 1888. Act 1911. Act 1925. Act 1951.

Notes This Schedule repeals in whole or in part earlier provisions of the Lloyd’s Acts 1871 to 1951.

SCHEDULE 4 TRANSITIONAL PROVISIONS PA RT I THE FIRST MEMBERS OF THE COUNCIL

1. Any person who is, immediately prior to the commencement of this Act, a member of the Committee of Lloyd’s pursuant to Lloyd’s Acts 1871 to 1951 and byelaws made thereunder (in this Schedule referred to as ‘‘the Old Committee’’) shall be a working member of the Council and a member of the Committee established by section 5 of this Act until such time as he would, but for this Act, have ceased to be a member of the Old Committee. 2. The provisions of Schedule 1 to this Act shall be carried into effect by the Old Committee, which shall provide that a member of the Society may object to his or another member’s classification on such Register, and for the determination of such objection and for the right to appeal against such determination to a sub-committee of the Old Committee consisting of three members thereof whose decision shall be conclusive, and the election of a person to the Council shall not be challenged or otherwise declared to be invalid by reason of any proceedings pursuant to such provision by the Old Committee not being completed or for any other reason whatsoever. 3. In lieu of the general meeting of members of the Society which would be held in November 1982 but for this Act a ballot to elect four working members of the Council shall be held at that time in accordance with byelaws for the time being in force provided, however, that the four persons to be elected shall be elected from among the working members of the Society by those members whose names are shown on Part I of the Register referred to in Schedule 1 to this Act as working members of the Society. Notwithstanding anything in the byelaws made under Lloyd’s Acts 1871 to 1951 the Old Committee shall appoint two or more members as scrutineers to take the vote and report the result. 4. A ballot to elect eight external members of the Council shall be held to which the following provisions shall apply:—

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(a) such ballot shall take place within four months of the day on which this Act is passed; (b) the election shall be by postal ballot of all those members of the Society whose names are shown on Part II of the Register referred to in Schedule 1 to this Act as external members of the Society, and each such member who exercises his right to vote in such ballot shall cast one vote for each of eight of the persons duly nominated for election; (c) the Old Committee shall give not less than 60 clear days’ notice of such ballot by notice in writing to each member of the Society entitled to vote at such ballot, addressed to such member’s last known place of business or abode and the notice shall state that the object of the ballot is to elect eight external members of the Council and the date and time by which nominations for such election are to be received in order to be valid; (d) an external member of the Society shall be nominated for election as an external member of the Council by a requisition signed by not less than sixteen members of the Society entitled to vote at such ballot, which requisition shall be lodged with the Secretary General of Lloyd’s or other person duly authorised by the Old Committee at least 42 clear days before the day on which such ballot is to take place; (e) if the number of persons duly nominated for election as external members of the Council in accordance with sub-paragraph (d) above does not exceed the number to be elected, the nominated candidates shall be declared to be elected and if the number of nominated candidates is reduced by withdrawal or otherwise to no more than that number, the remaining nominated candidates shall be declared to be elected; (f) not less than 28 clear days before the day on which the ballot is to take place, the Secretary General of Lloyd’s or other person duly authorised by the Old Committee shall send to each of the members of the Society entitled to vote at such ballot— (i) a ballot paper containing the name of each duly nominated candidate and stating that each such member shall cast one vote for each of eight of the candidates and the date and time by which ballot papers are to be received in order to be included in the ballot; and (ii) particulars of each candidate including any statement he may wish to make concerning his candidature, the form and content of which shall have been approved by the Old Committee; (g) a notice or ballot paper shall be deemed to have been properly sent by the Secretary General of Lloyd’s or other person duly authorised by the Old Committee if it is sent to a member at his last known place of business or abode but the result of a ballot under this Schedule shall not be invalidated by any failure by the Secretary General of Lloyd’s or other duly authorised person to send a ballot paper to any member of the Society entitled to vote at such ballot or by the non-receipt by any such member of a ballot paper; (h) a member of the Society entitled to vote at such ballot may exercise his right to vote by posting or delivering his ballot paper duly completed to the Secretary General of Lloyd’s or other person duly authorised but only ballot papers received by the Secretary General of Lloyd’s or such person on or before the date and time stated on the ballot paper shall be included in the votes counted; (i) subject to the provisions of any byelaws which may be made pursuant to section 3(5) of this Act four of the persons elected in such ballot shall be external members of the Council until 31st December 1984, and four of the persons so elected shall be external members of the Council until 31st December 1986. 5. Within 28 days after the election pursuant to paragraph 4 of this Schedule, the working members and the external members of the Council shall meet at a place, date and time determined by the Old Committee and shall, by resolution passed by separate majorities of both the working members of the Council and the external members of the Council, appoint the first three nominated members of the Council whose appointments shall be governed mutatis mutandis by the provisions of section 3(2)(c) of this Act. 6. Subject to the provisions of any byelaws which may be made pursuant to section 3(5) of this Act the following provisions shall have effect with respect to the appointments made pursuant to paragraph 5 of this Schedule:—

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(a) one of the persons appointed shall hold office until 31st December 1984, one shall hold office until 31st December 1985, and one shall hold office until 31st December 1986 (such persons, in default of agreement among the persons so appointed, to be determined by lot); (b) no person shall be appointed a nominated member of the Council without his consent. 7. The first meeting of the Council shall take place at such place, date and time not more than 28 days after the meeting referred to in paragraph 5 of this Schedule as may be decided at that meeting. 8. Unless at its first meeting the Council shall otherwise determine, the persons who are immediately prior to such meeting the Chairman of Lloyd’s and the Deputy Chairmen of Lloyd’s pursuant to Lloyd’s Acts 1871 to 1951 and byelaws made thereunder shall be respectively the Chairman of Lloyd’s and the Deputy Chairmen of Lloyd’s as if appointed under section 4 of this Act and shall continue to hold such positions until the end of the year 1982. PA RT I I OTHER TRANSITIONAL PROVISIONS

9. Until the first meeting of the Council, Lloyd’s Acts 1871 to 1951 shall, subject to the provisions of this Schedule, continue to have effect as though this Act had not been passed. 10. The Council may in preferring any charge against any person refer to, and the Disciplinary Committee in hearing that charge may have regard to and take into account, any act, default or other event which takes place before this Act comes into force. 11. Section 20 (Exclusion from membership for violation of fundamental rules, &c.) of the Act of 1871 (including the Schedule to that Act setting out the fundamental rules of the Society), section 12 (Power of Committee to temporarily suspend Members) of the Act of 1911 and byelaw 87 (vi) of the byelaws made pursuant to Lloyd’s Acts 1871 to 1951 shall continue to have effect until a Disciplinary Committee shall be established by byelaws made under this Act, and where proceedings have been commenced against any person under either of such sections or under such byelaw, they may be continued in all respects until concluded as if the section or byelaw under which the proceedings had been commenced continued in full force and effect. Notes The provisions of this Schedule are purely transitional, and have ceased to be of practical effect.

1.28 FRIENDLY SOCIETIES ACT 1992 (1992 c 40) General Note The Friendly Societies Act 1992 has three main objectives: to introduce the concept of the incorporated friendly society, alongside existing registered friendly societies; to modify the law relating to all friendly societies; and to provide the framework for the implementation of the EC single market for insurance, which applies to friendly societies as well as to insurance companies. Doubtless the most important of these changes is the introduction of incorporation, thereby enabling a friendly society to obtain subsidiaries conducting other forms of business. Friendly societies formed after the commencement of the 1992 Act may no longer be registered under the 1974 Act, but must be registered and incorporated under the 1992 Act. Existing friendly societies may remain registered under the 1974 Act, but must, under s 93 of the 1992 Act, amend their rules to accord with the provisions of the 1992 Act. There is set out in the 1992 Act a procedure for transfer from registration under the 1974 Act to incorporation under the 1992 Act. The 1992 Act applies largely in its regulation of insurance business to both registered and incorporated friendly societies, but some of its provisions relate only to the establishment of incorporated friendly societies. The Friendly Societies Act 1992 assimilates, as far as possible, the regulatory provisions applicable to insurance companies and to friendly societies. The authorisation of all friendly societies to carry on insurance business is governed by the 1992 Act alone. Many of the provisions of the 1992 Act reflect those in the Insurance Companies Act 1982, now replaced by the Financial Services and Markets Act 2000. Friendly societies falling within s 37(2), (3) of the 1992 Act,

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on account of the extent of their business, are known as ‘‘Directive societies’’ and benefit from the EC’s Third Generation of Insurance Directives, entitling them to carry on insurance business or to sell insurance anywhere in the EC provided that they possess UK authorisation: a Directive society must, however, satisfy the rather more onerous regulatory requirements imposed by the Third Non-Life and Life Directives. The necessary changes to the 1992 Act were made by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1992 No 1984, all of which have equivalent provisions in the 2000 Act. The 1992 Act had earlier been amended by the Friendly Societies (Amendment) Regulations 1993, SI 1993 No 2519. There have been 10 commencement and transitional provisions orders made under s 126(2) of the 1992 Act, as to which see the note to s 126. The Act was phased in from 8 June 1992. Repealed in whole or in part: ss 13, 14, 31–53, 55A, 56–57A, 62, 64, 65, 67–68, 71, 73, 77, 79, 84, 86, 90A, 97, 98, 99–101, 103, 117, 119, 119B, 121, 122, 124, Scheds 1–3, 7, 8, 13, 13A, 13B, 13C, 14–16, 17–21. Also repeals in FSMA 2000 Sched 18 Part I.

An Act to make further provision for friendly societies; to provide for the cessation of registration under the Friendly Societies Act 1974; to make provision about disputes involving friendly societies or other bodies registered under the Friendly Societies Act 1974 and about the functions of the Chief Registrar of friendly societies; and for connected purposes [16 March 1992] PA RT I FUNCTIONS OF THE AUTHORITY

Functions of the Financial Services Authority in relation to friendly societies 1.—(1) The Financial Services Authority (‘‘the Authority’’) has the following functions under this Act and the 1974 Act in relation to friendly societies— (a) to secure that the purposes of each friendly society are inconformity with this Act and any other enactment regulating the purposes of friendly societies; (b) to administer the system of regulation of the activities of friendly societies provided for by or under this Act and the 1974 Act; and (c) to advise and make recommendations to the Treasury and other government departments on any matter relating to friendly societies. (2) The Authority also has, in relation to such societies, the other functions conferred on it by or under this Act or any other enactment. Notes Part I (containing sections 1–4) was substituted in its entirety by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 54, to reflect the introduction of the Financial Services and Markets Act 2000. PA RT I I I N C O R P O R AT E D F R I E N D LY S O C I E T I E S

Constitution and purposes of incorporated friendly societies Establishment of incorporated friendly societies 5.—(1) This part of this Act has effect— (a) to enable societies to be established in accordance with this Act and to be registered and incorporated under it; and (b) to enable friendly societies registered under the 1974 Act to be registered and incorporated under this Act. (2) A society may be established under this Act if under its proposed memorandum— (a) its purposes are to include the carrying on of one or more activities falling within Head A, B, C or D of Schedule 2 to this Act; (b) any such activity— (i) is to be carried on by the society with a view to the provision, for its members and such persons connected with its members as may be prescribed in its rules, of insurance or other benefits; and

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(ii) is to be funded by voluntary subscriptions from members of the society, with or without donations; and (c) any other purposes which it is to have are within the permitted capacity of incorporated friendly societies under this Act. (3) A society established under this Act is incorporated as from the date of its registration under this Act by the Authority. (4) The Treasury may by order vary Schedule 2 to this Act by adding to or deleting, or by varying the description of, any activity for the time being specified in it. (5) No such order shall be made unless a draft of the order has been laid before and approved by a resolution of each House of Parliament. (6) Schedule 3 to this Act shall have effect in relation to— (a) the procedure for registration of societies as societies incorporated under this Act (in this Act referred to as ‘‘incorporated friendly societies’’); (b) the memorandum of the purposes and extent of the powers of, and the rules for the regulation of, such societies, (c) the name and registered office of such societies, and certain incidents of membership of incorporated friendly societies. (7) In this Part of this Act references to the permitted capacity of incorporated friendly societies under this Act are to the capacity to carry on all the activities mentioned in section 7(2) below. Notes Subs (1) The 1992 Act applies to allow the establishment and incorporation of new friendly societies and the incorporation of friendly societies registered under the Friendly Societies Act 1974 (as to the latter, see s 6). There is no obligation on a friendly society registered under the 1974 Act to seek incorporation under the 1992 Act, but a new friendly society may be formed only by incorporation under the 1992 Act. Subs (2) Heads A and B consist of long-term insurance and life-related general business, as defined under the FSMA 2000. A friendly society cannot be established to carry on other classes of general business. Heads C and D involve classes of business which are not insurance business as such, but relate to the traditional activities of friendly societies, eg, funeral expenses and the provision of discretionary benefits for the relief of members. The forms of business set out in Sched 2 may be carried on by both a registered and an incorporated friendly society (as to the former, see the Friendly Societies Act 1974, s 7(1)(a)), but on incorporation, a friendly society may also carry on the activities set out in s 7(2) of the 1992 Act. Subs (3) amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 55 to reflect the entry into force of the Financial Services and Markets Act 2000. Subs (4) amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 55 to reflect the entry into force of the Financial Services and Markets Act 2000.

Incorporation of registered friendly societies 6.—(1) A registered friendly society may be registered and incorporated under this Act if— (a) the conditions mentioned in section 5(2) above are satisfied by reference to the society’s proposed memorandum; and (b) the society complies with the requirements in Schedule 3 to this Act which are applicable to its registration under this Act; and such a society is so incorporated as from the date of its registration by the Authority. (2) On the incorporation of a registered friendly society all property held immediately before incorporation by any person in trust for the society shall become by virtue of this subsection the property of the society after incorporation. (3) After its incorporation the society shall continue to be entitled to all rights and subject to all liabilities to which it was entitled or subject immediately before incorporation. (4) On the incorporation of a registered society with registered or unregistered branches— (a) all property held immediately before incorporation by any person in trust for any branch of the society, and (b) all rights and liabilities to which any such branch was then entitled or subject, shall, subject to subsection (5) below, become by virtue of this subsection property, rights and liabilities of the society.

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(5) A registered friendly society may (in accordance with paragraph 2 of Schedule 4 to this Act) make a scheme identifying any property, rights or liabilities of any branch of the society which are not to be transferred to the society on its incorporation; and any such property, rights or liabilities shall be excluded from transfer under subsection (4) above. (6) On the incorporation of a registered friendly society, its registration under the 1974 Act and that of any registered branch of the society shall be cancelled by the Authority. (7) Schedule 4 to this Act shall have effect for supplementing this section. Notes This section is concerned with the consequences of the incorporation of a previously registered friendly society for its assets and for its previous rights and liabilities. It effects a transfer to the ownership of the company, subject to a scheme under s 6(5) which allows the company to maintain branches which continue to own their own property (as to which, see Sched 4, paras 2 and 9): the friendly society may, alternatively, decide that some or all of the property of branches is to vest in the incorporated friendly society itself (as to which, see Sched 4, paras 8 and 10). Section 6 is supplemented by Sched 4, which, inter alia, preserves the membership of existing members and the personality of the friendly society. Subs (1) amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 56 to reflect the entry into force of the Financial Services and Markets Act 2000. Subs (6) amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 56 to reflect the entry into force of the Financial Services and Markets Act 2000.

Purposes and powers of an incorporated friendly society 7.—(1) The purposes of an incorporated friendly society shall be those provided for by the society’s memorandum. (2) The purposes for which an incorporated friendly society may exist are— (a) the carrying on, subject to section 5(2)(b) above, of— (i) any business of any description falling within a class specified in Head A or B or within Head C of Schedule 2 to this Act, or (ii) any activity falling within Head D of that Schedule; and (b) the carrying on, in addition to any business or activity falling within paragraph (a) above, of any of the following, namely— (i) social or benevolent activities in accordance with section 10 below; (ii) group insurance business in accordance with section 11 below; (iii) reinsurance, in accordance with section 12 below, of risks insured by other friendly societies; (iv) control or joint control of bodies corporate in accordance with section 13 below; and the memorandum of an incorporated friendly society may also confer on the society power to do anything falling within Schedule 5 to this Act. (3) The memorandum of an incorporated friendly society may confer on it any other power specified in this Part of this Act, but no such power may be exercised except for carrying out the society’s purposes. (4) An incorporated friendly society shall, subject to the provisions of this Act, its memorandum and its rules, have any other power which is incidental or conducive to the carrying out of its purposes or for doing anything falling within Schedule 5 to this Act. (5) Nothing in this Act shall be taken as preventing an incorporated friendly society from providing in its rules— (a) for such system of representation of the members in the making of decisions by the society as the society may think fit; (b) for the division of the society’s members into groups under the control of the society and bound to contribute to the funds of the society but, subject to that, having funds and property of their own vested in trustees and administered by themselves or through their own trustees, officers or committees (and in accordance with their own rules); (c) for the delegation of authority to any such group (or to its committee or any of its officers) to act, within such limits as the society may set, on the society’s behalf; but no such group may do anything on its own account which does not fall [within section 10 below or] within Head D of Schedule 2 or within Schedule 5 to this Act.

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(6) Schedule 6 to this Act shall have effect in relation to the making of contracts and execution of documents by incorporated friendly societies. Notes Subs (2) On incorporation, a friendly society may carry on any of the activities here set out, provided that the activities fall within the general purposes of the friendly society as set out in its memorandum. For the more limited powers of a friendly society registered under the Friendly Societies Act 1974, see s 7 of the 1974 Act. Perhaps the most significant difference is found in s 7(2)(b)(iv) of the 1992 Act which, in accordance with s 13 and Sched 7, allows a friendly society to operate as the parent company of a subsidiary which carries on other forms of insurance-related business. Subs (5) This subsection was amended by the Deregulation (Friendly Societies Act 1992) Order 1996, SI 1996 No 1188, art 3. Sched 5 is concerned with loans and investments. Subs (6) Sched 6 provides that a friendly society may make contracts in the same way as an individual and may execute a document by attaching its common seal or by signatures of relevant authorised officers.

Effect of the memorandum of an incorporated society 8.—(1) The provisions of the memorandum of an incorporated friendly society are binding upon— (a) each of the members and officers of the society, (b) all persons claiming on account of a member or under its rules, and all such members, officers and persons (but no others) shall be taken to have notice of the provisions of the memorandum. (2) A person not of a description mentioned in subsection (1)(a) or (b) above who is a party to a transaction with an incorporated friendly society which is within the permitted capacity of such societies under this Act is not bound to enquire as to whether the transaction is within the capacity of the society in question. (3) Subsection (4) below applies to any act of an incorporated society which is within the permitted capacity of such societies under this Act but is beyond the capacity of the society in question. (4) In favour of a person who— (a) is not a person mentioned in subsection (1) above; (b) gives valuable consideration for the act; and (c) does not know that the act is beyond the capacity of the society, any act to which this subsection applies is deemed to be one which is within the capacity of the society to enter into, notwithstanding the provisions of the memorandum. (5) Where an incorporated friendly society purports to transfer or grant an interest in property, the fact that the act was beyond the capacity of the society does not affect the title of a person who in good faith subsequently acquired the property or an interest in it for valuable consideration and without actual notice of the circumstances affecting the validity of the society’s act. (6) Subsection (4) above does not affect— (a) the right of a member of an incorporated friendly society to bring proceedings to restrain the doing of an act (other than an act done in fulfilment of a legal obligation arising from a previous act of the society) which is beyond the capacity of the society; (b) the duty of the committee of management to observe any limitation on their powers flowing from the society’s memorandum; or (c) any liability incurred by any person by reason of the society acting beyond its capacity. (7) Relief from any liability mentioned in subsection (6)(c) above must be agreed to by special resolution. (8) In any proceedings arising out of subsection (4) above, the burden of proving that a person knew that an act was beyond the capacity of the society in question lies on the person making the allegation. (9) In this section ‘‘transaction’’ includes any act.

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Notes Subs (1) The principle that the memorandum is binding on the members is consistent with the rule applicable to registered friendly societies (Friendly Societies Act 1974, s 22) and companies generally (Companies Act 1985, s 14). Subs (2) This provision corresponds to the Companies Act 2006, s 40, abolishing the constructive notice rule by providing that an outsider is not deemed to know of any want of capacity. Subs (3)–(4) These subsections in effect abolish the ultra vires rule. Any person who contracts with an incorporated friendly society is protected from any want of capacity on its part providing that he is not aware of the want of capacity (and see subs (2)) and that the contract is one into which a friendly society could be empowered to enter. See, however, subs (6)–(8), which allow a member to restrain an ultra vires act.

Effect of the rules of an incorporated society 9.—(1) The provisions of the rules of an incorporated friendly society are binding upon— (a) each of the members and officers of the society, (b) all persons claiming on account of a member or under its rules, and all such members, officers and persons (but no others) shall be taken to have notice of the provisions of the rules. (2) A party to a transaction with an incorporated friendly society who is not of a description mentioned in subsection (1)(a) or (b) above is not bound to enquire as to any limitation on the powers of the committee of management to bind the society. (3) Subsection (4) below applies in relation to any act of an incorporated friendly society which is, or is deemed by section 8(4) above to be, within the capacity of the society and is decided upon by the committee of management acting beyond their powers under the constitution of the society. (4) In favour of a person who— (a) is not a person mentioned in subsection (1) above; (b) gives valuable consideration for an act to which this subsection applies; and (c) does not know that the act is beyond the powers of the committee of management; the power of the committee of management to bind the society shall be deemed free of any limitation in the society’s constitution. (5) Where an incorporated friendly society purports to transfer or grant an interest in property, the fact that the committee of management acted beyond their powers under the society’s constitution does not affect the title of a person who in good faith subsequently acquires the property or an interest in it for valuable consideration and without actual notice of the circumstances (if any) affecting the validity of the society’s act. (6) Subsection (4) above does not affect— (a) the right of a member of an incorporated friendly society to bring proceedings to restrain the doing of an act (other than an act done in fulfilment of a legal obligation arising from a previous act of the society) which is beyond the powers of the committee of management; (b) the duty of the committee of management to act within their powers under the constitution of the society; (c) any liability incurred by any person by reason of the committee of management exceeding their powers. (7) Action by the committee of management of an incorporated friendly society which is beyond their powers under the society’s constitution but is within its capacity may be ratified by the society in general meeting in such manner as its rules may provide; but relief from any liability mentioned in subsection (6)(c) above must be agreed to by special resolution separate from any resolution ratifying the committee’s action. (8) In this section— (a) references to limitations on the committee’s powers under the constitution of the society include limitations deriving from a resolution of the society in general meeting or any agreement between the members of the society; and (b) ‘‘transaction’’ includes any act. (9) In any proceedings arising out of subsection (4) above, the burden of proving that a person knew that an act was beyond the powers of the committee of management lies on the person making the allegation.

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(10) This section shall not affect the application, in relation to an incorporated friendly society, of any rule of law relating to the validity of acts which are within the capacity of a body corporate but may have been affected by defects arising from its internal management under its constitution. Notes This section is the equivalent of s 8, and applies to the rules of a friendly society rather than its memorandum. See the note to s 8, above. Acts carried out on behalf of a registered friendly society which fall outside its rules may be ratified by the members, under s 94 of the Friendly Societies Act 1992.

Social and benevolent activities 10.—(1) An incorporated friendly society may include among its purposes the carrying on of any social or benevolent activity which is not inconsistent with the other purposes of the society. (2) For the purposes of this section ‘‘benevolent activity’’ means the making of donations, the raising of funds or any other activity carried on for a charitable purpose or for any other benevolent purpose. Notes See, for registered friendly societies, the equivalent power in s 7(1)(c) of the Friendly Societies Act 1974.

Group insurance 11.—(1) An incorporated friendly society may include among its purposes the carrying on of any group insurance business. (2) In this Act ‘‘group insurance business’’ means business (carried on in accordance with the society’s rules) which— (a) is of a description falling within Head A, or class 2 of Head B, of Schedule 2 to this Act; and (b) is carried on as the business of providing benefits, in pursuance of a contract with a qualifying person, for or in respect of the members of a group scheme. (3) For the purposes of this section— ‘‘group scheme’’ means a scheme or other arrangement under which benefits are to be provided for or in respect of persons who are members of the scheme and who qualify for membership by virtue of— (a) being employees of a particular employer, or (b) being members of some other group of persons of a description prescribed in regulations under subsection (7) below; ‘‘qualifying person’’ means a person who has established or is otherwise responsible for the operation of a group scheme or a trustee of such a scheme; and ‘‘member’’, in relation to a group scheme, includes any person for or in respect of whom benefits are to be provided under the scheme, whatever the terms in which such persons are described in the scheme. (3) Group insurance business may be carried on by an incorporated friendly society whether or not members of the group scheme are, or are required by the society to be, members of the society. (4) Where an incorporated friendly society carries on any group insurance business and the rules of the society so provide, any qualifying person with whom the society contracts (or his nominee) may be accorded the rights of a member of the society (including any right to vote) for the purpose of participating in the affairs of the society in the interests of the members of the group scheme with which he is concerned. (5) A person who is accorded the rights of a member of a society by virtue of subsection (4) above shall, for the purposes of any power conferred on the Authority by this Act which is exercisable in the interests of members of the society, be treated as if he were a member of the society.

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(6) The rules of an incorporated friendly society may not prevent a person from being a member of the society in his private capacity by reason only of the fact that he has been accorded the rights of a member by virtue of subsection (4) above. (7) The Treasury may make regulations specifying the manner in which group insurance business may be carried on by incorporated friendly societies; and such regulations may in particular include limitations or requirements relating to— (a) the contracts in pursuance of which group insurance business may be carried on; or (b) the persons with whom, or the groups of persons for whose benefit, such contracts may be made. Notes For the equivalent power applicable to registered friendly societies, see s 65A of the Friendly Societies Act 1974, as inserted by the Friendly Societies Act 1992. Subs (3) While it is the case that group insurance can be carried on for the benefit of persons who are not members of the society, s 55 of the 1992 Act allows the Authority to take remedial steps should such insurance come to form a disproportionate part of the society’s activities. Subs (5) amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 57 to reflect the entry into force of the Financial Services and Markets Act 2000. Subs (7) The relevant regulations are the Friendly Societies (Group Schemes) Regulations 1993, SI 1993 No 59, which apply also to registered friendly societies. The Regulations, which apply to group schemes for sport and recreation, are not reproduced in this work. Amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 57 to reflect the entry into force of the Financial Services and Markets Act 2000.

Reinsurance 12.—(1) An incorporated friendly society may include among its purposes the carrying on of any reinsurance business to which subsection (2) below applies to such extent or in such circumstances as may from time to time be approved by the appropriate actuary. (2) This subsection applies to business consisting of the effecting and carrying out of contracts of reinsurance of risk which— (a) are insured or to be insured by any other friendly society (whether incorporated or not); and (b) are of a class or part of a class of insurance business which the society carrying on the reinsurance business itself carries on. (3) An incorporated friendly society which carries on any insurance business may provide in its rules for the reinsurance to such extent as may from time to time be approved by the appropriate actuary of any risks against which persons are or are to be insured by the society. Notes This section allows an incorporated friendly society to insure the liabilities of other friendly societies, presumably in respect of a class of business for which the reinsuring friendly society does not, but may under its memorandum, carry on itself. An equivalent power applies to registered friendly societies, under s 23A of the Friendly Societies Act 1974, as inserted by the Friendly Societies Act 1992.

Control of subsidiaries and other bodies corporate 13.—(1) Subject to the following provisions of this section, an incorporated friendly society may include among its purposes any of the following activities— (a) forming subsidiaries; (b) taking part with others in forming bodies corporate to be jointly controlled by it; (c) otherwise acquiring, or keeping, control or joint control of bodies corporate. [(2) to (5) omitted by Sched 18 (II), para 10, Financial Services and Markets Act 2000] (6) Any alteration of the memorandum of an incorporated friendly society to include among its purposes and powers the carrying on of any activity such as is mentioned in subsection (1) above must be adopted by a special resolution of the society in general meeting; and any amendment of a provision in its memorandum which permits it to do so must also be so adopted.

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(7) A registered friendly society may not include in a memorandum adopted for the purposes of paragraph 2(1)(c) of Schedule 3 to this Act any provision enabling it on incorporation to carry on any activity such as is mentioned in subsection (1) above unless its inclusion has been authorised by a special resolution of the society in general meeting. (8) [omitted] (9) For the purposes of this Act— (a) an incorporated friendly society has control of a body corporate if the society— (i) holds a majority of the voting rights in it; or (ii) is a member of it and has the right to appoint or remove a majority of its board of directors; or (iii) is a member of it and controls alone, pursuant to an agreement with other shareholders or members, a majority of the voting rights in it; (aa) an incorporated friendly society also has control of a body corporate if the body corporate is itself a body controlled in one of the ways mentioned in paragraph (a)(i), (ii) or (iii) by a body corporate of which the society has control; (b) a body corporate is a subsidiary of an incorporated friendly society if the society has control of it; (c) an incorporated friendly society has joint control of a body corporate if, in pursuance of an agreement or other arrangement between them, the society and another person— (i) hold a majority of the voting rights in that body; or (ii) are members of it and together have the right to appoint or remove a majority of its board of directors; or (iii) are members of it and alone control, pursuant to an agreement with other shareholders or members, a majority of the voting rights in it; (cc) an incorporated friendly society also has joint control of a body corporate if— (i) a subsidiary of the society has joint control of the body corporate in a way mentioned in paragraph (c)(i), (ii) or (iii); (ii) a body corporate of which the society has joint control has joint control of the body corporate in such a way; or (iii) the body corporate is controlled in a way mentioned in paragraph (a)(i), (ii) or (iii) by a body corporate of which the society has joint control; (d) a body corporate is a body jointly controlled by an incorporated friendly society if the society has joint control of it; and a society acquires joint control whenever any of the conditions mentioned in paragraph (c) or (cc) above are satisfied with respect to a body corporate, notwithstanding that it may already be a subsidiary of the society. (10) Schedule 8 to this Act shall have effect for supplementing this section. (11) [omitted] Notes The power of an incorporated friendly society to form a subsidiary company, or to control, jointly or alone, another company, provided for by s 13, is not available to a registered friendly society. The permission of the Authority is required where formation and control of another company is to be joint (subs (4)), and a divestiture order may be made by the court on the application of the Authority if consent is not sought (s 52(3)–(5)). The business of a subsidiary is limited to those activities set out in Sched 7 to the 1992 Act, and the Authority may present a winding-up petition in relation to a friendly society if its subsidiary is carrying on business beyond that permitted to it by Sched 7 of the 1992 Act (s 52(2)(d), but see s 52(5)). It will be necessary to alter the objects of a friendly society accordingly, and this may be done by special resolution under subs (6). Under s 16 of the Friendly Societies Act 1992, a friendly society may provide financial and other assistance to its subsidiaries and companies controlled by it. Where a friendly society has formed a subsidiary or jointly controls another company, the Authority may intervene where the subsidiary’s business has become disproportionately large or is unsuitable: for the powers of intervention, see s 54 of the 1992 Act, which authorises the Authority to give directions overcoming the problem. Subs (9) defines a subsidiary as a company controlled by a friendly society (subs (9)(b)). Sole control is defined by subs 9(a) and joint control by subs (9)(c). In each case control is determined by voting rights and the power to appoint and remove a majority of directors. These concepts are explained by Sched 9 to the 1992 Act which also deal with nominees, fiduciaries and shares held by way of security.

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Subsections (9)(aa) and (cc) inserted by Sched 18(II) to the Financial Services and Markets Act 2000, para 10 which also made a consequential amendment to subs (9)(d). Subsections (8) and (11) omitted by Sched 18(II) para 10 to the Financial Services and Markets Act 2000, para 10.

Powers of incorporated friendly societies Investment of funds 14.—(1) An incorporated friendly society may invest its funds— (a) in the purchase of land, or in the erection of offices or other buildings thereon; (b) upon any other security expressly directed by the rules of the society, other than personal security (but without prejudice to any provision of this Act relating to loans); or (c) in any other investment of a kind which trustees are for the time being by law authorised to make. (2) An incorporated friendly society which falls within subsection (3) below may also invest the funds of the society in any other manner authorised by its constitution. (3) An incorporated friendly society falls within this subsection if— (a) it is a society to which rules in respect of margins of solvency, made by the Authority under section 138 of the Financial Services and Markets Act 2000, apply; and (b) it maintains the margin of solvency which it is required to maintain by virtue of such rules. (4) [deleted] (5) Once a society falls within subsection (3) above, it shall be treated as continuing to do so for the purposes of subsection (2) above unless the Authority serves a notice under subsection (6) below on it. (6) Where it appears to the Authority that an incorporated friendly society has ceased to fall within subsection (3) above, it shall serve on the society a notice stating that fact. (7) The powers of investment of a society on which a notice is served under subsection (6) above shall accordingly, until the notice is revoked under subsection (10) below, be limited to investment falling within subsection (1) above. (8) A notice under subsection (6) above may direct a society to dispose of an investment which it could not have acquired except under subsection (2) above. (9) Subject to subsection (8) above, a society may retain any investment which it could only have acquired under subsection (2) above. (10) The Authority may, by a subsequent notice to the society, revoke a notice under this section at any time when it appears to it that the society again falls within subsection (3) above. (11) [deleted] (12) The Authority shall keep a copy of any notice served on a society under subsection (6) or (10) above in the public file of the society. Notes Amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 58 to reflect the entry into force of the Financial Services and Markets Act 2000. Subs (1) sets out the investment powers of all incorporated friendly societies. Equivalent powers of investment are conferred upon registered friendly societies by s 46(1) of the Friendly Societies Act 1974. Subs (2) allows an incorporated friendly society to undertake any investment if either (a) it maintains a margin of solvency under s 48 of the 1992 Act (s 14(3)) or it maintains a margin of solvency under regulations made under s 14(4) (no regulations have to date been made). Subs (2) and the following subsections of s 14 are applicable to registered friendly societies by virtue of the Friendly Societies Act 1992, s 46(2)(a), inserted by the Friendly Societies Act 1992. Subs (3)(a) and (b) amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 58 to reflect the entry into force of the Financial Services and Markets Act 2000. Subs (4) deleted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 58 to reflect the entry into force of the Financial Services and Markets Act 2000.

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Subs (10) amended to reflect the transfer of functions under the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 58 to reflect the entry into force of the Financial Services and Markets Act 2000. Subs (11) deleted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 58. Subs (12) amended to reflect the transfer of functions under the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 58 to reflect the entry into force of the Financial Services and Markets Act 2000.

Holding of land for purposes other than investment 15. An incorporated friendly society may acquire and hold land— (a) for the purpose of carrying on any of its activities; or (b) for the purpose of enabling a subsidiary of the society, or a body jointly controlled by it, to conduct its business; and may dispose of, or otherwise deal with, any land so held by it. Notes The power of an incorporated friendly society to hold land is the equivalent of the power in s 53 of the Friendly Societies Act 1974 as regards registered friendly societies.

Assistance to subsidiaries and jointly controlled bodies 16.—(1) An incorporated friendly society may provide its subsidiaries or bodies which it jointly controls with any of the following services— (a) loans of money, with or without security and whether or not at interest; (b) the use of services or property, whether or not for payment; (c) grants of money, whether or not repayable; and (d) guarantees of the discharge of their liabilities. (2) An incorporated friendly society may make payments towards the discharge of the liabilities of any of its subsidiaries. Notes This section, which applies only to incorporated friendly societies, relates back to the power of an incorporated friendly society to operate a subsidiary or otherwise to control a company, in s 13 of the 1992 Act.

Loans to assured members 17.—(1) An incorporated friendly society may advance to a member of at least one full year’s standing any sum not exceeding one half of the amount of an assurance of his life, on the written security of himself and two satisfactory sureties or, in Scotland, cautioners for repayment. (2) The amount so advanced, with all interest on it, may be deducted from the sum assured, without prejudice in the meantime to the operation of the security. (3) A person’s membership of a registered friendly society before the society’s incorporation is to be taken into account in calculating his standing for the purposes of this section. Notes This section is the equivalent of s 48 of the Friendly Societies Act 1974 in relation to registered friendly societies.

Benefit terms Terms on which benefits are available 18.—(1) The terms on which an incorporated friendly society provides any benefit shall be— (a) specified in its rules; or

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(b) determined in a manner specified in its rules. (2) If the terms on which a benefit is provided are not specified in the society’s rules, the society— (a) shall make copies of them available free of charge to members of the society at every office of the society; and (b) shall send, free of charge, copies of them to any member of the society who demands them. (3) If, on demand made of it under subsection (2) above, a society fails, in accordance with that subsection, to make available or, as the case may be, within 7 days of the demand, to send to a person a copy of the terms on which a benefit is provided, the society shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the standard scale. (4) Schedule 9 to this Act shall have effect in relation to nominations by members of incorporated friendly societies and related matters. Notes This section, which applies only to incorporated friendly societies, is the equivalent of s 65B of the Friendly Societies Act 1974 (as inserted by the Friendly Societies Act 1992) in relation to registered friendly societies. Sched 9 to the 1992 Act, see below, sets out the detailed rules on how nominations are to be made and nominated sums paid, for incorporated friendly societies only. Para 1 of Sched 9 equates to s 66 of the Friendly Societies Act 1974 and is applicable to ordinary nominations of sums not exceeding £5,000 by a member aged 16 or over. Para 2 of Sched 9 obliges an incorporated friendly society to pay the nominee on satisfactory proof of the member’s death: this equates to s 67 of the Friendly Societies Act 1974. Para 3 of Sched 9, which equates to s 68 of the Friendly Societies Act 1974, deals with payment where no nomination has been made.

Dissolution and winding up Modes of dissolution and winding up 19.—(1) An incorporated friendly society— (a) may be dissolved by consent of the members; or (b) may be wound up voluntarily or by the court, in accordance with this Part of this Act; and an incorporated friendly society may not, except where it is dissolved by virtue of section 85(4), 86(5) or 90(9) below, be dissolved or wound up in any other manner. (2) An incorporated friendly society which is in the course of dissolution by consent, or is being wound up voluntarily, may be wound up by the court. Notes An incorporated friendly society may be dissolved by the consent of the members (s 20), or may be wound up voluntarily (s 21) or compulsorily (s 22), although in the case of a winding-up the procedure is slightly different to that applicable to ordinary companies. A registered friendly society is not in corporate form and is necessarily outside the winding-up rules. However, a registered friendly society may be dissolved either by agreement or by order of the Financial Services Authority (primarily on the ground of insolvency). If a friendly society is dissolved or wound up, and is insolvent, the Financial Services Compensation Scheme—applies to ensure that policyholders receive 90 per cent of losses or that their policies are transferred. See Part XV of the Financial Services and Markets Act 2000. Subs (1) The exceptional cases here referred to relate to transfers of engagements. Subs (2) A dissolution or voluntary winding-up may be converted into a compulsory winding-up, normally where it is discovered that the friendly society is insolvent.

Dissolution by consent 20.—(1) An incorporated friendly society may be dissolved by an instrument of dissolution. (2) An instrument of dissolution shall only have effect if it is approved by special resolution.

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(3) An instrument of dissolution shall set out— (a) the liabilities and assets of the society in detail; (b) the number of members, and the nature of their interests in the society; (c) the claims of creditors, and the provision to be made for their payment; (d) the intended appropriation or division of the funds and property of the society; (e) the names of one or more persons to be appointed as trustees for the purposes of the dissolution, and their remuneration. (4) An instrument of dissolution may be altered, but the alteration shall only have effect if it is approved by special resolution. (5) The provisions of this Act shall continue to apply in relation to an incorporated friendly society as if the trustees appointed under the instrument of dissolution were the committee of management of the society. (6) The trustees shall— (a) within 15 days of the passing of a special resolution approving an instrument of dissolution, give notice to the Authority of the fact and the date of commencement of the dissolution, enclosing a copy of the instrument; and (b) within 15 days of the passing of a special resolution approving an alteration of such an instrument, give notice to the Authority of the fact, enclosing a copy of the altered instrument; and if the trustees fail to comply with this subsection, they shall each be guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the standard scale. (7) An instrument of dissolution or an alteration to such an instrument shall be binding on all members of the society as from the date on which the copy of the instrument or altered instrument, as the case may be, is placed on the public file of the society under subsection (12) below. (8) The trustees shall, within 28 days from the termination of the dissolution, give notice to the Authority of the fact and the date of the termination, enclosing an account and balance sheet signed and certified by them as correct, and showing— (a) the assets and liabilities of the society at the commencement of the dissolution; and (b) the way in which those assets and liabilities have been applied and discharged. (9) If the trustees fail to comply with subsection (8) above they shall each be guilty of an offence and liable on summary conviction— (a) to a fine not exceeding level 2 on the standard scale; and (b) in the case of a continuing offence, to an additional fine not exceeding one-tenth of that level for every day during which the offence continues. (10) Except with the consent of the Authority, no instrument of dissolution or alteration to such an instrument shall be of any effect if the purpose of the proposed dissolution or alteration is to effect or facilitate the transfer of the society’s engagements to any other friendly society or to a company. (11) Any provision in a resolution or document that members of an incorporated friendly society proposed to be dissolved shall accept membership of some other body in or towards satisfaction of their rights in the dissolution shall be conclusive evidence of such purpose as is mentioned in subsection (10) above. (12) The Authority shall keep in the public file of the society any notice or other document received by it under subsection (6) or (8) above and shall record in that file the date on which the notice or document is placed in it. Notes This section is the equivalent of s 94 of the Friendly Societies Act 1974, applicable to registered friendly societies. Subs (6)(a) amended to reflect the transfer of functions under the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 59 to reflect the entry into force of the Financial Services and Markets Act 2000. Subs (6)(b) amended to reflect the transfer of functions under the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 59 to reflect the entry into force of the Financial Services and Markets Act 2000. Subs (8) amended to reflect the transfer of functions under the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 59 to reflect the entry into force of the Financial Services and Markets Act 2000.

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Subs (10) amended to reflect the transfer of functions under the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 59 to reflect the entry into force of the Financial Services and Markets Act 2000. Subs (12) amended to reflect the transfer of functions under the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 59 to reflect the entry into force of the Financial Services and Markets Act 2000.

Voluntary winding up 21.—(1) An incorporated friendly society may be wound up voluntarily under the applicable winding up legislation if it resolves by special resolution that it be wound up voluntarily. (2) A copy of any special resolution passed for the voluntary winding up of an incorporated friendly society shall be sent by the society to the Authority within 15 days after it is passed; and the Authority shall keep the copy in the public file of the society. (3) A copy of any such resolution shall be annexed to every copy of the memorandum or of the rules issued after the passing of the resolution. (4) If an incorporated friendly society fails to comply with subsection (2) or (3) above, the society shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the standard scale. (5) For the purposes of this section, a liquidator of the society shall be treated as an officer of it. Notes This provision broadly corresponds to the rules relating to the voluntary winding-up of any company. Subs (21)(2) amended to reflect the transfer of functions under the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 60 to reflect the entry into force of the Financial Services and Markets Act 2000.

Winding up by court: grounds and petitioners 22.—(1) An incorporated friendly society may be wound up under the applicable winding up legislation by the court on any of the following grounds, that is to say, if— (a) the society has by special resolution resolved that it be wound up by the court; (b) the number of members is reduced below 7; (c) the number of members of the committee of management is reduced below 2; (d) the society has not commenced business within a year from its incorporation or has suspended its business for a whole year; (e) the society exists for an illegal purpose; (f) the society is unable to pay its debts; or (g) the court is of the opinion that it is just and equitable that the society should be wound up. (2) Except as provided by subsection (3) below or the applicable winding up legislation, a petition for the winding up of an incorporated friendly society may be presented by— (a) the Authority; (b) the society or its committee of management; (c) any creditor or creditors (including any contingent or any prospective creditor); or (d) any contributory or contributories, or by all or any of those parties, together or separately. (3) A contributory may not present a petition unless the number of members is reduced below 7 or he has been a contributory for at least six months before the winding up. (4) In this section ‘‘contributory’’ has the meaning assigned to it by paragraph 9 of Schedule 10 to this Act. Notes Subs (1) The grounds for the presentation of a petition are the equivalent of the grounds applicable to any company. Subs (2) The Authority is empowered to petition for the winding-up of a friendly society. Amended to reflect the transfer of functions under the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 61 to reflect the entry into force of the Financial Services and Markets Act 2000.

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Application of winding up legislation to incorporated friendly societies 23.—(1) In this section ‘‘the companies winding up legislation’’ means the enactments applicable in relation to England and Wales, Scotland and Northern Ireland which are specified in paragraph 1 of Schedule 10 to this Act (including any enactment which creates an offence by any person arising out of acts or omissions occurring before the commencement of the winding up). (2) In its application to the winding up of an incorporated friendly society, by virtue of section 21(1) or 22(1) above, the companies winding up legislation shall have effect with the modifications effected by Parts I to III of Schedule 10 to this Act; and the supplementary provisions of Part IV of that Schedule also have effect in relation to such a winding up and in relation to a dissolution by consent. (3) In section 21 and 22 above ‘‘the applicable winding up legislation’’ means the companies winding up legislation as so modified. Notes The winding-up of a friendly society is governed by the Insolvency Act 1986, with the modifications specified in Sched 10 to the Friendly Societies Act 1992. See below.

Continuation of long term business 24.—(1) This section has effect in relation to the winding up of an incorporated friendly society which carries on long term business (including any reinsurance business). (2) The liquidator shall, unless the court otherwise orders, carry on the long term business of the society with a view to its being transferred as a going concern under this Act; and, in carrying on that business, the liquidator may agree to the variation of any contracts of insurance in existence when the winding up order is made but shall not effect any new contracts of insurance. (3) If the liquidator is satisfied that the interests of the creditors in respect of liabilities of the society attributable to its long term business require the appointment of a special manager of the society’s long term business, he may apply to the court, and the court may on such application appoint a special manager of that business to act during such time as the court may direct, with such powers (including any of the powers of a receiver or manager) as may be entrusted to him by the court. (4) Section 177(5) of the Insolvency Act 1986 or, as the case may be, Article 151 of the Insolvency (Northern Ireland) Order 1989 shall apply to a special manager appointed under subsection (3) above as it applies to a special manager appointed under that section or that Article. (5) The court may, if it thinks fit and subject to such conditions (if any) as it may determine, reduce the amount of the contracts made by the society in the course of carrying on its long term business. (6) The court may, on the application of the liquidator, a special manager appointed under subsection (3) above or the Authority appoint an independent actuary to investigate the long term business of the society and to report to the liquidator, the special manager or the Authority, as the case may be, on the desirability or otherwise of that business being continued and on any reduction in the contracts made in the course of carrying on that business that may be necessary for its successful continuation. Notes This section requires the liquidator to continue the long-term business of a friendly society in liquidation, with a view to the transfer of the business as a going concern. This reflects the obligation of the Financial Services Compensation Scheme to seek such a transfer or to meet the friendly society’s obligations to pay losses up to 90 per cent. See Part XV of the Financial Services and Markets Act 2000. Subs (6) Amended to reflect the transfer of functions under the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 62 to reflect the entry into force of the Financial Services and Markets Act 2000.

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Power of court to declare dissolution void 25.—(1) Where an incorporated friendly society has been dissolved under section 20 above or following a winding up, the court may, at any time within 12 years after the date on which the society was dissolved, make an order under this section declaring the dissolution to have been void. (2) An order under this section may be made, on such terms as the court thinks fit, on an application by the trustees under section 20 above or the liquidator, as the case may be, or by any other person appearing to the court to be interested. (3) When an order under this section is made, such proceedings may be taken as might have been taken if the society had not been dissolved. (4) The person on whose application the order is made shall, within 7 days of its being so made, or such further time as the court may allow, furnish the Authority with a copy of the order; and the Authority shall keep the copy in the public file of the society. (5) If a person fails to comply with subsection (4) above, he shall be guilty of an offence and liable on summary conviction— (a) to a fine not exceeding level 3 on the standard scale; and (b) in the case of a continuing offence, to an additional fine not exceeding one-tenth of that level for every day during which the offence continues. (6) In this section ‘‘the court’’ means— (a) in relation to a society whose registered office is in England and Wales, the High Court; (b) in relation to a society whose registered office is in Scotland, the Court of Session; and (c) in relation to a society whose registered office is in Northern Ireland, the High Court in Northern Ireland. Notes This section echoes ss 1029 to 1034 of the Companies Act 2006, which permit a company to be restored to the register of companies after its dissolution. The main purpose of the section is to allow a dissolved company to be reinstated and sued in respect of a liability which was unknown at the date of dissolution. Section 651 will apply to a friendly society which has been wound up and subsequently removed from the register of companies. Subs (4) amended to reflect the transfer of functions under the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 63 to reflect the entry into force of the Financial Services and Markets Act 2000.

Cancellation of registration 26.—(1) Where the Authority is satisfied that an incorporated friendly society has been dissolved under section 20 above or following a winding up, it shall cancel the society’s registration under this Act. (2) Where the Authority is satisfied, with respect to an incorporated friendly society— (a) that a certificate of incorporation has been obtained for the society by fraud or mistake; or (b) that the society has ceased to exist, [or, (c) in the case of a society to which section 37(2) or (3) below applies, that the principal place of business of the society is outside the United Kingdom.] it may cancel the registration of the society. (3) Without prejudice to subsection (2) above, the Authority may, if it thinks fit, cancel the registration of an incorporated friendly society at the request of the society, evidenced in such manner as the Authority may direct. (4) Before cancelling the registration of an incorporated friendly society under subsection (2) above, the Authority shall give to the society not less than two months’ previous notice, specifying briefly the grounds of the proposed cancellation. (5) Where the registration of an incorporated friendly society is cancelled under subsection (2) above, the society may appeal— (a) where the registered office of the society is situated in England and Wales, to the High Court;

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(b) where that office is situated in Scotland, to the Court of Session; or (c) where that office is situated in Northern Ireland, to the High Court in Northern Ireland; and on any such appeal the court may, if it thinks it just to do so, set aside the cancellation. (6) Where the registration of a society is cancelled under subsection (2) or (3) above, then, subject to the right of appeal under subsection (5) above, the society, so far as it continues to exist, shall cease to be a society incorporated under this Act. (7) Subsection (6) above shall not affect any liability actually incurred by an incorporated friendly society; and any such liability may be enforced against the society as if the cancellation had not taken place. (8) Any cancellation of the registration of an incorporated friendly society under this section shall be effected by written notice given by the Authority to the society. (9) As soon as practicable after the cancellation of the registration of an incorporated friendly society under this section the Authority shall cause notice thereof to be published in the London Gazette, the Edinburgh Gazette or the Belfast Gazette according to the situation of the society’s registered office, and if it thinks fit, in one or more newspapers. Notes Subs (1) amended to reflect the transfer of functions under the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 64 to reflect the entry into force of the Financial Services and Markets Act 2000. Subs (2) was amended by the Financial Institutions (Prudential Supervision) Regulations 1996, SI 1996 No 1669, reg 14(1) and amended again to reflect the transfer of functions under the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 64 to reflect the entry into force of the Financial Services and Markets Act 2000. Subs (3) amended to reflect the transfer of functions under the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 64 to reflect the entry into force of the Financial Services and Markets Act 2000. Subs (4) amended to reflect the transfer of functions under the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 64 to reflect the entry into force of the Financial Services and Markets Act 2000. Subs (8) amended to reflect the transfer of functions under the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 64 to reflect the entry into force of the Financial Services and Markets Act 2000. Subs (9) amended to reflect the transfer of functions under the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 64 to reflect the entry into force of the Financial Services and Markets Act 2000. PA RT I I I M A N A G E M E N T A N D A D M I N I S T R AT I O N

Committee of management and other officers Committee of management 27.—(1) Every friendly society shall have a committee of management with at least 2 members. (2) The committee of management shall appoint one of its members to be chairman of the committee. (3) Members of the committee of management shall (unless co-opted on to the committee) be elected to office in accordance with the rules of the society. (4) The committee of management may co-opt as a member of the committee (whether as an additional member or to fill any vacancy) any person— (a) who appears to the committee to be fit and proper to be a member, and (b) who has not failed, having been nominated at an election held within the preceding 12 months, to be elected as a member of the committee; and such a person may be co-opted notwithstanding that he is not a member of the society. (5) Part I of Schedule 11 to this Act shall have effect in relation to committees of management and Part II shall have effect with regard to dealings with members of committees of management of friendly societies and registered branches.

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Notes An incorporated friendly society is run by a Committee of Management, operating in accordance with this section and with Sched 11 of the 1992 Act, see below. A registered friendly society, by contrast, is run by trustees: Friendly Societies Act 1974, s 24.

Chief executive and secretary 28.—(1) Every friendly society shall have a chief executive and a secretary. (2) The chief executive of a friendly society shall be a person appointed by the committee of management who (whether alone or jointly with one or more other persons) is responsible under the immediate authority of the committee for the conduct of the business of the society. (3) The secretary of a friendly society shall be appointed by the committee of management or, if the rules of the society so provide, elected to office in accordance with the rules. (4) The committee of management of a friendly society shall take all reasonable steps to secure that the person appointed as chief executive has the requisite knowledge and experience to discharge the functions of his office. (5) The offices of chief executive and secretary may be held by the same person. (6) Anything required or authorised to be done by or to the secretary or chief executive of a friendly society may, if the office is vacant or there is for any other reason no secretary or chief executive capable of acting be done by or to— (a) any assistant or deputy secretary or assistant or deputy chief executive, as the case may be; or (b) if there is no assistant or deputy capable of acting, any member of the society’s staff who is authorised generally or specially for that purpose by the committee of management. Notification of officers to Authority 29.—(1) Where a person becomes or ceases to be a member of the committee of management of a friendly society, the society shall within one month give notice of that fact, including the information specified in subsection (2) below, to the Authority. (2) The notice shall state the person’s full name and address and the date on which he became, or ceased to be, a member of the committee and in the case of a person becoming a member, the date of his birth. (3) Where a person becomes or ceases to be the chief executive or the secretary of a friendly society, the society shall within one month give notice of that fact to the Authority, stating the person’s full name and address and the date on which he became, or ceased to be, chief executive or secretary. (4) If a friendly society fails to comply with subsection (1) or (3) above, it shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 4 on the standard scale. (5) On receipt of a notice under this section, the Authority shall record the name of the person to whom the notice relates and the date on which he began to hold, or, as the case may be, ceased to hold office, in the public file of the society. Notes An incorporated friendly society is run by a Committee of Management, operating in accordance with this section and with Sched 11 of the 1992 Act, see below. A registered friendly society, by contrast, is run by trustees: Friendly Societies Act 1974, s 24. Subs (1) amended to reflect the transfer of functions under the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 65 to reflect the entry into force of the Financial Services and Markets Act 2000. Subs (3) amended to reflect the transfer of functions under the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 65 to reflect the entry into force of the Financial Services and Markets Act 2000. Subs (5) amended to reflect the transfer of functions under the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 65 to reflect the entry into force of the Financial Services and Markets Act 2000.

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Meetings and resolutions 30. Schedule 12 to this Act shall have effect with respect to meetings and resolutions of friendly societies and registered branches. Notes Sched 12 is concerned with the holding of the annual general meeting, and sets out general provisions for the summoning of and voting at meetings. PA RT I V A U T H O R I S AT I O N O F F R I E N D LY S O C I E T I E S ’ B U S I N E S S

Restriction on carrying on unauthorised business Notes Sections 31 to 36A were omitted by Sched 18, para 5 of the Financial Services and Markets Act 2000.

Restrictions on business of certain authorised societies Restriction of combinations of business 37.—(1), (1A) [omitted] (2) This subsection applies to a friendly society which carries on long term business— (a) if its rules do not contain provision for calling up additional contributions, for reducing benefits or for claiming assistance from other persons who have undertaken to provide it; or (b) if its annual contribution income from long term business exceeded 500,000 ECU for 3 consecutive years and it is not the subject of a direction under subsection (5) below; and, for the purposes of paragraph (b) above, years ending before 1st January 1985 shall be disregarded. (3) This subsection applies to a friendly society which carries on general business— (a) if its rules do not contain provision for calling up additional contributions or for reducing benefits; or (b) if its annual contribution income from general business in any previous year exceeded 1,000,000 ECU and it is not the subject of a direction under subsection (5) below; and, for the purposes of paragraph (b) above, years ending before 1st January 1993 shall be disregarded. (4) In subsections (2) and (3) above a reference to a year, in relation to annual contribution income, is a reference to any financial year of a society for which, at the relevant time, accounts have been or ought to have been prepared. (5) The Authority may, if it is satisfied that it is consistent with the international obligations of the United Kingdom to do so, direct that a friendly society— (a) which is, by virtue only of paragraph (b) of subsection (2) above, a society to which that subsection applies; or (b) which is, by virtue only of paragraph (b) of subsection (3) above, a society to which that subsection applies; shall, unless the direction is revoked, be treated as not being a society to which subsection (2) or, as the case may be, subsection (3) above applies. (6) If— (a) the Authority has given a direction under subsection (5) above in relation to a society such as is mentioned in subsection (5)(a) above; and (b) the Society’s annual contribution income from long term business exceeds 500,000 ECU for 3 consecutive years ending after a date specified in the direction, the Authority shall revoke the direction. (7) If—

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(a) the Authority has given a direction in relation to a society such as is mentioned in subsection (5)(b) above; and (b) the society’s annual contribution income from general business in a year ending after a date specified in the direction exceeded 1,000,000 ECU, the Authority shall revoke the direction. Notes Subs (1) and Subs (1A) omitted by s 32 omitted by Sched 18 to the Financial Services and Markets Act 2000, para 6. Subss (2)–(3) Friendly societies with business above these limits are generally known as ‘‘Directive societies’’, in that they are entitled to the benefits afforded to insurance companies under the Third NonLife Directive, Directive 92/49, and the Third Life Directive, 92/96, and can carry on insurance business or sell insurance anywhere in the EC provided that they are authorised by the UK authorities to do so. See the definition in s 117(8) of the 1992 Act. Such societies are however, subject to additional obligations, eg, to maintain an adequate amount of assets and premiums (ss 49A and 49B of the 1992 Act, the latter applying only to long-term business). See also the note to subs (8). Subs (5) amended to reflect the transfer of functions under the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 66 to reflect the entry into force of the Financial Services and Markets Act 2000. Subs (6) amended to reflect the transfer of functions under the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 66 to reflect the entry into force of the Financial Services and Markets Act 2000. Subs (7) amended to reflect the transfer of functions under the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 66 to reflect the entry into force of the Financial Services and Markets Act 2000. Subss (7A) to (9) omitted by Sched 18 to the Financial Services and Markets Act 2000, para 6. Note Sections 38 to 43 omitted by Sched 18, para 7 of the Financial Services and Markets Act 2000.

PA RT V R E G U L AT I O N O F F R I E N D LY S O C I E T I E S ’ B U S I N E S S

Preliminary Note Sections 44 to 50 omitted by Sched 18, para 8 of the Financial Services and Markets Act 2000.

Powers of Authority Power to forbid acceptance of new members 51.—[omitted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 68.] Applications to court 52.—(1) Where the Authority has reason to believe that any of the conditions mentioned in subsection (2) below is satisfied, it may present a petition to the High Court for the winding up of the society under the applicable winding up legislation. (2) The conditions referred to in subsection (1) above are— (a) that a friendly society is carrying on activities that are not activities which such a society is permitted by this Act or the 1974 Act to carry on; (b) that the society is not carrying on any activity falling within Schedule 2 to this Act; (c) that the society is failing to satisfy any obligation to which it is subject by virtue of any provision of the law of any EEA State other than the United Kingdom which— (i) gives effect to the general insurance or the life assurance consolidation Directive; or

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(ii) is otherwise applicable to the insurance activities of the society in that State; (d) [omitted] . (3) Where the Authority has reason to believe that any of the conditions mentioned in subsection (2) is satisfied, it may make an application to the High Court for an order under subsection (5) below. (4) A court may not make an order under subsection (5) unless it is satisfied that one or more of the conditions mentioned in subsection (2) are satisfied. (5) An order under this subsection is an order directing the society to modify its business as directed in the order or to take such other steps as may be so directed. (6) Where a court makes an order under subsection (5) above, the Authority shall keep a copy of the order in the public file of the society. (7) The power to present a petition or to make an application for an order under subsection (5) above is available to the Authority whether or not it has previously presented a petition or made an application for such an order, as the case may be. (8) In the application of this section to a friendly society whose registered office is in Scotland or Northern Ireland, references to the High Court shall be read as references to the Court of Session or, as the case may be, the High Court in Northern Ireland. (9) In this section ‘‘the applicable winding up legislation’’, in relation to an incorporated friendly society, has the same meaning as in section 23 above and, in relation to a registered friendly society, means Part V of the Insolvency Act 1986 or (where the society’s registered office is in Northern Ireland) Part VI of the Insolvency (Northern Ireland) Order 1989. Notes Subs (1) amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 69 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (2) The Authority may petition the court for a winding-up order on any of the grounds set out here. See, however, subs (5), which authorises the court, on the Authority’s petition, to make an order requiring the friendly society to modify its business in lieu of a winding-up order. Subs (2)(c)(i) modified by The Life Assurance Consolidation Directive (Consequential Amendments) Regulations 2004, SI 2004 No 3379, reg 3. Subs (2) paragraph (d) omitted by Sched 18(II) to the Financial Services and Markets Act 2000, para 15. Subs (2)(c) was substituted by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, reg 12. It complies with the EC’s Third Non-Life and Life Insurance Directives. Subs (3) modified by Sched 18 to the Financial Services and Markets Act 2000, para 15. Amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 69 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (4) substituted by Sched 18(II) to the Financial Services and Markets Act 2000, para 15. Subs (5) amended by Sched 18(II) to the Financial Services and Markets Act 2000, para 15. Subs (6) amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 69 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (7) amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 69 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Prohibition on disposal of assets 52A.—[deleted] Notes This section was inserted by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, reg 13. It applied only to Directive societies, within s 37(2), (3) of the 1992 Act. It was deleted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 70 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Residual power to impose requirements for protection of members 53.—[deleted]

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Notes Section 53 was deleted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 70 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Supervision of activities of subsidiaries etc. 54.—(1) In this section ‘‘friendly society group’’ means an incorporated friendly society, subsidiaries of that society and bodies jointly controlled by it. (2) If it appears to the Authority that the activities of subsidiaries of an incorporated friendly society or bodies jointly controlled by it are or may become disproportionate to those of the friendly society group as a whole, it may direct the society— (a) to take or refrain from taking steps specified in the direction with a view to securing that the activities in question cease to be or do not become disproportionate; or (b) to take steps so specified with a view to securing— (i) that it ceases to have control or joint control of any subsidiary or jointly controlled body in question; or (ii) that any such subsidiary or jointly controlled body is wound up. (3) If it appears to the Authority that any activity of a subsidiary of an incorporated friendly society or of a body jointly controlled by such a society is unsuitable for a member of a friendly society group, it may direct the society— (a) to take steps specified in the direction with a view to securing that that activity ceases; or (b) to take steps so specified with a view to securing— (i) that it ceases to have control or joint control of the subsidiary or jointly controlled body; or (ii) that the subsidiary or jointly controlled body is wound up. (4) A direction under this section may specify that the society is to comply with it— (a) immediately on receipt of a final notice in relation to the direction; (b) before the end of such period as may be specified in the direction, beginning with the giving of a final notice in relation to the direction; or (c) on the happening of an event subsequent to the giving of such a notice. (5) A society given a direction under this section must— (a) comply with the direction; or (b) convert itself into a company in accordance with Part VIII of this Act. (6) The Authority may by written notice to the society— (a) vary a direction under this section at the request of the society; or (b) revoke a direction under this section. (7) If a society requests the Authority to notify it as to whether in the opinion of the Authority it has complied with a direction under this section, the Authority shall comply with the request. (8) [deleted] (9) The Authority shall keep a copy— (a) of a direction under this section; (b) of a notice under subsection (6) above; (ba) of a final notice varying a direction under this section; or (c) of a notification under subsection (7) above; in the public file of the society. (10) ‘‘Final notice’’ means a final notice given under section 390 of the Financial Services and Markets Act 2000, as applied by section 58A(6) below. Notes Subs (2) amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 71 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (3) amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 71 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (4) revised by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 71 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

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Subs (6) revised by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 71 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (7) amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 71 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (8) was deleted by by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 71 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (9) amended and subs (ba) inserted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 71 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (10) inserted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 71 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Supervision of group insurance business 55.—(1) This section applies where a friendly society carries on any group insurance business providing benefits for or in respect of a group of persons who are not members of the society. (2) If it appears to the Authority that the business so carried on is or may become disproportionate to the other activities of the society (including any group insurance business carried on for the provision of benefits for or in respect of persons who are members of the society), it may direct the society to take or refrain from taking steps specified in the direction with a view to securing that the group business in question ceases to be or does not become disproportionate. (3) Subsections (4) to (9) of section 54 above shall apply in relation to a direction under this section as they apply to a direction under that section. Notes Under s 11 of the 1992 Act a friendly society may carry on group insurance business in respect of groups who are not members of the friendly society. This section ensures that such insurance does not form a disproportionate part of the society’s activities. Subs (2) amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 72 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Supervision of controllers 55A.—(1) [deleted]. (2) In this Act— ‘‘controller’’, in relation to a friendly society to which section 37(2) or (3) of this Act applies, means a person who, either alone or with any associate or associates— (a) is entitled to exercise or control the exercise of 10 per cent. or more of the voting power at any general meeting of the society; or (b) is able to exercise a significant influence over the management of the society by virtue of an entitlement to exercise, or to control the exercise of, the voting power at any general meeting of the society; (3) [deleted]. Notes This section was inserted by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, reg 14(1). Subs (1) and (3) were deleted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 73 to reflect the transfer of functions under the Financial Services and Markets Act 2000. The section applies only to Directive societies within s 37(2), (3) of the 1992 Act, and complies with the EC’s Non-Life and Life Directives. Subs (2) For the definition of associate, see s 119A of this Act.

Linked long-term insurance contracts 56.—[deleted]

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Notes Section 56 was deleted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 74 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Recognition of societies in accordance with insurance Directives 57. [deleted] Notes This section was substituted by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, reg 15(1). It had previously been amended by the Friendly Societies (Amendment) Regulations 1993, SI 1993 No 2519, reg 4. It was deleted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 74 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Notification by Commission of measures taken by it 57A.—[deleted] Notes This section was inserted by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, reg 16. It was deleted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 74 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Notices, hearings and appeals Notices, hearings and appeals 58A.—(1) If the Authority proposes— (a) to give a direction to a society under section 54 or section 55, or to vary such a direction other than at the request of the society, or (b) to give a direction in relation to a society under section 90, it must give the society a warning notice. (2) The warning notice must set out the terms of the direction which the Authority proposes to give and, in the case of a proposal to give a direction under section 54 or 55, any provisions which the Authority proposes to include in the direction by virtue of section 54(4) (including that provision as applied by section 55(3)). (3) If the Authority decides— (a) to give a direction to a society under section 54 or section 55, or to vary such a direction other than at the request of the society, or (b) to give a direction in relation to a society under section 90, it must give the society a decision notice. (4) The decision notice must set out the terms of the direction which the Authority has decided to give and, in the case of a decision to give a direction under section 54 or 55, any provisions to be included in the direction by virtue of section 54(4) (including that provision as applied by section 55(3)). (5) A society to whom a decision notice is given under this section may refer the matter to the Financial Services and Markets Tribunal. (6) Part XXVI of the Financial Services and Markets Act 2000 (notices) is to be treated as applying in respect of warning notices and decision notices given under this section as it applies in respect of warning notices and decision notices given under that Act, subject to subsection (8) below. (7) The provisions of Part IX of the Financial Services and Markets Act 2000 (hearings and appeals) are to be treated as applying in respect of references to the Financial Services and Markets Tribunal made under this section as they apply in respect of references made to that Tribunal under that Act.

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(8) In the application of Part XXVI of that Act in respect of warning notices and decision notices given under this section— (a) section 388(1)(e)(i) (which requires a decision notice to indicate any right given under that Act to refer a decision to the Tribunal) is to be read as if, for the words ‘‘this Act’’, there were substituted ‘‘the Friendly Societies Act 1992’’; (b) section 388(2) (which makes provision for the type of action to which a decision notice may relate if it was preceded by a warning notice) is to be read as if, for the word ‘‘Part’’, there were substituted ‘‘section’’; (c) section 390(4) (which provides for the content of a final notice about an order) is to be read as if— (i) for the words ‘‘an order’’ there were substituted ‘‘a direction’’, and (ii) for the words ‘‘the order’’, in both places where they appear, there were substituted ‘‘the direction’’; and (d) section 392 (application of sections 393 (third party rights) and 394 (access to Authority material)) is to be read as if— (i) paragraph (a) of that section contained a reference to a warning notice given under subsection (1) above, and (ii) paragraph (b) of that section contained a reference to a decision notice given under subsection (3) above. Notes Sections 58 to 61 were deleted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 75 to reflect the transfer of functions under the Financial Services and Markets Act 2000. The instrument also inserted s 58A.

Information Powers to obtain information and documents etc 62.—(1) This section applies to information, documents or other material, or explanations of matters which relate to— (a) the activities or the plans for future development of a friendly society; or (b) the activities or the plans for future development of a subsidiary of or body jointly controlled by an incorporated friendly society; and, in relation to the imposition of requirements under this section, ‘‘the purposes of its supervisory functions’’ means the purposes of the discharge by the Authority of any of its functions under this Act. (2) This section does not authorise any requirement in relation to information, documents or other material to be imposed on a subsidiary of or body jointly controlled by an incorporated friendly society unless that subsidiary or body carries on business in the United Kingdom; but a requirement may be imposed under this section on a friendly society in relation to information, documents or other material in the possession or control of a subsidiary of or body jointly controlled by the society which does not carry on business in the United Kingdom. (3) Subject to subsection (2) above, the Authority may by notice to a friendly society or to a subsidiary of, or body jointly controlled by, an incorporated friendly society, require the body to which it is addressed— (a) to furnish to it, within a specified period or at a specified time or times, such specified information as the Authority considers it needs for the purposes of its supervisory functions; (b) to produce to it, at a specified time and place, such specified documents or other material as the Authority considers it needs for the purposes of its supervisory functions; (c) to provide to it, within a specified period, such explanations of specified matters as the Authority considers it needs for the purposes of its supervisory functions; (d) to furnish to it, within a specified period, a report by an accountant or actuary approved by the Authority on, or on specified aspects of, information or documents or other material furnished or produced to the Authority.

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(3A) Subject to subsection (2) above, any person authorised for the purpose by the Authority (‘‘an authorised officer’’) may, on producing evidence of his authority, require a friendly society or a subsidiary of, or body jointly controlled by, an incorporated friendly society— (a) to furnish to him forthwith such specified information as the Authority considers it needs for the purposes of its supervisory functions; (b) to produce to him forthwith such documents or other material as the Authority considers it needs for those purposes; (c) to provide to him forthwith such explanations of specified matters as the Authority considers it needs for those purposes. (4) Where by virtue of subsection (3)(a), (b) or (c) above the Authority has power, or by virtue of subsection (3A) above an authorised officer has power, to require the furnishing of any information, the production of any document or material or the provision of any explanation by a friendly society, the Authority or authorised officer shall have the like power as regards any person who— (a) is or has been an officer, employee or agent of the society or, in the case of a society to which section 37(2) or (3) above applies, a controller or manager of the society, or (b) in the case of documents or material, appears to the Authority or authorised officer to have the document or material in his possession or under his control. (5) Where by virtue of subsection (3)(a), (b) or (c) above the Authority has power, or by virtue of subsection (3A) above an authorised officer has power, to require the furnishing of any information, the production of any document or material or the provision of any explanation by a subsidiary of or body jointly controlled by an incorporated friendly society, the Authority or authorised officer shall have the like power as regards any person who— (a) is or has been an officer, employee or agent of the subsidiary or jointly controlled body, or (b) in the case of documents or material, appears to the Authority or authorised officer to have the document or material in his possession or under his control. (6) Where any person from whom production of a document or material is required under subsection (4) or (5) above claims a lien on the document or material, the production of it shall be without prejudice to the lien. (7) Nothing in the foregoing provisions of this section shall compel the production— (a) by a barrister, solicitor, advocate or licensed conveyancer of a document or material contained in a privileged communication or, in Scotland, a communication which is protected from disclosure on the ground of confidentiality, made by him or to him in that capacity or the furnishing of information contained in such communication so made; (b) by a person who is not a barrister or solicitor of a document or material contained in a communication made by him or to him which is privileged by virtue of section 63 of the Courts and Legal Services Act 1990 or the furnishing of information contained in such a communication; or (c) by an independent qualified conveyancer, an executry practitioner or a recognised financial institution of a document or material contained in a communication made by him or to him which is protected from disclosure by virtue of section 22 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990 or the furnishing of information contained in such a communication. (8) Where, by virtue of subsection (3), (3A), (4) or (5) above, the Authority or an authorised officer requires the production by a friendly society or other body or any other person of documents or material, the Authority or authorised officer may— (a) if the documents or material are not produced, require that person to state, to the best of his knowledge and belief, where the documents or material are; (b) if the documents or material are produced, take copies of or extracts from them and require that person or any other person who is or has been an officer, employee or agent of the friendly society or other body, as the case may be, to provide an explanation of the documents or material. (9) Any person who, when required to do so under this section, fails without reasonable excuse to furnish any information or report, to produce any documents or material, or to

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provide any explanation or make any statement, shall be guilty of an offence and liable on summary conviction— (a) to a fine not exceeding level 5 on the standard scale; and (b) in the case of a continuing offence, to an additional fine not exceeding one tenth of that level for every day during which the offence continues. (10) Any friendly society which furnishes any information, provides any explanation or makes any statement which is false or misleading in a material particular, shall be guilty of an offence and liable— (a) on conviction on indictment, to a fine; and (b) on summary conviction to a fine not exceeding the statutory maximum. (11) Any person who knowingly or recklessly furnishes any information, provides any explanation or makes any statement which is false or misleading in a material particular shall be guilty of an offence and liable— (a) on conviction on indictment, to imprisonment for a term not exceeding 2 years or to a fine or both; and (b) on summary conviction, to a fine not exceeding the statutory maximum. (12) In this section— ‘‘specified’’ means specified in a notice under this section; and ‘‘agent’’, in relation to a friendly society or a subsidiary of, or body jointly controlled by, an incorporated friendly society, includes its bankers, accountants, solicitors and auditors and the appropriate actuary. Notes Subs (1) was amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 76 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (3) was amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 76 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (3A) was amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 76 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (4) was amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 76 to reflect the transfer of functions under the Financial Services and Markets Act 2000; subs (4)(a) was amended by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, reg 17(1). Subs (5) was amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 76 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (5A) was inserted by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, reg 17(2). It granted to the Authority the additional powers over Directive societies required by the EC’s Third Non-Life and Life Directives. It was deleted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 76. Subs (8) was amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 76 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Entry of premises under warrant under section 176 of the Financial Services and Markets Act 2000 62A.—(1) A justice of the peace may issue a warrant under section 176 of the Financial Services and Markets Act 2000 if satisfied on information on oath given by or on behalf of the Authority, an authorised officer within the meaning of section 62(3A) above, or a person appointed as an investigator under section 65(1) below or as an inspector under section 66(1) below, that there are reasonable grounds for believing that the first or second set of conditions below is satisfied. (2) The first set of conditions is that— (a) there are on the premises specified in the warrant information, documents or other material in relation to which a requirement has been imposed on any person under

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section 62(3), (3A), (4) or (5) above or section 67(3) below, or which it is the duty of any person to produce under section 65(3) or 67(2) below, and (b) that person has failed (wholly or in part) to comply with that requirement or, having been requested to do so, has failed (wholly or in part) to comply with that duty. (3) The second set of conditions is that— (a) there are on the premises specified in the warrant information, documents or other material in relation to which a requirement could be imposed on any person under section 62(3), (3A), (4) or (5) above or section 67(3) below, or which any person could be requested to produce in compliance with the duty imposed on them by section 65(3) or 67(2) below, and (b) if such a requirement were imposed, or such a request made,— (i) it would not be complied with, or (ii) any information, documents or other material to which it related would be removed, tampered with or destroyed. Notes Section 62A was inserted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 77 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Confidentiality of certain information 63.—[deleted] 64.—[deleted] Notes Sections 63 and 64 deleted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 78 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Disclosure of information 63A.—(1) For the purposes of sections 348 to 353 of the Financial Services and Markets Act 2000 (restrictions on disclosure of confidential information)— (a) information to which this section applies is to be treated as confidential information; and (b) in relation to such information, each of the following is a primary recipient— (i) the Authority; (ii) any person who is or has been employed by the Authority; and (iii) any person appointed by the Authority to carry out functions under this Act or the 1974 Act. (2) This section applies to information which— (a) relates to the business or other affairs of a friendly society, a registered branch of a friendly society or any other person; (b) was received by a primary recipient (within the meaning of subsection (1)(b)) for the purposes of, or in the discharge of, any functions of the Authority under any provision made by or under this Act or the 1974 Act; and (c) is not excluded information by virtue of subsection (4). (3) It is immaterial for the purposes of subsection (2) whether or not the information was received— (a) by virtue of a requirement to provide it imposed by or under this Act; (b) for other purposes as well as purposes mentioned in that subsection. (4) Information is excluded information if— (a) it has been made available to the public by virtue of being disclosed in any circumstances in which, or for any purposes for which, disclosure is not precluded by section 348 of the Financial Services and Markets Act 2000 (restrictions on disclosure of confidential information); or (b) it is in the form of a summary or collection of information so framed that it is not possible to ascertain from it information relating to any particular person.

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Notes Section 63A was inserted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 78 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Inspections etc Investigations on behalf of Authority 65.—(1) If it appears to the Authority desirable to do so for the purpose of its supervisory functions in relation to a friendly society, the Authority may appoint one or more competent persons to investigate and report to it on the state and conduct of the activities of the society, or any particular aspect of those activities. (2) If a person appointed under subsection (1) above thinks it necessary for the purposes of his investigation, he may also investigate the activities of any body corporate which is or has at any relevant time been a subsidiary of, or jointly controlled by, the society under investigation. (3) It shall be the duty of every person who is or has been an officer, employee and agent of a friendly society or other body which is under investigation— (a) to produce to the persons appointed under subsection (1) above all records, books and papers relating to the body concerned which are in his custody or power; and (b) to attend before those persons when required to do so; (c) to answer any question which is put to him by those persons with respect to any friendly society or other body which is under investigation, and otherwise to give to those persons all assistance in connection with the investigation which he is reasonably able to give. (4) A person who, without reasonable excuse— (a) fails to produce any records, books or papers which it is his duty to produce under subsection (3)(a) above; or (b) fails to comply with his duty under subsection (3)(b) or (c) above; shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale. (5) A person who is or has been an officer, employee or agent of a friendly society or other body and who knowingly or recklessly furnishes to any person appointed under subsection (1) above any information which is false or misleading in a material particular, shall be guilty of an offence and liable— (a) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or both; and (b) on summary conviction, to a fine not exceeding the statutory maximum. (5A) In relation to a friendly society to which section 37(2) or (3) above applies, any reference in subsection (3) or (5) above to a person who is or has been an officer shall be read as including a reference to a person who is or has been a controller or manager. (6) In this section— ‘‘agent’’, in relation to a friendly society or other body whose activities are under investigation, includes its bankers, accountants, solicitors and auditors and the appropriate actuary; ‘‘the purposes of its supervisory functions’’, in relation to the Authority, has the same meaning as in section 62 above. Notes Section 65 was modified by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 79 to reflect the transfer of functions under the Financial Services and Markets Act 2000. The order deleted subsections (1A) and (3A) which had been inserted by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984. Subs (2) was amended by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, reg 19(2). Subs (3) was amended by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, reg 19(2).

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Subs (5) was amended by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, reg 19(4). Subs (5A) was inserted by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, reg 19(5).

Inspections and special meetings: general 66.—(1) In the circumstances mentioned in subsection (2) below, the Authority may— (a) appoint one or more competent inspectors to investigate and report on the affairs of a friendly society; or (b) call a special meeting of a friendly society to consider its affairs; or (c) appoint (whether on the same or on different occasions) an inspector or inspectors and call a special meeting for those purposes; and, in the circumstances mentioned in subsection (3) below, the investigation or consideration may extend to the affairs of any body corporate which is or at any relevant time has been a subsidiary of or jointly controlled by the society concerned. (2) The powers conferred by subsection (1) above may be exercised either— (a) on the application of the requisite number of members of the society concerned; or (b) where the Authority is of the opinion that an investigation should be held into the affairs of the society, or that the affairs of the society call for consideration by a meeting of its members; but paragraph (a) above shall not apply to a registered society with branches (regardless of the number of members) except with the consent of the central body of that society. (3) The powers conferred by subsection (1) above may be exercised so as to extend the investigation or consideration to the affairs of a body which is or has been a subsidiary of or jointly controlled by a friendly society either— (a) where an application referred to in subsection (2)(a) above so requests; or (b) where the Authority is of the opinion that it is necessary for the purposes of the investigation into or consideration of the affairs of the friendly society that the affairs of the subsidiary or other body should also be investigated or considered. (4) Where the inspectors are of the opinion mentioned in subsection (3)(b) above in relation to a subsidiary of or a body jointly controlled by the society under investigation they may, with the consent of the Authority, extend their investigation to the affairs of the subsidiary or other body and make their report accordingly. (5) For the purposes of subsections (1) to (3) above the requisite number of members— (a) in the case of a friendly society having more than 1,000 members, is 100; and (b) in the case of any other friendly society, is one-tenth of the whole number of members of the society. (6) Where an application is made as mentioned in subsection (2) above— (a) the application shall be supported by such evidence as the Authority may require for the purpose of showing that the applicants have good reason for making the application and are not actuated by malicious, frivolous, vexatious or scandalous motives; (b) such notice of the application shall be given to the society concerned and, if the application extends to the affairs of a subsidiary of or body jointly controlled by that society, to that subsidiary or other body, as the Authority may direct; (c) the Authority may require the applicants to give security for payment of the costs of the investigation or meeting before the inspector is appointed or the meeting is called subject, in the case of the costs of an investigation, to an amount not exceeding the corresponding Companies Act limit; and (d) as regards the expenses of or incidental to the investigation or meeting— (i) in the case of an investigation (in whichever way instituted), the expenses shall be defrayed in the first instance by the Authority but without prejudice to its rights to contribution under section 67(10) below; (ii) in the case of a meeting, the expenses shall be defrayed by the applicants, or out of the funds of the society, or by the members or officers or former members or officers of the society, in such proportions as the Authority may direct. (7) Before exercising its powers under subsection (1) above in a case falling within subsection (2)(b) above, the Authority shall inform the society of the action which it proposes to take and

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the grounds for that action, and the society shall, within 14 days of receiving the information, be entitled to give the Authority an explanatory statement in writing by way of a reply. (8) Where the Authority proposes to exercise its powers under subsection (1) above in a case falling within subsection (3)(b) above, subsection (7) above shall apply in relation to the subsidiary or jointly controlled body as it applies in relation to the society. (9) Inspectors appointed under this section shall, in addition to having the powers which are necessary for or incidental to the discharge of their functions under this section, have the power specified in section 67 below. (10) Where a special meeting is called under this section— (a) the Authority may— (i) direct at what time and place the meeting is to be held and what matters are to be discussed and determined at the meeting; and (ii) direct which members may attend and vote at the meeting. and may give such other directions as it thinks fit with respect to the call, holding and conduct of the meeting; (b) the Authority may appoint a person to be chairman at the meeting or, in default of such an appointment, the meeting may appoint its own chairman; (c) the meeting shall have all the powers of a meeting called according to the rules of the society; and the provisions of this subsection and any direction given under it shall have effect notwithstanding anything in the rules of the society. (11) In this section ‘‘the corresponding Companies Act limit’’, in relation to security for the payment of the costs of an investigation, is £5,000 or such other sum as is specified for the time being in an order under section 431(4) of the Companies Act 1985 or Article 424(4) of the Companies (Northern Ireland) Order 1986. Notes Section 66, most subsections, were modified by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 80 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Inspections: supplementary provision 67.—(1) In this section— ‘‘the body under investigation’’ means— (i) the friendly society whose affairs are the subject of the investigation, or (ii) the friendly society, and each subsidiary of or body jointly controlled by the society, whose affairs are so subject, as the case may be; ‘‘the inspectors’’ means the person appointed by the Authority under section 66 above to conduct the investigation; ‘‘the investigation’’ means the investigation under section 66 above which the inspectors have been appointed to hold; and references to officers, employees or agents include past, as well as present, officers, employees or agents; and ‘‘agents’’, in relation to a friendly society or any subsidiary of or body jointly controlled by an incorporated friendly society, includes its bankers, accountants, solicitors and auditors and the appropriate actuary. (2) When the inspectors have been appointed, it is the duty of all officers, employees and agents of the body under investigation— (a) to produce to the inspectors all documents and material of or relating to the body under investigation which are in their custody or power; (b) to attend before the inspectors when required to do so; and (c) otherwise to give the inspectors all assistance in connection with the investigation which they are reasonably able to give. (3) If the inspectors consider that a person other than an officer, employee or agent of the body under investigation is or may be in possession of information concerning its affairs, they may require that person to produce to them any documents or material in his custody or power relating to the body under investigation, to attend before them and otherwise to give them all

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assistance in connection with the investigation which he is reasonably able to give; and it is that person’s duty to comply with the requirement. (4) The inspectors may examine on oath the officers, employees and agents of the body under investigation, and any such person as is mentioned in subsection (3) above, in relation to the affairs of the body under investigation, and may administer an oath accordingly. (5) An answer given by a person to a question put to him under the foregoing provisions of this section may be used in evidence against him. (6) If an officer, employee or agent of the body under investigation or any such person as is mentioned in subsection (3) above— (a) refuses to produce any document or material which it is his duty under this section to produce; or (b) refuses to attend before the inspectors when required to do so; or (c) refuses to answer any question put to him by the inspectors with respect to the affairs of the body under investigation, the inspectors may certify the refusal in writing to the High Court; and the court may thereupon enquire into the case and, after hearing any witnesses who may be produced against or on behalf of the alleged offender and after hearing any statement which may be offered in defence, may punish the offender in like manner as if he had been guilty of contempt of the court. (7) The inspectors may, and if so directed by the Authority shall, make interim reports to the Authority, but they may at any time in the course of the investigation, without making an interim report, inform the Authority of matters coming to their knowledge as a result of the investigation tending to show that an offence has been committed. (8) The Authority may, if it thinks fit— (a) send a copy of any report made by the inspectors to the body whose affairs are or were the subject of the investigation; (b) furnish a copy of any such report on request to— (i) any member of the body whose affairs are or were the subject of the investigation; (ii) the auditors of that body; (iii) any person whose conduct is referred to in the report; (iv) any other person whose financial interests appear to the Authority to be affected by matters dealt with in the report, whether as creditor or otherwise; and (c) cause the report to be printed and published. (8A) The Authority may charge a reasonable fee for furnishing to any person a copy of a report under subsection (8)(b) above. (9) A copy of a report of inspectors appointed under section 66 above to hold an investigation under that section, certified by the Authority to be a true copy, is admissible in any legal proceedings as evidence of the opinion of the inspectors in relation to any matter contained in the report; and a document purporting to be such a certificate shall be received in evidence and be deemed to be such a certificate, unless the contrary is proved. (10) The Authority shall be entitled to be repaid the expenses of the investigation defrayed by it under section 66(6)(d) above as provided in the following paragraph, that is to say— (a) by the applicants for the investigation, to such extent (if any) as the Authority may direct; (b) by any body whose affairs were the subject of the investigation, to such extent (if any) as the Authority may direct; (c) by any person convicted of an offence in proceedings instituted as a result of the investigation, to such extent (if any) as the court by or before which he was convicted may order; and a person liable under any one of paragraphs (a) to (c) above is entitled to contribution from any other person liable under the same paragraph, according to the amount of their respective liabilities under it. (10A) In relation to a friendly society to which section 37(2) or (3) above applies— (a) any reference in subsection (1), (2) or (4) above to officers shall be read as including a reference to controllers or managers; and (b) any reference in subsection (3) or (6) above to an officer shall be read as including a reference to a controller or manager.

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(11) In the application of this section to a friendly society whose registered office is in Scotland or Northern Ireland, any reference to the High Court shall be read as a reference to the Court of Session or, as the case may be, to the High Court in Northern Ireland. Notes Most subsections modified by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 81 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (8A) was inserted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 81, and a consequential amendment was made to subs (8). Subs (10A) was inserted by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, reg 20.

Information for members 67A. [deleted] 67B. [deleted] 67C. [deleted] 67D. [deleted] Notes Sections 67A to 67D were deleted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 82 to reflect the transfer of functions under the Financial Services and Markets Act 2000. PA RT V I ACCOUNTS AND AUDIT

Records Accounting records 68.—(1) Every friendly society and every registered branch shall— (a) cause accounting records to be kept. (2) The accounting records must be sufficient to show and explain the transactions of the society or branch and— (a) disclose, with reasonable accuracy and promptness, the financial position of the society or branch at any time; (b) enable the committee of management properly to discharge the duties imposed on them by or under this Act or the 1974 Act (and, where applicable, Article 4 of the IAS Regulation) and their function of direction of the affairs of the society or branch; and (c) enable the society or branch properly to discharge the duties imposed on it by or under this Act or the 1974 Act (and, where applicable, Article 4 of the IAS Regulation), and must be kept in an orderly manner. (3) The accounting records shall in particular contain— (a) entries from day to day of all sums received and paid by the society or branch and the matters in respect of which they are received or paid; (b) entries from day to day of every transaction entered into by the society or branch which will or there is reasonable ground for expecting may give rise to liabilities or assets of the society or branch other than insignificant assets or liabilities in respect of the management of the society or branch; and (c) a record of the assets and liabilities of the society or branch. (8) The accounting records shall be kept at the registered office of the society or branch or at such other place or places as the committee of management thinks fit, and shall at all times be open to inspection by the committee of management. (9) Accounting records shall be preserved for 6 years from the date on which they were made.

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(10) Where an incorporated friendly society has subsidiaries or jointly controls other bodies, the society shall also secure that such accounting records are kept by them as will enable the society to comply with the requirements of this section in relation to the business of the society and those subsidiaries and jointly controlled bodies. Notes The heading and cross-heading were modified by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 83 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (1)(b) was deleted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 83 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (2)(b) and (c) were amended by the The Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, Schedule paragraph 1. Subs (4) was deleted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 83 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (5) was deleted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 83 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (6) was deleted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 83 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (7) was deleted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 83 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (10) was modified by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 83 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (11) was deleted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 83 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Annual accounts of friendly societies and registered branches Duty to prepare accounts 69.—[deleted by The Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, art 2.] Duty to prepare individual accounts 69A.—(1) The committee of management of every friendly society or registered branch must prepare accounts for the society or branch for each of its financial years.Those accounts are referred to in this Part as the society’s or branch’s ‘‘individual accounts’’. (2) The individual accounts of a friendly society or registered branch of a society may be prepared— (a) in accordance with section 69B (‘‘Friendly Societies Act individual accounts’’), or (b) in accordance with international accounting standards (‘‘IAS individual accounts’’). This subsection is subject to subsection (3) and section 69I (consistency of accounts). (3) After the first financial year in which the committee of management of a friendly society or registered branch prepares IAS individual accounts (‘‘the first IAS year’’), all subsequent individual accounts of the society or branch must be prepared in accordance with international accounting standards unless there is a relevant change of circumstance. (4) There is a relevant change of circumstance if, at any time during or after the first IAS year— (a) the society or branch becomes a subsidiary undertaking of another undertaking and individual accounts for that undertaking are not prepared in accordance with international accounting standards, (b) the society or branch ceases to be a society or part of a society with securities admitted to trading on a regulated market, or

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(c) a parent undertaking of the society or branch ceases to be an undertaking with securities admitted to trading on a regulated market. In this subsection ‘‘regulated market’’ has the same meaning as it has in Council Directive 93/22/EEC on investment services in the securities field. (5) If, having changed to preparing Friendly Societies Act individual accounts following a relevant change of circumstance, the committee of management again prepares IAS individual accounts for the society or branch, subsections (3) and (4) apply again as if the first financial year for which such accounts are again prepared were the first IAS year. Notes Sections 69A to 69I were inserted by the The Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, art 2.

Friendly Societies Act individual accounts 69B.—(1) Friendly Societies Act individual accounts must comprise— (a) a balance sheet as at the last day of the financial year, and (b) an income and expenditure account. (2) The balance sheet must give a true and fair view of the state of affairs of the society or branch as at the end of the financial year; and the income and expenditure account must give a true and fair view of the income and expenditure of the society or branch for the financial year. (3) Friendly Societies Act individual accounts must comply with the requirements of regulations made under section 69C as to the form and content of the balance sheet and income and expenditure account and additional information to be provided by way of notes to the accounts or otherwise. (4) Where compliance with the provisions of those regulations, and the other provisions of this Act as to the matters to be included in a society’s or branch’s individual accounts or in notes to those accounts, would not be sufficient to give a true and fair view, the necessary additional information must be given in the accounts or in a note to them. (5) If in special circumstances compliance with any of those provisions is inconsistent with the requirement to give a true and fair view, the committee of management must depart from that provision to the extent necessary to give a true and fair view. (6) Particulars of any such departure, the reasons for it and its effect must be given in a note to the accounts. (7) The Treasury may by regulations— (a) add to the classes of documents to be comprised in a society’s or branch’s Friendly Societies Act individual accounts under subsection (1); (b) make provision as to the matters to be included in any document so added; (c) modify the requirements of this Part as to the matters to be stated in any document comprised in the society’s or branch’s Friendly Societies Act individual accounts; (d) reduce the classes of documents to be comprised in a society’s or branch’s Friendly Societies Act individual accounts. (8) Regulations under subsection (7)— (a) may make different provision for different cases, and (b) may include incidental and supplementary provisions. Notes Sections 69A to 69I were inserted by the The Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, art 2.

Form and contents of Friendly Societies Act individual accounts 69C.—(1) The Treasury must by regulations make provision with respect to the form and content of Friendly Societies Act individual accounts. (2) The Treasury may by regulations make provision with respect to additional information to be contained in Friendly Societies Act individual accounts, whether in the form of notes or otherwise. (3) The regulations may, in particular—

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(a) prescribe accounting principles and rules; (b) require corresponding information for a preceding financial year; (c) make different ‘provision for different descriptions of society or branch. Notes Sections 69A to 69I were inserted by the The Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, art 2.

IAS individual accounts 69D. Where the committee of management of a friendly society prepare IAS individual accounts for a society or branch, it must state in the notes to those accounts that the accounts have been prepared in accordance with international accounting standards. Notes Sections 69A to 69I were inserted by the The Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, art 2.

Duty to prepare group accounts 69E.—(1) If at the end of a financial year an incorporated friendly society has subsidiary undertakings, the committee of management, in addition to preparing individual accounts for the year, must prepare consolidated accounts for the year for the society and those undertakings taken as a whole, except as provided by regulations under subsection (7). Those accounts are referred to in this Part as the society’s ‘‘group accounts’’. (2) Certain friendly societies are obliged by Article 4 of the IAS Regulation to prepare their group accounts in accordance with international accounting standards (‘‘IAS group accounts’’). (3) The group accounts of other friendly societies may be prepared— (a) in accordance with section 69F (‘‘Friendly Societies Act group accounts’’), or (b) in accordance with international accounting standards (‘‘IAS group accounts’’). This subsection is subject to the following provisions of this section and section 69I (consistency of accounts). (4) After the first financial year in which the committee of management of a friendly society prepares IAS group accounts (‘‘the first IAS year’’), all subsequent group accounts of the society must be prepared in accordance with international accounting standards unless there is a relevant change of circumstance. (5) There is a relevant change of circumstance if, at any time during or after the first IAS year— (a) the society becomes a subsidiary undertaking of another undertaking and accounts for that undertaking and its subsidiary undertakings (taken as a whole) are not prepared in accordance with international accounting standards, (b) the society ceases to be a society with securities admitted to trading on a regulated market, or (c) a parent undertaking of the society ceases to be an undertaking with securities admitted to trading on a regulated market. In this subsection ‘‘regulated market’’ has the same meaning as it has in Council Directive 93/22/EEC on investment services in the securities field. (6) If, having changed to preparing Friendly Societies Act group accounts following a relevant change of circumstance, the committee of management again prepares IAS group accounts for the society, subsections (4) and (5) apply again as if the first financial year for which such accounts are again prepared were the first IAS year. (7) The Treasury may by regulations exempt specified descriptions of incorporated friendly societies with subsidiaries from any duty to prepare group accounts. (8) Regulations under subsection (7) may exempt societies by reference to any criterion and may make different provision for different descriptions of societies.

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Notes Sections 69A to 69I were inserted by the The Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, art 2.

Friendly Societies Act group accounts 69F.—(1) Friendly Societies Act group accounts must comprise— (a) a balance sheet dealing with the state of affairs of the society and its subsidiary undertakings; (b) an income and expenditure account showing the income and expenditure of the society and its subsidiary undertakings. (2) Friendly Societies Act group accounts must give a true and fair view of the state of affairs as at the end of the financial year, and the income and expenditure for the financial year, of the society and the subsidiary undertakings included in the group accounts as a whole, so far as concerns the members of the society. (3) Friendly Societies Act group accounts must comply with the requirements of regulations made under section 69I as to the form and content of the group accounts and additional information to be provided by way of notes to the accounts or otherwise. (4) Where compliance with the provisions of those regulations, and the other provisions of this Act as to the matters to be included in a society’s group accounts or in notes to those accounts, would not be sufficient to give a true and fair view, the necessary additional information must be given in the accounts or in a note to them. (5) If in special circumstances compliance with any of those provisions is inconsistent with the requirement to give a true and fair view, the committee of management must depart from that provision to the extent necessary to give a true and fair view. (6) Particulars of any such departure, the reasons for it and its effect must be given in a note to the accounts. (7) The Treasury may by regulations— (a) add to the classes of documents to be comprised in a society’s Friendly Societies Act group accounts under subsection (1); (b) make provision as to the matters to be included in any document so added; (c) modify the requirements of this Part as to the matters to be stated in any document comprised in the society’s Friendly Societies Act group accounts; and (d) reduce the classes of documents to be comprised in a society’s Friendly Societies Act group accounts. (8) Regulations under subsection (7)— (a) may make different provision for different descriptions of society; and (b) may include incidental and supplementary provisions. Notes Sections 69A to 69I were inserted by the The Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, art 2.

Form and content of Friendly Societies Act group accounts 69G.—(1) The Treasury must by regulations make provision with respect to the form and content of Friendly Societies Act group accounts. (2) The Treasury may by regulations make provision with respect to additional information to be contained in Friendly Societies Act group accounts, whether in the form of notes or otherwise. (3) The regulations may, in particular— (a) prescribe accounting principles and rules; (b) require corresponding information for a preceding financial year; and (c) make different provision for different descriptions of society. Notes Sections 69A to 69I were inserted by the The Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, art 2.

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IAS group accounts 69H. Where the committee of management of a friendly society prepares IAS group accounts, it must state in the notes to those accounts that the accounts have been prepared in accordance with international accounting standards. Notes Sections 69A to 69I were inserted by the The Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, art 2.

Consistency of accounts 69I.—(1) The committee of management of a friendly society that prepares group accounts must secure that the individual accounts of— (a) the friendly society, (b) each of its subsidiary undertakings, and (c) each of its registered branches, are all prepared using the same financial reporting framework, except to the extent that in their opinion there are good reasons for not doing so. (2) Subsection (1) only applies to accounts of subsidiary undertakings which are— (a) required to be prepared under Part 7 of the Companies Act 1985[2], or (b) required to be prepared under Part 6 of this Act. (3) Subsection (1) does not require accounts of undertakings that are charities to be prepared using the same financial reporting framework as accounts of undertakings which are not charities. (4) Subsection (1)(a) does not apply where the committee of management of a friendly society prepares IAS group accounts and IAS individual accounts. (5) The committee of management of a society which has subsidiary undertakings must ensure that, except where in its opinion there are good reasons against it, the financial year of each of its subsidiary undertakings coincides with the society’s own financial year. Notes Sections 69A to 69I were inserted by the Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, art 2.

Disclosures relating to members of the committee of management and employees of the society 69J.—(1) The information specified in Schedule 13D must be given in notes to a friendly society’s or a registered branch’s annual accounts, subject to the provisions of subsection (5). (2) In that Schedule— Part 1 relates to emoluments and other benefits of members of the committee of management and others and to loans and other dealings in favour of members of the committee and connected persons; and Part 2 relates to information about the employees of a society. (3) It is the duty of any member of the committee of management, and any person who has been at any time in the preceding five years a member of the committee, to give notice to the society of such matters relating to himself as may be necessary for the purposes of Part 1 of Schedule 13D. (4) A person who makes default in complying with subsection (3) commits an offence and is liable on summary conviction to a fine not exceeding level 3 on the standard scale. (5) Paragraphs 11 and 13 of Schedule 13D do not apply to non-directive friendly societies or their registered branches. (6) The annual accounts of a friendly society which is required to produce group accounts under section 69E must include the material specified by paragraphs 11 to 13 not only in respect of the society but also in respect of the society and its subsidiaries in combination. (7) The Treasury may, by order, modify the provisions of Schedule 13D. (8) An order under this section may—

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(a) make consequential amendments or repeals of other provisions of this Act; (b) make such transitional or saving provisions as appear to the Treasury to be necessary or expedient; (c) make different provision for different cases. Notes Sections 69J and 69K were inserted by the Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, paragraph 2 of the Schedule.

Disclosures about related undertakings 69K.—(1) The information specified in Schedule 13E[4] must be given in notes to a friendly society’s or a registered branch’s annual accounts. (2) In the case of a friendly society whose committee of management is not required to prepare consolidated accounts, the information specified in Part 1 of that Schedule must be given. (3) In the case of a friendly society whose committee of management is required to prepare consolidated accounts, the information specified in Part 2 of that Schedule must be given. (4) The Treasury may, by order, modify the provisions of Schedule 13E. (5) An order under this section may also— (a) make consequential amendments of or repeals in other provisions of this Act; (b) make such transitional or saving provisions as appear to the Treasury to be necessary or expedient; (c) make different provision for different cases Notes Sections 69J and 69K were inserted by the Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, paragraph 2 of the Schedule.

Contents and form of annual account 70.—[deleted by The Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, art 2.] Committee of management’s annual report Report on a friendly society’s affairs by the committee of management 71.—(1) The committee of management of a friendly society shall prepare for submission to the annual general meeting of the society a report on the activities of the society containing— (a) a fair review of the business of the society, its subsidiary undertakings and bodies that it jointly controls (if any) complying with section 71A; (aa) a description of the principal risks and uncertainties facing the society, its subsidiary undertakings and bodies that it jointly controls (if any); (b) such information relating to such aspects of the activities of the society as may be prescribed by regulations made by the Treasury; and (c) a statement whether any and, if so, what activities carried on during the year by the society are believed to have been carried on outside its powers. (1A) If the friendly society has subsidiary undertakings, the report may, where appropriate, give greater emphasis to those matters which are significant to the society and its subsidiary undertakings taken as a whole. (2) Where an incorporated friendly society has subsidiaries or jointly controls other bodies, the report shall— (a) contain such information relating to such aspects of the activities of any subsidiaries or bodies which it jointly controls as may be prescribed by regulations made by the Treasury; (b) [omitted]; and

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(c) contain a statement whether any and, if so, what activities carried on during the year by any of its subsidiaries or by any body which it jointly controls are believed to have been carried on outside the powers of the subsidiary or jointly controlled body. (3) If a report under this section does not contain the prescribed information or the information in the report is not given in accordance with the regulations, each member of the committee of management shall be guilty of an offence and liable— (a) on conviction on indictment, to a fine; and (b) on summary conviction, to a fine not exceeding the statutory maximum. Notes Subs (1)(a) was substituted the Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, art 3. Subs (1)(aa) was inserted by the Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, art 3. Subs (1)(b) was modified by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 85 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (1A) was inserted by the Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, art 3. Subs (2)(a) was modified by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 85 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (2)(b) was omitted by the Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, art 3.

Business review 71A.—(1) The review required for the purposes of section 71(1)(a) is a balanced and comprehensive analysis of— (a) the development and performance of the business of the friendly society, its subsidiary undertakings and bodies that it jointly controls (if any) during the financial year, and (b) the position of the friendly society, its subsidiary undertakings and bodies that it jointly controls (if any) at the end of that year, consistent with the size and complexity of the business. (2) The review must, to the extent necessary for an understanding of the development, performance or position of the business of the society, its subsidiary undertakings and bodies that it jointly controls (if any), include— (a) analysis using financial key performance indicators, and (b) where appropriate, analysis using other key performance indicators, including information relating to environmental matters and employee matters. (3) The review must, where appropriate, include references to additional explanations of amounts included in the annual accounts of the society. (4) In this section ‘‘key performance indicators’’ means factors by reference to which the development, performance or position of the business of the society, any subsidiary undertakings it has and any bodies that it jointly controls, can be measured effectively. Notes Section 71A was inserted by the Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, art 4.

Auditors Auditors’ appointment, tenure, qualifications, etc 72.—(1) Every friendly society and every registered branch shall at each annual general meeting appoint an auditor or auditors to hold office from the conclusion of that meeting until the conclusion of the next annual general meeting. (2) Schedule 14 to this Act has effect as regards— (a) the appointment of auditors;

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(b) their qualifications and grounds of disqualification; (c) the resignation and removal of auditors; and (d) the remuneration of auditors. Auditors’ report on annual accounts Auditor’s report 73.—(1) The auditors of a friendly society or of a registered branch shall make a report to the members on the annual accounts which are to be laid before the society or branch at the annual general meeting during their tenure of office. (2) The auditors of a friendly society or registered branch shall, in preparing their report, carry out such investigations as will enable them to form an opinion as to— (a) whether proper accounting records have been kept under section 68 above; (c) whether the annual accounts are in agreement with the accounting records; and, if the auditors are of the opinion that proper accounting records have not been kept, they shall state that fact in their report. (3) If the auditors fail to obtain all the information and explanations and the access to documents which, to the best of their knowledge and belief, are necessary for the purposes of their audit, they shall state that fact in their report. (4) [omitted] (4A) The auditors shall, in their report,— (a) state whether in their opinion the information given in the report of the committee of management for the financial year for which the annual accounts are prepared is consistent with those accounts; and (b) state whether in their opinion that report has been prepared in accordance with this Act and the regulations made under it. (5) [omitted] (5A) The auditors shall, in their report, include— (a) an introduction identifying the annual accounts that are the subject of the audit and the financial reporting framework that has been applied in their preparation; (b) a description of the scope of the audit identifying the auditing standards in accordance with which the audit was conducted. (5B) The auditors shall, in their report, state clearly whether in the auditors’ opinion the annual accounts have been properly prepared in accordance with the requirements of this Act (and, where applicable, Article 4 of the IAS Regulation). (5C) The auditors shall, in their report, state in particular whether the annual accounts give a true and fair view in accordance with the relevant financial reporting framework— (a) in the case of an individual balance sheet, of the state of affairs of the society or branch as at the end of the financial year; (b) in the case of an individual income and expenditure account, of the income and expenditure of the society or branch for the financial year; (c) in the case of the group accounts of an incorporated friendly society, of the state of affairs as at the end of the financial year and of the income and expenditure for the financial year of the society and the subsidiary undertakings dealt with in the group accounts, so far as concerns members of the society. (5D) The auditors’ report— (a) shall be either unqualified or qualified, and (b) shall include a reference to any matters to which the auditors wish to draw attention by way of emphasis without qualifying the report. (6) [omitted] (7) [omitted] Notes In addition to reporting to the members at the annual general meeting, the auditor must report to the Authority as regards each financial year of the friendly society: Friendly Societies Act 1992, s 79. Subs (2)(b) was deleted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 87 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

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Subs (4A) was substituted for subs (4) by the Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, art 5. Subsections (5A)–(5D) were substituted for subs (5) by the Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, art 5. Subsections (6) and (7) were omitted by the Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, art 5.

Signature of auditors’ report 74.—(1) The auditors’ report to the members of a friendly society or registered branch shall state the names of the auditors and be signed and dated by them. (2) The copies of the auditors’ report which are sent to the Authority under section 78(1) or (2) below shall be signed by the auditors. (3) Every copy of the auditors’ report which is laid before the society or branch in general meeting, sent to Authority or is otherwise circulated, published or issued shall state the names of the auditors. (4) If a copy of the auditors’ report— (a) is laid before the society or branch, sent to the Authority or otherwise circulated, published or issued, without the required statement of the auditors’ names; or (b) is sent to Authority without being signed as required by this section, the society or branch and every officer of it who is in default is guilty of an offence and liable on conviction on indictment to a fine. (5) References in this section to signature by the auditors are, where the office of auditor is held by a body corporate or partnership, to signature in the name of the body corporate or partnership by a person authorised to sign on its behalf. Notes Subs (1) was amended by the Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, art 6. Subss (2), (3), (4)(a) and (4)(b) were modified by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 88 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Auditors’ rights to information and to attend meetings 75.—(1) The auditors of a friendly society are entitled— (a) to access at all times to the books, accounts and vouchers of the society; (b) to require from the officers of the society such information and explanations as they think necessary for the performance of their duties as auditors; (c) to receive from the society— (i) notice of any general meeting of the society and of any matter relating to the business of such a meeting of which notice is given (by whatever means) to the society’s members; and (ii) copies of any communications sent to the society’s members with respect to any such meeting; and (d) to attend any general meeting of the society and to be heard on any part of the business of the meeting which concerns them as auditors; and the auditors of a registered branch have the corresponding rights to those specified in paragraphs (a) to (d) above, with the substitution for references to the society of references to the branch. (2) The right to attend or be heard at a meeting is exercisable in the case of a body corporate or partnership by an individual authorised by it in writing to act as its representative at the meeting. (3) An officer of a friendly society is guilty of an offence if he knowingly or recklessly makes to the society’s auditors a statement (whether written or oral) which— (a) conveys or purports to convey any information or explanations which the auditors require, or are entitled to require, as auditors of the society; and (b) is misleading, false or deceptive in a material particular.

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(4) An officer of a registered branch is guilty of an offence if he knowingly or recklessly makes to the auditors of the branch a statement (whether written or oral) which— (a) conveys or purports to convey any information or explanations which the auditors require, or are entitled to require, as auditors of the branch; and (b) is misleading, false or deceptive in a material particular. (5) A person guilty of an offence under subsection (3) or (4) above is liable— (a) on conviction on indictment, to imprisonment for a term not exceeding 2 years, or to a fine, or to both; and (b) on summary conviction, to imprisonment for a term not exceeding 6 months or to a fine not exceeding the statutory maximum, or to both. (6) It shall be the duty of a subsidiary of a friendly society which is— (a) a company within the meaning of the Companies Act 1985 incorporated in Great Britain; or (b) a company within the meaning of the Companies (Northern Ireland) Order 1986 incorporated in Northern Ireland, and of the auditors of such a subsidiary to give to the auditors of the society such information and explanations as those auditors may reasonably require for the purposes of their duties as auditors of that society. (7) If— (a) a subsidiary to which subsection (6) above applies fails to comply with that subsection; or (b) an auditor of such a subsidiary fails without reasonable excuse to comply with that subsection, the subsidiary or auditor is guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale. (8) An incorporated friendly society having a subsidiary to which subsection (6) above does not apply shall, if required by its auditors to do so, take all such steps as are reasonably open to it to obtain from the subsidiary such information and explanations as they may reasonably require for the purposes of their duties as auditors of that society. (9) If an incorporated friendly society fails to comply with subsection (8) above, it is guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale. Approval and signing of accounts 76.—(1) The annual accounts of a friendly society or a registered branch shall be approved by the committee of management. (2) The accounts so approved shall be signed by the secretary of the society or branch; and the signature shall be on the balance sheet. (3) Every copy of the balance sheet which is laid before the society or branch in general meeting, or is otherwise circulated, published or issued, shall state the name of the secretary of the society or branch. (4) The copy of the balance sheet of a friendly society or a registered branch which is sent to the Authority under section 78 below shall be signed by the secretary of the society or branch. (5) If annual accounts of a society or branch are approved which do not comply with the requirements of this Act, every member of the committee of management who is party to their approval and who knows that they do not comply or is reckless as to whether they comply is guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale. For this purpose every member of the committee at the time the accounts are approved shall be taken to be a party to their approval unless he shows that he took all reasonable steps to prevent their being approved. (6) If a copy of the balance sheet of a society or branch— (a) is laid before the society or branch, or otherwise circulated, published or issued, without the balance sheet having been signed as required by this section or without the required statement of the signatory’s name being included; or (b) is sent to the Authority without being signed as required by this section,

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the society or branch and every officer of it who is in default is guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the standard scale. Notes Subss (4) and (6) (b) were modified by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 89 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Information on appointed actuary to be annexed to balance sheet 77.—(1) This section applies to any copy of a friendly society’s balance sheet which— (a) is furnished to the Authority under section 78 below or at its request; (b) is laid before the society at its annual general meeting; or (c) is furnished to a member at his request. (2) Subject to the provisions of this section, a friendly society shall annex to each copy of its balance sheet to which this section applies as respects every person who, at any time during the financial year to which the balance sheet relates, was its appointed actuary, a statement of the following information— (a) whether the actuary was a member of the society or any subsidiary of the society at any time during that year; (b) particulars of any pecuniary interest of the actuary in any transaction between the actuary and the society or any subsidiary of the society and subsisting at any time during that year or, in the case of transactions of a minor character, a general description of such interests; (c) the aggregate amount of any remuneration and the value of any other benefits other than a pension or other future or contingent benefit under any contract of service of the actuary with, or contract for services by the actuary to, the society or any subsidiary of the society, receivable by the actuary in respect of any period in that year; and (d) a general description of any other pecuniary benefit (including any pension and other future contingent benefit) received by the actuary from the society or any subsidiary of the society in that year or receivable by him from the society or any such subsidiary, together with a statement that the society has made a request to the actuary to furnish to it the particulars specified in this subsection and identifying any particulars furnished pursuant to the request. (3) Subsection (2) above applies in relation— (a) to the actuary’s spouse or civil partner; (b) to a partner of the actuary; (c) to any child or step-child of the actuary who is under 18; (d) to any person (other than the society concerned or any subsidiary of that society) of whom the actuary is an employee; and (e) to any body corporate (other than the society concerned or any subsidiary of that society) of which the actuary is a director or which is controlled by him, as it applies in relation to the actuary. (4) For the purposes of subsection (3) above, an actuary shall be taken to control a body corporate if he is a person— (a) in accordance with whose directions or instructions the directors of that body corporate or of a body corporate of which it is a subsidiary are accustomed to act; or (b) who, either alone or with any other person falling within that subsection, is entitled to exercise or controls the exercise of, one third or more of the voting power at any general meeting of the body corporate or of a body corporate of which it is a subsidiary. (5) If a friendly society fails to annex the statement required by subsection (2) above to a copy of its balance sheet to which this section applies, the society concerned shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the standard scale.

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Notes Subs (1)(a) was modified by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 90 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (3)(a) amended by the Civil Partnership Act 2004, Schedule 27, paragraph 141.

Laying and furnishing of accounts and reports Laying and furnishing of accounts and reports 78.—(1) The committee of management of a friendly society shall in each year— (a) lay before the society, at the annual general meeting, copies of the annual accounts for the last financial year, the report of the committee of management for that year and the auditors’ report on those accounts; and (b) send to the Authority, not later than 30th June or 14 days before the annual general meeting, whichever is earlier, two copies of those accounts and reports. (2) The committee of management of a registered branch shall in each year— (a) lay before the branch, at the annual general meeting, copies of the annual accounts for the last financial year and the auditors’ report on those accounts; and (b) send to the Authority, not later than 30th June or 14 days before the annual general meeting, whichever is earlier, two copies of those accounts and that report. (3) Every friendly society shall, as from the date by which at the latest its committee of management is required by subsection (1) above to send them to the Authority— (a) make copies of the annual accounts, the report of the committee of management and the auditors’ report available free of charge to members of the society at every office of the society; and (b) send, free of charge, copies of those documents to any member of the society who demands them; and that duty shall cease, as respects those accounts, when the society comes to be under the same duty in respect of the accounts for the next financial year. (4) Every registered branch shall, as from the date by which at the latest its committee of management is required by subsection (2) above to send them to the Authority— (a) make copies of the annual accounts and the auditors’ report available free of charge to members of the branch at every office of the branch; and (b) send, free of charge, copies of those documents to any member of the branch who demands them; and that duty shall cease, as respects those accounts, when the branch comes to be under the same duty in respect of the accounts for the next financial year. (5) If default is made in complying with subsection (1) or (2) above, every person who was a member of the committee of management of the society or, as the case may be, the branch, at any time during the relevant period shall be guilty of an offence and liable on summary conviction— (a) to a fine not exceeding level 5 on the standard scale; and (b) in the case of a continuing offence, to an additional fine not exceeding one-tenth of that level for every day during which the offence continues. (6) If, on demand made of it under subsection (3) or (4) above, a friendly society or registered branch fails, in accordance with that subsection, to make available or, as the case may be, within 7 days of the demand, to send to a person a copy of the annual accounts, the society or branch shall be guilty of an offence and liable on summary conviction— (a) to a fine not exceeding level 3 on the standard scale; and (b) in the case of a continuing offence, to an additional fine not exceeding one-tenth of that level for every day during which the offence continues. (7) In subsection (5) above ‘‘the relevant period’’ means the period beginning at the end of the last financial year and ending with the date which falls 14 days before the annual general meeting following the end of that year. (8) The Authority shall keep one of the copies of document received by it from a friendly society under subsection (1) above in the public file of the society.

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Notes Subss (1) and (2) new text was substituted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 91 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subss (3), (4) and (8) were amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 91 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Interpretation of Part 6 78A.—(1) In this Part— ‘‘annual accounts’’, in relation to a friendly society or registered branch, means— (a) the individual accounts required by section 69A, and (b) any group accounts required by section 69E, together with the notes to those accounts; ‘‘IAS accounts’’ means IAS individual accounts or IAS group accounts; ‘‘IAS Regulation’’ means EC Regulation No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards [5]; ‘‘income and expenditure account’’, in relation to a friendly society or registered branch which prepares IAS accounts, includes an income statement or other equivalent financial statement required to be prepared by international accounting standards; ‘‘international accounting standards’’ means the international accounting standards, within the meaning of the IAS Regulation, adopted from time to time by the European Commission in accordance with the IAS Regulation; ‘‘non-directive friendly society’’ means a registered friendly society— (a) to which subsections (2) and (3) of section 37 (restriction of combinations of business do not apply; and (b) which does not carry on reinsurance business; ‘‘parent undertaking’’ and ‘‘subsidiary undertaking’’ shall be construed in accordance with the provisions of section 258 of the Companies Act 1985, read in conjunction with sections 259 and 260 of, and Schedule 10A to, that Act. (2) References in this Part to accounts giving a ‘‘true and fair view’’ are references— (a) in the case of Friendly Societies Act individual accounts, to the requirement under section 69B that such accounts give a true and fair view; (b) in the case of Friendly Societies Act group accounts, to the requirement under section 69F that such accounts give a true and fair view; and (c) in the case of IAS accounts, to the requirement under international accounting standards that such accounts achieve a fair presentation. Notes Section 78A was inserted by the Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, paragraph 3 of the Schedule.

Auditors’ duties to Commission and related rights 79.—[deleted] Notes Section 79 was deleted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 92 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

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Disputes relating to friendly societies Determination of certain disputes by arbitration 80.—(1) Subject to the following provisions of this section, any dispute between— (a) a member or person claiming through a member or under the rules of a friendly society or registered branch and the society or branch; (b) a person aggrieved who has ceased to be a member of a friendly society or registered branch, or a person claiming through such a person, and the society or branch or an officer of the society or branch; (c) a registered branch and the society of which it is a registered branch; (d) an officer of a registered branch and the society of which it is a registered branch; or (e) two or more registered branches, or any of their officers, shall be determined by arbitration in the manner directed by the rules of the society or branch. (1A) Nothing in subsection (1) above or in rules of a kind mentioned in that subsection prevents any person, in accordance with the scheme for which Part XVI of the Financial Services and Markets Act 2000 provides (the ombudsman scheme), from having a complaint dealt with under such a scheme before, or instead of, arbitration. (2) An application for the enforcement of an award on an arbitration under this section may be made to the county court. (3), (4) (Apply to Scotland only.) (5) If the parties to a dispute of a description specified in subsection (1) above agree that it shall be determined by the county court or, in Scotland, the sheriff, it may be so determined instead of being determined by arbitration under this section. (6) If— (a) a party to a dispute of a description specified in subsection (1) above applies to the society or branch in accordance with the rules for determination of the dispute by arbitration; (b) no such determination has been made within the period of 40 days beginning with the day on which the application was made; and (c) either party applies for determination of the dispute by the county court or, in Scotland, the sheriff, the dispute may be so determined. (7) If the society has registered branches— (a) the period of 40 days shall not begin to run until application has been made in succession to all the bodies entitled to determine the dispute by arbitration in accordance with the rules; but (b) the rules may not require a greater delay than 3 months between each successive determination by such a body. (8) In this section ‘‘dispute’’— (a) includes any dispute arising on the question whether a member or person aggrieved is entitled to be, or to continue to be, a member or to be reinstated as a member; but; (b) in the case of a person who has ceased to be a member does not (except as provided in paragraph (a) above) include any dispute other than one on a question which arose while he was a member, or arises out of his membership; and (c) does not include a dispute between parties mentioned in subsection (1)(a) or (b) above which has arisen as a result of and incidentally to a dispute between a member, or person aggrieved who has ceased to be a member and a person claiming through him or under the rules of a society or branch.

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Notes Subs (1A) was inserted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 93 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Complaints by members of friendly societies 81.—(1) Nothing in section 80 above shall affect the power of a friendly society or registered branch— (a) to establish internal procedures for the resolution of complaints; or (b) to make, to join with any other persons in making, or to accede to, schemes for the investigation and settlement by an adjudicator of complaints; but a society or branch may not prevent a member from referring any dispute to arbitration under that section by purporting to require instead the making of a complaint or the acceptance of any determination of a complaint. (2) The Authority shall have the function of promoting the establishment by friendly societies and registered branches of— (a) internal complaints procedures; and (b) schemes for the investigation and settlement of complaints; and, in particular, the Authority may issue such guidance on those matters to friendly societies and registered branches as it thinks fit. (3) In this section— ‘‘accede’’, in relation to a scheme, means assume the obligations and rights of membership of the scheme; ‘‘complaint’’ includes any complaint made by a member about action of a friendly society or branch which constitutes (in relation to that member) unfair treatment, maladministration or breach of any contractual or other duty and causes him pecuniary loss or inconvenience; ‘‘member’’ in relation to a friendly society or branch includes any person who is or was a member of the society or branch or is claiming through a member or under the rules; and ‘‘action’’ includes omissions. Notes Subs (2) was modified by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 94 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Disputes arising out of loans of surplus funds to societies of different description 82.—(1) Where— (a) a registered friendly society or a registered branch (‘‘the lender’’) has made or agreed to make advances under section 50 of the 1974 Act to another society or branch (‘‘the borrower’’); and (b) the lender is by reason of this empowered by the rules of the borrower to take part in the government or control of the borrower, subject to subsection (3) below, section 80 above shall apply in relation to the determination of a dispute between the lender and the borrower relating to such an advance or agreement or to the rights of the lender or an officer of the lender under the rules of the borrower, as if the borrower were a branch of the lender. (2) In the application of section 80 above to any such dispute, references in that section to the rules of the society are references to the rules of the borrower. (3) Section 80 above shall not prevent the bringing of legal proceedings for the determination of any such dispute unless, before the commencement of the proceedings, application has been made for a reference under the rules of the borrower. (4) Proceedings for the determination of any such dispute may be brought in a county court or, in Scotland, before the sheriff, whether or not the court would apart from this subsection have jurisdiction to entertain them.

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(5) The reference in subsection (1) above to advances under section 50 of the 1974 Act includes, in the case of a society formerly registered in Northern Ireland, a reference to advances made under section 42 of the Friendly Societies Act (Northern Ireland) 1970. Disputes relating to industrial and provident societies Disputes relating to industrial and provident societies 83. The following subsection shall be substituted for subsection (2) of section 60 of the Industrial and Provident Societies Act 1965 (decision of dispute)— ‘‘(2) The county court or, in Scotland, the sheriff may determine a dispute in a registered society if— (a) both parties to the dispute consent; or (b) the rules of the society concerned contain no directions as to disputes.’’. Disputes under National Savings Bank Act 1971 and National Debt Act 1972 Disputes under the National Savings Bank Act 1971 and National Debt Act 1972 84.—[repealed by The Finance Act (No 2) 2005, Sched 11 Part V.] PA RT V I I I A M A L G A M AT I O N S , T R A N S F E R S O F E N G A G E M E N T S A N D C O N V E R S I O N O F F R I E N D LY S O C I E T I E S I N T O C O M PA N I E S

Amalgamations Amalgamation of friendly societies 85.—(1) Any two or more friendly societies may, in accordance with this Part of this Act, amalgamate by establishing an incorporated friendly society as their successor. (2) In order to establish a society as their successor, friendly societies proposing to amalgamate must— (a) comply with the applicable requirements of Part I of Schedule 15 to this Act; (b) take the steps required by paragraph 1(2) of Schedule 3 to this Act; (c) each approve the proposed amalgamation and the terms on which it is to take place by special resolution; and (d) obtain the confirmation of the Authority of the amalgamation; and, on obtaining that confirmation, the successor may be registered and incorporated under this Act. (3) If the Authority confirms the amalgamation and the successor society is registered under this Act, the certificate of incorporation issued by the Authority shall specify a date as the transfer date for that amalgamation. (4) On the transfer date— (a) all the property, rights and liabilities of each society participating in the amalgamation shall become by virtue of this subsection the property, rights and liabilities of the successor society; and (b) each such society shall be dissolved; but the transfer from each such society effected by paragraph (a) above shall be deemed to have been effected immediately before the dissolution of that society. (4A) If, on the transfer date, each of the societies whose amalgamation was confirmed by the Authority has a permission under Part IV of the Financial Services and Markets Act 2000, the Authority shall, with effect from that date, give their successor such permission under that Part as it considers appropriate, and shall notify the successor of the permission by giving the successor a decision notice. (4B) Part XXVI of the Financial Services and Markets Act 2000 applies to a decision notice given under this section as it applies to a decision notice given under subsection (9) of section 52 of that Act by virtue of paragraph (a) of that subsection, except that— (a) section 390 (final notices) does not apply, and

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(b) for the purposes of section 391 (publication) the decision notice is to be treated as if it were a final notice rather than a decision notice. (4C) The giving of permission pursuant to subsection (4A) above is to be treated for the purposes of section 55 of the Financial Services and Markets Act 2000 (right to refer matters to the Financial Services and Markets Tribunal) as if it were the determination of an application made by the successor under Part IV of that Act, and Part IX of that Act (hearings and appeals) applies accordingly (but subject to subsection (4D) below). (4D) In the application of Part IX of that Act by virtue of subsection (4C) above, section 133(9) (which prevents the Authority from taking action specified in a decision notice until after any reference and appeal) is omitted. (5) Where a friendly society is dissolved by subsection (4)(b) above, its registration under this Act or the 1974 Act shall be cancelled by the Authority. (6) Schedule 15 to this Act has effect for supplementing this section. Notes Subss (2), (3) and (5) were amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 95 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subss (4A), (4B), (4C) and (4D) were inserted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 95 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Transfers of engagements Transfer of engagements by or to friendly society 86.—(1) A friendly society may, in accordance with this Part of this Act, transfer its engagements to any extent to any of the following persons, that is to say— (a) [repealed]; (b) to an industrial and provident society; (c) to a company within the meaning of the Companies Act 1985 or the Companies (Northern Ireland) Order 1986 incorporated in Great Britain or Northern Ireland; (d) in relation to engagements the fulfilment of which will constitute the carrying on of insurance business, to any other person who is an insurer; (e) in relation to engagements the fulfilment of which will not constitute the carrying on of insurance business, to a person (or body of persons) who is not of a description specified in paragraph (b), (c) or (d) above. (2) A friendly society, in order to transfer any of its engagements, must— (a) comply with the applicable requirements of Part I of Schedule 15 to this Act; (b) resolve to transfer the engagements by special resolution; (c) if the transfer is of some but not all of its engagements, resolve to do so by an affected members’ resolution; (d) record the extent of the transfer as so resolved in an instrument of transfer of engagements; and (e) obtain the confirmation of the Authority of the transfer; and, on obtaining that confirmation, the instrument of transfer of engagements may be registered under subsection (4) below. (3) Where it is proposed to transfer the engagements of one friendly society to another friendly society, the proposed transferee, in order to undertake to fulfil them, must— (a) comply with the applicable requirements of Part I of Schedule 15 to this Act and, if required, with sections 87 and 88 below; and (b) resolve to undertake to fulfil the engagements by special resolution or, if the Authority consents to that mode of proceeding, by resolution of the committee of management. (4) Where the Authority confirms a transfer of engagements, it shall, on the application of the society proposing to transfer them and the proposed transferee— (a) register a copy of the instrument of transfer of engagements; and (b) issue a registration certificate to the transferee,

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and a registration certificate shall specify a date as the transfer date for that transfer. (5) On the transfer date— (a) the property, rights and liabilities of the society transferring its engagements shall by virtue of this subsection become, to the extent provided in the instrument of transfer of engagements, the property, rights and liabilities of the transferee; and (b) if the transfer is of all the society’s engagements, the society shall be dissolved; but the transfer shall be deemed to have been effected immediately before any such dissolution. (6) The Authority shall keep a copy of the instrument and of the registration certificate issued under subsection (4) above— (a) where the transferee is a friendly society, in the public file of that society; (b) in any other case, in the public file of the society transferring the engagements. (7) Where a friendly society is dissolved by subsection (5)(b) above, its registration under this Act or the 1974 Act shall be cancelled by the Authority. (8) Where it is proposed that any engagements of a person other than a friendly society should be transferred to a friendly society, the proposed transferee, in order to undertake to fulfil them, must resolve to do so by special resolution. (9) For the purposes of this section— (a) an ‘‘affected members’ resolution’’ is a resolution approving a transfer of engagements which is passed by the appropriate majority of those members whose contracts with the society are included in the transfer and who are entitled to vote on the resolution; and (b) the ‘‘appropriate majority’’ means a majority consisting of not less than three quarters of those who vote on the resolution (in person or by proxy) at a meeting of the society or in a postal ballot; and sub-paragraphs (1)(b) and (c), (4), (5) and (6) of paragraph 7 of Schedule 12 to this Act shall apply to an affected members’ resolution as they apply to a special resolution. (10) Delegate voting may not take place on an affected members’ resolution; and where the rules of a friendly society provide for delegate voting on any matter, they must provide for voting by individual members on such resolutions. (11) Schedule 15 to this Act has effect for supplementing this section. (12) In this section ‘‘insurer’’ means— (a) a person who has permission under Part IV of the Financial Services and Markets Act 2000 to effect or carry out contracts of insurance, or (b) an EEA firm of the kind mentioned in paragraph 5(d) of Schedule 3 to that Act, which has permission under paragraph 15 of that Schedule (as a result of qualifying for authorisation under paragraph 12 of that Schedule) to effect or carry out contracts of insurance. (13) Subsection (12) must be read with— (a) section 22 of the Financial Services and Markets Act 2000; (b) any relevant order under that section; and (c) Schedule 2 to that Act. Notes Subs (1)(a) repealed by The Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 201. Subs (1)(d) amended by The Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 201. Subs (1)(e) amended by The Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 201. Subss (2), (3), (4), (6) and (7) were amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 96 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subss (12) and (13) inserted by The Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 201.

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Actuary’s report as to margin of solvency 87.—(1) This section applies where a friendly society (‘‘the transferor’’) proposes to transfer any of its engagements under section 86 above to another friendly society (‘‘the transferee’’). (2) Where— (a) the fulfilment of any of the engagements to be transferred will constitute— (i) in the case of a transferor to which subsection (2) or (3) of section 37 above applies, the carrying on of insurance business in one or more [EEA States], or (ii) in the case of a transferor to which neither of those subsections applies, the carrying on of insurance business in the United Kingdom, and (b) the transferee will, after taking the proposed transfer into account, be required by rules made by the Authority under section 138 of the Financial Services and Markets Act 2000 to maintain the margin of solvency required by such rules; the transferee shall furnish the Authority with a report by the appropriate actuary as to whether it will immediately after the proposed transfer, possess that margin of solvency. (3) Where— (a) the fulfilment of any of the engagements will constitute the carrying on of long-term business, and (b) a report is not required to be furnished under subsection (2) above, the Authority may direct the transferee to furnish the Authority with a report by the appropriate actuary as to whether it will, immediately after the proposed transfer, possess an excess of assets over liabilities. (4) The appropriate actuary has a right of access at all times to the books, accounts and vouchers of the transferor and of the transferee, and is entitled to require from the officers of either society such information and explanations as he thinks necessary to enable him to prepare a report under this section. (5) If the appropriate actuary fails to obtain all the information and explanations and the access to documents which, to the best of his knowledge and belief, are necessary for the purposes of a report under this section, he shall state that fact in his report. (6) An officer of a transferor or of the transferee shall be guilty of an offence if he knowingly or recklessly makes to the appropriate actuary a statement (whether written or oral) which— (a) conveys or purports to convey any information or explanations which he requires, or is entitled to require, for the purposes of a report under this section; and (b) is misleading, false or deceptive in a material particular. (7) A person guilty of an offence under subsection (6) above is liable— (a) on conviction on indictment, to imprisonment for a term not exceeding 2 years, or to a fine, or to both; and (b) on summary conviction, to imprisonment for a term not exceeding 6 months or to a fine not exceeding the statutory maximum, or to both. Notes Subss (2) and (3) were amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 97 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (2)(a) was substituted by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, reg 26(1), and was amended by SI 1997 No 2849, reg 3, to ensure that a transferee Directive society possesses an EC margin of solvency. Subs (6) A person who is guilty of an offence under this subsection but would not have been subject to the subsection without the changes made to subs (2)(a), may be liable on summary conviction only for a term of imprisonment not exceeding three months: Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, reg 26(2).

Actuary’s report on transfer of long term business 88.—(1) This section applies where— (a) a friendly society (‘‘a transferor society’’) proposes to transfer to any person engagements the fulfilment of which will constitute— (i) in the case of a society to which subsection (2) or (3) of section 37 above applies, the carrying on of long term business in one of more [EEA States]; or

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(ii) in the case of a society to which neither of those subsections applies, the carrying on of long term business in the United Kingdom; or (b) a friendly society (a ‘‘transferee society’’) proposes to undertake to fulfil any such engagements to be transferred to it from another friendly society. (2) The Authority may direct a transferor society or a transferee society to furnish the Authority with a report by an independent actuary on the terms of the proposed transfer and as to his opinion on the likely effects of the transfer on the members of the society who are long term policyholders. (3) A friendly society which is directed to furnish a report under this section shall, on payment of a reasonable fee, furnish a copy of the report to any person who asks for one at any time before the transfer in question is confirmed by the Authority. (4) Subsections (4) to (7) of section 87 above shall apply in relation to an actuary preparing a report under this section as they apply to the appropriate actuary preparing a report under that section. (5) In this section— ‘‘independent actuary’’, in relation to a transfer of engagements, means an actuary who is not the appropriate actuary of a friendly society participating in the transfer; ‘‘long term policyholder’’ means a member whose contract with a friendly society is a contract the effecting of which by the society constituted the carrying on of long term business. Notes Subs (1)(a) was substituted by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, reg 27 and was amended by SI 1997 No 2849, reg 3. Subss (2) and (3) were amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 98 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Power of Authority to alter requirements for transfer by friendly society 89.—(1) If the Authority is satisfied that it is expedient to do so in the interests of the members or potential members of a friendly society, it may give a direction under this section (‘‘a direction’’)— (a) modifying the requirements of subsection (2)(b) and (c) of section 86 above; and (b) modifying or disapplying the requirements of Part I of Schedule 15 to this Act, in relation to a particular proposed transfer or to all transfers made by the society after the making of the direction. (2) A direction may not modify the requirements of section 86(2) above so as to permit a society to resolve to make a transfer by a resolution passed by less than a majority, or to require more than a three-quarters majority, of those voting on the resolution. (3) The Authority shall not give a direction unless— (a) an application has been made to it by not less than 10 per cent of the members of the society concerned or, in the case of a society with more than 1000 members, by not less than 100 members of the society; (b) not less than one month before giving the direction the Authority has served on the society concerned a notice stating that it proposes to make a direction and specifying the considerations which have led it to conclude that it would be expedient to give it; (c) the Authority has considered any representations made by the society with respect to the notice mentioned in paragraph (b) above within such period (not being less than one month) from the date on which the society was served with the notice as the Authority may allow; and (d) if the society so requests, the Authority has afforded to it an opportunity of being heard by it within that period. (4) If the Authority considers it expedient to do so in the interests of the members or potential members of the society concerned, it may vary or revoke a direction by a further direction. (5) On giving a direction in relation to a society, the Authority shall serve on the society a copy of the direction, specifying the considerations which have led it to conclude that it is

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expedient to give the direction; but the Authority may not give a direction unless all the considerations so specified were those, or among those, which were specified in the notice served on the society under subsection (3) above. (6) Notice of a direction shall be published by the Authority in one or more of the London Gazette, the Belfast Gazette or the Edinburgh Gazette, as it thinks appropriate, and in such other ways as appear to the Authority expedient for informing the public. (7) The Authority shall keep a copy of any direction given under this section in the public file of the society concerned. Notes The heading and subss (1), (3), (4), (5 and, (6) were amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 99 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (7) was amended by the Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 203.

Power of Authority to effect transfer of engagements 90.—(1) Subject to the following provisions of this section the Authority may give a direction under this section (‘‘a direction’’) providing for the transfer of such of the engagements of a friendly society (‘‘the society’’) as are specified in the order to a person so specified (‘‘the transferee’’). (2) The Authority may give a direction if— (a) it considers that— (i) the society is unable to manage its affairs satisfactorily in relation to the engagements specified in the order; and (ii) a transfer of those engagements would be expedient to protect the interests of the members of the society; and (b) the proposed transferee has complied with paragraph 1 of Schedule 15 to this Act and has resolved to undertake to fulfil the engagements by special resolution or, if the Authority consents to that mode of proceeding, by resolution of the committee of management; but the Authority may direct that paragraph (b) above shall be modified in relation to a particular proposed transfer (but not to permit a society to resolve to undertake to fulfil the engagements by less than a majority or more than a three-quarters majority of those voting). (3) The Authority may not give a direction if, were the transfer to be proposed to be made under section 86 above, it would be precluded from confirming it by paragraph 11 or any provision of paragraphs 13 to 17 of Schedule 15 to this Act. (4) At the same time as giving a warning notice to the society in accordance with section 58A(1) in relation to its proposal to give a direction, the Authority shall publish notice of the proposed direction in one or more of the London Gazette, the Belfast Gazette or the Edinburgh Gazette, as it thinks appropriate, and, if it thinks appropriate, in one or more newspapers. (5) A notice published in pursuance of subsection (4)(b) above shall— (a) state that any interested party has the right to make representations to the Authority with respect to the proposed direction; (b) specify a date determined by the Authority before which any written representations or notice of a person’s intention to make oral representations must be received by the Authority; and (c) specify a date determined by the Authority as the day on which it intends to hear any oral representations. (6) After the date specified in pursuance of subsection (5)(b) above, the Authority shall— (a) determine the time and place at which oral representations may be made; (b) give notice of that determination to the society and the proposed transferee and to any persons who have given notice of their intention to make oral representations; and (c) send copies of the written representations received by the Authority to the society concerned and the proposed transferee. (7) Before the Authority decides whether to give the society a decision notice in accordance with section 58A(3), the Authority shall allow the society and the proposed transferee an

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opportunity to comment on the written representations, whether at a hearing or in writing before the expiration of such period as the Authority specifies in a notice to it. (8) If the Authority gives a direction it shall keep a copy of that direction and shall— (a) register that copy; and (b) issue a registration certificate to the transferee; and the registration certificate shall specify a date as the transfer date for the transfer. (9) On the transfer date— (a) the property, rights and liabilities of the society shall by virtue of this subsection become, to the extent provided in the direction, the property, rights and liabilities of the transferee; and (b) if the transfer is of all the society’s engagements, the society shall be dissolved; but the transfer shall be deemed to have been effected before any such dissolution. (10) The Authority shall keep a copy of a direction and of the registration certificate— (a) if the transferee is a friendly society, in the public file of that society; (b) in any other case, in the public file of the society transferring the engagements. (11) Where a friendly society is dissolved by subsection (9)(b) above, its registration under this Act or the 1974 Act shall be cancelled by the Authority. Notes The heading and all subsections except (9) were amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 100 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (2) The most important ground on which the Authority can give a direction under this subsection is that its affairs have not been carried on in accordance with the criteria of prudent management, in accordance with s 50 of the 1992 Act: see s 50(2)(e). Subs (8) was amended by the Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 203.

Issue of certificates by Commission 90A.—[deleted] Notes This section was inserted by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, reg 28 and deleted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 101 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Conversions Conversion of friendly society into company 91.—(1) A friendly society may, in accordance with this Part of this Act, convert itself into a company registered under the Companies Act 1985 or the Companies (Northern Ireland) Order 1986 (‘‘a company’’). (2) In order to convert itself into a company a friendly society must— (a) comply with the applicable requirements of Part I of Schedule 15 to this Act; (b) approve the proposed conversion, the terms on which it is to take place and the proposed memorandum and articles of association for the Company by special resolution; and (c) obtain the confirmation of the Authority of the conversion; and, on obtaining that confirmation, the society may apply for registration as a company. (3) The terms on which the conversion of a friendly society into a company is to take place may include provision for part of the funds of the society or the company to be distributed among, or for other rights in relation to shares in the company to be conferred on, members of the society. (4) Where— (a) a special resolution of a society contains the particulars required by the Companies Act 1985 or the Companies (Northern Ireland) Order 1986 to be contained in—

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(i) the memorandum of association of a company; or (ii) the articles of association of a company; and (b) a copy of the resolution has been registered by the Authority. a copy of that resolution under the seal and stamp of the Authority shall have the same effect as a memorandum of association or, as the case may be, as articles of association, which have been duly signed under the Companies Act 1985 or the Companies (Northern Ireland) Order 1986. (5) On the registration of a friendly society as a company the registration of the society under this Act or the 1974 Act shall be cancelled by the Authority. (6) Where a friendly society converts into a company the terms approved by the society and confirmed by the Authority shall, in so far as they provide for the conferral of rights on members or officers of the society, be enforceable as if they had been the subject of an agreement between the society and those members and officers. (7) Registration of a friendly society as a company shall not affect any right or claim subsisting against the society or any penalty incurred by the society; and for the purpose of enforcing any such right, claim or penalty, the society may be sued and proceeded against in the same manner as if it had not become registered as a company. (8) The Treasury, may make regulations providing for the regulation of the conversion of friendly societies into companies; and such regulations may, in particular make provision— (a) for and in connection with the transition from regulation by and under this Act or the 1974 Act to regulation by and under any other enactments on a society’s ceasing to be registered under that Act; and (b) for the treatment, in the hands of the company into which a friendly society has converted, of the property, rights and liabilities of the society immediately before its conversion and for the modification of any enactment in its application to any such property, rights and liabilities. (9) Schedule 15 to this Act has effect for supplementing this section. Notes Subss (2), (4), (5), (6) and (8) were amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 102 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Supplementary Compensation for loss of office 92.—(1) Subject to subsection (3) below, the terms of— (a) an amalgamation under section 85 above, (b) a transfer of engagements of a friendly society under section 86 above, or (c) a conversion under section 91 above, may include provision for compensation for loss of office or diminution of emoluments attributable to the amalgamation, transfer or conversion to be paid by a participating friendly society to or in respect of any of the persons mentioned in subsection (2) below. (2) Those persons are— (a) the officers of the society which is to pay the compensation; (b) in the case of an amalgamation or transfer, the officers of any other participating society; (c) in the case of a transfer, the officers of any other person participating in the transfer; and (d) the appointed actuary (if any) of any society participating in the amalgamation or transfer. (3) Any such provision as is mentioned in subsection (1) above must be approved by the society which is to pay the compensation by a special resolution separate from any resolution approving the other terms of the amalgamation, transfer or conversion. (4) If compensation which has not been authorised in accordance with subsection (3) above is received by an officer, it shall be repaid. (5) In this section—

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‘‘compensation’’ incudes the provision of benefits in kind; ‘‘loss of office’’ includes, in relation to an officer of an incorporated friendly society holding office by virtue of his position in the society in a subsidiary of the society or body jointly controlled by the society, the loss of that office; and ‘‘participating society’’, in relation to an amalgamation or transfer, means a friendly society participating in the amalgamation or transfer and, in relation to the conversion of a friendly society, that society. Notes The power to compensate an officer for loss of office applies only to amalgamations, voluntary transfers of engagements and conversions: a compulsory transfer of engagements under s 90 cannot authorise compensation for loss of office, given that the reason for the transfer will be mismanagement in one or other form. PA RT I X MISCELLANEOUS

Societies registered under 1974 Act Registration of societies under 1974 Act 93.—(1) No society may be registered under the 1974 Act after the commencement of this section. (2) Subject to section 7 of the 1974 Act, a society registered under the 1974 Act immediately before the commencement of this section (an ‘‘existing society’’) shall continue as a registered society in accordance with the provisions of that Act. (3) Nothing in subsection (1) above shall be taken as preventing the registration after the commencement of this section of a branch of an existing society as a registered branch. (4) Nothing in this Act shall be taken as preventing— (a) the performance by an existing friendly society of any contract which is in force immediately before the commencement of this section; or (b) the carrying on by such a society of any social or benevolent activity which is not inconsistent with the other activities of the society. (5) Before the end of the transitional period each existing friendly society shall— (a) by special resolution agree upon the alterations to be made to its rules so that they conform to this Act and the 1974 Act; and (b) send to the Authority [three] copies of the rules as altered each signed by the secretary and accompanied by a statutory declaration by the secretary that that agreement was affected by a resolution passed as a special resolution. (6) On agreeing upon any such alteration to its rules a society shall, subject to subsection (7) below, determine the date on which the society intends it to take effect, and any alteration to the society’s rules sent to the Authority shall be accompanied by a record specifying that date (in this paragraph referred to as ‘‘the specified date’’). (7) No date shall be specified under subsection (6) above which falls more than six months after the date of the meeting at which the society agreed upon the alteration to its rules. (8) The Authority, if satisfied that the rules as altered are in conformity with this Act and the 1974 Act, shall retain and register a copy of the altered rules. (9) On registering a copy of the altered rules under subsection (8) above, the Authority shall— (a) return another copy to the secretary of the society, together with a certificate of registration, and (b) keep another copy with the record of the specified date sent to it under subsection (6) above and a copy of that certificate, in the public file of the society. (10) Rules registered under this paragraph shall take effect on the specified date for the rule or, if registration of the rules is not effected until a later date, that later date. (11) If the Authority has not, before the end of the transitional period, received from an existing registered friendly society copies of its rules as altered in accordance with subsection (5) above, the society shall be treated as having agreed upon such alteration of its rules as the Authority directs.

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(12) Where the Authority proposes to give a direction under subsection (11) above in relation to a society it shall— (a) serve on the society a notice stating that it proposes to give a direction; and (b) consider any representation made by the society within such period (not being less than fourteen days) from the date on which the notice is served as the Authority may allow; and, if the society so requests, the Authority shall afford to it an opportunity of being heard by the Authority within that period. (13) Where under this section a society is treated as having agreed upon altered rules, the Authority shall prepare three copies of rules for the society and shall— (a) retain and register one copy, (b) send another to the secretary of the society, together with a certificate of registration, and (c) keep another copy, together with a copy of that certificate, in the public file of the society; and the rules so registered shall be for all purposes the rules of the society until amended under the 1974 Act. (14) In this section ‘‘the transitional period’’ means the period beginning with the commencement date for this section and expiring with such day as the Treasury prescribe by order. (15) Subsections (5) to (14) above apply to the rules of a registered branch of an existing friendly society as they apply to the rules of the society. Notes Subs (1) This subsection came into force on 1 February 1993, on which date registrations of friendly societies under the 1974 Act ceased to be possible. Subs (5) This subsection was amended by the Deregulation (Friendly Societies Act 1992) Order 1996, SI 1996 No 1188, art 5. Subss (5) to (14) were amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 103 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Registered friendly societies and branches: validation and ratification by members 94.—(1) Subject to subsection (3) below, if action not permitted by the rules of a registered friendly society or a registered branch is taken by or on behalf of the society or branch, the action is valid (whether or not it would be valid apart from this subsection) if all the members of the society or branch— (a) signified their agreement to it in writing before it was taken; or (b) signified their approval of it in writing before the end of the period of 28 days commencing with the day on which it was taken. (2) Subject to subsection (3) below, if a contract between a registered friendly society or branch and its members purports to create rights and obligations as to which the rules of the society or branch do not permit rights and obligations to be created, the contract shall be valid and shall bind all members of the society or branch if all members of the society or branch are parties to it. (3) This section does not validate the taking of any action or any term in a contract unless the matter falls within the capacity of a registered friendly society or branch under the 1974 Act or this Act. (4) In this section references to the members of a society or branch are to the members entitled to vote at a meeting of the society or branch. Notes This section applies to registered friendly societies. For the position applicable to incorporated friendly societies (where ratification is not required), see s 9 of the Friendly Societies Act 1992.

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Amendments of 1974 Act 95. Schedule 16 to this Act (which contains amendments to the 1974 Act) shall have effect. Notes Sched 16 is not reproduced in this work, as relevant parts of the Friendly Societies Act 1974 are reproduced in para 1.26 as amended by Sched 16.

Societies registered in Northern Ireland Extension of 1974 Act to Northern Ireland 96.—(1) The 1974 Act shall extend to Northern Ireland. (2) Societies which, immediately before the commencement of subsection (1) above, were societies registered under any provision of section 1 of the Friendly Societies Act (Northern Ireland) 1970 shall be treated as if they were societies registered under the corresponding provision of section 7 of the 1974 Act. (3) A branch of a society registered under that Act of 1970 which is, immediately before the commencement of subsection (1) above, a registered branch of the society under that Act, shall be treated as a branch registered under the 1974 Act. (4) In consequence of subsections (1) to (3) above, the Friendly Societies Act (Northern Ireland) 1970 is repealed. Other miscellaneous provisions Insurance protection 97. [deleted] Financial services 98. [deleted] Notes Sections 97 and 98 were deleted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 104 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Insurance of lives of children under 10 99.—(1) Subject to the following provisions of this section, if— (a) after this section comes into force a friendly society or registered branch enters into a contract of insurance under which benefit in excess of £800 is payable on the death of any person; and (b) that person dies under the age of 10, the obligation of the society, branch or company as to payment of benefit is only to pay £800 (without prejudice to any person’s right to recover part of the premiums paid). (2) Subsection (1) above does not apply where the benefit is payable to a person who has an interest in the life of the person on whose death it is payable. (3) The Treasury may, by order substitute some other sum for the sum for the time being specified in subsection (1) above. (4) In the application of this section to Northern Ireland the references to industrial assurance companies shall be omitted. Notes Subs (1) reference to industrial assurance companies deleted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 105 Subs (3) amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 105 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

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Industrial assurance 100. [deleted] Notes Section 100 was deleted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, Sched 4, para 1.

[Law applicable to contracts of insurance with friendly societies 101.—[repealed] Notes This section was repealed by The Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 202, having been re-enacted in the Financial Services and Markets Act 2000 (Law Applicable to Contracts of Insurance) Regulations 2001 (SI 2001 No 2635).

PA RT X G E N E R A L A N D S U P P L E M E N TA RY

General Power to amend, etc to assimilate to company law or law relating to persons carrying on insurance business 102.—(1) If, on any modification of the statutory provisions in force in Great Britain or Northern Ireland relating— (a) to companies; or (b) to persons or bodies of persons, other than friendly societies, whether incorporated or not, carrying on insurance business (including reinsurance business), it appears to the Treasury to be expedient to modify the relevant provisions of this Act for the purpose of assimilating the law relating to friendly societies to the law as so modified, the Treasury may, by order, make such modifications of the relevant provisions of this Act as they think appropriate for that purpose. (2) The ‘‘relevant provisions of this Act’’ are the following provisions as for the time being in force, that is to say— (a) so much of Part II as relates to winding up; (b) Part IV; (c) Part V; (d) Part VI; and (e) Part VIII. (3) The power conferred by subsection (1) above includes power to modify the relevant provisions of this Act so as to— (a) confer power to make orders, regulations, rules or other subordinate legislation; (b) create criminal offences; or (c) provide for the charging of fees but not any charge in the nature of taxation. (4) An order under this section may— (a) make consequential amendments of or repeals in other provisions of this Act; or (b) make such transitional or saving provisions as appear to the Treasury to be necessary or expedient. (5) In this section— ‘‘modification’’ includes any additions and, as regards modifications of the statutory provisions relating to companies, any modification whether effected by any future Act or by an instrument made after the passing of this Act under an Act whenever passed; and ‘‘statutory provisions’’ includes the provisions of any instrument made under an Act.

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Power to modify Part V and VI in relation to particular friendly societies 103.—(1) The Authority may, on the application or with the consent of a friendly society, direct that all or any of the provisions of Part VI of this Act, or any provision of regulations made for the purposes of that Part, shall not apply to the society or shall apply to it with such modifications as may be specified in the direction. (2) A direction under this section may be subject to conditions. (3) A direction under this section may be revoked by the Authority at any time; and the Authority, may at any time vary any such direction on the application or with the consent of the society to which it applies. (4) [deleted]. (5) [deleted]. (6) [deleted]. (7) Where the Authority— (a) makes a direction under this section, or (b) revokes or varies such a direction, it shall cause the direction, variation or revocation to be entered on a register kept by it for the purposes of this subsection. (8) The register kept for the purposes of subsection (7) above shall be available for inspection on reasonable notice by members of the public. (9) The Authority shall keep a copy of— (a) any direction made by it under this section, and (b) any revocation or variation of any such direction, in the public file of the society to which it relates. General Notes Subs (1)–(3), (7) and (9) modified by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 107 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (4)–(9) were inserted by the Deregulation (Friendly Societies Act 1992) Order 1996, SI 1996 No 1188, art 6. Subs (4)–(6) deleted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 107.

Public file of a friendly society 104.—(1) The Authority shall prepare and maintain a file relating to each friendly society (to be known as the public file) and the file shall— (a) contain the documents or, as the case may be, copies of the documents and the records of the matters directed by or under any provision of this Act to be kept in the public file of the society; and (b) be available for inspection on reasonable notice by members of the public subject to subsection (2A) below. (2) Any member of the public shall be entitled, subject to subsection (2A) below, to be furnished with a copy of all or any of the documents or records kept in the public file of a friendly society. (2A) The Authority may charge a reasonable fee for making the public file available to any person for inspection under subsection (1)(b) above, or for furnishing any person with a copy of any documents or records under subsection (2) above. (3) The Authority may keep in the public file of a registered friendly society any documents relating to a registered branch of the society which correspond to documents relating to the society which it is required to keep on that file. Notes Subs (2A) was inserted and consequential modifications made to subsections (1) and (2) by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 108. Further modifications were made by the same instrument to reflect the transfer of functions under the Financial Services and Markets Act 2000. The modifications to subs (1) and (2) were corrected by the Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 203.

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Exemptions from stamp duty 105. Stamp duty shall not be chargeable upon any document required or authorised by this Act, the 1974 Act or by the constitution of an incorporated friendly society or of a registered friendly society or registered branch. Notes Section 105A, which is not reproduced here, provides exemption from land stamp duty tax where the engagements of a friendly society have been transferred.

Officers and auditors not to be exempted from liability 106.—(1) Subject to subsection (3) below, any provision to which this section applies, whether contained in the constitution of a friendly society or in any contract with a friendly society or otherwise, shall be void. (2) This section applies to any provision for— (a) exempting any member of the committee of management, other officer, or person employed as auditor of a friendly society from any liability which, by virtue of any rule of law, would otherwise attach to him in respect of the negligence, default, breach of duty or breach of trust of which he may be guilty in relation to the society; or (b) indemnifying any such person against any such liability. (3) Subsection (1) above shall not prevent a friendly society— (a) from purchasing and maintaining for such a person insurance against any such liability; or (b) from indemnifying such a person against any liability incurred by him in defending any proceedings (whether criminal or civil) in which judgement is given in his favour or in which he is acquitted. (4) Section 727 of the Companies Act 1985 or Article 675 of the Companies (Northern Ireland) Order 1986 (each of which empowers the court to grant relief in certain cases of negligence, default, breach of duty or breach of trust) shall apply in relation to officers and auditors of a friendly society as it applies in relation to officers and auditors of a company. (5) For the purposes of this section a reference to an officer of a friendly society includes a reference to the appropriate actuary. Notes This section corresponds to s 532 of the Companies Act 2006, as amended. Section 1157 of the Companies Act 2006 permits the court to exempt directors from the civil consequences of breach of duty.

Time limit for commencing proceedings 107.—(1) Notwithstanding any limitation on the time for the taking of proceedings contained in any enactment, summary proceedings for any offence under this Act may, subject to subsection (2) below, be commenced by the Authority at any time within the period of one year beginning with the date on which evidence sufficient in the opinion of the Authority to justify a prosecution for the offence, comes to its knowledge. (2) Nothing in subsection (1) above shall authorise the commencement of proceedings for any offence at a time more than three years after the date on which the offence was committed. (3) For the purposes of subsection (1) above a certificate, purporting to be signed by or on behalf of the Authority, as to the date on which such evidence as is mentioned in that subsection came to its knowledge, shall be conclusive evidence of that date. (4), (5) (Apply to Scotland only.) Notes Section 107 was modified by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 109 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

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Offences by bodies corporate, partnerships and unincorporated associations 108.—(1) Where an offence under this Act committed by a body corporate is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of any member of the committee of management, director, manager, secretary or other similar officer of the body corporate, or any person who was purporting to act in any such capacity, he, as well as the body corporate, shall be guilty of that offence and liable to be proceeded against and punished accordingly. (2) Where the affairs of a body corporate are managed by the members, subsection (1) above shall apply in relation to the acts and defaults of a member in connection with his functions of management as if he were a director of the body corporate. (3) Where a partnership is guilty of an offence under this Act, every partner, other than a partner who is proved to have been ignorant of or to have attempted to prevent the Authority of the offence, shall also be guilty of that offence and be liable to be proceeded against and punished accordingly. (4) Where an unincorporated association (other than a partnership) is guilty of an offence under this Act— (a) every officer of the association who is bound to fulfil any duty of which the breach is the offence; or (b) if there is no such officer, every member of the governing body other than a member who is proved to have been ignorant of or to have attempted to prevent the Authority of the offence, shall also be guilty of the offence and be liable to be proceeded against and punished accordingly. Defence of due diligence 109. In any proceedings for an offence under this Act, it shall be a defence for a person charged to prove that he took all reasonable precautions and exercised all due diligence to avoid the Authority of such an offence by himself or any person under his control. Jurisdiction of magistrates’ courts in Northern Ireland 110.—(1) In Northern Ireland, a friendly society or an officer of a friendly society may be prosecuted for a summary offence under this Act before a magistrates’ court acting for the county court division in which the registered office of the society is situated. (2) Subsection (1) is without prejudice to the provisions of the Magistrates’ Courts (Northern Ireland) Order 1981 as to the jurisdiction of a magistrates’ court. Notes Section 110 substituted by the Courts Act 2003, Schedule 8, paragraph 357.

Evidence 111.—(1) Any document bearing the seal or stamp of the Authority shall be received in evidence without further proof. (1A) Any document purporting to have been signed by a person authorised to do so on behalf of the Authority, and every document purporting to be signed by any inspector or public valuer under this Act, shall, in the absence of any evidence to the contrary, be received in evidence without proof of the signature. (1B) In subsections (1) and (1A), ‘‘document’’ means any document issued, received or created by the Authority (or, as the case may be, by any inspector or public valuer under this Act) for the purposes of or in connection with this Act. (2) Any printed document purporting to be a copy of the rules or memorandum of an incorporated friendly society or the rules of a registered friendly society or a registered branch and certified by the secretary or other officer of the society or branch to be a true copy of its rules or memorandum as registered, shall be received in evidence and shall, in the absence of any evidence to the contrary, be deemed to be a true copy of its rules or memorandum.

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Notes Subs (1) was modified and subs (1A) and (1B) inserted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 110 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Records of friendly societies 112.—(1) Subject to any other provision of this Act or regulations under it, any record to be kept by a friendly society may be kept in any manner. (2) Where any such record is not kept by making entries in a bound book, but by some other means, adequate precautions shall be taken for guarding against falsification and facilitating its discovery. (3) The power in subsection (1) above includes power to keep the record by recording matters otherwise than in legible form so long as the recording is capable of being reproduced in a legible form; and any duty imposed by or under this Act to allow inspection of, or to furnish a copy of, the record or any part of it is to be treated as a duty to allow inspection of, or to furnish, a reproduction of the recording or of the relevant part of it in a legible form. (4) The Treasury may, by regulations make such provision in addition to subsection (3) above as they consider appropriate in connection with such records as are kept otherwise than in legible form; and the regulations may make modifications of this Act so far as it relates to the records of friendly societies. (5) If default is made in complying with this section the society shall be guilty of an offence and liable on summary conviction— (a) to a fine not exceeding level 4 on the standard scale; and (b) in the case of a continuing offence, to an additional fine not exceeding one-tenth of that level for every day during which the offence continues. Notes Subs (4) was modified by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 111 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Service of notices 113.—(1) This section has effect in relation to any notice, directions or other document required or authorised by or under any provision of this Act or by the rules of a friendly society to be served on any person other than the Authority but subject, in the case of notices or other documents to be given or sent to members of a friendly society, to any provision of its rules. (2) Any such document may be served on the person in question— (a) by delivering it to him; (b) by leaving it at his proper address; or (c) by sending it by post to him at that address. (3) Any such document may— (a) in the case of a friendly society, be served on the secretary of the society; (b) in the case of a body corporate (other than an incorporated friendly society), be served on the secretary or clerk of that body; (c) in the case of a partnership, be served on any partner; (d) in the case of an unincorporated association, other than a partnership or a registered friendly society or registered branch, be served on any member of its governing body. (4) For the purposes of this section and section 7 of the Interpretation Act 1978 (service of documents) in its application to this section, the proper address of any person is— (a) in the case of a friendly society or its secretary, the address of its registered office; (b) in the case of a member of an incorporated friendly society, his registered address; (c) in the case of a member of the committee of management or the chief executive of a friendly society, his officially notified address; (d) in the case of a body corporate (other than an incorporated friendly society), its secretary or clerk, the address of its registered or principal office in the United Kingdom;

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(e) in the case of an unincorporated association (other than a partnership, registered friendly society or registered branch) or a member of its governing body, its principal office in the United Kingdom; and, in any other case, his last-known address (whether of his residence or of a place where he carried on business or is employed). Notes Subs (1) was modified by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 112 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Form of documents 114.—(1) The Authority may, by directions under this section, make provision with respect to the form of any document to be sent to it under this Act or the 1974 Act, the particulars to be included in any such document and the procedure to be followed in sending any such document. (2) The directions have effect subject to any other provision of or made under this Act. Notes Section 114 modified by The Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 204 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Provision as to information supplied for purposes of social security 115.—(1) Subject to any exceptions or conditions prescribed by regulations of the Secretary of State, the Secretary of State shall at the request of any person claiming benefit from an incorporated friendly society provide the society for the purposes of the claim with a copy or abstract of any medical certificate relating to that person and supplied by him to the Secretary of State for the purposes of the enactments relating to social security. (2) Where the Secretary of State furnishes an incorporated friendly society, in connection with a claim for benefit from the society with information relating to a claim or award under those enactments, the expenses incurred in connection with his doing so by the Secretary of State or any other government department shall be treated as expenses in carrying those enactments into effect. (3) In this section, references to the Secretary of State shall be construed as including references to the Department of Health and Social Services for Northern Ireland. Notes Subs (3) was added by the Friendly Societies Act 1992 (Transitional and Consequential Provisions) Regulations 1995, SI 1995 No 710, reg 6.

Interpretation Friendly societies etc 116. In this Act— ‘‘friendly society’’ means an incorporated friendly society or a registered friendly society; ‘‘incorporated friendly society’’ means a society incorporated under this Act; ‘‘registered branch’’ means a branch of a registered friendly society which is separately registered within the meaning of the 1974 Act; ‘‘registered friendly society’’ means a society registered within the meaning of the 1974 Act by virtue of section 7(1)(a) of that Act or any enactment which it repealed.

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Insurance business etc 117.—(1) For the purposes of this Act— ‘‘annual contribution income’’ means, in relation to a friendly society’s long term business, the income of the society in a financial year without any deduction for reinsurance cessions; [‘‘commitment’’ means, in relation to a friendly society to which section 37(2) applies, a commitment represented by insurance business of any class of Head A of Schedule 2 to this Act;] ‘‘direct insurance business’’ means insurance business other than reinsurance business and ‘‘direct insurance’’ shall be construed accordingly; ‘‘insurance business’’ means long-term business and general business but, except for the purposes of sections 87 and 88 above, does not include the operations of a society whose benefits vary according to the resources available and which require each of its members to contribute on a flat-rate basis; ‘‘long term business’’ means insurance business of any of the classes specified in head A of Schedule 2 to this Act; and ‘‘general business’’ means insurance business of any of the classes specified in head B of that Schedule. (2) For the purposes of any provision of Parts IV, V, VI and VIII of this Act, unless the context otherwise requires— (a) references to insurance business include references to reinsurance business; and (b) reinsurance business consisting of the effecting and carrying out of a contract of reinsurance of risks of any class shall be taken to constitute the carrying on of insurance business of that class; and ‘‘reinsurance business’’ means the effecting and carrying out of contracts of reinsurance. (3) For the purposes of this Act the effecting and carrying out of a contract whose principal object is within one class of insurance business, but which contains related and subsidiary provisions within another class or classes, shall be taken to constitute the carrying on of insurance business of the first-mentioned class, and no other, if subsection (4) or (5) below applies to the contract. (4) This subsection applies to a contract whose principal object is within any class of long term business, but which contains subsidiary provisions within general business class 1 or 2, if the society concerned is authorised under section 32 above to carry on long term business class 1. (5) This subsection applies to a contract whose principal object is within one of the classes of general business but which contains subsidiary provisions within another of those classes. [(6) In relation to a contract of insurance entered into by a person on any date with a friendly society to which section 37(3) above applies the effecting of which constitutes general business, or a contract of insurance entered into by a person on any date with a friendly society to which section 37(2) above applies the effecting of which constitutes long term business, references in this Act to the member or EEA State where the risk or commitment is situated shall be construed as follows— (a) where that person is an individual, as references to the member or EEA State where he has his habitual place of residence on that date; and (b) in any other case, as references to the member or EEA State where the establishment of that person to which the contract relates is situated on that date. (7) In relation to any other contract of insurance with a friendly society, references in this Act to the member State where the risk is situated shall be construed as references to the member State where the person who has entered into the contract has his habitual place of residence.] (9) In this Act ‘‘establishment’’, in relation to a friendly society to which section 37(2) or (3) above applies, means the registered office or an overseas branch of the society. Any permanent presence of such a society in an EEA State other than the United Kingdom shall be regarded for those purposes as a single overseas branch, whether that presence consists of a single office which, or two or more offices each of which— (a) is managed by the society’s own staff;

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(b) is an agency of the society; or (c) is managed by a person who is independent but has permanent authority to act for the society in the same way as an agency. Notes Subs (1) was amended by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, reg 29(1). The definition of ‘insurance business’ was modified by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 114 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (4) The required margin of solvency for contracts falling within this subsection is specified by the Friendly Societies (Insurance Business) Regulations 1994, SI 1994 No 1981, reg 4(3). Subs (6) was amended by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, reg 29(2). See the note to s 101 of the 1992 Act. Subs (8) was inserted by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, reg 29(3) and repealed by the Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 205. Subs (9) was inserted by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, reg 29(3).

Financial year of friendly societies 118.—(1) Subject to subsection (2) below, in this Act ‘‘financial year’’ means the period of 12 months ending with 31st December. (2) The initial financial year of a friendly society shall be such period as expires with the end of the calendar year in which it is registered under the 1974 Act or incorporated under this Act and the final financial year of the society shall be such shorter period than 12 months as expires with the date as at which the society makes up its final accounts. General interpretation 119.—(1) In this Act, unless the context otherwise requires— ‘‘the 1974 Act’’ means the Friendly Societies Act 1974; ‘‘actuary’’ means an actuary possessing such qualifications, if any, as may be specified in rules made by the Authority under section 340 of the Financial Services and Markets Act 2000 (and subsections (3) to (6) of that section apply in relation to an actuary appointed by virtue of any provision of this Act as they apply in relation to an actuary appointed in compliance with such rules); ‘‘annuities on human life’’ does not include superannuation allowances and annuities payable out of any fund applicable solely to the relief and maintenance of persons engaged or who have been engaged in any particular profession, trade or employment, or of the dependants of such persons; ‘‘the Authority’’ means the Financial Services Authority; ‘‘appointed actuary’’ means the actuary appointed in accordance with rules made under section 340 of the Financial Services and Markets Act 2000; ‘‘the appropriate actuary’’ means— (a) if the society is under a duty imposed by rules made by the Authority under section 340 of the Financial Services and Markets Act 2000, the society’s appointed actuary; and (b) if it is not under such a duty, an actuary appointed to perform the function in question; ‘‘committee of management’’ means the committee of management or other directing body of a society or branch; ‘‘the life assurance consolidation Directive’’ means Directive 2002/83/EC of the European Parliament and of the Council of 5th November 2002 concerning life assurance; ‘‘contract of insurance’’ includes any contract the effecting of which constitutes the carrying on of insurance business by virtue of section 117 above; ‘‘controller’’ has the meaning given by section 55A above; ‘‘the court’’ except in relation to the winding-up of an incorporated friendly society, means—

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(a) in the case of a body whose registered office is situated in England and Wales or in Northern Ireland, the county court for the district in which the office is situated; (b) in the case of a body whose registered office is situated in Scotland, the sheriff in whose jurisdiction the office is situated; and, in relation to the winding-up of an incorporated friendly society, means the court which has jurisdiction under the applicable winding-up legislation to wind-up the society; ‘‘EEA Agreement’’ means the Agreement on the European Economic Area signed at Oporto on 2nd May 1992 as adjusted by the Protocol signed at Brussels on 17th March 1993; ‘‘EEA State’’ means a State which is a Contracting Party to the EEA Agreement but, until the EEA Agreement comes into force in relation to Liechtenstein, does not include Liechtenstein; ‘‘EFTA State’’ means an EEA State which is not a member State; ‘‘financial year’’ is to be construed in accordance with section 118; ‘‘the first general insurance Directive’’ means Council Directive 73/239/EEC of 24th July 1973 on the co-ordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct insurance other than life assurance; ‘‘the general insurance Directives’’ means the first general insurance Directive, the second general insurance Directive and the third general insurance Directive as amended, and such other Directives as make provision with respect to the business of direct insurance other than life assurance; ‘‘group business’’ is to be construed in accordance with section 11 above; ‘‘jointly controlled body’’ is to be construed in accordance with section 13 above; ‘‘manager’’, in relation to a friendly society to which section 37(2) or (3) above applies, means any person (other than an employee of a society) appointed by the society to manage any part of its insurance business, or any employee of the society (other than a chief executive) who, under the immediate authority of a member of the committee of management or chief executive of the society— (a) exercises managerial functions, or is responsible for maintaining accounts or other records of the society; and (b) is not a person whose functions relate exclusively to business conducted from a place of business which is not in a member State; ‘‘memorandum’’ has the meaning given by paragraph 4(3) of Schedule 3 to this Act; ‘‘modifications’’, in relation to enactments, includes additions, omissions and amendments and cognate expressions are to be construed accordingly; ‘‘non-insurance business’’ means business falling within head C of Schedule 2 to this Act; ‘‘notice’’ means written notice and ‘‘notice to’’ a person means notice given to that person, and ‘‘notify’’ shall be construed accordingly; ‘‘officer’’ means— (a) in relation to a registered friendly society or a registered branch— (i) a trustee; (ii) the treasurer, secretary and chief executive (however described); (iii) a member of the committee of management; and (iv) a person appointed by the society or branch to sue or be sued on its behalf; or (b) in relation to an incorporated friendly society, a member of the committee of management, the chief executive (however described) and the secretary; ‘‘the public file’’, in relation to a friendly society, means the file relating to the society which the Authority is required to maintain under section 104 above; ‘‘registered address’’, in relation to a member of an incorporated friendly society, has the meaning given by paragraph 14(6) of Schedule 3 to this Act; ‘‘the second general insurance Directive’’ means Council Directive 88/357/EEC of 22nd June 1988 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and laying down provisions to

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facilitate the effective exercise of freedom to provide services and amending Directive 73/239/EEC; ‘‘special resolution’’ has the meaning given by paragraph 7 of Schedule 12 to this Act; ‘‘subscription’’ includes any premium or other sum (however described) payable, in respect of the provision of benefits, by (or on behalf of) a member of a friendly society under the rules of the society; ‘‘subsidiary’’ is to be construed in accordance with section 13 above; ‘‘supervisory authority’’, in relation to an EEA State other than the United Kingdom, means the authority responsible in that State for supervising persons whose business consists of effecting or carrying out contracts of insurance; ‘‘the third general insurance Directive’’ means Council Directive 92/49/EEC of 18th June 1992 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and amending Directives 73/239/EEC and 88/357/EEC; (1AA) Any reference in this Act to the seal of the Authority is a reference to the seal provided for in regulations made under section 109(1)(b) of the Friendly Societies Act 1974 (and not to the Authority’s common seal). [(1A) References in this Act to the first or third general insurance Directive are references to that Directive as amended by the European Parliament and Council Directive of 29th June 1995 amending Directives 77/780/EEC and 89/646/EEC in the field of credit institutions, Directives 72/239/EEC and 92/49/EEC in the field of non-life insurance, Directive 93/22/EEC in the field of investment firms and Directive 85/611/EEC in the field of undertakings for collective investment in transferable securities (UCITS) with a view to reinforcing prudential supervision (No 95/26/EC). (1B) [repealed SI 2001 No 3649] (1C) In the definition of ‘‘supervisory authority’’ in subsection (1), the reference to contracts of insurance and to effecting or carrying out such contracts must be read with— (a) section 22 of the Financial Services and Markets Act 2000; (b) any relevant order under that section; and (c) Schedule 2 to that Act. (2) References in this Act to the ‘‘ECU’’ are to the unit of account of that name defined in Council Regulation (EEC) No 3180/78 as amended; and the exchange rates as between the ECU and pounds sterling to be applied for each year beginning on 31st December shall be the rates applicable on the last day of the preceding October for which exchange rates for the currencies of all the member States were published in the Official Journal of the Communities. Notes Section 119 was amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, Sched 3, para 115 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (1) was amended by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, reg 30. The definition of ‘the life assurance consolidation Directive’’ inserted by The Life Assurance Consolidation Directive (Consequential Amendments) Regulations 2004, SI 2004 No 3379 reg 3. which also omitted the definitions of the first life directive, the second life directive, the third life directive and the life directives. The definition of ‘modifications’ amended by the Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, paragraph 4 of the Schedule; the definition of ‘supervisory authority’ was amended by The Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 205. Subs (1AA) was inserted by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 115 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (1A) was inserted by the Financial Institutions (Prudential Supervision) Regulations 1996, SI 1996 No 1669, Sched 5, para 6. Amended by The Life Assurance Consolidation Directive (Consequential Amendments) Regulations 2004, SI 2004 No 3379 reg 3. Subs (1B) was inserted by the Financial Institutions (Prudential Supervision) Regulations 1996, SI 1996 No 1669, Sched 5, para 6 and repealed by The Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 205. Subs (1C) was inserted by The Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 205.

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The Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 20.

Meaning of ‘‘associate’’ 119A.—(1) In this Act ‘‘associate’’, in relation to any person entitled to exercise or control the exercise of voting power in relation to a friendly society to which section 37(2) or (3) above applies, means— (a) the wife or husband or civil partner or minor son or daughter of that person; (b) any company of which that person is a director; (c) any person who is an employee or partner of that person; (d) if that person is a company— (i) any director of that company; (ii) any subsidiary undertaking of that company; (iii) any director or employee of any such subsidiary undertaking; and (e) if that person has made an agreement or arrangement with any other person under which they undertake to act together in exercising their voting power in relation to the society, that other person. (2) In this section— ‘‘minor’’, in relation to Scotland, means not having attained the age of sixteen; ‘‘son’’ includes stepson and ‘‘daughter’’ includes stepdaughter; ‘‘subsidiary undertaking’’ has the same meaning as in the Insurance Companies Act 1982. Notes This section was inserted by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, reg 31. The definition of ‘‘associate’’ is relevant for the purposes of s 55A, which provides for the supervision of the controllers of Directive societies, the term ‘‘controller’’ itself being defined as including any associates of the controller. Subs (1)(a) amended by the Civil Partnership Act 2004, Sched 27, para 142.

Meaning of ‘‘main agent’’ 119B.—[omitted] Notes This section was inserted by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, reg 32, and was amended by SI 1997 No 2849, reg 3. It ceased to have effect pursuant to the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, Sched 3, para 116 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Supplementary Amendments and repeals 120.—(1) The enactments specified in Schedule 21 to this Act shall have effect with the amendments made by that Schedule. (2) The enactments specified in Schedule 22 to this Act are repealed to the extent specified in the third column of that Schedule. Orders and regulations 121.—(1) Any power of the Treasury to make regulations or an order under this Act is exercisable by statutory instrument. (2) Any statutory instrument containing such regulations or such an order, other than an order under section 5, 69J or 69K above or section 126 below, shall be subject to annulment in pursuance of a resolution of either House of Parliament. (3) Any power conferred by this Act to make such regulations or such an order includes power—

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(a) to make different provision for different cases; and (b) to make transitional, consequential or supplementary provision. Notes Subs (1) was amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 117 to reflect the transfer of functions under the Financial Services and Markets Act 2000. Subs (2) amended by the Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, para 5 of the Schedule

Expenses 122. [omitted] Notes Section 122 ceased to have effect pursuant to the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, Sched 3, para 118 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Power to make transitional, consequential etc provisions 123.—(1) The Treasury may by regulations make such transitional and consequential provisions and such savings as they consider necessary or expedient in preparation for, in connection with, or in consequence of— (a) the coming into force of any provision of this Act; or (b) the operation of any enactment repealed or amended by a provision of this Act during any period when the repeal or amendment is not wholly in force. (2) Regulations under this section may make modifications of any enactment contained in this or in any other Act.

Northern Ireland 124.—(1) This Act extends to Northern Ireland. Notes Subs (2) was repealed by the Northern Ireland Act 1998, Sched 15, para 1.

Channel Islands and Isle of Man 125.—(1) Her Majesty may by Order in Council direct that any of the provisions of this Act or any instrument made under it shall extend, with such modifications (if any) as may be specified in the Order, to— (a) any of the Channel Islands; or (b) the Isle of Man. (2) An Order in Council under this section may make such transitional, incidental or supplementary provision as appears to Her Majesty to be necessary or expedient.

Short title and commencement 126.—(1) This Act may be cited as the Friendly Societies Act 1992. (2) This Act shall come into force on such day as the Treasury may by order appoint and different days may be appointed for different provisions or different purposes.

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(3) An order under subsection (2) above may contain such transitional provisions and savings (whether or not involving the modification of any statutory provision) as appear to the Treasury necessary or expedient in connection with the provisions brought into force. Notes Subs (2) The commencement and related orders made under this section are as follows: (a) Friendly Societies Act 1992 (Commencement No 1) Order 1992, SI 1992 No 1325; (b) Friendly Societies Act 1992 (Commencement No 2) Order 1992, SI 1992 No 3117; (c) Friendly Societies Act 1992 (Transitional and Consequential Provisions and Savings) Regulations 1993, SI 1993 No 932; (d) Friendly Societies Act 1992 (Commencement No 3 and Transitional Provisions) Order 1993, SI 1993 No 16; (e) Friendly Societies Act 1992 (Commencement No 4) Order 1993, SI 1993 No 197; (f) Friendly Societies Act 1992 (Commencement No 5 and Savings) Order 1993, SI 1993 No 1186; (g) Friendly Societies Act 1992 (Consequential Provisions (No 2)) Regulations 1993, SI 1993 No 1187; (h) Friendly Societies Act 1992 (Commencement No 6 and Transitional Provisions) Order 1993, SI 1993 No 2213; (i) Friendly Societies Act 1992 (Commencement No 7 and Transitional Provisions and Savings) Order 1993, SI 1993 No 3226; (j) Friendly Societies Act 1992 (Commencement No 8) Order 1994, SI 1994 No 2543. (k) Friendly Societies Act 1992 (Transitional and Consequential Provisions) Regulations 1995, SI 1995 No 710. These provisions are not reproduced in this work.

SCHEDULES SCHEDULE 1 T H E F R I E N D LY S O C I E T I E S C O M M I S S I O N S E C T I O N 1 General Note This Schedule was repealed by the Financial Services and Markets Act 2000, SI 2001 No 2617, Sched 4, para 1.

SCHEDULE 2 T H E A C T I V I T I E S O F A F R I E N D LY S O C I E T Y S E C T I O N S 5 A N D 7 General Note Sched 2 sets out the classes of business which an incorporated friendly society may carry on in the UK, in accordance with ss 5(2) and 7(2) of the Friendly Societies Act 1992. The classes of business are, in insurance terms, narrower than those for which an insurance company may be authorised (in that most forms of general insurance may not be carried on by a friendly society) but wider as regards the matters set out under heads C and D of the Schedule. A. Long term business of one or more of the following classes: Number I

Description Life and annuity

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Nature of business Effecting and carrying out contracts of insurance on human life or contracts to pay annuities on human life, but excluding (in each case) contracts within Class III below.

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II

Marriage, civil partnership and birth

III

Linked long term

IV

Permanent health

V

Tontines

VI

Capital redemption

VII

Pension fund management

Effecting and carrying out contracts of insurance to provide a sum on marriage or on the formation of a civil partnership or on the birth of a child, being contracts expressed to be in effect for a period of more than one year. Effecting and carrying out contracts of insurance on human life or contracts to pay annuities on human life where the benefits are wholly or partly to be determined by reference to the value of, or the income from, property of any description (whether or not specified in the contracts) or by reference to fluctuation in, or in an index of, the value of property of any description (whether or not so specified). Effecting and carrying out contracts of insurance providing specified benefits against risks of persons becoming incapacitated in consequence of sustaining injury as a result of an accident or of an accident of a specified class or of sickness or infirmity, being contracts that: (a) are expressed to be in effect for a period of not less than five years, or until the normal retirement age for the persons concerned, or without limit of time, and (b) either are not expressed to be terminable by the insurer, or are expressed to be so terminable only in special circumstances mentioned in the contract. Effecting and carrying out tontines. Effecting and carrying out capital redemption contracts. Effecting and carrying out— (a) contracts to manage the investments of pension funds; or (b) contracts of the kind mentioned in paragraph (a) above that are combined with contracts of insurance covering either conservation of capital or payment of a minimum interest.

Notes Table A, class II, columns 2 and 3 amended by the Civil Partnership Act 2004, Schedule 27, paragraph 143.

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Friendly Societies Act 1992 B. General business of one or more of the following classes: Number

Description

1

Accident

2

Sickness

3

Miscellaneous financial loss

Nature of business Effecting and carrying out contracts of insurance providing fixed pecuniary benefits or benefits in the nature of indemnity (or a combination of both) against risks of the person insured: (a) sustaining injury as the result of an accident or of an accident of a specified class, or (b) dying as the result of an accident or of an accident of a specified class, or (c) becoming incapacitated in consequence of disease or of disease of a specified class, inclusive of contracts relating to industrial injury and occupational disease but exclusive of contracts falling within Class 2 below or within Class IV in head A of this Schedule (permanent health). Effecting and carrying out contracts of insurance providing fixed pecuniary benefits or benefits in the nature of indemnity (or a combination of the two) against risks of loss to the persons insured attributable to sickness or infirmity, but exclusive of contracts falling within Class IV in head A of this Schedule. Effecting and carrying out contracts of insurance against any of the following risks, namely: (a) risks of loss to the persons insured attributable to their being unemployed, or (b) risks of loss to the persons insured attributable to their being in distressed circumstances, or (c) risks of loss to the persons insured attributable to sickness or infirmity, but exclusive of contracts falling within Class 2 above or Class IV in head A of this Schedule.

C. Business, not falling within the descriptions of insurance business in head A or B above, consisting of the effecting and carrying out of contracts in accordance with which benefits are provided— (a) for the relief or maintenance of any persons during sickness or when in distressed circumstances; or (b) to meet the funeral expenses of any persons.

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D. Activities carried out in accordance with the society’s rules (or with arrangements made under the rules) whereby discretionary benefits are provided— (a) for the education of any persons; (b) for the relief or maintenance of any persons during sickness, when out of employment or when in distressed circumstances; or (c) for the funeral expenses of any persons. SCHEDULE 3 E S TA B L I S H M E N T, I N C O R P O R AT I O N A N D C O N S T I T U T I O N O F I N C O R P O R AT E D F R I E N D LY S O C I E T I E S S E C T I O N 5 General Note Sched 3 sets out the provisions which a friendly society must include in its constitution in order to qualify for incorporation, under s 5(6) of the 1992 Act. Where two or more friendly societies are to amalgamate, they must comply with para 1(2) of this Schedule, as well as with s 85 of, and Sched 15 to, the 1992 Act. The Schedule was amended by the Financial Institutions (Prudential Supervision) Regulations 1996, SI 1996 No 1669. The Schedule was revised pursuant to the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, art 120 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Requirements for establishment and incorporation 1.—(1) Any 7 or more persons may establish a society under this Act by taking the following steps— (a) agreeing upon the purposes of the society and upon the extent of its powers in a memorandum the provisions of which comply with the requirements of this Schedule; (b) agreeing upon rules for the regulation of the society which comply with the requirements of this Schedule; and (c) sending to the Authority 3 copies of the memorandum and the rules, each copy signed by at least 7 of those persons (or, if there are only 7, by all of them) and (unless the secretary is to be elected) by the intended secretary. (2) Where two or more friendly societies propose to amalgamate under section 85 above, they shall establish their successor society by— (a) agreeing upon the purposes of their successor and upon the extent of its powers in a memorandum the provisions of which comply with the requirements of this Schedule; (b) agreeing upon rules for the regulation of their successor which comply with the requirements of this Schedule; (c) each approving the memorandum and the rules by special resolution; and (d) sending to the Authority 3 copies of the rules and of the memorandum, each copy signed by the secretary of each of the societies participating in the amalgamation. (3) Where copies of the memorandum and the rules are sent to the Authority in accordance with sub-paragraph (1)(c) or (2)(d) above, the Authority, if satisfied that— (a) the memorandum and the rules are in conformity with this Act; and (b) the intended name of the society is not, in its opinion, undesirable, shall register the society and issue it with a certificate of incorporation. (4) The Authority shall not register a society as the successor society to any friendly societies proposing to amalgamate unless it has confirmed the proposed amalgamation under section 85 above. (5) The Authority shall not register a society which, if it were registered, would be a society to which section 37(2) or (3) above applies if the Authority is satisfied that the principal place of business of the society is to be situated outside the United Kingdom. 2.—(1) A registered friendly society may be incorporated under this Act only if the following steps are taken— (a) the proposal to apply for incorporation is submitted to the members of the society for their consent by the procedure required for a proposal to amend the rules (or, in the case of a society with branches, the general rules) of the society;

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(b) consent to the application is given in accordance with that procedure; (c) the society agrees, in accordance with that procedure— (i) upon the purposes of the society after incorporation, and upon the extent of its powers, in a memorandum the provisions of which comply with the requirements of this Schedule; and (ii) upon rules for the regulation of the society after incorporation which comply with the requirements of this Schedule; and (d) there are sent to the Authority— (i) 3 copies of the memorandum and the rules, each signed by at least 7 members and by the secretary of the society; and (ii) a statutory declaration by the secretary that the steps mentioned in paragraphs (a) and (b) above were taken. (2) Where copies of the memorandum, the rules and the statutory declaration are sent to the Authority in accordance with paragraph (c) of sub-paragraph (1) above, the Authority, if satisfied that— (a) the steps mentioned in sub-paragraph (1)(a) and (b) were taken; (b) the provisions of the memorandum and the rules are in conformity with this Act; (c) the name proposed for the society after incorporation is not, in its opinion, undesirable [; and (d) in the case of a society to which section 37(2) or (3) above applies, the principal place of business of the society is situated in the United Kingdom.] shall register the society and issue it with a certificate of incorporation. 3. On registering a society under paragraph 1 or 2 above, the Authority shall— (a) retain and register one copy of the memorandum and of the rules; (b) return another copy to the secretary of the society, together with a certificate of registration; and (c) keep another copy, a copy of the certificate of incorporation and a copy of the certificate of registration of the memorandum and the rules, in the public file of the society. The memorandum 4.—(1) The memorandum of an incorporated friendly society shall— (a) specify the name of the society; (b) state whether the registered office of the society is to be situated in England and Wales, or in Scotland, or in Northern Ireland; (c) specify the address of its registered office; (d) state the purposes of the society and the extent of its powers; and (e) if any of those purposes are to include the carrying on of any business outside the United Kingdom, state with respect to those purposes that that is the case. (2) The choice stated in a society’s memorandum in pursuance of sub-paragraph (1)(b) above may not be altered by the society. (3) In this Act, in relation to an incorporated friendly society, ‘‘memorandum’’ means the memorandum registered under paragraph 3 above, including the record of any alteration under paragraph 6 below. The rules 5.—(1) The rules of an incorporated friendly society shall provide for the matters specified in the Table in sub-paragraph (3) below. (2) Nothing in this paragraph shall be taken to authorise any provision in the rules of a society which is inconsistent with, or rendered void by, this Act (or any instrument made under it). (3) The Table referred to in sub-paragraph (1) above is as follows:—

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1 The terms of admission of members and the manner in which membership is to cease. 2 If the terms on which a benefit is provided are not in the rules, the manner in which they are to be determined. 3 Any forfeitures which may be imposed on any member. 4 The consequences of non-payment of any subscription. 5 The manner of remunerating the auditors. 6 As respects the officers— (a) the manner of their election or appointment and their removal; (b) the manner of remunerating them; and (c) the circumstances in which pensions may be awarded to persons by virtue of their office and the method of determining the terms of such pensions. 7 The powers and duties of the committee of management. 8 The investment of the funds of the society. 9 The manner in which disputes are to be settled. 10 If the society has a common seal, the form, custody and use of the seal. 11 The calling and holding of meetings and, in particular— (a) the right to requisition meetings; (b) the right to move resolutions at meetings; (c) the manner in which notice of meetings, and of any resolutions to be moved at meetings, is to be given; (d) the procedure to be observed at meetings; (e) the form of notice for the convening of a meeting; (f) the voting rights of members, the right to demand a poll and the manner in which a poll is to be taken. 12 The entitlement of members to participate in the distribution of any surplus assets after payments to creditors, on the winding up, or dissolution by consent, of the society. 13 The procedure for altering the society’s memorandum and rules.

Requirements for alteration of memorandum and rules 6.—(1) An incorporated friendly society may in the manner prescribed by its rules alter the memorandum or rules of the society by the addition, rescission or variation of any provision. (2) Sub-paragraph (1) above does not apply to any alteration to which section 13(6) above applies or which is prohibited by paragraph 4(2) above. (3) An alteration to the name or registered office of an incorporated friendly society shall (instead of being effected under this paragraph) be effected under paragraph 9 or 12 below; and it is not necessary to alter the memorandum or rules of such a society by reason only that its name or registered office is changed. (4) Where a society makes an alteration of its memorandum or rules under this paragraph, it shall send to the Authority— (a) 3 copies of a record of the alteration signed by the secretary; and (b) a statutory declaration by the secretary that the alteration was made in accordance with the procedure prescribed by the society’s rules. (5) On making an alteration of its memorandum or rules under this paragraph the society shall determine the date on which it intends the alteration to take effect; and the record of the alteration shall specify that date (in this paragraph referred to as ‘‘the specified date’’). (6) Where copies of a record of an alteration of a society’s memorandum or rules are sent to the Authority under sub-paragraph (4) above and the Authority is satisfied that the alteration is in conformity with this Act, the Authority shall— (a) retain and register one of the copies; (b) return another to the secretary of the society together with a certificate of registration of the alteration; and (c) keep another copy, together with a copy of the certificate of registration of the alteration, in the public file of the society.

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(7) An alteration of the memorandum or rules of a society under this paragraph shall not take effect until the specified date or, if the alteration is registered under sub-paragraph (6) above on a later date, the date on which the certificate of registration is issued. (8) If an incorporated friendly society arranges for the publication in consolidated form of its memorandum or rules as altered for the time being— (a) it shall send a copy to the Authority; and (b) the Authority shall keep the copy in the public file of the society; but the Authority shall not register the copy. (9) If an incorporated friendly society fails, within the period of 3 months beginning with the date on which an alteration to its memorandum or rules is made, to comply with sub-paragraph (4) above, the society shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 4 on the standard scale. Membership 7. A person under 18— (a) may, if the rules do not otherwise provide, be admitted as a member of an incorporated friendly society and, if he is over 16 by himself, and he is under 16 by his parent or guardian, execute all instruments and give all receipts necessary to be executed or given under the rules; (b) may not vote or hold any office in the society; and (c) may not nominate, or join in nominating, a person for election as a member of the committee of management, or (if the secretary is elected) as secretary, of the society. Liability of members 8.—(1) The liability of a member of an incorporated friendly society is limited to the amount of any subscription to the society which is outstanding. (2) No subscription of a member of an incorporated friendly society shall be recoverable at law except on the winding up of the society. Name 9.—(1) The name of an incorporated friendly society must have ‘‘Limited’’ as its last word, except that, if the society is to be registered with a memorandum stating that its registered office is to be situated in Wales, the name may have ‘‘cyfyngedig’’ (the Welsh equivalent of ‘‘Limited’’) as its last word. (3) If the society has a common seal, it shall bear the registered name of the society. (4) An incorporated friendly society may change its name by a resolution of the society in general meeting after the giving of such notice as is required for special resolution. (5) Where a society changes its name under this paragraph, notice of the change shall be sent to the Authority and, unless it is of the opinion that the changed name is undesirable, the Authority shall— (a) register the notice of the change of name; (b) issue the society with a certificate of registration; and (c) keep a copy of the certificate of registration in the public file of the society. (6) A change of name shall not take effect until the date on which the certificate of registration under sub-paragraph (5) above is issued or such later date as may be specified in the certificate. (7) A change of name shall not affect the rights and obligations of the society, of any of its members or of any other person concerned. 10.—(1) Every incorporated friendly society shall have its name mentioned in legible characters— (a) in all its business letters, its notices and its other official publications; (b) in all its bills of parcels, invoices, receipts and letters of credit; and

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(c) in all bills of exchange, promissory notes, endorsements, cheques and orders for money or goods purporting to be signed by or on behalf of the society. (2) Where the name of an incorporated friendly society does not include the words ‘‘friendly society’’, the fact that it is an incorporated friendly society shall be shown in legible characters in all documents such as are mentioned in sub-paragraph (1) above. Notes Para 9(2), concerning the use of a Welsh designation, was repealed by the Deregulation (Friendly Societies Act 1992) Order 1996, SI 1996 No 1188, art 7.

Offences relating to society’s name 11.—(1) If an incorporated friendly society— (a) fails, within the period of 3 months beginning with the date on which a resolution changing its name is passed, to send to the Authority the notice required by paragraph 9(5) above; or (b) fails to comply with paragraph 10(1) or (2) above; the society shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the standard scale. (2) If an officer of an incorporated friendly society or a person on its behalf— (a) issues or authorises the issue of any business letter, notice or other official publication of the society or any bill of parcels, invoice, receipt or letter of credit of the society in which the society’s name is not mentioned as required by paragraph 10(1) above; or (b) signs or authorises to be signed on behalf of the society any bill of exchange, promissory note, endorsement, cheque or order for money or goods in which the society’s name is not so mentioned, he shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the standard scale; and, in the case of the conduct mentioned in paragraph (b) above, he is further personally liable to the holder of the bill of exchange, promissory note, cheque or order for money or goods for the amount of it (unless it is duly paid by the society). (3) If an officer of an incorporated friendly society whose name does not include the words ‘‘friendly society’’ or a person on its behalf— (a) issues or authorises the issue of any such document as is mentioned in sub-paragraph (2)(a) above, and the fact that it is an incorporated friendly society is not shown in legible characters in the document; or (b) signs or authorises to be signed on behalf of the society any such document as is mentioned in sub-paragraph (2)(b) above, and the fact that it is an incorporated friendly society is not shown in legible characters in the document, he shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the standard scale; and, in the case of the conduct mentioned in paragraph (b) above, he is further personally liable to the holder of the bill of exchange, promissory note, cheque or order for money or goods for the amount of it (unless it is duly paid by the society). Change of registered office 12.—(1) An incorporated friendly society may change its registered office in such manner as its rules prescribe or, if the rules do not provide for that matter, by a resolution of the society in general meeting after the giving of such notice as is required for a special resolution. (2) Notice of any such change shall be sent to the Authority and the Authority shall— (a) register the notice of the change of registered office; (b) issue the society with a certificate of registration; and (c) keep a copy of the certificate of registration in the public file of the society. (3) A change of registered office shall not take effect until the date on which the certificate of registration under sub-paragraph (2) above is issued or such later date as may be specified in the certificate.

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(4) If an incorporated friendly society fails, within the period of 3 months beginning with the date on which a resolution changing its registered office is passed, to send to the Authority the notice required by sub-paragraph (2) above, the society shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 4 on the standard scale. Societies to supply copies of rules etc 13.—(1) An incorporated friendly society shall, on demand, give a copy of its statutory documents— (a) free of charge, to any member of the society to whom a copy of those documents has not previously been given; and (b) to any other person, upon payment of such fee as the society may require, not exceeding the prescribed amount. (2) The reference in sub-paragraph (1) above to a copy of an incorporated friendly society’s statutory documents is a reference to— (a) a printed copy of the society’s rules for the time being, with a copy of the certificate of incorporation of the society annexed to it; and (b) a printed copy of the memorandum of the society for the time being. (3) If an incorporated friendly society fails to comply with the requirements of sub-paragraph (1) above, the society shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 4 on the standard scale. (4) In sub-paragraph (1) above the ‘‘prescribed amount’’ means £1 or such other amount as the Treasury prescribe by order. Register of members 14.—(1) Every incorporated friendly society shall maintain a register of the names and addresses of the members of the society. (2) The register shall be kept at the registered office or at such other place or places as the committee of management thinks fit. (3) A society which was previously a registered friendly society need not enter in the register the address of a member who became a member before its incorporation while it has no address for him and his whereabouts are unknown. (4) Where it appears to an incorporated friendly society that the registered address shown in the register for a member is no longer current, the society— (a) may remove that address from the register; and (b) need not enter in the register an address for that member while it has no address for him and his whereabouts are unknown. (5) If an incorporated friendly society contravenes sub-paragraph (1) above, the society shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 4 on the standard scale. (6) For the purposes of this Act ‘‘registered address’’, in relation to a member of an incorporated friendly society, means— (a) the address shown in the register mentioned under this paragraph, except in a case where paragraph (b) below applies; (b) where the member has requested that communications from the society be sent to some other address, that other address. Inspection of records by members 15.—(1) Subject to sub-paragraph (2) below, a member or person having an interest in the funds of an incorporated friendly society may inspect the records at all reasonable hours at the registered office of the society or at any other place where they are kept. (2) Unless he is an officer of the society or is specially authorised by resolution of the society to do so, a member or such a person shall not have the right to inspect the loan account of any other member without the written consent of that member.

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Regulation of Insurers SCHEDULE 4 I N C O R P O R AT I O N O F R E G I S T E R E D F R I E N D LY S O C I E T I E S : S U P P L E M E N TA RY S E C T I O N 6

General Note Sched 4 supplements s 6 of the 1992 Act in relation to registered friendly societies which seek incorporation under the 1992 Act. In particular it is concerned with the position of branches which, prior to incorporation, owned property in their own right.

Preliminary 1.—(1) This Schedule has effect in relation to an incorporated friendly society (‘‘the incorporated society’’) which was formerly a registered friendly society (‘‘the registered society’’); and in this Schedule ‘‘incorporation’’ means the incorporation of that society. (2) In this Schedule ‘‘branch’’, in relation to the registered society, means any registered or unregistered branch of the society and, in relation to the incorporated society, means a group of members provided for by the rules of the society— (a) which is under the control, and bound to contribute to the funds, of the society; and (b) which has its own funds and other property vested in trustees and administered (in accordance with its rules) by the members of the group themselves, or through its own committee or other officers. (3) In this Schedule references to an agreement include references to any agreement (whether in writing or not) and any deed, bond or other instrument. (4) Nothing in section 6 above or this Schedule shall be taken as affecting any power or liability of a branch of a registered friendly society to secede or to be expelled from that society. Schemes under section 6(5) 2.—(1) This paragraph applies to a registered society with branches which proposes— (a) that the incorporated society will have branches; and (b) that any of those branches is to be treated as a continuation of a branch of the registered society. (2) The registered society may, by the procedure required to amend the rules of the society, approve a scheme under subsection (5) of section 6 above (a ‘‘scheme’’) identifying property, rights and liabilities of a branch which are to continue to be property, rights and liabilities of the branch (as a branch of the incorporated society) and so are to be excluded from transfer under subsection (4) of that section. (3) A scheme— (a) may deal with property, rights and liabilities of one or more branches of the registered society; and (b) may, instead of specifying any property, rights and liabilities of a branch of the registered society, refer to all the property, rights and liabilities referable to such part of its activities as is specified in the scheme. (4) A scheme may not identify for exclusion from transfer under section 6(4) above any property, rights or liabilities of a branch of the registered society which are referable only to an activity of the branch which a branch of the incorporated society would (by virtue of section 7(5) above) be unable to carry on on its own behalf. (5) On making a scheme the registered society shall send to the Authority— (a) 4 copies of the scheme, each signed by the secretary; (b) a statutory declaration by the secretary that the scheme was duly approved by the society; (c) in the case of a scheme identifying any property, rights or liabilities of a branch which was (immediately before incorporation) carrying on any insurance or non-insurance business; a certificate from the appropriate actuary that the incorporated society will,

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on incorporation, possess sufficient assets to meet such of the liabilities to be transferred to the society from that branch as are referable to that business. (6) On receiving copies of a scheme, the Authority shall, if satisfied that the society has duly approved the scheme— (a) retain and register one copy of the scheme; (b) return another copy to the secretary of the registered society, together with a certificate of registration; (c) keep another copy in the public file of the registered society and, after incorporation, in the public file of the incorporated society; and the Authority shall not register the incorporated society under this Act until after it has registered the scheme. Notes Sub-paragraphs (5) and (6) were amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, Sched 3, para 122 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Effect of incorporation on registered society 3.—(1) Subject to the provisions of this Act, the incorporated society shall be treated after incorporation as the same person as the registered society. (2) Without prejudice to the generality of sub-paragraph (1) above, any agreement made, transaction effected or other thing done by, to or in relation to the registered society which is in force or effective immediately before incorporation shall have effect as if made, effected or done by, to or in relation to the incorporated society; and, accordingly, references to the society— (a) in any agreement; (b) in any process or other document issued, prepared or employed for the purposes of any proceeding before any court or other tribunal or authority; and (c) in any other document whatsoever (other than an enactment) relating to or affecting any property, right or liability of the society. shall be taken as referring to the incorporated society. 4. On incorporation of the registered society— (a) a person who was immediately before incorporation a member of the registered society shall be a member of the incorporated society; (b) any appointment as trustee or treasurer of the society shall determine; and (c) all other persons who were officers of the registered society shall become officers, holding corresponding offices, of the incorporated society; but paragraph (c) above is without prejudice to anything done by the society after incorporation as respects the election or appointment of members of its committee of management and its other officers. 5. Any agreement made by the registered society which is in force immediately before incorporation shall have effect as if— (a) for references to members of the registered society there were substituted references to members of the incorporated society; (b) for references to officers of the registered society (other than its trustees or treasurer) there were substituted references to the corresponding officers of the incorporated society; (c) for references to the trustees of the registered society there were substituted references to the incorporated society; and (d) for references to the treasurer of the registered society there were substituted references to such person as the incorporated society may appoint or in default of appointment to the officer of that society who corresponds as nearly as may be to the treasurer. 6. It is hereby declared for the avoidance of doubt that— (a) any contract of employment with the registered society in force immediatley before incorporation is merely modified by the substitution of the name of the incorporated society as the employer (and is not terminated or varied in any other way);

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(b) any period of employment with the registered society shall count for all purposes as a period of employment with the incorporated society; and (c) the rights and liabilities referred to in section 6 above include any rights and liabilities subsisting immediately before incorporation— (i) under any agreement or arrangement for the payment of pensions, allowances or gratuities; or (ii) under the law of any country or territory outside the United Kingdom. 7.—(1) The final financial year of the registered friendly society shall be such period not exceeding 12 months as expires immediately before its incorporation. (2) Anything which, if it had not been incorporated, would be required to be done by the registered society at a time after its incorporation shall be done by the incorporated society. (3) If the incorporated friendly society fails to do anything which it is required to do by virtue of sub-paragraph (2) above, the society and its officers shall be subject to the sanctions to which the registered friendly society and its officers would have been subject if the society had failed to do it. Effect of incorporation on branches of registered society 8.—(1) This paragraph applies where the property, rights and liabilities of a branch of the registered society (‘‘the branch’’) are all transferred to the incorporated society by section 6(4) above. (2) The provisions of paragraphs 3 to 7 above shall apply in relation to the branch as they apply in relation to the registered society— (a) with the omission from paragraph 4 of the words following ‘‘shall determine’’; and (b) in paragraph 5, with the substitution for references to the members, officers, trustees or treasurer of the society of references to the corresponding officers of the branch; and the branch shall be deemed to be dissolved immediately after the transfer of its property, rights and liabilities to the incorporated society. 9.—(1) This paragraph applies where the property, rights and liabilities of a branch of the registered society are all excluded by virtue of a scheme from transfer to the incorporated society. (2) On incorporation of the registered society, the property, rights and liabilities of the branch shall continue as property, rights and liabilities of the branch (as a branch of the incorporated society). (3) The branch of the incorporated society shall be treated as a continuation of the branch of the registered society; and so on incorporation— (a) any member of the branch shall continue as a member; and (b) any trustee, treasurer or other officer of the branch immediately before incorporation shall continue in office; but paragraphs (a) and (b) above are without prejudice to anything done after incorporation as respects the membership and officers of the branch. 10.—(1) This paragraph applies where some of the property, rights and liabilities of a branch of the registered society are transferred to the incorporated society by section 6(4) above and some are excluded from transfer by virtue of a scheme. (2) As respects the property, rights and liabilities transferred from the branch to the incorporated society, the provisions of paragraphs 3, 5, 6 and 7 above shall apply in relation to the branch as they apply in relation to the registered society— (a) with, in paragraph 5, the substitution for references to the members, officers, trustees or treasurer of the society of references to the corresponding officers of the branch; and (b) with the omission of paragraph 7(1). (3) On incorporation of the registered society, the property, rights and liabilities of the branch which are excluded from transfer shall continue as property, rights and liabilities of the branch (as a branch of the incorporated society). (4) As respects the property, rights and liabilities so excluded, the branch shall, after incorporation of the registered society, be treated as a continuation of the branch of the registered society; and so on incorporation—

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(a) any member of the branch shall continue as a member; and (b) any trustee, treasurer or other officer of the branch shall continue in office; but paragraphs (a) and (b) above are without prejudice to anything done after incorporation as respects membership and officers of the branch. Consequences of transfer 11. No transfer affected by section 6 above shall give rise to any liability to stamp duty. 12.—(1) The action mentioned in the following provisions of this paragraph shall be taken not later than the end of the period of 90 days beginning with the day on which the registered society is incorporated. (2) The persons who were the trustees and treasurer of the registered society immediately before its incorporation shall deliver to the incorporated society— (a) any property of the society held by them; and (b) any documents relating to the property, rights and liabilities of the registered society or its financial affairs. (3) The persons who were the trustees and treasurer of any branch of the registered society immediately before its incorporation shall deliver to the incorporated society— (a) any property (formerly property of the branch) which is transferred to the society by section 6(4) above; and (b) any documents relating to such of the property, rights or liabilities of the branch as are so transferred. (4) The Public Trustee shall, if he held property on trust for the registered society immediately before its incorporation, deliver to the incorporated society any property so held by him and any documents relating to it. (5) Nothing in this Act shall have effect to relieve the former trustees or treasurer of a registered friendly society or branch or the Public Trustee from any liability arising from acts or omissions before the incorporation of the society. SCHEDULE 5 A D D I T I O N A L A C T I V I T I E S O F I N C O R P O R AT E D S O C I E T I E S S E C T I O N 7 General Note This Schedule contains the additional powers that may be exercised by an incorporated friendly society if authorised to do so by its memorandum. See the note to s 7(2) of the 1992 Act. The Schedule was amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, Sched 3(I), para 122(a).

Introductory 1. An incorporated friendly society may do anything mentioned in the following provisions of this Schedule in the manner directed by the society’s rules. Loans out of separate loan fund 2.—(1) An incorporated friendly society may, out of any separate loan fund to be formed by contributions or deposits from its members, make loans to members on their personal security, with or without sureties or, in Scotland, cautioners, subject to the restrictions in sub-paragraphs (2) to (4) below. (2) A loan shall not at any time be made out of money contributed otherwise than for the purpose of the loan fund. (3) A member shall not be capable of holding any interest in the loan fund exceeding £800. (4) The society shall not— (a) make any loan to a member on personal security beyond the amount fixed by the rules, or make any loan which, together with any money owing by a member to the society, exceeds £200; or

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(b) hold at any one time on deposit from its members any money beyond the amount fixed by the rules, and the amount so fixed shall not exceed two thirds of the total sums owing to the society by the members who have borrowed from the loan fund. (5) The Treasury may by order amend sub-paragraph (3) or (4) above to substitute, for the sum for the time being specified in that sub-paragraph, such greater sum as is specified in the order. Power to set up funds for purchasing Government Securities 3.—(1) An incorporated friendly society may set up and administer a fund for the purchase, on behalf of members contributing thereto, of Defence Bonds, National Savings Certificates, Ulster Savings Certificates or such other securities of Her Majesty’s Government as the Treasury may prescribe. (2) A society may allow persons to become members of the society for the purpose only of contributing to a fund set up by virtue of this paragraph. (3) Any securities prescribed, before the commencement of this paragraph, for the purposes of section 47 of the 1974 Act shall be treated as having been prescribed under sub-paragraph (1) above. Investment of funds in housing association 4.—(1) An incorporated friendly society may invest funds of the society in subscribing for any of the share or loan capital of a housing association (within the meaning of the Housing Associations Act 1985) other than shares or debentures not fully paid up at the time of issue. (2) This paragraph has effect without prejudice to any power the society may have by virtue of section 14 above. Accumulation of members’ surplus contributions 5. An incorporated friendly society may accumulate at interest, for the use of any member, any surplus of his contributions to the funds of the society which may remain after providing for any assurance in respect of which they are paid and for the withdrawal of the accumulations. Subscriptions to other bodies 6. An incorporated friendly society may subscribe out of its funds to any hospital, infirmary, charitable or provident institution, any annual or other sum which may be necessary to secure to members of the society and their families the benefits of that institution. 7. An incorporated friendly society may contribute to the funds and take part in the government of any other friendly society. SCHEDULE 6 MAKING OF CONTRACTS AND EXECUTION OF DOCUMENTS BY I N C O R P O R AT E D F R I E N D LY S O C I E T I E S S E C T I O N 7 General Note This Schedule is concerned with the formalities of the making of contracts by a friendly society. See s 7(6) of the 1992 Act.

England and Wales and Northern Ireland 1. Under the law of England and Wales and Northern Ireland a contract may be made— (a) by an incorporated friendly society, by writing under its common seal; or (b) on behalf of an incorporated friendly society, by any person acting under its authority, express or implied;

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and any formalities required by law in the case of a contract made by an individual also apply, unless a contrary intention appears, to a contract made by or on behalf of an incorporated friendly society. 2.—(1) The following provisions have effect with respect to the execution of documents by an incorporated friendly society under the law of England and Wales and of Northern Ireland. (2) A document is executed by an incorporated friendly society by the affixing of its common seal. (3) An incorporated friendly society need not have a common seal, however, and the following sub-paragraphs apply whether it does or not. (4) A document signed by a member of the committee of management and the secretary of an incorporated friendly society, or by 2 members of the committee of management, and expressed (in whatever form of words) to be executed by the society has the same effect as if executed under the common seal of the society. (5) A document executed by an incorporated friendly society which makes it clear on its face that it is intended by the person or persons making it to be a deed has effect, upon delivery, as a deed; and it shall be presumed, unless a contrary intention is proved, to be delivered upon its being so executed. (6) In favour of a purchaser a document shall be deemed to have been duly executed by an incorporated friendly society if it purports to be signed by a member of the committee of management and the secretary of the society, or by 2 members of the committee of management, and, where it makes it clear on its face that it is intended by the person or persons making it to be a deed, to have been delivered upon its being executed. (7) In sub-paragraph (6) above a ‘‘purchaser’’ means a purchaser in good faith for valuable consideration and includes a lessee, mortgagee or other person who for valuable consideration acquires an interest in property. 3. (Applies to Scotland only.)

SCHEDULE 7 A C T I V I T I E S W H I C H M AY B E C A R R I E D O N B Y A S U B S I D I A RY O F O R B O D Y J O I N T LY C O N T R O L L E D B Y A N I N C O R P O R AT E D F R I E N D LY S O C I E T Y General Note Schedule 7 was omitted by Schedule 18(II) to the Financial Services and Markets Act 2000, paragraph 10.

SCHEDULE 8 P R O V I S I O N S S U P P L E M E N TA RY T O S E C T I O N 1 3 General Note This Schedule supplements s 13, which permits an incorporated friendly society to form a subsidiary company or jointly or alone to control another company. Section 13(9) defines the concepts of ‘‘control’’ and ‘‘subsidiary company’’. See the note to s 13(9) of the 1992 Act. Amended by Schedule 18(II), para 14 to the Financial Services and Markets Act 2000.

1. The provisions of this Schedule explain expressions used in section 13 above and otherwise supplement that section. 2. In section 13(9)(a) and (c) the references to the voting rights in a body corporate are to the rights conferred on shareholders in respect of their shares or, in the case of a body corporate not having a share capital, on members, to vote at general meetings of the body corporate on all, or substantially all, matters. 3.—(1) For the purposes of section 13(9)(a) and (c) the reference to the right to appoint or remove a majority of the board of directors is to the right to appoint or remove directors holding a majority of the voting rights at meetings of the board on all, or substantially all, matters. (2) [omitted].

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3A.—(1) A body is to be treated for the purposes of section 13(9) as having the right to appoint to a directorship if— (a) a person’s appointment to the directorship follows necessarily from his appointment as an officer of that body; or (b) the directorship is held by the body itself. (2) A body (‘‘B’’) and some other person (‘‘P’’) together are to be treated, for the purposes of section 13(9), as having the right to appoint to a directorship if— (a) P is a body corporate which has directors and a person’s appointment to the directorship follows necessarily from his appointment both as an officer of B and a director of P; (b) P is a body corporate which does not have directors and a person’s appointment to the directorship follows necessarily from his appointment both as an officer of B and as a member of P’s managing body; or (c) the directorship is held jointly by B and P. (3) For the purposes of section 13(9), a right to appoint (or remove) which is exercisable only with the consent or agreement of another person must be left out of account unless no other person has a right to appoint (or remove) in relation to that directorship. (4) Nothing in this paragraph is to be read as restricting the effect of section 13(9). Notes Subparagraph 3(2) omitted and para 3A inserted by Sched 18(II) to the Financial Services and Markets Act 2000, para 14.

4. Rights which are exercisable only in certain circumstances shall be taken into account only— (a) when the circumstances have arisen, and for so long as they continue to obtain, or (b) when the circumstances are within the control of the person having the rights; and rights which are normally exercisable but are temporarily incapable of exercise shall continue to be taken into account. 5. Rights held by a person in a fiduciary capacity shall be treated as not held by him. 6. Rights held by a person as nominee for another shall be treated as held by the other; and rights shall be regarded as held as nominee for another if they are exercisable only on his instructions or with his consent or concurrence. 7. Rights attached to shares held by way of security shall be treated as held by the person providing the security— (a) where apart from the right to exercise them for the purpose of preserving the value of the security, or of realising it, the rights are exercisable only in accordance with his instructions; (b) where the shares are held in connection with the granting of loans as part of normal business activities and apart from the right to exercise them for the purpose of preserving the value of the security, or of realising it, the rights are exercisable only in his interests. 8. Rights shall be treated as held by an incorporated friendly society if they are held by any of its subsidiaries; and nothing in paragraph 6 or 7 above shall be construed as requiring rights held by an incorporated friendly society to be treated as held by any of its subsidiaries. 9. For the purposes of paragraph 7 above rights shall be treated as being exercisable in accordance with the instructions or in the interests of an incorporated friendly society if they are exercisable in accordance with the instructions of or, as the case may be, in the interests of any subsidiary of that society or in the interests of any body over which the society has joint control. Notes Paragraph 9 amended by Sched 18(II) to the Financial Services and Markets Act 2000, para 14.

10. The voting rights in a body corporate shall be reduced by any rights held by the body itself. 11. References in any provision of paragraphs 5 to 10 above to rights held by a person include rights falling to be treated as held by him by virtue of any other provision of those paragraphs but not rights which by virtue of any such provision are to be treated as not held by him.

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SCHEDULE 9 N O M I N AT I O N S B Y M E M B E R S O F I N C O R P O R AT E D F R I E N D LY S O C I E T I E S A N D R E L AT E D M AT T E R S S E C T I O N 1 8 General Note This Schedule supplements s 18 of the Friendly Societies Act 1992, by specifying the form of nomination for the payment of benefits owing to members.

1.—(1) Subject to the following provisions of this paragraph, a member of an incorporated friendly society who is not under the age of 16 years may by writing under his hand delivered at or sent to the registered office of the society, or made in a book kept at that office, nominate a person or persons to whom any sum of money payable by the society on the death of that member or any specified amount of money so payable, shall be paid at his decease. (2) The total amount which may be nominated under this paragraph shall not exceed the relevant maximum, that is to say, £5,000 or such higher amount as, by virtue of an order under section 6 of the Administration of Estates (Small Payments) Act 1965, may for the time being apply for the purposes of the enactments specified in subsection (1) of that section. (3) The sum payable on the death of a member by an incorporated friendly society shall include sums of money contributed to or deposited in the separate loan fund, together with interest on them, and any sum of money accumulated for the use of the member under the provisions of this Act, together with interest on it. (4) A person nominated under this paragraph must not at the date of the nomination be an officer or employee of the society unless he is the husband, wife, father, mother, child, brother, sister, nephew or niece of the nominator. (5) Nominations so made may be revoked or varied by any similar document under the hand of the nominator delivered, sent, or made as mentioned in sub-paragraph (1) above. (6) The marriage of a member of the society shall operate as a revocation of any nomination previously made by that member under this paragraph. (7) Where a society has paid money to a nominee in ignorance of a marriage subsequent to the nomination, the receipt of the nominee shall be a valid discharge to the society. 2.—(1) Subject to sub-paragraph (2) below, on receiving satisfactory proof of the death of a nominator, an incorporated society shall pay to his nominee or nominees the amount due to the deceased or, as the case may be, the amount specified in the nomination. (2) The total amount paid by an incorporated friendly society by virtue of a nomination (whether in favour of one nominee or more) shall not exceed the relevant maximum referred to in paragraph 1(2) above. (3) The receipt of a nominee over 16 years of age for any amount paid in accordance with this paragraph shall be valid. 3.—(1) If any member of an incorporated friendly society entitled from its funds to a sum not exceeding the relevant maximum referred to in paragraph 1(2) above dies without having made any nomination of that sum then subsisting, the society may, without letters of administration or probate of any will or, in Scotland, without any grant of confirmation, distribute the sum among such persons as appear to the society, upon such evidence as the society may deem satisfactory, to be entitled by law to receive that sum. (2) A payment made by an incorporated friendly society under this Schedule shall be valid and effectual against any demand made upon the society by any other person, but the next of kin or personal representatives of the deceased member shall have a remedy for recovery of the money paid under paragraph 2(1) above against the person who has received that money. SCHEDULE 10 A P P L I C AT I O N O F C O M PA N I E S W I N D I N G U P L E G I S L AT I O N T O I N C O R P O R AT E D F R I E N D LY S O C I E T I E S S E C T I O N 2 3 General Note Under s 23 of the 1992 Act, the Insolvency Act 1986 applies to the winding-up of a friendly society, subject to the modifications specified in this Schedule. The Schedule was revised by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, Sched 3, para 123 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

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1. The enactments which comprise the companies winding up legislation (referred to in this Schedule as ‘‘the enactments’’) are the provisions of— (a) Parts IV, VI, VII, XII and XIII of the Insolvency Act 1986, or (b) Parts V, VI, XI and XII of the Insolvency (Northern Ireland) Order 1989, and, in so far as they relate to offences under any such enactment, sections 430 and 432 of, and Schedule 10 to, that Act or Article 373 of, and Schedule 7 to, that Order. 2. Subject to the following provisions of this Schedule, the enactments apply to the winding up of incorporated friendly societies as they apply to the winding up of companies registered under the Companies Act 1985 or (as the case may be) the Companies (Northern Ireland) Order 1986. 3.—(1) Subject to the following provisions of this Schedule, the enactments shall, in their application to incorporated friendly societies, have effect with the substitution— (a) for ‘‘company’’ of ‘‘incorporated friendly society’’; (b) for ‘‘directors’’ of ‘‘committee of management’’; (c) for ‘‘the registrar of companies’’ or ‘‘the registrar’’ of ‘‘the Financial Services Authority’’; and (d) for ‘‘the articles’’ of ‘‘the rules’’. (2) Subject to the following provisions of this Schedule in the application of the enactments to incorporated friendly societies— (aa) every reference to a company registered in Scotland shall have effect as a reference to an incorporated friendly society whose registered office is situated in Scotland; (a) every reference to the officers, or to a particular officer, of a company shall have effect as a reference to the officers, or to the corresponding officer, of the incorporated friendly society and as including a person holding himself out as such an officer; (b) every reference to a director of a company shall be construed as a reference to a member of the committee of management; and (c) every reference to an administrator, an administration order, an administrative receiver, a shadow director or a voluntary arrangement shall be omitted. 4.—(1) Where any of the enactments as applied to incorporated friendly societies requires a notice or other document to be sent to the Authority, it shall have effect as if it required the Authority to keep the notice or document in the public file of the society and to record in that file the date on which the notice or document is placed in it. (2) Where any of the enactments, as so applied, refers to the registration, or to the date of registration, of such a notice or document, that enactment shall have effect as if it referred to the placing of the notice or document in the public file or (as the case may be) to the date on which it was placed there. 5. Any enactment which specifies a sum altered by order under section 416 of the Insolvency Act 1986 or Article 362 of the Insolvency (Northern Ireland) Order 1989 (powers to alter monetary limits) applies with the effect of the alteration. PA RT I I M O D I F I E D A P P L I C AT I O N O F I N S O LV E N C Y A C T 1 9 8 6 PA RT S I V A N D X I I

Preliminary 6. In this Part of this Schedule, Part IV of the Insolvency Act 1986 is referred to as ‘‘Part IV’’; and that Act is referred to as ‘‘the Act’’. Members of a friendly society as contributories in winding up 7.—(1) Section 74 (liability of members) of the Act is modified as follows. (2) In subsection (1), the reference to any past member shall be omitted. (3) Paragraphs (a) to (d) of subsection (2) shall be omitted; and so shall subsection (3).

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(4) The extent of the liability of a member of an incorporated friendly society in a winding up shall not exceed the extent of his liability under paragraph 8 of Schedule 3 to this Act. 8. Sections 75 to 78 and 83 in Chapter I of Part IV (miscellaneous provisions not relevant to incorporated friendly societies) do not apply. 9.—(1) Section 79 (meaning of ‘‘contributory’’) of the Act does not apply. (2) In the enactments as applied to an incorporated friendly society, ‘‘contributory’’— (a) means every person liable to contribute to the assets of the society in the event of its being wound up; and (b) for the purposes of all proceedings for determining, and all proceedings prior to the determination of, the persons who are to be deemed contributories, includes any person alleged to be a contributory; and (c) includes persons who are liable to pay or contribute to the payment of— (i) any debt or liability of the incorporated friendly society being wound up; or (ii) any sum for the adjustment of rights of members among themselves; or (iii) the expenses of the winding up; but does not include persons liable to contribute by virtue of a declaration by the court under section 213 (imputed responsibility for fraudulent trading) or section 214 (wrongful trading) of the Act.

Voluntary winding up 10.—(1) Section 84 of the Act does not apply. (2) In the enactments as applied to an incorporated friendly society, the expression ‘‘resolution for voluntary winding up’’ means a resolution passed under section 21(1) above. 11. Section 88 shall have effect with the omission of the words from the beginning to ‘‘and’’. 12.—(1) Subsection (1) of section 89 shall have effect as if for the words from the beginning to ‘‘meeting’’ there were substituted the words— ‘‘(1) Where it is proposed to wind up an incorporated friendly society voluntarily, the committee of management (or, in the case of an incorporated friendly society whose committee of management has more than two members, the majority of them) may at a meeting of the committee’’. (2) The reference to the directors in subsection (2) shall be construed as a reference to members of the committee of management. 13. Section 90 shall have effect as if for the words ‘‘directors’ statutory declaration under section 89’’ there were substituted the words ‘‘statutory declaration made under section 89 by members of the committee of management’’. 14. Sections 95(1) and 96 shall have effect as if the word ‘‘directors’’ were omitted from each of them. 15. In subsection (1) of section 101 (appointment of liquidation committee) of the Act, the reference to functions conferred on a liquidation committee by or under that Act shall have effect as a reference to its functions by or under that Act as applied to incorporated friendly societies. 16.—(1) Section 107 (distribution of property) of the Act does not apply; and the following applies in its place. (2) Subject to the provisions of Part IV relating to preferential payments, an incorporated friendly society’s property in a voluntary winding up shall be applied in satisfaction of the society’s liabilities to creditors pari passu and, subject to that application, in accordance with the rules of the society. 17. Sections 110 and 111 (liquidator accepting share, etc. as consideration for sale of company property) of the Act do not apply.

Winding up by the court 18. In sections 117 (High Court and county court jurisdiction) and 120 (Court of Session and sheriff court jurisdiction) of the Act, each reference to a company’s share capital paid up or

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credited as paid up shall have effect as a reference to the amount of the contribution or subscription income of an incorporated friendly society as shown by the latest balance sheet. 19. Section 122 (circumstances in which company may be wound up by the court) of the Act does not apply. 20. Section 124 (application for winding up) of the Act does not apply. 21.—(1) In section 125 (powers of court on hearing of petition) of the Act, subsection (1) applies with the omission of the words from ‘‘but the court’’ to the end of the subsection. (2) The conditions which the court may impose under section 125 of the Act include conditions for securing— (a) that the incorporated friendly society be dissolved by consent of its members under section 20 above; or (b) that the society amalgamates with, or transfers all or any of its engagements to, another friendly society under section 85 or 86 above, or (c) that the society converts itself into a company under section 91 above, and may also include conditions for securing that any default which occasioned the petition be made good and that the costs, or in Scotland the expenses, of the proceedings on that petition be defrayed by the person or persons responsible for the default. 22. Section 126 (power of court, between petition and winding-up order, to stay or restrain proceedings against company) of the Act has effect with the omission of subsection (2). 23. If, before the presentation of a petition for the winding up by the court of an incorporated friendly society, an instrument of dissolution under section 20 above is placed in the society’s public file, section 129(1) (commencement of winding up by the court) of the Act shall also apply in relation to the date on which the notice is so placed and to any proceedings in the course of the dissolution as it applies to the commencement date for, and proceedings in, a voluntary winding up. 24.—(1) Section 130 of the Act (consequences of winding-up order) shall have effect with the following modifications. (2) Subsections (1) and (3) shall be omitted. (3) An incorporated friendly society shall, within 15 days of a winding-up order being made in respect of it, give notice of the order to the Authority; and the Authority shall keep the notice in the public file of the society. (4) If an incorporated friendly society fails to comply with sub-paragraph (3) above, it shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the standard scale. 25. Section 140 (appointment of liquidator by court in certain circumstances) of the Act does not apply. 26. In the application of sections 141(1) and 142(1) (liquidation committees), of the Act to incorporated friendly societies, the references to functions conferred on a liquidation committee by or under that Act shall have effect as references to its functions by or under that Act as so applied. 27. The conditions which the court may impose under section 147 (power to stay or sist winding up) of the Act shall include those specified in paragraph 21(2) above. 28. Section 154 (adjustment of rights of contributories) of the Act shall have effect with the modification that any surplus is to be distributed in accordance with the rules of the society. 29. In section 165(2) (liquidator’s powers) of the Act, the reference to an extraordinary resolution shall have effect as a reference to a special resolution. Winding up: general 30. Section 187 (power to make over assets to employees) of the Act does not apply. 31.—(1) In section 201 (dissolution: voluntary winding up) of the Act, subsection (2) applies without the words from ‘‘and on the expiration’’ to the end of the subsection and, in subsection (3), the word ‘‘However’’ shall be omitted. (2) Sections 202 to 204 (early dissolution) of the Act do not apply. 32. In section 205 (dissolution: winding up by the court) of the Act, subsection (2) applies with the omission of the words from ‘‘and, subject’’ to the end of the subsection; and in subsections (3) and (4) references to the Secretary of State shall have effect as references to the Authority.

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Penal provisions 33. Sections 216 and 217 of the Act (restriction on re-use of name) do not apply. 34.—(1) Sections 218 and 219 (prosecution of delinquent officers) of the Act do not apply in relation to offences committed by members of an incorporated friendly society acting in that capacity. (2) Sections 218(5) of the Act and subsections (1) and (2) of section 219 of the Act do not apply. (3) The references in subsections (3) and (4) of section 219 of the Act to the Secretary of State shall have effect as references to the Authority; and the reference in subsection (3) to section 218 of the Act shall have effect as a reference to that section as supplemented by paragraph 35 below. 35.—(1) Where a report is made to the prosecuting authority (within the meaning of section 218) under section 218(4) of the Act, in relation to an officer of an incorporated friendly society, he may, if he thinks fit, refer the matter to the Authority for further enquiry. (2) On such a reference to it the Authority shall exercise its power under section 65(1) above to appoint one or more investigators to investigate and report on the matter. (3) An answer given by a person to a question put to him, in exercise of the powers conferred by section 65 above on a person so appointed, may be used in evidence against the person giving it. Preferential debts 36. Section 387 (meaning in Schedule 6 of ‘‘the relevant date’’) of the Act applies with the omission of subsections (2) and (4) to (6). General Note Part III, Modified Application of Insolvency (Northern Ireland) Order 1989, is omitted from this work. PA RT I V S U P P L E M E N TA RY

Dissolution of incorporated friendly society after winding up 67.—(1) Where an incorporated friendly society has been wound up voluntarily, it is dissolved as from 3 months from the date of the placing in the public file of the society of the return of the final meetings of the society and its creditors made by the liquidator under— (a) section 94 or 106 of the Insolvency Act 1986 (as applied to incorporated friendly societies), or on such other date as is determined in accordance with section 201 of that Act; or (b) Article 80 or 92 of the Insolvency (Northern Ireland) Order 1989 (as so applied), or on such other date as is determined in accordance with Article 166 of that Order. (2) Where an incorporated friendly society has been wound up by the court, it is dissolved as from 3 months from the date of the placing in the public file of the society of the liquidator’s notice under— (a) section 172(8) of the Insolvency Act 1986 (as applied to incorporated friendly societies) or on such other date as is determined in accordance with section 205 of that Act; or (b) Article 146(7) of the Insolvency (Northern Ireland) Order 1989 (as so applied) or on such other date as is determined in accordance with Article 169 of that Order. 68.—(1) Sections 654 to 658 of the Companies Act 1985 or Articles 605 to 609 of the Companies (Northern Ireland) Order 1986 (provisions as to corporate property as bona vacantia), shall have the same effect in relation to the property of a dissolved incorporated friendly society (whether dissolved under section 20 above or following its winding up) as they have in relation to the property of a dissolved company, but with the following modifications. (2) Paragraph 3(1) above shall apply to those sections for the purpose of their application to incorporated friendly societies.

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(3) Subsection (2) of section 654 and subsections (1) and (3) of section 655 apply without the words ‘‘or 653’’; and the references in those subsections to section 651 shall have effect as references to section 25 above. (4) Paragraph (2) of Article 605 and paragraph (1) of Article 606 apply without the words ‘‘or 604’’; and the references in those paragraphs to Article 602 shall have effect as references to section 25 above. Insolvency rules and fees 69.—(1) Rules may be made under— (a) section 411 of the Insolvency Act 1986; or (b) Article 359 of the Insolvency (Northern Ireland) Order 1989, for the purpose of giving effect, in relation to incorporated friendly societies, to the provisions of the applicable winding up legislation. (2) An order made by the competent authority under section 414 of the Insolvency Act 1986 may make provision for fees to be payable under that section in respect of proceedings under the applicable winding-up legislation and the performance by the official receiver or the Secretary of State of functions under it. (3) An order made by the competent authority under Article 361 of the Insolvency (Northern Ireland) Order 1989 may make provisions for fees to be payable under that section in respect of proceedings under the applicable winding-up legislation and the performance by the official receiver in Northern Ireland or the Department of Economic Development in Northern Ireland of functions under it. SCHEDULE 11 C O M M I T T E E O F M A N A G E M E N T: S U P P L E M E N TA RY S E C T I O N 2 7 General Note This Schedule sets out the rules governing the constitution and proceedings of the Committee of Management which a registered friendly society must appoint, under s 27 of the 1992 Act. The Schedule was revised by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, Sched 3, para 124 to reflect the transfer of functions under the Financial Services and Markets Act 2000. PA RT I ELIGIBILITY AND RETIREMENT OF COMMITTEE MEMBERS

Preliminary 1.—(1) This Part of this Schedule applies in relation to members of the committee of management of a friendly society (‘‘the society’’); and in this Schedule— ‘‘the committee’’ means the committee of management of the society; ‘‘the compulsory retirement age’’, where the rules of the society make the provision authorised by paragraph 3(1) below, means the age prescribed for that purpose in its rules; ‘‘the normal retirement age’’ means 70 years or such lesser age as the rules of the society may prescribe as the normal retirement age for members of its committee. (2) For the purposes of this Act the date of a person’s election to office as a member of the committee, where the rules of the society provide for election by postal ballot, is the date of the meeting at which the declaration of the result of the ballot is made. Eligibility to be elected committee member 2. Subject to paragraph 3 below, paragraph 7 of Schedule 3 to this Act and to the rules of the society, any person is eligible to be elected as a member of the committee. 3.—(1) The rules of the society may require the members of the committee to retire at a prescribed age without eligibility for re-election or reappointment; and, if the age so prescribed

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is no greater than the age which is the normal retirement age for members of the committee, sub-paragraph (3) below shall have no application to the society. (2) If the rules of the society make the provision authorised by sub-paragraph (1) above, a person who has attained the age so prescribed shall not be eligible to be elected as a member of the committee. (3) Except in the case mentioned in sub-paragraph (1) above, if a person has attained the normal retirement age for the society, he shall not be eligible to be elected as a member of the committee unless— (a) he has been approved as eligible to be so elected by resolution of the committee; and (b) his age and the reasons for the committee’s approval of his eligibility have been notified to every person entitled to vote at the election. (4) If a friendly society, in a case where its committee has approved as eligible for election a person who has attained the normal retirement age, fails to notify every person entitled to vote at the election, the society shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 4 on the standard scale; but no such failure shall invalidate the election. Eligibility to be co-opted committee member 4. No person may be co-opted as a member of the committee who has attained the normal retirement age or the compulsory retirement age (where that age is less than the normal retirement age). Notice to society of age of committee member 5.—(1) A person who holds office as, or is to his knowledge nominated for election or proposed for co-option to the committee as, a member of the committee shall, not later than 28 days before he attains the normal retirement age or, as the case may be, the compulsory retirement age for members of the committee, give the society notice of the date on which he will attain that age. (2) A person who fails to give to a friendly society a notice required, in relation to that society, by sub-paragraph (1) above shall be guilty of an offence and liable on summary conviction— (a) to a fine not exceeding level 3 on the standard scale; and (b) in the case of a continuing offence, to an additional fine not exceeding one-tenth of that level for every week during which the offence continues. Retirement of elected committee members 6.—(1) A member of the committee shall retire from office— (a) in any case not provided for by paragraph (b) below, sub-paragraph (2) below or rules under sub-paragraph (3) below, at the fifth annual general meeting of the society following the date of his election; and (b) in a case where he had attained the normal retirement age at his election, at the next annual general meeting following that date. (2) A member of the committee attaining the normal retirement age or, as the case may be, the compulsory retirement age shall, subject to any provision of the rules for earlier retirement, retire from office at the next annual general meeting of the society. (3) The rules of the society, if they provide for the retirement by rotation of members of its committee, may provide that a person elected to fill a vacant seat on the committee must retire at the annual general meeting at which, in accordance with the rules for retirement by rotation, the seat is to fall vacant. (4) Sub-paragraph (3) above applies to any vacancy arising when an elected member ceases to hold office for any reason before the annual general meeting at which (disregarding his age) the seat is due to fall vacant.

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7.—(1) A person who is co-opted as a member of the committee shall cease to hold office at the end of the permitted period unless he is elected to office as a member of the committee within that period. (2) For the purposes of sub-paragraph (1) above ‘‘the permitted period’’, with reference to the tenure of office of a co-opted member of the committee, is the period beginning with the date of his appointment and ending with the declaration of the next election of members of the committee conducted after his appointment or the expiration of the period of 16 months beginning with the date of his appointment, whichever first occurs.

PA RT I I DEALINGS WITH MEMBERS OF COMMITTEE OF MANAGEMENT

8.—(1) Sections 312 (payment for loss of office etc) and 316(3) (supplementary) of the Companies Act 1985 shall have effect as if any reference in them to a director of a company included a reference to a member of the committee of management of a friendly society or a registered branch but with the substitution in section 316(3) of a reference to section 312 for the reference to sections 312 to 315. (2) Articles 320 (payment for loss of office etc) and 324(3) (supplementary) of the Companies (Northern Ireland) Order 1986 shall have effect as if any reference in them to a director of a company included a reference to a member of the committee of management of a friendly society or a registered branch but with the substitution in Article 324(3) of a reference to Article 320 for the reference to Articles 320 to 323. 9.—(1) The following provisions of the Building Societies Act 1986— (a) section 62 (prohibition of tax-free payments to directors); (b) section 63 (disclosure of interests in contracts and other transactions); (c) section 64 (substantial property transactions); (d) section 65 (restriction on loans etc); (e) section 66 (sanctions); (f) section 68 (records of loans etc) with Schedule 9; (g) section 69 (disclosure and record of related businesses); and (h) section 70 (interpretation), shall have effect as if any reference to a director of a building society included a reference to a member of the committee of management of a friendly society or registered branch. (2) The provisions mentioned in sub-paragraph (1) above shall have effect in their application to such members with the substitution— (a) of a reference to a friendly society or registered branch for every reference to a building society; and (b) of a reference to the committee of management for every reference to the directors or board of directors. (3) Section 65 shall in addition have effect in its application to them— (a) with the omission of subsection (1)(c); and (b) with the substitution in subsection (1)(d) of the words ‘‘loan or disposal of property’’ for the words ‘‘loan, disposal of property or payment’’. (4) Section 69 shall in addition have effect with the substitution— (a) of the following subsection for subsection (3)— ‘‘(3) The following are relevant services— (a) legal services; (b) accountancy services; (c) services of a broker in respect of the society’s insurance business; (d) reinsurance of the society’s insurance business; (e) any other services designated as relevant services.’’; and (b) of a reference to Part II of this Schedule for every reference in subsection (7) to Schedule 10 to the Building Societies Act. (6) The requisite particulars of the business of a business associate of a friendly society or registered branch are accordingly those set out in paragraphs 10 to 12 or 13 to 15 below.

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Requisite particulars where no adoption of this Part 10. Where the business associate of the society or branch provides legal services the requisite particulars of its business in any financial year are the following— (a) the aggregate amount of the fees paid to it by the society or branch concerned for the provision of legal services; and (b) the aggregate amount of any fees paid to it by the society or branch in consideration of the provision of management services to the society or branch. 11. Where the business associate of the society or branch provides accountancy services the requisite particulars of its business in any financial year are the following— (a) the aggregate amount of the fees paid to it by the society or branch for the provision of accountancy services; and (b) the aggregate amount of any fees paid to it by the society or branch in consideration of the provision of management services to the society or branch. 12. Where the business associate of the society or branch arranges for the provision of insurance broking services, the requisite particulars of its business in any financial year are the following— (a) the aggregate of the amounts paid to it by the society or branch by way of commission; and (b) the aggregate amount of any fees paid to it by the society or branch in consideration of the provision of management services to the society or branch. Requisite particulars on adoption of this Part 13. Where the business associate of the society or branch provides legal services, the requisite particulars of its business in any financial year are the following— (a) the prescribed band within which falls the estimated aggregate amount of the fees paid to it by the society or branch for the provision of legal services; and (b) the prescribed band within which falls the estimated aggregate amount of any fees paid to it by the society or branch in consideration of the provision of management services to the society or branch. 14. Where the business associate of the society or branch provides accountancy services the requisite particulars of its business in any financial year are the following— (a) the prescribed band within which falls the estimated aggregate amount of the fees paid to it by the society or branch for the provision of accountancy services; and (b) the prescribed band within which falls the estimated aggregate amount of any fees paid to it by the society or branch in consideration of the provision of management services to the society or branch. 15. Where the business associate of the society or branch provides insurance broking services the requisite particulars of its business in any financial year are the following— (a) the prescribed band within which falls the estimated aggregate of the amounts paid to it by or by way of Authority; and (b) the prescribed band within which falls the estimated aggregate amount of any fees paid to it by the society or branch in consideration of the provision of management services to the society or branch. Power to prescribe bands 16.—(1) The Treasury may by order prescribe, for the purposes of the provisions of this Part of this Schedule, series of monetary amounts by reference to limits specified in the order; and, in any such provision, ‘‘prescribed band’’ means, in relation to monetary amounts, any series of monetary amounts so prescribed for the purposes of that provision. (2) The power conferred by this paragraph includes power to prescribe different series of monetary amounts for the purposes of different provisions.

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General Note This Schedule, in accordance with s 30 of the 1992 Act, imposes an obligation on an incorporated friendly society to hold an annual general meeting. The Schedule is also concerned with the notices summoning meetings and with voting at meetings. The Schedule was revised by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, Sched 3, para 125 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Annual general meeting 1.—(1) Every friendly society and registered branch shall in each year hold a general meeting as its annual general meeting (in addition to any other meetings in that year). (2) Not more than 15 months shall elapse between the date of one annual general meeting and that of the next. (3) If an incorporated friendly society holds its first annual general meeting within 18 months of its incorporation, it need not hold it in the year of its incorporation or in the following year. (4) If a registered friendly society or registered branch holds its first annual general meeting within 18 months of its registration under the 1974 Act, it need not hold it in the year of its registration or in the following year. 2.—(1) A meeting to be held as the annual general meeting of a friendly society or registered branch shall be specified as such in any notice calling it. (2) Notwithstanding anything in the rules of a friendly society or registered branch, the business which may be dealt with at the annual general meeting includes any resolution (whether a special resolution or not). 3.—(1) If a friendly society or registered branch fails to hold a meeting as its annual general meeting in accordance with paragraph 1 above, the society or branch shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 4 on the standard scale. (2) If such default is made, the Authority may— (a) call, or direct the calling of, an annual general meeting, and (b) give such ancillary or consequential directions as it thinks expedient, including directions modifying or supplementing the operation of the rules of the society concerned in relation to the calling, holding and conducting of the meeting. (3) If default is made in complying with any directions of the Authority given under this paragraph, the society or branch concerned shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale. Notice for calling meetings 4.—(1) A meeting of a friendly society or registered branch must be called by not less than 14 days’ notice to members, or such longer period as the rules may require, expiring— (a) with the date of the meeting; or (b) where proxy voting is permitted, with such earlier date as may be specified by the society, under its rules, as the final date for the receipt of instruments appointing proxies to vote at the meeting; and the notice to members of a meeting shall be given in such manner as is prescribed by the rules of the society or branch. (2) Where the rules of a friendly society do not provide for the giving of individual notices to those entitled (when the notice is given) to vote at meetings of any description, the rules may provide for the giving of notice of such meetings by advertisement. (3) If the rules provide for the giving of notice of any meetings by advertisement, the rules must include provision requiring the necessary advertisements to be inserted— (a) in at least one newspaper circulating in the areas in which the members of the society reside; or

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(b) where the membership of the society is drawn from a professional body or wholly or mainly from persons who are or have been engaged in a particular trade, profession or vocation, in an appropriate professional journal. as the rules may provide. (4) The rules of a friendly society or registered branch may provide— (a) for adjourned meetings to be called without notice or with such notice as the rules may require; (b) for meetings to be held at a specified time and place, on such dates as are prescribed by the rules, either without further notice or with such notice as the rules may require; and sub-paragraphs (1) to (3) above shall not apply to meetings held by virtue of such provision. (5) This paragraph is without prejudice to any requirement under the rules of a friendly society or registered branch as to the giving of notice of special resolutions to be moved, or any other business to be transacted, at a meeting of the society or branch. Members’ entitlement to vote on resolutions 5.—(1) Subject to sub-paragraph (2) below, any provision in the rules of a friendly society or registered branch is void to the extent that it would have the effect of making the voting rights conferred on members by the rules conditional upon the amount of their subscriptions. (2) Sub-paragraph (1) above shall not apply to any provision in the rules excluding or limiting the voting rights of members by reference to the amount of their subscriptions in such cases or circumstances as the Treasury may by regulations prescribe. (3) In this section ‘‘subscription’’ includes a contribution payment falling to be made by a member. Right to demand a poll 6.—(1) Any provision contained in the rules of a friendly society or registered branch shall be void in so far as it would have the effect either— (a) of excluding the right to demand a poll at a meeting of the society on any question other than the election of a chairman of the meeting or the adjournment of the meeting; or (b) of making ineffective a demand for a poll on any such question which is made by not less than 10 members who are entitled to vote at the meeting or, in the case of a society whose rules provide for delegate voting, 5 delegates who are so entitled. (2) The reference in sub-paragraph (1)(b) above to members includes a reference, where the rules allow the appointment of proxies, to persons who are duly appointed on behalf of members entitled to attend and vote at the meeting. Special resolutions 7.—(1) No resolution of a friendly society shall be passed as a special resolution unless— (a) it is required to be so passed by or under any provision of this Act or the 1974 Act or by the rules of the society; (b) at least 14 day’s notice, or such longer period as the rules may require, expiring— (i) with the date of the meeting at which the resolution is to be moved; or (ii) where proxy voting is permitted, with such earlier date as may be specified by the society, under its rules, as the final date for the receipt of instruments appointing proxies to vote at the meeting; is given to members in such manner as is prescribed by the rules; and (c) any such notice (or, in the case of a postal ballot, the ballot papers) includes a statement that the resolution will not be effective unless it is passed as a special resolution; and, in this Act, ‘‘special resolution’’ means a resolution so passed.

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(2) Subject to sub-paragraph (3) below, a resolution of a friendly society shall not be effective as a special resolution unless it is passed by not less than three-quarters of the number of the members of the society entitled to vote on it and voting either (in person or by proxy) on a poll at a meeting of the society or in a postal ballot. (3) Where the rules of a friendly society provide for delegate voting, a resolution shall not be effective as a special resolution unless it is passed by not less than three quarters of the number of delegates entitled to vote on the resolution and voting on a poll at a meeting or in a postal ballot. (4) Where the rules of a friendly society do not provide for the giving of individual notices to those entitled (when the notice is given) to vote on special resolutions of any description, the rules may provide for the giving of notice by advertisement. (5) If the rules provide for the giving of notice of any special resolutions by advertisement, the rules must include provision requiring the necessary advertisements to be inserted— (a) in at least one newspaper circulating in the areas in which the members of the society reside; or (b) where the membership of the society is drawn from a professional body or wholly or mainly from persons who are or have been engaged in a particular trade, profession or vocation, in an appropriate professional journal. as the rules may provide. (6) Proxy voting shall be permitted (notwithstanding anything to the contrary in a society’s rules) on any resolution which is to be moved as a special resolution at any meeting of a friendly society other than a meeting of delegates; and the procedure adopted by the society for such proxy voting shall comply with any requirements prescribed in regulations by the Treasury. Postal ballots 8.—(1) The rules of a friendly society or registered branch may provide for the voting— (a) in an election of the committee of management or, where applicable, of the secretary, or (b) on any resolution (whether special or not), to be conducted in all, or in any particular, circumstances by postal ballot; and in this Act ‘‘ballot’’ or ‘‘postal ballot’’ in relation to an election or a resolution of the society or branch, means a postal ballot taking place by virtue of those rules. (2) Where a postal ballot is to take place, the following provisions of this paragraph have effect. (3) Notice of a postal ballot shall be given not less than 14 nor more than 56 days before the date which the society or branch specifies as the final date for the receipt of completed ballot papers (referred to in this paragraph as ‘‘the voting date’’). (4) Subject to the provisions of this Act, notice of a postal ballot shall be given to every member of the society or branch who would be entitled to vote in the election or on the resolution if the voting date for the election or the resolution fell on the date of the notice. (5) Notice of a postal ballot— (a) shall contain such other notices relating to the election or resolution; and (b) shall be accompanied by such other documents, as would be required to be given or sent to a member in connection with the election or resolution had it been intended to hold the election or vote on the resolution at a meeting instead of by postal ballot with the exception, however, of any notice relating to voting by proxy at a meeting. Resolutions requiring special notice 9.—(1) Where by any provision of this Act special notice is required of a resolution, the resolution is not effective unless notice of the intention to move it has been given to the friendly society concerned at least 28 days before the meeting at which it is moved. (2) The friendly society concerned shall give its members notice of any such resolution at the same time and in the same manner as is required by its rules for notice of the meeting or, if that is not practicable, shall give them notice (either by advertisement in a newspaper having an

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appropriate circulation or in any other mode allowed by the society’s rules) at least 14 days before the meeting. (3) If, after notice of the intention to move such a resolution has been given to the society, a meeting is called for a date 28 days or less after the notice has been given, the notice is deemed properly given, though not given within the time required. SCHEDULES 13 to 13C General Note Schedules 13 to 13C ceased to have effect pursuant to the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, Sched 3, para 126 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

SCHEDULE 13D DISCLOSURES ABOUT MEMBERS OF THE COMMITTEE OF MANAGEMENT AND EMPLOYEES SCHEDULE 13E D I S C L O S U R E S A B O U T R E L AT E D U N D E RTA K I N G S General Note Schedules 13D and 13E were inserted by the Friendly Societies Act 1992 (International Accounting Standards and Other Accounting Amendments) Order 2005, SI 2005 No 2211, para 6 of the Schedule. They are not reproduced in this work.

SCHEDULE 14 A U D I T O R S : A P P O I N T M E N T, T E N U R E , Q U A L I F I C AT I O N S A N D R E M U N E R AT I O N S E C T I O N 7 2 General Note This Schedule is concerned with the appointment, qualifications, term of office and remuneration of auditors. The obligation on every friendly society to appoint an auditor is contained in s 72 of the 1992 Act. The Schedule was amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, Sched 3, para 127 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

Appointment 1.—(1) The first auditors of a friendly society or registered branch may be appointed by the committee of management of the society or branch at any time before the first general meeting of the society or branch following the end of its initial financial year; and auditors so appointed shall hold office until the conclusion of that meeting. (2) If the committee of management fails to exercise its powers under sub-paragraph (1) above, those powers may be exercised by the society or branch in general meeting. 2. The committee of management, or the society or branch in general meeting, may fill any casual vacancy in the office of auditor; but while any such vacancy continues, the surviving or continuing auditor or auditors (if any) may act. 3.—(1) If at any annual general meeting of a friendly society or registered branch no auditors are appointed or re-appointed, the Authority may appoint a person to fill the vacancy; and the society or branch shall, within one week of the power of the Authority becoming exercisable, give it notice of that fact. (2) If a society or branch fails to give the notice required by sub-paragraph (1) above, the society or branch shall be guilty of an offence and liable on summary conviction— (a) to a fine not exceeding level 3 on the standard scale; and (b) in the case of a continuing offence to an additional fine not exceeding one-tenth of that level for every day during which the offence continues.

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4.—(1) Subject to paragraph 7 below, a person is eligible for appointment as the auditor of a friendly society or registered branch only if he— (a) is a member of a recognised supervisory body; and (b) is not ineligible for the appointment under the rules of that body. (2) An individual or a firm may be appointed as auditor of a friendly society or registered branch. (3) In this Schedule— ‘‘firm’’ means a body corporate or a partnership; and ‘‘recognised supervisory body’’ means a body which is a recognised supervisory body for the purposes of Part II of the Companies Act 1989 or Part III of the Companies (Northern Ireland) Order 1990. 5.—(1) A person is ineligible for appointment as an auditor of a friendly society or a registered branch of the society under this Schedule if he is— (a) an officer or employee of the friendly society or any registered branch of the society; (b) a partner or employee of such a person or a partnership of which such a person is a partner, or, in the case of an incorporated friendly society, if he is ineligible by virtue of section 27(1)(a) or (b) of the Companies Act 1989 or Article 20(1) of the Companies (Northern Ireland) Order 1990 for appointment as company auditor of a subsidiary of the society or of a body jointly controlled by the society and some other person. (2) For this purpose an auditor of a friendly society or branch shall not be regarded as an officer or employee of the society or branch. (3) A person is also ineligible for appointment as auditor of a friendly society or branch if there exists between him or any associate of his and the society or branch or, if it is an incorporated friendly society, any of its subsidiaries, a connection of any such description as may be specified by regulations made by the Treasury. (4) In this paragraph ‘‘associate’’ has the meaning given by section 52 of the Companies Act 1989 or Article 54 of the Companies (Northern Ireland) Order 1990. Appointment of partnerships 6.—(1) The following provisions apply to the appointment as auditor under this Schedule of a partnership constituted under the law of England and Wales or Northern Ireland, or under the law of any other country or territory in which a partnership is not a legal person. (2) The appointment is (unless a contrary intention appears) an appointment of the partnership as such and not of the partners. (3) Where the partnership ceases, the appointment shall be treated as extending to— (a) any partnership which succeeds to the practice of that partnership and is eligible for the appointment; and (b) any person who succeeds to that practice having previously carried it on in partnership and is eligible for the appointment. (4) For this purpose a partnership shall be regarded as succeeding to the practice of another partnership only if the members of the successor partnership are substantially the same as those of the former partnership; and a partnership or other person shall be regarded as succeeding to the practice of a partnership only if it or he succeeds to the whole or substantially the whole of the business of the former partnership. (5) Where the partnership ceases and no person succeeds to the appointment under subparagraph (3) above, the appointment may with the consent of the recognised supervisory body be treated as extending to a partnership or other person eligible for the appointment who succeeds to the business of the former partnership or to such part of it as is agreed by the body shall be treated as comprising the appointment.

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Cases in which auditor need not be a member of a recognised supervisory body 7.—(1) A person who is not a member of a recognised supervisory body may be an auditor of a registered friendly society or of a registered branch if— (a) its receipts and payments in respect of the preceding financial year did not, in the aggregate, exceed £5,000; and (b) the number of its members at the end of that year did not exceed 500; and (c) the value of its assets at the end of that year did not, in the aggregate, exceed £5,000; (d) [deleted SI 2001 No 2617 Sched 3, para 127]. (2) [deleted SI 2001 No 2617 Sched 3, para 127]. (3) A person who is not a member of a recognised supervisory body may also be an auditor of a registered branch if— (a) the conditions mentioned in sub-paragraph (1)(a) and (b) and sub-paragraph (2)(b) above are satisfied; and (b) at the end of the preceding financial year at least 75 per cent of its assets had been transferred to the society of which it is a branch or to another registered branch of that society for the purpose of being invested, in accordance with the 1974 Act, by that society or other branch, and the value of its assets not so transferred did not, in the aggregate, exceed £5,000; and (c) an auditor of the society or branch to which the assets were transferred must be a member of a recognised supervisory body. (4) Regulations made by the Treasury may— (a) substitute for any sum or number for the time being specified in sub-paragraph (1) above, or for any sum or percentage for the time being specified in sub-paragraph (3) above, such sum, number or percentage as may be specified in the regulations; and (b) prescribe what receipts and payments of a body shall be taken into account for the purposes of those sub-paragraphs. (5) A registered friendly society or registered branch which, by virtue of this paragraph, may appoint a person who is not a member of a recognised supervisory body as an auditor in respect of any financial year is in this Schedule referred to as an exempt society or, as the case may be, an exempt branch, in respect of that financial year. (6) Subject to any direction given by the Authority under sub-paragraph (7) below, a society or branch which in respect of any financial year is an exempt society or, as the case may be, an exempt branch shall in respect of that year appoint— (a) one or more qualified auditors; or (b) two or more persons who are not qualified auditors, to audit its annual accounts for that year. (7) The Authority may give a direction in the case of any particular society or branch which is an exempt society or branch in respect of any financial year that sub-paragraph (4) above shall apply to it in respect of that year as if it were not an exempt society or branch.

Effect of ineligibility 8.—(1) No person shall act as an auditor under this Act if he is ineligible for appointment to the office. (2) If during his term of office an auditor appointed under this Schedule becomes ineligible for appointment to the office, he shall thereupon vacate office and shall forthwith give notice in writing to the society concerned that he has vacated it by reason of ineligibility. (3) A person who acts as auditor under this Act in contravention of sub-paragraph (1) above, or fails to give notice of vacating his office as required by sub-paragraph (2) above, is guilty of an offence and liable— (a) on conviction on indictment, to a fine; and (b) on summary conviction, to a fine not exceeding the statutory maximum and, in the case of a continuing offence, to an additional fine not exceeding one-tenth of the statutory maximum for every day during which the offence continues.

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(4) In proceedings against a person for an offence under this paragraph it is a defence for him to show that he did not know and had no reason to believe that he was, or had become, ineligible for appointment. Power of Authority to require second audit 9.—(1) Where a person appointed auditor under this Schedule was, for any part of the period during which the audit was conducted, ineligible for appointment to that office, the Authority may direct the friendly society or registered branch concerned to retain a person eligible for appointment as auditor under this Schedule— (a) to audit the relevant accounts again; or (b) to review the first audit and to report (giving his reasons) whether a second audit is needed; and the society or branch shall comply with such a direction within 21 days of its being given. (2) If a second audit is recommended, the society or branch shall forthwith take such steps as are necessary to comply with the recommendation. (3) Where a direction is given to a society or branch under this paragraph the Authority shall place a copy of the direction in the public file of the society. (3A) Where a society or branch receives a report under sub-paragraph (1)(b) above, it shall within 21 days send a copy of it to the Authority to be placed in the public file. (4) Any statutory or other provisions applying in relation to the first audit shall apply, so far as practicable, in relation to a second audit under this paragraph. (5) If a society or branch fails to comply with the requirements of this paragraph, it is guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale; and in the case of a continuing offence to an additional fine not exceeding one-tenth of that level for every day during which the offence continues. (6) A direction under this paragraph is, on the application of the Authority, enforceable by injunction or, in Scotland, by an order under section 45 of the Court of Session Act 1988. (7) If a person accepts an appointment, or continues to act, as an auditor under this Act at a time when he knows he is ineligible, the society concerned may recover from him any costs incurred by it in complying with the requirements of this paragraph. Removal of auditors 10.—(1) A friendly society or registered branch may by ordinary resolution in general meeting remove an auditor before the expiration of his term of office, notwithstanding anything in any agreement between it and him. (2) Where such a resolution is passed, the society or branch shall within 14 days give notice of that fact to the Authority. (3) If a friendly society or branch fails to give the notice required by sub-paragraph (2) above, it shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the standard scale and in the case of a continuing offence to an additional fine not exceeding one-tenth of that level for every day during which the offence continues. (4) Nothing in this paragraph is to be taken as depriving a person removed under it of compensation or damages that may be payable to him in respect of the termination of his appointment as auditor or of any appointment terminating with that as auditor. (5) An auditor of a friendly society or registered branch who has been removed has, notwithstanding his removal, the rights conferred by section 75 above in relation to any general meeting of the society or branch at which— (a) his term of office would otherwise have expired; or (b) it is proposed to fill the vacancy caused by his removal. Rights of auditors who are removed or not re-appointed 11.—(1) Special notice is required for a resolution at a general meeting of a friendly society or registered branch—

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(a) removing an auditor before the expiration of his term of office; or (b) appointing as auditor a person other than a retiring auditor. (2) On receipt of notice of such an intended resolution the friendly society or branch shall forthwith send a copy of it to the person proposed to be removed or, as the case may be, to the person proposed to be appointed and to the retiring auditor. (3) The auditor proposed to be removed or (as the case may be) the retiring auditor may make with respect to the intended resolution representations in writing to the society or branch (not exceeding a reasonable length) and request their notification to members of the society. (4) The society or branch shall (unless the representations are received by it too late for it to do so)— (a) in any notice of the resolution given to members of the society or branch, state the fact of the representations having been made; (b) include in or with any such notice a copy of the representations; and (c) make copies of them available to members at the meeting at which the resolution is to be moved. (5) If notice of any such representations is not given as required by sub-paragraph (4) above because received too late or because of the default of the society or branch, the auditor may (without prejudice to his right to be heard orally) require that the representations be read out at the meeting. (6) The steps required by sub-paragraphs (4) or (5) above need not be taken if, on the application of the society or branch or of any other person claiming to be aggrieved, the court is satisfied that the rights conferred by this paragraph are being abused to secure needless publicity for defamatory matter; and the court may order the costs of the society or branch on the application to be paid in whole or in part by the auditor, notwithstanding that he is not a party to the application. Resignation of auditors 12.—(1) An auditor of a friendly society or registered branch may resign his office by depositing a notice in writing to that effect at the society’s registered office. (2) The notice is not effective unless it is accompanied by the statement required by paragraph 14 below. (3) An effective notice of resignation operates to bring the auditor’s term of office to an end as of the date on which the notice is deposited or on such later date as may be specified in it. (4) The society or branch shall within 14 days of the deposit of a notice of resignation send a copy of the notice to the Authority. (5) If default is made in complying with sub-paragraph (4) above, the society or branch is guilty of an offence and liable— (a) on conviction on indictment, to a fine; and (b) on summary conviction, to a fine not exceeding the statutory maximum and in the case of a continuing offence, to an additional fine not exceeding one-tenth of the statutory maximum for every day during which the offence continues. Rights of resigning auditors 13.—(1) This paragraph applies where an auditor’s notice of resignation is accompanied by a statement of circumstances which he considers should be brought to the attention of members or creditors of the society or branch. (2) He may deposit with the notice a signed requisition calling on the committee of management of the society or branch forthwith duly to convene an extraordinary general meeting of the society or branch for the purpose of receiving and considering such explanation of the circumstances connected with his resignation as he may wish to place before the meeting. (3) The society or branch shall, at the request of the auditor (unless the statement is received too late to comply)—

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(a) in any notice of the meeting convened on his requisition or of any general meeting at which his term of office would otherwise have expired or at which it is proposed to fill the vacancy caused by his resignation, state the fact that the statement has been made; (b) include in or with that notice a copy of a statement in writing by him (not exceeding a reasonable length) of the circumstances connected with his resignation; and (c) make copies of the statement available to members at any such meeting. (4) If the committee of management does not within 21 days from the date of the deposit of a requisition under this paragraph proceed duly to convene a meeting for a day not more than 28 days after the date on which the notice convening the meeting is given, every member of the committee who failed to take all reasonable steps to secure that a meeting was convened as mentioned above is guilty of an offence and liable— (a) on conviction on indictment, to a fine; and (b) on summary conviction, to a fine not exceeding the statutory maximum. (5) If notice of the statement mentioned above is not given as required because received too late or because of the default of the society or branch, the auditor may (without prejudice to his right to be heard orally) require that the statement be read out at the meeting in question. (6) The steps required by sub-paragraphs (3) and (5) above need not be taken if, on the application of the society or branch or of any other person who claims to be aggrieved, the court is satisfied that the rights conferred by this paragraph are being abused to secure needless publicity for defamatory matter; and the court may order the costs of the society or branch on such an application to be paid in whole or in part by the auditor, notwithstanding that he is not a party to the application. (7) An auditor who has resigned has, notwithstanding his resignation, the rights conferred by section 75 above in relation to any such general meeting of the society or branch as is mentioned in sub-paragraph (3) above; and in such a case, the references in that section to matters concerning the auditors as auditors shall be construed as references to matters concerning him as a former auditor. Statement by person ceasing to hold office 14.—(1) Where an auditor of a friendly society or registered branch ceases for any reason to hold office, he shall deposit at the registered office of the society or branch concerned— (a) a statement of any circumstances connected with his ceasing to hold office which he considers should be brought to the attention of the members or creditors of the society or branch; or (b) if he considers that there are no such circumstances, a statement that there are none. (2) In a case falling within sub-paragraph (1)(a) above it shall also be the duty of the auditor, unless he receives notice of an application under sub-paragraph (4) below before the end of the period of 21 days beginning with the day on which he deposited the statement, to send the Authority a copy within a further 7 days. (3) In the case of resignation, the statement shall be deposited along with the notice of resignation; in the case of failure to seek re-appointment, the statement shall be deposited not less than 14 days before the end of the time allowed for next appointing auditors; in any other case, the statement shall be deposited not later than the end of the period of 14 days beginning with the date on which he ceases to hold office. (4) If the statement is of circumstances which the auditor considers should be brought to the attention of the members or creditors of the society or branch, the society shall within 14 days of the deposit of the statement either— (a) send a copy of it to every member who is, when the statement is deposited, entitled to vote at a meeting of the society or branch; or (b) apply to the court. (5) The society or branch shall if it applies to the court notify the auditor of the application. (6) If the court is satisfied that the auditor is using the statement to secure needless publicity for defamatory matter— (a) it shall direct that copies of the statement need not be sent out; and

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(b) it may further order the costs of the society or branch on the application to be paid in whole or in part by the auditor, notwithstanding that he is not a party to the application; and the society or branch shall within 14 days of the court’s decision send to the persons mentioned in sub-paragraph (4)(a) above a statement setting out the effect of the order. (7) If the court is not so satisfied, the society or branch shall within 14 days of the court’s decision— (a) send copies of the statement to the persons mentioned in sub-paragraph (4)(a) above; and (b) notify the auditor of the court’s decision; and the auditor shall within 7 days of receiving such notice send a copy of the statement to the Authority. Offences of failing to comply with paragraph 14 15.—(1) If a person ceasing to hold office as auditor fails to comply with paragraph 14 above, he is guilty of an offence and liable— (a) on conviction on indictment, to a fine; and (b) on summary conviction, to a fine not exceeding the statutory maximum. (2) If a society or branch makes default in complying with paragraph 14 above, it is guilty of an offence and liable— (a) on conviction on indictment, to a fine, and (b) on summary conviction, to a fine not exceeding the statutory maximum and in the case of a continuing offence, to an additional fine not exceeding one-tenth of the statutory maximum for every day during which the offence continues. Remuneration of auditors 16.—(1) The remuneration of auditors appointed by a friendly society or registered branch in general meeting shall be fixed by the society or branch in general meeting or in such manner as the society or branch in general meeting may determine. (2) The remuneration of auditors appointed by the committee of management or the Authority shall be fixed by the committee of management or the Authority as the case may be. (3) There shall be stated in a note to the annual accounts of the society or branch the amount of the remuneration of the auditors in their capacity as such. (4) For the purposes of this paragraph ‘‘remuneration’’ includes sums paid in respect of expenses. (5) This paragraph applies in relation to benefits in kind as to payments in cash, and in relation to any such benefit references to its amount are to its estimated money value. (6) The nature of any such benefit shall also be disclosed. Remuneration of auditors or their associates for non-audit work 17.—(1) The Treasury may make provision by regulations for securing the disclosure of the amount of any remuneration received or receivable by auditors appointed under this Schedule or their associates in respect of services other than those of auditors in their capacity as such. (2) The regulations may— (a) provide that ‘‘remuneration’’ includes sums paid in respect of expenses; (b) apply in relation to benefits in kind as to payments in cash, and in relation to any such benefit require disclosure of its nature and its estimated money value; (c) define ‘‘associate’’ in relation to an auditor; and (d) require the disclosure of remuneration in respect of services rendered to subsidiaries. (3) The regulations may require the auditors to disclose the relevant information in their report or require the relevant information to be disclosed in a note to the accounts of the

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society or branch and require the auditors to supply the committee of management of the society or branch with such information as is necessary to enable that disclosure to be made.

SCHEDULE 15 A M A L G A M AT I O N S , T R A N S F E R S O F E N G A G E M E N T S A N D C O N V E R S I O N : S U P P L E M E N TA RY S E C T I O N 8 5 General Note This Schedule was amended by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, reg 25(1) and Sched 4 and by SI 1997 No 2849. It had previously been amended by the Friendly Societies (Amendment) Regulations 1993, SI 1993 No 2519, reg 5. It relates to s 85 of the 1992 Act. The schedule was amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, Sched 3, para 128 to reflect the transfer of functions under the Financial Services and Markets Act 2000.

PA RT I P R O V I S I O N O F I N F O R M AT I O N T O M E M B E R S

Statements relating to amalgamations and transfers 1.—(1) A friendly society which desires— (a) to amalgamate under section 85 above; or (b) to transfer its engagements to any person, or to undertake to fulfil the engagements of another friendly society, under section 86 above; shall, subject to sub-paragraph (2) below, send a statement concerning the matters specified in paragraph 2 below to every member entitled (when the statements are sent) to vote on any resolution required by section 85, 86 or 90. (2) Sub-paragraph (1) above does not apply, in the case of a friendly society desirous of undertaking to fulfil another society’s engagements, where the Authority has consented under section 86(3)(b) or 90(2)(b) above to its proceeding by resolution of the committee of management. (3) The statement referred to in sub-paragraph (1) above shall be sent so as to arrive no later than 14 days (or such longer period as the rules may require for notice of any resolution required by section 85, 86 or 90 above) before— (a) the meeting at which any such resolution is to be moved; or (b) where proxy voting is permitted, such earlier date as may be specified by the society, under its rules, as the final date for the receipt of instruments appointing proxies to vote at the meeting. (4) If it appears to the Authority that it is impractical to include the summary mentioned in paragraph 2(1)(d) below in the statement referred to in sub-paragraph (1) above, the Authority may direct that the summary shall be sent separately from that statement within such period as the Authority may specify in the direction. 2.—(1) The matters of which a statement required by paragraph 1 above is to give particulars are the following, namely— (a) the financial position of the society and that of every other society or person participating in the amalgamation or transfer; (b) any interest of the members of the committee of management of the society in the amalgamation or transfer; (c) the compensation or other consideration (if any) proposed to be paid to or in respect of— (i) the members of the committee of management or other officers of the society; and (ii) the officers of every other society or person participating in the amalgamation or transfer; (d) in the case of a transfer, a summary of any actuary’s report which the society is directed to furnish to the Authority under section 88 above; and

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(e) any other matter which the Authority requires in the case of the particular amalgamation or transfer. (2) No statement shall be sent unless its contents, so far as they concern the matters specified in this paragraph, have been approved by the Authority. Statements relating to conversion of society into company 3.—(1) A friendly society which desires to convert into a company under section 91 above shall send a statement concerning— (a) such matters as may be prescribed in regulations made by the Treasury; and (b) such other matters as may be required by the Authority in the case of the particular conversion; to every member entitled (when the statements are sent) to vote on any resolution required by subsection (2) of that section. (2) Regulations under sub-paragraph (1) above may include among the prescribed matters any alternatives to a proposed conversion which may be available. 4. The statement referred to in paragraph 3 above shall be sent so as to arrive no later than 14 days (or such longer period as the rules may require for notice of any resolution required by section 91 above) before— (a) the meeting at which any such resolution is to be moved; or (b) where proxy voting is permitted, such earlier date as may be specified by the society, under its rules, as the final date for the receipt of instruments appointing proxies to vote at the meeting; but no such statement may be sent unless its contents, so far as they concern the matters mentioned in that paragraph, have been approved by the Authority. PA RT I I C O N F I R M AT I O N B Y A U T H O R I T Y

Applications for confirmation 5.—(1) An application by a friendly society for confirmation by the Authority— (a) of an amalgamation under section 85 above, (b) of a transfer of engagements of a friendly society under section 86 above, or (c) of the conversion of a friendly society into a company under section 91 above, shall be made in such manner as the Authority may direct. (2) An application for confirmation of an amalgamation shall be made jointly by the friendly societies concerned. [(3) The Authority may, on the application or with the consent of a friendly society, direct in relation to any provision of regulations made for the purposes of sub-paragraph (1) above that the provisions shall not apply to the society, or shall apply to it with such modifications as may be specified in the direction. (4) A direction under sub-paragraph (3) above may be subject to conditions. (5) A direction under sub-paragraph (3) above may be revoked by the Authority at any time; and the Authority may at any time vary any such direction on the application or with the consent of the society to which it applies. (6) Where the Authority— (a) makes a direction under subsection (3) above, or (b) revokes or varies such a direction, it shall cause the direction, variation or revocation to be entered on a register kept by it for the purposes of this subsection. (7) The register kept for the purposes of subsection (6) above shall be available for inspection on reasonable notice by members of the public. (8) The Authority shall keep a copy of— (a) any direction made by it under subsection (3) above, and (b) any revocation or variation of any such direction, and the Authority shall keep the copy in the public file of the society to which it relates.]

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Notes Subparas (3)–(8) were inserted by the Deregulation (Friendly Societies Act 1992) Order 1996, SI 1996 No 1188, art 8.

6.—(1) Where a friendly society applies for confirmation of an amalgamation, transfer or conversion, it shall publish a notice of the application— (a) in one or more of the London Gazette, the Edinburgh Gazette or the Belfast Gazette, as the Authority directs, and, (b) if it so directs, in one or more newspapers. (1A) Where an application for confirmation of a transfer is made by a friendly society to which section 37(2) or (3) above applies and as regards any policy included in the proposed transfer, [an EEA State] other than the United Kingdom is the State in which the risk or commitment is situated, the society shall also, if the Authority so directs, publish the notice in two national newspapers in that State. (2) The notice shall— (a) state that any interested party has the right to make representations to the Authority with respect to the application; (b) specify a date determined by the Authority before which any written representations or notice of a person’s intention to make oral representation must be received by the Authority; and (c) specify a date determined by the Authority as the day on which it intends to hear any oral representations. (3) Where a friendly society participating in a transfer is required under section 88 above to furnish an actuary’s report, the society shall publish a notice in the manner required by subparagraph (1) above— (a) stating that such a report has been obtained; (b) stating— (i) the addresses of the offices of the society, and (ii) where the society is directed in accordance with sub-paragraph (1A) above to publish a notice of the application in two national newspapers in a State other than the United Kingdom, the address of such place in that State as the Authority directs, at which copies of the report shall be available for inspection for a period of not less than 21 days beginning with the date of the first publication of the notice; and (c) containing such particulars of any other matter relating to the report which the Authority requires in the case of the transfer in question; and such a society may include the notice required by this sub-paragraph in the notice required by sub-paragraph (1) above. Notes Para 6(1A) was inserted by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, Sched 4, para 1(1). Para 6(3)(b) was substituted by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, Sched 4, para 1(2).

7. After the date specified in the notice in pursuance of paragraph 6(2)(b) above, the Authority shall— (a) determine the time and place at which oral representations may be made; (b) give notice of that determination to the friendly society applying for confirmation and to any persons who have given notice of their intention to make oral representations; and (c) send copies of any written representations received by the Authority to that society; and the Authority shall allow that society an opportunity to comment on the written representations (whether at a hearing or in writing) before the expiration of such period as the Authority specifies in a notice to the society.

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Confirmation by Authority: General 8.—(1) Where an application is duly made for confirmation by the Authority of an amalgamation, transfer of engagements or conversion, the Authority shall confirm the amalgamation, transfer or conversion unless it is precluded from doing so by any of the following provisions of this Schedule. (2) If it appears to the Authority, in relation to any amalgamation or transfer of engagements, that there is a substantial risk that the successor society or the person taking the transfer will not be able lawfully to carry out the engagements to be transferred to it under section 85(4) or 86(5) above, the Authority— (a) shall not confirm the amalgamation or transfer; and (b) where it has confirmed the amalgamation or transfer, shall withdraw its confirmation; but it may not withdraw its confirmation on or after the transfer date for the amalgamation on transfer. (3) For the purposes of sub-paragraph (2) above, the Authority may have regard to any requirements of the law of a country or territory outside the United Kingdom which appear to the Authority to be relevant. 9.—(1) Subject to sub-paragraph (3) below, the Authority shall not confirm an amalgamation or transfer if it considers that— (a) some information material to the members’ decision (including any decision on an affected members’ resolution under section 86 above) about the amalgamation or transfer was not made available to all the members eligible to vote; (b) the vote on any resolution approving the amalgamation or transfer does not represent the views of the members eligible to vote; or (c) some relevant requirement of this Act or the rules of any friendly society participating in the amalgamation or transfer was not fulfilled or not fulfilled as regards that society. (2) Subject to sub-paragraph (3) below, the Authority shall not confirm the conversion of a society if it considers that— (a) some information material to the members’ decision about the conversion was not made available to all the members eligible to vote; (b) the vote on any resolution approving the conversion does not represent the views of the members eligible to vote; (c) [deleted SI 2001 No 2167, article 128]; or (d) some relevant requirement of this Act or the rules of the society was not fulfilled. (3) The Authority shall not be precluded from confirming an amalgamation, transfer or conversion by virtue only of the non-fulfilment of some relevant requirement of this Act or the rules of a friendly society if it appears to the Authority that it could not have been material to the members’ decision about the amalgamation, transfer or conversion and the Authority gives a direction that the failure is to be disregarded for the purposes of this paragraph. 10.—(1) Where the Authority would be precluded— (a) from confirming an amalgamation or transfer by reason of any of the defects specified in paragraph 9(1) above, or (b) from confirming a conversion by reason of any of the defects specified in paragraph 9(2) above, or (c) from confirming a conversion by reason of paragraph 11 below, it may give to any friendly society participating in the amalgamation or transfer or, as the case may be, to the society proposing to convert a direction under sub-paragraph (2) below. (2) A direction under this sub-paragraph is a direction requiring a friendly society— (a) to take such steps to remedy the defect or defects, including the calling of a further meeting, or (as the case may be) to remove the risk referred to in paragraph 11 below, as are specified in the direction; and (b) to furnish the Authority with evidence that those steps have been taken; and if the Authority is satisfied that the steps have been taken and the defect or defects has or have been substantially remedied, or (as the case may be) that the risk has been removed, the Authority shall confirm the amalgamation, transfer or conversion.

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11. The Authority shall not confirm an amalgamation, transfer of engagements or conversion unless it is satisfied that there is no substantial risk that the successor society, the proposed transferee, or the company into which the society is converted, will not have— (a) such permission (if any) under Part IV of the Financial Services and Markets Act 2000, or (b) such permission (if any) under paragraph 15 of Schedule 3 to that Act (as a result of qualifying for authorisation under paragraph 12 of that Schedule), as will enable it to carry on the business which it will have as a result of the amalgamation, transfer or conversion without contravening section 19 of that Act (the general prohibition).

Confirmation of transfers of engagements 12. The Authority shall not confirm a transfer unless it is satisfied— (a) that all the engagements included in the transfer may be transferred under section 86 above to the transferee; (b) that the transfer is in the interests of the members of each friendly society participating in the transfer; and (c) where the transfer is not of all the engagements of the transferor, that the purposes of each friendly society participating in the transfer will, after the transfer, continue to include the carrying on of one or more activities falling within Schedule 2 to this Act. 13.—(1) The Authority shall not confirm a transfer in any case where the transferee is required by section 87 above to furnish the Authority with a report unless it is satisfied (after taking the proposed transfer into account) either that the transferee will possess the margin of solvency required by rules made by the Authority under section 138 of the Financial Services and Markets Act 2000 or, where no margin of solvency is required by such rules, that the value of the transferee’s assets will exceed its liabilities. (2) The Authority shall not confirm a transfer of any engagements the fulfilment of which will constitute effecting or carrying out contracts of insurance in the United Kingdom unless it is satisfied (after taking the proposed transfer into account) either that the transferee will possess the margin of solvency required by rules made by the Authority under section 138 of the Financial Services and Markets Act 2000 or, where no margin of solvency is required by such rules, that the value of the transferee’s assets will exceed its liabilities. (3) This paragraph does not apply to any transfer of engagements to which paragraph 15 or 15A below applies. (4) The reference in sub-paragraph (2) to effecting or carrying out contracts of insurance must be read with— (a) section 22 of the Financial Services and Markets Act 2000; (b) any relevant order under that section; and (c) Schedule 2 to that Act. Notes Paragraph 13 was comprehensively revised by The Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 206.

14. [omitted—SI 2001 No 2617 Sched 3, para 128(r)] 15.—(1) This paragraph applies to any transfer of engagements (other than contracts of reinsurance) where— (a) the effecting of the engagements constituted the carrying on of general business; (b) the transferor is a friendly society to which section 37(3) above applies; and (c) the transferee is— (i) a friendly society to which section 37(2) or (3) above applies; (ii) a UK firm which has an EEA right deriving from any of the insurance directives; (iii) an EEA firm of the kind mentioned in paragraph 5(d) of Schedule 3 to the Financial Services and Markets Act 2000; (iv) [repealed SI 2001 No 3649 article 207];

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(v) an insurance company whose head office is in Switzerland, which has permission under Part IV of the Financial Services and Markets Act 2000 to effect or carry out contracts of insurance, which permission is not limited to reinsurance business; or (vi) an insurance company whose margin of solvency is required to be supervised in accordance with Article 25 or 26 of the first general insurance Directive. (2) The Authority shall not confirm the transfer unless— (a) [omitted—SI 2001 No 2617, Sched 3, para 128(t)]; (b) it is satisfied that every policy included in the transfer evidences a contract which was entered into before the date of the application; (c) the relevant authority certifies that the transferee possesses the necessary margin of solvency after taking the proposed transfer into account; and (d) where the establishment from which the policies are to be transferred is situated in a member State other than the United Kingdom, the Authority is satisfied— (i) that the supervisory authority in that member State has been consulted about the proposed transfer; and (ii) either that the authority has responded or that the period of three months beginning with the consultation has elapsed. (3) Where, as regards any policy which is included in the proposed transfer, the risk is situated in [an EEA State] other than the United Kingdom, the Authority shall not confirm the transfer unless it is satisfied— (a) that the supervisory authority in that [EEA State] has been notified of the proposed transfer; (b) either that the authority has consented to the transfer or that the authority has not refused its consent to the transfer within the period of three months beginning with the notification. [...] (6) In this paragraph ‘‘the relevant authority’’ means— (a) if the transferee falls within paragraph (1)(c)(iii), its home state regulator; (b) if the transferee falls within paragraph (1)(c)(v), the supervisory authority in Switzerland; (c) if the transferee falls within paragraph (1)(c)(vi), the Authority or other supervisory body responsible for the supervision; (d) in any other case, the Authority. Notes This paragraph was substituted by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, Sched 4, para 4. Sub-paragraphs (1)(ii), (iii) and (v) were substituted and subparagraph (iv) repealed by The Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 207. Sub-paragraph (6) substituted by The Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 207.

15A.—(1) This paragraph applies to any transfer of engagements (other than contracts of reinsurance) where— (a) the effecting of the engagement constituted the carrying on of long term business; (b) the transferor is a friendly society to which section 37(3) above applies; and (c) the transferee is— (i) a friendly society to which section 37(2) or (3) above applies; (ii) a UK firm which has an EEA right deriving from any of the insurance directives;; (iii) an EEA firm of the kind mentioned in paragraph 5(d) of Schedule 3 to the Financial Services and Markets Act 2000; [(iv) repealed SI 2001 No 3649 article 208]; or (v) an insurance company whose margin of solvency is required to be supervised in accordance with Article 55 or 56 of the life assurance consolidation Directive. (2) The Authority shall not confirm the transfer unless— (a) [omitted—SI 2001 No 2617, Sched 3, para 128(u)],

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long term business of the class or classes to be transferred; (b) the relevant authority certifies that the transferee possesses the necessary margin of solvency after taking the proposed transfer into account; and (c) where the establishment from which the policies are to be transferred is situated in [an EEA State] other than the United Kingdom, the Authority is satisfied— (i) that the supervisory authority in that [EEA State] has been consulted about the proposed scheme; and (ii) either that the authority has responded or that the period of three months beginning with the consultation has elapsed. (3) Where, as regards any policy (other than an EFTA policy) which is included in the proposed transfer, a member State other than the United Kingdom, is the State in which the commitment is situated, the Authority shall not confirm the transfer unless it is satisfied— (a) that the supervisory authority in that member State has been notified of the proposed scheme; and (b) either that the authority has consented to the scheme or that the authority has not refused its consent to the scheme within the period of three months beginning with the notification. (4) Where the establishment of the transferee to which the policies are to be transferred is situated in the United Kingdom and, as regards any EFTA policy included in the proposed transfer, an EEA State other than the United Kingdom is the State in which the commitment is situated, the Authority shall not confirm the transfer unless it is satisfied that— (a) the transferee either fulfils the conditions in Articles 11, 12, 14 and 16 of the second life Directive in that EEA State; and (b) the supervisory authority in that EEA State agrees to the transfer. (5) Where the establishment of the transferee to which the policies are to be transferred is situated in an EEA State other than the United Kingdom and, as regards any EFTA policy included in the proposed transfer, an EEA State is the State in which the risk is situated, the Authority shall not confirm the transfer unless— (a) where the EEA State in which the establishment is situated is also the State in which the commitment is situated, it is satisfied that the supervisory authority in that EEA State agrees to the transfer; (b) where the United Kingdom is the State in which the commitment is situated, it is satisfied that the transferee is not precluded by Schedule 2F to the Insurance Companies Act 1982 from covering the commitment; and (c) where an EEA State other than the United Kingdom or the EEA State in which the establishment is situated is the State in which the risk is situated, it is satisfied that— (i) the transferee fulfils the conditions in Articles 11, 12, 14 and 16 of the second life Directive in the EEA State which is the State in which the commitment is situated; (ii) the law of that State provides for the possibility of such a transfer; and (iii) the supervisory authority in that State agrees to the transfer. (6) In this paragraph ‘‘the relevant authority’’ means— (a) if the transferee falls within paragraph (1)(c)(iii), its home state regulator; (b) if the transferee falls within paragraph (1)(c)(v), the Authority or other supervisory body responsible for the supervision; (c) in any other case, the Authority. Notes This paragraph was inserted by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, Sched 4, para 4. Sub-paragraphs (1)(c)(ii), (iii) and (v) were substituted and subparagraph (iv) repealed by The Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 208. Sub-paragraph (1)(c)(v) amended by The Life Assurance Consolidation Directive (Consequential Amendments) Regulations 2004, SI 2004 No 3379 reg 3.

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Sub-paragraph (6) substituted by The Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 208.

16. [omitted—SI 2001 No 2617, Sched 3, para 128(v)] Rights of policy holders 16A.—(1) This paragraph applies where the Authority confirms a transfer in accordance with paragraph 15 above and as regards any policy included in the transfer, [an EEA State] other than the United Kingdom is the [EEA State] in which the risk is situated. (2) The Authority shall direct that— (a) notice of its decision, and of the execution of any instrument giving effect to the transfer, shall be published in the [EEA State] in which the risk is situated; and (b) the notice shall specify the period during which the policy holder may exercise any right to cancel the policy; and the instrument shall not bind the policy holder if either such a notice is not so published or the policy holder exercises any such right during the period so specified. (3) The law of the [EEA State] in which the risk is situated shall determine— (a) whether the policy holder has a right to cancel the policy; and (b) the conditions applicable to any such right. Notes This paragraph was inserted by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, Sched 4, para 5.

16B.—(1) This paragraph applies where the Authority confirms a transfer in accordance with paragraph 15A above and either— (a) as regards any policy included in the transfer, [an EEA State] other than the United Kingdom is the State in which the commitment is situated; or (b) as regards any EFTA policy included in the transfer, an EEA State other than the United Kingdom is the State in which the commitment is situated. (2) The Authority shall direct that— (a) notice of the making of any order, or the execution of any instrument, giving effect to the transfer shall be published in the [EEA State] which is the State in which the commitment is situated; and (b) the notice shall specify the period during which the policy holder may exercise any right to cancel the policy; and the instrument or order shall not bind the policy holder if either such a notice is not so published or the policy holder exercises any such right during the period so specified. (3) The law of the [EEA State] which is the State in which the commitment is situated shall determine— (a) whether the policy holder has a right to cancel the policy; and (b) the conditions applicable to any such right. Notes This paragraph was inserted by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, Sched 4, para 6.

Effect of failure to comply with relevant requirements 17. A failure to comply with a relevant requirement of this Act or any rules of a friendly society shall not invalidate any amalgamation, transfer of engagements or conversion; but a society which— (a) participates in an amalgamation or transfer or converts into a company; and (b) fails without reasonable excuse to comply with such a requirement; shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 4 on the standard scale.

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18.—(1) In this Part of this Schedule expressions used which are defined in Schedule 3 to the Financial Services and Markets Act 2000 but are not defined for the purposes of this Part of this Schedule have the same meaning as they have for the purposes of that Act. (2) In this Part of this Schedule— ‘‘policy’’ means a contract (other than a contract of reinsurance) the effecting of which by a friendly society to which section 37(2) or (3) above applies constituted the carrying on of insurance business of any class; ‘‘policy holder’’ means a member whose contract with such a society is a contract the effecting of which by the society constituted the carrying on of insurance business (other than reinsurance business) of any class; ‘‘relevant requirement’’, with reference to this Act or the rules of a friendly society, means a requirement of this Part of this Act or of any rules prescribing the procedure to be followed by the society in approving or effecting an amalgamation or transfer of engagements or its conversion into a company. (3) A policy which evidences a contract of direct insurance is an ‘‘EFTA policy’’ for the purposes of this Part of this Schedule if— (a) it covers a risk or commitment in an EFTA State and the transferee is a friendly society to which section 37(2) or (3) above applies, a UK or EC company or a non-EC company whose head office is in an EFTA State; or (b) it covers a risk or commitment situated in [an EEA State] and the transferee is a nonEC company whose head office is in an EFTA State. Notes This paragraph was substituted by the Friendly Societies Act 1992 (Amendment) Regulations 1994, SI 1994 No 1984, Sched 4, para 6. Sub-paragraph (1) amended by The Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 209.

Schedules 16 to 19 [These have been omitted: see the notes to ss 95, 97, 98 and 100 of the Friendly Societies Act 1992. Schedule 16 is not reproduced in this work, as relevant parts of the Friendly Society Act 1974 are reproduced in para 1.26 as amended by Sched 16. Schedules 17 to 19 ceased to have effect pursuant to the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617, Sched 3, para 130, to reflect the transfer of functions under the Financial Services and Markets Act 2000.] SCHEDULE 20 L AW A P P L I C A B L E T O C E RTA I N C O N T R A C T S O F I N S U R A N C E SECTION 101 General Note This Schedule was repealed by The Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 202, having been re-enacted in the Financial Services and Markets Act 2000 (Law Applicable to Contracts of Insurance) Regulations 2001 (SI 2001 No 2635).

1.29 DISABILITY DISCRIMINATION ACT 1995 General Note This Act, as amended by the Disability Discrimination Act 2006, sets out a general prohibition on the grounds of disability, defined for this purpose as any physical or mental impairment which has a substantial and long-term adverse effect on day-to-day activities: see also the Disability Discrimination (Meaning of Disability) Regulations 1996, SI 1996 No 1455 (not reproduced in this work). Part III of the Act outlaws discrimination by service providers including, under s 19(3)(c), insurance service providers. Section 20 defines discrimination as unjustified discrimination, so that ordinary assessment of insurance risks is doubtless lawful. Section 21 requires insurers to abandon practices or procedures which produce unreasonable difficulties for disabled persons: this provision is capable of applying to policy terms.

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Enforcement is by county court proceedings for damages, which may include compensation for injured feelings (s 27—not reproduced below). Guidance on what is and is not permissible is contained in the Disability Discrimination (Service Providers and Local Authorities Carrying Out Functions) Order 2005, SI 2005 No 2901. Sections 19 to 21 are printed as amended by the 2006 Act.

Discrimination in relation to goods, facilities and services 19.—(1) It is unlawful for a provider of services to discriminate against a disabled person— (a) in refusing to provide, or deliberately not providing, to the disabled person any service which he provides, or is prepared to provide, to members of the public; (b) in failing to comply with any duty imposed on him by section 21 in circumstances in which the effect of that failure is to make it impossible or unreasonably difficult for the disabled person to make use of any such service; (c) in the standard of service which he provides to the disabled person or the manner in which he provides it to him; or (d) in the terms on which he provides a service to the disabled person. (2) For the purposes of this section and sections 20 to 21ZA— (a) the provision of services includes the provision of any goods or facilities; (b) a person is ‘‘a provider of services’’ if he is concerned with the provision, in the United Kingdom, of services to the public or to a section of the public; and (c) it is irrelevant whether a service is provided on payment or without payment. (3) The following are examples of services to which this section and sections 20 and 21 apply— (a) access to and use of any place which members of the public are permitted to enter; (b) access to and use of means of communication; (c) access to and use of information services; (d) accommodation in a hotel, boarding house or other similar establishment; (e) facilities by way of banking or insurance or for grants, loans, credit or finance; (f) facilities for entertainment, recreation or refreshment; (g) facilities provided by employment agencies or under section 2 of the Employment and Training Act 1973; (h) the services of any profession or trade, or any local or other public authority. (4) In the case of an act which constitutes discrimination by virtue of section 55, this section also applies to discrimination against a person who is not disabled. (4A) Subsection (1) does not apply to anything that is governed by Regulation (EC) No 1107/2006 of the European Parliament and of the Council of 5 July 2006 concerning the rights of disabled persons and persons with reduced mobility when travelling by air. (5) Regulations may provide for subsection (1) and section 21(1), (2) and (4) not to apply, or to apply only to a prescribed extent, in relation to a service of a prescribed description. (5A) Nothing in this section or sections 20 to 21A applies to the provision of a service in relation to which discrimination is unlawful under Part 4. Notes Subs (4A) added by the Civil Aviation (Access to Air Travel for Disabled Persons and Persons with Reduced Mobility) Regulations) 2007, SI 2007 No 1895, reg 8.

Meaning of ‘‘discrimination’’ 20.—(1) For the purposes of section 19, a provider of services discriminates against a disabled person if— (a) for a reason which relates to the disabled person’s disability, he treats him less favourably than he treats or would treat others to whom that reason does not or would not apply; and (b) he cannot show that the treatment in question is justified. (2) For the purposes of section 19, a provider of services also discriminates against a disabled person if— (a) he fails to comply with a section 21 duty imposed on him in relation to the disabled person; and

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(b) he cannot show that his failure to comply with that duty is justified. (3) For the purposes of this section, treatment is justified only if— (a) in the opinion of the provider of services, one or more of the conditions mentioned in subsection (4) are satisfied; and (b) it is reasonable, in all the circumstances of the case, for him to hold that opinion. (4) The conditions are that— (a) in any case, the treatment is necessary in order not to endanger the health or safety of any person (which may include that of the disabled person); (b) in any case, the disabled person is incapable of entering into an enforceable agreement, or of giving an informed consent, and for that reason the treatment is reasonable in that case; (c) in a case falling within section 19(1)(a), the treatment is necessary because the provider of services would otherwise be unable to provide the service to members of the public; (d) in a case falling within section 19(1)(c) or (d), the treatment is necessary in order for the provider of services to be able to provide the service to the disabled person or to other members of the public; (e) in a case falling within section 19(1)(d), the difference in the terms on which the service is provided to the disabled person and those on which it is provided to other members of the public reflects the greater cost to the provider of services in providing the service to the disabled person. (5) Any increase in the cost of providing a service to a disabled person which results from compliance by a provider of services with a section 21 duty shall be disregarded for the purposes of subsection (4)(e). (6) Regulations may make provision, for purposes of this section, as to circumstances in which— (a) it is reasonable for a provider of services to hold the opinion mentioned in subsection (3)(a); (b) it is not reasonable for a provider of services to hold that opinion. (7) Regulations may make provision for subsection (4)(b) not to apply in prescribed circumstances where— (a) a person is acting for a disabled person under a power of attorney; (b) functions conferred by or under Part VII of the Mental Health Act 1983 are exercisable in relation to a disabled person’s property or affairs; or (c) powers are exercisable in relation to a disabled person’s property or affairs in consequence of the appointment, under the law of Scotland, of a guardian, tutor or judicial factor. (8) Regulations may make provision, for purposes of this section, as to circumstances (other than those mentioned in subsection (4)) in which treatment is to be taken to be justified. (9) In subsections (3), (4) and (8)‘treatment‘includes failure to comply with a section 21 duty. Duty of providers of services to make adjustments 21.—(1) Where a provider of services has a practice, policy or procedure which makes it impossible or unreasonably difficult for disabled persons to make use of a service which he provides, or is prepared to provide, to other members of the public, it is his duty to take such steps as it is reasonable, in all the circumstances of the case, for him to have to take in order to change that practice, policy or procedure so that it no longer has that effect. (2) Where a physical feature (for example, one arising from the design or construction of a building or the approach or access to premises) makes it impossible or unreasonably difficult for disabled persons to make use of such a service, it is the duty of the provider of that service to take such steps as it is reasonable, in all the circumstances of the case, for him to have to take in order to— (a) remove the feature; (b) alter it so that it no longer has that effect; (c) provide a reasonable means of avoiding the feature; or

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(d) provide a reasonable alternative method of making the service in question available to disabled persons. (3) Regulations may prescribe— (a) matters which are to be taken into account in determining whether any provision of a kind mentioned in subsection (2)(c) or (d) is reasonable; and (b) categories of providers of services to whom subsection (2) does not apply. (4) Where an auxiliary aid or service (for example, the provision of information on audio tape or of a sign language interpreter) would— (a) enable disabled persons to make use of a service which a provider of services provides, or is prepared to provide, to members of the public, or (b) facilitate the use by disabled persons of such a service, it is the duty of the provider of that service to take such steps as it is reasonable, in all the circumstances of the case, for him to have to take in order to provide that auxiliary aid or service. (5) Regulations may make provision, for the purposes of this section— (a) as to circumstances in which it is reasonable for a provider of services to have to take steps of a prescribed description; (b) as to circumstances in which it is not reasonable for a provider of services to have to take steps of a prescribed description; (c) as to what is to be included within the meaning of ‘‘practice, policy or procedure’’; (d) as to what is not to be included within the meaning of that expression; (e) as to things which are to be treated as physical features; (f) as to things which are not to be treated as such features; (g) as to things which are to be treated as auxiliary aids or services; (h) as to things which are not to be treated as auxiliary aids or services. (6) Nothing in this section requires a provider of services to take any steps which would fundamentally alter the nature of the service in question or the nature of his trade, profession or business. (7) Nothing in this section requires a provider of services to take any steps which would cause him to incur expenditure exceeding the prescribed maximum. (8) Regulations under subsection (7) may provide for the prescribed maximum to be calculated by reference to— (a) aggregate amounts of expenditure incurred in relation to different cases; (b) prescribed periods; (c) services of a prescribed description; (d) premises of a prescribed description; or (e) such other criteria as may be prescribed. (9) Regulations may provide, for the purposes of subsection (7), for expenditure incurred by one provider of services to be treated as incurred by another. (10) This section imposes duties only for the purposes of determining whether a provider of services has discriminated against a disabled person; and accordingly a breach of any such duty is not actionable as such. Notes Subs 5(c). For regulations made under subs 5(c), see the Disability Discrimination (Service Providers and Local Authorities Carrying Out Functions) Order 2005, SI 2005 No 2901, reg 7 (provision of services and guarantees) and reg 8 (provision of goods and facilities).

1.30 FINANCIAL SERVICES AND MARKETS ACT 2000 General Note The Financial Services and Markets Act 2000 represented a complete departure from the previous forms of regulation. Earlier legislation set out separate regulatory regimes for insurance companies, banks, building societies and other financial institutions, and operated alongside voluntary controls in the form of Codes of Practice and sectoral ombudsmen. Cutting across this piecemeal structure, the Financial Services Act 1986 laid down a complex combination of regulation and self-regulation for the marketing of financial services. As far as insurance was concerned, there was regulation under the Insurance Companies Act 1982 for all insurers, under the Financial Services Act 1986 for life offices, under the Policyholders Protection Act

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1975 again for all insurers and under the Insurance Brokers (Registration) Act 1977 for independent intermediaries. This legislation was concerned for the most part with solvency: individual disputes were controlled by two voluntary initiatives, the Association of British Insurers’ Statements of Insurance Practice 1977 (revised in 1986) and by the Insurance Ombudsman Bureau. All of this was swept away by the FSMA 2000. The legislative structure remains complex, albeit for different reasons. The 2000 Act contains both general provisions which apply to all financial services sectors, and specific provisions relating to particular sectors. The Act is supplemented by a mass of implementing secondary legislation and, perhaps most importantly, by the Financial Services Authority’s Handbook. The Handbook now contains much of the fine detail which was previously found in statutory instruments made under the Insurance Companies Act 1982. The sheer volume of the Handbook makes its reproduction in this work impossible, but it is available online where it is constantly updated, often daily. The web address is: http://www.fsa.gov.uk/Pages/handbook/. The annotations to the FSMA 2000 cross-refer to the relevant provisions of the Handbook, and also to the implementing secondary legislation. The FSMA 2000 runs to 433 sections and 22 schedules. In this work we have reproduced only those general provisions which are of direct relevance to insurance, and also the specific insurance rules. Where sections have been omitted, this is noted in the text. The structure of the legislation is as follows. Part I (read with Schedule 1) establishes the Financial Services Authority as the regulator for the financial services sector as a whole and lays down regulatory objectives. Part II (read with Schedule 2) prohibits the carrying on of a regulated activity (including insurance business) unless he is authorised or exempt, and sets out the consequences for breach of that prohibition. Part III defines the persons who have authorisation or who are exempt from that requirement. Part IV lays down the procedure for the grant of permission by the Financial Services Authority for the carrying on of regulated activities. Part V empowers the Financial Services Authority to prohibit a person from carrying on a regulated activity and to issue statements of principle and codes of conduct. Part VII (read with Schedule 12) provides rules specific to insurance and banking for the transfer of business, requiring judicial authorisation. Part IX (read with Schedule 13) establishes the Financial Services and Markets Tribunal to hear appeals against decisions by the Financial Services Authority. Part X contains the rule-making powers conferred on the Financial Services Authority, and in particular ss 141-142 authorise the making of rules which prevent a person authorised to carry on insurance business from carrying on any other regulated or unregulated activity. Guidance may also be issued. Part XI (read with Schedule 15) sets out the Financial Services Authority’s powers of information gathering and investigation, the provisions relating to competition scrutiny (read with Schedule 14) and consumer credit (read with Schedule 16) have been omitted. Part XII seeks to ensure that the full or partial control of an authorised person does not fall into the hands of a third party who is not a fit and proper person to carry on the business. Part XIII (read with Schedules 3 and 4) is concerned with the regulation of a firm authorised elsewhere in the European Economic Area (the European Union and EFTA, but excluding Switzerland) which seeks to carry on any regulated activity in the UK either through a branch or agency or by means of direct selling: the general rule here is home state control, but Part XIII authorises limited intervention by the UK authorities in exceptional circumstances. Part XIV identifies the disciplinary measures open to the Financial Services Authority where a person has contravened a requirement imposed by the Act or under EU law, including the imposition of financial penalties. Part XV establishes the Financial Services Compensation Scheme, a general scheme which in particular replaces the Policyholders Protection Act 1975. Part XVI (read with Schedule 17) gives statutory effect to the previous voluntary Insurance Ombudsman Bureau, by merging the IOB with the various other voluntary and statutory ombudsmen who had operated in different financial sectors and creating a single statutory Financial Services Ombudsman Bureau. Parts XVII (Collective Investment Schemes, read with Schedules 6 to 11) and XVIII (Recognised Investment Exchanges and Clearing Houses) are not reproduced in this work. Part XIX extends the regulatory regime to Lloyd’s. Part XX (Provision of Financial Services by Members of the Profession) is not reproduced in this work. Part XXI (read with Schedule 18) brings mutual societies, in particular friendly societies, within the 2000 Act. Part XXII is concerned with those situations in which auditors and actuaries are to be appointed by a regulated person, and provides that they are to be given the necessary access to books and records. Part XXIII controls the use of information obtained by the Financial Services Authority in the course of exercising its functions. Part XXIV (Insolvency) is reproduced elsewhere in this work. Part XXV empowers the Financial Services Authority and the Secretary of State to seek injunctive relief and to order restitution. Part XXVI deals with the issue of warning and decision notices by the Financial Services Authority. Parts XXVII, XXVIII, XXIX and XXX are sweeping up provisions, relating to offences, miscellaneous provisions, interpretation and supplementary points.

An act to make provision about the regulation of financial services and markets; to provide for the transfer of certain statutory functions relating to building societies, friendly societies, industrial and provident societies and certain other mutual societies; and for connected purposes. [14th June, 2000] BE IT ENACTED by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—

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The Financial Services Authority 1.—(1) The body corporate known as the Financial Services Authority (‘‘the Authority’’) is to have the functions conferred on it by or under this Act. (2) The Authority must comply with the requirements as to its constitution set out in Schedule 1. (3) Schedule 1 also makes provision about the status of the Authority and the exercise of certain of its functions. Authority’s general duties The Authority’s general duties 2.—(1) In discharging its general functions the Authority must, so far as is reasonably possible, act in a way— (a) which is compatible with the regulatory objectives; and (b) which the Authority considers most appropriate for the purpose of meeting those objectives. (2) The regulatory objectives are— (a) market confidence; (b) public awareness; (c) the protection of consumers; and (d) the reduction of financial crime. (3) In discharging its general functions the Authority must have regard to— (a) the need to use its resources in the most efficient and economic way; (b) the responsibilities of those who manage the affairs of authorised persons; (c) the principle that a burden or restriction which is imposed on a person, or on the carrying on of an activity, should be proportionate to the benefits, considered in general terms, which are expected to result from the imposition of that burden or restriction; (d) the desirability of facilitating innovation in connection with regulated activities; (e) the international character of financial services and markets and the desirability of maintaining the competitive position of the United Kingdom; (f) the need to minimise the adverse effects on competition that may arise from anything done in the discharge of those functions; (g) the desirability of facilitating competition between those who are subject to any form of regulation by the Authority. (4) The Authority’s general functions are— (a) its function of making rules under this Act (considered as a whole); (b) its function of preparing and issuing codes under this Act (considered as a whole); (c) its functions in relation to the giving of general guidance (considered as a whole); and (d) its function of determining the general policy and principles by reference to which it performs particular functions. (5) ‘‘General guidance’’ has the meaning given in section 158 (5). The regulatory objectives Market confidence 3.—(1) The market confidence objective is: maintaining confidence in the financial system. (2) ‘‘The financial system’’ means the financial system operating in the United Kingdom and includes— (a) financial markets and exchanges; (b) regulated activities; and (c) other activities connected with financial markets and exchanges.

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Public awareness 4.—(1) The public awareness objective is: promoting public understanding of the financial system. (2) It includes, in particular— (a) promoting awareness of the benefits and risks associated with different kinds of investment or other financial dealing; and (b) the provision of appropriate information and advice. (3) ‘‘The financial system’’ has the same meaning as in section 3. The protection of consumers 5.—(1) The protection of consumers objective is: securing the appropriate degree of protection for consumers. (2) In considering what degree of protection may be appropriate, the Authority must have regard to— (a) the differing degrees of risk involved in different kinds of investment or other transaction; (b) the differing degrees of experience and expertise that different consumers may have in relation to different kinds of regulated activity; (c) the needs that consumers may have for advice and accurate information; and (d) the general principle that consumers should take responsibility for their decisions. (3) ‘‘Consumers’’ means persons— (a) who are consumers for the purposes of section 138; or (b) who, in relation to regulated activities carried on otherwise than by authorised persons, would be consumers for those purposes if the activities were carried on by authorised persons. The reduction of financial crime 6.—(1) The reduction of financial crime objective is: reducing the extent to which it is possible for a business carried on— (a) by a regulated person, or (b) in contravention of the general prohibition, to be used for a purpose connected with financial crime. (2) In considering that objective the Authority must, in particular, have regard to the desirability of— (a) regulated persons being aware of the risk of their businesses being used in connection with the commission of financial crime; (b) regulated persons taking appropriate measures (in relation to their administration and employment practices, the conduct of transactions by them and otherwise) to prevent financial crime, facilitate its detection and monitor its incidence; (c) regulated persons devoting adequate resources to the matters mentioned in paragraph (b). (3) ‘‘Financial crime’’ includes any offence involving— (a) fraud or dishonesty; (b) misconduct in, or misuse of information relating to, a financial market; or (c) handling the proceeds of crime. (4) ‘‘Offence’’ includes an act or omission which would be an offence if it had taken place in the United Kingdom. (5) ‘‘Regulated person’’ means an authorised person, a recognised investment exchange or a recognised clearing house. Notes Sections 7 through to 18 omitted. Section 14 amended by the Inquiries Act 2005, section 46.

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R E G U L AT E D A N D P R O H I B I T E D A C T I V I T I E S

The general prohibition The general prohibition 19.—(1) No person may carry on a regulated activity in the United Kingdom, or purport to do so, unless he is— (a) an authorised person; or (b) an exempt person. (2) The prohibition is referred to in this Act as the general prohibition. Requirement for permission Authorised persons acting without permission 20.—(1) If an authorised person carries on a regulated activity in the United Kingdom, or purports to do so, otherwise than in accordance with permission— (a) given to him by the Authority under Part IV, or (b) resulting from any other provision of this Act, he is to be taken to have contravened a requirement imposed on him by the Authority under this Act. (2) The contravention does not(a) make a person guilty of an offence; (b) make any transaction void or unenforceable; or (c) (subject to subsection (3)) give rise to any right of action for breach of statutory duty. (3) In prescribed cases the contravention is actionable at the suit of a person who suffers loss as a result of the contravention, subject to the defences and other incidents applying to actions for breach of statutory duty. Financial promotion Restrictions on financial promotions 21.—(1) A person (‘‘A’’) must not, in the course of business, communicate an invitation or inducement to engage in investment activity. (2) But subsection (1) does not apply if— (a) A is an authorised person; or (b) the content of the communication is approved for the purposes of this section by an authorised person. (3) In the case of a communication originating outside the United Kingdom, subsection (1) applies only if the communication is capable of having an effect in the United Kingdom. (4) The Treasury may by order specify circumstances in which a person is to be regarded for the purposes of subsection (1) as— (a) acting in the course of business; (b) not acting in the course of business. (5) The Treasury may by order specify circumstances (which may include compliance with financial promotion rules) in which subsection (1) does not apply. (6) An order under subsection (5) may, in particular, provide that subsection (1) does not apply in relation to communications— (a) of a specified description; (b) originating in a specified country or territory outside the United Kingdom; (c) originating in a country or territory which falls within a specified description of country or territory outside the United Kingdom; or (d) originating outside the United Kingdom. (7) The Treasury may by order repeal subsection (3). (8) ‘‘Engaging in investment activity’’ means—

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(a) entering or offering to enter into an agreement the making or performance of which by either party constitutes a controlled activity; or (b) exercising any rights conferred by a controlled investment to acquire, dispose of, underwrite or convert a controlled investment. (9) An activity is a controlled activity if— (a) it is an activity of a specified kind or one which falls within a specified class of activity; and (b) it relates to an investment of a specified kind, or to one which falls within a specified class of investment. (10) An investment is a controlled investment if it is an investment of a specified kind or one which falls within a specified class of investment. (11) Schedule 2 (except paragraph 26) applies for the purposes of subsections (9) and (10) with references to section 22 being read as references to each of those subsections. (12) Nothing in Schedule 2, as applied by subsection (11), limits the powers conferred by subsection (9) or (10). (13) ‘‘Communicate’’ includes causing a communication to be made. (14) ‘‘Investment’’ includes any asset, right or interest. (15) ‘‘Specified’’ means specified in an order made by the Treasury. Notes Implementation: Financial Services and Markets Act 2000 (Financial Promotion) Order 2001, SI 2001 No 1335; amended by SI 2001 No 2633, SI 2001 No 3650, SI 2001 No 3800, SI 2002 No 1310, SI 2002 No 1777, SI 2002 No 2157 and 2003 No 1676; FSA Handbook PRIN 3.2 and ICOB 3.

Regulated activities The classes of activity and categories of investment 22.—(1) An activity is a regulated activity for the purposes of this Act if it is an activity of a specified kind which is carried on by way of business and— (a) relates to an investment of a specified kind; or (b) in the case of an activity of a kind which is also specified for the purposes of this paragraph, is carried on in relation to property of any kind. (2) Schedule 2 makes provision supplementing this section. (3) Nothing in Schedule 2 limits the powers conferred by subsection (1). (4) ‘‘Investment’’ includes any asset, right or interest. (5) ‘‘Specified’’ means specified in an order made by the Treasury. Notes Subs (5) the relevant order is the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, SI 2001 No 544 as amended.

Offences Contravention of the general prohibition 23.—(1) A person who contravenes the general prohibition is guilty of an offence and liable— (a) on summary conviction, to imprisonment for a term not exceeding six months or a fine not exceeding the statutory maximum, or both; (b) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine, or both. (2) In this Act ‘‘an authorisation offence’’ means an offence under this section. (3) In proceedings for an authorisation offence it is a defence for the accused to show that he took all reasonable precautions and exercised all due diligence to avoid committing the offence.

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False claims to be authorised or exempt 24.—(1) A person who is neither an authorised person nor, in relation to the regulated activity in question, an exempt person is guilty of an offence if he— (a) describes himself (in whatever terms) as an authorised person; (b) describes himself (in whatever terms) as an exempt person in relation to the regulated activity; or (c) behaves, or otherwise holds himself out, in a manner which indicates (or which is reasonably likely to be understood as indicating) that he is— (i) an authorised person; or (ii) an exempt person in relation to the regulated activity. (2) In proceedings for an offence under this section it is a defence for the accused to show that he took all reasonable precautions and exercised all due diligence to avoid committing the offence. (3) A person guilty of an offence under this section is liable on summary conviction to imprisonment for a term not exceeding six months or a fine not exceeding level 5 on the standard scale, or both. (4) But where the conduct constituting the offence involved or included the public display of any material, the maximum fine for the offence is level 5 on the standard scale multiplied by the number of days for which the display continued. Contravention of section 21 25.—(1) A person who contravenes section 21(1) is guilty of an offence and liable— (a) on summary conviction, to imprisonment for a term not exceeding six months or a fine not exceeding the statutory maximum, or both; (b) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine, or both. (2) In proceedings for an offence under this section it is a defence for the accused to show— (a) that he believed on reasonable grounds that the content of the communication was prepared, or approved for the purposes of section 21, by an authorised person; or (b) that he took all reasonable precautions and exercised all due diligence to avoid committing the offence. Enforceability of agreements Agreements made by unauthorised persons 26.—(1) An agreement made by a person in the course of carrying on a regulated activity in contravention of the general prohibition is unenforceable against the other party. (2) The other party is entitled to recover— (a) any money or other property paid or transferred by him under the agreement; and (b) compensation for any loss sustained by him as a result of having parted with it. (3) ‘‘Agreement’’ means an agreement— (a) made after this section comes into force; and (b) the making or performance of which constitutes, or is part of, the regulated activity in question. (4) This section does not apply if the regulated activity is accepting deposits. Agreement made through unauthorised persons 27.—(1) An agreement made by an authorised person (‘‘the provider’’)— (a) in the course of carrying on a regulated activity (not in contravention of the general prohibition), but (b) in consequence of something said or done by another person (‘‘the third party’’) in the course of a regulated activity carried on by the third party in contravention of the general prohibition, is unenforceable against the other party.

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(2) The other party is entitled to recover— (a) any money or other property paid or transferred by him under the agreement; and (b) compensation for any loss sustained by him as a result of having parted with it. (3) ‘‘Agreement’’ means an agreement— (a) made after this section comes into force; and (b) the making or performance of which constitutes, or is part of, the regulated activity in question carried on by the provider. (4) This section does not apply if the regulated activity is accepting deposits. Agreements made unenforceable by section 26 or 27 28.—(1) This section applies to an agreement which is unenforceable because of section 26 or 27. (2) The amount of compensation recoverable as a result of that section is— (a) the amount agreed by the parties; or (b) on the application of either party, the amount determined by the court. (3) If the court is satisfied that it is just and equitable in the circumstances of the case, it may allow— (a) the agreement to be enforced; or (b) money and property paid or transferred under the agreement to be retained. (4) In considering whether to allow the agreement to be enforced or (as the case may be) the money or property paid or transferred under the agreement to be retained the court must— (a) if the case arises as a result of section 26, have regard to the issue mentioned in subsection (5); or (b) if the case arises as a result of section 27, have regard to the issue mentioned in subsection (6). (5) The issue is whether the person carrying on the regulated activity concerned reasonably believed that he was not contravening the general prohibition by making the agreement. (6) The issue is whether the provider knew that the third party was (in carrying on the regulated activity) contravening the general prohibition. (7) If the person against whom the agreement is unenforceable— (a) elects not to perform the agreement, or (b) as a result of this section, recovers money paid or other property transferred by him under the agreement, he must repay any money and return any other property received by him under the agreement. (8) If property transferred under the agreement has passed to a third party, a reference in section 26 or 27 or this section to that property is to be read as a reference to its value at the time of its transfer under the agreement. (9) The commission of an authorisation offence does not make the agreement concerned illegal or invalid to any greater extent than is provided by section 26 or 27. Accepting deposits in breach of general prohibition 29.—(1) This section applies to an agreement between a person (‘‘the depositor’’) and another person (‘‘the deposit-taker’’) made in the course of the carrying on by the deposittaker of accepting deposits in contravention of the general prohibition. (2) If the depositor is not entitled under the agreement to recover without delay any money deposited by him, he may apply to the court for an order directing the deposit-taker to return the money to him. (3) The court need not make such an order if it is satisfied that it would not be just and equitable for the money deposited to be returned, having regard to the issue mentioned in subsection (4). (4) The issue is whether the deposit-taker reasonably believed that he was not contravening the general prohibition by making the agreement. (5) ‘‘Agreement’’ means an agreement— (a) made after this section comes into force; and (b) the making or performance of which constitutes, or is part of, accepting deposits.

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Enforceability of agreements resulting from unlawful communications 30.—(1) In this section— ‘‘unlawful communication’’ means a communication in relation to which there has been a contravention of section 21(1); ‘‘controlled agreement’’ means an agreement the making or performance of which by either party constitutes a controlled activity for the purposes of that section; and ‘‘controlled investment’’ has the same meaning as in section 21. (2) If in consequence of an unlawful communication a person enters as a customer into a controlled agreement, it is unenforceable against him and he is entitled to recover— (a) any money or other property paid or transferred by him under the agreement; and (b) compensation for any loss sustained by him as a result of having parted with it. (3) If in consequence of an unlawful communication a person exercises any rights conferred by a controlled investment, no obligation to which he is subject as a result of exercising them is enforceable against him and he is entitled to recover— (a) any money or other property paid or transferred by him under the obligation; and (b) compensation for any loss sustained by him as a result of having parted with it. (4) But the court may allow— (a) the agreement or obligation to be enforced, or (b) money or property paid or transferred under the agreement or obligation to be retained, if it is satisfied that it is just and equitable in the circumstances of the case. (5) In considering whether to allow the agreement or obligation to be enforced or (as the case may be) the money or property paid or transferred under the agreement to be retained the court must have regard to the issues mentioned in subsections (6) and (7). (6) If the applicant made the unlawful communication, the issue is whether he reasonably believed that he was not making such a communication. (7) If the applicant did not make the unlawful communication, the issue is whether he knew that the agreement was entered into in consequence of such a communication. (8) ‘‘Applicant’’ means the person seeking to enforce the agreement or obligation or retain the money or property paid or transferred. (9) Any reference to making a communication includes causing a communication to be made. (10) The amount of compensation recoverable as a result of subsection (2) or (3) is— (a) the amount agreed between the parties; or (b) on the application of either party, the amount determined by the court. (11) If a person elects not to perform an agreement or an obligation which (by virtue of subsection (2) or (3)) is unenforceable against him, he must repay any money and return any other property received by him under the agreement. (12) If (by virtue of subsection (2) or (3)) a person recovers money paid or property transferred by him under an agreement or obligation, he must repay any money and return any other property received by him as a result of exercising the rights in question. (13) If any property required to be returned under this section has passed to a third party, references to that property are to be read as references to its value at the time of its receipt by the person required to return it. PA RT I I I

A U T H O R I S AT I O N A N D E X E M P T I O N

Authorisation Authorised persons 31.—(1) The following persons are authorised for the purposes of this Act— (a) a person who has a Part IV permission to carry on one or more regulated activities; (b) an EEA firm qualifying for authorisation under Schedule 3; (c) a Treaty firm qualifying for authorisation under Schedule 4; (d) a person who is otherwise authorised by a provision of, or made under, this Act. (2) In this Act ‘‘authorised person’’ means a person who is authorised for the purposes of this Act.

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Partnerships and unincorporated associations 32.—(1) If a firm is authorised— (a) it is authorised to carry on the regulated activities concerned in the name of the firm; and (b) its authorisation is not affected by any change in its membership. (2) If an authorised firm is dissolved, its authorisation continues to have effect in relation to any firm which succeeds to the business of the dissolved firm. (3) For the purposes of this section, a firm is to be regarded as succeeding to the business of another firm only if— (a) the members of the resulting firm are substantially the same as those of the former firm; and (b) succession is to the whole or substantially the whole of the business of the former firm. (4) ‘‘Firm’’ means— (a) a partnership; or (b) an unincorporated association of persons. (5) ‘‘Partnership’’ does not include a partnership which is constituted under the law of any place outside the United Kingdom and is a body corporate. Ending of authorisation Withdrawal of authorisation by the authority 33.—(1) This section applies if— (a) an authorised person’s Part IV permission is cancelled; and (b) as a result, there is no regulated activity for which he has permission. (2) The Authority must give a direction withdrawing that person’s status as an authorised person. Notes Implementation: FSA Handbook SUP 6.5.

EEA firms 34.—(1) An EEA firm ceases to qualify for authorisation under Part II of Schedule 3 if it ceases to be an EEA firm as a result of— (a) having its EEA authorisation withdrawn; or (b) ceasing to have an EEA right in circumstances in which EEA authorisation is not required. (2) At the request of an EEA firm, the Authority may give a direction cancelling its authorisation under Part II of Schedule 3. (3) If an EEA firm has a Part IV permission, it does not cease to be an authorised person merely because it ceases to qualify for authorisation under Part II of Schedule 3. Treaty firms 35.—(1) A Treaty firm ceases to qualify for authorisation under Schedule 4 if its home State authorisation is withdrawn. (2) At the request of a Treaty firm, the Authority may give a direction cancelling its Schedule 4 authorisation. (3) If a Treaty firm has a Part IV permission, it does not cease to be an authorised person merely because it ceases to qualify for authorisation under Schedule 4. Persons authorised as a result of paragraph 1(1) of Schedule 5 36.—(1) At the request of a person authorised as a result of paragraph 1(1) of Schedule 5, the Authority may give a direction cancelling his authorisation as such a person.

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(2) If a person authorised as a result of paragraph 1(1) of Schedule 5 has a Part IV permission, he does not cease to be an authorised person merely because he ceases to be a person so authorised. Exercise of EEA rights by UK firms Exercise of EEA rights by UK firms 37. Part III of Schedule 3 makes provision in relation to the exercise outside the United Kingdom of EEA rights by UK firms. Exemption Exemption orders 38.—(1) The Treasury may by order (‘‘an exemption order’’) provide for— (a) specified persons, or (b) persons falling within a specified class, to be exempt from the general prohibition. (2) But a person cannot be an exempt person as a result of an exemption order if he has a Part IV permission. (3) An exemption order may provide for an exemption to have effect— (a) in respect of all regulated activities; (b) in respect of one or more specified regulated activities; (c) only in specified circumstances; (d) only in relation to specified functions; (e) subject to conditions. (4) ‘‘Specified’’ means specified by the exemption order. Exemption of appointed representatives 39.—(1) If a person (other than an authorised person)— (a) is a party to a contract with an authorised person (‘‘his principal’’) which— (i) permits or requires him to carry on business of a prescribed description, and (ii) complies with such requirements as may be prescribed, and (b) is someone for whose activities in carrying on the whole or part of that business his principal has accepted responsibility in writing, he is exempt from the general prohibition in relation to any regulated activity comprised in the carrying on of that business for which his principal has accepted responsibility. (1A) But a person is not exempt as a result of subsection (1)— (a) if his principal is an investment firm or a credit institution, and (b) so far as the business for which his principal has accepted responsibility is investment services business, unless he is entered on the applicable register. (1B) The ‘‘applicable register’’ is— (a) in the case of a person established in an EEA State (other than the United Kingdom) which permits investment firms authorised by the competent authority of that State to appoint tied agents, the register of tied agents maintained in that State pursuant to Article 23 of the markets in financial instruments directive; (b) in the case of a person established in an EEA State which does not permit investment firms authorised as mentioned in paragraph (a) to appoint tied agents— (i) if his principal has his relevant office in the United Kingdom, the record maintained by the Authority by virtue of section 347(1)(ha), and (ii) if his principal is established in an EEA State (other than the United Kingdom) which permits investment firms authorised by the competent authority of the State to appoint tied agents, the register of tied agents maintained by that State pursuant to Article 23 of the markets in financial instruments directive; and (c) in any other case, the record maintained by the Authority by virtue of section 347(1)(ha).

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(2) A person who is exempt as a result of subsection (1) is referred to in this Act as an appointed representative. (3) The principal of an appointed representative is responsible, to the same extent as if he had expressly permitted it, for anything done or omitted by the representative in carrying on the business for which he has accepted responsibility. (4) In determining whether an authorised person has complied with a provision contained in or made under this Act, or with a provision contained in any directly applicable Community regulation made under the markets in financial instruments directive, anything which a relevant person has done or omitted as respects business for which the authorised person has accepted responsibility is to be treated as having been done or omitted by the authorised person. (5) ‘‘Relevant person’’ means a person who at the material time is or was an appointed representative by virtue of being a party to a contract with the authorised person. (6) Nothing in subsection (4) is to cause the knowledge or intentions of an appointed representative to be attributed to his principal for the purpose of determining whether the principal has committed an offence, unless in all the circumstances it is reasonable for them to be attributed to him. (7) A person carries on ‘‘investment services business’’ if— (a) the business includes providing services or carrying on activities of the kind mentioned in Article 4.1.25 of the markets in financial instruments directive, and (b) as a result of providing such services or carrying on such activities he is a tied agent or would be if he were established in an EEA State. (8) In this section— ‘‘competent authority’’ has the meaning given in Article 4.1.22 of the markets in financial instruments directive; ‘‘credit institution’’ means— (a) a credit institution authorised under the banking consolidation directive, or (b) an institution which would satisfy the requirements for authorisation as a credit institution under that directive if it had its relevant office in an EEA State; ‘‘relevant office’’ means— (a) in relation to a body corporate, its registered office or, if it has no registered office, its head office, and (b) in relation to a person other than a body corporate, the person’s head office. Notes Subs (1A) inserted by SI 2007 No 126. Subs (1B) inserted by SI 2007 No 126. Subs (4) the words ‘‘or with a provision . . . financial instruments directive’’ inserted by SI 2007 No 126. Subs (7) inserted by SI 2007 No 126. Subs (8) inserted by SI 2007 No 126. Implementation: Financial Services and Markets Act 2000 (Appointed Representatives) Regulations 2001, SI 2001 No 1217 as amended.

Certain tied agents operating outside United Kingdom 39A.—(1) This section applies to an authorised person whose relevant office is in the United Kingdom if— (a) he is a party to a contract with a person (other than an authorised person) who is established— (i) in the United Kingdom, or (ii) in an EEA State which does not permit investment firms authorised by the competent authority of the State to appoint tied agents; and (b) the contract is a relevant contract. (2) A contract is a ‘‘relevant contract’’ if it satisfies conditions A to C. (3) Condition A is that the contract permits or requires the person mentioned in subsection (1)(a) (the ‘‘agent’’) to carry on investment services business. (4) Condition B is that either—

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(a) it is a condition of the contract that such business may only be carried on by the agent in an EEA State other than the United Kingdom; or (b) in a case not falling within paragraph (a), the Authority is satisfied that no such business is, or is likely to be, carried on by the agent in the United Kingdom. (5) Condition C is that the business is of a description that, if carried on in the United Kingdom, would be prescribed for the purposes of section 39(1)(a)(i). (6) An authorised person to whom this section applies who— (a) enters into or continues to perform a relevant contract with an agent which does not comply with the applicable requirements, (b) enters into or continues to perform a relevant contract without accepting or having accepted responsibility in writing for the agent’s activities in carrying on investment services business, (c) enters into a relevant contract with an agent who is not entered on the record maintained by the Authority by virtue of section 347(1)(ha), or (d) continues to perform a relevant contract with an agent when he knows or ought to know that the agent is not entered on that record, is to be taken for the purposes of this Act to have contravened a requirement imposed on him by or under this Act. (7) The ‘‘applicable requirements’’ are the requirements prescribed for the purposes of subsection (1)(a)(ii) of section 39 which have effect in the case of a person to whom subsection (1A) of that section applies. (8) A person carries on ‘‘investment services business’’ if— (a) his business includes providing services or carrying on activities of the kind mentioned in Article 4.1.25 of the markets in financial instruments directive, and (b) as a result of providing such services or carrying on such activities he is a tied agent. (9) In this section— ‘‘competent authority’’ has the meaning given in Article 4.1.22 of the markets in financial instruments directive; ‘‘relevant office’’ means— (a) in relation to a body corporate, its registered office or, if it has no registered office, its head office, and (b) in relation to a person other than a body corporate, the person’s head office. Notes Section 39A inserted by SI 2007 No 126.

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Application for permission Application for permission 40.—(1) An application for permission to carry on one or more regulated activities may be made to the Authority by— (a) an individual; (b) a body corporate; (c) a partnership; or (d) an unincorporated association. (2) An authorised person may not apply for permission under this section if he has a permission— (a) given to him by the Authority under this Part, or (b) having effect as if so given, which is in force. (3) An EEA firm may not apply for permission under this section to carry on a regulated activity which it is, or would be, entitled to carry on in exercise of an EEA right, whether through a United Kingdom branch or by providing services in the United Kingdom.

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(4) A permission given by the Authority under this Part or having effect as if so given is referred to in this Act as ‘‘a Part IV permission’’. Notes See further Part IV of the Act. Application: FSA Handbook COND 2.1.2. Implementation: FSA Handbook COND.

The threshold conditions 41.—(1) ‘‘The threshold conditions’’, in relation to a regulated activity, means the conditions set out in Schedule 6. (2) In giving or varying permission, or imposing or varying any requirement, under this Part the Authority must ensure that the person concerned will satisfy, and continue to satisfy, the threshold conditions in relation to all of the regulated activities for which he has or will have permission. (3) But the duty imposed by subsection (2) does not prevent the Authority, having due regard to that duty, from taking such steps as it considers are necessary, in relation to a particular authorised person, in order to secure its regulatory objective of the protection of consumers. Notes On the relationship between section 41 and section 45, see FSA Handbook COND 1.2.3. Implementation: FSA Handbook COND.

Permission Giving permission 42.—(1) ‘‘The applicant’’ means an applicant for permission under section 40. (2) The Authority may give permission for the applicant to carry on the regulated activity or activities to which his application relates or such of them as may be specified in the permission. (3) If the applicant— (a) in relation to a particular regulated activity, is exempt from the general prohibition as a result of section 39(1) or an order made under section 38(1), but (b) has applied for permission in relation to another regulated activity, the application is to be treated as relating to all the regulated activities which, if permission is given, he will carry on. (4) If the applicant— (a) in relation to a particular regulated activity, is exempt from the general prohibition as a result of section 285(2) or (3), but (b) has applied for permission in relation to another regulated activity, the application is to be treated as relating only to that other regulated activity. (5) If the applicant— (a) is a person to whom, in relation to a particular regulated activity, the general prohibition does not apply as a result of Part XIX, but (b) has applied for permission in relation to another regulated activity, the application is to be treated as relating only to that other regulated activity. (6) If it gives permission, the Authority must specify the permitted regulated activity or activities, described in such manner as the Authority considers appropriate. (7) The Authority may— (a) incorporate in the description of a regulated activity such limitations (for example as to circumstances in which the activity may, or may not, be carried on) as it considers appropriate; (b) specify a narrower or wider description of regulated activity than that to which the application relates; (c) give permission for the carrying on of a regulated activity which is not included among those to which the application relates.

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Imposition of requirements 43.—(1) A Part IV permission may include such requirements as the Authority considers appropriate. (2) A requirement may, in particular, be imposed— (a) so as to require the person concerned to take specified action; or (b) so as to require him to refrain from taking specified action. (3) A requirement may extend to activities which are not regulated activities. (4) A requirement may be imposed by reference to the person’s relationship with(a) his group; or (b) other members of his group. (5) A requirement expires at the end of such period as the Authority may specify in the permission. (6) But subsection (5) does not affect the Authority’s powers under section 44 or 45. Variation and cancellation of Part IV permission Variation etc. at request of authorised person 44.—(1) The Authority may, on the application of an authorised person with a Part IV permission, vary the permission by— (a) adding a regulated activity to those for which it gives permission; (b) removing a regulated activity from those for which it gives permission; (c) varying the description of a regulated activity for which it gives permission; (d) cancelling a requirement imposed under section 43; or (e) varying such a requirement. (2) The Authority may, on the application of an authorised person with a Part IV permission, cancel the permission. (3) The Authority may refuse an application under this section if it appears to it— (a) that the interests of consumers, or potential consumers, would be adversely affected if the application were to be granted; and (b) that it is desirable in the interests of consumers, or potential consumers, for the application to be refused. (4) If, as a result of a variation of a Part IV permission under this section, there are no longer any regulated activities for which the authorised person concerned has permission, the Authority must, once it is satisfied that it is no longer necessary to keep the permission in force, cancel it. (5) The Authority’s power to vary a Part IV permission under this section extends to including any provision in the permission as varied that could be included if a fresh permission were being given in response to an application under section 40. Variation etc. on the Authority’s own initiative 45.—(1) The Authority may exercise its power under this section in relation to an authorised person if it appears to it that— (a) he is failing, or is likely to fail, to satisfy the threshold conditions; (b) he has failed, during a period of at least 12 months, to carry on a regulated activity for which he has a Part IV permission; or (c) it is desirable to exercise that power in order to protect the interests of consumers or potential consumers. (2) The Authority’s power under this section is the power to vary a Part IV permission in any of the ways mentioned in section 44(1) or to cancel it. (2A) Without prejudice to the generality of subsections (1) and (2), the Authority may, in relation to an authorised person who is an investment firm, exercise its power under this section to cancel the Part IV permission of the firm if it appears to it that— (a) the firm has failed, during a period of at least six months, to carry on a regulated activity which is an investment service or activity for which it has a Part IV permission;

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(b) the firm obtained the Part IV permission by making a false statement or by other irregular means; (c) the firm no longer satisfies the requirements for authorisation pursuant to Chapter I of Title II of the markets in financial instruments directive, or pursuant to or contained in any Community legislation made under that Chapter, in relation to a regulated activity which is an investment service or activity for which it has a Part IV permission; or (d) the firm has seriously and systematically infringed the operating conditions pursuant to Chapter II of Title II of the markets in financial instruments directive, or pursuant to or contained in any Community legislation made under that Chapter, in relation to a regulated activity which is an investment service or activity for which it has a Part IV permission. (2B) For the purposes of subsection (2A) a regulated activity is an investment service or activity if it falls within the definition of ‘‘investment services and activities’’ in section 417(1). (3) If, as a result of a variation of a Part IV permission under this section, there are no longer any regulated activities for which the authorised person concerned has permission, the Authority must, once it is satisfied that it is no longer necessary to keep the permission in force, cancel it. (4) The Authority’s power to vary a Part IV permission under this section extends to including any provision in the permission as varied that could be included if a fresh permission were being given in response to an application under section 40. (5) The Authority’s power under this section is referred to in this Part as its own-initiative power. Notes Subs (2A) inserted by SI 2007 No 126. Subs (2B) inserted by SI 2007 No 126. On the relationship between sections 41 and 45, see FSA Handbook COND 1.2.3. Implementation: FSA Handbook SUP 7: Individual requirements.

Variation of permission on acquisition of control 46.—(1) This section applies if it appears to the Authority that— (a) a person has acquired control over a UK authorised person who has a Part IV permission; but (b) there are no grounds for exercising its own-initiative power. (2) If it appears to the Authority that the likely effect of the acquisition of control on the authorised person, or on any of its activities, is uncertain the Authority may vary the authorised person’s permission by— (a) imposing a requirement of a kind that could be imposed under section 43 on giving permission; or (b) varying a requirement included in the authorised person’s permission under that section. (3) Any reference to a person having acquired control is to be read in accordance with Part XII. Exercise of power in support of overseas regulator 47.—(1) The Authority’s own-initiative power may be exercised in respect of an authorised person at the request of, or for the purpose of assisting, a regulator who is— (a) outside the United Kingdom; and (b) of a prescribed kind. (2) Subsection (1) applies whether or not the Authority has powers which are exercisable in relation to the authorised person by virtue of any provision of Part XIII. (3) If a request to the Authority for the exercise of its own-initiative power has been made by a regulator who is— (a) outside the United Kingdom, (b) of a prescribed kind, and

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(c) acting in pursuance of provisions of a prescribed kind, the Authority must, in deciding whether or not to exercise that power in response to the request, consider whether it is necessary to do so in order to comply with a Community obligation. (4) In deciding in any case in which the Authority does not consider that the exercise of its own-initiative power is necessary in order to comply with a Community obligation, it may take into account in particular— (a) whether in the country or territory of the regulator concerned, corresponding assistance would be given to a United Kingdom regulatory authority; (b) whether the case concerns the breach of a law, or other requirement, which has no close parallel in the United Kingdom or involves the assertion of a jurisdiction not recognised by the United Kingdom; (c) the seriousness of the case and its importance to persons in the United Kingdom; (d) whether it is otherwise appropriate in the public interest to give the assistance sought. (5) The Authority may decide not to exercise its own-initiative power, in response to a request, unless the regulator concerned undertakes to make such contribution towards the cost of its exercise as the Authority considers appropriate. (6) Subsection (5) does not apply if the Authority decides that it is necessary for it to exercise its own-initiative power in order to comply with a Community obligation. (7) In subsections (4) and (5) ‘‘request’’ means a request of a kind mentioned in subsection (1). Notes Subs (1) on overseas regulators cf. SI 2001 No 2639. Subs (3) on overseas regulators cf. SI 2001 No 2639.

Prohibitions and restrictions 48.—(1) This section applies if the Authority— (a) on giving a person a Part IV permission, imposes an assets requirement on him; or (b) varies an authorised person’s Part IV permission so as to alter an assets requirement imposed on him or impose such a requirement on him. (2) A person on whom an assets requirement is imposed is referred to in this section as ‘‘A’’. (3) ‘‘Assets requirement’’ means a requirement under section 43— (a) prohibiting the disposal of, or other dealing with, any of A’s assets (whether in the United Kingdom or elsewhere) or restricting such disposals or dealings; or (b) that all or any of A’s assets, or all or any assets belonging to consumers but held by A or to his order, must be transferred to and held by a trustee approved by the Authority. (4) If the Authority— (a) imposes a requirement of the kind mentioned in subsection (3)(a), and (b) gives notice of the requirement to any institution with whom A keeps an account, the notice has the effects mentioned in subsection (5). (5) Those effects are that— (a) the institution does not act in breach of any contract with A if, having been instructed by A (or on his behalf) to transfer any sum or otherwise make any payment out of A’s account, it refuses to do so in the reasonably held belief that complying with the instruction would be incompatible with the requirement; and (b) if the institution complies with such an instruction, it is liable to pay to the Authority an amount equal to the amount transferred from, or otherwise paid out of, A’s account in contravention of the requirement. (6) If the Authority imposes a requirement of the kind mentioned in subsection (3)(b), no assets held by a person as trustee in accordance with the requirement may, while the requirement is in force, be released or dealt with except with the consent of the Authority. (7) If, while a requirement of the kind mentioned in subsection (3)(b) is in force, A creates a charge over any assets of his held in accordance with the requirement, the charge is (to the

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extent that it confers security over the assets) void against the liquidator and any of A’s creditors. (8) Assets held by a person as trustee (‘‘T’’) are to be taken to be held by T in accordance with a requirement mentioned in subsection (3)(b) only if— (a) A has given T written notice that those assets are to be held by T in accordance with the requirement; or (b) they are assets into which assets to which paragraph (a) applies have been transposed by T on the instructions of A. (9) A person who contravenes subsection (6) is guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale. (10) ‘‘Charge’’ includes a mortgage (or in Scotland a security over property). (11) Subsections (6) and (8) do not affect any equitable interest or remedy in favour of a person who is a beneficiary of a trust as a result of a requirement of the kind mentioned in subsection (3)(b). Connected persons Persons connected with an applicant 49.—(1) In considering— (a) an application for a Part IV permission, or (b) whether to vary or cancel a Part IV permission, the Authority may have regard to any person appearing to it to be, or likely to be, in a relationship with the applicant or person given permission which is relevant. (2) Before— (a) giving permission in response to an application made by a person who is connected with an EEA firm, (other than an EEA firm falling within paragraph 5(e) of Schedule 3 (insurance and reinsurance intermediaries)) or (b) cancelling or varying any permission given by the Authority to such a person, the Authority must consult the firm’s home state regulator. (2A) But subsection (2) does not apply to the extent that the permission relates to— (a) an insurance mediation activity (within the meaning given by paragraph 2(5) of Schedule 6); or (b) regulated activity involving a regulated mortgage contract, a regulated home reversion plan or a regulated home purchase plan. (3) A person (‘‘A’’) is connected with an EEA firm if— (a) A is a subsidiary undertaking of the firm; or (b) A is a subsidiary undertaking of a parent undertaking of the firm. Notes Subs (2)(a) The words in brackets inserted by SI 2003 No 1476, implementing the Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation. Subs (2A) an earlier wording was inserted by SI 2003 No 1476 (implementing the Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation) but did not enter into force before it was revoked by SI 2004 No 1610, which also introduced new language, subsequently amended by SI 2006 No 2383.

Additional permissions Authority’s duty to consider other permissions etc. 50.—(1) ‘‘Additional Part IV permission’’ means a Part IV permission which is in force in relation to an EEA firm, a Treaty firm or a person authorised as a result of paragraph 1(1) of Schedule 5. (2) If the Authority is considering whether, and if so how, to exercise its own-initiative power under this Part in relation to an additional Part IV permission, it must take into account— (a) the home State authorisation of the authorised person concerned; (b) any relevant directive; and (c) relevant provisions of the Treaty.

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Procedure Applications under this Part 51.—(1) An application for a Part IV permission must— (a) contain a statement of the regulated activity or regulated activities which the applicant proposes to carry on and for which he wishes to have permission; and (b) give the address of a place in the United Kingdom for service on the applicant of any notice or other document which is required or authorised to be served on him under this Act. (2) An application for the variation of a Part IV permission must contain a statement— (a) of the desired variation; and (b) of the regulated activity or regulated activities which the applicant proposes to carry on if his permission is varied. (3) Any application under this Part must— (a) be made in such manner as the Authority may direct; and (b) contain, or be accompanied by, such other information as the Authority may reasonably require. (4) At any time after receiving an application and before determining it, the Authority may require the applicant to provide it with such further information as it reasonably considers necessary to enable it to determine the application. (5) Different directions may be given, and different requirements imposed, in relation to different applications or categories of application. (6) The Authority may require an applicant to provide information which he is required to provide under this section in such form, or to verify it in such a way, as the Authority may direct. Determination of applications 52.—(1) An application under this Part must be determined by the Authority before the end of the period of six months beginning with the date on which it received the completed application. (2) The Authority may determine an incomplete application if it considers it appropriate to do so; and it must in any event determine such an application within twelve months beginning with the date on which it received the application. (3) The applicant may withdraw his application, by giving the Authority written notice, at any time before the Authority determines it. (4) If the Authority grants an application for, or for variation of, a Part IV permission, it must give the applicant written notice. (5) The notice must state the date from which the permission, or the variation, has effect. (6) If the Authority proposes— (a) to give a Part IV permission but to exercise its power under section 42(7)(a) or (b) or 43(1), or (b) to vary a Part IV permission on the application of an authorised person but to exercise its power under any of those provisions (as a result of section 44(5)), it must give the applicant a warning notice. (7) If the Authority proposes to refuse an application made under this Part, it must (unless subsection (8) applies) give the applicant a warning notice. (8) This subsection applies if it appears to the Authority that— (a) the applicant is an EEA firm; and (b) the application is made with a view to carrying on a regulated activity in a manner in which the applicant is, or would be, entitled to carry on that activity in the exercise of an EEA right whether through a United Kingdom branch or by providing services in the United Kingdom. (9) If the Authority decides— (a) to give a Part IV permission but to exercise its power under section 42(7)(a) or (b) or 43(1), (b) to vary a Part IV permission on the application of an authorised person but to exercise its power under any of those provisions (as a result of section 44(5)), or

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(c) to refuse an application under this Part, it must give the applicant a decision notice. Note Subss (6), (7), (9) warning notices: interpretation, s 387; implementation FSA Handbook DEPP 2.2.

Exercise of own-initiative power: procedure 53.—(1) This section applies to an exercise of the Authority’s own-initiative power to vary an authorised person’s Part IV permission. (2) A variation takes effect— (a) immediately, if the notice given under subsection (4) states that that is the case; (b) on such date as may be specified in the notice; or (c) if no date is specified in the notice, when the matter to which the notice relates is no longer open to review. (3) A variation may be expressed to take effect immediately (or on a specified date) only if the Authority, having regard to the ground on which it is exercising its own-initiative power, reasonably considers that it is necessary for the variation to take effect immediately (or on that date). (4) If the Authority proposes to vary the Part IV permission, or varies it with immediate effect, it must give the authorised person written notice. (5) The notice must— (a) give details of the variation; (b) state the Authority’s reasons for the variation and for its determination as to when the variation takes effect; (c) inform the authorised person that he may make representations to the Authority within such period as may be specified in the notice (whether or not he has referred the matter to the Tribunal); (d) inform him of when the variation takes effect; and (e) inform him of his right to refer the matter to the Tribunal. (6) The Authority may extend the period allowed under the notice for making representations. (7) If, having considered any representations made by the authorised person, the Authority decides— (a) to vary the permission in the way proposed, or (b) if the permission has been varied, not to rescind the variation, it must give him written notice. (8) If, having considered any representations made by the authorised person, the Authority decides— (a) not to vary the permission in the way proposed, (b) to vary the permission in a different way, or (c) to rescind a variation which has effect, it must give him written notice. (9) A notice given under subsection (7) must inform the authorised person of his right to refer the matter to the Tribunal. (10) A notice under subsection (8)(b) must comply with subsection (5). (11) If a notice informs a person of his right to refer a matter to the Tribunal, it must give an indication of the procedure on such a reference. (12) For the purposes of subsection (2)(c), whether a matter is open to review is to be determined in accordance with section 391 (8). Cancellation of Part IV permission: procedure 54.—(1) If the Authority proposes to cancel an authorised person’s Part IV permission otherwise than at his request, it must give him a warning notice. (2) If the Authority decides to cancel an authorised person’s Part IV permission otherwise than at his request, it must give him a decision notice.

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Note Warning notices: interpretation, s 387; implementation FSA Handbook DEPP 2.2.

References to the Tribunal Right to refer matters to the Tribunal 55.—(1) An applicant who is aggrieved by the determination of an application made under this Part may refer the matter to the Tribunal. (2) An authorised person who is aggrieved by the exercise of the Authority’s own-initiative power may refer the matter to the Tribunal. PA RT V

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Prohibition orders Prohibition orders 56.—(1) Subsection (2) applies if it appears to the Authority that an individual is not a fit and proper person to perform functions in relation to a regulated activity carried on by an authorised person. (2) The Authority may make an order (‘‘a prohibition order’’) prohibiting the individual from performing a specified function, any function falling within a specified description or any function. (3) A prohibition order may relate to— (a) a specified regulated activity, any regulated activity falling within a specified description or all regulated activities; (b) authorised persons generally or any person within a specified class of authorised person. (4) An individual who performs or agrees to perform a function in breach of a prohibition order is guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale. (5) In proceedings for an offence under subsection (4) it is a defence for the accused to show that he took all reasonable precautions and exercised all due diligence to avoid committing the offence. (6) An authorised person must take reasonable care to ensure that no function of his, in relation to the carrying on of a regulated activity, is performed by a person who is prohibited from performing that function by a prohibition order. (7) The Authority may, on the application of the individual named in a prohibition order, vary or revoke it. (8) This section applies to the performance of functions in relation to a regulated activity carried on by— (a) a person who is an exempt person in relation to that activity, and (b) a person to whom, as a result of Part XX, the general prohibition does not apply in relation to that activity, as it applies to the performance of functions in relation to a regulated activity carried on by an authorised person. (9) ‘‘Specified’’ means specified in the prohibition order. Notes Subs (1) ‘‘fit and proper person’’: FSA Handbook FIT. Implementation: FSA Handbook ENF 8 (in force until 27 August 2007).

Prohibition orders: procedure and right to refer to Tribunal 57.—(1) If the Authority proposes to make a prohibition order it must give the individual concerned a warning notice. (2) The warning notice must set out the terms of the prohibition.

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(3) If the Authority decides to make a prohibition order it must give the individual concerned a decision notice. (4) The decision notice must— (a) name the individual to whom the prohibition order applies; (b) set out the terms of the order; and (c) be given to the individual named in the order. (5) A person against whom a decision to make a prohibition order is made may refer the matter to the Tribunal. Notes Warning notices: interpretation, s 387; implementation FSA Handbook DEPP 2.2.

Applications relating to prohibitions: procedure and right to refer to Tribunal 58.—(1) This section applies to an application for the variation or revocation of a prohibition order. (2) If the Authority decides to grant the application, it must give the applicant written notice of its decision. (3) If the Authority proposes to refuse the application, it must give the applicant a warning notice. (4) If the Authority decides to refuse the application, it must give the applicant a decision notice. (5) If the Authority gives the applicant a decision notice, he may refer the matter to the Tribunal. Notes Warning notices: interpretation, s 387; implementation FSA Handbook DEPP 2.2.

Approval Approval for particular arrangements 59.—(1) An authorised person (‘‘A’’) must take reasonable care to ensure that no person performs a controlled function under an arrangement entered into by A in relation to the carrying on by A of a regulated activity, unless the Authority approves the performance by that person of the controlled function to which the arrangement relates. (2) An authorised person (‘‘A’’) must take reasonable care to ensure that no person performs a controlled function under an arrangement entered into by a contractor of A in relation to the carrying on by A of a regulated activity, unless the Authority approves the performance by that person of the controlled function to which the arrangement relates. (3) ‘‘Controlled function’’ means a function of a description specified in rules. (4) The Authority may specify a description of function under subsection (3) only if, in relation to the carrying on of a regulated activity by an authorised person, it is satisfied that the first, second or third condition is met. (5) The first condition is that the function is likely to enable the person responsible for its performance to exercise a significant influence on the conduct of the authorised person’s affairs, so far as relating to the regulated activity. (6) The second condition is that the function will involve the person performing it in dealing with customers of the authorised person in a manner substantially connected with the carrying on of the regulated activity. (7) The third condition is that the function will involve the person performing it in dealing with property of customers of the authorised person in a manner substantially connected with the carrying on of the regulated activity. (8) Neither subsection (1) nor subsection (2) applies to an arrangement which allows a person to perform a function if the question of whether he is a fit and proper person to perform the function is reserved under any of the single market directives to an authority in a country or territory outside the United Kingdom.

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(9) In determining whether the first condition is met, the Authority may take into account the likely consequences of a failure to discharge that function properly. (10) ‘‘Arrangement’’— (a) means any kind of arrangement for the performance of a function of A which is entered into by A or any contractor of his with another person; and (b) includes, in particular, that other person’s appointment to an office, his becoming a partner or his employment (whether under a contract of service or otherwise). (11) ‘‘Customer’’, in relation to an authorised person, means a person who is using, or who is or may be contemplating using, any of the services provided by the authorised person. Notes Subs (8) ‘‘fit and proper person’’: FSA Handbook FIT. Implementation: FSA Handbook APER.

Applications for approval 60.—(1) An application for the Authority’s approval under section 59 may be made by the authorised person concerned. (2) The application must— (a) be made in such manner as the Authority may direct; and (b) contain, or be accompanied by, such information as the Authority may reasonably require. (3) At any time after receiving the application and before determining it, the Authority may require the applicant to provide it with such further information as it reasonably considers necessary to enable it to determine the application. (4) The Authority may require an applicant to present information which he is required to give under this section in such form, or to verify it in such a way, as the Authority may direct. (5) Different directions may be given, and different requirements imposed, in relation to different applications or categories of application. (6) ‘‘The authorised person concerned’’ includes a person who has applied for permission under Part IV and will be the authorised person concerned if permission is given. Determination of applications 61.—(1) The Authority may grant an application made under section 60 only if it is satisfied that the person in respect of whom the application is made (‘‘the candidate’’) is a fit and proper person to perform the function to which the application relates. (2) In deciding that question, the Authority may have regard (among other things) to whether the candidate, or any person who may perform a function on his behalf— (a) has obtained a qualification, (b) has undergone, or is undergoing, training, or (c) possesses a level of competence, required by general rules in relation to persons performing functions of the kind to which the application relates. (3) The Authority must, before the end of the period of three months beginning with the date on which it receives an application made under section 60 (‘‘the period for consideration’’), determine whether— (a) to grant the application; or (b) to give a warning notice under section 62(2). (4) If the Authority imposes a requirement under section 60 (3), the period for consideration stops running on the day on which the requirement is imposed but starts running again— (a) on the day on which the required information is received by the Authority; or (b) if the information is not provided on a single day, on the last of the days on which it is received by the Authority. (5) A person who makes an application under section 60 may withdraw his application by giving written notice to the Authority at any time before the Authority determines it, but only with the consent of—

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(a) the candidate; and (b) the person by whom the candidate is to be retained to perform the function concerned, if not the applicant. Notes Subs (1) ‘‘fit and proper person’’: FSA Handbook FIT.

Applications for approval: procedure and right to refer to Tribunal 62.—(1) If the Authority decides to grant an application made under section 60 (‘‘an application’’), it must give written notice of its decision to each of the interested parties. (2) If the Authority proposes to refuse an application, it must give a warning notice to each of the interested parties. (3) If the Authority decides to refuse an application, it must give a decision notice to each of the interested parties. (4) If the Authority decides to refuse an application, each of the interested parties may refer the matter to the Tribunal. (5) ‘‘The interested parties’’, in relation to an application, are— (a) the applicant; (b) the person in respect of whom the application is made (‘‘A’’); and (c) the person by whom A’s services are to be retained, if not the applicant. Notes Warning notices: interpretation, s 387; implementation FSA Handbook DEPP 2.2.

Withdrawal of approval 63.—(1) The Authority may withdraw an approval given under section 59 if it considers that the person in respect of whom it was given is not a fit and proper person to perform the function to which the approval relates. (2) When considering whether to withdraw its approval, the Authority may take into account any matter which it could take into account if it were considering an application made under section 60 in respect of the performance of the function to which the approval relates. (3) If the Authority proposes to withdraw its approval, it must give each of the interested parties a warning notice. (4) If the Authority decides to withdraw its approval, it must give each of the interested parties a decision notice. (5) If the Authority decides to withdraw its approval, each of the interested parties may refer the matter to the Tribunal. (6) ‘‘The interested parties’’, in relation to an approval, are— (a) the person on whose application it was given (‘‘A’’); (b) the person in respect of whom it was given (‘‘B’’); and (c) the person by whom B’s services are retained, if not A. Notes Subs (1) ‘‘fit and proper person’’: FSA Handbook FIT. Subs (3) warning notices: interpretation, s 387; implementation FSA Handbook DEPP 2.2. Implementation: FSA Handbook ENF 7 (in force until 27 August 2007).

Conduct Conduct: statements and codes 64.—(1) The Authority may issue statements of principle with respect to the conduct expected of approved persons. (2) If the Authority issues a statement of principle under subsection (1), it must also issue a code of practice for the purpose of helping to determine whether or not a person’s conduct complies with the statement of principle.

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(3) A code issued under subsection (2) may specify— (a) descriptions of conduct which, in the opinion of the Authority, comply with a statement of principle; (b) descriptions of conduct which, in the opinion of the Authority, do not comply with a statement of principle; (c) factors which, in the opinion of the Authority, are to be taken into account in determining whether or not a person’s conduct complies with a statement of principle. (4) The Authority may at any time alter or replace a statement or code issued under this section. (5) If a statement or code is altered or replaced, the altered or replacement statement or code must be issued by the Authority. (6) A statement or code issued under this section must be published by the Authority in the way appearing to the Authority to be best calculated to bring it to the attention of the public. (7) A code published under this section and in force at the time when any particular conduct takes place may be relied on so far as it tends to establish whether or not that conduct complies with a statement of principle. (8) Failure to comply with a statement of principle under this section does not of itself give rise to any right of action by persons affected or affect the validity of any transaction. (9) A person is not to be taken to have failed to comply with a statement of principle if he shows that, at the time of the alleged failure, it or its associated code of practice had not been published. (10) The Authority must, without delay, give the Treasury a copy of any statement or code which it publishes under this section. (11) The power under this section to issue statements of principle and codes of practice— (a) includes power to make different provision in relation to persons, cases or circumstances of different descriptions; and (b) is to be treated for the purposes of section 2(4)(a) as part of the Authority’s rulemaking functions. (12) The Authority may charge a reasonable fee for providing a person with a copy of a statement or code published under this section. (13) ‘‘Approved person’’ means a person in relation to whom the Authority has given its approval under section 59. Notes Subs (1) see FSA Handbook APER 2. Subs (2) see FSA Handbook APER 3 and 4. Implementation: FSA Handbook APER, in particular APER 2.1.

Statements and codes: procedure 65.—(1) Before issuing a statement or code under section 64, the Authority must publish a draft of it in the way appearing to the Authority to be best calculated to bring it to the attention of the public. (2) The draft must be accompanied by— (a) a cost benefit analysis; and (b) notice that representations about the proposal may be made to the Authority within a specified time. (3) Before issuing the proposed statement or code, the Authority must have regard to any representations made to it in accordance with subsection (2)(b). (4) If the Authority issues the proposed statement or code it must publish an account, in general terms, of— (a) the representations made to it in accordance with subsection (2)(b); and (b) its response to them. (5) If the statement or code differs from the draft published under subsection (1) in a way which is, in the opinion of the Authority, significant—

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(a) the Authority must (in addition to complying with subsection (4)) publish details of the difference; and (b) those details must be accompanied by a cost benefit analysis. (6) Neither subsection (2)(a) nor subsection (5)(b) applies if the Authority considers— (a) that, making the appropriate comparison, there will be no increase in costs; or (b) that, making that comparison, there will be an increase in costs but the increase will be of minimal significance. (7) Subsections (1) to (6) do not apply if the Authority considers that the delay involved in complying with them would prejudice the interests of consumers. (8) A statement or code must state that it is issued under section 64. (9) The Authority may charge a reasonable fee for providing a copy of a draft published under subsection (1). (10) This section also applies to a proposal to alter or replace a statement or code. (11) ‘‘Cost benefit analysis’’ means an estimate of the costs together with an analysis of the benefits that will arise— (a) if the proposed statement or code is issued; or (b) if subsection (5)(b) applies, from the statement or code that has been issued. (12) ‘‘The appropriate comparison’’ means— (a) in relation to subsection (2)(a), a comparison between the overall position if the statement or code is issued and the overall position if it is not issued; (b) in relation to subsection (5)(b), a comparison between the overall position after the issuing of the statement or code and the overall position before it was issued. Disciplinary powers 66.—(1) The Authority may take action against a person under this section if— (a) it appears to the Authority that he is guilty of misconduct; and (b) the Authority is satisfied that it is appropriate in all the circumstances to take action against him. (2) A person is guilty of misconduct if, while an approved person— (a) he has failed to comply with a statement of principle issued under section 64; or (b) he has been knowingly concerned in a contravention by the relevant authorised person of a requirement imposed on that authorised person by or under this Act or by any directly applicable Community regulation made under the markets in financial instruments directive. (3) If the Authority is entitled to take action under this section against a person, it may— (a) impose a penalty on him of such amount as it considers appropriate; or (b) publish a statement of his misconduct. (4) The Authority may not take action under this section after the end of the period of two years beginning with the first day on which the Authority knew of the misconduct, unless proceedings in respect of it against the person concerned were begun before the end of that period. (5) For the purposes of subsection (4)— (a) the Authority is to be treated as knowing of misconduct if it has information from which the misconduct can reasonably be inferred; and (b) proceedings against a person in respect of misconduct are to be treated as begun when a warning notice is given to him under section 67(1). (6) ‘‘Approved person’’ has the same meaning as in section 64. (7) ‘‘Relevant authorised person’’, in relation to an approved person, means the person on whose application approval under section 59 was given. Notes Subs (2)(b) last fifteen words inserted by SI 2007 No 126. Subs (3)(a) on insurance against financial penalties, see FSA Handbook GEN 6.1.

Disciplinary measures: procedure and right to refer to Tribunal 67.—(1) If the Authority proposes to take action against a person under section 66, it must give him a warning notice.

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(2) A warning notice about a proposal to impose a penalty must state the amount of the penalty. (3) A warning notice about a proposal to publish a statement must set out the terms of the statement. (4) If the Authority decides to take action against a person under section 66, it must give him a decision notice. (5) A decision notice about the imposition of a penalty must state the amount of the penalty. (6) A decision notice about the publication of a statement must set out the terms of the statement. (7) If the Authority decides to take action against a person under section 66, he may refer the matter to the Tribunal. Notes Subss (1)–(3) warning notices: interpretation, s 387; implementation FSA Handbook DEPP 2.2. Subss (4)–(6) decision notices: interpretation, s 388; implementation FSA Handbook DEPP 2.3.

Publication 68. After a statement under section 66 is published, the Authority must send a copy of it to the person concerned and to any person to whom a copy of the decision notice was given. Statement of policy 69.—(1) The Authority must prepare and issue a statement of its policy with respect to— (a) the imposition of penalties under section 66; and (b) the amount of penalties under that section. (2) The Authority’s policy in determining what the amount of a penalty should be must include having regard to— (a) the seriousness of the misconduct in question in relation to the nature of the principle or requirement concerned; (b) the extent to which that misconduct was deliberate or reckless; and (c) whether the person on whom the penalty is to be imposed is an individual. (3) The Authority may at any time alter or replace a statement issued under this section. (4) If a statement issued under this section is altered or replaced, the Authority must issue the altered or replacement statement. (5) The Authority must, without delay, give the Treasury a copy of any statement which it publishes under this section. (6) A statement issued under this section must be published by the Authority in the way appearing to the Authority to be best calculated to bring it to the attention of the public. (7) The Authority may charge a reasonable fee for providing a person with a copy of the statement. (8) In exercising, or deciding whether to exercise, its power under section 66 in the case of any particular misconduct, the Authority must have regard to any statement of policy published under this section and in force at the time when the misconduct in question occurred. Notes Subs (1) see FSA Handbook ENF 13.

Statements of policy: procedure 70.—(1) Before issuing a statement under section 69, the Authority must publish a draft of the proposed statement in the way appearing to the Authority to be best calculated to bring it to the attention of the public. (2) The draft must be accompanied by notice that representations about the proposal may be made to the Authority within a specified time. (3) Before issuing the proposed statement, the Authority must have regard to any representations made to it in accordance with subsection (2).

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(4) If the Authority issues the proposed statement it must publish an account, in general terms, of— (a) the representations made to it in accordance with subsection (2); and (b) its response to them. (5) If the statement differs from the draft published under subsection (1) in a way which is, in the opinion of the Authority, significant, the Authority must (in addition to complying with subsection (4)) publish details of the difference. (6) The Authority may charge a reasonable fee for providing a person with a copy of a draft published under subsection (1). (7) This section also applies to a proposal to alter or replace a statement. Breach of statutory duty Actions for damages 71.—(1) A contravention of section 56(6) or 59(1) or (2) is actionable at the suit of a private person who suffers loss as a result of the contravention, subject to the defences and other incidents applying to actions for breach of statutory duty. (2) In prescribed cases, a contravention of that kind which would be actionable at the suit of a private person is actionable at the suit of a person who is not a private person, subject to the defences and other incidents applying to actions for breach of statutory duty. (3) ‘‘Private person’’ has such meaning as may be prescribed. PA RT V I

OFFICIAL LISTING

This Part is outside the scope of this work and consequently is not reproduced here. PA RT V I I

CONTROL OF BUSINESS TRANSFERS

Control of business transfers 104. No insurance business transfer scheme or banking business transfer scheme is to have effect unless an order has been made in relation to it under section 111(1). Notes Application to Lloyd’s: see SI 2001 No 3626.

Insurance business transfer schemes 105.—(1) A scheme is an insurance business transfer scheme if it— (a) satisfies one of the conditions set out in subsection (2); (b) results in the business transferred being carried on from an establishment of the transferee in an EEA State; and (c) is not an excluded scheme. (2) The conditions are that— (a) the whole or part of the business carried on in one or more member States by a UK authorised person who has permission to effect or carry out contracts of insurance (‘‘the authorised person concerned’’) is to be transferred to another body (‘‘the transferee’’); (b) the whole or part of the business, so far as it consists of reinsurance, carried on in the United Kingdom through an establishment there by an EEA firm qualifying for authorisation under Schedule 3 which has permission to effect or carry out contracts of insurance (‘‘the authorised person concerned’’) is to be transferred to another body (‘‘the transferee’’); (c) the whole or part of the business carried on in the United Kingdom by an authorised person who is neither a UK authorised person nor an EEA firm but who has permission to effect or carry out contracts of insurance (‘‘the authorised person concerned’’) is to be transferred to another body (‘‘the transferee’’).

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(3) A scheme is an excluded scheme for the purposes of this section if it falls within any of the following cases: CASE 1

Where the authorised person concerned is a friendly society. CASE 2

Where— (a) the authorised person concerned is a UK authorised person; (b) the business to be transferred under the scheme is business which consists of the effecting or carrying out of contracts of reinsurance in one or more EEA States other than the United Kingdom; and (c) the scheme has been approved by a court in an EEA State other than the United Kingdom or by the host state regulator. CASE 3

Where— (a) the authorised person concerned is a UK authorised person; (b) the business to be transferred under the scheme is carried on in one or more countries or territories (none of which is an EEA State) and does not include policies of insurance (other than reinsurance) against risks arising in an EEA State; and (c) the scheme has been approved by a court in a country or territory other than an EEA State or by the authority responsible for the supervision of that business in a country or territory in which it is carried on. CASE 4

Where the business to be transferred under the scheme is the whole of the business of the authorised person concerned and— (a) consists solely of the effecting or carrying out of contracts of reinsurance, or (b) all the policyholders are controllers of the firm or of firms within the same group as the firm which is the transferee, and, in either case, all of the policyholders who will be affected by the transfer have consented to it. (4) The parties to a scheme which falls within Case 2, 3 or 4 may apply to the court for an order sanctioning the scheme as if it were an insurance business transfer scheme. (5) Subsection (6) applies if the scheme involves a compromise or arrangement falling within section 427A of the Companies Act 1985 (or Article 420A of the Companies (Northern Ireland) Order 1986). (6) Sections 425 to 427 of that Act (or Articles 418 to 420 of that Order) have effect as modified by section 427A of that Act (or Article 420A of that Order) in relation to that compromise or arrangement. (7) But subsection (6) does not affect the operation of this Part in relation to the scheme. (8) ‘‘UK authorised person’’ means a body which is an authorised person and which— (a) is incorporated in the United Kingdom; or (b) is an unincorporated association formed under the law of any part of the United Kingdom. (9) ‘‘Establishment’’ means, in relation to a person, his head office or a branch of his. Notes Subs (9) on the meaning of ‘head office’, see FSA Handbook COND 2.2.3. Section 106 deals with banking business transfer schemes and is outside the scope of this work.

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Application for order sanctioning transfer scheme 107.—(1) An application may be made to the court for an order sanctioning an insurance business transfer scheme or a banking business transfer scheme. (2) An application may be made by— (a) the authorised person concerned; (b) the transferee; or (c) both. (3) The application must be made— (a) if the authorised person concerned and the transferee are registered or have their head offices in the same jurisdiction, to the court in that jurisdiction; (b) if the authorised person concerned and the transferee are registered or have their head offices in different jurisdictions, to the court in either jurisdiction; (c) if the transferee is not registered in the United Kingdom and does not have his head office there, to the court which has jurisdiction in relation to the authorised person concerned. (4) ‘‘Court’’ means— (a) the High Court; or (b) in Scotland, the Court of Session. Notes Subs (3)(a), (b) and (c) on the meaning of ‘head office’, see FSA Handbook COND 2.2.3. An applicant under section 107 of the Act for an order sanctioning an insurance business transfer scheme (‘‘the scheme’’) must comply with the formal requirements laid out in SI 2001 No 3625, including the publication of the scheme to policyholders directly and also in national newspapers, although any breach does not deprive the court of ultimate jurisdiction to sanction a scheme: Re Refuge Assurance [2000] All ER (D) 2219. Application to Lloyd’s of ss 107–114: see SI 2001 No 3626.

Requirements on applicants 108.—(1) The Treasury may by regulations impose requirements on applicants under section 107. (2) The court may not determine an application under that section if the applicant has failed to comply with a prescribed requirement. (3) The regulations may, in particular, include provision— (a) as to the persons to whom, and periods within which, notice of an application must be given; (b) enabling the court to waive a requirement of the regulations in prescribed circumstances. Scheme reports 109.—(1) An application under section 107 in respect of an insurance business transfer scheme must be accompanied by a report on the terms of the scheme (‘‘a scheme report’’). (2) A scheme report may be made only by a person— (a) appearing to the Authority to have the skills necessary to enable him to make a proper report; and (b) nominated or approved for the purpose by the Authority. (3) A scheme report must be made in a form approved by the Authority. Notes The expert preparing the scheme report must be independent: Re Norwich Union [2004] EWHC 2802 (Ch); Re Allied Dunbar Assurance plc [2005] EWHC 28 (Ch).

Right to participate in proceedings 110. On an application under section 107, the following are also entitled to be heard— (a) the Authority, and

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(b) any person (including an employee of the authorised person concerned or of the transferee) who alleges that he would be adversely affected by the carrying out of the scheme. Sanction of the court for business transfer schemes 111.—(1) This section sets out the conditions which must be satisfied before the court may make an order under this section sanctioning an insurance business transfer scheme or a banking business transfer scheme. (2) The court must be satisfied that— (a) the appropriate certificates have been obtained (as to which see Parts I and II of Schedule 12); (b) the transferee has the authorisation required (if any) to enable the business, or part, which is to be transferred to be carried on in the place to which it is to be transferred (or will have it before the scheme takes effect). (3) The court must consider that, in all the circumstances of the case, it is appropriate to sanction the scheme. Notes There are numerous authorities on the operation of the judicial discretion to sanction a transfer of insurance business. The effect of the authorities was summarised in Re Allied Dunbar Assurance plc [2005] EWHC 28 (Ch). In general, the court is to take account of the commercial judgment underlying the transfer, and the scheme report under s 109 is to be given particular weight unless it is shown to have been based on an error or the expert has gone beyond his reporting functions (see Re Axa Equity and Law [2001] 2 BCLC 447; Re Eagle Star Insurance Co Ltd [2005] EWHC 1850 (Ch)). Although the court is to be vigilant to ensure that policyholders and creditors are not adversely affected by the scheme the fact that there are such adverse effects is not fatal to the grant of a sanction as long as it is fair overall. See also: Re Eagle Star Insurance Co Ltd [2006] EWHC 1850 (Ch); Re Pearl Assurance (Unit Linked Pensions) Ltd [2006] EWHC 2291 (Ch); Re Alba Life Ltd [2006] EWHC 3507 (Ch); Re Equitable Life Assurance Society, Re Canada Life Ltd 14 February 2007, unreported.

Effect of order sanctioning business transfer scheme 112.—(1) If the court makes an order under section 111(1), it may by that or any subsequent order make such provision (if any) as it thinks fit— (a) for the transfer to the transferee of the whole or any part of the undertaking concerned and of any property or liabilities of the authorised person concerned; (b) for the allotment or appropriation by the transferee of any shares, debentures, policies or other similar interests in the transferee which under the scheme are to be allotted or appropriated to or for any other person; (c) for the continuation by (or against) the transferee of any pending legal proceedings by (or against) the authorised person concerned; (d) with respect to such incidental, consequential and supplementary matters as are, in its opinion, necessary to secure that the scheme is fully and effectively carried out. (2) An order under subsection (1)(a) may— (a) transfer property or liabilities whether or not the authorised person concerned otherwise has the capacity to effect the transfer in question; (b) make provision in relation to property which was held by the authorised person concerned as trustee; (c) make provision as to future or contingent rights or liabilities of the authorised person concerned, including provision as to the construction of instruments (including wills) under which such rights or liabilities may arise; (d) make provision as to the consequences of the transfer in relation to any occupational pension scheme (within the meaning of section 150(5) of the Finance Act 2004) operated by or on behalf of the authorised person concerned. (3) If an order under subsection (1) makes provision for the transfer of property or liabilities— (a) the property is transferred to and vests in, and (b) the liabilities are transferred to and become liabilities of,

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the transferee as a result of the order. (4) But if any property or liability included in the order is governed by the law of any country or territory outside the United Kingdom, the order may require the authorised person concerned, if the transferee so requires, to take all necessary steps for securing that the transfer to the transferee of the property or liability is fully effective under the law of that country or territory. (5) Property transferred as the result of an order under subsection (1) may, if the court so directs, vest in the transferee free from any charge which is (as a result of the scheme) to cease to have effect. (6) An order under subsection (1) which makes provision for the transfer of property is to be treated as an instrument of transfer for the purposes of the provisions mentioned in subsection (7) and any other enactment requiring the delivery of an instrument of transfer for the registration of property. (7) The provisions are— (a) section 183(1) of the Companies Act 1985; (b) Article 193(1) and (2) of the Companies (Northern Ireland) Order 1986. (8) If the court makes an order under section 111(1) in relation to an insurance business transfer scheme, it may by that or any subsequent order make such provision (if any) as it thinks fit— (a) for dealing with the interests of any person who, within such time and in such manner as the court may direct, objects to the scheme; (b) for the dissolution, without winding up, of the authorised person concerned; (c) for the reduction, on such terms and subject to such conditions (if any) as it thinks fit, of the benefits payable under— (i) any description of policy, or (ii) policies generally, entered into by the authorised person concerned and transferred as a result of the scheme. (9) If, in the case of an insurance business transfer scheme, the authorised person concerned is not an EEA firm, it is immaterial for the purposes of subsection (1)(a), (c) or (d) or subsection (2), (3) or (4) that the law applicable to any of the contracts of insurance included in the transfer is the law of an EEA State other than the United Kingdom. (10) The transferee must, if an insurance or banking business transfer scheme is sanctioned by the court, deposit two office copies of the order made under subsection (1) with the Authority within 10 days of the making of the order. (11) But the Authority may extend that period. (12) ‘‘Property’’ includes property, rights and powers of any description. (13) ‘‘Liabilities’’ includes duties. (14) ‘‘Shares’’ and ‘‘debentures’’ have the same meaning as in— (a) the Companies Act 1985; or (b) in Northern Ireland, the Companies (Northern Ireland) Order 1986. (15) ‘‘Charge’’ includes a mortgage (or, in Scotland, a security over property). Notes Subs (2)(d) amended by SI 2006 No 745 to refer to occupational pension schemes. A transfer of business carries with it a transfer of the insurers’ outwards reinsurance: WASA International (UK) Insurance Co Ltd v. WASA International Insurance Co Ltd [2002] EWHC 2698 (Ch).

Appointment of actuary in relation to reduction of benefits 113.—(1) This section applies if an order has been made under section 111(1). (2) The court making the order may, on the application of the Authority, appoint an independent actuary— (a) to investigate the business transferred under the scheme; and (b) to report to the Authority on any reduction in the benefits payable under policies entered into by the authorised person concerned that, in the opinion of the actuary, ought to be made.

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Rights of certain policyholder 114.—(1) This section applies in relation to an insurance business transfer scheme if— (a) the authorised person concerned is an authorised person other than an EEA firm qualifying for authorisation under Schedule 3; (b) the court has made an order under section 111 in relation to the scheme; and (c) an EEA State other than the United Kingdom is, as regards any policy included in the transfer which evidences a contract of insurance, the State of the commitment or the EEA State in which the risk is situated (‘‘the EEA State concerned’’). (2) The court must direct that notice of the making of the order, or the execution of any instrument, giving effect to the transfer must be published by the transferee in the EEA State concerned. (3) A notice under subsection (2) must specify such period as the court may direct as the period during which the policyholder may exercise any right which he has to cancel the policy. (4) The order or instrument mentioned in subsection (2) does not bind the policyholder if— (a) the notice required under that subsection is not published; or (b) the policyholder cancels the policy during the period specified in the notice given under that subsection. (5) The law of the EEA State concerned governs— (a) whether the policyholder has a right to cancel the policy; and (b) the conditions, if any, subject to which any such right may be exercised. (6) Paragraph 6 of Schedule 12 applies for the purposes of this section as it applies for the purposes of that Schedule. Notes Subs (1)(c) meaning of contract of insurance—see SI 2001 No 544 Reg 3(1) and FSA Handbook SUP App 3.10.3.

Business transfers outside the United Kingdom Certificates for purposes of insurance business transfers overseas 115. Part III of Schedule 12 makes provision about certificates which the Authority may issue in relation to insurance business transfers taking place outside the United Kingdom. Effect of insurance business transfers authorised in other EEA States 116.—(1) This section applies if, as a result of an authorised transfer, an EEA firm falling within paragraph 5(d) of Schedule 3 transfers to another body all its rights and obligations under any UK policies. (2) This section also applies if, as a result of an authorised transfer, a company authorised in an EEA State other than the United Kingdom under Article 51 of the life assurance consolidation directive, or Article 23 of the first non-life insurance directive, transfers to another body all its rights and obligations under any UK policies. (3) If appropriate notice of the execution of an instrument giving effect to the transfer is published, the instrument has the effect in law— (a) of transferring to the transferee all the transferor’s rights and obligations under the UK policies to which the instrument applies, and (b) if the instrument so provides, of securing the continuation by or against the transferee of any legal proceedings by or against the transferor which relate to those rights and obligations. (4) No agreement or consent is required before subsection (3) has the effects mentioned. (5) ‘‘Authorised transfer’’ means— (a) in subsection (1), a transfer authorised in the home State of the EEA firm in accordance with— (i) Article 14 of the life assurance consolidation directive; or (ii) Article 12 of the third non-life directive; and

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(b) in subsection (2), a transfer authorised in an EEA State other than the United Kingdom in accordance with— (i) Article 53 of the life assurance consolidation directive; or (ii) Article 28a of the first non-life directive. (6) ‘‘UK policy’’ means a policy evidencing a contract of insurance (other than a contract of reinsurance) to which the applicable law is the law of any part of the United Kingdom. (7) ‘‘Appropriate notice’’ means— (a) if the UK policy evidences a contract of insurance in relation to which an EEA State other than the United Kingdom is the State of the commitment, notice given in accordance with the law of that State; (b) if the UK policy evidences a contract of insurance where the risk is situated in an EEA State other than the United Kingdom, notice given in accordance with the law of that EEA State; (c) in any other case, notice given in accordance with the applicable law. (8) Paragraph 6 of Schedule 12 applies for the purposes of this section as it applies for the purposes of that Schedule. Notes Subs (2) amended by SI 2004 No 3379 to refer to the Consolidated Life (2002/83/EC). Subs 5(a)(i) amended by SI 2004 No 3379 to refer to the Consolidated Life (2002/83/EC). Subs 5(b)(i) amended by SI 2004 No 3379 to refer to the Consolidated Life (2002/83/EC). Subs (6) meaning of contract of insurance—see SI 2001 No 544 Reg 3(1) and FSA 3.10.3. Subs (7) meaning of contract of insurance—see SI 2001 No 544 Reg 3(1) and FSA 3.10.3.

Insurance Directive Insurance Directive Insurance Directive Handbook SUP App Handbook SUP App

Modifications Power to modify this Part 117. The Treasury may by regulations— (a) provide for prescribed provisions of this Part to have effect in relation to prescribed cases with such modifications as may be prescribed; (b) make such amendments to any provision of this Part as they consider appropriate for the more effective operation of that or any other provision of this Part. PA RT V I I I

P E N A LT I E S F O R M A R K E T A B U S E

This Part is outside the scope of this work and consequently is not reproduced here. PA RT I X

HEARINGS AND APPEALS

The Financial Services and Markets Tribunal 132.—(1) For the purposes of this Act, there is to be a tribunal known as the Financial Services and Markets Tribunal (but referred to in this Act as ‘‘the Tribunal’’). (2) The Tribunal is to have the functions conferred on it by or under this Act. (3) The Lord Chancellor may by rules make such provision as appears to him to be necessary or expedient in respect of the conduct of proceedings before the Tribunal. (4) Schedule 13 is to have effect as respects the Tribunal and its proceedings (but does not limit the Lord Chancellor’s powers under this section). Proceedings: general provision 133.—(1) A reference to the Tribunal under this Act must be made before the end of— (a) the period of 28 days beginning with the date on which the decision notice or supervisory notice in question is given; or

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(b) such other period as may be specified in rules made under section 132. (2) Subject to rules made under section 132, the Tribunal may allow a reference to be made after the end of that period. (3) On a reference the Tribunal may consider any evidence relating to the subject-matter of the reference, whether or not it was available to the Authority at the material time. (4) On a reference the Tribunal must determine what (if any) is the appropriate action for the Authority to take in relation to the matter referred to it. (5) On determining a reference, the Tribunal must remit the matter to the Authority with such directions (if any) as the Tribunal considers appropriate for giving effect to its determination. (6) In determining a reference made as a result of a decision notice, the Tribunal may not direct the Authority to take action which the Authority would not, as a result of section 388(2), have had power to take when giving the decision notice. (7) In determining a reference made as a result of a supervisory notice, the Tribunal may not direct the Authority to take action which would have otherwise required the giving of a decision notice. (8) The Tribunal may, on determining a reference, make recommendations as to the Authority’s regulating provisions or its procedures. (9) The Authority must not take the action specified in a decision notice— (a) during the period within which the matter to which the decision notice relates may be referred to the Tribunal; and (b) if the matter is so referred, until the reference, and any appeal against the Tribunal’s determination, has been finally disposed of. (10) The Authority must act in accordance with the determination of, and any direction given by, the Tribunal. (11) An order of the Tribunal may be enforced— (a) as if it were an order of a county court; or (b) in Scotland, as if it were an order of the Court of Session. (12) ‘‘Supervisory notice’’ has the same meaning as in section 395.

Legal assistance before the Tribunal Legal assistance scheme 134.—(1) The Lord Chancellor may by regulations establish a scheme governing the provision of legal assistance in connection with proceedings before the Tribunal. (2) If the Lord Chancellor establishes a scheme under subsection (1), it must provide that a person is eligible for assistance only if— (a) he falls within subsection (3); and (b) he fulfils such other criteria (if any) as may be prescribed as a result of section 135(1)(d). (3) A person falls within this subsection if he is an individual who has referred a matter to the Tribunal under section 127(4). (4) In this Part of this Act ‘‘the legal assistance scheme’’ means any scheme in force under subsection (1). Provisions of the legal assistance scheme 135.—(1) The legal assistance scheme may, in particular, make provision as to— (a) the kinds of legal assistance that may be provided; (b) the persons by whom legal assistance may be provided; (c) the manner in which applications for legal assistance are to be made; (d) the criteria on which eligibility for legal assistance is to be determined; (e) the persons or bodies by whom applications are to be determined; (f) appeals against refusals of applications; (g) the revocation or variation of decisions; (h) its administration and the enforcement of its provisions.

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(2) Legal assistance under the legal assistance scheme may be provided subject to conditions or restrictions, including conditions as to the making of contributions by the person to whom it is provided. Funding of the legal assistance scheme 136.—(1) The Authority must pay to the Lord Chancellor such sums at such times as he may, from time to time, determine in respect of the anticipated or actual cost of legal assistance provided in connection with proceedings before the Tribunal under the legal assistance scheme. (2) In order to enable it to pay any sum which it is obliged to pay under subsection (1), the Authority must make rules requiring the payment to it by authorised persons or any class of authorised person of specified amounts or amounts calculated in a specified way. (3) Sums received by the Lord Chancellor under subsection (1) must be paid into the Consolidated Fund. (4) The Lord Chancellor must, out of money provided by Parliament fund the cost of legal assistance provided in connection with proceedings before the Tribunal under the legal assistance scheme. (5) Subsection (6) applies if, as respects a period determined by the Lord Chancellor, the amount paid to him under subsection (1) as respects that period exceeds the amount he has expended in that period under subsection (4). (6) The Lord Chancellor must— (a) repay, out of money provided by Parliament, the excess to the Authority; or (b) take the excess into account on the next occasion on which he makes a determination under subsection (1). (7) The Authority must make provision for any sum repaid to it under subsection (6)(a)— (a) to be distributed among— (i) the authorised persons on whom a levy was imposed in the period in question as a result of rules made under subsection (2); or (ii) such of those persons as it may determine; (b) to be applied in order to reduce any amounts which those persons, or such of them as it may determine, are or will be liable to pay to the Authority, whether under rules made under subsection (2) or otherwise; or (c) to be partly so distributed and partly so applied. (8) If the Authority considers that it is not practicable to deal with any part of a sum repaid to it under subsection (6)(a) in accordance with provision made by it as a result of subsection (7), it may, with the consent the Lord Chancellor, apply or dispose of that part of that sum in such manner as it considers appropriate. (9) ‘‘Specified’’ means specified in the rules. Appeals Appeal on a point of law 137.—(1) A party to a reference to the Tribunal may with permission appeal— (a) to the Court of Appeal, or (b) in Scotland, to the Court of Session, on a point of law arising from a decision of the Tribunal disposing of the reference. (2) ‘‘Permission’’ means permission given by the Tribunal or by the Court of Appeal or (in Scotland) the Court of Session. (3) If, on an appeal under subsection (1), the court considers that the decision of the Tribunal was wrong in law, it may— (a) remit the matter to the Tribunal for rehearing and determination by it; or (b) itself make a determination. (4) An appeal may not be brought from a decision of the Court of Appeal under subsection (3) except with the leave of— (a) the Court of Appeal; or

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(b) the House of Lords. [(b) the Supreme Court] (5) An appeal lies, with the leave of the Court of Session or the House of Lords [Supreme Court], from any decision of the Court of Session under this section, and such leave may be given on such terms as to costs, expenses or otherwise as the Court of Session or the House of Lords [Supreme Court] may determine. (6) Rules made under section 132 may make provision for regulating or prescribing any matters incidental to or consequential on an appeal under this section. Notes Subs (4)(b) the subsection will be amended to refer to the Supreme Court upon the entry into force of the Constitutional Reform Act 2005, Schedule 9, paragraph 69. Subs (5) the subsection will be amended to refer to the Supreme Court upon the entry into force of the Constitutional Reform Act 2005, Schedule 9, paragraph 69.

PA RT X

RULES AND GUIDANCE

Chapter I

Rule-making Powers

General rule-making power 138.—(1) The Authority may make such rules applying to authorised persons— (a) with respect to the carrying on by them of regulated activities, or (b) with respect to the carrying on by them of activities which are not regulated activities, as appear to it to be necessary or expedient for the purpose of protecting the interests of consumers. (1A) The Authority may also make such rules applying to authorised persons who are investment firms or credit institutions, with respect to the provision by them of a relevant ancillary service, as appear to the Authority to be necessary or expedient for the purpose of protecting the interests of consumers. (1B) ‘‘Credit institution’’ means— (a) a credit institution authorised under the banking consolidation directive, or (b) an institution which would satisfy the requirements for authorisation as a credit institution under that directive if it had its registered office (or if it does not have a registered office, its head office) in an EEA State. (1C) ‘‘Relevant ancillary service’’ means any service of a kind mentioned in Section B of Annex I to the markets in financial instruments directive the provision of which does not involve the carrying on of a regulated activity. (2) Rules made under this section are referred to in this Act as the Authority’s general rules. (3) The Authority’s power to make general rules is not limited by any other power which it has to make regulating provisions. (4) The Authority’s general rules may make provision applying to authorised persons even though there is no relationship between the authorised persons to whom the rules will apply and the persons whose interests will be protected by the rules. (5) General rules may contain requirements which take into account, in the case of an authorised person who is a member of a group, any activity of another member of the group. (6) General rules may not— (a) make provision prohibiting an EEA firm from carrying on, or holding itself out as carrying on, any activity which it has permission conferred by Part II of Schedule 3 to carry on in the United Kingdom; (b) make provision, as respects an EEA firm, about any matter responsibility for which is, under any of the single market directives, reserved to the firm’s home state regulator. (7) ‘‘Consumers’’ means persons—

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(a) who use, have used, or are or may be contemplating using, any of the services provided by— (i) authorised persons in carrying on regulated activities; (ia) authorised persons who are investment firms or credit institutions in providing a relevant ancillary service; or (ii) persons acting as appointed representatives; (b) who have rights or interests which are derived from, or are otherwise attributable to, the use of any such services by other persons; or (c) who have rights or interests which may be adversely affected by the use of any such services by persons acting on their behalf or in a fiduciary capacity in relation to them. (8) If an authorised person is carrying on a regulated activity in his capacity as a trustee, the persons who are, have been or may be beneficiaries of the trust are to be treated as persons who use, have used or are or may be contemplating using services provided by the authorised person in his carrying on of that activity. (9) For the purposes of subsection (7) a person who deals with an authorised person in the course of the authorised person’s carrying on of a regulated activity is to be treated as using services provided by the authorised person in carrying on those activities. Notes Subs (1A) inserted by SI 2006 No 2975. Subs (1B) inserted by SI 2006 No 2975. Subs (1C) inserted by SI 2006 No 2975. Subs (7)(a)(ia) inserted by SI 2006 No 2975. Implementation: see FSA Handbook PRIN (Schedule 4).

Miscellaneous ancillary matters 139.—(1) Rules relating to the handling of money held by an authorised person in specified circumstances (‘‘clients’ money’’) may— (a) make provision which results in that clients’ money being held on trust in accordance with the rules; (b) treat two or more accounts as a single account for specified purposes (which may include the distribution of money held in the accounts); (c) authorise the retention by the authorised person of interest accruing on the clients’ money; and (d) make provision as to the distribution of such interest which is not to be retained by him. (2) An institution with which an account is kept in pursuance of rules relating to the handling of clients’ money does not incur any liability as constructive trustee if money is wrongfully paid from the account, unless the institution permits the payment— (a) with knowledge that it is wrongful; or (b) having deliberately failed to make enquiries in circumstances in which a reasonable and honest person would have done so. (3) In the application of subsection (1) to Scotland, the reference to money being held on trust is to be read as a reference to its being held as agent for the person who is entitled to call for it to be paid over to him or to be paid on his direction or to have it otherwise credited to him. (4) Rules may— (a) confer rights on persons to rescind agreements with, or withdraw offers to, authorised persons within a specified period; and (b) make provision, in respect of authorised persons and persons exercising those rights, for the restitution of property and the making or recovery of payments where those rights are exercised. (5) ‘‘Rules’’ means general rules. (6) ‘‘Specified’’ means specified in the rules.

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Restriction on managers of certain collective investment schemes 140.—(1) The Authority may make rules prohibiting an authorised person who has permission to act as— (a) the manager of an authorised unit trust scheme, or (b) the management company of an authorised UCITS open-ended investment company, from carrying on a specified activity. (2) Such rules may specify an activity which is not a regulated activity. (3) In this section— (a) ‘‘authorised UCITS open-ended investment company’’ means an authorised openended investment company to which the UCITS directive applies; and (b) ‘‘management company’’ has the meaning given by Article 1a.2 of the UCITS directive. Notes Side note amended by SI 2003 No 2066. Subs (1) amended by SI 2003 No 2066. Subs (3) inserted by SI 2003 No 2066.

Insurance business rules 141.—(1) The Authority may make rules prohibiting an authorised person who has permission to effect or carry out contracts of insurance from carrying on a specified activity. (2) Such rules may specify an activity which is not a regulated activity. (3) The Authority may make rules in relation to contracts entered into by an authorised person in the course of carrying on business which consists of the effecting or carrying out of contracts of long-term insurance. (4) Such rules may, in particular— (a) restrict the descriptions of property or indices of the value of property by reference to which the benefits under such contracts may be determined; (b) make provision, in the interests of the protection of policyholders, for the substitution of one description of property, or index of value, by reference to which the benefits under a contract are to be determined for another such description of property or index. (5) Rules made under this section are referred to in this Act as insurance business rules. Notes The Rules referred to in this section are the FSA Handbook, Insurance: Conduct of Business (ICOB).

Insurance business: regulations supplementing Authority’s rules 142.—(1) The Treasury may make regulations for the purpose of preventing a person who is not an authorised person but who— (a) is a parent undertaking of an authorised person who has permission to effect or carry out contracts of insurance, and (b) falls within a prescribed class, from doing anything to lessen the effectiveness of asset identification rules. (2) ‘‘Asset identification rules’’ means rules made by the Authority which require an authorised person who has permission to effect or carry out contracts of insurance to identify assets which belong to him and which are maintained in respect of a particular aspect of his business. (3) The regulations may, in particular, include provision— (a) prohibiting the payment of dividends; (b) prohibiting the creation of charges; (c) making charges created in contravention of the regulations void. (4) The Treasury may by regulations provide that, in prescribed circumstances, charges created in contravention of asset identification rules are void.

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(5) A person who contravenes regulations under subsection (1) is guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale. (6) ‘‘Charges’’ includes mortgages (or in Scotland securities over property). Endorsement of codes etc. 143.—(1) The Authority may make rules (‘‘endorsing rules’’)— (a) endorsing the City Code on Takeovers and Mergers issued by the Panel on Takeovers and Mergers; (b) endorsing the Rules Governing Substantial Acquisitions of Shares issued by the Panel. (1A) The Authority may not make endorsing rules in respect of provisions of that Code that are given effect by regulation 3 of the Takeovers Directive (Interim Implementation) Regulations 2006. (2) Endorsement may be— (a) as respects all authorised persons; or (b) only as respects a specified kind of authorised person. (3) At any time when endorsing rules are in force, and if asked to do so by the Panel, the Authority may exercise its powers under Part IV or section 66 as if failure to comply with an endorsed provision was a ground entitling the Authority to exercise those powers. (4) At any time when endorsing rules are in force and if asked to do so by the Panel, the Authority may exercise its powers under Part XIII, XIV or XXV as if the endorsed provisions were rules applying to the persons in respect of whom they are endorsed. (5) For the purposes of subsections (3) and (4), a failure to comply with a requirement imposed, or ruling given, under an endorsed provision is to be treated as a failure to comply with the endorsed provision under which that requirement was imposed or ruling was given. (6) If endorsed provisions are altered, subsections (3) and (4) apply to them as altered, but only if before the alteration the Authority has notified the Panel (and has not withdrawn its notification) that it is satisfied with the Panel’s consultation procedures. (7) ‘‘Consultation procedures’’ means procedures designed to provide an opportunity for persons likely to be affected by alterations to those provisions to make representations about proposed alterations to any of those provisions. (8) Subsections (1), (2)(d), (4), (5), (6)(a) and (12) of section 155 apply (with the necessary modifications) to a proposal to give notification of the kind mentioned in subsection (6) as they apply to a proposal to make endorsing rules. (9) This section applies in relation to particular provisions of the code or rules mentioned in subsection (1) as it applies to the code or the rules. Notes Section 143 will be repealed when the remainder of Schedule 16 to the Companies Act 2006 enters into force. Subs (1A) inserted by SI 2006 No 1183. Notes Sections 144, 145, 146, 147 omitted.

Modification or waiver Modification or waiver of rules 148.—(1) This section applies in relation to the following— (a) auditors and actuaries rules; (b) control of information rules; (c) financial promotion rules; (d) general rules; (e) insurance business rules; (f) money laundering rules; and (g) price stabilising rules.

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(2) The Authority may, on the application or with the consent of an authorised person, direct that all or any of the rules to which this section applies— (a) are not to apply to the authorised person; or (b) are to apply to him with such modifications as may be specified in the direction. (3) An application must be made in such manner as the Authority may direct. (4) The Authority may not give a direction unless it is satisfied that— (a) compliance by the authorised person with the rules, or with the rules as unmodified, would be unduly burdensome or would not achieve the purpose for which the rules were made; and (b) the direction would not result in undue risk to persons whose interests the rules are intended to protect. (5) A direction may be given subject to conditions. (6) Unless it is satisfied that it is inappropriate or unnecessary to do so, a direction must be published by the Authority in such a way as it thinks most suitable for bringing the direction to the attention of— (a) those likely to be affected by it; and (b) others who may be likely to make an application for a similar direction. (7) In deciding whether it is satisfied as mentioned in subsection (6), the Authority must— (a) take into account whether the direction relates to a rule contravention of which is actionable in accordance with section 150; (b) consider whether its publication would prejudice, to an unreasonable degree, the commercial interests of the authorised person concerned or any other member of his immediate group; and (c) consider whether its publication would be contrary to an international obligation of the United Kingdom. (8) For the purposes of paragraphs (b) and (c) of subsection (7), the Authority must consider whether it would be possible to publish the direction without either of the consequences mentioned in those paragraphs by publishing it without disclosing the identity of the authorised person concerned. (9) The Authority may— (a) revoke a direction; or (b) vary it on the application, or with the consent, of the authorised person to whom it relates. (10) ‘‘Direction’’ means a direction under subsection (2). (11) ‘‘Immediate group’’, in relation to an authorised person (‘‘A’’), means— (a) A; (b) a parent undertaking of A; (c) a subsidiary undertaking of A; (d) a subsidiary undertaking of a parent undertaking of A; (e) a parent undertaking of a subsidiary undertaking of A. Notes Implementation: FSA Handbook SUP 8 waiver and modification of rules. In relation to Financial Conglomerates, see the Financial Conglomerates and Other Financial Groups Regulations 2004, SI 2004 No 1862, reg 4. FSA Handbook PRIN Schedule 6: The rules in PRIN can be waived by the FSA under s 148 of the Act.

Contravention of rules Evidential provisions 149.—(1) If a particular rule so provides, contravention of the rule does not give rise to any of the consequences provided for by other provisions of this Act. (2) A rule which so provides must also provide— (a) that contravention may be relied on as tending to establish contravention of such other rule as may be specified; or

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(b) that compliance may be relied on as tending to establish compliance with such other rule as may be specified. (3) A rule may include the provision mentioned in subsection (1) only if the Authority considers that it is appropriate for it also to include the provision required by subsection (2).

Actions for damages 150.—(1) A contravention by an authorised person of a rule is actionable at the suit of a private person who suffers loss as a result of the contravention, subject to the defences and other incidents applying to actions for breach of statutory duty. (2) If rules so provide, subsection (1) does not apply to contravention of a specified provision of those rules. (3) In prescribed cases, a contravention of a rule which would be actionable at the suit of a private person is actionable at the suit of a person who is not a private person, subject to the defences and other incidents applying to actions for breach of statutory duty. (4) In subsections (1) and (3) ‘‘rule’’ does not include— (a) Part 6 rules; or (b) a rule requiring an authorised person to have or maintain financial resources. (5) ‘‘Private person’’ has such meaning as may be prescribed. Notes Subs 4(a) modified by SI 2005 No 381 Reg 6. Implementation: see FSA Handbook PRIN 3.4 and Schedule 5.

Limits on effect of contravening rules 151.—(1) A person is not guilty of an offence by reason of a contravention of a rule made by the Authority. (2) No such contravention makes any transaction void or unenforceable.

Procedural provisions Notification of rules to the Treasury 152.—(1) If the Authority makes any rules, it must give a copy to the Treasury without delay. (2) If the Authority alters or revokes any rules, it must give written notice to the Treasury without delay. (3) Notice of an alteration must include details of the alteration.

Rule-making instruments 153.—(1) Any power conferred on the Authority to make rules is exercisable in writing. (2) An instrument by which rules are made by the Authority (‘‘a rule-making instrument’’) must specify the provision under which the rules are made. (3) To the extent to which a rule-making instrument does not comply with subsection (2), it is void. (4) A rule-making instrument must be published by the Authority in the way appearing to the Authority to be best calculated to bring it to the attention of the public. (5) The Authority may charge a reasonable fee for providing a person with a copy of a rulemaking instrument. (6) A person is not to be taken to have contravened any rule made by the Authority if he shows that at the time of the alleged contravention the rule-making instrument concerned had not been made available in accordance with this section.

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Verification of rules 154.—(1) The production of a printed copy of a rule-making instrument purporting to be made by the Authority— (a) on which is endorsed a certificate signed by a member of the Authority’s staff authorised by it for that purpose, and (b) which contains the required statements, is evidence (or in Scotland sufficient evidence) of the facts stated in the certificate. (2) The required statements are— (a) that the instrument was made by the Authority; (b) that the copy is a true copy of the instrument; and (c) that on a specified date the instrument was made available to the public in accordance with section 153(4). (3) A certificate purporting to be signed as mentioned in subsection (1) is to be taken to have been properly signed unless the contrary is shown. (4) A person who wishes in any legal proceedings to rely on a rule-making instrument may require the Authority to endorse a copy of the instrument with a certificate of the kind mentioned in subsection (1). Consultation 155.—(1) If the Authority proposes to make any rules, it must publish a draft of the proposed rules in the way appearing to it to be best calculated to bring them to the attention of the public. (2) The draft must be accompanied by— (a) a cost benefit analysis; (b) an explanation of the purpose of the proposed rules; (c) an explanation of the Authority’s reasons for believing that making the proposed rules is compatible with its general duties under section 2; and (d) notice that representations about the proposals may be made to the Authority within a specified time. (3) In the case of a proposal to make rules under a provision mentioned in subsection (9), the draft must also be accompanied by details of the expected expenditure by reference to which the proposal is made. (4) Before making the proposed rules, the Authority must have regard to any representations made to it in accordance with subsection (2)(d). (5) If the Authority makes the proposed rules, it must publish an account, in general terms, of— (a) the representations made to it in accordance with subsection (2)(d); and (b) its response to them. (6) If the rules differ from the draft published under subsection (1) in a way which is, in the opinion of the Authority, significant— (a) the Authority must (in addition to complying with subsection (5)) publish details of the difference; and (b) those details must be accompanied by a cost benefit analysis. (7) Subsections (1) to (6) do not apply if the Authority considers that the delay involved in complying with them would be prejudicial to the interests of consumers. (8) Neither subsection (2)(a) nor subsection (6)(b) applies if the Authority considers— (a) that, making the appropriate comparison, there will be no increase in costs; or (b) that, making that comparison, there will be an increase in costs but the increase will be of minimal significance. (9) Neither subsection (2)(a) nor subsection (6)(b) requires a cost benefit analysis to be carried out in relation to rules made under— (a) section 136(2); (b) subsection (1) of section 213 as a result of subsection (4) of that section; (c) section 234; (d) paragraph 17 of Schedule 1. (10) ‘‘Cost benefit analysis’’ means an estimate of the costs together with an analysis of the benefits that will arise—

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(a) if the proposed rules are made; or (b) if subsection (6) applies, from the rules that have been made. (11) ‘‘The appropriate comparison’’ means— (a) in relation to subsection (2)(a), a comparison between the overall position if the rules are made and the overall position if they are not made; (b) in relation to subsection (6)(b), a comparison between the overall position after the making of the rules and the overall position before they were made. (12) The Authority may charge a reasonable fee for providing a person with a copy of a draft published under subsection (1). General supplementary powers 156.—(1) Rules made by the Authority may make different provision for different cases and may, in particular, make different provision in respect of different descriptions of authorised person, activity or investment. (2) Rules made by the Authority may contain such incidental, supplemental, consequential and transitional provision as the Authority considers appropriate. Notes Implementation: see FSA Handbook PRIN (Schedule 4).

Chapter II

Guidance

Guidance 157.—(1) The Authority may give guidance consisting of such information and advice as it considers appropriate— (a) with respect to the operation of this Act and of any rules made under it; (b) with respect to any matters relating to functions of the Authority; (c) for the purpose of meeting the regulatory objectives; (d) with respect to any other matters about which it appears to the Authority to be desirable to give information or advice. (2) The Authority may give financial or other assistance to persons giving information or advice of a kind which the Authority could give under this section. (3) If the Authority proposes to give guidance to regulated persons generally, or to a class of regulated person, in relation to rules to which those persons are subject, subsections (1), (2) and (4) to (10) of section 155 apply to the proposed guidance as they apply to proposed rules. (4) The Authority may— (a) publish its guidance; (b) offer copies of its published guidance for sale at a reasonable price; and (c) if it gives guidance in response to a request made by any person, make a reasonable charge for that guidance. (5) In this Chapter (except in section 158A), references to guidance given by the Authority include references to any recommendation made by the Authority to persons generally, to regulated persons generally or to any class of regulated person. (6) ‘‘Regulated person’’ means any— (a) authorised person; (b) person who is otherwise subject to rules made by the Authority. Notes Subs (5) the words in brackets referring to s 158A inserted by SI 2006 No 2975. Implementation: see FSA Handbook PRIN (Schedule 4).

Notification of guidance to the Treasury 158.—(1) On giving any general guidance, the Authority must give the Treasury a copy of the guidance without delay.

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(2) If the Authority alters any of its general guidance, it must give written notice to the Treasury without delay. (3) The notice must include details of the alteration. (4) If the Authority revokes any of its general guidance, it must give written notice to the Treasury without delay. (5) ‘‘General guidance’’ means guidance given by the Authority under section 157 which is— (a) given to persons generally, to regulated persons generally or to a class of regulated person; (b) intended to have continuing effect; and (c) given in writing or other legible form. (6) ‘‘Regulated person’’ has the same meaning as in section 157. Guidance on outsourcing by investment firms and credit institutions 158A.—(1) Without prejudice to the generality of section 157, the Authority must give guidance in the terms required by Article 15(3) of Commission Directive 2006/73/EC of 10 August 2006 (requirement to publish statement of policy on outsourcing of investment services by investment firms and credit institutions). (2) Subsections (1), (2)(b) and (d), (4), (5), (6)(a) and (7) of section 155 apply to guidance which the Authority is required to give under this section as they apply to proposed rules. (3) The Authority must publish its guidance under this section. (4) The Authority may offer copies of the published guidance for sale at a reasonable price. (5) Subsections (1) to (4) of section 158 apply to guidance under this section as they apply to general guidance (as defined by section 158(5)). Notes Section 158A inserted by SI 2006 No 2975. Notes Sections 159, 160, 161, 162, 163 and 164 omitted.

PA RT X I

I N F O R M AT I O N G AT H E R I N G A N D I N V E S T I G AT I O N S

Powers to gather information Authority’s power to require information 165.—(1) The Authority may, by notice in writing given to an authorised person, require him— (a) to provide specified information or information of a specified description; or (b) to produce specified documents or documents of a specified description. (2) The information or documents must be provided or produced— (a) before the end of such reasonable period as may be specified; and (b) at such place as may be specified. (3) An officer who has written authorisation from the Authority to do so may require an authorised person without delay— (a) to provide the officer with specified information or information of a specified description; or (b) to produce to him specified documents or documents of a specified description. (4) This section applies only to information and documents reasonably required in connection with the exercise by the Authority of functions conferred on it by or under this Act. (5) The Authority may require any information provided under this section to be provided in such form as it may reasonably require. (6) The Authority may require—

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(a) any information provided, whether in a document or otherwise, to be verified in such manner, or (b) any document produced to be authenticated in such manner, as it may reasonably require. (7) The powers conferred by subsections (1) and (3) may also be exercised to impose requirements on— (a) a person who is connected with an authorised person; (b) an operator, trustee or depositary of a scheme recognised under section 270 or 272 who is not an authorised person; (c) a recognised investment exchange or recognised clearing house. (8) ‘‘Authorised person’’ includes a person who was at any time an authorised person but who has ceased to be an authorised person. (9) ‘‘Officer’’ means an officer of the Authority and includes a member of the Authority’s staff or an agent of the Authority. (10) ‘‘Specified’’ means— (a) in subsections (1) and (2), specified in the notice; and (b) in subsection (3), specified in the authorisation. (11) For the purposes of this section, a person is connected with an authorised person (‘‘A’’) if he is or has at any relevant time been— (a) a member of A’s group; (b) a controller of A; (c) any other member of a partnership of which A is a member; or (d) in relation to A, a person mentioned in Part I of Schedule 15. Reports by skilled persons 166.—(1) The Authority may, by notice in writing given to a person to whom subsection (2) applies, require him to provide the Authority with a report on any matter about which the Authority has required or could require the provision of information or production of documents under section 165. (2) This subsection applies to— (a) an authorised person (‘‘A’’), (b) any other member of A’s group, (c) a partnership of which A is a member, or (d) a person who has at any relevant time been a person falling within paragraph (a), (b) or (c), who is, or was at the relevant time, carrying on a business. (3) The Authority may require the report to be in such form as may be specified in the notice. (4) The person appointed to make a report required by subsection (1) must be a person— (a) nominated or approved by the Authority; and (b) appearing to the Authority to have the skills necessary to make a report on the matter concerned. (5) It is the duty of any person who is providing (or who at any time has provided) services to a person to whom subsection (2) applies in relation to a matter on which a report is required under subsection (1) to give a person appointed to provide such a report all such assistance as the appointed person may reasonably require. (6) The obligation imposed by subsection (5) is enforceable, on the application of the Authority, by an injunction or, in Scotland, by an order for specific performance under section 45 of the Court of Session Act 1988. Appointment of investigators Appointment of persons to carry out general investigations 167.—(1) If it appears to the Authority or the Secretary of State (‘‘the investigating authority’’) that there is good reason for doing so, the investigating authority may appoint one or more competent persons to conduct an investigation on its behalf into—

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(a) the nature, conduct or state of the business of a recognised investment exchange or an authorised person or of an appointed representative; (b) a particular aspect of that business; or (c) the ownership or control of a recognised investment exchange or an authorised person. (2) If a person appointed under subsection (1) thinks it necessary for the purposes of his investigation, he may also investigate the business of a person who is or has at any relevant time been— (a) a member of the group of which the person under investigation (‘‘A’’) is part; or (b) a partnership of which A is a member. (3) If a person appointed under subsection (1) decides to investigate the business of any person under subsection (2) he must give that person written notice of his decision. (4) The power conferred by this section may be exercised in relation to a former authorised person (or appointed representative) but only in relation to— (a) business carried on at any time when he was an authorised person (or appointed representative); or (b) the ownership or control of a former authorised person at any time when he was an authorised person. (5) ‘‘Business’’ includes any part of a business even if it does not consist of carrying on regulated activities. (6) References in subsection (1) to a recognised investment exchange do not include references to an overseas investment exchange (as defined by section 313(1)). Notes Subs (1)(a) reference to ‘‘recognised investment exchange’’ inserted by SI 2007 No 126. Subs (1)(c) reference to ‘‘recognised investment exchange’’ inserted by SI 2007 No 126. Subs (6) inserted by SI 2007 No 126.

Appointment of persons to carry out investigations in particular cases 168.—(1) Subsection (3) applies if it appears to an investigating authority that there are circumstances suggesting that— (a) a person may have contravened any regulation made under section 142; or (b) a person may be guilty of an offence under section 177, 191, 346 or 398(1) or under Schedule 4. (2) Subsection (3) also applies if it appears to an investigating authority that there are circumstances suggesting that— (a) an offence under section 24(1) or 397 or under Part V of the Criminal Justice Act 1993 may have been committed; (b) there may have been a breach of the general prohibition; (c) there may have been a contravention of section 21 or 238; or (d) market abuse may have taken place. (3) The investigating authority may appoint one or more competent persons to conduct an investigation on its behalf. (4) Subsection (5) applies if it appears to the Authority that there are circumstances suggesting that— (a) a person may have contravened section 20; (b) a person may be guilty of an offence under prescribed regulations relating to money laundering; (c) an authorised person may have contravened a rule made by the Authority; (d) an individual may not be a fit and proper person to perform functions in relation to a regulated activity carried on by an authorised or exempt person; (e) an individual may have performed or agreed to perform a function in breach of a prohibition order; (f) an authorised or exempt person may have failed to comply with section 56(6); (g) an authorised person may have failed to comply with section 59(1) or (2);

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(h) a person in relation to whom the Authority has given its approval under section 59 may not be a fit and proper person to perform the function to which that approval relates; (i) a person may be guilty of misconduct for the purposes of section 66; or (j) a person may have contravened any provision made by or under this Act for the purpose of implementing the markets in financial instruments directive or by any directly applicable Community regulation made under that directive. (5) The Authority may appoint one or more competent persons to conduct an investigation on its behalf. (6) ‘‘Investigating authority’’ means the Authority or the Secretary of State. Notes Subs (4)(b) see SI 2001 No 1819. Subs (4)(d) and (h) ‘fit and proper person’: FSA Handbook FIT. Subs (4)(j) inserted by SI 2007 No 126.

Assistance to overseas regulators Investigations etc. in support of overseas regulator 169.—(1) At the request of an overseas regulator, the Authority may— (a) exercise the power conferred by section 165; or (b) appoint one or more competent persons to investigate any matter. (2) An investigator has the same powers as an investigator appointed under section 168(3) (as a result of subsection (1) of that section). (3) If the request has been made by a competent authority in pursuance of any Community obligation the Authority must, in deciding whether or not to exercise its investigative power, consider whether its exercise is necessary to comply with any such obligation. (4) In deciding whether or not to exercise its investigative power, the Authority may take into account in particular— (a) whether in the country or territory of the overseas regulator concerned, corresponding assistance would be given to a United Kingdom regulatory authority; (b) whether the case concerns the breach of a law, or other requirement, which has no close parallel in the United Kingdom or involves the assertion of a jurisdiction not recognised by the United Kingdom; (c) the seriousness of the case and its importance to persons in the United Kingdom; (d) whether it is otherwise appropriate in the public interest to give the assistance sought. (5) The Authority may decide that it will not exercise its investigative power unless the overseas regulator undertakes to make such contribution towards the cost of its exercise as the Authority considers appropriate. (6) Subsections (4) and (5) do not apply if the Authority considers that the exercise of its investigative power is necessary to comply with a Community obligation. (7) If the Authority has appointed an investigator in response to a request from an overseas regulator, it may direct the investigator to permit a representative of that regulator to attend, and take part in, any interview conducted for the purposes of the investigation. (8) A direction under subsection (7) is not to be given unless the Authority is satisfied that any information obtained by an overseas regulator as a result of the interview will be subject to safeguards equivalent to those contained in Part XXIII. (9) The Authority must prepare a statement of its policy with respect to the conduct of interviews in relation to which a direction under subsection (7) has been given. (10) The statement requires the approval of the Treasury. (11) If the Treasury approve the statement, the Authority must publish it. (12) No direction may be given under subsection (7) before the statement has been published. (13) ‘‘Overseas regulator’’ has the same meaning as in section 195. (14) ‘‘Investigative power’’ means one of the powers mentioned in subsection (1). (15) ‘‘Investigator’’ means a person appointed under subsection (1)(b).

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Notes Subs (7) implementation: DEPP 7.

Conduct of investigations

Investigations: general 170.—(1) This section applies if an investigating authority appoints one or more competent persons (‘‘investigators’’) under section 167 or 168(3) or (5) to conduct an investigation on its behalf. (2) The investigating authority must give written notice of the appointment of an investigator to the person who is the subject of the investigation (‘‘the person under investigation’’). (3) Subsections (2) and (9) do not apply if— (a) the investigator is appointed as a result of section 168 (1) or (4) and the investigating authority believes that the notice required by subsection (2) or (9) would be likely to result in the investigation being frustrated; or (b) the investigator is appointed as a result of subsection (2) of section 168. (4) A notice under subsection (2) must— (a) specify the provisions under which, and as a result of which, the investigator was appointed; and (b) state the reason for his appointment. (5) Nothing prevents the investigating authority from appointing a person who is a member of its staff as an investigator. (6) An investigator must make a report of his investigation to the investigating authority. (7) The investigating authority may, by a direction to an investigator, control— (a) the scope of the investigation; (b) the period during which the investigation is to be conducted; (c) the conduct of the investigation; and (d) the reporting of the investigation. (8) A direction may, in particular— (a) confine the investigation to particular matters; (b) extend the investigation to additional matters; (c) require the investigator to discontinue the investigation or to take only such steps as are specified in the direction; (d) require the investigator to make such interim reports as are so specified. (9) If there is a change in the scope or conduct of the investigation and, in the opinion of the investigating authority, the person subject to investigation is likely to be significantly prejudiced by not being made aware of it, that person must be given written notice of the change. (10) ‘‘Investigating authority’’, in relation to an investigator, means— (a) the Authority, if the Authority appointed him; (b) the Secretary of State, if the Secretary of State appointed him. Powers of persons appointed under section 167 171.—(1) An investigator may require the person who is the subject of the investigation (‘‘the person under investigation’’) or any person connected with the person under investigation— (a) to attend before the investigator at a specified time and place and answer questions; or (b) otherwise to provide such information as the investigator may require. (2) An investigator may also require any person to produce at a specified time and place any specified documents or documents of a specified description. (3) A requirement under subsection (1) or (2) may be imposed only so far as the investigator concerned reasonably considers the question, provision of information or production of the document to be relevant to the purposes of the investigation. (3A) Where the investigation relates to a recognised investment exchange, an investigator has the additional powers conferred by sections 172 and 173 (and for this purpose references in those sections to an investigator are to be read accordingly).

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(4) For the purposes of this section and section 172, a person is connected with the person under investigation (‘‘A’’) if he is or has at any relevant time been— (a) a member of A’s group; (b) a controller of A; (c) a partnership of which A is a member; or (d) in relation to A, a person mentioned in Part I or II of Schedule 15. (5) ‘‘Investigator’’ means a person conducting an investigation under section 167. (6) ‘‘Specified’’ means specified in a notice in writing. (7) The reference in subsection (3A) to a recognised investment exchange does not include a reference to an overseas investment exchange (as defined by section 313(1)). Notes Subs (3A) inserted by SI 2007 No 126. Subs (7) inserted by SI 2007 No 126.

Additional power of persons appointed as a result of section 168(1) or (4) 172.—(1) An investigator has the powers conferred by section 171. (2) An investigator may also require a person who is neither the subject of the investigation (‘‘the person under investigation’’) nor a person connected with the person under investigation— (a) to attend before the investigator at a specified time and place and answer questions; or (b) otherwise to provide such information as the investigator may require for the purposes of the investigation. (3) A requirement may only be imposed under subsection (2) if the investigator is satisfied that the requirement is necessary or expedient for the purposes of the investigation. (4) ‘‘Investigator’’ means a person appointed as a result of subsection (1) or (4) of section 168. (5) ‘‘Specified’’ means specified in a notice in writing. Powers of persons appointed as a result of section 168(2) 173.—(1) Subsections (2) to (4) apply if an investigator considers that any person (‘‘A’’) is or may be able to give information which is or may be relevant to the investigation. (2) The investigator may require A— (a) to attend before him at a specified time and place and answer questions; or (b) otherwise to provide such information as he may require for the purposes of the investigation. (3) The investigator may also require A to produce at a specified time and place any specified documents or documents of a specified description which appear to the investigator to relate to any matter relevant to the investigation. (4) The investigator may also otherwise require A to give him all assistance in connection with the investigation which A is reasonably able to give. (5) ‘‘Investigator’’ means a person appointed under subsection (3) of section 168 (as a result of subsection (2) of that section). Admissibility of statements made to investigators 174.—(1) A statement made to an investigator by a person in compliance with an information requirement is admissible in evidence in any proceedings, so long as it also complies with any requirements governing the admissibility of evidence in the circumstances in question. (2) But in criminal proceedings in which that person is charged with an offence to which this subsection applies or in proceedings in relation to action to be taken against that person under section 123— (a) no evidence relating to the statement may be adduced, and (b) no question relating to it may be asked,

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by or on behalf of the prosecution or (as the case may be) the Authority, unless evidence relating to it is adduced, or a question relating to it is asked, in the proceedings by or on behalf of that person. (3) Subsection (2) applies to any offence other than one— (a) under section 177(4) or 398; (b) under section 5 of the Perjury Act 1911 (false statements made otherwise than on oath); (c) under section 44(2) of the Criminal Law (Consolidation)(Scotland) Act 1995 (false statements made otherwise than on oath); or (d) under Article 10 of the Perjury (Northern Ireland) Order 1979. (4) ‘‘Investigator’’ means a person appointed under section 167 or 168(3) or (5). (5) ‘‘Information requirement’’ means a requirement imposed by an investigator under section 171, 172, 173 or 175. Information and documents: supplemental provisions 175.—(1) If the Authority or an investigator has power under this Part to require a person to produce a document but it appears that the document is in the possession of a third person, that power may be exercised in relation to the third person. (2) If a document is produced in response to a requirement imposed under this Part, the person to whom it is produced may— (a) take copies or extracts from the document; or (b) require the person producing the document, or any relevant person, to provide an explanation of the document. (3) If a person who is required under this Part to produce a document fails to do so, the Authority or an investigator may require him to state, to the best of his knowledge and belief, where the document is. (4) A lawyer may be required under this Part to furnish the name and address of his client. (5) No person may be required under this Part to disclose information or produce a document in respect of which he owes an obligation of confidence by virtue of carrying on the business of banking unless— (a) he is the person under investigation or a member of that person’s group; (b) the person to whom the obligation of confidence is owed is the person under investigation or a member of that person’s group; (c) the person to whom the obligation of confidence is owed consents to the disclosure or production; or (d) the imposing on him of a requirement with respect to such information or document has been specifically authorised by the investigating authority. (6) If a person claims a lien on a document, its production under this Part does not affect the lien. (7) ‘‘Relevant person’’, in relation to a person who is required to produce a document, means a person who— (a) has been or is or is proposed to be a director or controller of that person; (b) has been or is an auditor of that person; (c) has been or is an actuary, accountant or lawyer appointed or instructed by that person; or (d) has been or is an employee of that person. (8) ‘‘Investigator’’ means a person appointed under section 167 or 168(3) or (5). Entry of premises under warrant 176.—(1) A justice of the peace may issue a warrant under this section if satisfied on information on oath given by or on behalf of the Secretary of State, the Authority or an investigator that there are reasonable grounds for believing that the first, second or third set of conditions is satisfied. (2) The first set of conditions is—

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(a) that a person on whom an information requirement has been imposed has failed (wholly or in part) to comply with it; and (b) that on the premises specified in the warrant— (i) there are documents which have been required; or (ii) there is information which has been required. (3) The second set of conditions is— (a) that the premises specified in the warrant are premises of an authorised person or an appointed representative; (b) that there are on the premises documents or information in relation to which an information requirement could be imposed; and (c) that if such a requirement were to be imposed— (i) it would not be complied with; or (ii) the documents or information to which it related would be removed, tampered with or destroyed. (4) The third set of conditions is— (a) that an offence mentioned in section 168 for which the maximum sentence on conviction on indictment is two years or more has been (or is being) committed by any person; (b) that there are on the premises specified in the warrant documents or information relevant to whether that offence has been (or is being) committed; (c) that an information requirement could be imposed in relation to those documents or information; and (d) that if such a requirement were to be imposed— (i) it would not be complied with; or (ii) the documents or information to which it related would be removed, tampered with or destroyed. (5) A warrant under this section shall authorise a constable— (a) to enter the premises specified in the warrant; (b) to search the premises and take possession of any documents or information appearing to be documents or information of a kind in respect of which a warrant under this section was issued (‘‘the relevant kind’’) or to take, in relation to any such documents or information, any other steps which may appear to be necessary for preserving them or preventing interference with them; (c) to take copies of, or extracts from, any documents or information appearing to be of the relevant kind; (d) to require any person on the premises to provide an explanation of any document or information appearing to be of the relevant kind or to state where it may be found; and (e) to use such force as may be reasonably necessary. (6) In England and Wales, sections 15(5) to (8) and section 16 of the Police and Criminal Evidence Act 1984 (execution of search warrants and safeguards) apply to warrants issued under this section. (7) In Northern Ireland, Articles 17(5) to (8) and 18 of the Police and Criminal Evidence (Northern Ireland) Order 1989 apply to warrants issued under this section. (8) Any document of which possession is taken under this section may be retained— (a) for a period of three months; or (b) if within that period proceedings to which the document is relevant are commenced against any person for any criminal offence, until the conclusion of those proceedings. (9) In the application of this section to Scotland— (a) for the references to a justice of the peace substitute references to a justice of the peace or a sheriff; and (b) for the references to information on oath substitute references to evidence on oath. (10) ‘‘Investigator’’ means a person appointed under section 167 or 168(3) or (5). (11) ‘‘Information requirement’’ means a requirement imposed— (a) by the Authority under section 87C, 87J, 165 or 175; or (b) by an investigator under section 171, 172, 173 or 175.

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Notes Subs (11)(a) references to sections 87C and 87J inserted by SI 2005 No 1433.

Offences Offences 177.—(1) If a person other than the investigator (‘‘the defaulter’’) fails to comply with a requirement imposed on him under this Part the person imposing the requirement may certify that fact in writing to the court. (2) If the court is satisfied that the defaulter failed without reasonable excuse to comply with the requirement, it may deal with the defaulter (and in the case of a body corporate, any director or officer) as if he were in contempt. (3) A person who knows or suspects that an investigation is being or is likely to be conducted under this Part is guilty of an offence if— (a) he falsifies, conceals, destroys or otherwise disposes of a document which he knows or suspects is or would be relevant to such an investigation, or (b) he causes or permits the falsification, concealment, destruction or disposal of such a document, unless he shows that he had no intention of concealing facts disclosed by the documents from the investigator. (4) A person who, in purported compliance with a requirement imposed on him under this Part— (a) provides information which he knows to be false or misleading in a material particular, or (b) recklessly provides information which is false or misleading in a material particular, is guilty of an offence. (5) A person guilty of an offence under subsection (3) or (4) is liable— (a) on summary conviction, to imprisonment for a term not exceeding six months or a fine not exceeding the statutory maximum, or both; (b) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine, or both. (6) Any person who intentionally obstructs the exercise of any rights conferred by a warrant under section 176 is guilty of an offence and liable on summary conviction to imprisonment for a term not exceeding three months or a fine not exceeding level 5 on the standard scale, or both. (7) ‘‘Court’’ means— (a) the High Court; (b) in Scotland, the Court of Session. PA RT X I I

CONTROL OVER AUTHORISED PERSONS

Notice of control Obligation to notify the Authority 178.—(1) If a step which a person proposes to take would result in his acquiring— (a) control over a UK authorised person, (b) an additional kind of control over a UK authorised person, or (c) an increase in a relevant kind of control which he already has over a UK authorised person, he must notify the Authority of his proposal. (2) A person who, without himself taking any such step, acquires any such control or additional or increased control must notify the Authority before the end of the period of 14 days beginning with the day on which he first becomes aware that he has acquired it. (3) A person who is under the duty to notify the Authority imposed by subsection (1) must also give notice to the Authority on acquiring, or increasing, the control in question. (4) In this Part ‘‘UK authorised person’’ means an authorised person who—

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(a) is a body incorporated in, or an unincorporated association formed under the law of, any part of the United Kingdom; and (b) is not a person authorised as a result of paragraph 1 of Schedule 5. (5) A notice under subsection (1) or (2) is referred to in this Part as ‘‘a notice of control’’. Notes Implementation: see s 192 and SI 2001 No 2638.

Acquiring, increasing and reducing control Acquiring control 179.—(1) For the purposes of this Part, a person (‘‘the acquirer’’) acquires control over a UK authorised person (‘‘A’’) on first falling within any of the cases in subsection (2). (2) The cases are where the acquirer— (a) holds 10% or more of the shares in A; (b) is able to exercise significant influence over the management of A by virtue of his shareholding in A; (c) holds 10% or more of the shares in a parent undertaking (‘‘P’’) of A; (d) is able to exercise significant influence over the management of P by virtue of his shareholding in P; (e) is entitled to exercise, or control the exercise of, 10% or more of the voting power in A; (f) is able to exercise significant influence over the management of A by virtue of his voting power in A; (g) is entitled to exercise, or control the exercise of, 10% or more of the voting power in P; or (h) is able to exercise significant influence over the management of P by virtue of his voting power in P. (3) In subsection (2) ‘‘the acquirer’’ means— (a) the acquirer; (b) any of the acquirer’s associates; or (c) the acquirer and any of his associates. (4) For the purposes of this Part, each of the following is to be regarded as a kind of control— (a) control arising as a result of the holding of shares in A; (b) control arising as a result of the holding of shares in P; (c) control arising as a result of the entitlement to exercise, or control the exercise of, voting power in A; (d) control arising as a result of the entitlement to exercise, or control the exercise of, voting power in P. (5) For the purposes of this section and sections 180 and 181, ‘‘associate’’, ‘‘shares’’ and ‘‘voting power’’ have the same meaning as in section 422. Increasing control 180.—(1) For the purposes of this Part, a controller of a person (‘‘A’’) who is a UK authorised person increases his control over A if— (a) the percentage of shares held by the controller in A increases by any of the steps mentioned in subsection (2); (b) the percentage of shares held by the controller in a parent undertaking (‘‘P’’) of A increases by any of the steps mentioned in subsection (2); (c) the percentage of voting power which the controller is entitled to exercise, or control the exercise of, in A increases by any of the steps mentioned in subsection (2); (d) the percentage of voting power which the controller is entitled to exercise, or control the exercise of, in P increases by any of the steps mentioned in subsection (2); or (e) the controller becomes a parent undertaking of A.

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(2) The steps are— (a) from below 10% to 10% or more but less than 20%; (b) from below 20% to 20% or more but less than 33%; (c) from below 33% to 33% or more but less than 50%; (d) from below 50% to 50% or more. (3) In paragraphs (a) to (d) of subsection (1) ‘‘the controller’’ means— (a) the controller; (b) any of the controller’s associates; or (c) the controller and any of his associates. (4) In the rest of this Part ‘‘acquiring control’’ or ‘‘having control’’ includes— (a) acquiring or having an additional kind of control; or (b) acquiring an increase in a relevant kind of control, or having increased control of a relevant kind. Reducing control 181.—(1) For the purposes of this Part, a controller of a person (‘‘A’’) who is a UK authorised person reduces his control over A if— (a) the percentage of shares held by the controller in A decreases by any of the steps mentioned in subsection (2); (b) the percentage of shares held by the controller in a parent undertaking (‘‘P’’) of A decreases by any of the steps mentioned in subsection (2), (c) the percentage of voting power which the controller is entitled to exercise, or control the exercise of, in A decreases by any of the steps mentioned in subsection (2), (d) the percentage of voting power which the controller is entitled to exercise, or control the exercise of, in P decreases by any of the steps mentioned in subsection (2), or (e) the controller ceases to be a parent undertaking of A, unless the controller ceases to have the kind of control concerned over A as a result. (2) The steps are— (a) from 50% or more to 33% or more but less than 50%; (b) from 33% or more to 20% or more but less than 33%; (c) from 20% or more to 10% or more but less than 20%; (d) from 10% or more to less than 10%. (3) In paragraphs (a) to (d) of subsection (1) ‘‘the controller’’ means— (a) the controller; (b) any of the controller’s associates; or (c) the controller and any of his associates. Acquiring or increasing control: procedure Notification 182.—(1) A notice of control must— (a) be given to the Authority in writing; and (b) include such information and be accompanied by such documents as the Authority may reasonably require. (2) The Authority may require the person giving a notice of control to provide such additional information or documents as it reasonably considers necessary in order to enable it to determine what action it is to take in response to the notice. (3) Different requirements may be imposed in different circumstances. Duty of Authority in relation to notice of control 183.—(1) The Authority must, before the end of the period of three months beginning with the date on which it receives a notice of control (‘‘the period for consideration’’), determine whether— (a) to approve of the person concerned having the control to which the notice relates; or (b) to serve a warning notice under subsection (3) or section 185(3).

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(2) Before doing so, the Authority must comply with such requirements as to consultation with competent authorities outside the United Kingdom as may be prescribed. (3) If the Authority proposes to give the person concerned a notice of objection under section 186(1), it must give him a warning notice. Notes Subs (1)(b) warning notices: interpretation, s 387; implementation FSA Handbook DEPP 2.2.

Approval of acquisition of control 184.—(1) If the Authority decides to approve of the person concerned having the control to which the notice relates it must notify that person of its approval in writing without delay. (2) If the Authority fails to comply with subsection (1) of section 183 it is to be treated as having given its approval and notified the person concerned at the end of the period fixed by that subsection. (3) The Authority’s approval remains effective only if the person to whom it relates acquires the control in question— (a) before the end of such period as may be specified in the notice; or (b) if no period is specified, before the end of the period of one year beginning with the date— (i) of the notice of approval; (ii) on which the Authority is treated as having given approval under subsection (2); or (iii) of a decision on a reference to the Tribunal which results in the person concerned receiving approval. Conditions attached to approval 185.—(1) The Authority’s approval under section 184 may be given unconditionally or subject to such conditions as the Authority considers appropriate. (2) In imposing any conditions, the Authority must have regard to its duty under section 41. (3) If the Authority proposes to impose conditions on a person it must give him a warning notice. (4) If the Authority decides to impose conditions on a person it must give him a decision notice. (5) A person who is subject to a condition imposed under this section may apply to the Authority— (a) for the condition to be varied; or (b) for the condition to be cancelled. (6) The Authority may, on its own initiative, cancel a condition imposed under this section. (7) If the Authority has given its approval to a person subject to a condition, he may refer to the Tribunal— (a) the imposition of the condition; or (b) the Authority’s decision to refuse an application made by him under subsection (5). Notes Subs (2): Implementation: FSA Handbook SUP 11.7.3 G, Acquisition or increase of control: procedures. Subs (3) warning notices: interpretation, s 387; implementation FSA Handbook DEPP 2.2.

Objection to acquisition of control 186.—(1) On considering a notice of control, the Authority may give a decision notice under this section to the person acquiring control (‘‘the acquirer’’) unless it is satisfied that the approval requirements are met. (2) The approval requirements are that— (a) the acquirer is a fit and proper person to have the control over the authorised person that he has or would have if he acquired the control in question; and

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(b) the interests of consumers would not be threatened by the acquirer’s control or by his acquiring that control. (3) In deciding whether the approval requirements are met, the Authority must have regard, in relation to the control that the acquirer— (a) has over the authorised person concerned (‘‘A’’), or (b) will have over A if the proposal to which the notice of control relates is carried into effect, to its duty under section 41 in relation to each regulated activity carried on by A. (4) If the Authority gives a notice under this section but considers that the approval requirements would be met if the person to whom a notice is given were to take, or refrain from taking, a particular step, the notice must identify that step. (5) A person to whom a notice under this section is given may refer the matter to the Tribunal. (6) ‘‘Consumers’’ means persons who are consumers for the purposes of section 138. Notes Subs (1) a ‘‘notice of objection’’. Interpretation: s 388; implementation: decision notices FSA Handbook DEPP 2.3. Subs (2)(a) ‘‘fit and proper person’’: FSA Handbook FIT Subs (3), see s 185(2); see also FSA Handbook COND 1.2.4.

Objection to existing control 187.—(1) If the Authority is not satisfied that the approval requirements are met, it may give a decision notice under this section to a person if he has failed to comply with a duty to notify imposed by section 178. (2) If the failure relates to subsection (1) or (2) of that section, the Authority may (instead of giving a notice under subsection (1)) approve the acquisition of the control in question by the person concerned as if he had given it a notice of control. (3) The Authority may also give a decision notice under this section to a person who is a controller of a UK authorised person if the Authority becomes aware of matters as a result of which it is satisfied that— (a) the approval requirements are not met with respect to the controller; or (b) a condition imposed under section 185 required that person to do (or refrain from doing) a particular thing and the condition has been breached as a result of his failing to do (or doing) that thing. (4) A person to whom a notice under this section is given may refer the matter to the Tribunal. (5) ‘‘Approval requirements’’ has the same meaning as in section 186. Notes Subs (1) a ‘‘notice of objection’’. Interpretation: s 388; implementation: decision notices FSA Handbook DEPP 2.3.

Notices of objection under section 187: procedure 188.—(1) If the Authority proposes to give a notice of objection to a person under section 187, it must give him a warning notice. (2) Before doing so, the Authority must comply with such requirements as to consultation with competent authorities outside the United Kingdom as may be prescribed. (3) If the Authority decides to give a warning notice under this section, it must do so before the end of the period of three months beginning— (a) in the case of a notice to be given under section 187(1), with the date on which it became aware of the failure to comply with the duty in question; (b) in the case of a notice to be given under section 187(3), with the date on which it became aware of the matters in question. (4) The Authority may require the person concerned to provide such additional information or documents as it considers reasonable.

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(5) Different requirements may be imposed in different circumstances. (6) In this Part ‘‘notice of objection’’ means a notice under section 186 or 187. Notes Subs (1) warning notices: interpretation, s 387; implementation FSA Handbook DEPP 2.2. Section 189 is entitled Improperly acquired shares and is outside the scope of this work.

Reducing control: procedure Notification 190.—(1) If a step which a controller of a UK authorised person proposes to take would result in his— (a) ceasing to have control of a relevant kind over the authorised person, or (b) reducing a relevant kind of control over that person, he must notify the Authority of his proposal. (2) A controller of a UK authorised person who, without himself taking any such step, ceases to have that control or reduces that control must notify the Authority before the end of the period of 14 days beginning with the day on which he first becomes aware that— (a) he has ceased to have the control in question; or (b) he has reduced that control. (3) A person who is under the duty to notify the Authority imposed by subsection (1) must also give a notice to the Authority— (a) on ceasing to have the control in question; or (b) on reducing that control. (4) A notice under this section must— (a) be given to the Authority in writing; and (b) include details of the extent of the control (if any) which the person concerned will retain (or still retains) over the authorised person concerned. Notes Implementation: see s 192 and SI 2001 No 2638.

Offences Offences under this Part 191.—(1) A person who fails to comply with the duty to notify the Authority imposed on him by section 178(1) or 190(1) is guilty of an offence. (2) A person who fails to comply with the duty to notify the Authority imposed on him by section 178(2) or 190(2) is guilty of an offence. (3) If a person who has given a notice of control to the Authority carries out the proposal to which the notice relates, he is guilty of an offence if— (a) the period of three months beginning with the date on which the Authority received the notice is still running; and (b) the Authority has not responded to the notice by either giving its approval or giving him a warning notice under section 183(3) or 185(3). (4) A person to whom the Authority has given a warning notice under section 183(3) is guilty of an offence if he carries out the proposal to which the notice relates before the Authority has decided whether to give him a notice of objection. (5) A person to whom a notice of objection has been given is guilty of an offence if he acquires the control to which the notice applies at a time when the notice is still in force. (6) A person guilty of an offence under subsection (1), (2), (3) or (4) is liable on summary conviction to a fine not exceeding level 5 on the standard scale. (7) A person guilty of an offence under subsection (5) is liable— (a) on summary conviction, to a fine not exceeding the statutory maximum; and (b) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine, or both.

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(8) A person guilty of an offence under subsection (5) is also liable on summary conviction to a fine not exceeding one tenth of the statutory maximum for each day on which the offence has continued. (9) It is a defence for a person charged with an offence under subsection (1) to show that he had, at the time of the alleged offence, no knowledge of the act or circumstances by virtue of which the duty to notify the Authority arose. (10) If a person— (a) was under the duty to notify the Authority imposed by section 178(1) or 190(1) but had no knowledge of the act or circumstances by virtue of which that duty arose, but (b) subsequently becomes aware of that act or those circumstances, he must notify the Authority before the end of the period of 14 days beginning with the day on which he first became so aware. (11) A person who fails to comply with the duty to notify the Authority imposed by subsection (10) is guilty of an offence and liable, on summary conviction, to a fine not exceeding level 5 on the standard scale. Miscellaneous Power to change definitions of control etc. 192. The Treasury may by order— (a) provide for exemptions from the obligations to notify imposed by sections 178 and 190; (b) amend section 179 by varying, or removing, any of the cases in which a person is treated as having control over a UK authorised person or by adding a case; (c) amend section 180 by varying, or removing, any of the cases in which a person is treated as increasing control over a UK authorised person or by adding a case; (d) amend section 181 by varying, or removing, any of the cases in which a person is treated as reducing his control over a UK authorised person or by adding a case; (e) amend section 422 by varying, or removing, any of the cases in which a person is treated as being a controller of a person or by adding a case. Notes Subs (a) see SI 2001 No 2638.

PA RT X I I I

INCOMING FIRMS: INTERVENTION BY AUTHORITY

Interpretation Interpretation of this Part 193.—(1) In this Part— ‘‘additional procedure’’ means the procedure described in section 199; ‘‘incoming firm’’ means— (a) an EEA firm which is exercising, or has exercised, its right to carry on a regulated activity in the United Kingdom in accordance with Schedule 3; or (b) a Treaty firm which is exercising, or has exercised, its right to carry on a regulated activity in the United Kingdom in accordance with Schedule 4; and ‘‘power of intervention’’ means the power conferred on the Authority by section 196. (2) In relation to an incoming firm which is an EEA firm, expressions used in this Part and in Schedule 3 have the same meaning in this Part as they have in that Schedule. General grounds on which power of intervention is exercisable 194.—(1) The Authority may exercise its power of intervention in respect of an incoming firm if it appears to it that—

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(a) the firm has contravened, or is likely to contravene, a requirement which is imposed on it by or under this Act (in a case where the Authority is responsible for enforcing compliance in the United Kingdom); (b) the firm has, in purported compliance with any requirement imposed by or under this Act, knowingly or recklessly given the Authority information which is false or misleading in a material particular; or (c) it is desirable to exercise the power in order to protect the interests of actual or potential customers. (2) Subsection (3) applies to an incoming EEA firm falling within sub-paragraph (a) or (b) of paragraph 5 of Schedule 3 which is exercising an EEA right to carry on any Consumer Credit Act business in the United Kingdom. (3) The Authority may exercise its power of intervention in respect of the firm if the Director General of Fair Trading has informed the Authority that— (a) the firm, (b) any of the firm’s employees, agents or associates (whether past or present), or (c) if the firm is a body corporate, a controller of the firm or an associate of such a controller, has done any of the things specified in paragraphs (a) to (e) of section 25(2A) of the Consumer Credit Act 1974. (4) ‘‘Associate’’, ‘‘Consumer Credit Act business’’ and ‘‘controller’’ have the same meaning as in section 203. Notes Subs (3) reference to ‘(a) to (e) of section 25(2A)’ inserted by the Consumer Credit Act 2006. Implementation: FSA Handbook DEPP.

Contravention by relevant EEA firm with UK branch of requirement under markets in financial instruments directive: Authority primarily responsible for securing compliance 194A.—(1) This section applies if— (a) a relevant EEA firm has a branch in the United Kingdom; and (b) the Authority ascertains that the firm has contravened, or is contravening, a requirement falling within subsection (3) (in a case to which Article 62.2 of the markets in financial instruments directive applies). (2) ‘‘Relevant EEA firm’’ means an EEA firm falling within paragraph 5(a) or (b) of Schedule 3 which is exercising in the United Kingdom an EEA right deriving from the markets in financial instruments directive. (3) A requirement falls within this subsection if it is imposed on the firm— (a) by any provision of or made under this Act which implements the markets in financial instruments directive; or (b) by any directly applicable Community regulation made under that directive. (4) The Authority must give the firm written notice which— (a) requires the firm to put an end to the contravention; (b) states that the Authority’s power of intervention will become exercisable in relation to the firm if the firm continues the contravention; and (c) indicates any requirements that the Authority proposes to impose on the firm in exercise of its power of intervention in the event of the power becoming exercisable. (5) The Authority may exercise its power of intervention in respect of the firm if— (a) a reasonable time has expired since the giving of the notice under subsection (4); (b) the firm has failed to put an end to the contravention within that time; and (c) the Authority has informed the firm’s home state regulator of its intention to exercise its power of intervention in respect of the firm. (6) Subsection (5) applies whether or not the Authority’s power of intervention is also exercisable as a result of section 194. (7) If the Authority exercises its power of intervention in respect of a relevant EEA firm by virtue of subsection (5), it must at the earliest opportunity inform the firm’s home state regulator and the Commission of—

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(a) the fact that the Authority has exercised that power in respect of the firm; and (b) any requirements it has imposed on the firm in exercise of the power. Notes Section 194A was inserted by SI 2007 No 126 and enters into force on 1 November 2007.

Exercise of power in support of overseas regulator 195.—(1) The Authority may exercise its power of intervention in respect of an incoming firm at the request of, or for the purpose of assisting, an overseas regulator. (2) Subsection (1) applies whether or not the Authority’s power of intervention is also exercisable as a result of section 194. (3) ‘‘An overseas regulator’’ means an authority in a country or territory outside the United Kingdom— (a) which is a home state regulator; or (b) which exercises any function of a kind mentioned in subsection (4). (4) The functions are— (a) a function corresponding to any function of the Authority under this Act; (b) a function corresponding to any function exercised by the competent authority under Part VI; (c) a function corresponding to any function exercised by the Secretary of State under the Companies Act 1985; (d) a function in connection with— (i) the investigation of conduct of the kind prohibited by Part V of the Criminal Justice Act 1993 (insider dealing); or (ii) the enforcement of rules (whether or not having the force of law) relating to such conduct; (e) a function prescribed by regulations made for the purposes of this subsection which, in the opinion of the Treasury, relates to companies or financial services. (5) If— (a) a request to the Authority for the exercise of its power of intervention has been made by a home state regulator in pursuance of a Community obligation, or (b) a home state regulator has notified the Authority that an EEA firm’s EEA authorisation has been withdrawn, the Authority must, in deciding whether or not to exercise its power of intervention, consider whether exercising it is necessary in order to comply with a Community obligation. (6) In deciding in any case in which the Authority does not consider that the exercise of its power of intervention is necessary in order to comply with a Community obligation, it may take into account in particular— (a) whether in the country or territory of the overseas regulator concerned, corresponding assistance would be given to a United Kingdom regulatory authority; (b) whether the case concerns the breach of a law, or other requirement, which has no close parallel in the United Kingdom or involves the assertion of a jurisdiction not recognised by the United Kingdom; (c) the seriousness of the case and its importance to persons in the United Kingdom; (d) whether it is otherwise appropriate in the public interest to give the assistance sought. (7) The Authority may decide not to exercise its power of intervention, in response to a request, unless the regulator concerned undertakes to make such contribution to the cost of its exercise as the Authority considers appropriate. (8) Subsection (7) does not apply if the Authority decides that it is necessary for it to exercise its power of intervention in order to comply with a Community obligation. Notes Subs (4)(b) originally ended with the words ‘in relation to the listing of shares’; omitted by SI 2005 No 1433.

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Contravention by relevant EEA firm of requirement under markets in financial instruments directive: home state regulator primarily responsible for securing compliance 195A.—(1) This section applies if the Authority has clear and demonstrable grounds for believing that a relevant EEA firm has contravened, or is contravening, a requirement falling within subsection (2) (in a case to which Article 62.1 or 62.3 of the markets in financial instruments directive applies). (2) A requirement falls within this subsection if it is imposed on the firm— (a) by or under any provision adopted in the firm’s home state for the purpose of implementing the markets in financial instruments directive; or (b) by any directly applicable Community regulation made under that directive. (3) The Authority must notify the firm’s home state regulator of the situation mentioned in subsection (1). (4) The notice under subsection (3) must— (a) request that the home state regulator take all appropriate measures for the purpose of ensuring that the firm puts an end to the contravention; (b) state that the Authority’s power of intervention is likely to become exercisable in relation to the firm if the firm continues the contravention; and (c) indicate any requirements that the Authority proposes to impose on the firm in exercise of its power of intervention in the event of the power becoming exercisable. (5) The Authority may exercise its power of intervention in respect of the firm if— (a) a reasonable time has expired since the giving of the notice under subsection (3); and (b) conditions A to C are satisfied. (6) Condition A is that— (a) the firm’s home state regulator has failed or refused to take measures for the purpose mentioned in subsection (4)(a); or (b) any measures taken by the home state regulator have proved inadequate for that purpose. (7) Condition B is that the firm is acting in a manner which is clearly prejudicial to the interests of investors in the United Kingdom or the orderly functioning of the markets. (8) Condition C is that the Authority has informed the firm’s home state regulator of its intention to exercise its power of intervention in respect of the firm. (9) Subsection (5) applies whether or not the Authority’s power of intervention is also exercisable as a result of section 194 or 195. (10) If the Authority exercises its power of intervention in respect of a relevant EEA firm by virtue of subsection (5), it must at the earliest opportunity inform the Commission of— (a) the fact that the Authority has exercised that power in respect of the firm; and (b) any requirements it has imposed on the firm in exercise of the power. (11) In this section— ‘‘home state’’, in relation to a relevant EEA firm, means— (a) in the case of a firm which is a body corporate, the EEA State in which the firm has its registered office or, if it has no registered office, its head office; and (b) in any other case, the EEA State in which the firm has its head office; ‘‘relevant EEA firm’’ has the same meaning as in section 194A. Notes Section 195A was inserted by SI 2007 No 126 and enters into force on 1 November 2007.

The power of intervention 196. If the Authority is entitled to exercise its power of intervention in respect of an incoming firm under this Part, it may impose any requirement in relation to the firm which it could impose if— (a) the firm’s permission was a Part IV permission; and (b) the Authority was entitled to exercise its power under that Part to vary that permission.

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Notes Implementation: FSA Handbook ENF 4 (in force until 27 August 2007).

Exercise of power of intervention Procedure on exercise of power of intervention 197.—(1) A requirement takes effect— (a) immediately, if the notice given under subsection (3) states that that is the case; (b) on such date as may be specified in the notice; or (c) if no date is specified in the notice, when the matter to which it relates is no longer open to review. (2) A requirement may be expressed to take effect immediately (or on a specified date) only if the Authority, having regard to the ground on which it is exercising its power of intervention, considers that it is necessary for the requirement to take effect immediately (or on that date). (3) If the Authority proposes to impose a requirement under section 196 on an incoming firm, or imposes such a requirement with immediate effect, it must give the firm written notice. (4) The notice must— (a) give details of the requirement; (b) inform the firm of when the requirement takes effect; (c) state the Authority’s reasons for imposing the requirement and for its determination as to when the requirement takes effect; (d) inform the firm that it may make representations to the Authority within such period as may be specified in the notice (whether or not it has referred the matter to the Tribunal); and (e) inform it of its right to refer the matter to the Tribunal. (5) The Authority may extend the period allowed under the notice for making representations. (6) If, having considered any representations made by the firm, the Authority decides— (a) to impose the requirement proposed, or (b) if it has been imposed, not to rescind the requirement, it must give it written notice. (7) If, having considered any representations made by the firm, the Authority decides— (a) not to impose the requirement proposed, (b) to impose a different requirement from that proposed, or (c) to rescind a requirement which has effect, it must give it written notice. (8) A notice given under subsection (6) must inform the firm of its right to refer the matter to the Tribunal. (9) A notice under subsection (7)(b) must comply with subsection (4). (10) If a notice informs a person of his right to refer a matter to the Tribunal, it must give an indication of the procedure on such a reference. Notes See also ss 199 and 200.

Power to apply to court for injunction in respect of certain overseas insurance companies 198.—(1) This section applies if the Authority has received a request made in respect of an incoming EEA firm in accordance with— (a) Article 20.5 of the first non-life insurance directive; or (b) Article 37.5 of the life assurance consolidation directive (2) The court may, on an application made to it by the Authority with respect to the firm, grant an injunction restraining (or in Scotland an interdict prohibiting) the firm disposing of or otherwise dealing with any of its assets.

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(3) If the court grants an injunction, it may by subsequent orders make provision for such incidental, consequential and supplementary matters as it considers necessary to enable the Authority to perform any of its functions under this Act. (4) ‘‘The court’’ means— (a) the High Court; or (b) in Scotland, the Court of Session. Notes Subs (1)(b) amended by SI 2004 No 3379 to refer to the Consolidated Life Assurance Directive.

Additional procedure for EEA firms in certain cases 199.—(1) This section applies if it appears to the Authority that its power of intervention is exercisable in relation to an EEA firm exercising EEA rights in the United Kingdom (‘‘an incoming EEA firm’’) in respect of the contravention of a relevant requirement. (2) A requirement is relevant if— (a) it is imposed by the Authority under this Act; and (b) as respects its contravention, any of the single market directives (other than the markets in financial instruments directive) provides that a procedure of the kind set out in the following provisions of this section is to apply. (3) The Authority must, in writing, require the firm to remedy the situation. (4) If the firm fails to comply with the requirement under subsection (3) within a reasonable time, the Authority must give a notice to that effect to the firm’s home state regulator requesting it— (a) to take all appropriate measures for the purpose of ensuring that the firm remedies the situation which has given rise to the notice; and (b) to inform the Authority of the measures it proposes to take or has taken or the reasons for not taking such measures. (5) Except as mentioned in subsection (6), the Authority may not exercise its power of intervention unless satisfied— (a) that the firm’s home state regulator has failed or refused to take measures for the purpose mentioned in subsection (4)(a); or (b) that the measures taken by the home state regulator have proved inadequate for that purpose. (6) If the Authority decides that it should exercise its power of intervention in respect of the incoming EEA firm as a matter of urgency in order to protect the interests of consumers, it may exercise that power— (a) before complying with subsections (3) and (4); or (b) where it has complied with those subsections, before it is satisfied as mentioned in subsection (5). (7) In such a case the Authority must at the earliest opportunity inform the firm’s home state regulator and the Commission. (8) If— (a) the Authority has (by virtue of subsection (6)) exercised its power of intervention before complying with subsections (3) and (4) or before it is satisfied as mentioned in subsection (5), and (b) the Commission decides under any of the single market directives (other than the markets in financial instruments directive) that the Authority must rescind or vary any requirement imposed in the exercise of its power of intervention, the Authority must in accordance with the decision rescind or vary the requirement. Notes Subs (2)(b) the words in brackets ‘‘(other than the markets in financial instruments directive)’’ inserted by SI 2007 No 126. Subs (8)(b) the words in brackets ‘‘(other than the markets in financial instruments directive)’’ inserted by SI 2007 No 126.

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Supplemental Rescission and variation of requirements 200.—(1) The Authority may rescind or vary a requirement imposed in exercise of its power of intervention on its own initiative or on the application of the person subject to the requirement. (2) The power of the Authority on its own initiative to rescind a requirement is exercisable by written notice given by the Authority to the person concerned, which takes effect on the date specified in the notice. (3) Section 197 applies to the exercise of the power of the Authority on its own initiative to vary a requirement as it applies to the imposition of a requirement. (4) If the Authority proposes to refuse an application for the variation or rescission of a requirement, it must give the applicant a warning notice. (5) If the Authority decides to refuse an application for the variation or rescission of a requirement— (a) the Authority must give the applicant a decision notice; and (b) that person may refer the matter to the Tribunal. Notes Subs (4) warning notices: interpretation, s 387; implementation FSA Handbook DEPP 2.2.

Effect of certain requirements on other persons 201. If the Authority, in exercising its power of intervention, imposes on an incoming firm a requirement of a kind mentioned in subsection (3) of section 48, the requirement has the same effect in relation to the firm as it would have in relation to an authorised person if it had been imposed on the authorised person by the Authority acting under section 45. Contravention of requirement imposed under this Part 202.—(1) Contravention of a requirement imposed by the Authority under this Part does not— (a) make a person guilty of an offence; (b) make any transaction void or unenforceable; or (c) (subject to subsection (2)) give rise to any right of action for breach of statutory duty. (2) In prescribed cases the contravention is actionable at the suit of a person who suffers loss as a result of the contravention, subject to the defences and other incidents applying to actions for breach of statutory duty. Notes Sections 203 and 204 deal with consumer credit insurance and are outside the scope of this work. PA RT X I V

D I S C I P L I N A RY M E A S U R E S

Public censure 205. If the Authority considers that an authorised person has contravened a requirement imposed on him by or under this Act, or by any directly applicable Community regulation made under the markets in financial instruments directive, the Authority may publish a statement to that effect. Notes The words ‘‘or by any directly applicable Community regulation made under the markets in financial instruments directive’’ inserted by SI 2007 No 126. On the criteria for determining whether it is appropriate to issue a public censure, see FSA Handbook DEPP 6.4 Financial penalty or public censure.

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Financial penalties 206.—(1) If the Authority considers that an authorised person has contravened a requirement imposed on him by or under this Act, or by any directly applicable Community regulation made under the markets in financial instruments directive, it may impose on him a penalty, in respect of the contravention, of such amount as it considers appropriate. (2) The Authority may not in respect of any contravention both require a person to pay a penalty under this section and withdraw his authorisation under section 33. (3) A penalty under this section is payable to the Authority. Notes Subs (1) the words ‘‘or by any directly applicable Community regulation made under the markets in financial instruments directive’’ inserted by SI 2007 No 126. Subs (1) on insurance against financial penalties, see FSA Handbook GEN 6.1. On financial penalties, see FSA Handbook DEPP 6.5 Determining the appropriate level of financial penalty.

Proposal to take disciplinary measures 207.—(1) If the Authority proposes— (a) to publish a statement in respect of an authorised person (under section 205), or (b) to impose a penalty on an authorised person (under section 206), it must give the authorised person a warning notice. (2) A warning notice about a proposal to publish a statement must set out the terms of the statement. (3) A warning notice about a proposal to impose a penalty, must state the amount of the penalty. Notes Warning notices: interpretation, s 387; implementation FSA Handbook DEPP 2.2.

Decision notice 208.—(1) If the Authority decides— (a) to publish a statement under section 205 (whether or not in the terms proposed), or (b) to impose a penalty under section 206 (whether or not of the amount proposed), it must without delay give the authorised person concerned a decision notice. (2) In the case of a statement, the decision notice must set out the terms of the statement. (3) In the case of a penalty, the decision notice must state the amount of the penalty. (4) If the Authority decides to— (a) publish a statement in respect of an authorised person under section 205, or (b) impose a penalty on an authorised person under section 206, the authorised person may refer the matter to the Tribunal. Publication 209. After a statement under section 205 is published, the Authority must send a copy of it to the authorised person and to any person on whom a copy of the decision notice was given under section 393(4). Statements of policy 210.—(1) The Authority must prepare and issue a statement of its policy with respect to— (a) the imposition of penalties under this Part; and (b) the amount of penalties under this Part. (2) The Authority’s policy in determining what the amount of a penalty should be must include having regard to—

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(a) the seriousness of the contravention in question in relation to the nature of the requirement contravened; (b) the extent to which that contravention was deliberate or reckless; and (c) whether the person on whom the penalty is to be imposed is an individual. (3) The Authority may at any time alter or replace a statement issued under this section. (4) If a statement issued under this section is altered or replaced, the Authority must issue the altered or replacement statement. (5) The Authority must, without delay, give the Treasury a copy of any statement which it publishes under this section. (6) A statement issued under this section must be published by the Authority in the way appearing to the Authority to be best calculated to bring it to the attention of the public. (7) In exercising, or deciding whether to exercise, its power under section 206 in the case of any particular contravention, the Authority must have regard to any statement published under this section and in force at the time when the contravention in question occurred. (8) The Authority may charge a reasonable fee for providing a person with a copy of the statement. Notes Subs (1) see FSA Handbook DEPP 6.

Statements of policy: procedure 211.—(1) Before issuing a statement under section 210, the Authority must publish a draft of the proposed statement in the way appearing to the Authority to be best calculated to bring it to the attention of the public. (2) The draft must be accompanied by notice that representations about the proposal may be made to the Authority within a specified time. (3) Before issuing the proposed statement, the Authority must have regard to any representations made to it in accordance with subsection (2). (4) If the Authority issues the proposed statement it must publish an account, in general terms, of— (a) the representations made to it in accordance with subsection (2); and (b) its response to them. (5) If the statement differs from the draft published under subsection (1) in a way which is, in the opinion of the Authority, significant, the Authority must (in addition to complying with subsection (4)) publish details of the difference. (6) The Authority may charge a reasonable fee for providing a person with a copy of a draft published under subsection (1). (7) This section also applies to a proposal to alter or replace a statement. PA RT X V

T H E F I N A N C I A L S E R V I C E S C O M P E N S AT I O N S C H E M E

The scheme manager The scheme manager 212.—(1) The Authority must establish a body corporate (‘‘the scheme manager’’) to exercise the functions conferred on the scheme manager by or under this Part. (2) The Authority must take such steps as are necessary to ensure that the scheme manager is, at all times, capable of exercising those functions. (3) The constitution of the scheme manager must provide for it to have— (a) a chairman; and (b) a board (which must include the chairman) whose members are the scheme manager’s directors. (4) The chairman and other members of the board must be persons appointed, and liable to removal from office, by the Authority (acting, in the case of the chairman, with the approval of the Treasury).

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(5) But the terms of their appointment (and in particular those governing removal from office) must be such as to secure their independence from the Authority in the operation of the compensation scheme. (6) The scheme manager is not to be regarded as exercising functions on behalf of the Crown. (7) The scheme manager’s board members, officers and staff are not to be regarded as Crown servants. Notes The Financial Services Compensation Scheme was established by the Financial Services and Markets Act 2000 (Transitional Provisions, Repeals and Savings) (Financial Services Compensation Scheme) Order 2001, SI 2001 No 2967, subsequently amended by SI 2003 No 2134 and SI 2006 No 3259. The Financial Services and Markets Act 2000 (Compensation Scheme: Electing Participants) Regulations 2001, SI 2001 No 1783 set out the circumstances in which a person who qualifies for authorisation under Sched 3 (EEA passport rights) to the Financial Services and Markets Act 2000 may elect to participate in the compensation scheme. None of the instruments referred to are included in this work.

The scheme The compensation scheme 213.—(1) The Authority must by rules establish a scheme for compensating persons in cases where relevant persons are unable, or are likely to be unable, to satisfy claims against them. (2) The rules are to be known as the Financial Services Compensation Scheme (but are referred to in this Act as ‘‘the compensation scheme’’). (3) The compensation scheme must, in particular, provide for the scheme manager— (a) to assess and pay compensation, in accordance with the scheme, to claimants in respect of claims made in connection with regulated activities carried on (whether or not with permission) by relevant persons; and (b) to have power to impose levies on authorised persons, or any class of authorised person, for the purpose of meeting its expenses (including in particular expenses incurred, or expected to be incurred, in paying compensation, borrowing or insuring risks). (4) The compensation scheme may provide for the scheme manager to have power to impose levies on authorised persons, or any class of authorised person, for the purpose of recovering the cost (whenever incurred) of establishing the scheme. (5) In making any provision of the scheme by virtue of subsection (3)(b), the Authority must take account of the desirability of ensuring that the amount of the levies imposed on a particular class of authorised person reflects, so far as practicable, the amount of the claims made, or likely to be made, in respect of that class of person. (6) An amount payable to the scheme manager as a result of any provision of the scheme made by virtue of subsection (3)(b) or (4) may be recovered as a debt due to the scheme manager. (7) Sections 214 to 217 make further provision about the scheme but are not to be taken as limiting the power conferred on the Authority by subsection (1). (8) In those sections ‘‘specified’’ means specified in the scheme. (9) In this Part (except in sections 219, 220 or 224) ‘‘relevant person’’ means a person who was— (a) an authorised person at the time the act or omission giving rise to the claim against him took place; or (b) an appointed representative at that time. (10) But a person who, at that time— (a) qualified for authorisation under Schedule 3, and (b) fell within a prescribed category, is not to be regarded as a relevant person in relation to any activities for which he had permission as a result of any provision of, or made under, that Schedule unless he had elected to participate in the scheme in relation to those activities at that time.

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Provisions of the scheme General 214.—(1) The compensation scheme may, in particular, make provision— (a) as to the circumstances in which a relevant person is to be taken (for the purposes of the scheme) to be unable, or likely to be unable, to satisfy claims made against him; (b) for the establishment of different funds for meeting different kinds of claim; (c) for the imposition of different levies in different cases; (d) limiting the levy payable by a person in respect of a specified period; (e) for repayment of the whole or part of a levy in specified circumstances; (f) for a claim to be entertained only if it is made by a specified kind of claimant; (g) for a claim to be entertained only if it falls within a specified kind of claim; (h) as to the procedure to be followed in making a claim; (i) for the making of interim payments before a claim is finally determined; (j) limiting the amount payable on a claim to a specified maximum amount or a maximum amount calculated in a specified manner; (k) for payment to be made, in specified circumstances, to a person other than the claimant. (2) Different provision may be made with respect to different kinds of claim. (3) The scheme may provide for the determination and regulation of matters relating to the scheme by the scheme manager. (4) The scheme, or particular provisions of the scheme, may be made so as to apply only in relation to— (a) activities carried on, (b) claimants, (c) matters arising, or (d) events occurring, in specified territories, areas or localities. (5) The scheme may provide for a person who— (a) qualifies for authorisation under Schedule 3, and (b) falls within a prescribed category, to elect to participate in the scheme in relation to some or all of the activities for which he has permission as a result of any provision of, or made under, that Schedule. (6) The scheme may provide for the scheme manager to have power— (a) in specified circumstances, (b) but only if the scheme manager is satisfied that the claimant is entitled to receive a payment in respect of his claim— (i) under a scheme which is comparable to the compensation scheme, or (ii) as the result of a guarantee given by a government or other authority, to make a full payment of compensation to the claimant and recover the whole or part of the amount of that payment from the other scheme or under that guarantee. Notes Subs (5) prescribed category—see SI 2001 No 1783.

Rights of the scheme in relevant person’s insolvency 215.—(1) The compensation scheme may, in particular, make provision— (a) as to the effect of a payment of compensation under the scheme in relation to rights or obligations arising out of the claim against a relevant person in respect of which the payment was made; (b) for conferring on the scheme manager a right of recovery against that person. (2) Such a right of recovery conferred by the scheme does not, in the event of the relevant person’s insolvency, exceed such right (if any) as the claimant would have had in that event. (3) If a person other than the scheme manager makes an administration application under Schedule B1 to the 1986 Act or presents a petition under Article 22 of the 1989 Order in relation to a company or partnership which is a relevant person, the scheme manager has the same rights as are conferred on the Authority by section 362.

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(3A) In subsection (3) the reference to making an administration application includes a reference to— (a) appointing an administrator under paragraph 14 or 22 of Schedule B1 to the 1986 Act, or (b) filing with the court a copy of notice of intention to appoint an administrator under either of those paragraphs. (4) If a person other than the scheme manager presents a petition for the winding up of a body which is a relevant person, the scheme manager has the same rights as are conferred on the Authority by section 371. (5) If a person other than the scheme manager presents a bankruptcy petition to the court in relation to an individual who, or an entity which, is a relevant person, the scheme manager has the same rights as are conferred on the Authority by section 374. (6) Insolvency rules may be made for the purpose of integrating any procedure for which provision is made as a result of subsection (1) into the general procedure on the administration of a company or partnership or on a winding-up, bankruptcy or sequestration. (7) ‘‘Bankruptcy petition’’ means a petition to the court— (a) under section 264 of the 1986 Act or Article 238 of the 1989 Order for a bankruptcy order to be made against an individual; (b) under section 5 of the 1985 Act for the sequestration of the estate of an individual; or (c) under section 6 of the 1985 Act for the sequestration of the estate belonging to or held for or jointly by the members of an entity mentioned in subsection (1) of that section. (8) ‘‘Insolvency rules’’ are— (a) for England and Wales, rules made under sections 411 and 412 of the 1986 Act; (b) for Scotland, rules made by order by the Treasury, after consultation with the Scottish Ministers, for the purposes of this section; and (c) for Northern Ireland, rules made under Article 359 of the 1989 Order and section 55 of the Judicature (Northern Ireland) Act 1978. (9) ‘‘The 1985 Act’’, ‘‘the 1986 Act’’, ‘‘the 1989 Order’’ and ‘‘court’’ have the same meaning as in Part XXIV. Notes Subs (3) amended by the Enterprise Act 2002, Sched 17, para 54. Subs (3A) inserted by the Enterprise Act 2002, Sched 17, para 54.

Continuity of long-term insurance policies 216.—(1) The compensation scheme may, in particular, include provision requiring the scheme manager to make arrangements for securing continuity of insurance for policyholders, or policyholders of a specified class, of relevant long-term insurers. (2) ‘‘Relevant long-term insurers’’ means relevant persons who— (a) have permission to effect or carry out contracts of long-term insurance; and (b) are unable, or likely to be unable, to satisfy claims made against them. (3) The scheme may provide for the scheme manager to take such measures as appear to him to be appropriate— (a) for securing or facilitating the transfer of a relevant long-term insurer’s business so far as it consists of the carrying out of contracts of long-term insurance, or of any part of that business, to another authorised person; (b) for securing the issue by another authorised person to the policyholders concerned of policies in substitution for their existing policies. (4) The scheme may also provide for the scheme manager to make payments to the policyholders concerned— (a) during any period while he is seeking to make arrangements mentioned in subsection (1); (b) if it appears to him that it is not reasonably practicable to make such arrangements. (5) A provision of the scheme made by virtue of section 213 (3)(b) may include power to impose levies for the purpose of meeting expenses of the scheme manager incurred in—

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(a) taking measures as a result of any provision of the scheme made by virtue of subsection (3); (b) making payments as a result of any such provision made by virtue of subsection (4). Insurers in financial difficulties 217.—(1) The compensation scheme may, in particular, include provision for the scheme manager to have power to take measures for safeguarding policyholders, or policyholders of a specified class, of relevant insurers. (2) ‘‘Relevant insurers’’ means relevant persons who— (a) have permission to effect or carry out contracts of insurance; and (b) are in financial difficulties. (3) The measures may include such measures as the scheme manager considers appropriate for— (a) securing or facilitating the transfer of a relevant insurer’s business so far as it consists of the carrying out of contracts of insurance, or of any part of that business, to another authorised person; (b) giving assistance to the relevant insurer to enable it to continue to effect or carry out contracts of insurance. (4) The scheme may provide— (a) that if measures of a kind mentioned in subsection (3)(a) are to be taken, they should be on terms appearing to the scheme manager to be appropriate, including terms reducing, or deferring payment of, any of the things to which any of those who are eligible policyholders in relation to the relevant insurer are entitled in their capacity as such; (b) that if measures of a kind mentioned in subsection (3)(b) are to be taken, they should be conditional on the reduction of, or the deferment of the payment of, the things to which any of those who are eligible policyholders in relation to the relevant insurer are entitled in their capacity as such; (c) for ensuring that measures of a kind mentioned in subsection (3)(b) do not benefit to any material extent persons who were members of a relevant insurer when it began to be in financial difficulties or who had any responsibility for, or who may have profited from, the circumstances giving rise to its financial difficulties, except in specified circumstances; (d) for requiring the scheme manager to be satisfied that any measures he proposes to take are likely to cost less than it would cost to pay compensation under the scheme if the relevant insurer became unable, or likely to be unable, to satisfy claims made against him. (5) The scheme may provide for the Authority to have power— (a) to give such assistance to the scheme manager as it considers appropriate for assisting the scheme manager to determine what measures are practicable or desirable in the case of a particular relevant insurer; (b) to impose constraints on the taking of measures by the scheme manager in the case of a particular relevant insurer; (c) to require the scheme manager to provide it with information about any particular measures which the scheme manager is proposing to take. (6) The scheme may include provision for the scheme manager to have power— (a) to make interim payments in respect of eligible policyholders of a relevant insurer; (b) to indemnify any person making payments to eligible policyholders of a relevant insurer. (7) A provision of the scheme made by virtue of section 213 (3)(b) may include power to impose levies for the purpose of meeting expenses of the scheme manager incurred in— (a) taking measures as a result of any provision of the scheme made by virtue of subsection (1); (b) making payments or giving indemnities as a result of any such provision made by virtue of subsection (6). (8) ‘‘Financial difficulties’’ and ‘‘eligible policyholders’’ have such meanings as may be specified.

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Annual report 218.—(1) At least once a year, the scheme manager must make a report to the Authority on the discharge of its functions. (2) The report must— (a) include a statement setting out the value of each of the funds established by the compensation scheme; and (b) comply with any requirements specified in rules made by the Authority. (3) The scheme manager must publish each report in the way it considers appropriate. Information and documents Scheme manager’s power to require information 219.—(1) The scheme manager may, by notice in writing given to the relevant person in respect of whom a claim is made under the scheme or to a person otherwise involved, require that person— (a) to provide specified information or information of a specified description; or (b) to produce specified documents or documents of a specified description. (2) The information or documents must be provided or produced— (a) before the end of such reasonable period as may be specified; and (b) in the case of information, in such manner or form as may be specified. (3) This section applies only to information and documents the provision or production of which the scheme manager considers— (a) to be necessary for the fair determination of the claim; or (b) to be necessary (or likely to be necessary) for the fair determination of other claims made (or which it expects may be made) in respect of the relevant person concerned. (4) If a document is produced in response to a requirement imposed under this section, the scheme manager may— (a) take copies or extracts from the document; or (b) require the person producing the document to provide an explanation of the document. (5) If a person who is required under this section to produce a document fails to do so, the scheme manager may require the person to state, to the best of his knowledge and belief, where the document is. (6) If the relevant person is insolvent, no requirement may be imposed under this section on a person to whom section 220 or 224 applies. (7) If a person claims a lien on a document, its production under this Part does not affect the lien. (8) ‘‘Relevant person’’ has the same meaning as in section 224. (9) ‘‘Specified’’ means specified in the notice given under subsection (1). (10) A person is involved in a claim made under the scheme if he was knowingly involved in the act or omission giving rise to the claim. Scheme manager’s power to inspect information held by liquidator etc. 220.—(1) For the purpose of assisting the scheme manager to discharge its functions in relation to a claim made in respect of an insolvent relevant person, a person to whom this section applies must permit a person authorised by the scheme manager to inspect relevant documents. (2) A person inspecting a document under this section may take copies of, or extracts from, the document. (3) This section applies to— (a) the administrative receiver, administrator, liquidator or trustee in bankruptcy of an insolvent relevant person;

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(b) the permanent trustee, within the meaning of the Bankruptcy (Scotland) Act 1985, on the estate of an insolvent relevant person. (4) This section does not apply to a liquidator, administrator or trustee in bankruptcy who is— (a) the Official Receiver; (b) the Official Receiver for Northern Ireland; or (c) the Accountant in Bankruptcy. (5) ‘‘Relevant person’’ has the same meaning as in section 224. Powers of court where information required 221.—(1) If a person (‘‘the defaulter’’)— (a) fails to comply with a requirement imposed under section 219, or (b) fails to permit documents to be inspected under section 220, the scheme manager may certify that fact in writing to the court and the court may enquire into the case. (2) If the court is satisfied that the defaulter failed without reasonable excuse to comply with the requirement (or to permit the documents to be inspected), it may deal with the defaulter (and, in the case of a body corporate, any director or officer) as if he were in contempt. (3) ‘‘Court’’ means— (a) the High Court; (b) in Scotland, the Court of Session. Miscellaneous Statutory immunity 222.—(1) Neither the scheme manager nor any person who is, or is acting as, its board member, officer or member of staff is to be liable in damages for anything done or omitted in the discharge, or purported discharge, of the scheme manager’s functions. (2) Subsection (1) does not apply— (a) if the act or omission is shown to have been in bad faith; or (b) so as to prevent an award of damages made in respect of an act or omission on the ground that the act or omission was unlawful as a result of section 6(1) of the Human Rights Act 1998. Management expenses 223.—(1) The amount which the scheme manager may recover, from the sums levied under the scheme, as management expenses attributable to a particular period may not exceed such amount as may be fixed by the scheme as the limit applicable to that period. (2) In calculating the amount of any levy to be imposed by the scheme manager, no amount may be included to reflect management expenses unless the limit mentioned in subsection (1) has been fixed by the scheme. (3) ‘‘Management expenses’’ means expenses incurred, or expected to be incurred, by the scheme manager in connection with its functions under this Act other than those incurred— (a) in paying compensation; (b) as a result of any provision of the scheme made by virtue of section 216(3) or (4) or 217(1) or (6). Scheme manager’s power to inspect documents held by Official Receiver etc. 224.—(1) If, as a result of the insolvency or bankruptcy of a relevant person, any documents have come into the possession of a person to whom this section applies, he must permit any person authorised by the scheme manager to inspect the documents for the purpose of establishing— (a) the identity of persons to whom the scheme manager may be liable to make a payment in accordance with the compensation scheme; or

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(b) the amount of any payment which the scheme manager may be liable to make. (2) A person inspecting a document under this section may take copies or extracts from the document. (3) In this section ‘‘relevant person’’ means a person who was— (a) an authorised person at the time the act or omission which may give rise to the liability mentioned in subsection (1)(a) took place; or (b) an appointed representative at that time. (4) But a person who, at that time— (a) qualified for authorisation under Schedule 3, and (b) fell within a prescribed category, is not to be regarded as a relevant person for the purposes of this section in relation to any activities for which he had permission as a result of any provision of, or made under, that Schedule unless he had elected to participate in the scheme in relation to those activities at that time. (5) This section applies to— (a) the Official Receiver; (b) the Official Receiver for Northern Ireland; and (c) the Accountant in Bankruptcy. Notes Subs (4) prescribed category—see SI 2001 No 1783. PA RT X V I

THE OMBUDSMAN SCHEME

The scheme The scheme and the scheme operator 225.—(1) This Part provides for a scheme under which certain disputes may be resolved quickly and with minimum formality by an independent person. (2) The scheme is to be administered by a body corporate (‘‘the scheme operator’’). (3) The scheme is to be operated under a name chosen by the scheme operator but is referred to in this Act as ‘‘the ombudsman scheme’’. (4) Schedule 17 makes provision in connection with the ombudsman scheme and the scheme operator. Notes The scheme operator of the Financial Ombudsman Service takes the form of a company limited by guarantee. The powers and functions of the scheme operator are set out in Part XVI of the Act, Sched 17 of the Act and the memorandum of association and articles of association of the company. Subs (4) Sched 17 appears below in this work.

Compulsory jurisdiction 226.—(1) A complaint which relates to an act or omission of a person (‘‘the respondent’’) in carrying on an activity to which compulsory jurisdiction rules apply is to be dealt with under the ombudsman scheme if the conditions mentioned in subsection (2) are satisfied. (2) The conditions are that— (a) the complainant is eligible and wishes to have the complaint dealt with under the scheme; (b) the respondent was an authorised person at the time of the act or omission to which the complaint relates; and (c) the act or omission to which the complaint relates occurred at a time when compulsory jurisdiction rules were in force in relation to the activity in question. (3) ‘‘Compulsory jurisdiction rules’’ means rules— (a) made by the Authority for the purposes of this section; and (b) specifying the activities to which they apply. (4) Only activities which are regulated activities, or which could be made regulated activities by an order under section 22, may be specified.

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(5) Activities may be specified by reference to specified categories (however described). (6) A complainant is eligible, in relation to the compulsory jurisdiction of the ombudsman scheme, if he falls within a class of person specified in the rules as eligible. (7) The rules— (a) may include provision for persons other than individuals to be eligible; but (b) may not provide for authorised persons to be eligible except in specified circumstances or in relation to complaints of a specified kind. (8) The jurisdiction of the scheme which results from this section is referred to in this Act as the ‘‘compulsory jurisdiction’’.

Consumer credit jurisdiction 226A.—(1) A complaint which relates to an act or omission of a person (‘‘the respondent’’) is to be dealt with under the ombudsman scheme if the conditions mentioned in subsection (2) are satisfied. (2) The conditions are that— (a) the complainant is eligible and wishes to have the complaint dealt with under the scheme; (b) the complaint falls within a description specified in consumer credit rules; (c) at the time of the act or omission the respondent was the licensee under a standard licence or was authorised to carry on an activity by virtue of section 34A of the Consumer Credit Act 1974; (d) the act or omission occurred in the course of a business being carried on by the respondent which was of a type mentioned in subsection (3); (e) at the time of the act or omission that type of business was specified in an order made by the Secretary of State; and (f) the complaint cannot be dealt with under the compulsory jurisdiction. (3) The types of business referred to in subsection (2)(d) are— (a) a consumer credit business; (b) a consumer hire business; (c) a business so far as it comprises or relates to credit brokerage; (d) a business so far as it comprises or relates to debt-adjusting; (e) a business so far as it comprises or relates to debt-counselling; (f) a business so far as it comprises or relates to debt-collecting; (g) a business so far as it comprises or relates to debt administration; (h) a business so far as it comprises or relates to the provision of credit information services; (i) a business so far as it comprises or relates to the operation of a credit reference agency. (4) A complainant is eligible if— (a) he is— (i) an individual; or (ii) a surety in relation to a security provided to the respondent in connection with the business mentioned in subsection (2)(d); and (b) he falls within a class of person specified in consumer credit rules. (5) The approval of the Treasury is required for an order under subsection (2)(e). (6) The jurisdiction of the scheme which results from this section is referred to in this Act as the ‘‘consumer credit jurisdiction’’. (7) In this Act ‘‘consumer credit rules’’ means rules made by the scheme operator with the approval of the Authority for the purposes of the consumer credit jurisdiction. (8) Consumer credit rules under this section may make different provision for different cases. (9) Expressions used in the Consumer Credit Act 1974 have the same meaning in this section as they have in that Act. Notes Section 226A inserted by the Consumer Credit Act 2006.

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Voluntary jurisdiction 227.—(1) A complaint which relates to an act or omission of a person (‘‘the respondent’’) in carrying on an activity to which voluntary jurisdiction rules apply is to be dealt with under the ombudsman scheme if the conditions mentioned in subsection (2) are satisfied. (2) The conditions are that— (a) the complainant is eligible and wishes to have the complaint dealt with under the scheme; (b) at the time of the act or omission to which the complaint relates, the respondent was participating in the scheme; (c) at the time when the complaint is referred under the scheme, the respondent has not withdrawn from the scheme in accordance with its provisions; (d) the act or omission to which the complaint relates occurred at a time when voluntary jurisdiction rules were in force in relation to the activity in question; and (e) the complaint cannot be dealt with under the compulsory jurisdiction or the consumer credit jurisdiction. (3) ‘‘Voluntary jurisdiction rules’’ means rules— (a) made by the scheme operator for the purposes of this section; and (b) specifying the activities to which they apply. (4) The only activities which may be specified in the rules are activities which are, or could be, specified in compulsory jurisdiction rules. (5) Activities may be specified by reference to specified categories (however described). (6) The rules require the Authority’s approval. (7) A complainant is eligible, in relation to the voluntary jurisdiction of the ombudsman scheme, if he falls within a class of person specified in the rules as eligible. (8) The rules may include provision for persons other than individuals to be eligible. (9) A person qualifies for participation in the ombudsman scheme if he falls within a class of person specified in the rules in relation to the activity in question. (10) Provision may be made in the rules for persons other than authorised persons to participate in the ombudsman scheme. (11) The rules may make different provision in relation to complaints arising from different activities. (12) The jurisdiction of the scheme which results from this section is referred to in this Act as the ‘‘voluntary jurisdiction’’. (13) In such circumstances as may be specified in voluntary jurisdiction rules, a complaint— (a) which relates to an act or omission occurring at a time before the rules came into force, and (b) which could have been dealt with under a scheme which has to any extent been replaced by the voluntary jurisdiction, is to be dealt with under the ombudsman scheme even though paragraph (b) or (d) of subsection (2) would otherwise prevent that. (14) In such circumstances as may be specified in voluntary jurisdiction rules, a complaint is to be dealt with under the ombudsman scheme even though— (a) paragraph (b) or (d) of subsection (2) would otherwise prevent that, and (b) the complaint is not brought within the scheme as a result of subsection (13), but only if the respondent has agreed that complaints of that kind were to be dealt with under the scheme. Notes Subs (2)(e) reference to consumer credit jurisdiction inserted by Consumer Credit Act 2006.

Determination of complaints Determination under the compulsory jurisdiction 228.—(1) This section applies only in relation to the compulsory jurisdiction and to the consumer credit jurisdiction.

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(2) A complaint is to be determined by reference to what is, in the opinion of the ombudsman, fair and reasonable in all the circumstances of the case. (3) When the ombudsman has determined a complaint he must give a written statement of his determination to the respondent and to the complainant. (4) The statement must— (a) give the ombudsman’s reasons for his determination; (b) be signed by him; and (c) require the complainant to notify him in writing, before a date specified in the statement, whether he accepts or rejects the determination. (5) If the complainant notifies the ombudsman that he accepts the determination, it is binding on the respondent and the complainant and final. (6) If, by the specified date, the complainant has not notified the ombudsman of his acceptance or rejection of the determination he is to be treated as having rejected it. (7) The ombudsman must notify the respondent of the outcome. (8) A copy of the determination on which appears a certificate signed by an ombudsman is evidence (or in Scotland sufficient evidence) that the determination was made under the scheme. (9) Such a certificate purporting to be signed by an ombudsman is to be taken to have been duly signed unless the contrary is shown. Notes Subs (1) reference to consumer credit jurisdiction inserted by Consumer Credit Act 2006.

Awards 229.—(1) This section applies only in relation to the compulsory jurisdiction and to the consumer credit jurisdiction. (2) If a complaint which has been dealt with under the scheme is determined in favour of the complainant, the determination may include— (a) an award against the respondent of such amount as the ombudsman considers fair compensation for loss or damage (of a kind falling within subsection (3)) suffered by the complainant (‘‘a money award’’); (b) a direction that the respondent take such steps in relation to the complainant as the ombudsman considers just and appropriate (whether or not a court could order those steps to be taken). (3) A money award may compensate for— (a) financial loss; or (b) any other loss, or any damage, of a specified kind. (4) The Authority may specify for the purposes of the compulsory jurisdiction the maximum amount which may be regarded as fair compensation for a particular kind of loss or damage specified under subsection (3)(b). (4A) The scheme operator may specify for the purposes of the consumer credit jurisdiction the maximum amount which may be regarded as fair compensation for a particular kind of loss or damage specified under subsection (3)(b). (5) A money award may not exceed the monetary limit; but the ombudsman may, if he considers that fair compensation requires payment of a larger amount, recommend that the respondent pay the complainant the balance. (6) The monetary limit is such amount as may be specified. (7) Different amounts may be specified in relation to different kinds of complaint. (8) A money award— (a) may provide for the amount payable under the award to bear interest at a rate and as from a date specified in the award; and (b) is enforceable by the complainant in accordance with Part III of Schedule 17 or (as the case may be) Part 3A of that Schedule. (9) Compliance with a direction under subsection (2)(b)— (a) is enforceable by an injunction; or (b) in Scotland, is enforceable by an order under section 45 of the Court of Session Act 1988.

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(10) Only the complainant may bring proceedings for an injunction or proceedings for an order. (11) ‘‘Specified’’ means— (a) for the purposes of the compulsory jurisdiction, specified in compulsory jurisdiction rules; (b) for the purposes of the consumer credit jurisdiction, specified in consumer credit rules. (12) Consumer credit rules under this section may make different provision for different cases. Notes Subs (4) amended to refer to compulsory jurisdiction by the Consumer Credit Act 2006. Subs (4A) inserted by the Consumer Credit Act 2006. Subs (8) amended by the Consumer Credit Act 2006. Subs (11) new text substituted by the Consumer Credit Act 2006. Subs (12) inserted by the Consumer Credit Act 2006. In Bunney v. Burns Anderson [2007] EWHC 1240 (Ch) it was held that an award by the Ombudsman which required the regulated firm to make payment of a sum in excess of the sum specified for voluntary jurisdiction was not enforceable against the firm in enforcement proceedings insofar as the statutory maximum was exceeded.

Costs 230.—(1) The scheme operator may by rules (‘‘costs rules’’) provide for an ombudsman to have power, on determining a complaint under the compulsory jurisdiction or the consumer credit jurisdiction, to award costs in accordance with the provisions of the rules. (2) Costs rules require the approval of the Authority. (3) Costs rules may not provide for the making of an award against the complainant in respect of the respondent’s costs. (4) But they may provide for the making of an award against the complainant in favour of the scheme operator, for the purpose of providing a contribution to resources deployed in dealing with the complaint, if in the opinion of the ombudsman— (a) the complainant’s conduct was improper or unreasonable; or (b) the complainant was responsible for an unreasonable delay. (5) Costs rules may authorise an ombudsman making an award in accordance with the rules to order that the amount payable under the award bears interest at a rate and as from a date specified in the order. (6) An amount due under an award made in favour of the scheme operator is recoverable as a debt due to the scheme operator. (7) Any other award made against the respondent is to be treated as a money award for the purposes of paragraph 16 of Schedule 17 or (as the case may be) paragraph 16D of that Schedule. Notes Subs (1) amended to refer to consumer credit jurisdiction by the Consumer Credit Act 2006. Subs (7) amended to refer to paragraph 16D of Schedule 17 by the Consumer Credit Act 2006.

Information Ombudsman’s power to require information 231.—(1) An ombudsman may, by notice in writing given to a party to a complaint, require that party— (a) to provide specified information or information of a specified description; or (b) to produce specified documents or documents of a specified description. (2) The information or documents must be provided or produced— (a) before the end of such reasonable period as may be specified; and (b) in the case of information, in such manner or form as may be specified.

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(3) This section applies only to information and documents the production of which the ombudsman considers necessary for the determination of the complaint. (4) If a document is produced in response to a requirement imposed under this section, the ombudsman may— (a) take copies or extracts from the document; or (b) require the person producing the document to provide an explanation of the document. (5) If a person who is required under this section to produce a document fails to do so, the ombudsman may require him to state, to the best of his knowledge and belief, where the document is. (6) If a person claims a lien on a document, its production under this Part does not affect the lien. (7) ‘‘Specified’’ means specified in the notice given under subsection (1). Powers of court where information required 232.—(1) If a person (‘‘the defaulter’’) fails to comply with a requirement imposed under section 231, the ombudsman may certify that fact in writing to the court and the court may enquire into the case. (2) If the court is satisfied that the defaulter failed without reasonable excuse to comply with the requirement, it may deal with the defaulter (and, in the case of a body corporate, any director or officer) as if he were in contempt. (3) ‘‘Court’’ means— (a) the High Court; (b) in Scotland, the Court of Session. Data protection 233. In section 31 of the Data Protection Act 1998 (regulatory activity), after subsection (4), insert— ‘‘(4A) Personal data processed for the purpose of discharging any function which is conferred by or under Part XVI of the Financial Services and Markets Act 2000 on the body established by the Financial Services Authority for the purposes of that Part are exempt from the subject information provisions in any case to the extent to which the application of those provisions to the data would be likely to prejudice the proper discharge of the function.’’ Funding Industry funding 234.—(1) For the purpose of funding— (a) the establishment of the ombudsman scheme (whenever any relevant expense is incurred), and (b) its operation in relation to the compulsory jurisdiction, the Authority may make rules requiring the payment to it or to the scheme operator, by authorised persons or any class of authorised person of specified amounts (or amounts calculated in a specified way). (2) ‘‘Specified’’ means specified in the rules. Funding by consumer credit licensees etc. 234A.—(1) For the purpose of funding— (a) the establishment of the ombudsman scheme so far as it relates to the consumer credit jurisdiction (whenever any relevant expense is incurred), and (b) its operation in relation to the consumer credit jurisdiction, the scheme operator may from time to time with the approval of the Authority determine a sum which is to be raised by way of contributions under this section.

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(2) A sum determined under subsection (1) may include a component to cover the costs of the collection of contributions to that sum (‘‘collection costs’’) under this section. (3) The scheme operator must notify the OFT of every determination under subsection (1). (4) The OFT must give general notice of every determination so notified. (5) The OFT may by general notice impose requirements on— (a) licensees to whom this section applies, or (b) persons who make applications to which this section applies, to pay contributions to the OFT for the purpose of raising sums determined under subsection (1). (6) The amount of the contribution payable by a person under such a requirement— (a) shall be the amount specified in or determined under the general notice; and (b) shall be paid before the end of the period or at the time so specified or determined. (7) A general notice under subsection (5) may— (a) impose requirements only on descriptions of licensees or applicants specified in the notice; (b) provide for exceptions from any requirement imposed on a description of licensees or applicants; (c) impose different requirements on different descriptions of licensees or applicants; (d) make provision for refunds in specified circumstances. (8) Contributions received by the OFT must be paid to the scheme operator. (9) As soon as practicable after the end of— (a) each financial year of the scheme operator, or (b) if the OFT and the scheme operator agree that this paragraph is to apply instead of paragraph (a) for the time being, each period agreed by them, the scheme operator must pay to the OFT an amount representing the extent to which collection costs are covered in accordance with subsection (2) by the total amount of the contributions paid by the OFT to it during the year or (as the case may be) the agreed period. (10) Amounts received by the OFT from the scheme operator are to be retained by it for the purpose of meeting its costs. (11) The Secretary of State may by order provide that the functions of the OFT under this section are for the time being to be carried out by the scheme operator. (12) An order under subsection (11) may provide that while the order is in force this section shall have effect subject to such modifications as may be set out in the order. (13) The licensees to whom this section applies are licensees under standard licences which cover to any extent the carrying on of a type of business specified in an order under section 226A(2)(e). (14) The applications to which this section applies are applications for— (a) standard licences covering to any extent the carrying on of a business of such a type; (b) the renewal of standard licences on terms covering to any extent the carrying on of a business of such a type. (15) Expressions used in the Consumer Credit Act 1974 have the same meaning in this section as they have in that Act. Notes Section 234A inserted by the Consumer Credit Act 2006. PA RT X V I I

COLLECTIVE INVESTMENT SCHEMES

This Part is outside the scope of this work and consequently is not reproduced here. PA RT X V I I I

RECOGNISED INVESTMENT EXCHANGES AND CLEARING HOUSES

This Part is outside the scope of this work and consequently is not reproduced here.

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PA RT X I X L L O Y D ’ S

General Authority’s general duty 314.—(1) The Authority must keep itself informed about— (a) the way in which the Council supervises and regulates the market at Lloyd’s; and (b) the way in which regulated activities are being carried on in that market. (2) The Authority must keep under review the desirability of exercising— (a) any of its powers under this Part; (b) any powers which it has in relation to the Society as a result of section 315. The Society The Society: authorisation and permission 315.—(1) The Society is an authorised person. (2) The Society has permission to carry on a regulated activity of any of the following kinds— (a) arranging deals in contracts of insurance written at Lloyd’s (‘‘the basic market activity’’); (b) arranging deals in participation in Lloyd’s syndicates (‘‘the secondary market activity’’); and (c) an activity carried on in connection with, or for the purposes of, the basic or secondary market activity. (3) For the purposes of Part IV, the Society’s permission is to be treated as if it had been given on an application for permission under that Part. (4) The power conferred on the Authority by section 45 may be exercised in anticipation of the coming into force of the Society’s permission (or at any other time). (5) The Society is not subject to any requirement of this Act concerning the registered office of a body corporate. Power to apply Act to Lloyd’s underwriting Direction by Authority 316.—(1) The general prohibition or (if the general prohibition is not applied under this section) a core provision applies to the carrying on of an insurance market activity by— (a) a member of the Society, or (b) the members of the Society taken together, only if the Authority so directs. (2) A direction given under subsection (1) which applies a core provision is referred to in this Part as ‘‘an insurance market direction’’. (3) In subsection (1)— ‘‘core provision’’ means a provision of this Act mentioned in section 317; and ‘‘insurance market activity’’ means a regulated activity relating to contracts of insurance written at Lloyd’s. (4) In deciding whether to give a direction under subsection (1), the Authority must have particular regard to— (a) the interests of policyholders and potential policyholders; (b) any failure by the Society to satisfy an obligation to which it is subject as a result of a provision of the law of another EEA State which— (i) gives effect to any of the insurance directives; and (ii) is applicable to an activity carried on in that State by a person to whom this section applies; (c) the need to ensure the effective exercise of the functions which the Authority has in relation to the Society as a result of section 315. (5) A direction under subsection (1) must be in writing.

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(6) A direction under subsection (1) applying the general prohibition may apply it in relation to different classes of person. (7) An insurance market direction— (a) must specify each core provision, class of person and kind of activity to which it applies; (b) may apply different provisions in relation to different classes of person and different kinds of activity. (8) A direction under subsection (1) has effect from the date specified in it, which may not be earlier than the date on which it is made. (9) A direction under subsection (1) must be published in the way appearing to the Authority to be best calculated to bring it to the attention of the public. (10) The Authority may charge a reasonable fee for providing a person with a copy of the direction. (11) The Authority must, without delay, give the Treasury a copy of any direction which it gives under this section. The core provisions 317.—(1) The core provisions are Parts V, X, XI, XII, XIV, XV, XVI, XXII and XXIV, sections 384 to 386 and Part XXVI. (2) References in an applied core provision to an authorised person are (where necessary) to be read as references to a person in the class to which the insurance market direction applies. (3) An insurance market direction may provide that a core provision is to have effect, in relation to persons to whom the provision is applied by the direction, with modifications. Exercise of powers through Council 318.—(1) The Authority may give a direction under this subsection to the Council or to the Society (acting through the Council) or to both. (2) A direction under subsection (1) is one given to the body concerned— (a) in relation to the exercise of its powers generally with a view to achieving, or in support of, a specified objective; or (b) in relation to the exercise of a specified power which it has, whether in a specified manner or with a view to achieving, or in support of, a specified objective. (3) ‘‘Specified’’ means specified in the direction. (4) A direction under subsection (1) may be given— (a) instead of giving a direction under section 316(1); or (b) if the Authority considers it necessary or expedient to do so, at the same time as, or following, the giving of such a direction. (5) A direction may also be given under subsection (1) in respect of underwriting agents as if they were among the persons mentioned in section 316(1). (6) A direction under this section— (a) does not, at any time, prevent the exercise by the Authority of any of its powers; (b) must be in writing. (7) A direction under subsection (1) must be published in the way appearing to the Authority to be best calculated to bring it to the attention of the public. (8) The Authority may charge a reasonable fee for providing a person with a copy of the direction. (9) The Authority must, without delay, give the Treasury a copy of any direction which it gives under this section. Consultation 319.—(1) Before giving a direction under section 316 or 318, the Authority must publish a draft of the proposed direction. (2) The draft must be accompanied by— (a) a cost benefit analysis; and

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(b) notice that representations about the proposed direction may be made to the Authority within a specified time. (3) Before giving the proposed direction, the Authority must have regard to any representations made to it in accordance with subsection (2)(b). (4) If the Authority gives the proposed direction it must publish an account, in general terms, of— (a) the representations made to it in accordance with subsection (2)(b); and (b) its response to them. (5) If the direction differs from the draft published under subsection (1) in a way which is, in the opinion of the Authority, significant— (a) the Authority must (in addition to complying with subsection (4)) publish details of the difference; and (b) those details must be accompanied by a cost benefit analysis. (6) Subsections (1) to (5) do not apply if the Authority considers that the delay involved in complying with them would be prejudicial to the interests of consumers. (7) Neither subsection (2)(a) nor subsection (5)(b) applies if the Authority considers— (a) that, making the appropriate comparison, there will be no increase in costs; or (b) that, making that comparison, there will be an increase in costs but the increase will be of minimal significance. (8) The Authority may charge a reasonable fee for providing a person with a copy of a draft published under subsection (1). (9) When the Authority is required to publish a document under this section it must do so in the way appearing to it to be best calculated to bring it to the attention of the public. (10) ‘‘Cost benefit analysis’’ means an estimate of the costs together with an analysis of the benefits that will arise— (a) if the proposed direction is given; or (b) if subsection (5)(b) applies, from the direction that has been given. (11) ‘‘The appropriate comparison’’ means— (a) in relation to subsection (2)(a), a comparison between the overall position if the direction is given and the overall position if it is not given; (b) in relation to subsection (5)(b), a comparison between the overall position after the giving of the direction and the overall position before it was given.

Former underwriting members Former underwriting members 320.—(1) A former underwriting member may carry out each contract of insurance that he has underwritten at Lloyd’s whether or not he is an authorised person. (2) If he is an authorised person, any Part IV permission that he has does not extend to his activities in carrying out any of those contracts. (3) The Authority may impose on a former underwriting member such requirements as appear to it to be appropriate for the purpose of protecting policyholders against the risk that he may not be able to meet his liabilities. (4) A person on whom a requirement is imposed may refer the matter to the Tribunal. Requirements imposed under section 320 321.—(1) A requirement imposed under section 320 takes effect— (a) immediately, if the notice given under subsection (2) states that that is the case; (b) in any other case, on such date as may be specified in that notice. (2) If the Authority proposes to impose a requirement on a former underwriting member (‘‘A’’) under section 320, or imposes such a requirement on him which takes effect immediately, it must give him written notice. (3) The notice must— (a) give details of the requirement; (b) state the Authority’s reasons for imposing it;

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(c) inform A that he may make representations to the Authority within such period as may be specified in the notice (whether or not he has referred the matter to the Tribunal); (d) inform him of the date on which the requirement took effect or will take effect; and (e) inform him of his right to refer the matter to the Tribunal. (4) The Authority may extend the period allowed under the notice for making representations. (5) If, having considered any representations made by A, the Authority decides— (a) to impose the proposed requirement, or (b) if it has been imposed, not to revoke it, it must give him written notice. (6) If the Authority decides— (a) not to impose a proposed requirement, or (b) to revoke a requirement that has been imposed, it must give A written notice. (7) If the Authority decides to grant an application by A for the variation or revocation of a requirement, it must give him written notice of its decision. (8) If the Authority proposes to refuse an application by A for the variation or revocation of a requirement it must give him a warning notice. (9) If the Authority, having considered any representations made in response to the warning notice, decides to refuse the application, it must give A a decision notice. (10) A notice given under— (a) subsection (5), or (b) subsection (9) in the case of a decision to refuse the application, must inform A of his right to refer the matter to the Tribunal. (11) If the Authority decides to refuse an application for a variation or revocation of the requirement, the applicant may refer the matter to the Tribunal. (12) If a notice informs a person of his right to refer a matter to the Tribunal, it must give an indication of the procedure on such a reference. Notes Subs (8) implementation: warning notices FSA Handbook DEPP 2.2. Subs (9) implementation: decision notices FSA Handbook DEPP 2.3.

Rules applicable to former underwriting members 322.—(1) The Authority may make rules imposing such requirements on persons to whom the rules apply as appear to it to be appropriate for protecting policyholders against the risk that those persons may not be able to meet their liabilities. (2) The rules may apply to— (a) former underwriting members generally; or (b) to a class of former underwriting member specified in them. (3) Section 319 applies to the making of proposed rules under this section as it applies to the giving of a proposed direction under section 316. (4) Part X (except sections 152 to 154) does not apply to rules made under this section.

Transfers of business done at Lloyd’s Transfer schemes 323. The Treasury may by order provide for the application of any provision of Part VII (with or without modification) in relation to schemes for the transfer of the whole or any part of the business carried on by one or more members of the Society or former underwriting members.

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Supplemental Interpretation of this Part 324.—(1) In this Part— ‘‘arranging deals’’, in relation to the investments to which this Part applies, has the same meaning as in paragraph 3 of Schedule 2; ‘‘former underwriting member’’ means a person ceasing to be an underwriting member of the Society on, or at any time after, 24 December 1996; and ‘‘participation in Lloyd’s syndicates’’, in relation to the secondary market activity, means the investment described in sub-paragraph (1) of paragraph 21 of Schedule 2. (2) A term used in this Part which is defined in Lloyd’s Act 1982 has the same meaning as in that Act. PA RT X X

PROVISION OF FINANCIAL SERVICES BY MEMBERS OF THE PROFESSIONS

This Part is outside the scope of this work and consequently is not reproduced here. PA RT X X I

MUTUAL SOCIETIES

Friendly societies The Friendly Societies Commission 334.—(1) The Treasury may by order provide— (a) for any functions of the Friendly Societies Commission to be transferred to the Authority; (b) for any functions of the Friendly Societies Commission which have not been, or are not being, transferred to the Authority to be transferred to the Treasury. (2) If the Treasury consider it appropriate to do so, they may by order provide for the Friendly Societies Commission to cease to exist on a day specified in or determined in accordance with the order. (3) The enactments relating to friendly societies which are mentioned in Part I of Schedule 18 are amended as set out in that Part. (4) Part II of Schedule 18— (a) removes certain restrictions on the ability of incorporated friendly societies to form subsidiaries and control corporate bodies; and (b) makes connected amendments. The Registry of Friendly Societies 335.—(1) The Treasury may by order provide— (a) for any functions of the Chief Registrar of Friendly Societies, or of an assistant registrar of friendly societies for the central registration area, to be transferred to the Authority; (b) for any of their functions which have not been, or are not being, transferred to the Authority to be transferred to the Treasury. (2) The Treasury may by order provide— (a) for any functions of the central office of the registry of friendly societies to be transferred to the Authority; (b) for any functions of that office which have not been, or are not being, transferred to the Authority to be transferred to the Treasury. (3) The Treasury may by order provide— (a) for any functions of the assistant registrar of friendly societies for Scotland to be transferred to the Authority; (b) for any functions of the assistant registrar which have not been, or are not being, transferred to the Authority to be transferred to the Treasury. (4) If the Treasury consider it appropriate to do so, they may by order provide for— (a) the office of Chief Registrar of Friendly Societies,

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Regulation of Insurers the office of assistant registrar of friendly societies for the central registration area, the central office, or the office of assistant registrar of friendly societies for Scotland, to exist on a day specified in or determined in accordance with the order.

Notes Sections 336 and 337 deal with building societies and are outside the scope of this work.

Industrial and provident societies and credit unions Industrial and provident societies and credit unions 338.—(1) The Treasury may by order provide for the transfer to the Authority of any functions conferred by— (a) the Industrial and Provident Societies Act 1965; (b) the Industrial and Provident Societies Act 1967; (c) the Friendly and Industrial and Provident Societies Act 1968; (d) the Industrial and Provident Societies Act 1975; (e) the Industrial and Provident Societies Act 1978; (f) the Credit Unions Act 1979. (2) The Treasury may by order provide for the transfer to the Treasury of any functions under those enactments which have not been, or are not being, transferred to the Authority. (3) The enactments relating to industrial and provident societies which are mentioned in Part IV of Schedule 18 are amended as set out in that Part. (4) The enactments relating to credit unions which are mentioned in Part V of Schedule 18 are amended as set out in that Part. Supplemental Supplemental provisions 339.—(1) The additional powers conferred by section 428 on a person making an order under this Act include power for the Treasury, when making an order under section 334, 335, 336 or 338 which transfers functions, to include provision— (a) for the transfer of any functions of a member of the body, or servant or agent of the body or person, whose functions are transferred by the order; (b) for the transfer of any property, rights or liabilities held, enjoyed or incurred by any person in connection with transferred functions; (c) for the carrying on and completion by or under the authority of the person to whom functions are transferred of any proceedings, investigations or other matters commenced, before the order takes effect, by or under the authority of the person from whom the functions are transferred; (d) amending any enactment relating to transferred functions in connection with their exercise by, or under the authority of, the person to whom they are transferred; (e) for the substitution of the person to whom functions are transferred for the person from whom they are transferred, in any instrument, contract or legal proceedings made or begun before the order takes effect. (2) The additional powers conferred by section 428 on a person making an order under this Act include power for the Treasury, when making an order under section 334(2), 335(4), 336(2) or 337, to include provision— (a) for the transfer of any property, rights or liabilities held, enjoyed or incurred by any person in connection with the office or body which ceases to have effect as a result of the order; (b) for the carrying on and completion by or under the authority of such person as may be specified in the order of any proceedings, investigations or other matters commenced, before the order takes effect, by or under the authority of the person whose office, or the body which, ceases to exist as a result of the order; (c) amending any enactment which makes provision with respect to that office or body; (d) for the substitution of the Authority, the Treasury or such other body as may be specified in the order in any instrument, contract or legal proceedings made or begun before the order takes effect.

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(3) On or after the making of an order under any of sections 334 to 338 (‘‘the original order’’), the Treasury may by order make any incidental, supplemental, consequential or transitional provision which they had power to include in the original order. (4) A certificate issued by the Treasury that property vested in a person immediately before an order under this Part takes effect has been transferred as a result of the order is conclusive evidence of the transfer. (5) Subsections (1) and (2) are not to be read as affecting in any way the powers conferred by section 428.

PA RT X X I I

AUDITORS AND ACTUARIES

Appointment Appointment 340.—(1) Rules may require an authorised person, or an authorised person falling within a specified class— (a) to appoint an auditor, or (b) to appoint an actuary, if he is not already under an obligation to do so imposed by another enactment. (2) Rules may require an authorised person, or an authorised person falling within a specified class— (a) to produce periodic financial reports; and (b) to have them reported on by an auditor or an actuary. (3) Rules may impose such other duties on auditors of, or actuaries acting for, authorised persons as may be specified. (4) Rules under subsection (1) may make provision— (a) specifying the manner in which and time within which an auditor or actuary is to be appointed; (b) requiring the Authority to be notified of an appointment; (c) enabling the Authority to make an appointment if no appointment has been made or notified; (d) as to remuneration; (e) as to the term of office, removal and resignation of an auditor or actuary. (5) An auditor or actuary appointed as a result of rules under subsection (1), or on whom duties are imposed by rules under subsection (3)— (a) must act in accordance with such provision as may be made by rules; and (b) is to have such powers in connection with the discharge of his functions as may be provided by rules. (6) In subsections (1) to (3) ‘‘auditor’’ or ‘‘actuary’’ means an auditor, or actuary, who satisfies such requirements as to qualifications, experience and other matters (if any) as may be specified. (7) ‘‘Specified’’ means specified in rules. Information Access to books etc. 341.—(1) An appointed auditor of, or an appointed actuary acting for, an authorised person— (a) has a right of access at all times to the authorised person’s books, accounts and vouchers; and (b) is entitled to require from the authorised person’s officers such information and explanations as he reasonably considers necessary for the performance of his duties as auditor or actuary. (2) ‘‘Appointed’’ means appointed under or as a result of this Act.

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Information given by auditor or actuary to the Authority 342.—(1) This section applies to a person who is, or has been, an auditor of an authorised person appointed under or as a result of a statutory provision. (2) This section also applies to a person who is, or has been, an actuary acting for an authorised person and appointed under or as a result of a statutory provision. (3) An auditor or actuary does not contravene any duty to which he is subject merely because he gives to the Authority— (a) information on a matter of which he has, or had, become aware in his capacity as auditor of, or actuary acting for, the authorised person, or (b) his opinion on such a matter, if he is acting in good faith and he reasonably believes that the information or opinion is relevant to any functions of the Authority. (4) Subsection (3) applies whether or not the auditor or actuary is responding to a request from the Authority. (5) The Treasury may make regulations prescribing circumstances in which an auditor or actuary must communicate matters to the Authority as mentioned in subsection (3). (6) It is the duty of an auditor or actuary to whom any such regulations apply to communicate a matter to the Authority in the circumstances prescribed by the regulations. (7) The matters to be communicated to the Authority in accordance with the regulations may include matters relating to persons other than the authorised person concerned. Notes Implementation: SI 2001 No 2587. Subs (5) the relevant Regulations may be found in SI 2003 No 1294.

Information given by auditor or actuary to the Authority: persons with close links 343.—(1) This section applies to a person who— (a) is, or has been, an auditor of an authorised person appointed under or as a result of a statutory provision; and (b) is, or has been, an auditor of a person (‘‘CL’’) who has close links with the authorised person. (2) This section also applies to a person who— (a) is, or has been, an actuary acting for an authorised person and appointed under or as a result of a statutory provision; and (b) is, or has been, an actuary acting for a person (‘‘CL’’) who has close links with the authorised person. (3) An auditor or actuary does not contravene any duty to which he is subject merely because he gives to the Authority— (a) information on a matter concerning the authorised person of which he has, or had, become aware in his capacity as auditor of, or actuary acting for, CL, or (b) his opinion on such a matter, if he is acting in good faith and he reasonably believes that the information or opinion is relevant to any functions of the Authority. (4) Subsection (3) applies whether or not the auditor or actuary is responding to a request from the Authority. (5) The Treasury may make regulations prescribing circumstances in which an auditor or actuary must communicate matters to the Authority as mentioned in subsection (3). (6) It is the duty of an auditor or actuary to whom any such regulations apply to communicate a matter to the Authority in the circumstances prescribed by the regulations. (7) The matters to be communicated to the Authority in accordance with the regulations may include matters relating to persons other than the authorised person concerned. (8) CL has close links with the authorised person concerned (‘‘A’’) if CL is— (a) a parent undertaking of A; (b) a subsidiary undertaking of A; (c) a parent undertaking of a subsidiary undertaking of A; or (d) a subsidiary undertaking of a parent undertaking of A.

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(9) ‘‘Subsidiary undertaking’’ includes all the instances mentioned in Article 1(1) and (2) of the Seventh Company Law Directive in which an entity may be a subsidiary of an undertaking. Notes Implementation: SI 2001 No 2587. Subs (5) the relevant Regulations may be found in SI 2003 No 1294.

Duty of auditor or actuary resigning etc. to give notice 344.—(1) This section applies to an auditor or actuary to whom section 342 applies. (2) He must without delay notify the Authority if he— (a) is removed from office by an authorised person; (b) resigns before the expiry of his term of office with such a person; or (c) is not re-appointed by such a person. (3) If he ceases to be an auditor of, or actuary acting for, such a person, he must without delay notify the Authority— (a) of any matter connected with his so ceasing which he thinks ought to be drawn to the Authority’s attention; or (b) that there is no such matter. Disqualification Disqualification 345.—(1) If it appears to the Authority that an auditor or actuary to whom section 342 applies has failed to comply with a duty imposed on him under this Act, it may disqualify him from being the auditor of, or (as the case may be) from acting as an actuary for, any authorised person or any particular class of authorised person. (2) If the Authority proposes to disqualify a person under this section it must give him a warning notice. (3) If it decides to disqualify him it must give him a decision notice. (4) The Authority may remove any disqualification imposed under this section if satisfied that the disqualified person will in future comply with the duty in question. (5) A person who has been disqualified under this section Notes Subs (2) warning notices: interpretation, s 387; implementation FSA Handbook DEPP 2.2. Subs (3) decision notices: interpretation, s 388; implementation: FSA Handbook DEPP 2.3. Section 346, Provision of false or misleading information to auditor or actuary is omitted here. PA RT X X I I I

P U B L I C R E C O R D , D I S C L O S U R E O F I N F O R M AT I O N A N D C O - O P E R AT I O N

The public record The record of authorised persons etc. 347.—(1) The Authority must maintain a record of every— (a) person who appears to the Authority to be an authorised person; (b) authorised unit trust scheme; (c) authorised open-ended investment company; (d) recognised scheme; (e) recognised investment exchange; (f) recognised clearing house; (g) individual to whom a prohibition order relates; (h) approved person; (ha) person to whom subsection (2A) applies; and (i) person falling within such other class (if any) as the Authority may determine.

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(2) The record must include such information as the Authority considers appropriate and at least the following information— (a) in the case of a person appearing to the Authority to be an authorised person— (i) information as to the services which he holds himself out as able to provide; and (ii) any address of which the Authority is aware at which a notice or other document may be served on him; (b) in the case of an authorised unit trust scheme, the name and address of the manager and trustee of the scheme; (c) in the case of an authorised open-ended investment company, the name and address of— (i) the company; (ii) if it has only one director, the director; and (iii) its depositary (if any); (d) in the case of a recognised scheme, the name and address of— (i) the operator of the scheme; and (ii) any representative of the operator in the United Kingdom; (e) in the case of a recognised investment exchange or recognised clearing house, the name and address of the exchange or clearing house; (f) in the case of an individual to whom a prohibition order relates— (i) his name; and (ii) details of the effect of the order; (g) in the case of a person who is an approved person— (i) his name; (ii) the name of the relevant authorised person; (iii) if the approved person is performing a controlled function under an arrangement with a contractor of the relevant authorised person, the name of the contractor. (2A) This subsection applies to— (a) an appointed representative to whom subsection (1A) of section 39 applies for whom the applicable register (as defined by subsection (1B) of that section) is the record maintained by virtue of subsection (1)(ha) above; (b) a person mentioned in subsection (1)(a) of section 39A if— (i) the contract with an authorised person to which he is party complies with the applicable requirements (as defined by subsection (7) of that section), and (ii) the authorised person has accepted responsibility in writing for the person’s activities in carrying on investment services business (as defined by subsection (8) of that section); and (c) any person not falling within paragraph (a) or (b) in respect of whom the Authority considers that a record must be maintained for the purpose of securing compliance with Article 23.3 of the markets in financial instruments directive (registration of tied agents). (3) If it appears to the Authority that a person in respect of whom there is an entry in the record as a result of one of the paragraphs of subsection (1) has ceased to be a person to whom that paragraph applies, the Authority may remove the entry from the record. (4) But if the Authority decides not to remove the entry, it must— (a) make a note to that effect in the record; and (b) state why it considers that the person has ceased to be a person to whom that paragraph applies. (5) The Authority must— (a) make the record available for inspection by members of the public in a legible form at such times and in such place or places as the Authority may determine; and (b) provide a certified copy of the record, or any part of it, to any person who asks for it— (i) on payment of the fee (if any) fixed by the Authority; and (ii) in a form (either written or electronic) in which it is legible to the person asking for it. (6) The Authority may— (a) publish the record, or any part of it;

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(b) exploit commercially the information contained in the record, or any part of that information. (7) ‘‘Authorised unit trust scheme’’, ‘‘authorised open-ended investment company’’ and ‘‘recognised scheme’’ have the same meaning as in Part XVII, and associated expressions are to be read accordingly. (8) ‘‘Approved person’’ means a person in relation to whom the Authority has given its approval under section 59 and ‘‘controlled function’’ and ‘‘arrangement’’ have the same meaning as in that section. (9) ‘‘Relevant authorised person’’ has the meaning given in section 66. Notes Subs (1)(ha) inserted by SI 2007 No 126. Subs (2A) inserted by SI 2007 No 126.

Disclosure of information Restrictions on disclosure of confidential information by Authority etc. 348.—(1) Confidential information must not be disclosed by a primary recipient, or by any person obtaining the information directly or indirectly from a primary recipient, without the consent of— (a) the person from whom the primary recipient obtained the information; and (b) if different, the person to whom it relates. (2) In this Part ‘‘confidential information’’ means information which— (a) relates to the business or other affairs of any person; (b) was received by the primary recipient for the purposes of, or in the discharge of, any functions of the Authority, the competent authority for the purposes of Part VI or the Secretary of State under any provision made by or under this Act; and (c) is not prevented from being confidential information by subsection (4). (3) It is immaterial for the purposes of subsection (2) whether or not the information was received— (a) by virtue of a requirement to provide it imposed by or under this Act; (b) for other purposes as well as purposes mentioned in that subsection. (4) Information is not confidential information if— (a) it has been made available to the public by virtue of being disclosed in any circumstances in which, or for any purposes for which, disclosure is not precluded by this section; or (b) it is in the form of a summary or collection of information so framed that it is not possible to ascertain from it information relating to any particular person. (5) Each of the following is a primary recipient for the purposes of this Part— (a) the Authority; (b) any person exercising functions conferred by Part VI on the competent authority; (c) the Secretary of State; (d) a person appointed to make a report under section 166; (e) any person who is or has been employed by a person mentioned in paragraphs (a) to (c); (f) any auditor or expert instructed by a person mentioned in those paragraphs. (6) In subsection (5)(f) ‘‘expert’’ includes— (a) a competent person appointed by the competent authority under section 97; (b) a competent person appointed by the Authority or the Secretary of State to conduct an investigation under Part XI; (c) any body or person appointed under paragraph 6 of Schedule 1 to perform a function on behalf of the Authority. Exceptions from section 348 349.—(1) Section 348 does not prevent a disclosure of confidential information which is— (a) made for the purpose of facilitating the carrying out of a public function; and

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(b) permitted by regulations made by the Treasury under this section. (2) The regulations may, in particular, make provision permitting the disclosure of confidential information or of confidential information of a prescribed kind— (a) by prescribed recipients, or recipients of a prescribed description, to any person for the purpose of enabling or assisting the recipient to discharge prescribed public functions; (b) by prescribed recipients, or recipients of a prescribed description, to prescribed persons, or persons of prescribed descriptions, for the purpose of enabling or assisting those persons to discharge prescribed public functions; (c) by the Authority to the Treasury or the Secretary of State for any purpose; (d) by any recipient if the disclosure is with a view to or in connection with prescribed proceedings. (3) The regulations may also include provision— (a) making any permission to disclose confidential information subject to conditions (which may relate to the obtaining of consents or any other matter); (b) restricting the uses to which confidential information disclosed under the regulations may be put. (3A) Section 348 does not apply to— (a) the disclosure by a recipient to which subsection (3B) applies of confidential information disclosed to it by the Authority in reliance on subsection (1); (b) the disclosure of such information by a person obtaining it directly or indirectly from a recipient to which subsection (3B) applies. (3B) This subsection applies to— (a) the Panel on Takeovers and Mergers; (b) an authority designated as a supervisory authority for the purposes of Article 4.1 of the Takeovers Directive; (c) any other person or body that exercises public functions, under legislation in an EEA State other than the United Kingdom, that are similar to the Authority’s functions or those of the Panel on Takeovers and Mergers. (4) In relation to confidential information, each of the following is a ‘‘recipient’’— (a) a primary recipient; (b) a person obtaining the information directly or indirectly from a primary recipient. (5) ‘‘Public functions’’ includes— (a) functions conferred by or in accordance with any provision contained in any enactment or subordinate legislation; (b) functions conferred by or in accordance with any provision contained in the Community Treaties or any Community instrument; (c) similar functions conferred on persons by or under provisions having effect as part of the law of a country or territory outside the United Kingdom; (d) functions exercisable in relation to prescribed disciplinary proceedings. (6) ‘‘Enactment’’ includes— (a) an Act of the Scottish Parliament; (b) Northern Ireland legislation. (7) ‘‘Subordinate legislation’’ has the meaning given in the Interpretation Act 1978 and also includes an instrument made under an Act of the Scottish Parliament or under Northern Ireland legislation. (8) Section 348 has effect subject to regulation 18(1) of the Takeovers Directive (Interim Implementation) Regulations 2006. Notes Subs (3A) inserted by the Companies Act 2006, to enter into force on a date to be determined. Subs (3B) inserted by the Companies Act 2006, to enter into force on a date to be determined. Subs (8) inserted by SI 2006 No 1183.

Disclosure of information by the Inland Revenue 350.—(1) No obligation as to secrecy imposed by statute or otherwise prevents the disclosure of Revenue information to—

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(a) the Authority, or (b) the Secretary of State, if the disclosure is made for the purpose of assisting in the investigation of a matter under section 168 or with a view to the appointment of an investigator under that section. (2) A disclosure may only be made under subsection (1) by or under the authority of the Commissioners of Inland Revenue. (3) Section 348 does not apply to Revenue information. (4) Information obtained as a result of subsection (1) may not be used except— (a) for the purpose of deciding whether to appoint an investigator under section 168; (b) in the conduct of an investigation under section 168; (c) in criminal proceedings brought against a person under this Act or the Criminal Justice Act 1993 as a result of an investigation under section 168; (d) for the purpose of taking action under this Act against a person as a result of an investigation under section 168; (e) in proceedings before the Tribunal as a result of action taken as mentioned in paragraph (d). (5) Information obtained as a result of subsection (1) may not be disclosed except— (a) by or under the authority of the Commissioners of Inland Revenue; (b) in proceedings mentioned in subsection (4)(c) or (e) or with a view to their institution. (6) Subsection (5) does not prevent the disclosure of information obtained as a result of subsection (1) to a person to whom it could have been disclosed under subsection (1). (7) ‘‘Revenue information’’ means information held by a person which it would be an offence under section 182 of the Finance Act 1989 for him to disclose. Competition information 351.—(1) [repealed] (2) [repealed] (3) [repealed] (4) Section 348 does not apply to competition information. (5) ‘‘Competition information’’ means information which— (a) relates to the affairs of a particular individual or body; (b) is not otherwise in the public domain; and (c) was obtained under or by virtue of a competition provision. (6) ‘‘Competition provision’’ means any provision of— (a) an order made under section 95; (b) Chapter III of Part X; or (c) Chapter II of Part XVIII. (7) [repealed]. Notes Subss (1) to (3) and (7) and Sched 19 to the Financial Services and Markets Act 2000 were repealed by s 247(k) of the Enterprise Act 2002.

Offences 352.—(1) A person who discloses information in contravention of section 348 or 350(5) is guilty of an offence. (2) A person guilty of an offence under subsection (1) is liable— (a) on summary conviction, to imprisonment for a term not exceeding three months or a fine not exceeding the statutory maximum, or both; (b) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine, or both. (3) A person is guilty of an offence if, in contravention of any provision of regulations made under section 349, he uses information which has been disclosed to him in accordance with the regulations.

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(4) A person is guilty of an offence if, in contravention of subsection (4) of section 350, he uses information which has been disclosed to him in accordance with that section. (5) A person guilty of an offence under subsection (3) or (4) is liable on summary conviction to imprisonment for a term not exceeding three months or a fine not exceeding level 5 on the standard scale, or both. (6) In proceedings for an offence under this section it is a defence for the accused to prove— (a) that he did not know and had no reason to suspect that the information was confidential information or that it had been disclosed in accordance with section 350; (b) that he took all reasonable precautions and exercised all due diligence to avoid committing the offence. Removal of other restrictions on disclosure 353.—(1) The Treasury may make regulations permitting the disclosure of any information, or of information of a prescribed kind— (a) by prescribed persons for the purpose of assisting or enabling them to discharge prescribed functions under this Act or any rules or regulations made under it; (b) by prescribed persons, or persons of a prescribed description, to the Authority for the purpose of assisting or enabling the Authority to discharge prescribed functions; (c) by the scheme operator to the Office of Fair Trading for the purpose of assisting or enabling that Office to discharge prescribed functions under the Consumer Credit Act 1974. (2) Regulations under this section may not make any provision in relation to the disclosure of confidential information by primary recipients or by any person obtaining confidential information directly or indirectly from a primary recipient. (3) If a person discloses any information as permitted by regulations under this section the disclosure is not to be taken as a contravention of any duty to which he is subject. Notes Subs (1)(c) inserted by the Consumer Credit Act 2000.

Co-operation Authority’s duty to co-operate with others 354.—(1) The Authority must take such steps as it considers appropriate to co-operate with other persons (whether in the United Kingdom or elsewhere) who have functions— (a) similar to those of the Authority; or (b) in relation to the prevention or detection of financial crime. (1A) The Authority must take such steps as it considers appropriate to co-operate with— (a) the Panel on Takeovers and Mergers; (b) an authority designated as a supervisory authority for the purposes of Article 4.1 of the Takeovers Directive; (c) any other person or body that exercises functions of a public nature, under legislation in any country or territory outside the United Kingdom, that appear to the Authority to be similar to those of the Panel on Takeovers and Mergers. (2) Co-operation may include the sharing of information which the Authority is not prevented from disclosing. (3) ‘‘Financial crime’’ has the same meaning as in section 6. Notes Subs (1A) inserted by the Companies Act 2006, to enter into force on a date to be determined.

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Interpretation Interpretation of this Part 355.—(1) In this Part— ‘‘the 1985 Act’’ means the Bankruptcy (Scotland) Act 1985; ‘‘the 1986 Act’’ means the Insolvency Act 1986; ‘‘the 1989 Order’’ means the Insolvency (Northern Ireland) Order 1989; ‘‘body’’ means a body of persons— (a) over which the court has jurisdiction under any provision of, or made under, the 1986 Act (or the 1989 Order); but (b) which is not a building society, a friendly society or an industrial and provident society; and ‘‘court’’ means— (a) the court having jurisdiction for the purposes of the 1985 Act or the 1986 Act; or (b) in Northern Ireland, the High Court. (2) In this Part ‘‘insurer’’ has such meaning as may be specified in an order made by the Treasury. Notes Subs (2) The order defining ‘‘insurer’’ is the Financial Services and Markets Act 2000 (Insolvency) (Definition of ‘‘Insurer’’) Order 2001 Statutory Instrument 2001 No 2634.

Voluntary arrangements Authority’s powers to participate in proceedings: company voluntary arrangements 356.—(1) Where a voluntary arrangement has effect under Part I of the 1986 Act in respect of a company or insolvent partnership which is an authorised person, the Authority may apply to the court under section 6 or 7 of that Act. (2) Where a voluntary arrangement has been approved under Part II of the 1989 Order in respect of a company or insolvent partnership which is an authorised person, the Authority may apply to the court under Article 19 or 20 of that Order. (3) If a person other than the Authority makes an application to the court in relation to the company or insolvent partnership under any of those provisions, the Authority is entitled to be heard at any hearing relating to the application. Notes Subs (1) amended by the Insolvency Act 2000 s 15. Subs (2) amended by the Insolvency Act 2000 s 15. Subs (3) amended by the Insolvency Act 2000 s 15.

Authority’s powers to participate in proceedings: individual voluntary arrangements 357.—(1) The Authority is entitled to be heard on an application by an individual who is an authorised person under section 253 of the 1986 Act (or Article 227 of the 1989 Order). (2) Subsections (3) to (6) apply if such an order is made on the application of such a person. (3) A person appointed for the purpose by the Authority is entitled to attend any meeting of creditors of the debtor summoned under section 257 of the 1986 Act (or Article 231 of the 1989 Order). (4) Notice of the result of a meeting so summoned is to be given to the Authority by the chairman of the meeting. (5) The Authority may apply to the court— (a) under section 262 of the 1986 Act (or Article 236 of the 1989 Order); or (b) under section 263 of the 1986 Act (or Article 237 of the 1989 Order).

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(6) If a person other than the Authority makes an application to the court under any provision mentioned in subsection (5), the Authority is entitled to be heard at any hearing relating to the application. Authority’s powers to participate in proceedings: trust deeds for creditors in Scotland 358.—(1) This section applies where a trust deed has been granted by or on behalf of a debtor who is an authorised person. (2) The trustee must, as soon as practicable after he becomes aware that the debtor is an authorised person, send to the Authority— (a) in every case, a copy of the trust deed; (b) where any other document or information is sent to every creditor known to the trustee in pursuance of paragraph 5(1)(c) of Schedule 5 to the 1985 Act, a copy of such document or information. (3) Paragraph 7 of that Schedule applies to the Authority as if it were a qualified creditor who has not been sent a copy of the notice as mentioned in paragraph 5(1)(c) of the Schedule. (4) The Authority must be given the same notice as the creditors of any meeting of creditors held in relation to the trust deed. (5) A person appointed for the purpose by the Authority is entitled to attend and participate in (but not to vote at) any such meeting of creditors as if the Authority were a creditor under the deed. (6) This section does not affect any right the Authority has as a creditor of a debtor who is an authorised person. (7) Expressions used in this section and in the 1985 Act have the same meaning in this section as in that Act. Administration order Petitions 359.—(1) The Authority may make an administration application under Schedule B1 to the 1986 Act (or present a petition under Article 22 of the 1989 Order) in relation to a company or insolvent partnership which— (a) is or has been an authorised person, (b) is or has been an appointed representative, or (c) is carrying on or has carried on a regulated activity in contravention of the general prohibition. (2) Subsection (3) applies in relation to an administration application made (or a petition presented) by the Authority by virtue of this section. (3) Any of the following shall be treated for the purpose of paragraph 11(a) of Schedule B1 to the 1986 Act (or Article 21(1)(a) of the 1989 Order) as unable to pay its debts— (a) a company or partnership in default on an obligation to pay a sum due and payable under an agreement, and (b) an authorised deposit taker in default on an obligation to pay a sum due and payable in respect of a relevant deposit. (4) In this section— ‘‘agreement’’ means an agreement the making or performance of which constitutes or is part of a regulated activity carried on by the company or partnership, ‘‘authorised deposit taker’’ means a person with a Part IV permission to accept deposits (but not a person who has a Part IV permission to accept deposits only for the purpose of carrying on another regulated activity in accordance with that permission), ‘‘company’’ means a company— (a) in respect of which an administrator may be appointed under Schedule B1 to the 1986 Act, or (b) to which Article 21 of the 1989 Order applies, and ‘‘relevant deposit’’ shall, ignoring any restriction on the meaning of deposit arising from the identity of the person making the deposit, be construed in accordance with— (a) section 22,

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(b) any relevant order under that section, and (c) Schedule 2. (5) The definition of ‘‘authorised deposit taker’’ in subsection (4) shall be construed in accordance with— (a) section 22, (b) any relevant order under that section, and (c) Schedule 2. Notes Section 359 was comprehensively revised by the Enterprise Act 2002, Sched 17, art 55.

Insurers 360.—(1) The Treasury may by order provide that such provisions of Part II of the 1986 Act (or Part III of the 1989 Order) as may be specified are to apply in relation to insurers with such modifications as may be specified. (2) An order under this section— (a) may provide that such provisions of this Part as may be specified are to apply in relation to the administration of insurers in accordance with the order with such modifications as may be specified; and (b) requires the consent of the Secretary of State. (3) ‘‘Specified’’ means specified in the order. Administrator’s duty to report to Authority 361.—(1) This section applies where a company or partnership is— (a) in administration within the meaning of Schedule B1 to the 1986 Act, or (b) the subject of an administration order under Part III of the 1989 Order. (2) If the administrator thinks that the company or partnership is carrying on or has carried on a regulated activity in contravention of the general prohibition, he must report to the Authority without delay. (3) Subsection (2) does not apply where the administration arises out of an administration order made on an application made or petition presented by the Authority. Notes Section 361 was revised by the Enterprise Act 2002, Sched 17, art 56.

Authority’s powers to participate in proceedings 362.—(1) This section applies if a person other than the Authority makes an administration application under Schedule B1 to the 1986 Act (or presents a petition under Article 22 of the 1989 Order) in relation to a company or partnership which— (a) is, or has been, an authorised person; (b) is, or has been, an appointed representative; or (c) is carrying on, or has carried on, a regulated activity in contravention of the general prohibition. (1A) This section also applies in relation to— (a) the appointment under paragraph 14 or 22 of Schedule B1 to the 1986 Act of an administrator of a company of a kind described in subsection (1)(a) to (c), or (b) the filing with the court of a copy of notice of intention to appoint an administrator under either of those paragraphs. (2) The Authority is entitled to be heard— (a) at the hearing of the administration application or the petition; and (b) at any other hearing of the court in relation to the company or partnership under Part II of the 1986 Act (or Part III of the 1989 Order). (3) Any notice or other document required to be sent to a creditor of the company or partnership must also be sent to the Authority. (4) The Authority may apply to the court under paragraph 74 of Schedule B1 to the 1986 Act (or Article 39 of the 1989 Order).

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(4A) In respect of an application under subsection (4)— (a) paragraph 74(1)(a) and (b) shall have effect as if for the words ‘‘harm the interests of the applicant (whether alone or in common with some or all other members or creditors)’’ there were substituted the words ‘‘harm the interests of some or all members or creditors’’, and (b) Article 39 of the 1989 Order shall have effect with the omission of the words ‘‘(including at least himself’’).’’, and (5) A person appointed for the purpose by the Authority is entitled— (a) to attend any meeting of creditors of the company or partnership summoned under any enactment; (b) to attend any meeting of a committee established under paragraph 57 of Schedule B1 to the 1986 Act (or Article 38 of the 1989 Order); and (c) to make representations as to any matter for decision at such a meeting. (6) If, during the course of the administration of a company, a compromise or arrangement is proposed between the company and its creditors, or any class of them, the Authority may apply to the court under section 425 of the Companies Act 1985 (or Article 418 of the Companies (Northern Ireland) Order 1986). Notes Paragraph (1) amended by the Enterprise Act 2002, Sched 17, art 57. Paragraph (1A) inserted by the Enterprise Act 2002, Sched 17, art 57. Paragraph (2)(a) amended by the Enterprise Act 2002, Sched 17, art 57. Paragraph (4) amended by the Enterprise Act 2002, Sched 17, art 57. Paragraph (4A) inserted by the Enterprise Act 2002, Sched 17, art 57. Paragraph (5) amended by the Enterprise Act 2002, Sched 17, art 57.

Administrator appointed by company or directors 362A.—(1) This section applies in relation to a company of a kind described in section 362(1)(a) to (c). (2) An administrator of the company may not be appointed under paragraph 22 of Schedule B1 to the 1986 Act without the consent of the Authority. (3) Consent under subsection (2)— (a) must be in writing, and (b) must be filed with the court along with the notice of intention to appoint under paragraph 27 of that Schedule. (4) In a case where no notice of intention to appoint is required— (a) subsection (3)(b) shall not apply, but (b) consent under subsection (2) must accompany the notice of appointment filed under paragraph 29 of that Schedule. Notes Section 362A inserted by the Enterprise Act 2002, Sched 17, art 58.

Receivership Authority’s powers to participate in proceedings 363.—(1) This section applies if a receiver has been appointed in relation to a company which— (a) is, or has been, an authorised person; (b) is, or has been, an appointed representative; or (c) is carrying on, or has carried on, a regulated activity in contravention of the general prohibition. (2) The Authority is entitled to be heard on an application made under section 35 or 63 of the 1986 Act (or Article 45 of the 1989 Order). (3) The Authority is entitled to make an application under section 41(1)(a) or 69(1)(a) of the 1986 Act (or Article 51(1)(a) of the 1989 Order).

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(4) A report under section 48(1) or 67(1) of the 1986 Act (or Article 58(1) of the 1989 Order) must be sent by the person making it to the Authority. (5) A person appointed for the purpose by the Authority is entitled— (a) to attend any meeting of creditors of the company summoned under any enactment; (b) to attend any meeting of a committee established under section 49 or 68 of the 1986 Act (or Article 59 of the 1989 Order); and (c) to make representations as to any matter for decision at such a meeting. Receiver’s duty to report to Authority 364. If— (a) a receiver has been appointed in relation to a company, and (b) it appears to the receiver that the company is carrying on, or has carried on, a regulated activity in contravention of the general prohibition, the receiver must report the matter to the Authority without delay. Voluntary winding up Authority’s powers to participate in proceedings 365.—(1) This section applies in relation to a company which— (a) is being wound up voluntarily; (b) is an authorised person; and (c) is not an insurer effecting or carrying out contracts of long-term insurance. (2) The Authority may apply to the court under section 112 of the 1986 Act (or Article 98 of the 1989 Order) in respect of the company. (3) The Authority is entitled to be heard at any hearing of the court in relation to the voluntary winding up of the company. (4) Any notice or other document required to be sent to a creditor of the company must also be sent to the Authority. (5) A person appointed for the purpose by the Authority is entitled— (a) to attend any meeting of creditors of the company summoned under any enactment; (b) to attend any meeting of a committee established under section 101 of the 1986 Act (or Article 87 of the 1989 Order); and (c) to make representations as to any matter for decision at such a meeting. (6) The voluntary winding up of the company does not bar the right of the Authority to have it wound up by the court. (7) If, during the course of the winding up of the company, a compromise or arrangement is proposed between the company and its creditors, or any class of them, the Authority may apply to the court under section 425 of the Companies Act 1985 (or Article 418 of the Companies (Northern Ireland) Order 1986). Insurers effecting or carrying out long-term contracts or insurance 366.—(1) An insurer effecting or carrying out contracts of long-term insurance may not be wound up voluntarily without the consent of the Authority. (2) If notice of a general meeting of such an insurer is given, specifying the intention to propose a resolution for voluntary winding up of the insurer, a director of the insurer must notify the Authority as soon as practicable after he becomes aware of it. (3) A person who fails to comply with subsection (2) is guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale. (4) The following provisions do not apply in relation to a winding-up resolution— (a) sections 378(3) and 381A of the Companies Act 1985 (‘‘the 1985 Act’’); and (b) Articles 386(3) and 389A of the Companies (Northern Ireland) Order 1986 (‘‘the 1986 Order’’). (5) A copy of a winding-up resolution forwarded to the registrar of companies in accordance with section 380 of the 1985 Act (or Article 388 of the 1986 Order) must be accompanied by

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a certificate issued by the Authority stating that it consents to the voluntary winding up of the insurer. (6) If subsection (5) is complied with, the voluntary winding up is to be treated as having commenced at the time the resolution was passed. (7) If subsection (5) is not complied with, the resolution has no effect. (8) ‘‘Winding-up resolution’’ means a resolution for voluntary winding up of an insurer effecting or carrying out contracts of long-term insurance. Winding up by the court Winding-up petitions 367.—(1) The Authority may present a petition to the court for the winding up of a body which— (a) is, or has been, an authorised person; (b) is, or has been, an appointed representative; or (c) is carrying on, or has carried on, a regulated activity in contravention of the general prohibition. (2) In subsection (1) ‘‘body’’ includes any partnership. (3) On such a petition, the court may wind up the body if— (a) the body is unable to pay its debts within the meaning of section 123 or 221 of the 1986 Act (or Article 103 or 185 of the 1989 Order); or (b) the court is of the opinion that it is just and equitable that it should be wound up. (4) If a body is in default on an obligation to pay a sum due and payable under an agreement, it is to be treated for the purpose of subsection (3)(a) as unable to pay its debts. (5) ‘‘Agreement’’ means an agreement the making or performance of which constitutes or is part of a regulated activity carried on by the body concerned. (6) Subsection (7) applies if a petition is presented under subsection (1) for the winding up of a partnership— (a) on the ground mentioned in subsection (3)(b); or (b) in Scotland, on a ground mentioned in subsection (3)(a) or (b). (7) The court has jurisdiction, and the 1986 Act (or the 1989 Order) has effect, as if the partnership were an unregistered company as defined by section 220 of that Act (or Article 184 of that Order). Winding-up petitions: EEA and Treaty firms 368. The Authority may not present a petition to the court under section 367 for the winding up of— (a) an EEA firm which qualifies for authorisation under Schedule 3, or (b) a Treaty firm which qualifies for authorisation under Schedule 4, unless it has been asked to do so by the home state regulator of the firm concerned. Insurers: service of petition etc. on Authority 369.—(1) If a person other than the Authority presents a petition for the winding up of an authorised person with permission to effect or carry out contracts of insurance, the petitioner must serve a copy of the petition on the Authority. (2) If a person other than the Authority applies to have a provisional liquidator appointed under section 135 of the 1986 Act (or Article 115 of the 1989 Order) in respect of an authorised person with permission to effect or carry out contracts of insurance, the applicant must serve a copy of the application on the Authority. Liquidator’s duty to report to Authority 370. If— (a) a company is being wound up voluntarily or a body is being wound up on a petition presented by a person other than the Authority, and

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(b) it appears to the liquidator that the company or body is carrying on, or has carried on, a regulated activity in contravention of the general prohibition, the liquidator must report the matter to the Authority without delay. Authority’s powers to participate in proceedings 371.—(1) This section applies if a person other than the Authority presents a petition for the winding up of a body which— (a) is, or has been, an authorised person; (b) is, or has been, an appointed representative; or (c) is carrying on, or has carried on, a regulated activity in contravention of the general prohibition. (2) The Authority is entitled to be heard— (a) at the hearing of the petition; and (b) at any other hearing of the court in relation to the body under or by virtue of Part IV or V of the 1986 Act (or Part V or VI of the 1989 Order). (3) Any notice or other document required to be sent to a creditor of the body must also be sent to the Authority. (4) A person appointed for the purpose by the Authority is entitled— (a) to attend any meeting of creditors of the body; (b) to attend any meeting of a committee established for the purposes of Part IV or V of the 1986 Act under section 101 of that Act or under section 141 or 142 of that Act; (c) to attend any meeting of a committee established for the purposes of Part V or VI of the 1989 Order under Article 87 of that Order or under Article 120 of that Order; and (d) to make representations as to any matter for decision at such a meeting. (5) If, during the course of the winding up of a company, a compromise or arrangement is proposed between the company and its creditors, or any class of them, the Authority may apply to the court under section 425 of the Companies Act 1985 (or Article 418 of the Companies (Northern Ireland) Order 1986). Bankruptcy Petitions 372.—(1) The Authority may present a petition to the court— (a) under section 264 of the 1986 Act (or Article 238 of the 1989 Order) for a bankruptcy order to be made against an individual; or (b) under section 5 of the 1985 Act for the sequestration of the estate of an individual. (2) But such a petition may be presented only on the ground that— (a) the individual appears to be unable to pay a regulated activity debt; or (b) the individual appears to have no reasonable prospect of being able to pay a regulated activity debt. (3) An individual appears to be unable to pay a regulated activity debt if he is in default on an obligation to pay a sum due and payable under an agreement. (4) An individual appears to have no reasonable prospect of being able to pay a regulated activity debt if— (a) the Authority has served on him a demand requiring him to establish to the satisfaction of the Authority that there is a reasonable prospect that he will be able to pay a sum payable under an agreement when it falls due; (b) at least three weeks have elapsed since the demand was served; and (c) the demand has been neither complied with nor set aside in accordance with rules. (5) A demand made under subsection (4)(a) is to be treated for the purposes of the 1986 Act (or the 1989 Order) as if it were a statutory demand under section 268 of that Act (or Article 242 of that Order). (6) For the purposes of a petition presented in accordance with subsection (1)(b)— (a) the Authority is to be treated as a qualified creditor; and (b) a ground mentioned in subsection (2) constitutes apparent insolvency.

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(7) ‘‘Individual’’ means an individual— (a) who is, or has been, an authorised person; or (b) who is carrying on, or has carried on, a regulated activity in contravention of the general prohibition. (8) ‘‘Agreement’’ means an agreement the making or performance of which constitutes or is part of a regulated activity carried on by the individual concerned. (9) ‘‘Rules’’ means— (a) in England and Wales, rules made under section 412 of the 1986 Act; (b) in Scotland, rules made by order by the Treasury, after consultation with the Scottish Ministers, for the purposes of this section; and (c) in Northern Ireland, rules made under Article 359 of the 1989 Order. Insolvency practitioner’s duty to report to Authority 373.—(1) If— (a) a bankruptcy order or sequestration award is in force in relation to an individual by virtue of a petition presented by a person other than the Authority, and (b) it appears to the insolvency practitioner that the individual is carrying on, or has carried on, a regulated activity in contravention of the general prohibition, the insolvency practitioner must report the matter to the Authority without delay. (2) ‘‘Bankruptcy order’’ means a bankruptcy order under Part IX of the 1986 Act (or Part IX of the 1989 Order). (3) ‘‘Sequestration award’’ means an award of sequestration under section 12 of the 1985 Act. (4) ‘‘Individual’’ includes an entity mentioned in section 374(1)(c). Authority’s powers to participate in proceedings 374.—(1) This section applies if a person other than the Authority presents a petition to the court— (a) under section 264 of the 1986 Act (or Article 238 of the 1989 Order) for a bankruptcy order to be made against an individual; (b) under section 5 of the 1985 Act for the sequestration of the estate of an individual; or (c) under section 6 of the 1985 Act for the sequestration of the estate belonging to or held for or jointly by the members of an entity mentioned in subsection (1) of that section. (2) The Authority is entitled to be heard— (a) at the hearing of the petition; and (b) at any other hearing in relation to the individual or entity under— (i) Part IX of the 1986 Act; (ii) Part IX of the 1989 Order; or (iii) the 1985 Act. (3) A copy of the report prepared under section 274 of the 1986 Act (or Article 248 of the 1989 Order) must also be sent to the Authority. (4) A person appointed for the purpose by the Authority is entitled— (a) to attend any meeting of creditors of the individual or entity; (b) to attend any meeting of a committee established under section 301 of the 1986 Act (or Article 274 of the 1989 Order); (c) to attend any meeting of commissioners held under paragraph 17 or 18 of Schedule 6 to the 1985 Act; and (d) to make representations as to any matter for decision at such a meeting. (5) ‘‘Individual’’ means an individual who— (a) is, or has been, an authorised person; or (b) is carrying on, or has carried on, a regulated activity in contravention of the general prohibition. (6) ‘‘Entity’’ means an entity which— (a) is, or has been, an authorised person; or

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(b) is carrying on, or has carried on, a regulated activity in contravention of the general prohibition. Provisions against debt avoidance Authority’s right to apply for an order 375.—(1) The Authority may apply for an order under section 423 of the 1986 Act (or Article 367 of the 1989 Order) in relation to a debtor if— (a) at the time the transaction at an undervalue was entered into, the debtor was carrying on a regulated activity (whether or not in contravention of the general prohibition); and (b) a victim of the transaction is or was party to an agreement entered into with the debtor, the making or performance of which constituted or was part of a regulated activity carried on by the debtor. (2) An application made under this section is to be treated as made on behalf of every victim of the transaction to whom subsection (1)(b) applies. (3) Expressions which are given a meaning in Part XVI of the 1986 Act (or Article 367, 368 or 369 of the 1989 Order) have the same meaning when used in this section. Supplemental provisions concerning insurers Continuation of contracts of long-term insurance where insurer in liquidation 376.—(1) This section applies in relation to the winding up of an insurer which effects or carries out contracts of long-term insurance. (2) Unless the court otherwise orders, the liquidator must carry on the insurer’s business so far as it consists of carrying out the insurer’s contracts of long-term insurance with a view to its being transferred as a going concern to a person who may lawfully carry out those contracts. (3) In carrying on the business, the liquidator— (a) may agree to the variation of any contracts of insurance in existence when the winding up order is made; but (b) must not effect any new contracts of insurance. (4) If the liquidator is satisfied that the interests of the creditors in respect of liabilities of the insurer attributable to contracts of long-term insurance effected by it require the appointment of a special manager, he may apply to the court. (5) On such an application, the court may appoint a special manager to act during such time as the court may direct. (6) The special manager is to have such powers, including any of the powers of a receiver or manager, as the court may direct. (7) Section 177(5) of the 1986 Act (or Article 151(5) of the 1989 Order) applies to a special manager appointed under subsection (5) as it applies to a special manager appointed under section 177 of the 1986 Act (or Article 151 of the 1989 Order). (8) If the court thinks fit, it may reduce the value of one or more of the contracts of long-term insurance effected by the insurer. (9) Any reduction is to be on such terms and subject to such conditions (if any) as the court thinks fit. (10) The court may, on the application of an official, appoint an independent actuary to investigate the insurer’s business so far as it consists of carrying out its contracts of long-term insurance and to report to the official— (a) on the desirability or otherwise of that part of the insurer’s business being continued; and (b) on any reduction in the contracts of long-term insurance effected by the insurer that may be necessary for successful continuation of that part of the insurer’s business. (11) ‘‘Official’’ means— (a) the liquidator; (b) a special manager appointed under subsection (5); or (c) the Authority.

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(12) The liquidator may make an application in the name of the insurer and on its behalf under Part VII without obtaining the permission that would otherwise be required by section 167 of, and Schedule 4 to, the 1986 Act (or Article 142 of, and Schedule 2 to, the 1989 Order). Reducing the value of contracts instead of winding up 377.—(1) This section applies in relation to an insurer which has been proved to be unable to pay its debts. (2) If the court thinks fit, it may reduce the value of one or more of the insurer’s contracts instead of making a winding up order. (3) Any reduction is to be on such terms and subject to such conditions (if any) as the court thinks fit. Treatment of assets on winding up 378.—(1) The Treasury may by regulations provide for the treatment of the assets of an insurer on its winding up. (2) The regulations may, in particular, provide for— (a) assets representing a particular part of the insurer’s business to be available only for meeting liabilities attributable to that part of the insurer’s business; (b) separate general meetings of the creditors to be held in respect of liabilities attributable to a particular part of the insurer’s business. Winding-up rules 379.—(1) Winding-up rules may include provision— (a) for determining the amount of the liabilities of an insurer to policyholders of any class or description for the purpose of proof in a winding up; and (b) generally for carrying into effect the provisions of this Part with respect to the winding up of insurers. (2) Winding-up rules may, in particular, make provision for all or any of the following matters— (a) the identification of assets and liabilities; (b) the apportionment, between assets of different classes or descriptions, of— (i) the costs, charges and expenses of the winding up; and (ii) any debts of the insurer of a specified class or description; (c) the determination of the amount of liabilities of a specified description; (d) the application of assets for meeting liabilities of a specified description; (e) the application of assets representing any excess of a specified description. (3) ‘‘Specified’’ means specified in winding-up rules. (4) ‘‘Winding-up rules’’ means rules made under section 411 of the 1986 Act (or Article 359 of the 1989 Order). (5) Nothing in this section affects the power to make winding-up rules under the 1986 Act or the 1989 Order. PA RT X X V

INJUNCTIONS AND RESTITUTION

Injunctions Injunctions 380.—(1) If, on the application of the Authority or the Secretary of State, the court is satisfied— (a) that there is a reasonable likelihood that any person will contravene a relevant requirement, or (b) that any person has contravened a relevant requirement and that there is a reasonable likelihood that the contravention will continue or be repeated,

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the court may make an order restraining (or in Scotland an interdict prohibiting) the contravention. (2) If on the application of the Authority or the Secretary of State the court is satisfied— (a) that any person has contravened a relevant requirement, and (b) that there are steps which could be taken for remedying the contravention, the court may make an order requiring that person, and any other person who appears to have been knowingly concerned in the contravention, to take such steps as the court may direct to remedy it. (3) If, on the application of the Authority or the Secretary of State, the court is satisfied that any person may have— (a) contravened a relevant requirement, or (b) been knowingly concerned in the contravention of such a requirement, it may make an order restraining (or in Scotland an interdict prohibiting) him from disposing of, or otherwise dealing with, any assets of his which it is satisfied he is reasonably likely to dispose of or otherwise deal with. (4) The jurisdiction conferred by this section is exercisable by the High Court and the Court of Session. (5) In subsection (2), references to remedying a contravention include references to mitigating its effect. (6) ‘‘Relevant requirement’’— (a) in relation to an application by the Authority, means a requirement— (i) which is imposed by or under this Act or by any directly applicable Community regulation made under the markets in financial instruments directive; or (ii) which is imposed by or under any other Act and whose contravention constitutes an offence which the Authority has power to prosecute under this Act; (b) in relation to an application by the Secretary of State, means a requirement which is imposed by or under this Act and whose contravention constitutes an offence which the Secretary of State has power to prosecute under this Act. (7) In the application of subsection (6) to Scotland— (a) in paragraph (a)(ii) for ‘‘which the Authority has power to prosecute under this Act’’ substitute ‘‘mentioned in paragraph (a) or (b) of section 402(1)’’; and (b) in paragraph (b) omit ‘‘which the Secretary of State has power to prosecute under this Act’’. Notes Subs (6)(a)(i) the words ‘‘or by any directly applicable Community regulation made under the markets in financial instruments directive’’ inserted by SI 2007 No 126. Implementation: FSA handbook ENF 6.3, 6.5, 6.6 (in force until 27 August 2007).

Injunctions in cases of market abuse 381.—(1) If, on the application of the Authority, the court is satisfied— (a) that there is a reasonable likelihood that any person will engage in market abuse, or (b) that any person is or has engaged in market abuse and that there is a reasonable likelihood that the market abuse will continue or be repeated, the court may make an order restraining (or in Scotland an interdict prohibiting) the market abuse. (2) If on the application of the Authority the court is satisfied— (a) that any person is or has engaged in market abuse, and (b) that there are steps which could be taken for remedying the market abuse, the court may make an order requiring him to take such steps as the court may direct to remedy it. (3) Subsection (4) applies if, on the application of the Authority, the court is satisfied that any person— (a) may be engaged in market abuse; or (b) may have been engaged in market abuse.

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(4) The court make an order restraining (or in Scotland an interdict prohibiting) the person concerned from disposing of, or otherwise dealing with, any assets of his which it is satisfied that he is reasonably likely to dispose of, or otherwise deal with. (5) The jurisdiction conferred by this section is exercisable by the High Court and the Court of Session. (6) In subsection (2), references to remedying any market abuse include references to mitigating its effect. Notes Implementation: FSA handbook ENF 6.4, 6.5, 6.6 (in force until 27 August 2007).

Restitution orders Restitution orders 382.—(1) The court may, on the application of the Authority or the Secretary of State, make an order under subsection (2) if it is satisfied that a person has contravened a relevant requirement, or been knowingly concerned in the contravention of such a requirement, and— (a) that profits have accrued to him as a result of the contravention; or (b) that one or more persons have suffered loss or been otherwise adversely affected as a result of the contravention. (2) The court may order the person concerned to pay to the Authority such sum as appears to the court to be just having regard— (a) in a case within paragraph (a) of subsection (1), to the profits appearing to the court to have accrued; (b) in a case within paragraph (b) of that subsection, to the extent of the loss or other adverse effect; (c) in a case within both of those paragraphs, to the profits appearing to the court to have accrued and to the extent of the loss or other adverse effect. (3) Any amount paid to the Authority in pursuance of an order under subsection (2) must be paid by it to such qualifying person or distributed by it among such qualifying persons as the court may direct. (4) On an application under subsection (1) the court may require the person concerned to supply it with such accounts or other information as it may require for any one or more of the following purposes— (a) establishing whether any and, if so, what profits have accrued to him as mentioned in paragraph (a) of that subsection; (b) establishing whether any person or persons have suffered any loss or adverse effect as mentioned in paragraph (b) of that subsection and, if so, the extent of that loss or adverse effect; and (c) determining how any amounts are to be paid or distributed under subsection (3). (5) The court may require any accounts or other information supplied under subsection (4) to be verified in such manner as it may direct. (6) The jurisdiction conferred by this section is exercisable by the High Court and the Court of Session. (7) Nothing in this section affects the right of any person other than the Authority or the Secretary of State to bring proceedings in respect of the matters to which this section applies. (8) ‘‘Qualifying person’’ means a person appearing to the court to be someone— (a) to whom the profits mentioned in subsection (1)(a) are attributable; or (b) who has suffered the loss or adverse effect mentioned in subsection (1)(b). (9) ‘‘Relevant requirement’’— (a) in relation to an application by the Authority, means a requirement— (i) which is imposed by or under this Act or by any directly applicable Community regulation made under the markets in financial instruments directive; or (ii) which is imposed by or under any other Act and whose contravention constitutes an offence which the Authority has power to prosecute under this Act;

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(b) in relation to an application by the Secretary of State, means a requirement which is imposed by or under this Act and whose contravention constitutes an offence which the Secretary of State has power to prosecute under this Act. (10) In the application of subsection (9) to Scotland— (a) in paragraph (a)(ii) for ‘‘which the Authority has power to prosecute under this Act’’ substitute ‘‘mentioned in paragraph (a) or (b) of section 402(1); and (b) in paragraph (b) omit ‘‘which the Secretary of State has power to prosecute under this Act’’. Notes Subs (9)(a)(i) the words ‘or by any directly applicable Community regulation made under the markets in financial instruments directive’ inserted by SI 2007 No 126. Implementation: FSA Handbook ENF 9 (in force until 27 August 2007). Section 383 concerns restitution orders in cases of market abuse.

Restitution required by Authority Power of Authority to require restitution 384.—(1) The Authority may exercise the power in subsection (5) if it is satisfied that an authorised person (‘‘the person concerned’’) has contravened a relevant requirement, or been knowingly concerned in the contravention of such a requirement, and— (a) that profits have accrued to him as a result of the contravention; or (b) that one or more persons have suffered loss or been otherwise adversely affected as a result of the contravention. (2) The Authority may exercise the power in subsection (5) if it is satisfied that a person (‘‘the person concerned’’)— (a) has engaged in market abuse, or (b) by taking or refraining from taking any action has required or encouraged another person or persons to engage in behaviour which, if engaged in by the person concerned, would amount to market abuse, and the condition mentioned in subsection (3) is fulfilled, (3) The condition is— (a) that profits have accrued to the person concerned as a result of the market abuse; or (b) that one or more persons have suffered loss or been otherwise adversely affected as a result of the market abuse. (4) But the Authority may not exercise that power as a result of subsection (2) if, having considered any representations made to it in response to a warning notice, there are reasonable grounds for it to be satisfied that— (a) the person concerned believed, on reasonable grounds, that his behaviour did not fall within paragraph (a) or (b) of that subsection; or (b) he took all reasonable precautions and exercised all due diligence to avoid behaving in a way which fell within paragraph (a) or (b) of that subsection. (5) The power referred to in subsections (1) and (2) is a power to require the person concerned, in accordance with such arrangements as the Authority considers appropriate, to pay to the appropriate person or distribute among the appropriate persons such amount as appears to the Authority to be just having regard— (a) in a case within paragraph (a) of subsection (1) or (3), to the profits appearing to the Authority to have accrued; (b) in a case within paragraph (b) of subsection (1) or (3), to the extent of the loss or other adverse effect; (c) in a case within paragraphs (a) and (b) of subsection (1) or (3), to the profits appearing to the Authority to have accrued and to the extent of the loss or other adverse effect. (6) ‘‘Appropriate person’’ means a person appearing to the Authority to be someone— (a) to whom the profits mentioned in paragraph (a) of subsection (1) or (3) are attributable; or (b) who has suffered the loss or adverse effect mentioned in paragraph (b) of subsection (1) or (3).

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(7) ‘‘Relevant requirement’’ means— (a) a requirement imposed by or under this Act or by any directly applicable Community regulation made under the markets in financial instruments directive; and (b) a requirement which is imposed by or under any other Act and whose contravention constitutes an offence in relation to which this Act confers power to prosecute on the Authority. (8) In the application of subsection (7) to Scotland, in paragraph (b) for ‘‘in relation to which this Act confers power to prosecute on the Authority’’ substitute ‘‘mentioned in paragraph (a) or (b) of section 402(1)’’. Notes Subs (7)(a) the words ‘‘or by any directly applicable Community regulation made under the markets in financial instruments directive’’ inserted by SI 2007 No 126. Implementation: FSA Handbook ENF 9.

Warning notices 385.—(1) If the Authority proposes to exercise the power under section 384(5) in relation to a person, it must give him a warning notice. (2) A warning notice under this section must specify the amount which the Authority proposes to require the person concerned to pay or distribute as mentioned in section 384(5). Notes Warning notices: Interpretation, s 387; implementation: FSA Handbook DEPP 2.2.

Decision notices 386.—(1) If the Authority decides to exercise the power under section 384(5), it must give a decision notice to the person in relation to whom the power is exercised. (2) The decision notice must— (a) state the amount that he is to pay or distribute as mentioned in section 384(5); (b) identify the person or persons to whom that amount is to be paid or among whom that amount is to be distributed; and (c) state the arrangements in accordance with which the payment or distribution is to be made. (3) If the Authority decides to exercise the power under section 384(5), the person in relation to whom it is exercised may refer the matter to the Tribunal. Notes Warning notices: Interpretation, s 387; implementation: FSA Handbook DEPP 2.2. PA RT X X V I

NOTICES

Warning notices Warning notices 387.—(1) A warning notice must— (a) state the action which the Authority proposes to take; (b) be in writing; (c) give reasons for the proposed action; (d) state whether section 394 applies; and (e) if that section applies, describe its effect and state whether any secondary material exists to which the person concerned must be allowed access under it. (2) The warning notice must specify a reasonable period (which may not be less than 28 days) within which the person to whom it is given may make representations to the Authority. (3) The Authority may extend the period specified in the notice.

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(4) The Authority must then decide, within a reasonable period, whether to give the person concerned a decision notice. Notes Implementation: FSA Handbook DEPP 2.2.

Decision notices Decision notices 388.—(1) A decision notice must— (a) be in writing; (b) give the Authority’s reasons for the decision to take the action to which the notice relates; (c) state whether section 394 applies; (d) if that section applies, describe its effect and state whether any secondary material exists to which the person concerned must be allowed access under it; and (e) give an indication of— (i) any right to have the matter referred to the Tribunal which is given by this Act; and (ii) the procedure on such a reference. (2) If the decision notice was preceded by a warning notice, the action to which the decision notice relates must be action under the same Part as the action proposed in the warning notice. (3) The Authority may, before it takes the action to which a decision notice (‘‘the original notice’’) relates, give the person concerned a further decision notice which relates to different action in respect of the same matter. (4) The Authority may give a further decision notice as a result of subsection (3) only if the person to whom the original notice was given consents. (5) If the person to whom a decision notice is given under subsection (3) had the right to refer the matter to which the original decision notice related to the Tribunal, he has that right as respects the decision notice under subsection (3). Notes Decision notices: FSA Handbook DEPP 2.3.

Conclusion of proceedings Notices of discontinuance 389.—(1) If the Authority decides not to take— (a) the action proposed in a warning notice, or (b) the action to which a decision notice relates, it must give a notice of discontinuance to the person to whom the warning notice or decision notice was given. (2) But subsection (1) does not apply if the discontinuance of the proceedings concerned results in the granting of an application made by the person to whom the warning or decision notice was given. (3) A notice of discontinuance must identify the proceedings which are being discontinued. Final notices 390.—(1) If the Authority has given a person a decision notice and the matter was not referred to the Tribunal within the period mentioned in section 133(1), the Authority must, on taking the action to which the decision notice relates, give the person concerned and any person to whom the decision notice was copied a final notice. (2) If the Authority has given a person a decision notice and the matter was referred to the Tribunal, the Authority must, on taking action in accordance with any directions given by—

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(a) the Tribunal, or (b) the court under section 137, give that person and any person to whom the decision notice was copied a final notice. (3) A final notice about a statement must— (a) set out the terms of the statement; (b) give details of the manner in which, and the date on which, the statement will be published. (4) A final notice about an order must— (a) set out the terms of the order; (b) state the date from which the order has effect. (5) A final notice about a penalty must— (a) state the amount of the penalty; (b) state the manner in which, and the period within which, the penalty is to be paid; (c) give details of the way in which the penalty will be recovered if it is not paid by the date stated in the notice. (6) A final notice about a requirement to make a payment or distribution in accordance with section 384(5) must state— (a) the persons to whom, (b) the manner in which, and (c) the period within which, it must be made. (7) In any other case, the final notice must— (a) give details of the action being taken; (b) state the date on which the action is to be taken. (8) The period stated under subsection (5)(b) or (6)(c) may not be less than 14 days beginning with the date on which the final notice is given. (9) If all or any of the amount of a penalty payable under a final notice is outstanding at the end of the period stated under subsection (5)(b), the Authority may recover the outstanding amount as a debt due to it. (10) If all or any of a required payment or distribution has not been made at the end of a period stated in a final notice under subsection (6)(c), the obligation to make the payment is enforceable, on the application of the Authority, by injunction or, in Scotland, by an order under section 45 of the Court of Session Act 1988. Publication Publication 391.—(1) Neither the Authority nor a person to whom a warning notice or decision notice is given or copied may publish the notice or any details concerning it. (2) A notice of discontinuance must state that, if the person to whom the notice is given consents, the Authority may publish such information as it considers appropriate about the matter to which the discontinued proceedings related. (3) A copy of a notice of discontinuance must be accompanied by a statement that, if the person to whom the notice is copied consents, the Authority may publish such information as it considers appropriate about the matter to which the discontinued proceedings related, so far as relevant to that person. (4) The Authority must publish such information about the matter to which a final notice relates as it considers appropriate. (5) When a supervisory notice takes effect, the Authority must publish such information about the matter to which the notice relates as it considers appropriate. (6) But the Authority may not publish information under this section if publication of it would, in its opinion, be unfair to the person with respect to whom the action was taken or prejudicial to the interests of consumers. (7) Information is to be published under this section in such manner as the Authority considers appropriate. (8) For the purposes of determining when a supervisory notice takes effect, a matter to which the notice relates is open to review if—

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(a) the period during which any person may refer the matter to the Tribunal is still running; (b) the matter has been referred to the Tribunal but has not been dealt with; (c) the matter has been referred to the Tribunal and dealt with but the period during which an appeal may be brought against the Tribunal’s decision is still running; or (d) such an appeal has been brought but has not been determined. (9) ‘‘Notice of discontinuance’’ means a notice given under section 389. (10) ‘‘Supervisory notice’’ has the same meaning as in section 395. (11) ‘‘Consumers’’ means persons who are consumers for the purposes of section 138. Third party rights and access to evidence Application of sections 393 and 394 392. Sections 393 and 394 apply to— (a) a warning notice given in accordance with section 54(1), 57(1), 63(3), 67(1), 88(4)(b), 89(2), 92(1), 126(1), 207(1), 255(1), 280(1), 331(1), 345(2) (whether as a result of subsection (1) of that section or section 249(1)), 385(1) or 412B(4) or (8); (b) a decision notice given in accordance with section 54(2), 57(3), 63(4), 67(4), 88(6)(b), 89(3), 92(4), 127(1), 208(1), 255(2), 280(2), 331(3), 345(3) (whether as a result of subsection (1) of that section or section 249(1)), 386(1) or 412B(5) or (9). Notes Subs (a) references to ss 385(1) or 412B(4) or (8) inserted by SI 2007 No 126. Subs (b) references to ss 386(1) or 412B(5) or (9) inserted by SI 2007 No 126. Third party rights: implementation, FSA Handbook DEPP 2.4.

Third party rights 393.—(1) If any of the reasons contained in a warning notice to which this section applies relates to a matter which— (a) identifies a person (‘‘the third party’’) other than the person to whom the notice is given, and (b) in the opinion of the Authority, is prejudicial to the third party, a copy of the notice must be given to the third party. (2) Subsection (1) does not require a copy to be given to the third party if the Authority— (a) has given him a separate warning notice in relation to the same matter; or (b) gives him such a notice at the same time as it gives the warning notice which identifies him. (3) The notice copied to a third party under subsection (1) must specify a reasonable period (which may not be less than 28 days) within which he may make representations to the Authority. (4) If any of the reasons contained in a decision notice to which this section applies relates to a matter which— (a) identifies a person (‘‘the third party’’) other than the person to whom the decision notice is given, and (b) in the opinion of the Authority, is prejudicial to the third party, a copy of the notice must be given to the third party. (5) If the decision notice was preceded by a warning notice, a copy of the decision notice must (unless it has been given under subsection (4)) be given to each person to whom the warning notice was copied. (6) Subsection (4) does not require a copy to be given to the third party if the Authority— (a) has given him a separate decision notice in relation to the same matter; or (b) gives him such a notice at the same time as it gives the decision notice which identifies him.

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(7) Neither subsection (1) nor subsection (4) requires a copy of a notice to be given to a third party if the Authority considers it impracticable to do so. (8) Subsections (9) to (11) apply if the person to whom a decision notice is given has a right to refer the matter to the Tribunal. (9) A person to whom a copy of the notice is given under this section may refer to the Tribunal— (a) the decision in question, so far as it is based on a reason of the kind mentioned in subsection (4); or (b) any opinion expressed by the Authority in relation to him. (10) The copy must be accompanied by an indication of the third party’s right to make a reference under subsection (9) and of the procedure on such a reference. (11) A person who alleges that a copy of the notice should have been given to him, but was not, may refer to the Tribunal the alleged failure and— (a) the decision in question, so far as it is based on a reason of the kind mentioned in subsection (4); or (b) any opinion expressed by the Authority in relation to him. (12) Section 394 applies to a third party as it applies to the person to whom the notice to which this section applies was given, in so far as the material which the Authority must disclose under that section relates to the matter which identifies the third party. (13) A copy of a notice given to a third party under this section must be accompanied by a description of the effect of section 394 as it applies to him. (14) Any person to whom a warning notice or decision notice was copied under this section must be given a copy of a notice of discontinuance applicable to the proceedings to which the warning notice or decision notice related. Note Third party rights: implementation, FSA Handbook DEPP 2.4.

Access to Authority material 394.—(1) If the Authority gives a person (‘‘A’’) a notice to which this section applies, it must— (a) allow him access to the material on which it relied in taking the decision which gave rise to the obligation to give the notice; (b) allow him access to any secondary material which, in the opinion of the Authority, might undermine that decision. (2) But the Authority does not have to allow A access to material under subsection (1) if the material is excluded material or it— (a) relates to a case involving a person other than A; and (b) was taken into account by the Authority in A’s case only for purposes of comparison with other cases. (3) The Authority may refuse A access to particular material which it would otherwise have to allow him access to if, in its opinion, allowing him access to the material— (a) would not be in the public interest; or (b) would not be fair, having regard to— (i) the likely significance of the material to A in relation to the matter in respect of which he has been given a notice to which this section applies; and (ii) the potential prejudice to the commercial interests of a person other than A which would be caused by the material’s disclosure. (4) If the Authority does not allow A access to material because it is excluded material consisting of a protected item, it must give A written notice of— (a) the existence of the protected item; and (b) the Authority’s decision not to allow him access to it. (5) If the Authority refuses under subsection (3) to allow A access to material, it must give him written notice of— (a) the refusal; and (b) the reasons for it.

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(6) ‘‘Secondary material’’ means material, other than material falling within paragraph (a) of subsection (1) which— (a) was considered by the Authority in reaching the decision mentioned in that paragraph; or (b) was obtained by the Authority in connection with the matter to which the notice to which this section applies relates but which was not considered by it in reaching that decision. (7) ‘‘Excluded material’’ means material which— (a) has been intercepted in obedience to a warrant issued under any enactment relating to the interception of communications; (b) indicates that such a warrant has been issued or that material has been intercepted in obedience to such a warrant; or (c) is a protected item (as defined in section 413). Note Third party rights: implementation, FSA Handbook DEPP 2.4.

The Authority’s procedures The Authority’s procedures 395.—(1) The Authority must determine the procedure that it proposes to follow in relation to the giving of— (a) supervisory notices; and (b) warning notices and decision notices. (2) That procedure must be designed to secure, among other things, that the decision which gives rise to the obligation to give any such notice is taken by a person not directly involved in establishing the evidence on which that decision is based. (3) But the procedure may permit a decision which gives rise to an obligation to give a supervisory notice to be taken by a person other than a person mentioned in subsection (2) if— (a) the Authority considers that, in the particular case, it is necessary in order to protect the interests of consumers; and (b) the person taking the decision is of a level of seniority laid down by the procedure. (4) A level of seniority laid down by the procedure for the purposes of subsection (3)(b) must be appropriate to the importance of the decision. (5) The Authority must issue a statement of the procedure. (6) The statement must be published in the way appearing to the Authority to be best calculated to bring it to the attention of the public. (7) The Authority may charge a reasonable fee for providing a person with a copy of the statement. (8) The Authority must, without delay, give the Treasury a copy of any statement which it issues under this section. (9) When giving a supervisory notice, or a warning notice or decision notice, the Authority must follow its stated procedure. (10) If the Authority changes the procedure in a material way, it must publish a revised statement. (11) The Authority’s failure in a particular case to follow its procedure as set out in the latest published statement does not affect the validity of a notice given in that case. (12) But subsection (11) does not prevent the Tribunal from taking into account any such failure in considering a matter referred to it. (13) ‘‘Supervisory notice’’ means a notice given in accordance with section— (a) 53(4), (7) or (8)(b); (b) 78(2) or (5); (ba) 96C; (bb) 87O(2) or (5); (c) 197(3), (6) or (7)(b); (d) 259(3), (8) or (9)(b);

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Notes Subs 13(ba) inserted by SI 2005 No 381, Reg 7. Subs 13(bb) inserted by SI 2005 No 1433. Implementation: FSA Handbook DEC.

Statements under section 395: consultation 396.—(1) Before issuing a statement of procedure under section 395, the Authority must publish a draft of the proposed statement in the way appearing to the Authority to be best calculated to bring it to the attention of the public. (2) The draft must be accompanied by notice that representations about the proposal may be made to the Authority within a specified time. (3) Before issuing the proposed statement of procedure, the Authority must have regard to any representations made to it in accordance with subsection (2). (4) If the Authority issues the proposed statement of procedure it must publish an account, in general terms, of— (a) the representations made to it in accordance with subsection (2); and (b) its response to them. (5) If the statement of procedure differs from the draft published under subsection (1) in a way which is, in the opinion of the Authority, significant, the Authority must (in addition to complying with subsection (4)) publish details of the difference. (6) The Authority may charge a reasonable fee for providing a person with a copy of a draft published under subsection (1). (7) This section also applies to a proposal to revise a statement of policy. PA RT X X V I I

OFFENCES

Miscellaneous offences Misleading statements and practices 397.—(1) This subsection applies to a person who— (a) makes a statement, promise or forecast which he knows to be misleading, false or deceptive in a material particular; (b) dishonestly conceals any material facts whether in connection with a statement, promise or forecast made by him or otherwise; or (c) recklessly makes (dishonestly or otherwise) a statement, promise or forecast which is misleading, false or deceptive in a material particular. (2) A person to whom subsection (1) applies is guilty of an offence if he makes the statement, promise or forecast or conceals the facts for the purpose of inducing, or is reckless as to whether it may induce, another person (whether or not the person to whom the statement, promise or forecast is made)— (a) to enter or offer to enter into, or to refrain from entering or offering to enter into, a relevant agreement; or (b) to exercise, or refrain from exercising, any rights conferred by a relevant investment. (3) Any person who does any act or engages in any course of conduct which creates a false or misleading impression as to the market in or the price or value of any relevant investments is guilty of an offence if he does so for the purpose of creating that impression and of thereby inducing another person to acquire, dispose of, subscribe for or underwrite those investments or to refrain from doing so or to exercise, or refrain from exercising, any rights conferred by those investments. (4) In proceedings for an offence under subsection (2) brought against a person to whom subsection (1) applies as a result of paragraph (a) of that subsection, it is a defence for him to show that the statement, promise or forecast was made in conformity with

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(a) price stabilising rules; (b) control of information rules; or (c) the relevant provisions of Commission Regulation (EC) No 2273/2003 of 22 December 2003 implementing Directive 2003/6/EC of the European Parliament and of the Council as regards exemptions for buy-back programmes and stabilisation of financial instruments. (5) In proceedings brought against any person for an offence under subsection (3) it is a defence for him to show— (a) that he reasonably believed that his act or conduct would not create an impression that was false or misleading as to the matters mentioned in that subsection; (b) that he acted or engaged in the conduct— (i) for the purpose of stabilising the price of investments; and (ii) in conformity with price stabilising rules; (c) that he acted or engaged in the conduct in conformity with control of information rules; or (d) that he acted or engaged in the conduct in conformity with the relevant provisions of Commission Regulation (EC) No 2273/2003 of 22 December 2003 implementing Directive 2003/6/EC of the European Parliament and of the Council as regards exemptions for buy-back programmes and stabilisation of financial instruments. (6) Subsections (1) and (2) do not apply unless— (a) the statement, promise or forecast is made in or from, or the facts are concealed in or from, the United Kingdom or arrangements are made in or from the United Kingdom for the statement, promise or forecast to be made or the facts to be concealed; (b) the person on whom the inducement is intended to or may have effect is in the United Kingdom; or (c) the agreement is or would be entered into or the rights are or would be exercised in the United Kingdom. (7) Subsection (3) does not apply unless— (a) the act is done, or the course of conduct is engaged in, in the United Kingdom; or (b) the false or misleading impression is created there. (8) A person guilty of an offence under this section is liable— (a) on summary conviction, to imprisonment for a term not exceeding six months or a fine not exceeding the statutory maximum, or both; (b) on conviction on indictment, to imprisonment for a term not exceeding seven years or a fine, or both. (9) ‘‘Relevant agreement’’ means an agreement— (a) the entering into or performance of which by either party constitutes an activity of a specified kind or one which falls within a specified class of activity; and (b) which relates to a relevant investment. (10) ‘‘Relevant investment’’ means an investment of a specified kind or one which falls within a prescribed class of investment. (11) Schedule 2 (except paragraphs 25 and 26) applies for the purposes of subsections (9) and (10) with references to section 22 being read as references to each of those subsections. (12) Nothing in Schedule 2, as applied by subsection (11), limits the power conferred by subsection (9) or (10). (13) ‘‘Investment’’ includes any asset, right or interest. (14) ‘‘Specified’’ means specified in an order made by the Treasury. Notes Subs 4(a)–(c) inserted by SI 2005 No 381, Reg 8. Subs 5(d) inserted by SI 2005 No 381, rule 8 (misnumbered in that instrument as 5(a)).

Misleading the Authority: residual cases 398.—(1) A person who, in purported compliance with any requirement imposed by or under this Act, knowingly or recklessly gives the Authority information which is false or misleading in a material particular is guilty of an offence.

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(2) Subsection (1) applies only to a requirement in relation to which no other provision of this Act creates an offence in connection with the giving of information. (3) A person guilty of an offence under this section is liable— (a) on summary conviction, to a fine not exceeding the statutory maximum; (b) on conviction on indictment, to a fine. Misleading the Director General of Fair Trading 399. Section 44 of the Competition Act 1998 (offences connected with the provision of false or misleading information) applies in relation to any function of the Director General of Fair Trading under this Act as if it were a function under Part I of that Act. Bodies corporate and partnerships Offences by bodies corporate etc. 400.—(1) If an offence under this Act committed by a body corporate is shown— (a) to have been committed with the consent or connivance of an officer, or (b) to be attributable to any neglect on his part, the officer as well as the body corporate is guilty of the offence and liable to be proceeded against and punished accordingly. (2) If the affairs of a body corporate are managed by its members, subsection (1) applies in relation to the acts and defaults of a member in connection with his functions of management as if he were a director of the body. (3) If an offence under this Act committed by a partnership is shown— (a) to have been committed with the consent or connivance of a partner, or (b) to be attributable to any neglect on his part, the partner as well as the partnership is guilty of the offence and liable to be proceeded against and punished accordingly. (4) In subsection (3) ‘‘partner’’ includes a person purporting to act as a partner. (5) ‘‘Officer’’, in relation to a body corporate, means— (a) a director, member of the committee of management, chief executive, manager, secretary or other similar officer of the body, or a person purporting to act in any such capacity; and (b) an individual who is a controller of the body. (6) If an offence under this Act committed by an unincorporated association (other than a partnership) is shown— (a) to have been committed with the consent or connivance of an officer of the association or a member of its governing body, or (b) to be attributable to any neglect on the part of such an officer or member, that officer or member as well as the association is guilty of the offence and liable to be proceeded against and punished accordingly. (7) Regulations may provide for the application of any provision of this section, with such modifications as the Treasury consider appropriate, to a body corporate or unincorporated association formed or recognised under the law of a territory outside the United Kingdom. Institution of proceedings Proceedings for offences 401.—(1) In this section ‘‘offence’’ means an offence under this Act or subordinate legislation made under this Act. (2) Proceedings for an offence may be instituted in England and Wales only— (a) by the Authority or the Secretary of State; or (b) by or with the consent of the Director of Public Prosecutions. (3) Proceedings for an offence may be instituted in Northern Ireland only— (a) by the Authority or the Secretary of State; or (b) by or with the consent of the Director of Public Prosecutions for Northern Ireland.

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(4) Except in Scotland, proceedings for an offence under section 203 may also be instituted by the Director General of Fair Trading. (5) In exercising its power to institute proceedings for an offence, the Authority must comply with any conditions or restrictions imposed in writing by the Treasury. (6) Conditions or restrictions may be imposed under subsection (5) in relation to— (a) proceedings generally; or (b) such proceedings, or categories of proceedings, as the Treasury may direct. Notes Implementation: FSA Handbook ENF 15 (in force until 27 August 2007).

Power of the Authority to institute proceedings for certain other offences 402.—(1) Except in Scotland, the Authority may institute proceedings for an offence under— (a) Part V of the Criminal Justice Act 1993 (insider dealing); or (b) prescribed regulations relating to money laundering. (2) In exercising its power to institute proceedings for any such offence, the Authority must comply with any conditions or restrictions imposed in writing by the Treasury. (3) Conditions or restrictions may be imposed under subsection (2) in relation to— (a) proceedings generally; or (b) such proceedings, or categories of proceedings, as the Treasury may direct. Notes Subs (1)(b) see SI 2001 No 1819. Implementation: FSA Handbook ENF 15 (in force until 27 August 2007).

Jurisdiction and procedure in respect of offences 403.—(1) A fine imposed on an unincorporated association on its conviction of an offence is to be paid out of the funds of the association. (2) Proceedings for an offence alleged to have been committed by an unincorporated association must be brought in the name of the association (and not in that of any of its members). (3) Rules of court relating to the service of documents are to have effect as if the association were a body corporate. (4) In proceedings for an offence brought against an unincorporated association— (a) section 33 of the Criminal Justice Act 1925 and Schedule 3 to the Magistrates’ Courts Act 1980 (procedure) apply as they do in relation to a body corporate; (b) section 70 of the Criminal Procedure (Scotland) Act 1995 (procedure) applies as if the association were a body corporate; (c) section 18 of the Criminal Justice (Northern Ireland) Act 1945 and Schedule 4 to the Magistrates’ Courts (Northern Ireland) Order 1981 (procedure) apply as they do in relation to a body corporate. (5) Summary proceedings for an offence may be taken— (a) against a body corporate or unincorporated association at any place at which it has a place of business; (b) against an individual at any place where he is for the time being. (6) Subsection (5) does not affect any jurisdiction exercisable apart from this section. (7) ‘‘Offence’’ means an offence under this Act. Notes Sections 404–412 omitted; section 405(5)(b) repealed by SI 2006 No 3221; section 405(5)(d) amended by SI 2004 No 3379 to refer to the consolidated life assurance directive; section 412 modified by Gambling Act 2005, s 334.

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MISCELLANEOUS

Limitation on powers to require documents Protected items 413.—(1) A person may not be required under this Act to produce, disclose or permit the inspection of protected items. (2) ‘‘Protected items’’ means— (a) communications between a professional legal adviser and his client or any person representing his client which fall within subsection (3); (b) communications between a professional legal adviser, his client or any person representing his client and any other person which fall within subsection (3) (as a result of paragraph (b) of that subsection); (c) items which— (i) are enclosed with, or referred to in, such communications; (ii) fall within subsection (3); and (iii) are in the possession of a person entitled to possession of them. (3) A communication or item falls within this subsection if it is made— (a) in connection with the giving of legal advice to the client; or (b) in connection with, or in contemplation of, legal proceedings and for the purposes of those proceedings. (4) A communication or item is not a protected item if it is held with the intention of furthering a criminal purpose. Service of notices Service of notices 414.—(1) The Treasury may by regulations make provision with respect to the procedure to be followed, or rules to be applied, when a provision of or made under this Act requires a notice, direction or document of any kind to be given or authorises the imposition of a requirement. (2) The regulations may, in particular, make provision— (a) as to the manner in which a document must be given; (b) as to the address to which a document must be sent; (c) requiring, or allowing, a document to be sent electronically; (d) for treating a document as having been given, or as having been received, on a date or at a time determined in accordance with the regulations; (e) as to what must, or may, be done if the person to whom a document is required to be given is not an individual; (f) as to what must, or may, be done if the intended recipient of a document is outside the United Kingdom. (3) Subsection (1) applies however the obligation to give a document is expressed (and so, in particular, includes a provision which requires a document to be served or sent). (4) Section 7 of the Interpretation Act 1978 (service of notice by post) has effect in relation to provisions made by or under this Act subject to any provision made by regulations under this section. Jurisdiction Jurisdiction in civil proceedings 415.—(1) of— (a) the (b) the (c) the (d) the

Proceedings arising out of any act or omission (or proposed act or omission) Authority, competent authority for the purposes of Part VI, scheme manager, or scheme operator,

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in the discharge or purported discharge of any of its functions under this Act may be brought before the High Court or the Court of Session. (2) The jurisdiction conferred by subsection (1) is in addition to any other jurisdiction exercisable by those courts. Removal of certain unnecessary provisions Provisions relating to industrial assurance and certain other enactments 416.—(1) The following enactments are to cease to have effect— (a) the Industrial Assurance Act 1923; (b) the Industrial Assurance and Friendly Societies Act 1948; (c) the Insurance Brokers (Registration) Act 1977. (2) The Industrial Assurance (Northern Ireland) Order 1979 is revoked. (3) The following bodies are to cease to exist— (a) the Insurance Brokers Registration Council; (b) the Policyholders Protection Board; (c) the Deposit Protection Board; (d) the Board of Banking Supervision. (4) If the Treasury consider that, as a consequence of any provision of this section, it is appropriate to do so, they may by order make any provision of a kind that they could make under this Act (and in particular any provision of a kind mentioned in section 339) with respect to anything done by or under any provision of Part XXI. (5) Subsection (4) is not to be read as affecting in any way any other power conferred on the Treasury by this Act. PA RT X X I X

I N T E R P R E TAT I O N

Definitions 417.—(1) In this Act— ‘‘appointed representative’’ has the meaning given in section 39(2); ‘‘auditors and actuaries rules’’ means rules made under section 340; ‘‘authorisation offence’’ has the meaning given in section 23(2); ‘‘authorised open-ended investment company’’ has the meaning given in section 237(3); ‘‘authorised person’’ has the meaning given in section 31(2); ‘‘the Authority’’ means the Financial Services Authority; ‘‘body corporate’’ includes a body corporate constituted under the law of a country or territory outside the United Kingdom; ‘‘chief executive’’— (a) in relation to a body corporate whose principal place of business is within the United Kingdom, means an employee of that body who, alone or jointly with one or more others, is responsible under the immediate authority of the directors, for the conduct of the whole of the business of that body; and (b) in relation to a body corporate whose principal place of business is outside the United Kingdom, means the person who, alone or jointly with one or more others, is responsible for the conduct of its business within the United Kingdom; ‘‘collective investment scheme’’ has the meaning given in section 235; ‘‘the Commission’’ means the European Commission (except in provisions relating to the Competition Commission); ‘‘the compensation scheme’’ has the meaning given in section 213(2); ‘‘control of information rules’’ has the meaning given in section 147(1); ‘‘director’’, in relation to a body corporate, includes— (a) a person occupying in relation to it the position of a director (by whatever name called); and (b) a person in accordance with whose directions or instructions (not being advice given in a professional capacity) the directors of that body are accustomed to act;

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‘‘documents’’ includes information recorded in any form and, in relation to information recorded otherwise than in legible form, references to its production include references to producing a copy of the information in legible form; ‘‘electronic commerce directive’’ means Directive 2000/31/EC of the European Parliament and the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (Directive on electronic commerce); ‘‘exempt person’’, in relation to a regulated activity, means a person who is exempt from the general prohibition in relation to that activity as a result of an exemption order made under section 38(1) or as a result of section 39(1) or 285(2) or (3); ‘‘financial promotion rules’’ means rules made under section 145; ‘‘friendly society’’ means an incorporated or registered friendly society; ‘‘general prohibition’’ has the meaning given in section 19(2); ‘‘general rules’’ has the meaning given in section 138(2); ‘‘incorporated friendly society’’ means a society incorporated under the Friendly Societies Act 1992; ‘‘industrial and provident society’’ means a society registered or deemed to be registered under the Industrial and Provident Societies Act 1965 or the Industrial and Provident Societies Act (Northern Ireland) 1969; ‘‘information society service’’ means an information society service within the meaning of Article 2(a) of the electronic commerce directive; ‘‘investment services and activities’’ has the meaning given in Article 4.1.2 of the markets in financial instruments directive, read with— (a) Chapter VI of Commission Regulation 1287/2006 of 10 August 2006, and (b) Article 52 of Commission Directive 2006/73/EC of 10 August 2006; ‘‘market abuse’’ has the meaning given in section 118; ‘‘Minister of the Crown’’ has the same meaning as in the Ministers of the Crown Act 1975; ‘‘money laundering rules’’ means rules made under section 146; ‘‘notice of control’’ (except in Chapter 1A of Part 18) has the meaning given in section 178(5); ‘‘the ombudsman scheme’’ has the meaning given in section 225(3); ‘‘open-ended investment company’’ has the meaning given in section 236; ‘‘Part IV permission’’ has the meaning given in section 40(4); ‘‘partnership’’ includes a partnership constituted under the law of a country or territory outside the United Kingdom; ‘‘prescribed’’ (where not otherwise defined) means prescribed in regulations made by the Treasury; ‘‘price stabilising rules’’ means rules made under section 144; ‘‘private company’’ has the meaning given in section 1(3) of the Companies Act 1985 or in Article 12(3) of the Companies (Northern Ireland) Order 1986; ‘‘prohibition order’’ has the meaning given in section 56(2); ‘‘recognised clearing house’’ and ‘‘recognised investment exchange’’ have the meaning given in section 285; ‘‘registered friendly society’’ means a society which is— (a) a friendly society within the meaning of section 7(1)(a) of the Friendly Societies Act 1974; and (b) registered within the meaning of that Act; ‘‘regulated activity’’ has the meaning given in section 22; ‘‘regulating provisions’’ has the meaning given in section 159(1); ‘‘regulatory objectives’’ means the objectives mentioned in section 2; ‘‘regulatory provisions’’ has the meaning given in section 302; ‘‘rule’’ means a rule made by the Authority under this Act; ‘‘rule-making instrument’’ has the meaning given in section 153; ‘‘the scheme manager’’ has the meaning given in section 212(1); ‘‘the scheme operator’’ has the meaning given in section 225(2); ‘‘scheme particulars rules’’ has the meaning given in section 248(1);

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‘‘Seventh Company Law Directive’’ means the European Council Seventh Company Law Directive of 13 June 1983 on consolidated accounts (No 83/349/EEC); ‘‘Takeovers Directive’’ means Directive 2004/25/EC of the European Parliament and of the Council; ‘‘threshold conditions’’, in relation to a regulated activity, has the meaning given in section 41; ‘‘the Treaty’’ means the treaty establishing the European Community; ‘‘trust scheme rules’’ has the meaning given in section 247(1); ‘‘UK authorised person’’ has the meaning given in section 178(4); and ‘‘unit trust scheme’’ has the meaning given in section 237. (2) In the application of this Act to Scotland, references to a matter being actionable at the suit of a person are to be read as references to the matter being actionable at the instance of that person. (3) For the purposes of any provision of this Act (other than a provision of Part 6) authorising or requiring a person to do anything within a specified number of days no account is to be taken of any day which is a public holiday in any part of the United Kingdom. (4) For the purposes of this Act— (a) an information society service is provided from an EEA State if it is provided from an establishment in that State; (b) an establishment, in connection with an information society service, is the place at which the provider of the service (being a national of an EEA State or a company or firm as mentioned in Article 48 of the Treaty) effectively pursues an economic activity for an indefinite period; (c) the presence or use in a particular place of equipment or other technical means of providing an information society service does not, of itself, constitute that place as an establishment of the kind mentioned in paragraph (b); (d) where it cannot be determined from which of a number of establishments a given information society service is provided, that service is to be regarded as provided from the establishment where the provider has the centre of his activities relating to the service. Notes Definition of ‘‘electronic commerce directive’’ inserted by SI 2002 No 1775. Definition of ‘‘information society service’’ inserted by SI 2002 No 1775. Definition of ‘‘investment services and activities’’ inserted by SI 2007 No 126. Definition of ‘‘notice of control’’ amended by SI 2007 No 126 which inserted the words ‘‘(except in Chapter 1A of Part 18)’’. Definition of ‘‘Takeovers Directive’’ inserted by Companies Act 2006. Subs (3) the words ‘‘(other than a provision of Part 6)’’ inserted by SI 2005 No 1433. Subs (4) inserted by SI 2002 No 1775.

Carrying on regulated activities in the United Kingdom 418.—(1) In the five cases described in this section, a person who— (a) is carrying on a regulated activity, but (b) would not otherwise be regarded as carrying it on in the United Kingdom, is, for the purposes of this Act, to be regarded as carrying it on in the United Kingdom. (2) The first case is where— (a) his registered office (or if he does not have a registered office his head office) is in the United Kingdom; (b) he is entitled to exercise rights under a single market directive as a UK firm; and (c) he is carrying on in another EEA State a regulated activity to which that directive applies. (3) The second case is where— (a) his registered office (or if he does not have a registered office his head office) is in the United Kingdom; (b) he is the manager of a scheme which is entitled to enjoy the rights conferred by an instrument which is a relevant Community instrument for the purposes of section 264; and

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(c) persons in another EEA State are invited to become participants in the scheme. (4) The third case is where— (a) his registered office (or if he does not have a registered office his head office) is in the United Kingdom; (b) the day-to-day management of the carrying on of the regulated activity is the responsibility of— (i) his registered office (or head office); or (ii) another establishment maintained by him in the United Kingdom. (5) The fourth case is where— (a) his head office is not in the United Kingdom; but (b) the activity is carried on from an establishment maintained by him in the United Kingdom. (5A) The fifth case is any other case where the activity— (a) consists of the provision of an information society service to a person or persons in one or more EEA States; and (b) is carried on from an establishment in the United Kingdom. (6) For the purposes of subsections (2) to (5A) it is irrelevant where the person with whom the activity is carried on is situated. Notes Subs (2)(a), (3)(a), (4)(a) and (5)(a) on the meaning of ‘‘head office’’, see FSA Handbook COND 2.2.3. Subs (5A) was inserted by SI 2002 No 1775 which also made consequential amendments to subsections (1) and (6).

Carrying on regulated activities by way of business 419.—(1) The Treasury may by order make provision— (a) as to the circumstances in which a person who would otherwise not be regarded as carrying on a regulated activity by way of business is to be regarded as doing so; (b) as to the circumstances in which a person who would otherwise be regarded as carrying on a regulated activity by way of business is to be regarded as not doing so. (2) An order under subsection (1) may be made so as to apply— (a) generally in relation to all regulated activities; (b) in relation to a specified category of regulated activity; or (c) in relation to a particular regulated activity. (3) An order under subsection (1) may be made so as to apply— (a) for the purposes of all provisions; (b) for a specified group of provisions; or (c) for a specified provision. (4) ‘‘Provision’’ means a provision of, or made under, this Act. (5) Nothing in this section is to be read as affecting the provisions of section 428(3). Parent and subsidiary undertaking 420.—(1) In this Act, except in relation to an incorporated friendly society, ‘‘parent undertaking’’ and ‘‘subsidiary undertaking’’ have the same meaning as in Part VII of the Companies Act 1985 (or Part VIII of the Companies (Northern Ireland) Order 1986). (2) But— (a) ‘‘parent undertaking’’ also includes an individual who would be a parent undertaking for the purposes of those provisions if he were taken to be an undertaking (and ‘‘subsidiary undertaking’’ is to be read accordingly); (b) ‘‘subsidiary undertaking’’ also includes, in relation to a body incorporated in or formed under the law of an EEA State other than the United Kingdom, an undertaking which is a subsidiary undertaking within the meaning of any rule of law in force in that State for purposes connected with implementation of the Seventh Company Law Directive (and ‘‘parent undertaking’’ is to be read accordingly). (3) In this Act ‘‘subsidiary undertaking’’, in relation to an incorporated friendly society, means a body corporate of which the society has control within the meaning of section 13(9)(a)

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or (aa) of the Friendly Societies Act 1992 (and ‘‘parent undertaking’’ is to be read accordingly). Group 421.—(1) In this Act ‘‘group’’, in relation to a person (‘‘A’’), means A and any person who is— (a) a parent undertaking of A; (b) a subsidiary undertaking of A; (c) a subsidiary undertaking of a parent undertaking of A; (d) a parent undertaking of a subsidiary undertaking of A; (e) an undertaking in which A or an undertaking mentioned in paragraph (a), (b), (c) or (d) has a participating interest; (f) if A or an undertaking mentioned in paragraph (a) or (d) is a building society, an associated undertaking of the society; or (g) if A or an undertaking mentioned in paragraph (a) or (d) is an incorporated friendly society, a body corporate of which the society has joint control (within the meaning of section 13(9)(c) or (cc) of the Friendly Societies Act 1992). (2) ‘‘Participating interest’’ has the same meaning as in Part VII of the Companies Act 1985 or Part VIII of the Companies (Northern Ireland) Order 1986; but also includes an interest held by an individual which would be a participating interest for the purposes of those provisions if he were taken to be an undertaking. (3) ‘‘Associated undertaking’’ has the meaning given in section 119(1) of the Building Societies Act 1986. Controller 422.—(1) In this Act, except in Chapter 1A of Part 18, ‘‘controller’’, in relation to an undertaking (‘‘A’’), means a person who falls within any of the cases in subsection (2). (2) The cases are where the person— (a) holds 10% or more of the shares in A; (b) is able to exercise significant influence over the management of A by virtue of his shareholding in A; (c) holds 10% or more of the shares in a parent undertaking (‘‘P’’) of A; (d) is able to exercise significant influence over the management of P by virtue of his shareholding in P; (e) is entitled to exercise, or control the exercise of, 10% or more of the voting power in A; (f) is able to exercise significant influence over the management of A by virtue of his voting power in A; (g) is entitled to exercise, or control the exercise, of, 10% or more of the voting power in P; or (h) is able to exercise significant influence over the management of P by virtue of his voting power in P. (3) In subsection (2) ‘‘the person’’ means— (a) the person; (b) any of the person’s associates; or (c) the person and any of his associates. (4) ‘‘Associate’’, in relation to a person (‘‘H’’) holding shares in an undertaking (‘‘C’’) or entitled to exercise or control the exercise of voting power in relation to another undertaking (‘‘D’’), means— (a) the spouse of H; (b) a child or stepchild of H (if under 18); (c) the trustee of any settlement under which H has a life interest in possession (or in Scotland a life interest); (d) an undertaking of which H is a director; (e) a person who is an employee or partner of H; (f) if H is an undertaking—

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(i) a director of H; (ii) a subsidiary undertaking of H; (iii) a director or employee of such a subsidiary undertaking; and (g) if H has with any other person an agreement or arrangement with respect to the acquisition, holding or disposal of shares or other interests in C or D or under which they undertake to act together in exercising their voting power in relation to C or D, that other person. (5) ‘‘Settlement’’, in subsection (4)(c), includes any disposition or arrangement under which property is held on trust (or subject to a comparable obligation). (6) ‘‘Shares’’— (a) in relation to an undertaking with a share capital, means allotted shares; (b) in relation to an undertaking with capital but no share capital, means rights to share in the capital of the undertaking; (c) in relation to an undertaking without capital, means interests— (i) conferring any right to share in the profits, or liability to contribute to the losses, of the undertaking; or (ii) giving rise to an obligation to contribute to the debts or expenses of the undertaking in the event of a winding up. (7) ‘‘Voting power’’, in relation to an undertaking which does not have general meetings at which matters are decided by the exercise of voting rights, means the right under the constitution of the undertaking to direct the overall policy of the undertaking or alter the terms of its constitution. Notes Subs (1) the words ‘‘except in Chapter 1A of Part 18’’ inserted by SI 2007 No 126.

Manager 423.—(1) In this Act, except in relation to a unit trust scheme or a registered friendly society, ‘‘manager’’ means an employee who— (a) under the immediate authority of his employer is responsible, either alone or jointly with one or more other persons, for the conduct of his employer’s business; or (b) under the immediate authority of his employer or of a person who is a manager by virtue of paragraph (a) exercises managerial functions or is responsible for maintaining accounts or other records of his employer. (2) If the employer is not an individual, references in subsection (1) to the authority of the employer are references to the authority— (a) in the case of a body corporate, of the directors; (b) in the case of a partnership, of the partners; and (c) in the case of an unincorporated association, of its officers or the members of its governing body. (3) ‘‘Manager’’, in relation to a body corporate, means a person (other than an employee of the body) who is appointed by the body to manage any part of its business and includes an employee of the body corporate (other than the chief executive) who, under the immediate authority of a director or chief executive of the body corporate, exercises managerial functions or is responsible for maintaining accounts or other records of the body corporate. Insurance 424.—(1) In this Act, references to— (a) contracts of insurance, (b) reinsurance, (c) contracts of long-term insurance, (d) contracts of general insurance, are to be read with section 22 and Schedule 2. (2) In this Act ‘‘policy’’ and ‘‘policyholder’’, in relation to a contract of insurance, have such meaning as the Treasury may by order specify.

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(3) The law applicable to a contract of insurance, the effecting of which constitutes the carrying on of a regulated activity, is to be determined, if it is of a prescribed description, in accordance with regulations made by the Treasury. Notes Subs (1)(a) meaning of contract of insurance—see SI 2001 No 544, Reg 3(1) and FSA Handbook SUP App 3.10.3. Subs (2) meaning of ‘‘policy’’ and ‘‘policyholder’’—see SI 2001 No 2361. Subs (3) see SI 2001 No 2635, amended by SI 2001 No 3542.

Investment firm 424A.—(1) In this Act, ‘‘investment firm’’ has the meaning given in Article 4.1.1 of the markets in financial instruments directive. (2) Subsection (1) is subject to subsections (3) to (5). (3) References in this Act to an ‘‘investment firm’’ include references to a person who would be an investment firm (within the meaning of Article 4.1.1 of the markets in financial instruments directive) if— (a) in the case of a body corporate, his registered office or, if he has no registered office, his head office, and (b) in the case of a person other than a body corporate, his head office, were in an EEA State. (4) But subsection (3) does not apply if the person in question is one to whom the markets in financial instruments directive would not apply by virtue of Article 2 of that directive. (5) References in this Act to an ‘‘investment firm’’ do not include references to— (a) a person to whom the markets in financial instruments directive does not apply by virtue of Article 2 of the directive; or (b) a person whose home Member State (within the meaning of Article 4.1.20 of the markets in financial instruments directive) is an EEA State and to whom, by reason of the fact that the State has given effect to Article 3 of that directive, that directive does not apply by virtue of that Article. Notes Section 424A inserted by SI 2006 No 2975. Subs (3) new text inserted by SI 2007 No 126.

Expressions relating to authorisation elsewhere in the single market 425.—(1) In this Act— (a) ‘‘banking consolidation directive’’, ‘‘life assurance consolidation directive’’, ‘‘EEA authorisation’’, ‘‘EEA firm’’, ‘‘EEA right’’, ‘‘EEA State’’, ‘‘first non-life insurance directive’’, ‘‘insurance directives’’, ‘‘insurance mediation directive’’, ‘‘markets in financial instruments directive’’, ‘‘single market directives’’, ‘‘tied agent’’ and ‘‘UCITS directive’’ have the meaning given in Schedule 3; and (b) ‘‘home state regulator’’, in relation to an EEA firm, has the meaning given in Schedule 3. (2) In this Act— (a) ‘‘home state authorisation’’ has the meaning given in Schedule 4; (b) ‘‘Treaty firm’’ has the meaning given in Schedule 4; and (c) ‘‘home state regulator’’, in relation to a Treaty firm, has the meaning given in Schedule 4. Notes Subs (1)(a) amended by SI 2003 No 2066, modified by 2004 No 3379, reg 6 (life assurance consolidation); amended by SI 2003 No 1473 implementing Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation. Re-amended to refer to the markets in financial instruments directive by SI 2006 No 2975. Reference to ‘investment services directive’ deleted by SI 2007 No 126 which also inserted reference to ‘‘tied agent’’.

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S U P P L E M E N TA L

Consequential and supplementary provision 426.—(1) A Minister of the Crown may by order make such incidental, consequential, transitional or supplemental provision as he considers necessary or expedient for the general purposes, or any particular purpose, of this Act or in consequence of any provision made by or under this Act or for giving full effect to this Act or any such provision. (2) An order under subsection (1) may, in particular, make provision— (a) for enabling any person by whom any powers will become exercisable, on a date set by or under this Act, by virtue of any provision made by or under this Act to take before that date any steps which are necessary as a preliminary to the exercise of those powers; (b) for applying (with or without modifications) or amending, repealing or revoking any provision of or made under an Act passed before this Act or in the same Session; (c) dissolving any body corporate established by any Act passed, or instrument made, before the passing of this Act; (d) for making savings, or additional savings, from the effect of any repeal or revocation made by or under this Act. (3) Amendments made under this section are additional, and without prejudice, to those made by or under any other provision of this Act. (4) No other provision of this Act restricts the powers conferred by this section. Notes The relevant Order for the purposes of sections 426–428 is SI 2003 No 2134.

Transitional provisions 427.—(1) Subsections (2) and (3) apply to an order under section 426 which makes transitional provisions or savings. (2) The order may, in particular— (a) if it makes provision about the authorisation and permission of persons who before commencement were entitled to carry on any activities, also include provision for such persons not to be treated as having any authorisation or permission (whether on an application to the Authority or otherwise); (b) make provision enabling the Authority to require persons of such descriptions as it may direct to re-apply for permissions having effect by virtue of the order; (c) make provision for the continuation as rules of such provisions (including primary and subordinate legislation) as may be designated in accordance with the order by the Authority, including provision for the modification by the Authority of provisions designated; (d) make provision about the effect of requirements imposed, liabilities incurred and any other things done before commencement, including provision for and about investigations, penalties and the taking or continuing of any other action in respect of contraventions; (e) make provision for the continuation of disciplinary and other proceedings begun before commencement, including provision about the decisions available to bodies before which such proceedings take place and the effect of their decisions; (f) make provision as regards the Authority’s obligation to maintain a record under section 347 as respects persons in relation to whom provision is made by the order. (3) The order may— (a) confer functions on the Treasury, the Secretary of State, the Authority, the scheme manager, the scheme operator, members of the panel established under paragraph 4 of Schedule 17, the Competition Commission or the Director General of Fair Trading; (b) confer jurisdiction on the Tribunal; (c) provide for fees to be charged in connection with the carrying out of functions conferred under the order;

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(d) modify, exclude or apply (with or without modifications) any primary or subordinate legislation (including any provision of, or made under, this Act). (4) In subsection (2) ‘‘commencement’’ means the commencement of such provisions of this Act as may be specified by the order. Regulations and orders 428.—(1) Any power to make an order which is conferred on a Minister of the Crown by this Act and any power to make regulations which is conferred by this Act is exercisable by statutory instrument. (2) The Lord Chancellor’s power to make rules under section 132 is exercisable by statutory instrument. (3) Any statutory instrument made under this Act may— (a) contain such incidental, supplemental, consequential and transitional provision as the person making it considers appropriate; and (b) make different provision for different cases. Parliamentary control of statutory instruments 429.—(1) No order is to be made under— (a) section 144(4), 192(b) or (e), 236(5), 404 or 419, or (b) paragraph 1 of Schedule 8, unless a draft of the order has been laid before Parliament and approved by a resolution of each House. (2) No regulations are to be made under section 90B or 262 unless a draft of the regulations has been laid before Parliament and approved by a resolution of each House. (3) An order to which, if it is made, subsection (4) or (5) will apply is not to be made unless a draft of the order has been laid before Parliament and approved by a resolution of each House. (4) This subsection applies to an order under section 21 if— (a) it is the first order to be made, or to contain provisions made, under section 21(4); (b) it varies an order made under section 21(4) so as to make section 21(1) apply in circumstances in which it did not previously apply; (c) it is the first order to be made, or to contain provision made, under section 21(5); (d) it varies a previous order made under section 21(5) so as to make section 21(1) apply in circumstances in which it did not, as a result of that previous order, apply; (e) it is the first order to be made, or to contain provisions made, under section 21(9) or (10); (f) it adds one or more activities to those that are controlled activities for the purposes of section 21; or (g) it adds one or more investments to those which are controlled investments for the purposes of section 21. (5) This subsection applies to an order under section 38 if— (a) it is the first order to be made, or to contain provisions made, under that section; or (b) it contains provisions restricting or removing an exemption provided by an earlier order made under that section. (6) An order containing a provision to which, if the order is made, subsection (7) will apply is not to be made unless a draft of the order has been laid before Parliament and approved by a resolution of each House. (7) This subsection applies to a provision contained in an order if— (a) it is the first to be made in the exercise of the power conferred by subsection (1) of section 326 or it removes a body from those for the time being designated under that subsection; or (b) it is the first to be made in the exercise of the power conferred by subsection (6) of section 327 or it adds a description of regulated activity or investment to those for the time being specified for the purposes of that subsection.

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(8) Any other statutory instrument made under this Act, apart from one made under section 431(2) or to which paragraph 26 of Schedule 2 applies, shall be subject to annulment in pursuance of a resolution of either House of Parliament. Notes Subs (2) reference to s 90B inserted by Companies Act 2006, Schedule 15, Part 1, paragraph 12.

Extent 430.—(1) This Act, except Chapter IV of Part XVII, extends to Northern Ireland. (2) Except where Her Majesty by Order in Council provides otherwise, the extent of any amendment or repeal made by or under this Act is the same as the extent of the provision amended or repealed. (3) Her Majesty may by Order in Council provide for any provision of or made under this Act relating to a matter which is the subject of other legislation which extends to any of the Channel Islands or the Isle of Man to extend there with such modifications (if any) as may be specified in the Order. Commencement 431.—(1) The following provisions come into force on the passing of this Act— (a) this section; (b) sections 428, 430 and 433; (c) paragraphs 1 and 2 of Schedule 21. (2) The other provisions of this Act come into force on such day as the Treasury may by order appoint; and different days may be appointed for different purposes. Minor and consequential amendments, transitional provisions and repeals 432.—(1) Schedule 20 makes minor and consequential amendments. (2) Schedule 21 makes transitional provisions. (3) The enactments set out in Schedule 22 are repealed. Short title 433. This Act may be cited as the Financial Services and Markets Act 2000.

SCHEDULE 1

THE FINANCIAL SERVICES AUTHORITY PA RT I

GENERAL

Interpretation 1.—(1) In this Schedule— ‘‘the 1985 Act’’ means the Companies Act 1985; ‘‘non-executive committee’’ means the committee maintained under paragraph 3; ‘‘functions’’, in relation to the Authority, means functions conferred on the Authority by or under any provision of this Act. (2) For the purposes of this Schedule, the following are the Authority’s legislative functions— (a) making rules; (b) issuing codes under section 64 or 119; (c) issuing statements under section 64, 69, 124 or 210; (d) giving directions under section 316, 318 or 328; (e) issuing general guidance (as defined by section 158(5)) or guidance under section 158A.

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Notes Sub-paragraph (2)(e) the words ‘‘or guidance under section 158A’’ inserted by SI 2006 No 2975.

Constitution 2.—(1) The constitution of the Authority must continue to provide for the Authority to have— (a) a chairman; and (b) a governing body. (2) The governing body must include the chairman. (3) The chairman and other members of the governing body must be appointed, and be liable to removal from office, by the Treasury. (4) The validity of any act of the Authority is not affected— (a) by a vacancy in the office of chairman; or (b) by a defect in the appointment of a person as a member of the governing body or as chairman. Non-executive members of the governing body 3.—(1) The Authority must secure— (a) that the majority of the members of its governing body are non-executive members; and (b) that a committee of its governing body, consisting solely of the non-executive members, is set up and maintained for the purposes of discharging the functions conferred on the committee by this Schedule. (2) The members of the non-executive committee are to be appointed by the Authority. (3) The non-executive committee is to have a chairman appointed by the Treasury from among its members. Functions of the non-executive committee 4.—(1) In this paragraph ‘‘the committee’’ means the non-executive committee. (2) The non-executive functions are functions of the Authority but must be discharged by the committee. (3) The non-executive functions are— (a) keeping under review the question whether the Authority is, in discharging its functions in accordance with decisions of its governing body, using its resources in the most efficient and economic way; (b) keeping under review the question whether the Authority’s internal financial controls secure the proper conduct of its financial affairs; and (c) determining the remuneration of— (i) the chairman of the Authority’s governing body; and (ii) the executive members of that body. (4) The function mentioned in sub-paragraph (3)(b) and those mentioned in sub-paragraph (3)(c) may be discharged on behalf of the committee by a sub-committee. (5) Any sub-committee of the committee— (a) must have as its chairman the chairman of the committee; but (b) may include persons other than members of the committee. (6) The committee must prepare a report on the discharge of its functions for inclusion in the Authority’s annual report to the Treasury under paragraph 10. (7) The committee’s report must relate to the same period as that covered by the Authority’s report. Arrangements for discharging functions 5.—(1) The Authority may make arrangements for any of its functions to be discharged by a committee, sub-committee, officer or member of staff of the Authority.

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(2) But in exercising its legislative functions, the Authority must act through its governing body. (3) Sub-paragraph (1) does not apply to the non-executive functions. Monitoring and enforcement 6.—(1) The Authority must maintain arrangements designed to enable it to determine whether persons on whom requirements are imposed by or under this Act, or by any directly applicable Community regulation made under the markets in financial instruments directive, are complying with them. (2) Those arrangements may provide for functions to be performed on behalf of the Authority by any body or person who, in its opinion, is competent to perform them. (3) The Authority must also maintain arrangements for enforcing the provisions of, or made under, this Act, or by any directly applicable Community regulation made under the markets in financial instruments directive. (4) Sub-paragraph (2) does not affect the Authority’s duty under sub-paragraph (1). Notes Sub-paragraph (1) the words ‘‘or by any directly applicable Community regulation made under the markets in financial instruments directive’’ inserted by SI 2007 No 126. Sub-paragraph (3) the words ‘‘or by any directly applicable Community regulation made under the markets in financial instruments directive’’ inserted by SI 2007 No 126.

Arrangements for the investigation of complaints 7.—(1) The Authority must— (a) make arrangements (‘‘the complaints scheme’’) for the investigation of complaints arising in connection with the exercise of, or failure to exercise, any of its functions (other than its legislative functions); and (b) appoint an independent person (‘‘the investigator’’) to be responsible for the conduct of investigations in accordance with the complaints scheme. (2) The complaints scheme must be designed so that, as far as reasonably practicable, complaints are investigated quickly. (3) The Treasury’s approval is required for the appointment or dismissal of the investigator. (4) The terms and conditions on which the investigator is appointed must be such as, in the opinion of the Authority, are reasonably designed to secure— (a) that he will be free at all times to act independently of the Authority; and (b) that complaints will be investigated under the complaints scheme without favouring the Authority. (5) Before making the complaints scheme, the Authority must publish a draft of the proposed scheme in the way appearing to the Authority best calculated to bring it to the attention of the public. (6) The draft must be accompanied by notice that representations about it may be made to the Authority within a specified time. (7) Before making the proposed complaints scheme, the Authority must have regard to any representations made to it in accordance with sub-paragraph (6). (8) If the Authority makes the proposed complaints scheme, it must publish an account, in general terms, of— (a) the representations made to it in accordance with subparagraph (6); and (b) its response to them. (9) If the complaints scheme differs from the draft published under sub-paragraph (5) in a way which is, in the opinion of the Authority, significant the Authority must (in addition to complying with sub-paragraph (8)) publish details of the difference. (10) The Authority must publish up-to-date details of the complaints scheme including, in particular, details of— (a) the provision made under paragraph 8(5); and (b) the powers which the investigator has to investigate a complaint.

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(11) Those details must be published in the way appearing to the Authority to be best calculated to bring them to the attention of the public. (12) The Authority must, without delay, give the Treasury a copy of any details published by it under this paragraph. (13) The Authority may charge a reasonable fee for providing a person with a copy of— (a) a draft published under sub-paragraph (5); (b) details published under sub-paragraph (10). (14) Sub-paragraphs (5) to (9) and (13)(a) also apply to a proposal to alter or replace the complaints scheme. Investigation of complaints 8.—(1) The Authority is not obliged to investigate a complaint in accordance with the complaints scheme which it reasonably considers would be more appropriately dealt with in another way (for example by referring the matter to the Tribunal or by the institution of other legal proceedings). (2) The complaints scheme must provide— (a) for reference to the investigator of any complaint which the Authority is investigating; and (b) for him— (i) to have the means to conduct a full investigation of the complaint; (ii) to report on the result of his investigation to the Authority and the complainant; and (iii) to be able to publish his report (or any part of it) if he considers that it (or the part) ought to be brought to the attention of the public. (3) If the Authority has decided not to investigate a complaint, it must notify the investigator. (4) If the investigator considers that a complaint of which he has been notified under subparagraph (3) ought to be investigated, he may proceed as if the complaint had been referred to him under the complaints scheme. (5) The complaints scheme must confer on the investigator the power to recommend, if he thinks it appropriate, that the Authority— (a) makes a compensatory payment to the complainant, (b) remedies the matter complained of, or takes both of those steps. (6) The complaints scheme must require the Authority, in a case where the investigator— (a) has reported that a complaint is well-founded, or (b) has criticised the Authority in his report, to inform the investigator and the complainant of the steps which it proposes to take in response to the report. (7) The investigator may require the Authority to publish the whole or a specified part of the response. (8) The investigator may appoint a person to conduct the investigation on his behalf but subject to his direction. (9) Neither an officer nor an employee of the Authority may be appointed under subparagraph (8). (10) Sub-paragraph (2) is not to be taken as preventing the Authority from making arrangements for the initial investigation of a complaint to be conducted by the Authority. Records 9. The Authority must maintain satisfactory arrangements for— (a) recording decisions made in the exercise of its functions; and (b) the safe-keeping of those records which it considers ought to be preserved.

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10.—(1) At least once a year the Authority must make a report to the Treasury on— (a) the discharge of its functions; (b) the extent to which, in its opinion, the regulatory objectives have been met; (c) its consideration of the matters mentioned in section 2(3); and (d) such other matters as the Treasury may from time to time direct. (2) The report must be accompanied by— (a) the report prepared by the non-executive committee under paragraph 4(6); and (b) such other reports or information, prepared by such persons, as the Treasury may from time to time direct. (3) The Treasury must lay before Parliament a copy of each report received by them under this paragraph. (4) The Treasury may— (a) require the Authority to comply with any provisions of the 1985 Act about accounts and their audit which would not otherwise apply to it; or (b) direct that any such provision of that Act is to apply to the Authority with such modifications as are specified in the direction. (5) Compliance with any requirement imposed under subparagraph (4)(a) or (b) is enforceable by injunction or, in Scotland, an order under section 45(b) of the Court of Session Act 1988. (6) Proceedings under sub-paragraph (5) may be brought only by the Treasury. Annual public meeting 11.—(1) Not later than three months after making a report under paragraph 10, the Authority must hold a public meeting (‘‘the annual meeting’’) for the purposes of enabling that report to be considered. (2) The Authority must organise the annual meeting so as to allow— (a) a general discussion of the contents of the report which is being considered; and (b) a reasonable opportunity for those attending the meeting to put questions to the Authority about the way in which it discharged, or failed to discharge, its functions during the period to which the report relates. (3) But otherwise the annual meeting is to be organised and conducted in such a way as the Authority considers appropriate. (4) The Authority must give reasonable notice of its annual meeting. (5) That notice must— (a) give details of the time and place at which the meeting is to be held; (b) set out the proposed agenda for the meeting; (c) indicate the proposed duration of the meeting; (d) give details of the Authority’s arrangements for enabling persons to attend; and (e) be published by the Authority in the way appearing to it to be most suitable for bringing the notice to the attention of the public. (6) If the Authority proposes to alter any of the arrangements which have been included in the notice given under sub-paragraph (4) it must— (a) give reasonable notice of the alteration; and (b) publish that notice in the way appearing to the Authority to be best calculated to bring it to the attention of the public. Report of annual meeting 12. Not later than one month after its annual meeting, the Authority must publish a report of the proceedings of the meeting. PA RT I I

S TAT U S

13. In relation to any of its functions— (a) the Authority is not to be regarded as acting on behalf of the Crown; and

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(b) its members, officers and staff are not to be regarded as Crown servants. Exemption from requirement of ‘‘limited’’ in Authority’s name 14. The Authority is to continue to be exempt from the requirements of the 1985 Act relating to the use of ‘‘limited’’ as part of its name. 15. If the Secretary of State is satisfied that any action taken by the Authority makes it inappropriate for the exemption given by paragraph 14 to continue he may, after consulting the Treasury, give a direction removing it. PA RT I I I

P E N A LT I E S A N D F E E S

Penalties 16.—(1) In determining its policy with respect to the amounts of penalties to be imposed by it under this Act, the Authority must take no account of the expenses which it incurs, or expects to incur, in discharging its functions. (2) The Authority must prepare and operate a scheme for ensuring that the amounts paid to the Authority by way of penalties imposed under this Act are applied for the benefit of authorised persons. (3) The scheme may, in particular, make different provision with respect to different classes of authorised person. (4) Up to date details of the scheme must be set out in a document (‘‘the scheme details’’). (5) The scheme details must be published by the Authority in the way appearing to it to be best calculated to bring them to the attention of the public. (6) Before making the scheme, the Authority must publish a draft of the proposed scheme in the way appearing to the Authority to be best calculated to bring it to the attention of the public. (7) The draft must be accompanied by notice that representations about the proposals may be made to the Authority within a specified time. (8) Before making the scheme, the Authority must have regard to any representations made to it in accordance with sub-paragraph (7). (9) If the Authority makes the proposed scheme, it must publish an account, in general terms, of— (a) the representations made to it in accordance with subparagraph (7); and (b) its response to them. (10) If the scheme differs from the draft published under subparagraph (6) in a way which is, in the opinion of the Authority, significant the Authority must (in addition to complying with sub-paragraph (9)) publish details of the difference. (11) The Authority must, without delay, give the Treasury a copy of any scheme details published by it. (12) The Authority may charge a reasonable fee for providing a person with a copy of— (a) a draft published under sub-paragraph (6); (b) scheme details. (13) Sub-paragraphs (6) to (10) and (12)(a) also apply to a proposal to alter or replace the complaints scheme. Fees 17.—(1) The Authority may make rules providing for the payment to it of such fees, in connection with the discharge of any of its functions under or as a result of this Act, as it considers will (taking account of its expected income from fees and charges provided for by any other provision of this Act) enable it— (a) to meet expenses incurred in carrying out its functions or for any incidental purpose;

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(b) to repay the principal of, and pay any interest on, any money which it has borrowed and which has been used for the purpose of meeting expenses incurred in relation to its assumption of functions under this Act or the Bank of England Act 1998; and (c) to maintain adequate reserves. (2) In fixing the amount of any fee which is to be payable to the Authority, no account is to be taken of any sums which the Authority receives, or expects to receive, by way of penalties imposed by it under this Act. (3) Sub-paragraph (1)(b) applies whether expenses were incurred before or after the coming into force of this Act or the Bank of England Act 1998. (4) Any fee which is owed to the Authority under any provision made by or under this Act may be recovered as a debt due to the Authority. Notes Sub-paragraph (1) see FSA Handbook FEES 5.2 and FEES 6.1.

Services for which fees may not be charged 18. The power conferred by paragraph 17 may not be used to require— (a) a fee to be paid in respect of the discharge of any of the Authority’s functions under paragraphs 13, 14, 19 or 20 of Schedule 3; or (b) a fee to be paid by any person whose application for approval under section 59 has been granted.

PA RT I V

MISCELLANEOUS

Exemption from liability in damages 19.—(1) Neither the Authority nor any person who is, or is acting as, a member, officer or member of staff of the Authority is to be liable in damages for anything done or omitted in the discharge, or purported discharge, of the Authority’s functions. (2) Neither the investigator appointed under paragraph 7 nor a person appointed to conduct an investigation on his behalf under paragraph 8(8) is to be liable in damages for anything done or omitted in the discharge, or purported discharge, of his functions in relation to the investigation of a complaint. (3) Neither sub-paragraph (1) nor sub-paragraph (2) applies— (a) if the act or omission is shown to have been in bad faith; or (b) so as to prevent an award of damages made in respect of an act or omission on the ground that the act or omission was unlawful as a result of section 6(1) of the Human Rights Act 1998.

Disqualification for membership of House of Commons 20. In Part III of Schedule 1 to the House of Commons Disqualification Act 1975 (disqualifying offices), insert at the appropriate place— ‘‘Member of the governing body of the Financial Services Authority’’.

Disqualification for membership of Northern Ireland Assembly 21. In Part III of Schedule 1 to the Northern Ireland Assembly Disqualification Act 1975 (disqualifying offices), insert at the appropriate place— ‘‘Member of the governing body of the Financial Services Authority’’.

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R E G U L AT E D A C T I V I T I E S R E G U L AT E D A C T I V I T I E S

General 1. The matters with respect to which provision may be made under section 22(1) in respect of activities include, in particular, those described in general terms in this Part of this Schedule. Dealing in investments 2.—(1) Buying, selling, subscribing for or underwriting investments or offering or agreeing to do so, either as a principal or as an agent. (2) In the case of an investment which is a contract of insurance, that includes carrying out the contract. Notes Subs (2) meaning of contract of insurance—see SI 2001 No 544, Reg 3(1) and FSA Handbook SUP App 3.10.3.

Arranging deals in investments 3. Making, or offering or agreeing to make— (a) arrangements with a view to another person buying, selling, subscribing for or underwriting a particular investment; (b) arrangements with a view to a person who participates in the arrangements buying, selling, subscribing for or underwriting investments. Deposit taking 4. Accepting deposits. Safekeeping and administration of assets 5.—(1) Safeguarding and administering assets belonging to another which consist of or include investments or offering or agreeing to do so. (2) Arranging for the safeguarding and administration of assets belonging to another, or offering or agreeing to do so. Managing investments 6. Managing, or offering or agreeing to manage, assets belonging to another person where— (a) the assets consist of or include investments; or (b) the arrangements for their management are such that the assets may consist of or include investments at the discretion of the person managing or offering or agreeing to manage them. Investment advice 7. Giving or offering or agreeing to give advice to persons on— (a) buying, selling, subscribing for or underwriting an investment; or (b) exercising any right conferred by an investment to acquire, dispose of, underwrite or convert an investment.

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8. Establishing, operating or winding up a collective investment scheme, including acting as— (a) trustee of a unit trust scheme; (b) depositary of a collective investment scheme other than a unit trust scheme; or (c) sole director of a body incorporated by virtue of regulations under section 262. Using computer-based systems for giving investment instructions 9.—(1) Sending on behalf of another person instructions relating to an investment by means of a computer-based system which enables investments to be transferred without a written instrument. (2) Offering or agreeing to send such instructions by such means on behalf of another person. (3) Causing such instructions to be sent by such means on behalf of another person. (4) Offering or agreeing to cause such instructions to be sent by such means on behalf of another person. PA RT I I

INVESTMENTS

General 10. The matters with respect to which provision may be made under section 22(1) in respect of investments include, in particular, those described in general terms in this Part of this Schedule. Securities 11.—(1) Shares or stock in the share capital of a company. (2) ‘‘Company’’ includes— (a) any body corporate (wherever incorporated), and (b) any unincorporated body constituted under the law of a country or territory outside the United Kingdom, other than an open-ended investment company. Instruments creating or acknowledging indebtedness 12. Any of the following— (a) debentures; (b) debenture stock; (c) loan stock; (d) bonds; (e) certificates of deposit; (f) any other instruments creating or acknowledging a present or future indebtedness. Government and public securities 13.—(1) Loan stock, bonds and other instruments— (a) creating or acknowledging indebtedness; and (b) issued by or on behalf of a government, local authority or public authority. (2) ‘‘Government, local authority or public authority’’ means— (a) the government of the United Kingdom, of Northern Ireland, or of any country or territory outside the United Kingdom; (b) a local authority in the United Kingdom or elsewhere; (c) any international organisation the members of which include the United Kingdom or another member State.

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Instruments giving entitlement to investments 14.—(1) Warrants or other instruments entitling the holder to subscribe for any investment. (2) It is immaterial whether the investment is in existence or identifiable. Certificates representing securities 15. Certificates or other instruments which confer contractual or property rights— (a) in respect of any investment held by someone other than the person on whom the rights are conferred by the certificate or other instrument; and (b) the transfer of which may be effected without requiring the consent of that person. Units in collective investment schemes 16.—(1) Shares in or securities of an open-ended investment company. (2) Any right to participate in a collective investment scheme. Options 17. Options to acquire or dispose of property. Futures 18. Rights under a contract for the sale of a commodity or property of any other description under which delivery is to be made at a future date. Contracts for differences 19. Rights under— (a) a contract for differences; or (b) any other contract the purpose or pretended purpose of which is to secure a profit or avoid a loss by reference to fluctuations in— (i) the value or price of property of any description; or (ii) an index or other factor designated for that purpose in the contract. Contracts of insurance 20. Rights under a contract of insurance, including rights under contracts falling within head C of Schedule 2 to the Friendly Societies Act 1992. Notes Meaning of contract of insurance—see SI 2001 No 544, Reg 3(1) and FSA Handbook SUP App 3.10.3.

Participation in Lloyd’s syndicates 21.—(1) The underwriting capacity of a Lloyd’s syndicate. (2) A person’s membership (or prospective membership) of a Lloyd’s syndicate. Deposits 22. Rights under any contract under which a sum of money (whether or not denominated in a currency) is paid on terms under which it will be repaid, with or without interest or a premium, and either on demand or at a time or in circumstances agreed by or on behalf of the person making the payment and the person receiving it.

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23.—(1) Rights under any contract under which— (a) one person provides another with credit; and (b) the obligation of the borrower to repay is secured on land. (2) ‘‘Credit’’ includes any cash loan or other financial accommodation. (3) ‘‘Cash’’ includes money in any form. Other finance arrangements involving land 23A.—(1) Rights under any arrangement for the provision of finance under which the person providing the finance either— (a) acquires a major interest in land from the person to whom the finance is provided, or (b) disposes of a major interest in land to that person, as part of the arrangement. (2) References in sub-paragraph (1) to a ‘‘major interest’’ in land are to— (a) in relation to land in England or Wales— (i) an estate in fee simple absolute, or (ii) a term of years absolute, whether subsisting at law or in equity; (b) in relation to land in Scotland— (i) the interest of an owner of land, or (ii) the tenant’s right over or interest in a property subject to a lease; (c) in relation to land in Northern Ireland— (i) any freehold estate, or (ii) any leasehold estate, whether subsisting at law or in equity. (3) It is immaterial for the purposes of sub-paragraph (1) whether either party acquires or (as the case may be) disposes of the interest in land— (a) directly, or (b) indirectly. Notes Section 23A inserted by Regulation of Financial Services (Land Transactions) Act 2005 (c. 24), section 1.

Rights in investments 24. Any right or interest in anything which is an investment as a result of any other provision made under section 22(1). PA RT I I I

S U P P L E M E N TA L P R O V I S I O N S

The order-making power 25.—(1) An order under section 22(1) may— (a) provide for exemptions; (b) confer powers on the Treasury or the Authority; (c) authorise the making of regulations or other instruments by the Treasury for purposes of, or connected with, any relevant provision; (d) authorise the making of rules or other instruments by the Authority for purposes of, or connected with, any relevant provision; (e) make provision in respect of any information or document which, in the opinion of the Treasury or the Authority, is relevant for purposes of, or connected with, any relevant provision; (f) make such consequential, transitional or supplemental provision as the Treasury consider appropriate for purposes of, or connected with, any relevant provision.

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(2) Provision made as a result of sub-paragraph (1)(f) may amend any primary or subordinate legislation, including any provision of, or made under, this Act. (3) ‘‘Relevant provision’’ means any provision— (a) of section 22 or this Schedule; or (b) made under that section or this Schedule. Parliamentary control 26.—(1) This paragraph applies to the first order made under section 22(1). (2) This paragraph also applies to any subsequent order made under section 22(1) which contains a statement by the Treasury that, in their opinion, the effect (or one of the effects) of the proposed order would be that an activity which is not a regulated activity would become a regulated activity. (3) An order to which this paragraph applies— (a) must be laid before Parliament after being made; and (b) ceases to have effect at the end of the relevant period unless before the end of that period the order is approved by a resolution of each House of Parliament (but without that affecting anything done under the order or the power to make a new order). (4) ‘‘Relevant period’’ means a period of twenty-eight days beginning with the day on which the order is made. (5) In calculating the relevant period no account is to be taken of any time during which Parliament is dissolved or prorogued or during which both Houses are adjourned for more than four days. Interpretation 27.—(1) In this Schedule— ‘‘buying’’ includes acquiring for valuable consideration; ‘‘offering’’ includes inviting to treat; ‘‘property’’ includes currency of the United Kingdom or any other country or territory; and ‘‘selling’’ includes disposing for valuable consideration. (2) In sub-paragraph (1) ‘‘disposing’’ includes— (a) in the case of an investment consisting of rights under a contract— (i) surrendering, assigning or converting those rights; or (ii) assuming the corresponding liabilities under the contract; (b) in the case of an investment consisting of rights under other arrangements, assuming the corresponding liabilities under the contract or arrangements; (c) in the case of any other investment, issuing or creating the investment or granting the rights or interests of which it consists. (3) In this Schedule references to an instrument include references to any record (whether or not in the form of a document).

SCHEDULE 3 PA RT I

E E A PA S S P O RT R I G H T S DEFINED TERMS

The single market directives 1. ‘‘The single market directives’’ means— (a) the banking consolidation directive; (c) the insurance directives; (d) the markets in financial instruments directive, (e) the insurance mediation directive; and (f) the UCITS directive.

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Notes Schedule 3 was amended by SI 2000 No 2952, SI 2001 No 1376, SI 2003 No 1473 (implementing Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation) and SI 2004 No 2066. The application of the Schedule to Gibraltar is laid out in SI 2001 No 3084, amended by SI 2005 No 1 and SI 2006 No 1805. Sub-paragraph (a) was amended and (b) was removed to reflect the consolidation of the banking Directives. Sub-paragraph (d) was added by SI 2003 No 1473 to reflect the introduction of the intermediaries Directive. The sub-paragraph was amended by SI 2007 No 126 to refer instead to the markets in financial instruments directive. Sub-paragraph (f) inserted by SI 2003 No 2066.

The banking co-ordination directives 2. ‘‘The banking consolidation directive’’ means Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions. Notes Paragraph 2 was amended by SI 2000 No 2952 to refer to Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions; the paragraph was amended again by SI 2006 No 3221 to refer to the revised Directive. The header does not appear to have been amended.

The insurance directives 3.—(1) ‘‘The insurance directives’’ means the first, second and third non-life insurance directives and the life assurance consolidation directive. (2) ‘‘First non-life insurance directive’’ means the Council Directive of 24 July 1973 on the co-ordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct insurance other than life assurance (No 73/239/EEC). (3) ‘‘Second non-life insurance directive’’ means the Council Directive of 22 June 1988 on the co-ordination of laws, etc, and laying down provisions to facilitate the effective exercise of freedom to provide services and amending Directive 73/239/EEC (No 88/357/EEC). (4) ‘‘Third non-life insurance directive’’ means the Council Directive of 18 June 1992 on the co-ordination of laws, etc, and amending Directives 73/239/EEC and 88/357/EEC (No 92/49/EEC). (5) [deleted] (6) [deleted] (7) [deleted] (8) ‘‘Life assurance consolidation directive’’ means Directive 2002/83/EC of the European Parliament and of the Council of 5th November 2002 concerning life assurance. Notes Sub-paragraph (1) was amended by SI 2004 No 3379 to refer to the Life Assurance Consolidation Directive. Sub-paragraphs (5), (6) and (7) were deleted by SI 2004 No 3379, which implements the Life Assurance Consolidation Directive. Sub-paragraph (8) was introduced by SI 2004 No 3379 to reflect the Life Assurance Consolidation Directive.

The investment services directive 4. [deleted] Notes Paragraph 4, which defined the investment services directive as ‘‘the Council Directive of 10 May 1993 on investment services in the securities field (No 93/22/EEC)’’ was deleted by SI 2007 No 126.

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The insurance mediation directive 4A. ‘‘The insurance mediation directive’’ means the European Parliament and Council Directive of 9 December 2002 on insurance mediation (No 2002/92/EC). Notes Paragraph 4A was inserted by SI 2003 No 1473 implementing Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation.

The UCITS directive 4B. ‘‘The UCITS directive’’ means the Council Directive of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (No 85/611/EEC). Notes Paragraph 4B inserted by SI 2003 No 2066.

The markets in financial instruments directive 4C. ‘‘The markets in financial instruments directive’’ means Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments. Notes Paragraph 4C inserted by SI 2006 No 2975.

EEA firm 5. ‘‘EEA firm’’ means any of the following if it does not have its relevant office in the United Kingdom— (a) an investment firm (as defined in Article 4.1.1 of the markets in financial instruments directive) which is authorised (within the meaning of Article 5) by its home state regulator; (b) a credit institution (as defined in Article 4.1 of the banking consolidation directive) which is authorised (within the meaning of Article 4.2) by its home state regulator; (c) a financial institution (as defined in Article 4.5 of the banking consolidation directive) which is a subsidiary of the kind mentioned in Article 24 and which fulfils the conditions in that Article; (d) an undertaking pursuing the activity of direct insurance (within the meaning of Article 2 of the life assurance consolidation directive or Article 1 of the first non-life insurance directive) which has received authorisation under Article 4 of the life assurance consolidation directive or Article 6 of the first non-life insurance directive from its home state regulator; or (e) an insurance intermediary (as defined in Article 2.5 of the insurance mediation directive), or a reinsurance intermediary (as defined in Article 2.6) which is registered with its home state regulator under Article 3; or (f) a management company (as defined in Article 1a.2 of the UCITS directive) which is authorised (within the meaning of Article 5) by its home state regulator. Notes In the opening line the words ‘‘relevant office’’ were substituted for the words ‘‘head office’’ by SI 2003 No 1473 implementing Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation. On the meaning of ‘‘head office’’, see FSA Handbook COND 2.2.3. Sub-paragraph (a) was amended by SI 2007 No 126 to refer to the relevant Articles in the markets in financial instruments directive, instead of the investment services directive. Sub-paragraphs (b) and (c) were amended by SI 2000 No 2952 to reflect the introduction of the Banking Consolidation Directive; new text inserted by SI 2006 No 3221 to reflect the revised Directive.

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Sub-paragraph (d) was amended by SI 2004 No 3379 to reflect the introduction of the Life Assurance Consolidation Directive. Sub-paragraph (e) was inserted by SI 2003 No 1473. Sub-paragraph (f) was inserted by SI 2003 No 2066.

5A. In paragraph 5, ‘‘relevant office’’ means— (a) in relation to a firm falling within sub-paragraph (e) of that paragraph which has a registered office, its registered office; (b) in relation to any other firm, its head office. Notes Paragraph 5A was inserted by SI 2003 No 1473 implementing Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation. On the meaning of ‘‘head office’’, see FSA Handbook COND 2.2.3.

EEA authorisation 6. ‘‘EEA authorisation’’ means— (a) in relation to an EEA firm falling within paragraph 5(e), registration with its home state regulator under Article 3 of the insurance mediation directive; (b) in relation to any other EEA firm, authorisation granted to an EEA firm by its home state regulator for the purpose of the relevant single market directive. Notes Paragraph 6 was amended by SI 2003 No 1473 implementing Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation.

EEA right 7. ‘‘EEA right’’ means the entitlement of a person to establish a branch, or provide services, in an EEA State other than that in which he has his relevant office— (a) in accordance with the Treaty as applied in the EEA; and (b) subject to the conditions of the relevant single market directive. Notes In the opening words of paragraph 7, the words ‘‘relevant office’’ were substituted for the words ‘‘head office’’ by SI 2003 No 1473 implementing Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation. On the meaning of ‘‘head office’’, see FSA Handbook COND 2.2.3.

7A. In paragraph 7, ‘‘relevant office’’ means— (a) in relation to a person who has a registered office and whose entitlement is subject to the conditions of the insurance mediation directive, his registered office; (b) in relation to any other person, his head office. Notes Paragraph 7A was introduced by SI 2003 No 1473 implementing Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation. On the meaning of ‘‘head office’’, see FSA Handbook COND 2.2.3.

EEA State 8. ‘‘EEA State’’ has the meaning given by Schedule 1 to the Interpretation Act 1978. Notes Paragraph 8 was amended by SI 2007 No 108.

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Home state regulator 9. ‘‘Home state regulator’’ means the competent authority (within the meaning of the relevant single market directive) of an EEA State (other than the United Kingdom) in relation to the EEA firm concerned. UK firm 10. ‘‘UK firm’’ means a person whose relevant office is in the UK and who has an EEA right to carry on activity in an EEA State other than the United Kingdom. 10A. In paragraph 10, ‘‘relevant office’’ means— (a) in relation to a firm whose EEA right derives from the insurance mediation directive and which has a registered office, its registered office; (b) in relation to any other firm, its head office. Notes In paragraph 10, the words ‘‘relevant office’’ were substituted for the words ‘‘head office’’ by SI 2003 No 1473 implementing Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation. The definition in paragraph 10A was also inserted by SI 2003 No 1473. On the meaning of ‘‘head office’’, see FSA Handbook COND 2.2.3.

UK investment firm 10B. ‘‘UK investment firm’’ means a UK firm— (a) which is an investment firm, and (b) whose EEA right derives from the markets in financial instruments directive. Notes Paragraph 10B inserted by SI 2007 No 126.

Host state regulator 11. ‘‘Host state regulator’’ means the competent authority (within the meaning of the relevant single market directive) of an EEA State (other than the United Kingdom) in relation to a UK firm’s exercise of EEA rights there. Tied agent 11A. ‘‘Tied agent’’ has the meaning given in Article 4.1.25 of the markets in financial instruments directive. Notes Paragraph 11A inserted by SI 2007 No 126. PA RT I I

E X E R C I S E O F PA S S P O RT R I G H T S B Y E E A F I R M S

Firms qualifying for authorisation 12.—(1) Once an EEA firm which is seeking to establish a branch in the United Kingdom in exercise of an EEA right satisfies the establishment conditions, it qualifies for authorisation. (2) Once an EEA firm which is seeking to provide services in the United Kingdom in exercise of an EEA right satisfies the service conditions, it qualifies for authorisation. (3) If an EEA firm falling within paragraph 5(a) is seeking to use a tied agent established in the United Kingdom in connection with the exercise of an EEA right deriving from the markets in financial instruments directive, this Part of this Schedule applies as if the firm were seeking to establish a branch in the United Kingdom.

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(4) But if— (a) an EEA firm already qualifies for authorisation by virtue of sub-paragraph (1); and (b) the EEA right which it is exercising derives from the markets in financial instruments directive, sub-paragraph (3) does not require the firm to satisfy the establishment conditions in respect of its use of the tied agent in question. Notes Sub-paragraph (3) inserted by SI 2007 No 126. Sub-paragraph (4) inserted by SI 2007 No 126.

Establishment 13.—(1) If the firm falls within paragraph 5(a), (b), (c), (d) or (f), the establishment conditions are that— (a) the Authority has received notice (‘‘a consent notice’’) from the firm’s home state regulator that it has given the firm consent to establish a branch in the United Kingdom; (b) the consent notice— (i) is given in accordance with the relevant single market directive; (ii) identifies the activities to which consent relates; and (iii) includes such other information as may be prescribed; (ba) in the case of a firm falling within paragraph 5(a), the Authority has given the firm notice for the purposes of this paragraph or two months have elapsed beginning with the date when the home state regulator gave the consent notice; and (c) in the case of a firm falling within paragraph 5(b), (c), (d) or (f), the firm has been informed of the applicable provisions or two months have elapsed beginning with the date when the Authority received the consent notice. (1A) If the firm falls within paragraph 5(e), the establishment conditions are that— (a) the firm has given its home state regulator notice of its intention to establish a branch in the United Kingdom; (b) the Authority has received notice (‘‘a regulator’s notice’’) from the firm’s home state regulator that the firm intends to establish a branch in the United Kingdom; (c) the firm’s home state regulator has informed the firm that the regulator’s notice has been sent to the Authority; and (d) one month has elapsed beginning with the date on which the firm’s home state regulator informed the firm that the regulator’s notice has been sent to the Authority. (2) If the Authority has received a consent notice, it must— (a) prepare for the firm’s supervision; (b) except if the firm falls within paragraph 5(a), notify the firm of the applicable provisions (if any); and (c) if the firm falls within paragraph 5(d), notify its home state regulator of the applicable provisions (if any). (3) A notice under sub-paragraph (2)(b) or (c) must be given before the end of the period of two months beginning with the day on which the Authority received the consent notice. (4) For the purposes of this paragraph— ‘‘applicable provisions’’ means the host state rules with which the firm is required to comply when carrying on a permitted activity through a branch in the United Kingdom; ‘‘host state rules’’ means rules— (a) made in accordance with the relevant single market directive; and (b) which are the responsibility of the United Kingdom (both as to implementation and as to supervision of compliance) in accordance with that directive; and ‘‘permitted activity’’ means an activity identified in the consent notice or regulator’s notice, as the case may be.

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Notes Sub-paragraph (1), the first six words and the paragraph references that follow were inserted by SI 2003 No 1473 implementing Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation. Reference to sub-paragraph (f) inserted by SI 2003 No 2066 implementing the UCITS Directive. Sub-paragraph (1)(ba) was inserted by SI 2007 No 126. Sub-paragraph (1)(c) the first nine words and the paragraph references that follow inserted by SI 2007 No 126. Sub-paragraph (1A) was inserted by SI 2003 No 1473. Sub-paragraph (2)(b) the exclusion of firms falling within paragraph (5)(a) was inserted by SI 2007 No 126. In sub-paragraph (4), the definition of ‘‘permitted activity’’ was amended by SI 2003 No 1473.

Services 14.—(1) The service conditions are that— (a) the firm has given its home state regulator notice of its intention to provide services in the United Kingdom (‘‘a notice of intention’’); (b) if the firm falls within paragraph 5(a), (d), (e) or (f), the Authority has received notice (‘‘a regulator’s notice’’) from the firm’s home state regulator containing such information as may be prescribed; (ba) if the firm falls within paragraph 5(b) and is seeking to provide services in exercise of the right under Article 31.5 of the markets in financial instruments directive, the Authority has received notice (‘‘a regulator’s notice’’) from the firm’s home state regulator stating that the firm intends to exercise that right in the United Kingdom; (c) if the firm falls within paragraph 5(d) or (e), its home state regulator has informed it that the regulator’s notice has been sent to the Authority; and (d) if the firm falls within paragraph 5(e), one month has elapsed beginning with the date on which the firm’s home state regulator informed the firm that the regulator’s notice has been sent to the Authority. (2) If the Authority has received a regulator’s notice or, where none is required by subparagraph (1), has been informed of the firm’s intention to provide services in the United Kingdom, it must, unless the firm falls within paragraph 5(e),— (a) prepare for the firm’s supervision; and (b) notify the firm of the applicable provisions (if any). (2A) Sub-paragraph (2)(b) does not apply in the case of a firm falling within paragraph 5(a). (3) A notice under sub-paragraph (2)(b) must be given before the end of the period of two months beginning on the day on which the Authority received the regulator’s notice, or was informed of the firm’s intention. (4) For the purposes of this paragraph— ‘‘applicable provisions’’ means the host state rules with which the firm is required to comply when carrying on a permitted activity by providing services in the United Kingdom; ‘‘host state rules’’ means rules(a) made in accordance with the relevant single market directive; and (b) which are the responsibility of the United Kingdom (both as to implementation and as to supervision of compliance) in accordance with that directive; and ‘‘permitted activity’’ means an activity identified in— (a) the regulator’s notice; or (b) where none is required by sub-paragraph (1), the notice of intention. Notes Sub-paragraphs (1) and (2) were modified by SI 2003 No 1473 implementing Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation. Sub-paragraph (1)(b) reference to sub-paragraph (f) inserted by SI 2003 No 2066 implementing the UCITS directive. Sub-paragraph (1)(ba) inserted by SI 2007 No 126. Sub-paragraph (2A) inserted by SI 2007 No 126.

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15.—(1) On qualifying for authorisation as a result of paragraph 12, a firm has, in respect of each permitted activity which is a regulated activity, permission to carry it on through its United Kingdom branch (if it satisfies the establishment conditions) or by providing services in the United Kingdom (if it satisfies the service conditions). (1A) Sub-paragraph (1) is to be read subject to paragraph 15A(3). (2) The permission is to be treated as being on terms equivalent to those appearing from the consent notice, regulator’s notice or notice of intention. (3) Sections 21 and 39(1) of the Consumer Credit Act 1974 (business requiring a licence under that Act) do not apply in relation to the carrying on of a permitted activity which is Consumer Credit Act business by a firm which qualifies for authorisation as a result of paragraph 12, unless the Director General of Fair Trading has exercised the power conferred on him by section 203 in relation to the firm. (4) ‘‘Consumer Credit Act business’’ has the same meaning as in section 203. Notes Sub-paragraph (1A) was inserted by SI 2003 No 2066. Sub-paragraph (3) references to the Consumer Credit Act 1974 amended by the Consumer Credit Act 2006.

Power to restrict permission of management companies 15A.—(1) Sub-paragraph (2) applies if— (a) a firm falling within paragraph 5(f) qualifies for authorisation as a result of paragraph 12(1) (establishment conditions satisfied); but (b) the Authority determines that the way in which the firm intends to invite persons in the United Kingdom to become participants in any collective investment scheme which that firm manages does not comply with the law in force in the United Kingdom. (2) The Authority may give a notice to the firm and the firm’s home state regulator of the Authority’s determination under sub-paragraph (1)(b). (3) Paragraph 15(1) does not give a firm to which the Authority has given (and not withdrawn) a notice under sub-paragraph (2) permission to carry on through the firm’s United Kingdom branch the regulated activity of dealing in units in the collective investment schemes which the firm manages. (4) Any notice given under sub-paragraph (2) must be given before the end of the period of two months beginning with the day on which the Authority received the consent notice. (5) Sections 264(4) and 265(1), (2) and (4) apply to a notice given under sub-paragraph (2) as they apply to a notice given by the Authority under section 264(2). (6) If a decision notice is given to the firm under section 265(4), by virtue of sub-paragraph (5), the firm may refer the matter to the Tribunal. (7) In sub-paragraph (3)— (a) ‘‘units’’ has the meaning given by section 237(2); and (b) the reference to ‘‘dealing in’’ units in a collective investment scheme must be read with— (i) section 22; (ii) any relevant order under that section; and (iii) Schedule 2. Notes Paragraph 15A was inserted by SI 2003 No 2066.

Effect of carrying on regulated activity when not qualified for authorisation 16.—(1) This paragraph applies to an EEA firm which is not qualified for authorisation under paragraph 12. (2) Section 26 does not apply to an agreement entered into by the firm.

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(3) Section 27 does not apply to an agreement in relation to which the firm is a third party for the purposes of that section. (4) Section 29 does not apply to an agreement in relation to which the firm is the deposittaker. Continuing regulation of EEA firms 17. Regulations may— (a) modify any provision of this Act which is an applicable provision (within the meaning of paragraph 13 or 14) in its application to an EEA firm qualifying for authorisation; (b) make provision as to any change (or proposed change) of a prescribed kind relating to an EEA firm or to an activity that it carries on in the United Kingdom and as to the procedure to be followed in relation to such cases; (c) provide that the Authority may treat an EEA firm’s notification that it is to cease to carry on regulated activity in the United Kingdom as a request for cancellation of its qualification for authorisation under this Schedule. Giving up right to authorisation 18. Regulations may provide that in prescribed circumstances an EEA firm falling within paragraph 5(c) may, on following the prescribed procedure— (a) have its qualification for authorisation under this Schedule cancelled; and (b) seek to become an authorised person by applying for a Part IV permission. PA RT I I I

E X E R C I S E O F PA S S P O RT R I G H T S B Y U K F I R M S

Establishment 19.—(1) Subject to sub-paragraph (5A), a UK firm may not exercise an EEA right to establish a branch unless three conditions are satisfied. (2) The first is that the firm has given the Authority, in the specified way, notice of its intention to establish a branch (‘‘a notice of intention’’) which(a) identifies the activities which it seeks to carry on through the branch; and (b) includes such other information as may be specified. (3) Subject to sub-paragraph (5B), the activities identified in a notice of intention may include activities which are not regulated activities. (4) The second is that the Authority has given notice in specified terms (‘‘a consent notice’’) to the host state regulator. (5) The third is— (a) if the EEA right in question derives from the insurance mediation directive, that one month has elapsed beginning with the date on which the firm received notice, in accordance with sub-paragraph (11), that the Authority has given a consent notice; (b) in any other case, that either— (i) the host state regulator has notified the firm (or, where the EEA right in question derives from any of the insurance directives, the Authority) of the applicable provisions; or (ii) two months have elapsed beginning with the date on which the Authority gave the consent notice. (5A) If— (a) the EEA right in question derives from the insurance mediation directive, and (b) the EEA State in which the firm intends to establish a branch has not notified the Commission, in accordance with Article 6(2) of that directive, of its wish to be informed of the intention of any UK firm to establish a branch in its territory, the second and third conditions do not apply (and so the firm may establish the branch to which its notice of intention relates as soon as the first condition is satisfied).

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(5B) If the firm is a UK investment firm, a notice of intention may not include ancillary services unless such services are to be provided in connection with the carrying on of one or more investment services and activities. (5C) In sub-paragraph (5B) ‘‘ancillary services’’ has the meaning given in Article 4.1.3 of the markets in financial instruments directive. (6) If the firm’s EEA right derives from the banking consolidation directive, the UCITS directive or, in the case of a credit institution authorised under the banking consolidation directive, the markets in financial instruments directive and the first condition is satisfied, the Authority must give a consent notice to the host state regulator unless it has reason to doubt the adequacy of the firm’s resources or its administrative structure. (7) If the firm’s EEA right derives from any of the insurance directives and the first condition is satisfied, the Authority must give a consent notice unless it has reason— (a) to doubt the adequacy of the firm’s resources or its administrative structure, or (b) to question the reputation, qualifications or experience of the directors or managers of the firm or the person proposed as the branch’s authorised agent for the purposes of those directives, in relation to the business to be conducted through the proposed branch. (7A) If— (a) the firm’s EEA right derives from the insurance mediation directive, (b) the first condition is satisfied, and (c) the second condition applies, the Authority must give a consent notice, and must do so within one month beginning with the date on which it received the firm’s notice of intention. (7B) If the firm is a UK investment firm and the first condition is satisfied, the Authority must give a consent notice to the host state regulator within three months beginning with the date on which it received the firm’s notice of intention unless the Authority has reason to doubt the adequacy of the firm’s resources or its administrative structure. (8) If the Authority proposes to refuse to give a consent notice it must give the firm concerned a warning notice. (9) If the firm’s EEA right derives from any of the insurance directives and the host state regulator has notified it of the applicable provisions, the Authority must inform the firm of those provisions. (10) Rules may specify the procedure to be followed by the Authority in exercising its functions under this paragraph. (11) If the Authority gives a consent notice it must give written notice that it has done so to the firm concerned. (12) If the Authority decides to refuse to give a consent notice— (a) it must, within the relevant period, give the person who gave that notice a decision notice to that effect; and (b) that person may refer the matter to the Tribunal. (12A) In sub-paragraph (12), ‘‘the relevant period’’ means— (a) if the firm’s EEA right derives from the UCITS directive two months beginning with the date on which the Authority received the notice of intention; (b) in any other case, three months beginning with that date. (13) In this paragraph, ‘‘applicable provisions’’ means the host state rules with which the firm will be required to comply when conducting business through the proposed branch in the EEA State concerned. (14) In sub-paragraph (13), ‘‘host state rules’’ means rules— (a) made in accordance with the relevant single market directive; and (b) which are the responsibility of the EEA State concerned (both as to implementation and as to supervision of compliance) in accordance with that directive. (15) ‘‘Specified’’ means specified in rules. Notes Sub-paragraph (3) the ‘‘subject to’’ was inserted by SI 2007 No 126. Sub-paragraph (5) was substantially amended by SI 2003 No 1473 implementing Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation. Sub-paragraph (5A) was inserted by SI 2003 No 1473.

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Sub-paragraph (5B) inserted by SI 2007 No 126. Sub-paragraph (5C) inserted by SI 2007 No 126. Sub-paragraph (6) was amended by SI 2003 No 2066; re-amended by SI 2007 No 126 with the words ‘‘the UCITS directive or, in the case of a credit institution authorised under the banking consolidation directive, the markets in financial instruments directive’’. Sub-paragraph (7A) was inserted by SI 2003 No 1473. Sub-paragraph (7B) was inserted by SI 2007 No 126. Sub-paragraph (12)(a) was amended by SI 2003 No 2066. Sub-paragraph (12A) was inserted by SI 2003 No 2066.

Services 20.—(1) A UK firm may not exercise an EEA right to provide services unless the firm has given the Authority, in the specified way, notice of its intention to provide services (‘‘a notice of intention’’) which— (a) identifies the activities which it seeks to carry out by way of provision of services; and (b) includes such other information as may be specified. (2) Subject to sub-paragraph (2A), the activities identified in a notice of intention may include activities which are not regulated activities. (2A) If the firm is a UK investment firm, a notice of intention may not include ancillary services unless such services are to be provided in connection with the carrying on of one or more investment services and activities. (2B) In sub-paragraph (2A) ‘‘ancillary services’’ has the meaning given in Article 4.1.3 of the markets in financial instruments directive. (3) If the firm’s EEA right derives from the banking consolidation directive, the markets in financial instruments directive or the UCITS directive, the Authority must, within one month of receiving a notice of intention, send a copy of it to the host state regulator with such other information as may be specified. (3A) If the firm’s EEA right derives from any of the insurance directives, the Authority must, within one month of receiving the notice of intention— (a) give notice in specified terms (‘‘a consent notice’’) to the host state regulator; or (b) give written notice to the firm of— (i) its refusal to give a consent notice; and (ii) its reasons for that refusal. (3B) If the firm’s EEA right derives from the insurance mediation directive and the EEA State in which the firm intends to provide services has notified the Commission, in accordance with Article 6(2) of that directive, of its wish to be informed of the intention of any UK firm to provide services in its territory— (a) the Authority must, within one month of receiving the notice of intention, send a copy of it to the host state regulator; (b) the Authority, when it sends the copy in accordance with sub-paragraph (a), must give written notice to the firm concerned that it has done so; and (c) the firm concerned must not provide the services to which its notice of intention relates until one month, beginning with the date on which it receives the notice under sub-paragraph (b), has elapsed. (4) When the Authority sends the copy under sub-paragraph (3) or gives a consent notice, it must give written notice to the firm concerned. (4A) If the firm is given notice under sub-paragraph (3A)(b), it may refer the matter to the Tribunal. (4B) If the firm’s EEA right derives from any of the insurance directives or from the markets in financial instruments directive, it must not provide the services to which its notice of intention relates until it has received written notice under sub-paragraph (4). (4BA) If the firm’s EEA right derives from the markets in financial instruments directive, the Authority must comply as soon as reasonably practicable with a request for information under the second sub-paragraph of Article 31.6 of that directive from the host state regulator. (4C) Rules may specify the procedure to be followed by the Authority under this paragraph. (6) ‘‘Specified’’ means specified in rules.

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Notes Sub-paragraph (2) the ‘‘subject to’’ inserted by SI 2007 No 126. Sub-paragraph (2A) inserted by SI 2007 No 126. Sub-paragraph (2B) inserted by SI 2007 No 126. Sub-paragraph (3) was amended by SI 2003 No 2066; re-amended by SI 2007 No 126 to refer to the markets in financial instruments directive. Sub-paragraph (3A) was inserted by SI 2001 No 1376. Sub-paragraph (3B) was inserted by SI 2003 No 1473 implementing Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation. Sub-paragraph (4) was amended by SI 2001 No 1376. Sub-paragraph (4A) was inserted by SI 2001 No 1376. Sub-paragraph (4B) was inserted by SI 2001 No 1376; amended by SI 2007 No 126 to refer to the markets in financial instruments directive. Sub-paragraph (4BA) inserted by SI 2007 No 126. Sub-paragraph (4C) was inserted by SI 2001 No 1376. Sub-paragraph (5), which read ‘‘(5) If the firm concerned’s EEA right derives from the investment services directive, it must not provide the services to which its notice of intention relates until it has received written notice from the Authority under sub-paragraph (4).’’ was omitted by SI 2001 No 1376.

Tied agents 20A.—(1) If a UK investment firm is seeking to use a tied agent established in an EEA State (other than the United Kingdom) in connection with the exercise of an EEA right deriving from the markets in financial instruments directive, this Part of this Schedule applies as if the firm were seeking to establish a branch in that State. (2) But if— (a) a UK investment firm has already established a branch in an EEA State other than the United Kingdom in accordance with paragraph 19; and (b) the EEA right which it is exercising derives from the markets in financial instruments directive, paragraph 19 does not apply in respect of its use of the tied agent in question. Offence relating to exercise of passport rights 21.—(1) If a UK firm which is not an authorised person contravenes the prohibition imposed by— (a) sub-paragraph (1) of paragraph 19, or (b) sub-paragraph (1), 1), (3B)(c) or (4B) of paragraph 20, it is guilty of an offence. (2) A firm guilty of an offence under sub-paragraph (1) is liable— (a) on summary conviction, to a fine not exceeding the statutory maximum; or (b) on conviction on indictment, to a fine. (3) In proceedings for an offence under sub-paragraph (1), it is a defence for the firm to show that it took all reasonable precautions and exercised all due diligence to avoid committing the offence. Notes Sub-paragraph (1)(b) was amended by SI 2001 No 1376, and re-amended by SI 2003 No 1473 implementing Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation.

Continuing regulation of UK firms 22.—(1) Regulations may make such provision as the Treasury consider appropriate in relation to a UK firm’s exercise of EEA rights, and may in particular provide for the application (with or without modification) of any provision of, or made under, this Act in relation to an activity of a UK firm. (2) Regulations may—

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(a) make provision as to any change (or proposed change) of a prescribed kind relating to a UK firm or to an activity that it carries on and as to the procedure to be followed in relation to such cases; (b) make provision with respect to the consequences of the firm’s failure to comply with a provision of the regulations. (3) Where a provision of the kind mentioned in sub-paragraph (2) requires the Authority’s consent to a change (or proposed change)— (a) consent may be refused only on prescribed grounds; and (b) if the Authority decides to refuse consent, the firm concerned may refer the matter to the Tribunal. 23.—(1) Sub-paragraphs (2) and (2A) apply if a UK firm— (a) has a Part IV permission; and (b) is exercising an EEA right to carry on any Consumer Credit Act business in an EEA State other than the United Kingdom. (2) The Authority may exercise its power under section 45 in respect of the firm if the Director of Fair Trading has informed the Authority that(a) the firm, (b) any of the firm’s employees, agents or associates (whether past or present), or (c) if the firm is a body corporate, a controller of the firm or an associate of such a controller, has done any of the things specified in paragraphs (a) to (e) of section 25(2A) of the Consumer Credit Act 1974. (2A) The Authority may also exercise its power under section 45 in respect of the firm if the Office of Fair Trading has informed the Authority that it has concerns about any of the following— (a) the firm’s skills, knowledge and experience in relation to Consumer Credit Act businesses; (b) such skills, knowledge and experience of other persons who are participating in any Consumer Credit Act business being carried on by the firm; (c) practices and procedures that the firm is implementing in connection with any such business. (3) ‘‘Associate’’, ‘‘Consumer Credit Act business’’ and ‘‘controller’’ have the same meaning as in section 203. Notes Sub-paragraph (1) reference to sub-paragraph (2A) inserted by the Consumer Credit Act 2006. Sub-paragraph (2) paragraph references in closing words amended by the Consumer Credit Act 2006. Sub-paragraph (2A) inserted by the Consumer Credit Act 2006.

24.—(1) Sub-paragraph (2) applies if a UK firm— (a) is not required to have a Part IV permission in relation to the business which it is carrying on; and (b) is exercising the right conferred by Article 24 of the banking consolidation directive to carry on that business in an EEA State other than the United Kingdom. (2) If requested to do so by the host state regulator in the EEA State in which the UK firm’s business is being carried on, the Authority may impose any requirement in relation to the firm which it could impose if— (a) the firm had a Part IV permission in relation to the business which it is carrying on; and (b) the Authority was entitled to exercise its power under that Part to vary that permission. Notes Sub-paragraph (1)(b) was amended by SI 2000 No 2952; amended again by SI 2006 No 3221 to refer to the correct article in the revised Directive.

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25. The Authority must include in the record that it maintains under section 347 in relation to any UK firm whose EEA right derives from the insurance mediation directive information as to each EEA State in which the UK firm, in accordance with such a right— (a) has established a branch; or (b) is providing services. Notes Sub-paragraph (25) was inserted by SI 2003 No 1473 implementing Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation.

SCHEDULE 4

T R E AT Y R I G H T S

Definitions 1. In this Schedule— ‘‘consumers’’ means persons who are consumers for the purposes of section 138; ‘‘Treaty firm’’ means a person— (a) whose head office is situated in an EEA State (its ‘‘home state’’) other than the United Kingdom; and (b) which is recognised under the law of that State as its national; and ‘‘home state regulator’’, in relation to a Treaty firm, means the competent authority of the firm’s home state for the purpose of its home state authorisation (as to which see paragraph 3(1) (a)). Notes On the meaning of ‘head office’, see FSA Handbook COND 2.2.3.

Firms qualifying for authorisation 2. Once a Treaty firm which is seeking to carry on a regulated activity satisfies the conditions set out in paragraph 3(1), it qualifies for authorisation. Exercise of Treaty rights 3.—(1) The conditions are that— (a) the firm has received authorisation (‘‘home state authorisation’’) under the law of its home state to carry on the regulated activity in question (‘‘the permitted activity’’); (b) the relevant provisions of the law of the firm’s home state— (i) afford equivalent protection; or (ii) satisfy the conditions laid down by a Community instrument for the co-ordination or approximation of laws, regulations or administrative provisions of member States relating to the carrying on of that activity; and (c) the firm has no EEA right to carry on that activity in the manner in which it is seeking to carry it on. (2) A firm is not to be regarded as having home state authorisation unless its home state regulator has so informed the Authority in writing. (3) Provisions afford equivalent protection if, in relation to the firm’s carrying on of the permitted activity, they afford consumers protection which is at least equivalent to that afforded by or under this Act in relation to that activity. (4) A certificate issued by the Treasury that the provisions of the law of a particular EEA State afford equivalent protection in relation to the activities specified in the certificate is conclusive evidence of that fact.

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Permission 4.—(1) On qualifying for authorisation under this Schedule, a Treaty firm has permission to carry on each permitted activity through its United Kingdom branch or by providing services in the United Kingdom. (2) The permission is to be treated as being on terms equivalent to those to which the firm’s home state authorisation is subject. (3) If, on qualifying for authorisation under this Schedule, a firm has a Part IV permission which includes permission to carry on a permitted activity, the Authority must give a direction cancelling the permission so far as it relates to that activity. (4) The Authority need not give a direction under sub-paragraph (3) if it considers that there are good reasons for not doing so. Notice to Authority 5.—(1) Sub-paragraph (2) applies to a Treaty firm which— (a) qualifies for authorisation under this Schedule, but (b) is not carrying on in the United Kingdom the regulated activity, or any of the regulated activities, which it has permission to carry on there. (2) At least seven days before it begins to carry on such a regulated activity, the firm must give the Authority written notice of its intention to do so. (3) If a Treaty firm to which sub-paragraph (2) applies has given notice under that subparagraph, it need not give such a notice if it again becomes a firm to which that sub-paragraph applies. (4) Subsections (1), (3) and (6) of section 51 apply to a notice under sub-paragraph (2) as they apply to an application for a Part IV permission. Offences 6.—(1) A person who contravenes paragraph 5(2) is guilty of an offence. (2) In proceedings against a person for an offence under sub-paragraph (1) it is a defence for him to show that he took all reasonable precautions and exercised all due diligence to avoid committing the offence. (3) A person is guilty of an offence if in, or in connection with, a notice given by him under paragraph 5(2) he— (a) provides information which he knows to be false or misleading in a material particular; or (b) recklessly provides information which is false or misleading in a material particular. (4) A person guilty of an offence under this paragraph is liable— (a) on summary conviction, to a fine not exceeding the statutory maximum; (b) on conviction on indictment, to a fine. Notes Schedule 5 deals with persons concerned in collective investment schemes and is not reproduced in this work.

SCHEDULE 6 PA RT I

THRESHOLD CONDITIONS PA RT I V

PERMISSION

Legal status 1.—(1) If the regulated activity concerned is the effecting or carrying out of contracts of insurance the authorised person must be a body corporate (other than a limited liability partnership), a registered friendly society or a member of Lloyd’s. (2) If the person concerned appears to the Authority to be seeking to carry on, or to be carrying on, a regulated activity constituting accepting deposits or issuing electronic money, it must be— (a) a body corporate; or (b) a partnership.

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Notes Sub-paragraph (1) words in brackets inserted by The Financial Services and Markets Act 2000 (Variation of Threshold Conditions) Order 2001, SI 2001 No 2507, art 2. Sub-paragraph (2) amended by The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2002, SI 2002 No 682, art 8. Implementation: FSA Handbook COND 2.1.

Location of offices 2.—(1) Subject to sub-paragraphs (2A) and (3), if the person concerned is a body corporate constituted under the law of any part of the United Kingdom— (a) its head office, and (b) if it has a registered office, that office, must be in the United Kingdom. (2) If the person concerned has its head office in the United Kingdom but is not a body corporate, it must carry on business in the United Kingdom. (2A) If— (a) the regulated activity concerned is any of the investment services and activities, and (b) the person concerned is a body corporate with no registered office, sub-paragraph (2B) applies in place of sub-paragraph (1). (2B) If the person concerned has its head office in the United Kingdom, it must carry on business in the United Kingdom. (3) If the regulated activity concerned is an insurance mediation activity, sub-paragraph (1) does not apply. (4) If the regulated activity concerned is an insurance mediation activity, the person concerned— (a) if he is a body corporate constituted under the law of any part of the United Kingdom, must have its registered office, or if it has no registered office, its head office, in the United Kingdom; (b) if he is a natural person, is to be treated for the purposes of sub-paragraph (2), as having his head office in the United Kingdom if his residence is situated there. (5) ‘‘Insurance mediation activity’’ means any of the following activities— (a) dealing in rights under a contract of insurance as agent; (b) arranging deals in rights under a contract of insurance; (c) assisting in the administration and performance of a contract of insurance; (d) advising on buying or selling rights under a contract of insurance; (e) agreeing to do any of the activities specified in subparagraph (a) to (d). (6) Paragraph (5) must be read with— (a) section 22; (b) any relevant order under that section; and (c) Schedule 2. Notes Opening line of sub-paragraph (1): the ‘‘subject to’’ was inserted by SI 2003 No 1476 implementing the Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation; reference to sub-paragraph (2A) was added by SI 2007 No 126. Sub-paragraph (2A) inserted by SI 2007 No 126. Sub-paragraph (2B) inserted by SI 2007 No 126. Sub-paragraph (3) inserted by SI 2003 No 1476. Sub-paragraph (4) inserted by SI 2003 No 1476. Sub-paragraph (5) inserted by SI 2003 No 1476. Sub-paragraph (6) inserted by SI 2003 No 1476. Interpretation: Sub-paragraph (1)(a), (2), (4)(a) and (4)(b) on the meaning of ‘‘head office’’, see FSA Handbook COND 2.2.3. Sub-paragraph (5) meaning of contract of insurance—see SI 2001 No 544, Reg 3(1) and FSA Handbook SUP App 3.10.3. Implementation: FSA Handbook COND 2.2.

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Appointment of claims representatives 2A.—(1) If it appears to the Authority that— (a) the regulated activity that the person concerned is carrying on, or is seeking to carry on, is the effecting or carrying out of contracts of insurance, and (b) contracts of insurance against damage arising out of or in connection with the use of motor vehicles on land (other than carrier’s liability) are being, or will be, effected or carried out by the person concerned, that person must have a claims representative in each EEA State other than the United Kingdom. (2) For the purposes of sub-paragraph (1)(b), contracts of reinsurance are to be disregarded. (3) A claims representative is a person with responsibility for handling and settling claims arising from accidents of the kind mentioned in Article 1(2) of the fourth motor insurance directive. (4) In this paragraph ‘‘fourth motor insurance directive’’ means Directive 2000/26/EC of the European Parliament and of the Council of 16 May 2000 on the approximation of the laws of the Member States relating to insurance against civil liability in respect of the use of motor vehicles and amending Council Directives 73/239/EEC and 88/357/EEC. Notes Paragraph 2A inserted by The Financial Services and Markets Act 2000 (Variation of Threshold Conditions) Order 2002, SI 2002 No 2707.

Close links 3.—(1) If the person concerned (‘‘A’’) has close links with another person (‘‘CL’’) the Authority must be satisfied— (a) that those links are not likely to prevent the Authority’s effective supervision of A; and (b) if it appears to the Authority that CL is subject to the laws, regulations or administrative provisions of a territory which is not an EEA State (‘‘the foreign provisions’’), that neither the foreign provisions, nor any deficiency in their enforcement, would prevent the Authority’s effective supervision of A. (2) A has close links with CL if— (a) CL is a parent undertaking of A; (b) CL is a subsidiary undertaking of A; (c) CL is a parent undertaking of a subsidiary undertaking of A; (d) CL is a subsidiary undertaking of a parent undertaking of A; (e) CL owns or controls 20% or more of the voting rights or capital of A; or (f) A owns or controls 20% or more of the voting rights or capital of CL. (3) ‘‘Subsidiary undertaking’’ includes all the instances mentioned in Article 1(1) and (2) of the Seventh Company Law Directive in which an entity may be a subsidiary of an undertaking. Notes Implementation: FSA Handbook COND 2.3.

Adequate resources 4.—(1) The resources of the person concerned must, in the opinion of the Authority, be adequate in relation to the regulated activities that he seeks to carry on, or carries on. (2) In reaching that opinion, the Authority may— (a) take into account the person’s membership of a group and any effect which that membership may have; and (b) have regard to—

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Notes Implementation: FSA Handbook COND 2.4.

Suitability 5. The person concerned must satisfy the Authority that he is a fit and proper person having regard to all the circumstances, including— (a) his connection with any person; (b) the nature of any regulated activity that he carries on or seeks to carry on; and (c) the need to ensure that his affairs are conducted soundly and prudently. Notes Opening words: ‘‘fit and proper person’’: FSA Handbook FIT. Implementation: FSA Handbook COND 2.5. PA RT I I

A U T H O R I S AT I O N

Authorisation under Schedule 3 6. In relation to an EEA firm qualifying for authorisation under Schedule 3, the conditions set out in paragraphs 1 and 3 to 5 apply, so far as relevant, to— (a) an application for permission under Part IV; (b) exercise of the Authority’s own-initiative power under section 45 in relation to a Part IV permission. Authorisation under Schedule 4 7. In relation to a person who qualifies for authorisation under Schedule 4, the conditions set out in paragraphs 1 and 3 to 5 apply, so far as relevant, to— (a) an application for an additional permission; (b) the exercise of the Authority’s own-initiative power under section 45 in relation to additional permission. PA RT I I I

ADDITIONAL CONDITIONS

8.—(1) If this paragraph applies to the person concerned, he must, for the purposes of such provisions of this Act as may be specified, satisfy specified additional conditions. (2) This paragraph applies to a person who— (a) has his head office outside the EEA; and (b) appears to the Authority to be seeking to carry on a regulated activity relating to insurance business. (3) ‘‘Specified’’ means specified in, or in accordance with, an order made by the Treasury. Notes Sub-paragraph (2)(a) on the meaning of ‘‘head office’’, see FSA Handbook COND 2.2.3. Sub-paragraph (3) the Financial Services and Markets Act 2000 (Variation of Threshold Conditions) Order 2001, SI 2001 No 2507, art 3. Implementation: FSA Handbook COND 2.2.

9. The Treasury may by order—

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(a) vary or remove any of the conditions set out in Parts I and II; (b) add to those conditions. Notes Schedules 7 and 8 regulate the functions of the Financial Services Authority and are not reproduced in this work. Schedule 9 repealed by SI 2005 No 1433. Schedule 10 deals with exemptions from liability under s 90(1) for loss caused by a statement and is not included in this work. Schedule 11 repealed by SI 2005 No 1433. Schedule 11A inserted by SI 2005 No 1433—omitted here.

SCHEDULE 12 PA RT I

T R A N S F E R S C H E M E S : C E RT I F I C AT E S

INSURANCE BUSINESS TRANSFER SCHEMES

1.—(1) For the purposes of section 111(2) the appropriate certificates, in relation to an insurance business transfer scheme, are— (a) a certificate under paragraph 2; (b) if sub-paragraph (2) applies, a certificate under paragraph 3; (c) if sub-paragraph (3) applies, a certificate under paragraph 4; (d) if sub-paragraph (4) applies, a certificate under paragraph 5. (2) This sub-paragraph applies if— (a) the authorised person concerned is a UK authorised person which has received authorisation under Article 4 of the life assurance consolidation directive or Article 6 of the first non-life insurance directive from the Authority; and (b) the establishment from which the business is to be transferred under the proposed insurance business transfer scheme is in an EEA State other than the United Kingdom. (3) This sub-paragraph applies if— (a) the authorised person concerned has received authorisation under Article 4 of the life assurance consolidation directive from the Authority; (b) the proposed transfer relates to business which consists of the effecting or carrying out of contracts of long-term insurance; and (c) as regards any policy which is included in the proposed transfer and which evidences a contract of insurance (other than reinsurance), an EEA State other than the United Kingdom is the State of the commitment. (4) This sub-paragraph applies if— (a) the authorised person concerned has received authorisation under Article 6 of the first non-life insurance directive from the Authority; (b) the business to which the proposed insurance business transfer scheme relates is business which consists of the effecting or carrying out of contracts of general insurance; and (c) as regards any policy which is included in the proposed transfer and which evidences a contract of insurance (other than reinsurance), the risk is situated in an EEA State other than the United Kingdom. Notes Application to Lloyd’s: see SI 2001 No 3626. Sub-paragraphs (2)(a) and (3)(a) were amended by SI 2004 No 3379 to reflect the introduction of the consolidated life assurance directive. Sub-paragraph (3)(c) and (4)(c) meaning of contract of insurance—see SI 2001 No 544, Reg 3(1) and FSA Handbook SUP App 3.10.3.

Certificates as to margin of solvency 2.—(1) A certificate under this paragraph is to be given— (a) by the relevant authority; or (b) in a case in which there is no relevant authority, by the Authority.

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(2) A certificate given under sub-paragraph (1)(a) is one certifying that, taking the proposed transfer into account— (a) the transferee possesses, or will possess before the scheme takes effect, the necessary margin of solvency; or (b) there is no necessary margin of solvency applicable to the transferee. (3) A certificate under sub-paragraph (1)(b) is one certifying that the Authority has received from the authority which it considers to be the authority responsible for supervising persons who effect or carry out contracts of insurance in the place to which the business is to be transferred that, taking the proposed transfer into account— (a) the transferee possesses or will possess before the scheme takes effect the margin of solvency required under the law applicable in that place; or (b) there is no such margin of solvency applicable to the transferee. (4) ‘‘Necessary margin of solvency’’ means the margin of solvency required in relation to the transferee, taking the proposed transfer into account, under the law which it is the responsibility of the relevant authority to apply. (5) ‘‘Margin of solvency’’ means the excess of the value of the assets of the transferee over the amount of its liabilities. (6) ‘‘Relevant authority’’ means— (a) if the transferee is an EEA firm falling within paragraph 5 (d) of Schedule 3, its home state regulator; (b) if the transferee is a Swiss general insurer, the authority responsible in Switzerland for supervising persons who effect or carry out contracts of insurance; (c) if the transferee is an authorised person not falling within paragraph (a) or (b), the Authority. (7) In sub-paragraph (6), any reference to a transferee of a particular description includes a reference to a transferee who will be of that description if the proposed scheme takes effect. (8) ‘‘Swiss general insurer’’ means a body— (a) whose head office is in Switzerland; (b) which has permission to carry on regulated activities consisting of the effecting and carrying out of contracts of general insurance; and (c) whose permission is not restricted to the effecting or carrying out of contracts of reinsurance. Notes Sub-paragraph (8)(a) on the meaning of ‘‘head office’’, see FSA Handbook COND 2.2.3.

Certificates as to consent 3. A certificate under this paragraph is one given by the Authority and certifying that the host State regulator has been notified of the proposed scheme and that— (a) that regulator has responded to the notification; or (b) that it has not responded but the period of three months beginning with the notification has elapsed. Certificates as to long-term business 4. A certificate under this paragraph is one given by the Authority and certifying that the authority responsible for supervising persons who effect or carry out contracts of insurance in the State of the commitment has been notified of the proposed scheme and that— (a) that authority has consented to the proposed scheme; or (b) the period of three months beginning with the notification has elapsed and that authority has not refused its consent. Certificates as to general business 5. A certificate under this paragraph is one given by the Authority and certifying that the authority responsible for supervising persons who effect or carry out contracts of insurance in

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the EEA State in which the risk is situated has been notified of the proposed scheme and that— (a) that authority has consented to the proposed scheme; or (b) the period of three months beginning with the notification has elapsed and that authority has not refused its consent. Interpretation of Part I 6.—(1) ‘‘State of the commitment’’, in relation to a commitment entered into at any date, means— (a) if the policyholder is an individual, the State in which he had his habitual residence at that date; (b) if the policyholder is not an individual, the State in which the establishment of the policyholder to which the commitment relates was situated at that date. (2) ‘‘Commitment’’ means a commitment represented by contracts of insurance of a prescribed class. (3) References to the EEA State in which a risk is situated are— (a) if the insurance relates to a building or to a building and its contents (so far as the contents are covered by the same policy), to the EEA State in which the building is situated; (b) if the insurance relates to a vehicle of any type, to the EEA State of registration; (c) in the case of policies of a duration of four months or less covering travel or holiday risks (whatever the class concerned), to the EEA State in which the policyholder took out the policy; (d) in a case not covered by paragraphs (a) to (c)— (i) if the policyholder is an individual, to the EEA State in which he has his habitual residence at the date when the contract is entered into; and (ii) otherwise, to the EEA State in which the establishment of the policyholder to which the policy relates is situated at that date. (4) If the insurance relates to a vehicle dispatched from one EEA State to another, in respect of the period of 30 days beginning with the day on which the purchaser accepts delivery a reference to the EEA State in which a risk is situated is a reference to the State of destination (and not, as provided by sub-paragraph (3)(b), to the State of registration). Notes Sub-paragraph 4 inserted by The Financial Services and Markets Act 2000 (Motor Insurance) Regulations 2007 (SI 2007 No 2403). PA RT I I B A N K I N G B U S I N E S S T R A N S F E R S C H E M E S

Notes Part II comprising paragraphs 7 to 9 is outside the scope of this work and is not reproduced here. PA RT I I I

INSURANCE BUSINESS TRANSFERS EFFECTED OUTSIDE THE UNITED KINGDOM

10.—(1) This paragraph applies to a proposal to execute under provisions corresponding to Part VII in a country or territory other than the United Kingdom an instrument transferring all the rights and obligations of the transferor under general or long-term insurance policies, or under such descriptions of such policies as may be specified in the instrument, to the transferee if any of the conditions in sub-paragraphs (2), (3) or (4) is met in relation to it. (2) The transferor is an EEA firm falling within paragraph 5(d) of Schedule 3 and the transferee is an authorised person whose margin of solvency is supervised by the Authority. (3) The transferor is a company authorised in an EEA State other than the United Kingdom under Article 51 of the life assurance consolidation directive or Article 23 of the first non-life insurance directive and the transferee is a UK authorised person which has received authorisation under Article 4 of the life assurance consolidation directive or Article 6 of the first non-life insurance directive

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(4) The transferor is a Swiss general insurer and the transferee is a UK authorised person which has received authorisation under Article 4 of the life assurance consolidation directive or Article 6 of the first non-life insurance directive. (5) In relation to a proposed transfer to which this paragraph applies, the Authority may, if it is satisfied that the transferee possesses the necessary margin of solvency, issue a certificate to that effect. (6) ‘‘Necessary margin of solvency’’ means the margin of solvency which the transferee, taking the proposed transfer into account, is required by the Authority to maintain. (7) ‘‘Swiss general insurer’’ has the same meaning as in paragraph 2. (8) ‘‘General policy’’ means a policy evidencing a contract which, if it had been effected by the transferee, would have constituted the carrying on of a regulated activity consisting of the effecting of contracts of general insurance. (9) ‘‘Long-term policy’’ means a policy evidencing a contract which, if it had been effected by the transferee, would have constituted the carrying on of a regulated activity consisting of the effecting of contracts of long-term insurance. Notes Sub-paragraph (3) was amended by SI 2004 No 3379 to reflect the introduction of the consolidated life assurance directive. Sub-paragraph (4) was amended by SI 2004 No 3379, paragraph 6, to reflect the introduction of the consolidated life assurance directive.

SCHEDULE 13

THE FINANCIAL SERVICES AND MARKETS TRIBUNAL PA RT I

GENERAL

Interpretation 1. In this Schedule— ‘‘panel of chairmen’’ means the panel established under paragraph 3(1); ‘‘lay panel’’ means the panel established under paragraph 3(4); ‘‘rules’’ means rules made by the Lord Chancellor under section 132. PA RT I I

THE TRIBUNAL

President 2.—(1) The Lord Chancellor must appoint one of the members of the panel of chairmen to preside over the discharge of the Tribunal’s functions. (2) The member so appointed is to be known as the President of the Financial Services and Markets Tribunal (but is referred to in this Act as ‘‘the President’’). (3) The Lord Chancellor may appoint one of the members of the panel of chairmen to be Deputy President. (4) The Deputy President is to have such functions in relation to the Tribunal as the President may assign to him. (5) The Lord Chancellor may not appoint a person to be the President or Deputy President unless that person— (a) has a ten year general qualification within the meaning of section 71 of the Courts and Legal Services Act 1990; (b) is an advocate or solicitor in Scotland of at least ten years’ standing; or (c) is— (i) a member of the Bar of Northern Ireland of at least ten years’ standing; or (ii) a solicitor of the Supreme Court of Northern Ireland of at least ten years’ standing. (6) If the President (or Deputy President) ceases to be a member of the panel of chairmen, he also ceases to be the President (or Deputy President). (7) The functions of the President may, if he is absent or is otherwise unable to act, be discharged— (a) by the Deputy President; or (b) if there is no Deputy President or he too is absent or otherwise unable to act, by a person appointed for that purpose from the panel of chairmen by the Lord Chancellor.

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(8) The Lord Chancellor may appoint a person under sub-paragraph (7)(b) only after consulting the following— (a) the Lord Chief Justice of England and Wales; (b) the Lord President of the Court of Session; (c) the Lord Chief Justice of Northern Ireland. (9) The Lord Chief Justice of England and Wales may nominate a judicial office holder (as defined in section 109(4) of the Constitutional Reform Act 2005) to exercise his functions under this paragraph. (10) The Lord President of the Court of Session may nominate a judge of the Court of Session who is a member of the First or Second Division of the Inner House of that Court to exercise his functions under this paragraph. (11) The Lord Chief Justice of Northern Ireland may nominate any of the following to exercise his functions under this paragraph— (a) the holder of one of the offices listed in Schedule 1 to the Justice (Northern Ireland) Act 2002; (b) a Lord Justice of Appeal (as defined in section 88 of that Act). Notes Sub-paragraph (8) inserted by the Constitutional Reform Act 2005. Sub-paragraph (9) inserted by the Constitutional Reform Act 2005. Sub-paragraph (10) inserted by the Constitutional Reform Act 2005. Sub-paragraph (11) inserted by the Constitutional Reform Act 2005.

Panels 3.—(1) The Lord Chancellor must appoint a panel of persons for the purposes of serving as chairmen of the Tribunal. (2) A person is qualified for membership of the panel of chairmen if— (a) he has a seven year general qualification within the meaning of section 71 of the Courts and Legal Services Act 1990; (b) he is an advocate or solicitor in Scotland of at least seven years’ standing; or (c) he is— (i) a member of the Bar of Northern Ireland of at least seven years’ standing; or (ii) a solicitor of the Supreme Court of Northern Ireland of at least seven years’ standing. (3) The panel of chairmen must include at least one member who is a person of the kind mentioned in sub-paragraph (2)(b). (4) The Lord Chancellor must also appoint a panel of persons who appear to him to be qualified by experience or otherwise to deal with matters of the kind that may be referred to the Tribunal. Terms of office etc 4.—(1) Subject to the provisions of this Schedule, each member of the panel of chairmen and the lay panel is to hold and vacate office in accordance with the terms of his appointment. (2) The Lord Chancellor may remove a member of either panel (including the President) on the ground of incapacity or misbehaviour. (2A) The Lord Chancellor may remove a person under sub-paragraph (2) only with the concurrence of the appropriate senior judge. (2B) The appropriate senior judge is the Lord Chief Justice of England and Wales, unless— (a) the person to be removed exercises functions wholly or mainly in Scotland, in which case it is the Lord President of the Court of Session, or (b) the person to be removed exercises functions wholly or mainly in Northern Ireland, in which case it is the Lord Chief Justice of Northern Ireland. Notes Sub-paragraphs (2A) and (2B) inserted by the Constitutional Reform Act 2005.

(3) A member of either panel— (a) may at any time resign office by notice in writing to the Lord Chancellor; (b) is eligible for re-appointment if he ceases to hold office.

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5. The Lord Chancellor may pay to any person, in respect of his service— (a) as a member of the Tribunal (including service as the President or Deputy President), or (b) as a person appointed under paragraph 7(4), such remuneration and allowances as he may determine. Staff 6.—(1) The Lord Chancellor may appoint such staff for the Tribunal as he may determine. (2) The remuneration of the Tribunal’s staff is to be defrayed by the Lord Chancellor. (3) Such expenses of the Tribunal as the Lord Chancellor may determine are to be defrayed by the Lord Chancellor.

PA RT I I I

CONSTITUTION OF TRIBUNAL

7.—(1) On a reference to the Tribunal, the persons to act as members of the Tribunal for the purposes of the reference are to be selected from the panel of chairmen or the lay panel in accordance with arrangements made by the President for the purposes of this paragraph (‘‘the standing arrangements’’). (2) The standing arrangements must provide for at least one member to be selected from the panel of chairmen. (3) If while a reference is being dealt with, a person serving as member of the Tribunal in respect of the reference becomes unable to act, the reference may be dealt with by— (a) the other members selected in respect of that reference; or (b) if it is being dealt with by a single member, such other member of the panel of chairmen as may be selected in accordance with the standing arrangements for the purposes of the reference. (4) If it appears to the Tribunal that a matter before it involves a question of fact of special difficulty, it may appoint one or more experts to provide assistance.

PA RT I V

TRIBUNAL PROCEDURE

8. For the purpose of dealing with references, or any matter preliminary or incidental to a reference, the Tribunal must sit at such times and in such place or places as the Lord Chancellor may, after consulting the President of the Financial Services and Markets Tribunal, direct. Notes The words ‘‘after consulting the President of the Financial Services and Markets Tribunal’’ inserted by the Constitutional Reform Act 2005.

9. Rules made by the Lord Chancellor under section 132 may, in particular, include provision— (a) as to the manner in which references are to be instituted; (b) for the holding of hearings in private in such circumstances as may be specified in the rules; (c) as to the persons who may appear on behalf of the parties; (d) for a member of the panel of chairmen to hear and determine interlocutory matters arising on a reference; (e) for the suspension of decisions of the Authority which have taken effect; (f) as to the withdrawal of references; (g) as to the registration, publication and proof of decisions and orders.

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Practice directions 10. The President of the Tribunal may give directions as to the practice and procedure to be followed by the Tribunal in relation to references to it. Evidence 11.—(1) The Tribunal may by summons require any person to attend, at such time and place as is specified in the summons, to give evidence or to produce any document in his custody or under his control which the Tribunal considers it necessary to examine. (2) The Tribunal may— (a) take evidence on oath and for that purpose administer oaths; or (b) instead of administering an oath, require the person examined to make and subscribe a declaration of the truth of the matters in respect of which he is examined. (3) A person who without reasonable excuse— (a) refuses or fails— (i) to attend following the issue of a summons by the Tribunal, or (ii) to give evidence, or (b) alters, suppresses, conceals or destroys, or refuses to produce a document which he may be required to produce for the purposes of proceedings before the Tribunal, is guilty of an offence. (4) A person guilty of an offence under sub-paragraph (3)(a) is liable on summary conviction to a fine not exceeding the statutory maximum. (5) A person guilty of an offence under sub-paragraph (3)(b) is liable— (a) on summary conviction, to a fine not exceeding the statutory maximum; (b) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine or both. Decisions of Tribunal 12.—(1) A decision of the Tribunal may be taken by a majority. (2) The decision must— (a) state whether it was unanimous or taken by a majority; (b) be recorded in a document which— (i) contains a statement of the reasons for the decision; and (ii) is signed and dated by the member of the panel of chairmen dealing with the reference. (3) The Tribunal must— (a) inform each party of its decision; and (b) as soon as reasonably practicable, send to each party and, if different, to any authorised person concerned, a copy of the document mentioned in sub-paragraph (2). (4) The Tribunal must send the Treasury a copy of its decision. Costs 13.—(1) If the Tribunal considers that a party to any proceedings on a reference has acted vexatiously, frivolously or unreasonably it may order that party to pay to another party to the proceedings the whole or part of the costs or expenses incurred by the other party in connection with the proceedings. (2) If, in any proceedings on a reference, the Tribunal considers that a decision of the Authority which is the subject of the reference was unreasonable it may order the Authority to pay to another party to the proceedings the whole or part of the costs or expenses incurred by the other party in connection with the proceedings. Notes Schedule 14 regulates the role of the Competition Commission and is not reproduced in this work.

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Regulation of Insurers I N F O R M AT I O N A N D I N V E S T I G AT I O N S : C O N N E C T E D PERSONS PA RT I

RULES FOR SPECIFIC BODIES

Corporate bodies 1. If the authorised person (‘‘BC’’) is a body corporate, a person who is or has been— (a) an officer or manager of BC or of a parent undertaking of BC; (b) an employee of BC; (c) an agent of BC or of a parent undertaking of BC. Partnerships 2. If the authorised person (‘‘PP’’) is a partnership, a person who is or has been a member, manager, employee or agent of PP. Unincorporated associations 3. If the authorised person (‘‘UA’’) is an unincorporated association of persons which is neither a partnership nor an unincorporated friendly society, a person who is or has been an officer, manager, employee or agent of UA. Friendly societies 4.—(1) If the authorised person (‘‘FS’’) is a friendly society, a person who is or has been an officer, manager or employee of FS. (2) In relation to FS, ‘‘officer’’ and ‘‘manager’’ have the same meaning as in section 119(1) of the Friendly Societies Act 1992. Building societies 5.—(1) If the authorised person (‘‘BS’’) is a building society, a person who is or has been an officer or employee of BS. (2) In relation to BS, ‘‘officer’’ has the same meaning as it has in section 119(1) of the Building Societies Act 1986. Individuals 6. If the authorised person (‘‘IP’’) is an individual, a person who is or has been an employee or agent of IP. Application to sections 171 and 172 7. For the purposes of sections 171 and 172, if the person under investigation is not an authorised person the references in this Part of this Schedule to an authorised person are to be taken to be references to the person under investigation. PA RT I I

ADDITIONAL RULES

8. A person who is, or at the relevant time was, the partner, manager, employee, agent, appointed representative, banker, auditor, actuary or solicitor of— (a) the person under investigation (‘‘A’’); (b) a parent undertaking of A; (c) a subsidiary undertaking of A;

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(d) a subsidiary undertaking of a parent undertaking of A; or (e) a parent undertaking of a subsidiary undertaking of A. Notes Schedule 16 deals with prohibitions and restrictions imposed by the director general of fair trading and is not reproduced in this work.

SCHEDULE 17

THE OMBUDSMAN SCHEME PA RT I

GENERAL

Interpretation 1. In this Schedule— ‘‘ombudsman’’ means a person who is a member of the panel; and ‘‘the panel’’ means the panel established under paragraph 4. PA RT I I

T H E S C H E M E O P E R AT O R

Establishment by the Authority 2.—(1) The Authority must establish a body corporate to exercise the functions conferred on the scheme operator by or under this Act. (2) The Authority must take such steps as are necessary to ensure that the scheme operator is, at all times, capable of exercising those functions. Constitution 3.—(1) The constitution of the scheme operator must provide for it to have— (a) a chairman; and (b) a board (which must include the chairman) whose members are the scheme operator’s directors. (2) The chairman and other members of the board must be persons appointed, and liable to removal from office, by the Authority (acting, in the case of the chairman, with the approval of the Treasury). (3) But the terms of their appointment (and in particular those governing removal from office) must be such as to secure their independence from the Authority in the operation of the scheme. (4) The function of making voluntary jurisdiction rules under section 227, the function of making consumer credit rules, the function of making determinations under section 234A(1) and the functions conferred by paragraphs 4, 5, 7, 9 or 14 may be exercised only by the board. (5) The validity of any act of the scheme operator is unaffected by— (a) a vacancy in the office of chairman; or (b) a defect in the appointment of a person as chairman or as a member of the board. Notes Sub-para (4) references to consumer credit rules and to s 234A(1) inserted by the Consumer Credit Act 2006.

The panel of ombudsmen 4.—(1) The scheme operator must appoint and maintain a panel of persons, appearing to it to have appropriate qualifications and experience, to act as ombudsmen for the purposes of the scheme. (2) A person’s appointment to the panel is to be on such terms (including terms as to the duration and termination of his appointment and as to remuneration) as the scheme operator considers— (a) consistent with the independence of the person appointed; and (b) otherwise appropriate.

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5.—(1) The scheme operator must appoint one member of the panel to act as Chief Ombudsman. (2) The Chief Ombudsman is to be appointed on such terms (including terms as to the duration and termination of his appointment) as the scheme operator considers appropriate. Status 6.—(1) The scheme operator is not to be regarded as exercising functions on behalf of the Crown. (2) The scheme operator’s board members, officers and staff are not to be regarded as Crown servants. (3) Appointment as Chief Ombudsman or to the panel or as a deputy ombudsman does not confer the status of Crown servant. Annual reports 7.—(1) At least once a year— (a) the scheme operator must make a report to the Authority on the discharge of its functions; and (b) the Chief Ombudsman must make a report to the Authority on the discharge of his functions. (2) Each report must distinguish between functions in relation to the scheme’s compulsory jurisdiction functions in relation to its consumer credit jurisdiction and functions in relation to its voluntary jurisdiction. (3) Each report must also comply with any requirements specified in rules made by the Authority. (4) The scheme operator must publish each report in the way it considers appropriate. Notes Sub-paragraph (2) reference to consumer credit jurisdiction inserted by the Consumer Credit Act 2006.

Guidance 8. The scheme operator may publish guidance consisting of such information and advice as it considers appropriate and may charge for it or distribute it free of charge. Budget 9.—(1) The scheme operator must, before the start of each of its financial years, adopt an annual budget which has been approved by the Authority. (2) The scheme operator may, with the approval of the Authority, vary the budget for a financial year at any time after its adoption. (3) The annual budget must include an indication of— (a) the distribution of resources deployed in the operation of the scheme, and (b) the amounts of income of the scheme operator arising or expected to arise from the operation of the scheme, distinguishing between the scheme’s compulsory, consumer credit and voluntary jurisdiction. Notes Sub-paragraph (3) closing words reference to consumer credit jurisdiction inserted by the Consumer Credit Act 2006.

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Exemption from liability in damages 10.—(1) No person is to be liable in damages for anything done or omitted in the discharge, or purported discharge, of any functions under this Act in relation to the compulsory jurisdiction or to the consumer credit jurisdiction. (2) Sub-paragraph (1) does not apply— (a) if the act or omission is shown to have been in bad faith; or (b) so as to prevent an award of damages made in respect of an act or omission on the ground that the act or omission was unlawful as a result of section 6(1) of the Human Rights Act 1998. Notes Sub-paragraph (1) reference to consumer credit jurisdiction inserted by the Consumer Credit Act 2006.

Privilege 11. For the purposes of the law relating to defamation, proceedings in relation to a complaint which is subject to the compulsory jurisdiction or to the consumer credit jurisdiction are to be treated as if they were proceedings before a court. Notes Paragraph 11 reference to consumer credit jurisdiction inserted by the Consumer Credit Act 2006.

PA RT I I I

T H E C O M P U L S O RY J U R I S D I C T I O N

Introduction 12. This Part of this Schedule applies only in relation to the compulsory jurisdiction. Authority’s procedural rules 13.—(1) The Authority must make rules providing that a complaint is not to be entertained unless the complainant has referred it under the ombudsman scheme before the applicable time limit (determined in accordance with the rules) has expired. (2) The rules may provide that an ombudsman may extend that time limit in specified circumstances. (3) The Authority may make rules providing that a complaint is not to be entertained (except in specified circumstances) if the complainant has not previously communicated its substance to the respondent and given him a reasonable opportunity to deal with it. (4) The Authority may make rules requiring an authorised person who may become subject to the compulsory jurisdiction as a respondent to establish such procedures as the Authority considers appropriate for the resolution of complaints which— (a) may be referred to the scheme; and (b) arise out of activity to which the Authority’s powers under Part X do not apply. The scheme operator’s rules 14.—(1) The scheme operator must make rules, to be known as ‘‘scheme rules’’, which are to set out the procedure for reference of complaints and for their investigation, consideration and determination by an ombudsman. (2) Scheme rules may, among other things— (a) specify matters which are to be taken into account in determining whether an act or omission was fair and reasonable; (b) provide that a complaint may, in specified circumstances, be dismissed without consideration of its merits;

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(c) provide for the reference of a complaint, in specified circumstances and with the consent of the complainant, to another body with a view to its being determined by that body instead of by an ombudsman; (d) make provision as to the evidence which may be required or admitted, the extent to which it should be oral or written and the consequences of a person’s failure to produce any information or document which he has been required (under section 231 or otherwise) to produce; (e) allow an ombudsman to fix time limits for any aspect of the proceedings and to extend a time limit; (f) provide for certain things in relation to the reference, investigation or consideration (but not determination) of a complaint to be done by a member of the scheme operator’s staff instead of by an ombudsman; (g) make different provision in relation to different kinds of complaint. (3) The circumstances specified under sub-paragraph (2)(b) may include the following— (a) the ombudsman considers the complaint frivolous or vexatious; (b) legal proceedings have been brought concerning the subject-matter of the complaint and the ombudsman considers that the complaint is best dealt with in those proceedings; or (c) the ombudsman is satisfied that there are other compelling reasons why it is inappropriate for the complaint to be dealt with under the ombudsman scheme. (4) If the scheme operator proposes to make any scheme rules it must publish a draft of the proposed rules in the way appearing to it to be best calculated to bring them to the attention of persons appearing to it to be likely to be affected. (5) The draft must be accompanied by a statement that representations about the proposals may be made to the scheme operator within a time specified in the statement. (6) Before making the proposed scheme rules, the scheme operator must have regard to any representations made to it under sub-paragraph (5). (7) The consent of the Authority is required before any scheme rules may be made. Fees 15.—(1) Scheme rules may require a respondent to pay to the scheme operator such fees as may be specified in the rules. (2) The rules may, among other things— (a) provide for the scheme operator to reduce or waive a fee in a particular case; (b) set different fees for different stages of the proceedings on a complaint; (c) provide for fees to be refunded in specified circumstances; (d) make different provision for different kinds of complaint. Enforcement of money awards 16. A money award, including interest, which has been registered in accordance with scheme rules may— (a) if a county court so orders in England and Wales, be recovered by execution issued from the county court (or otherwise) as if it were payable under an order of that court; (b) be enforced in Northern Ireland as a money judgment under the Judgments Enforcement (Northern Ireland) Order 1981; (c) be enforced in Scotland by the sheriff, as if it were a judgment or order of the sheriff and whether or not the sheriff could himself have granted such judgment or order. Notes New Part IIIA inserted by Consumer Credit Act 2006; omitted here.

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T H E V O L U N TA RY J U R I S D I C T I O N

Introduction 17. This Part of this Schedule applies only in relation to the voluntary jurisdiction. Terms of reference to the scheme 18.—(1) Complaints are to be dealt with and determined under the voluntary jurisdiction on standard terms fixed by the scheme operator with the approval of the Authority. (2) Different standard terms may be fixed with respect to different matters or in relation to different cases. (3) The standard terms may, in particular— (a) require the making of payments to the scheme operator by participants in the scheme of such amounts, and at such times, as may be determined by the scheme operator; (b) make provision as to the award of costs on the determination of a complaint. (4) The scheme operator may not vary any of the standard terms or add or remove terms without the approval of the Authority. (5) The standard terms may include provision to the effect that (unless acting in bad faith) none of the following is to be liable in damages for anything done or omitted in the discharge or purported discharge of functions in connection with the voluntary jurisdiction— (a) the scheme operator; (b) any member of its governing body; (c) any member of its staff; (d) any person acting as an ombudsman for the purposes of the scheme. Delegation by and to other schemes 19.—(1) The scheme operator may make arrangements with a relevant body— (a) for the exercise by that body of any part of the voluntary jurisdiction of the ombudsman scheme on behalf of the scheme; or (b) for the exercise by the scheme of any function of that body as if it were part of the voluntary jurisdiction of the scheme. (2) A ‘‘relevant body’’ is one which the scheme operator is satisfied— (a) is responsible for the operation of a broadly comparable scheme (whether or not established by statute) for the resolution of disputes; and (b) in the case of arrangements under sub-paragraph (1)(a), will exercise the jurisdiction in question in a way compatible with the requirements imposed by or under this Act in relation to complaints of the kind concerned. (3) Such arrangements require the approval of the Authority. Voluntary jurisdiction rules: procedure 20.—(1) If the scheme operator makes voluntary jurisdiction rules, it must give a copy to the Authority without delay. (2) If the scheme operator revokes any such rules, it must give written notice to the Authority without delay. (3) The power to make voluntary jurisdiction rules is exercisable in writing. (4) Immediately after making voluntary jurisdiction rules, the scheme operator must arrange for them to be printed and made available to the public. (5) The scheme operator may charge a reasonable fee for providing a person with a copy of any voluntary jurisdiction rules. Verification of the rules 21.—(1) The production of a printed copy of voluntary jurisdiction rules purporting to be made by the scheme operator—

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(a) on which is endorsed a certificate signed by a member of the scheme operator’s staff authorised by the scheme operator for that purpose, and (b) which contains the required statements, is evidence (or in Scotland sufficient evidence) of the facts stated in the certificate. (2) The required statements are— (a) that the rules were made by the scheme operator; (b) that the copy is a true copy of the rules; and (c) that on a specified date the rules were made available to the public in accordance with paragraph 20(4). (3) A certificate purporting to be signed as mentioned in subparagraph (1) is to be taken to have been duly signed unless the contrary is shown. Consultation 22.—(1) If the scheme operator proposes to make voluntary jurisdiction rules, it must publish a draft of the proposed rules in the way appearing to it to be best calculated to bring them to the attention of the public. (2) The draft must be accompanied by— (a) an explanation of the proposed rules; and (b) a statement that representations about the proposals may be made to the scheme operator within a specified time. (3) Before making any voluntary jurisdiction rules, the scheme operator must have regard to any representations made to it in accordance with sub-paragraph (2)(b). (4) If voluntary jurisdiction rules made by the scheme operator differ from the draft published under sub-paragraph (1) in a way which the scheme operator considers significant, the scheme operator must publish a statement of the difference.

SCHEDULE 18

MUTUALS

General Note This Schedule makes amendments to the Friendly Societies Act 1974 and the Friendly Societies Act 1992. Amending paragraphs are not reproduced separately here.

16. References in any provision of, or made under, any enactment to subsidiaries of, or bodies jointly controlled by, an incorporated friendly society are to be read as including references to bodies which are such subsidiaries or bodies as a result of any provision of this Part of this Schedule. Notes This para amends the Industrial and Provident Societies Act 1965 (c.12). Schedule 19 was repealed by the Enterprise Act 2002, s 247(k) and Sched 26. Schedules 20, 21 and 22 contain amendments, repeals and transitional provisions and are not reproduced separately.

1.31 INSURANCE (LLOYD’S) REGULATIONS 1983 (SI 1983 No 224) General Note These Regulations applied the Insurance Companies Act 1982 to Lloyd’s. The Regulations were amended by the Insurance Companies Regulations 1994, SI 1994 No 1516, the Insurance (Lloyd’s) Regulations 1996, SI 1996 No 3011 and the Insurance (Lloyd’s) Regulations 1997, SI 1997 No 686. Although the 1983 Regulations have not been repealed they are of transitional interest only and have not been reproduced in this work.

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The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 1.34 1.32 INSURANCE (LLOYD’S) REGULATIONS 1996 (SI 1996 No 3011) General Note These Regulations amended the Lloyd’s Act 1982 and the Insurance (Lloyd’s) Regulations 1983, SI 1983 No 224. They were revoked by the Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 542, to reflect the transfer of functions under the Financial Services and Markets Act 2000. Amendments were made throughout this from The Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001 No 2617 and The Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649 transfer functions following the setting up of the Financial Services Authority.

1.33 INSURANCE (LLOYD’S) REGULATIONS 1997 (SI 1997 No 686) General Note These Regulations amended the Insurance (Lloyd’s) Regulations 1983, SI 1983 No 224 and are not reproduced here.

1.34 THE FINANCIAL SERVICES AND MARKETS ACT 2000 (REGULATED ACTIVITIES) ORDER 2001 (SI 2001 No 544) The Treasury, in exercise of the powers conferred on them by sections 22(1) and (5), 426 and 428(3) of, and para 25 of Sched 2 to, the Financial Services and Markets Act 2000, hereby make the following Order:

PA RT I

GENERAL

Citation 1. This Order may be cited as the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. Commencement 2.—(1) Except as provided by paragraph (2), this Order comes into force on the day on which section 19 of the Act comes into force. (2) This Order comes into force— (a) for the purposes of articles 59, 60 and 87 (funeral plan contracts) on 1st January 2002; and (b) for the purposes of articles 61 to 63, 88, 90 and 91 (regulated mortgage contracts) on such a day as the Treasury may specify. (3) Any day specified under paragraph (2)(b) must be caused to be notified in the London, Edinburgh and Belfast Gazettes published not later than one week before that day. Notes Paragraph (2)(b) the original words ‘‘nine months after section 19 of the Act comes into force’’ were amended to read ‘‘on such a day as the Treasury may specify’’ by SI 2002 No 1777, Reg 2. Paragraph (3) was inserted by SI 2002 No 1777, Reg 2.

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Interpretation 3.—(1) In this Order— ‘‘the Act’’ means the Financial Services and Markets Act 2000; ‘‘annuities on human life’’ does not include superannuation allowances and annuities payable out of any fund applicable solely to the relief and maintenance of persons engaged, or who have been engaged, in any particular profession, trade or employment, or of the dependants of such persons; ‘‘buying’’ includes acquiring for valuable consideration; ‘‘close relative’’ in relation to a person means— (a) his spouse or civil partner; (b) his children and step children, his parents and step-parents, his brothers and sisters and his step-brothers and step-sisters; and (c) the spouse or civil partner of any person within sub-paragraph (b); ‘‘the Commission Regulation’’ means Commission Regulation 1287/2006 of 10 August 2006; ‘‘contract of general insurance’’ means any contract falling within Part I of Schedule 1; ‘‘contract of insurance’’ means any contract of insurance which is a contract of long-term insurance or a contract of general insurance, and includes— (a) fidelity bonds, performance bonds, administration bonds, bail bonds, customs bonds or similar contracts of guarantee, where these are— (i) effected or carried out by a person not carrying on a banking business; (ii) not effected merely incidentally to some other business carried on by the person effecting them; and (iii) effected in return for the payment of one or more premiums; (b) tontines; (c) capital redemption contracts or pension fund management contracts, where these are effected or carried out by a person who— (i) does not carry on a banking business; and (ii) otherwise carries on a regulated activity of the kind specified by article 10(1) or (2); (d) contracts to pay annuities on human life; (e) contracts of a kind referred to in article 1(2)(e) of the first life insurance directive (collective insurance etc.); and (f) contracts of a kind referred to in article 1(3) of the first life insurance directive (social insurance); but does not include a funeral plan contract (or a contract which would be a funeral plan contract but for the exclusion in article 60); ‘‘contract of long-term insurance’’ means any contract falling within Part II of Schedule 1; ‘‘contractually based investment’’ means— (a) rights under a qualifying contract of insurance; (b) any investment of the kind specified by any of articles 83, 84, 85 and 87; or (c) any investment of the kind specified by article 89 so far as relevant to an investment falling within (a) or (b); ‘‘credit institution’’ means— (a) a credit institution authorised under the banking consolidation directive other than an institution to which Article 2.1 of the markets in financial instruments directive (the text of which is set out in Schedule 3) applies, or (b) an institution which would satisfy the requirements for authorisation as a credit institution under that directive (other than an institution to which Article 2.1 of the markets in financial instruments directive would apply) if it had its registered office (or if it does not have a registered office, its head office) in an EEA State; ‘‘deposit’’ has the meaning given by article 5; ‘‘electronic money’’ means monetary value, as represented by a claim on the issuer, which is— (a) stored on an electronic device;

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The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 1.34 (b) issued on receipt of funds; and (c) accepted as a means of payment by persons other than the issuer; ‘‘financial instrument’’ means any instrument listed in Section C of Annex I to the markets in financial instruments directive (the text of which is set out in Part 1 of Schedule 2) read with Chapter VI of the Commission Regulation (the text of which is set out in Part 2 of Schedule 2); ‘‘funeral plan contract’’ has the meaning given by article 59; ‘‘home purchase provider’’ has the meaning given by article 63F(3); ‘‘home purchaser’’ has the meaning given by article 63F(3); ‘‘home Member State’’, in relation to an investment firm, has the meaning given by Article 4.1.20 of the markets in financial instruments directive, and in relation to a credit institution, has the meaning given by Article 4.7 of the banking consolidation directive; ‘‘instrument’’ includes any record whether or not in the form of a document; ‘‘investment firm’’ means a person whose regular occupation or business is the provision or performance of investment services and activities on a professional basis but does not include— (a) a person to whom the markets in financial instruments directive does not apply by virtue of Article 2 of that directive (the text of which is set out in Schedule 3); (b) a person whose home Member State is an EEA State other than the United Kingdom and to whom, by reason of the fact that the State has given effect to Article 3 of that directive, that directive does not apply by virtue of that Article; (c) a person who does not have a home Member State and to whom (if he had his registered office in an EEA State, or, being a person other than a body corporate or a body corporate not having a registered office, if he had his head office in an EEA State) the markets in financial instruments directive would not apply by virtue of Article 2 of that directive; ‘‘investment services and activities’’ means— (a) any service provided to third parties listed in Section A of Annex I to the markets in financial instruments directive (the text of which is set out in Part 3 of Schedule 2) read with Article 52 of Commission Directive 2006/73/EC of 10 August 2006 (the text of which is set out in Part 4 of Schedule 2), or (b) any activity listed in Section A of Annex I to that directive, relating to any financial instrument; ‘‘joint enterprise’’ means an enterprise into which two or more persons (‘‘the participators’’) enter for commercial purposes related to a business or businesses (other than the business of engaging in a regulated activity) carried on by them; and, where a participator is a member of a group, each other member of the group is also to be regarded as a participator in the enterprise; ‘‘local authority’’ means— (a) in England and Wales, a local authority within the meaning of the Local Government Act 1972, the Greater London Authority, the Common Council of the City of London or the Council of the Isles of Scilly; (b) in Scotland, a local authority within the meaning of the Local Government (Scotland) Act 1973; (c) in Northern Ireland, a district council within the meaning of the Local Government Act (Northern Ireland) 1972; ‘‘management company’’ has the meaning given by Article 1a.2 of the UCITS directive as amended by Directive 2001/107/EC; ‘‘managing agent’’ means a person who is permitted by the Council of Lloyd’s in the conduct of his business as an underwriting agent to perform for a member of Lloyd’s one or more of the following functions— (a) underwriting contracts of insurance at Lloyd’s; (b) reinsuring such contracts in whole or in part; (c) paying claims on such contracts; ‘‘market operator’’ means a market operator within the meaning of Article 4.1.13 of the markets in financial instruments directive, or a person who would be a market

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operator if he had his registered office, or if he does not have a registered office his head office, in an EEA State, but does not include— (a) a person to whom the markets in financial instruments directive does not apply by virtue of Article 2 of that directive (the text of which is set out in Schedule 3); (b) a person who does not have a home Member State to whom (if he had his registered office, or if he does not have a registered office his head office, in an EEA State) the markets in financial instruments directive would not apply by virtue of Article 2 of that directive; ‘‘multilateral trading facility’’ means— (a) a multilateral trading facility (within the meaning of Article 4.1.15 of the markets in financial instruments directive) operated by an investment firm, a credit institution or a market operator, or (b) a facility which— (i) is operated by an investment firm, a credit institution or market operator which does not have a home Member State, and (ii) if its operator had a home Member State, would be a multilateral trading facility within the meaning of Article 4.1.15 of the markets in financial instruments directive; ‘‘occupational pension scheme’’ has the meaning given by section 1 of the Pension Schemes Act 1993 but with paragraph (b) of the definition omitted; ‘‘overseas person’’ means a person who— (a) carries on activities of the kind specified by any of articles 14, 21, 25, 25A, 25B, 25C, 25D, 37, 39A, 40, 45, 51, 52, 53, 53A, 53B, 53C, 61, 63B and 63F or, so far as relevant to any of those articles, article 64 (or activities of a kind which would be so specified but for the exclusion in article 72); but (b) does not carry on any such activities, or offer to do so, from a permanent place of business maintained by him in the United Kingdom; ‘‘pension fund management contract’’ means a contract to manage the investments of pension funds (other than funds solely for the benefit of the officers or employees of the person effecting or carrying out the contract and their dependants or, in the case of a company, partly for the benefit of officers and employees and their dependants of its subsidiary or holding company or a subsidiary of its holding company); and for the purposes of this definition, ‘‘subsidiary’’ and ‘‘holding company’’ are to be construed in accordance with section 736 of the Companies Act 1985 or article 4 of the Companies (Northern Ireland) Order 1986; ‘‘personal pension scheme’’ means a scheme or arrangement which is not an occupational pension scheme or a stakeholder pension scheme and which is comprised in one or more instruments or agreements, having or capable of having effect so as to provide benefits to or in respect of people— (a) on retirement, (b) on having reached a particular age, or (c) on termination of service in an employment; ‘‘plan provider’’ has the meaning given by paragraph (3) of article 63B, read with paragraphs (7) and (8) of that article; ‘‘property’’ includes currency of the United Kingdom or any other country or territory; ‘‘qualifying contract of insurance’’ means a contract of long-term insurance which is not— (a) a reinsurance contract; nor (b) a contract in respect of which the following conditions are met— (i) the benefits under the contract are payable only on death or in respect of incapacity due to injury, sickness or infirmity; (ii) [deleted: the contract provides that benefits are payable on death (other than death due to an accident) only where the death occurs within ten years of the date on which the life of the person in question was first insured under the contract, or where the death occurs before that person attains a specified age not exceeding seventy years]; (iii) the contract has no surrender value, or the consideration consists of a single premium and the surrender value does not exceed that premium; and

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The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 1.34 (iv) the contract makes no provision for its conversion or extension in a manner which would result in it ceasing to comply with any of the above conditions; ‘‘regulated home purchase plan’’ has the meaning given by article 63F(3); ‘‘regulated home reversion plan’’ has the meaning given by article 63B(3); ‘‘regulated mortgage contract’’ has the meaning given by article 61(3); ‘‘relevant investment’’ means— (a) rights under a qualifying contract of insurance; (b) rights under any other contract of insurance; (c) any investment of the kind specified by any of articles 83, 84, 85 and 87; or (d) any investment of the kind specified by article 89 so far as relevant to an investment falling within (a) or (c); ‘‘reversion seller’’ has the meaning given by article 63B(3); ‘‘security’’ means (except where the context otherwise requires) any investment of the kind specified by any of articles 76 to 82 or, so far as relevant to any such investment, article 89; ‘‘selling’’, in relation to any investment, includes disposing of the investment for valuable consideration, and for these purposes ‘‘disposing’’ includes— (a) in the case of an investment consisting of rights under a contract— (i) surrendering, assigning or converting those rights; or (ii) assuming the corresponding liabilities under the contract; (b) in the case of an investment consisting of rights under other arrangements, assuming the corresponding liabilities under the arrangements; and (c) in the case of any other investment, issuing or creating the investment or granting the rights or interests of which it consists; ‘‘stakeholder pension scheme’’ has the meaning given by section 1 of the Welfare Reform and Pensions Act 1999 in relation to Great Britain and has the meaning given by article 3 of the Welfare Reform and Pensions (Northern Ireland) Order 1999 in relation to Northern Ireland; ‘‘syndicate’’ means one or more persons, to whom a particular syndicate number has been assigned by or under the authority of the Council of Lloyd’s, carrying out or effecting contracts of insurance written at Lloyd’s; ‘‘voting shares’’, in relation to a body corporate, means shares carrying voting rights attributable to share capital which are exercisable in all circumstances at any general meeting of that body corporate. (2) For the purposes of this Order, a transaction is entered into through a person if he enters into it as agent or arranges, in a manner constituting the carrying on of an activity of the kind specified by article 25(1), 25A(1), 25B(1) or 25C(1), for it to be entered into by another person as agent or principal. (3) For the purposes of this Order, a contract of insurance is to be treated as falling within Part II of Schedule 1, notwithstanding the fact that it contains related and subsidiary provisions such that it might also be regarded as falling within Part I of that Schedule, if its principal object is that of a contract falling within Part II and it is effected or carried out by an authorised person who has permission to effect or carry out contracts falling within paragraph I of Part II of Schedule 1. Notes Art 3(1) definitions of ‘‘the Commission Regulation’’, ‘‘credit institution’’, ‘‘financial instrument’’, ‘‘home Member State’’, ‘‘investment firm’’, ‘‘investment services and activities’’, ‘‘management company’’, ‘‘market operator’’, ‘‘multilateral trading facility’’ were inserted by SI 2006 No 3384, implementing in part Directive 2004/39/EC of 21 April 2004 of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (OJ No L145, 30.4.2004, p.1) (‘‘MiFID’’). The definition of ‘‘close relative’’ was amended to encompass civil partners by SI 2005 No 2114. Definition of ‘‘electronic money’’ inserted by SI 2002 No 682 implementing Directive 2000/46/EC of the European Parliament and of the Council of 18 September 2000 on the taking up, pursuit of and prudential supervision of the business of electronic money institutions (OJ L275, 27.10.2000, p.39). Definition of ‘‘home purchase provider’’ inserted by SI 2006 No 2383. Definition of ‘‘home purchaser’’ inserted by SI 2006 No 2383.

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Definition of ‘‘occupational pension scheme’’ amended by SI 2005 No 593 and then again by SI 2006 No 1969. Definition of ‘‘overseas person’’ in regulation 3 amended by SI 2003 No 1475, SI 2003 No 1476, SI 2006 No 2383 and 2006 No 3384, each of which inserted additional paragraph references. Definition of ‘‘personal pension scheme’’ inserted by SI 2006 No 1969. Definition of ‘‘plan provider’’ inserted by SI 2006 No 2383. Definition of ‘‘qualifying contract of insurance’’ sub-paragraph (b)(ii) omitted by SI 2007 No 1339, effective 6 June 2007. Definition of ‘‘regulated home purchase plan’’ inserted by SI 2006 No 2383. Definition of ‘‘regulated home reversion plan’’ inserted by SI 2006 No 2383. Definition of ‘‘relevant investment’’ inserted by SI 2003 No 1476. Definition of ‘‘reversion seller’’ inserted by SI 2006 No 2383; Definition of ‘‘stakeholder pension scheme’’ amended by SI 2005 No 593. Art 3(2) references to arts 25A(1), 25B(1) or 25C(1) inserted by SI 2003 No 2383.

PA RT I I

SPECIFIED ACTIVITIES

Chapter I

General

Specified activities: general 4.—(1) The following provisions of this Part specify kinds of activity for the purposes of section 22 of the Act (and accordingly any activity of one of those kinds, which is carried on by way of business, and relates to an investment of a kind specified by any provision of Part III and applicable to that activity, is a regulated activity for the purposes of the Act). (2) The kinds of activity specified by articles 51 and 52 are also specified for the purposes of section 22(1)(b) of the Act (and accordingly any activity of one of those kinds, when carried on by way of business, is a regulated activity when carried on in relation to property of any kind). (3) Subject to paragraph (4), each provision specifying a kind of activity is subject to the exclusions applicable to that provision (and accordingly any reference in this Order to an activity of the kind specified by a particular provision is to be read subject to any such exclusions). (4) Where an investment firm or credit institution— (a) provides or performs investment services and activities on a professional basis, and (b) in doing so would be treated as carrying on an activity of a kind specified by a provision of this Part but for an exclusion in any of articles 15, 16, 19, 22, 23, 29, 38, 67, 68, 69, 70 and 72E, that exclusion is to be disregarded and, accordingly, the investment firm or credit institution is to be treated as carrying on an activity of the kind specified by the provision in question. (4A) Where a person, other than a person specified by Article 1.2 of the insurance mediation directive (the text of which is set out in Part 1 of Schedule 4)— (a) for remuneration, takes up or pursues insurance mediation or reinsurance mediation in relation to a risk or commitment located in an EEA State, and (b) in doing so would be treated as carrying on an activity of a kind specified by a provision of this Part but for an exclusion in any of articles 30, 66 and 67, that exclusion is to be disregarded (and accordingly that person is to be treated as carrying on an activity of the kind specified by the provision in question). (5) In this article— ‘‘insurance mediation’’ has the meaning given by Article 2.3 of the insurance mediation directive, the text of which is set out in Part II of Schedule 4; ‘‘reinsurance mediation’’ has the meaning given by Article 2.4 of the insurance mediation directive, the text of which is set out in Part III of Schedule 4. Notes Art 4 revised by SI 2006 No 3384, implementing in part Directive 2004/39/EC of 21 April 2004 of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (OJ No L145, 30.4.2004, p 1) (‘‘MiFID’’); reference to section 72E first inserted by SI 2005 No 1518. Paragraph (4A) inserted by SI 2003 No 1476.

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The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 1.34 Paragraph (5) definitions of ‘‘insurance mediation’’ and ‘‘reinsurance mediation’’ inserted by SI 2003 No 1476 implementing the insurance mediation directive; definitions of ‘‘core investment services’’ and ‘‘investment firm’’ deleted by SI 2006 No 3384, implementing in part Directive 2004/39/EC of 21 April 2004 of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (OJ No L145, 30.4.2004, p 1) (‘‘MiFID’’). Chapter II, comprising arts 5, 6, 7, 8, 9, 9A and 9AA omitted. Chapter IIA omitted; the Chapter, comprising arts 9B to 9K, was inserted by SI 2002 No 682 implementing Directive 2000/46/EC of the European Parliament and of the Council of 18 September 2000 on the taking up, pursuit of and prudential supervision of the business of electronic money institutions (OJ L275, 27.10.2000, p 39).

Chapter III

Insurance

The activities Effecting and carrying out contracts of insurance 10.—(1) Effecting a contract of insurance as principal is a specified kind of activity. (2) Carrying out a contract of insurance as principal is a specified kind of activity. Exclusions Community co-insurers 11.—(1) There is excluded from article 10(1) or (2) the effecting or carrying out of a contract of insurance by an EEA firm falling within paragraph 5(d) of Schedule 3 to the Act— (a) other than through a branch in the United Kingdom; and (b) pursuant to a Community co-insurance operation in which the firm is participating otherwise than as the leading insurer. (2) In paragraph (1), ‘‘Community co-insurance operation’’ and ‘‘leading insurer’’ have the same meaning as in the Council Directive of 30 May 1978 on the co-ordination of laws, regulations and administrative provisions relating to Community co-insurance (No 78/473/EEC). Breakdown insurance 12.—(1) There is excluded from article 10(1) or (2) the effecting or carrying out, by a person who does not otherwise carry on an activity of the kind specified by that article, of a contract of insurance which— (a) is a contract under which the benefits provided by that person (‘‘the provider’’) are exclusively or primarily benefits in kind in the event of accident to or breakdown of a vehicle; and (b) contains the terms mentioned in paragraph (2). (2) Those terms are that— (a) the assistance takes either or both of the forms mentioned in paragraph (3)(a) and (b); (b) the assistance is not available outside the United Kingdom and the Republic of Ireland except where it is provided without the payment of additional premium by a person in the country concerned with whom the provider has entered into a reciprocal agreement; and (c) assistance provided in the case of an accident or breakdown occurring in the United Kingdom or the Republic of Ireland is, in most circumstances, provided by the provider’s servants. (3) The forms of assistance are— (a) repairs to the relevant vehicle at the place where the accident or breakdown has occurred; this assistance may also include the delivery of parts, fuel, oil, water or keys to the relevant vehicle;

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(b) removal of the relevant vehicle to the nearest or most appropriate place at which repairs may be carried out, or to— (i) the home, point of departure or original destination within the United Kingdom of the driver and passengers, provided the accident or breakdown occurred within the United Kingdom; (ii) the home, point of departure or original destination within the Republic of Ireland of the driver and passengers, provided the accident or breakdown occurred within the Republic of Ireland or within Northern Ireland; (iii) the home, point of departure or original destination within Northern Ireland of the driver and passengers, provided the accident or breakdown occurred within the Republic of Ireland; and this form of assistance may include the conveyance of the driver or passengers of the relevant vehicle, with the vehicle, or (where the vehicle is to be conveyed only to the nearest or most appropriate place at which repairs may be carried out) separately, to the nearest location from which they may continue their journey by other means. (4) A contract does not fail to meet the condition in paragraph (1)(a) solely because the provider may reimburse the person entitled to the assistance for all or part of any sums paid by him in respect of assistance either because he failed to identify himself as a person entitled to the assistance or because he was unable to get in touch with the provider in order to claim the assistance. (5) In this article— ‘‘the assistance’’ means the benefits to be provided under a contract of the kind mentioned in paragraph (1); ‘‘breakdown’’ means an event— (a) which causes the driver of the relevant vehicle to be unable to start a journey in the vehicle or involuntarily to bring the vehicle to a halt on a journey because of some malfunction of the vehicle or failure of it to function, and (b) after which the journey cannot reasonably be commenced or continued in the relevant vehicle; ‘‘the relevant vehicle’’ means the vehicle (including a trailer or caravan) in respect of which the assistance is required. Information society services 12A. Article 10 is subject to the exclusion in article 72A (information society services), as qualified by paragraph (2) of that article. Notes Art 12A inserted by SI 2002 No 1776 to reflect the European Parliament and Council Directive of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce in the Internal Market (No 2000/31/EC).

Supplemental Application of sections 327 and 332 of the Act to insurance market activities 13.—(1) In sections 327(5) and (7) and 332(3)(b) of the Act (exemption from the general prohibition for members of the professions, and rules in relation to such persons), the references to ‘‘a regulated activity’’ and ‘‘regulated activities’’ do not include— (a) any activity of the kind specified by article 10(1) or (2), where— (i) P is a member of the Society; and (ii) by virtue of section 316 of the Act (application of the Act to Lloyd’s underwriting), the general prohibition does not apply to the carrying on by P of that activity; or (b) any activity of the kind specified by article 10(2), where— (i) P is a former underwriting member; and (ii) the contract of insurance in question is one underwritten by P at Lloyd’s. (2) In paragraph— ‘‘member of the Society’’ has the same meaning as in Lloyd’s Act 1982; and

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The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 1.34 ‘‘former underwriting member’’ has the meaning given by section 324(1) of the Act. Notes Articles 14 (amended by SI 2006 No 3384), 15, 16, 17, 18, 18A (inserted by SI 2003 No 2822), 19 and 20 omitted.

Chapter V

Dealing in Investments as Agent The activity

Dealing in investments as agent 21.—(1) Buying, selling, subscribing for or underwriting securities or relevant investments (other than investments of the kind specified by article 87, or article 89 so far as relevant to that article) as agent is a specified kind of activity. (2) Paragraph (1) does not apply to a kind of activity to which article 25D applies. Notes Paragraph (1) the words ‘‘relevant investments’’ substituted for ‘‘contractually based investments’’ by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation. Paragraph (2) inserted by SI 2006 No 3384, implementing in part Directive 2004/39/EC of 21 April 2004 of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (OJ No L145, 30.4.2004, p 1) (‘‘MiFID’’).

Exclusions Deals with or through authorised persons 22.—(1) A person who is not an authorised person does not carry on an activity of the kind specified by article 21 by entering into a transaction as agent for another person (‘‘the client’’) with or through an authorised person if— (a) the transaction is entered into on advice given to the client by an authorised person; or (b) it is clear, in all the circumstances, that the client, in his capacity as an investor, is not seeking and has not sought advice from the agent as to the merits of the client’s entering into the transaction (or, if the client has sought such advice, the agent has declined to give it but has recommended that the client seek such advice from an authorised person). (2) But the exclusion in paragraph (1) does not apply if— (a) the transaction relates to a contract of insurance; or (b) the agent receives from any person other than the client any pecuniary reward or other advantage, for which he does not account to the client, arising out of his entering into the transaction. (3) This article is subject to article 4(4). Notes Paragraph (2) substituted in its entirety by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation. Paragraph (3) inserted by SI 2006 No 3384, implementing in part Directive 2004/39/EC of 21 April 2004 of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (OJ No L145, 30.4.2004, p.1) (‘‘MiFID’’).

Risk management 23.—(1) A person (‘‘B’’) does not carry on an activity of the kind specified by article 21 by entering as agent for a relevant person into a transaction with another person (‘‘C’’) if— (a) the transaction relates to investments of the kind specified by any of articles 83 to 85 (or article 89 so far as relevant to any of those articles); (b) neither B nor C is an individual; (c) the sole or main purpose for which B enters into the transaction (either by itself or in combination with other such transactions) is that of limiting the extent to which a

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relevant business will be affected by any identifiable risk arising otherwise than as a result of the carrying on of a regulated activity; and (d) the relevant business consists mainly of activities other than— (i) regulated activities; or (ii) activities which would be regulated activities but for any exclusion made by this Part. (2) In paragraph (1), ‘‘relevant person’’ means— (a) a member of the same group as B; or (b) where B and another person are, or propose to become, participators in a joint enterprise, that other person; and ‘‘relevant business’’ means a business carried on by a relevant person. (3) This article is subject to article 4(4). Notes Paragraph (3) inserted by SI 2006 No 3384, implementing in part Directive 2004/39/EC of 21 April 2004 of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (OJ No L145, 30.4.2004, p.1) (‘‘MiFID’’).

Other exclusions 24. Article 21 is also subject to the exclusions in articles 67 (profession or non-investment business), 68 (sale of goods and supply of services), 69 (groups and joint enterprises), 70 (sale of body corporate), 71 (employee share schemes), 72 (overseas persons), 72A (information society services), 72B (activities carried on by a provider of relevant goods or services) and 72D (large risks contracts where risk situated outside the EEA). Notes Reference to art 72A inserted by SI 2002 No 1776 to reflect the European Parliament and Council Directive of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce in the Internal Market (No 2000/31/EC). References to arts 72B and 72D inserted by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation.

Chapter VI

Arranging Deals in Investments The activities

Arranging deals in investments 25.—(1) Making arrangements for another person (whether as principal or agent) to buy, sell, subscribe for or underwrite a particular investment which is— (a) a security, (b) a relevant investment, or (c) an investment of the kind specified by article 86, or article 89 so far as relevant to that article, is a specified kind of activity. (2) Making arrangements with a view to a person who participates in the arrangements buying, selling, subscribing for or underwriting investments falling within paragraph (1)(a), (b) or (c) (whether as principal or agent) is also a specified kind of activity. (3) Paragraphs (1) and (2) do not apply to a kind of activity to which article 25D applies. Notes The words ‘‘relevant investment’’ substituted for the words ‘‘contractually based investment’’ by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation. Paragraph (3) was inserted by SI 2006 No 3384, implementing in part Directive 2004/39/EC of 21 April 2004 of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (OJ No L145, 30.4.2004, p.1) (‘‘MiFID’’).

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The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 1.34 Arranging regulated mortgage contracts 25A.—(1) Making arrangements— (a) for another person to enter into a regulated mortgage contract as borrower; or (b) for another person to vary the terms of a regulated mortgage contract entered into by him as borrower after the coming into force of article 61, in such a way as to vary his obligations under that contract, is a specified kind of activity. (2) Making arrangements with a view to a person who participates in the arrangements entering into a regulated mortgage contract as borrower is also a specified kind of activity. (3) In this article ‘‘borrower’’ has the meaning given by article 61(3)(a)(i). Notes Art 25A inserted by SI 2003 No 1475 which deals with regulated mortgage contracts.

Arranging regulated home reversion plans 25B.—(1) Making arrangements— (a) for another person to enter into a regulated home reversion plan as reversion seller or as plan provider; or (b) for another person to vary the terms of a regulated home reversion plan, entered into on or after 6th April 2007 by him as reversion seller or as plan provider, in such a way as to vary his obligations under that plan, is a specified kind of activity. (2) Making arrangements with a view to a person who participates in the arrangements entering into a regulated home reversion plan as reversion seller or as plan provider is also a specified kind of activity. Notes Art 25B inserted by SI 2006 No 2383.

Arranging regulated home purchase plans 25C.—(1) Making arrangements— (a) for another person to enter into a regulated home purchase plan as home purchaser; or (b) for another person to vary the terms of a regulated home purchase plan, entered into on or after 6th April 2007 by him as home purchaser, in such a way as to vary his obligations under that plan, is a specified kind of activity. (2) Making arrangements with a view to a person who participates in the arrangements entering into a regulated home purchase plan as home purchaser is also a specified kind of activity. Notes Art 25C inserted by SI 2006 No 2383.

Operating a multilateral trading facility 25D. —(1) The operation of a multilateral trading facility on which MiFID instruments are traded is a specified kind of activity. (2) In paragraph (1), ‘‘MiFID instrument’’ means any investment— (a) of the kind specified by article 76, 77, 78, 79, 80, 81, 83, 84 or 85; or (b) of the kind specified by article 89 so far as relevant to an investment falling within subparagraph (a), that is a financial instrument.

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Notes Paragraph 25D inserted by SI 2006 No 3384, implementing in part Directive 2004/39/EC of 21 April 2004 of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (OJ No L145, 30.4.2004, p 1) (‘‘MiFID’’).

Exclusions Arrangements not causing a deal 26. There are excluded from articles 25(1), 25A(1), 25B(1) and 25C(1) arrangements which do not or would not bring about the transaction to which the arrangements relate. Notes Reference to art 25A(1) inserted by SI 2003 No 1475 which deals with regulated mortgage contracts. Reference to arts 25B(1) and 25C(1) inserted by SI 2006 No 2383.

Enabling parties to communicate 27. A person does not carry on an activity of the kind specified by article 25(2), 25A(2), 25B(2) or 25C(2) merely by providing means by which one party to a transaction (or potential transaction) is able to communicate with other such parties. Notes Reference to art 25A(2) inserted by SI 2003 No 1475. References to arts 25(2), 25A(2), 25B(2) and 25C(2) inserted by SI 2006 No 2383.

Arranging transactions to which the arranger is a party 28.—(1) There are excluded from article 25(1) any arrangements for a transaction into which the person making the arrangements enters or is to enter as principal or as agent for some other person. (2) There are excluded from article 25(2) any arrangements which a person makes with a view to transactions into which he enters or is to enter as principal or as agent for some other person. (3) But the exclusions in paragraphs (1) and (2) do not apply to arrangements made for or with a view to a transaction which relates to a contract of insurance, unless the person making the arrangements either— (a) is the only policyholder; or (b) as a result of the transaction, would become the only policyholder. Notes Paragraph (3) inserted by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation.

Arranging contracts to which the arranger is a party 28A.—(1) There are excluded from articles 25A(1), 25B(1) and 25C(1) any arrangements— (a) for a contract or plan into which the person making the arrangements enters or is to enter; or (b) for a variation of a contract or plan to which that person is (or is to become) a party. (2) There are excluded from articles 25A(2), 25B(2) and 25C(2) any arrangements which a person makes with a view to contracts or plans into which he enters or is to enter. Notes Art 28A inserted by SI 2003 No 1475 which deals with regulated mortgage contracts. Paragraph (1) references to arts 25B(1) and 25C(1) inserted by SI 2006 No 2383. Sub-paras (a) and (b) amended to refer to contract or plan by SI 2006 No 2383.

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The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 1.34 Paragraph (2) references to arts 25A(2), 25B(2) and 25C(2) inserted by SI 2006 No 2383, which also inserted the words ‘‘or plans’’.

Arranging deals with or through authorised persons 29.—(1) There are excluded from articles 25(1) and (2), 25A(1) and (2), 25B(1) and (2) and 25C(1) and (2) arrangements made by a person (‘‘A’’) who is not an authorised person for or with a view to a transaction which is or is to be entered into by a person (‘‘the client’’) with or though an authorised person if— (a) the transaction is or is to be entered into on advice to the client by an authorised person; or (b) it is clear, in all the circumstances, that the client, in his capacity as an investor, borrower, reversion seller, plan provider or (as the case may be) home purchaser, is not seeking and has not sought advice from A as to the merits of the client’s entering into the transaction (or, if the client has sought such advice, A has declined to give it but has recommended that the client seek such advice from an authorised person). (2) But the exclusion in paragraph (1) does not apply if— (a) the transaction relates, or would relate, to a contract of insurance; or (b) A receives from any person other than the client any pecuniary reward or other advantage, for which he does not account to the client, arising out of his making the arrangements. (3) This article is subject to article 4(4). Notes Paragraph (1) amended to refer to art 25A by SI 2003 No 1475 which deals with regulated mortgage contracts. Further amended to include references to arts 25B and 25C by SI 2006 No 2383. Sub-paragraph (b) the words ‘‘or (as the case may be) a borrower under a regulated mortgage contract’’ inserted by SI 2003 No 1475. The sub-paragraph further amended by SI 2006 No 2383 to refer to ‘‘investor, borrower, reversion seller, plan provider or (as the case may be) home purchaser’’. Paragraph (2) text substituted by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation. Paragraph (3) inserted by SI 2006 No 3384, implementing in part Directive 2004/39/EC of 21 April 2004 of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (OJ No L145, 30.4.2004, p 1) (‘‘MiFID’’).

Arrangements made in the course of administration by authorised person 29A.—(1) A person who is not an authorised person (‘‘A’’) does not carry on an activity of the kind specified by article 25A(1)(b) as a result of— (a) anything done by an authorised person (‘‘B’’) in relation to a regulated mortgage contract which B is administering pursuant to an arrangement of the kind mentioned in article 62(a); or (b) anything A does in connection with the administration of a regulated mortgage contract in circumstances falling within article 62(b). (2) A person who is not an authorised person (‘‘A’’) does not carry on an activity of the kind specified by article 25B(1)(b) as a result of— (a) anything done by an authorised person (‘‘B’’) in relation to a regulated home reversion plan which B is administering pursuant to an arrangement of the kind mentioned in article 63C(a); or (b) anything A does in connection with the administration of a regulated home reversion plan in circumstances falling within article 63C(b). (3) A person who is not an authorised person (‘‘A’’) does not carry on an activity of the kind specified by article 25C(1)(b) as a result of— (a) anything done by an authorised person (‘‘B’’) in relation to a regulated home purchase plan which B is administering pursuant to an arrangement of the kind mentioned in article 63G(a); or (b) anything A does in connection with the administration of a regulated home purchase plan in circumstances falling within article 63G(b).

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Notes Art 29A inserted by SI 2003 No 1475 which deals with regulated mortgage contracts. Paragraphs (2) and (3) inserted by SI 2006 No 2383.

Arranging transactions in connection with lending on the security of insurance policies 30.—(1) There are excluded from article 25(1) and (2) arrangements made by a moneylender under which either— (a) a relevant authorised person or a person acting on his behalf will introduce to the money-lender persons with whom the relevant authorised person has entered, or proposes to enter, into a relevant transaction, or will advise such persons to approach the money-lender, with a view to the money-lender lending money on the security of any contract effected pursuant to a relevant transaction; or (b) a relevant authorised person gives an assurance to the money-lender as to the amount which, on the security of any contract effected pursuant to a relevant transaction, will or may be received by the money-lender should the money-lender lend money to a person introduced to him pursuant to the arrangements. (2) In paragraph (1)— ‘‘money-lender’’ means a person who is— (a) a money-lending company within the meaning of section 338 of the Companies Act 1985; (b) a body corporate incorporated under the law of, or of any part of, the United Kingdom relating to building societies; or (c) a person whose ordinary business includes the making of loans or the giving of guarantees in connection with loans; ‘‘relevant authorised person’’ means an authorised person who has permission to effect contracts of insurance or to sell investments of the kind specified by article 89, so far as relevant to such contracts; ‘‘relevant transaction’’ means the effecting of a contract of insurance or the sale of an investment of the kind specified by article 89, so far as relevant to such contracts. (3) This article is subject to article 4(4A). Notes Paragraph (1)(a) new text substituted by SI 2001 No 3544. Paragraph (2) the definition of ‘‘relevant authorised persons’’ originally read ‘‘ . . . to effect qualifying contracts of insurance . . . ’’ (emphasis added); modified by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation. The definition of ‘‘relevant transaction’’ originally read ‘‘the effecting of a qualifying contract of insurance’’ (emphasis added); modified by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation. Paragraph (3) inserted by SI 2006 No 3384, implementing in part Directive 2004/39/EC of 21 April 2004 of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (OJ No L145, 30.4.2004, p 1) (‘‘MiFID’’). Article 31, Arranging the acceptance of debentures in connection with loans is outside the scope of this work.

Provision of finance 32. There are excluded from article 25(2) arrangements having as their sole purpose the provision of finance to enable a person to buy, sell, subscribe for or underwrite investments. Introducing 33. There are excluded from articles 25(2), 25A(2), 25B(2) and 25C(2) arrangements where— (a) they are arrangements under which persons (‘‘clients’’) will be introduced to another person; (b) the person to whom introductions are to be made is— (i) an authorised person; (ii) an exempt person acting in the course of a business comprising a regulated activity in relation to which he is exempt; or

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The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 1.34 (iii) a person who is not unlawfully carrying on regulated activities in the United Kingdom and whose ordinary business involves him in engaging in an activity of the kind specified by any of articles 14, 21, 25, 25A, 25B, 25C, 37, 39A, 40, 45, 51, 52, 53, 53A, 53B and 53C (or, so far as relevant to any of those articles, article 64), or would do so apart from any exclusion from any of those articles made by this Order; (c) the introduction is made with a view to the provision of independent advice or the independent exercise of discretion in relation to investments generally or in relation to any class of investments to which the arrangements relate; and (d) the arrangements are made with a view to a person entering into a transaction which does not relate to a contract of insurance. Notes Opening words reference to art 25A inserted by SI 2003 No 1475 which deals with regulated mortgage contracts. Further amended to refer to arts 25B(2) and 25C(2) by SI 2006 No 2383. Sub-paragraph (b)(iii) the reference to art 39A inserted by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation; references to arts 25A and 52, 53 and 53A inserted by SI 2003 No 1475 which deals with regulated mortgage contracts. References to arts 25B, 25C, 53B and 53C inserted by SI 2006 No 2383. Sub-paragraph (d) inserted by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation.

Introducing to authorised persons etc. 33A.—(1) There are excluded from article 25A(2) arrangements where— (a) they are arrangements under which a client is introduced to a person (‘‘N’’) who is— (i) an authorised person who has permission to carry on a regulated activity of the kind specified by any of articles 25A, 53A, and 61(1), (ii) an appointed representative who may carry on a regulated activity of the kind specified by either of articles 25A and 53A without contravening the general prohibition, or (iii) an overseas person who carries on activities specified by any of articles 25A, 53A and 61(1); and (b) the conditions mentioned in paragraph (2) are satisfied. (1A) There are excluded from article 25B(2) arrangements where— (a) they are arrangements under which a client is introduced to a person (‘‘N’’) who is— (i) an authorised person who has permission to carry on a regulated activity of the kind specified by any of articles 25B, 53B and 63B(1), (ii) an appointed representative who may carry on a regulated activity of the kind specified by either of articles 25B and 53B without contravening the general prohibition, or (iii) an overseas person who carries on activities specified by any of articles 25B, 53B and 63B(1); and (b) the conditions mentioned in paragraph (2) are satisfied. (1B) There are excluded from article 25C(2) arrangements where— (a) they are arrangements under which a client is introduced to a person (‘‘N’’) who is— (i) an authorised person who has permission to carry on a regulated activity of the kind specified by any of articles 25C, 53C and 63F(1), (ii) an appointed representative who may carry on a regulated activity of the kind specified by either of articles 25C and 53C without contravening the general prohibition, or (iii) an overseas person who carries on activities specified by any of articles 25C, 53C and 63F(1); and (b) the conditions mentioned in paragraph (2) are satisfied. (2) Those conditions are—

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(a) that the person making the introduction (‘‘P’’) does not receive any money, other than money payable to P on his own account, paid by the client for or in connection with any transaction which the client enters into with or through N as a result of the introduction; and (b) that before making the introduction P discloses to the client such of the information mentioned in paragraph (3) as applies to P. (3) That information is— (a) that P is a member of the same group as N; (b) details of any payment which P will receive from N, by way of fee or commission, for introducing the client to N; (c) an indication of any other reward or advantage received or to be received by P that arises out of his introducing clients to N. (4) In this article, ‘‘client’’ means— (a) for the purposes of paragraph (1), a borrower within the meaning given by article 61(3)(a)(i), or a person who is or may be contemplating entering into a regulated mortgage contract as such a borrower; (b) for the purposes of paragraph (1A), a reversion seller, a plan provider or a person who is or may be contemplating entering into a regulated home reversion plan as a reversion seller or as a plan provider; (c) for the purposes of paragraph (1B), a home purchaser or a person who is or may be contemplating entering into a regulated home purchase plan as a home purchaser. Notes Art 33A inserted by SI 2003 No 1475 which deals with regulated mortgage contracts. Paragraphs (1A) and (1B) inserted by SI 2006 No 2383. Paragraph (4) new language substituted by SI 2006 No 2383. Arts 34 and 35 are outside the scope of this work and are not reproduced here.

Other exclusions 36.—(1) Article 25 is also subject to the exclusions in articles 66 (trustees etc.), 67 (profession or non-investment business), 68 (sale of goods and supply of services), 69 (groups and joint enterprises), 70 (sale of body corporate), 71 (employee share schemes), 72 (overseas persons), 72A (information society services), 72B (activities carried on by a provider of relevant goods or services), 72C (provision of information about contracts of insurance on an incidental basis) and 72D (large risks contracts where risk situated outside the EEA). (2) Articles 25A, 25B and 25C are also subject to the exclusions in articles 66 (trustees etc.), 67 (profession or non-investment business), 72 (overseas persons) and 72A (information society services). (3) Article 25D is also subject to the exclusion in article 72 (overseas persons). Notes Paragraph (1) Reference to art 72A inserted by SI 2002 No 1776 to reflect the European Parliament and Council Directive of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce in the Internal Market (No 2000/31/EC). References to arts 72B, 72C and 72D inserted by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation. Paragraph (2) inserted by SI 2003 No 1475 which deals with regulated mortgage contracts. References to arts 25B and 25C added by SI 2006 No 2383. Paragraph (3) inserted by SI 2006 No 3384, implementing in part Directive 2004/39/EC of 21 April 2004 of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (OJ No L145, 30.4.2004, p.1) (‘‘MiFID’’).

Chapter VII

Managing Investments The activity

Managing investments 37. Managing assets belonging to another person, in circumstances involving the exercise of discretion, is a specified kind of activity if—

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The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 1.34 (a) the assets consist of or include any investment which is a security or a contractually based investment; or (b) the arrangements for their management are such that the assets may consist of or include such investments, and either the assets have at any time since 29th April 1988 done so, or the arrangements have at any time (whether before or after that date) been held out as arrangements under which the assets would do so. Exclusions Attorneys 38.—(1) A person does not carry on an activity of the kind specified by article 37 if— (a) he is a person appointed to manage the assets in question under a power of attorney; and (b) all routine or day-to-day decisions, so far as relating to investments of a kind mentioned in article 37(a), are taken on behalf of that person by— (i) an authorised person with permission to carry on activities of the kind specified by article 37; (ii) a person who is an exempt person in relation to activities of that kind; or (iii) an overseas person. [(2)] This article is subject to article 4(4). Notes Sub-paragraph (1)(b)(iii) inserted by SI 2001 No 3544. Paragraph (2) inserted (without paragraph number) by SI 2006 No 3384, implementing in part Directive 2004/39/EC of 21 April 2004 of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (OJ No L145, 30.4.2004, p.1) (‘‘MiFID’’).

Other exclusions 39. Article 37 is also subject to the exclusions in articles 66 (trustees etc.), 68 (sale of goods and supply of services), 69 (groups and joint enterprises), 72A (information society services) and 72C (provision of information about contracts of insurance on an incidental basis). Notes Reference to art 72A inserted by SI 2002 No 1776 to reflect the European Parliament and Council Directive of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce in the Internal Market (No 2000/31/EC). Reference to art 72C inserted by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation. Notes Chapter VIIA below inserted by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation.

Chapter VIIA

Assisting in the Administration and Performance of a Contract of Insurance The activity

Assisting in the administration and performance of a contract of insurance 39A. Assisting in the administration and performance of a contract of insurance is a specified kind of activity. Exclusions Claims management on behalf of an insurer etc. 39B.—(1) A person does not carry on an activity of the kind specified by article 39A if he acts in the course of carrying on the activity of—

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(a) expert appraisal; (b) loss adjusting on behalf of a relevant insurer; or (c) managing claims on behalf of a relevant insurer, and that activity is carried on in the course of carrying on any profession or business. (2) In this article— (a) ‘‘relevant insurer’’ means— (i) a person who has Part IV permission to carry on an activity of the kind specified by article 10; (ii) a person to whom the general prohibition does not apply by virtue of section 316(1)(a) of the Act (members of the Society of Lloyd’s); (iii) an EEA firm falling within paragraph 5(d) of Schedule 3 to the Act (insurance undertaking); or (iv) a relevant reinsurer; (b) ‘‘relevant reinsurer’’ means a person whose main business consists of accepting risks ceded by— (i) a person falling within sub-paragraph (i), (ii) or (iii) of the definition of ‘‘relevant insurer’’; or (ii) a person who is established outside the United Kingdom who carries on an activity of the kind specified by article 10 by way of business. Other exclusions 39C. Article 39A is also subject to the exclusions in articles 66 (trustees etc.), 67 (profession or non-investment business), 72A (information society services), 72B (activities carried on by a provider of relevant goods or services), 72C (provision of information about contracts of insurance on an incidental basis) and 72D (large risks contracts where risk situated outside the EEA). Chapter VIII

Safeguarding and Administering Investments The activity

Safeguarding and administering investments 40.—(1) The activity consisting of both— (a) the safeguarding of assets belonging to another, and (b) the administration of those assets, or arranging for one or more other persons to carry on that activity, is a specified kind of activity if the condition in sub-paragraph (a) or (b) of paragraph (2) is met. (2) The condition is that— (a) the assets consist of or include any investment which is a security or a contractually based investment; or (b) the arrangements for their safeguarding and administration are such that the assets may consist of or include such investments, and either the assets have at any time since 1st June 1997 done so, or the arrangements have at any time (whether before or after that date) been held out as ones under which such investments would be safeguarded and administered. (3) For the purposes of this article— (a) it is immaterial that title to the assets safeguarded and administered is held in uncertificated form; (b) it is immaterial that the assets safeguarded and administered may be transferred to another person, subject to a commitment by the person safeguarding and administering them, or arranging for their safeguarding and administration, that they will be replaced by equivalent assets at some future date or when so requested by the person to whom they belong.

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The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 1.34 Notes Arts 41 to 44 are omitted from this work Chapter IX, Sending dematerialised instructions omitted from this work. The Chapter is made up of arts 45 to 50.

Chapter X

Collective Investment Schemes The activities

Establishing etc. a collective investment scheme 51.—(1) The following are specified kinds of activity— (a) establishing, operating or winding up a collective investment scheme; (b) acting as trustee of an authorised unit trust scheme; (c) acting as the depositary or sole director of an open-ended investment company. (2) In this article, ‘‘trustee’’, ‘‘authorised unit trust scheme’’ and ‘‘depositary’’ have the meaning given by section 237 of the Act. Exclusion Information society services 51A. Article 51 is subject to the exclusion in article 72A (information society services). Notes Art 51A inserted by SI 2002 No 1776 to reflect the European Parliament and Council Directive of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce in the Internal Market (No 2000/31/EC).

Chapter XI

Stakeholder Pension Schemes The activities

Establishing etc. a pension scheme 52. The following are specified kinds of activity— (a) establishing, operating or winding up a stakeholder pension scheme; (b) establishing, operating or winding up a personal pension scheme. Notes Art 52 modified by SI 2006 No 1969.

Exclusion Information society services 52A. Article 52 is subject to the exclusion in article 72A (information society services). Notes Art 52A inserted by SI 2002 No 1776 to reflect the European Parliament and Council Directive of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce in the Internal Market (No 2000/31/EC).

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Providing Basic Advice on Stakeholder Products The activity

Providing basic advice on stakeholder products 52B.—(1) Providing basic advice to a retail consumer on a stakeholder product is a specified kind of activity. (2) For the purposes of paragraph (1), a person (‘‘P’’) provides basic advice when— (a) he asks a retail consumer questions to enable him to assess whether a stakeholder product is appropriate for that consumer; and (b) relying on the information provided by the retail consumer P assesses that a stakeholder product is appropriate for the retail consumer and— (i) describes that product to that consumer; (ii) gives a recommendation of that product to that consumer; and (c) the retail consumer has indicated to P that he has understood the description and the recommendation in sub-paragraph (b). (3) In this article— ‘‘retail consumer’’ means any person who is advised by P on the merits of opening or buying a stakeholder product in the course of a business carried on by P and who does not receive the advice in the course of a business carried on by him; ‘‘stakeholder product’’ means— (a) an account which qualifies as a stakeholder child trust fund within the meaning given by the Child Trust Funds Regulations 2004; (b) rights under a stakeholder pension scheme; (c) an investment of a kind specified in regulations made by the Treasury. Notes Chapter XIA inserted by SI 2004 No 2737 Sub-paragraph (3)(b) new text substituted by SI 2005 No 593.

Chapter XII

Advising on Investments The activity

Advising on investments 53. Advising a person is a specified kind of activity if the advice is— (a) given to the person in his capacity as an investor or potential investor, or in his capacity as agent for an investor or a potential investor; and (b) advice on the merits of his doing any of the following (whether as principal or agent)— (i) buying, selling, subscribing for or underwriting a particular investment which is a security or a relevant investment, or (ii) exercising any right conferred by such an investment to buy, sell, subscribe for or underwrite such an investment. Notes Sub-paragraph (b)(i) the words ‘‘relevant investment’’ were substituted for the words ‘‘contractually based investment’’ by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation.

Advising on regulated mortgage contracts 53A.—(1) Advising a person is a specified kind of activity if the advice— (a) is given to the person in his capacity as a borrower or potential borrower; and (b) is advice on the merits of his doing any of the following— (i) entering into a particular regulated mortgage contract, or

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The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 1.34 (ii) varying the terms of a regulated mortgage contract entered into by him after the coming into force of article 61 in such a way as to vary his obligations under that contract. (2) In this article, ‘‘borrower’’ has the meaning given by article 61(3)(a)(i). Notes Art 53A inserted by SI 2003 No 1475 which deals with regulated mortgage contracts.

Advising on regulated home reversion plans 53B. Advising a person is a specified kind of activity if the advice— (a) is given to the person in his capacity as— (i) a reversion seller or potential reversion seller, or (ii) a plan provider or potential plan provider; and (b) is advice on the merits of his doing either of the following— (i) entering into a particular regulated home reversion plan, or (ii) varying the terms of a regulated home reversion plan, entered into on or after 6th April 2007 by him, in such a way as to vary his obligations under that plan. Notes Art 53B inserted by SI 2006 No 2383.

Advising on regulated home purchase plans 53C. Advising a person is a specified kind of activity if the advice— (a) is given to the person in his capacity as a home purchaser or potential home purchaser; and (b) is advice on the merits of his doing either of the following— (i) entering into a particular regulated home purchase plan, or (ii) varying the terms of a regulated home purchase plan, entered into on or after 6th April 2007 by him, in such a way as to vary his obligations under that plan. Notes Art 53C inserted by SI 2006 No 2383.

Exclusions Advice given in newspapers etc. 54.—(1) There is excluded from articles 53, 53A, 53B and 53C the giving of advice in writing or other legible form if the advice is contained in a newspaper, journal, magazine, or other periodical publication, or is given by way of a service comprising regularly updated news or information, if the principal purpose of the publication or service, taken as a whole and including any advertisements or other promotional material contained in it, is neither— (a) that of giving advice of a kind mentioned in article 53, 53A, 53B or 53C, as the case may be; nor (b) that of leading or enabling persons— (i) to buy, sell, subscribe for or underwrite securities or relevant investments, or (as the case may be), (ii) to enter as borrower into regulated mortgage contracts, or vary the terms of regulated mortgage contracts entered into by them as borrower; (iii) to enter as reversion seller or plan provider into regulated home reversion plans, or vary the terms of regulated home reversion plans entered into by them as reversion seller or plan provider, (iv) to enter as home purchaser into regulated home purchase plans, or vary the terms of regulated home purchase plans entered into by them as home purchaser.

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(2) There is also excluded from articles 53, 53A, 53B and 53C the giving of advice in any service consisting of the broadcast or transmission of television or radio programmes, if the principal purpose of the service, taken as a whole and including any advertisements or other promotional material contained in it, is neither of those mentioned in paragraph (1)(a) and (b). (3) The Authority may, on the application of the proprietor of any such publication or service as is mentioned in paragraph (1) or (2), certify that it is of the nature described in that paragraph, and may revoke any such certificate if it considers that it is no longer justified. (4) A certificate given under paragraph (3) and not revoked is conclusive evidence of the matters certified. Notes Paragraph (1) the references to art 53A was inserted by SI 2003 No 1475 which deals with regulated mortgage contracts. Sub-paragraph (1)(a) article references amended by SI 2006 No 2383. Sub-paragraph (1)(b) was modified by SI 2003 No 1475 which deals with regulated mortgage contracts. The words ‘‘relevant investments’’ were substituted for the words ‘‘contractually based investments’’ by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation. Sub-paragraphs (1)(b)(iii) and (iv) inserted by SI 2006 No 2383. Paragraph (2) the reference to art 53A was inserted by SI 2003 No 1475 which deals with regulated mortgage contracts. Reference to arts 53B and 53 C inserted by SI 2006 No 2383.

Advice given in the course of administration by authorised person 54A.—(1) A person who is not an authorised person (‘‘A’’) does not carry on an activity of the kind specified by article 53A by reason of— (a) anything done by an authorised person (‘‘B’’) in relation to a regulated mortgage contract which B is administering pursuant to arrangements of the kind mentioned in article 62(a); or (b) anything A does in connection with the administration of a regulated mortgage contract in circumstances falling within article 62(b). (2) A person who is not an authorised person (‘‘A’’) does not carry on an activity of the kind specified by article 53B by reason of— (a) anything done by an authorised person (‘‘B’’) in relation to a regulated home reversion plan which B is administering pursuant to arrangements of the kind mentioned in article 63C(a); or (b) anything A does in connection with the administration of a regulated home reversion plan in circumstances falling within article 63C(b). (3) A person who is not an authorised person (‘‘A’’) does not carry on an activity of the kind specified by article 53C by reason of— (a) anything done by an authorised person (‘‘B’’) in relation to a regulated home purchase plan which B is administering pursuant to arrangements of the kind mentioned in article 63G(a); or (b) anything A does in connection with the administration of a regulated home purchase plan in circumstances falling within article 63G(b). Notes Art 54A originally inserted by SI 2003 No 1475 which deals with regulated mortgage contracts. Paragraphs (2) and (3) inserted by SI 2006 No 2383.

Other exclusions 55.—(1) Article 53 is also subject to the exclusions in articles 66 (trustees etc.), 67, (profession or non-investment business), 68 (sale of goods and supply of services), 69 (groups and joint enterprises), 70 (sale of body corporate), 72 (overseas persons), 72A (information society services), 72B (activities carried on by a provider of relevant goods or services) and 72D (large risks contracts where risk situated outside the EEA).

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The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 1.34 (2) Articles 53A, 53B and 53C are also subject to the exclusions in articles 66 (trustees etc.), 67 (profession or non-investment business) and 72A (information society services) Notes Paragraph (1) the references to arts 72B and 72D were inserted by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation. Paragraph (2) was inserted by SI 2003 No 1475 which deals with regulated mortgage contracts. References to arts 53B and 53C were inserted by SI 2006 No 2383.

Chapter XIII

Lloyd’s

The activities Advice on syndicate participation at Lloyd’s 56. Advising a person to become, or continue or cease to be, a member of a particular Lloyd’s syndicate is a specified kind of activity. Managing the underwriting capacity of a Lloyd’s syndicate 57. Managing the underwriting capacity of a Lloyd’s syndicate as a managing agent at Lloyd’s is a specified kind of activity. Arranging deals in contracts of insurance written at Lloyd’s 58. The arranging, by the society incorporated by Lloyd’s Act 1871 by the name of Lloyd’s, of deals in contracts of insurance written at Lloyd’s, is a specified kind of activity. Exclusion Information society services 58A. Articles 56 to 58 are subject to the exclusion in article 72A (information society services). Notes Art 58A inserted by SI 2002 No 1776 to reflect the European Parliament and Council Directive of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce in the Internal Market (No 2000/31/EC).

Chapter XIV

Funeral Plan Contracts The activity

Funeral plan contracts 59.—(1) Entering as provider into a funeral plan contract is a specified kind of activity. (2) A ‘‘funeral plan contract’’ is a contract (other than one excluded by article 60) under which— (a) a person (‘‘the customer’’) makes one or more payments to another person (‘‘the provider’’); and (b) the provider undertakes to provide, or secure that another person provides, a funeral in the United Kingdom for the customer (or some other person who is living at the date when the contract is entered into) on his death; unless, at the time of entering into the contract, the customer and the provider intend or expect the funeral to occur within one month.

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Plans covered by insurance or trust arrangements 60.—(1) There is excluded from article 59 any contract under which— (a) the provider undertakes to secure that sums paid by the customer under the contract will be applied towards a contract of whole life insurance on the life of the customer (or other person for whom the funeral is to be provided), effected and carried out by an authorised person who has permission to effect and carry out such contracts of insurance, for the purpose of providing the funeral; or (b) the provider undertakes to secure that sums paid by the customer under the contract will be held on trust for the purpose of providing the funeral, and that the following requirements are or will be met with respect to the trust— (i) the trust must be established by a written instrument; (ii) more than half of the trustees must be unconnected with the provider; (iii) the trustees must appoint, or have appointed, an independent fund manager who is an authorised person who has permission to carry on an activity of the kind specified by article 37, and who is a person who is unconnected with the provider, to manage the assets of the trust; (iv) annual accounts must be prepared, and audited by a person who is eligible for appointment as a company auditor under section 25 of the Companies Act 1989, with respect to the assets and liabilities of the trust; and (v) the assets and liabilities of the trust must, at least once every three years, be determined, calculated and verified by an actuary who is a Fellow of the Institute of Actuaries or of the Faculty of Actuaries. (2) For the purposes of paragraph (1)(b)(ii) and (iii), a person is unconnected with the provider if he is a person other than— (a) the provider; (b) a member of the same group as the provider; (c) a director, other officer or employee of the provider, or of any member of the same group as the provider; (d) a partner of the provider; (e) a close relative of a person falling within sub-paragraph (a), (c) or (d); or (f) an agent of any person falling within sub-paragraphs (a) to (e).

Information society services 60A. Article 59 is subject to the exclusion in article 72A (information society services). Notes Art 60A inserted by SI 2002 No 1776 to reflect the European Parliament and Council Directive of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce in the Internal Market (No 2000/31/EC). Arts 61 and 62 omitted.

Other exclusions 63A. Article 61 is also subject to the exclusions in articles 66 (trustees etc.), 72 (overseas persons) and 72A (information society services). Notes Art 63A inserted by SI 2002 No 1776 to reflect the European Parliament and Council Directive of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce in the Internal Market (No 2000/31/EC). Revised by SI 2003 No 1475 which deals with regulated mortgage contracts. New Chapters 15A and 15B (numbering as shown) entitled ‘Regulated home reversion plans’ and ‘Regulated home purchase plans’ respectively inserted by SI 2006 No 2383—omitted here.

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Agreeing to Carry on Activities The activity

Agreeing to carry on specified kinds of activity 64. Agreeing to carry on an activity of the kind specified by any other provision of this Part (other than article 5, 9B, 10, 25D, 51 or 52) is a specified kind of activity. Notes The reference to art 9B was inserted by SI 2002 No 682 implementing Directive 2000/46/EC of the European Parliament and of the Council of 18 September 2000 on the taking up, pursuit of and prudential supervision of the business of electronic money institutions (OJ L275, 27.10.2000, p 39). The reference to art 25D was inserted by SI 2006 No 3384, implementing in part Directive 2004/39/EC of 21 April 2004 of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (OJ No L 145, 30.4.2004, p 1) (‘‘MiFID’’).

Exclusions Overseas persons etc. 65. Article 64 is subject to the exclusions in articles 72 (overseas persons) and 72A (information society services). Notes New art 65 substituted by SI 2002 No 1776 to reflect the European Parliament and Council Directive of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce in the Internal Market (No 2000/31/EC).

Chapter XVII

Exclusions Applying to Several Specified Kinds of Activity

Trustees, nominees and personal representatives 66.—(1) A person (‘‘X’’) does not carry on an activity of the kind specified by article 14 where he enters into a transaction as bare trustee or, in Scotland, as nominee for another person (‘‘Y’’) and— (a) X is acting on Y’s instructions; and (b) X does not hold himself out as providing a service of buying and selling securities or contractually based investments. (2) Subject to paragraph (7), there are excluded from articles 25(1) and (2), 25A(1) and (2), 25B(1) and (2) and 25C(1) and (2) arrangements made by a person acting as trustee or personal representative for or with a view to a transaction which is or is to be entered into— (a) by that person and a fellow trustee or personal representative (acting in their capacity as such); or (b) by a beneficiary under the trust, will or intestacy. (3) Subject to paragraph (7), there is excluded from article 37 any activity carried on by a person acting as trustee or personal representative, unless— (a) he holds himself out as providing a service comprising an activity of the kind specified by article 37; or (b) the assets in question are held for the purposes of an occupational pension scheme, and, by virtue of article 4 of the Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001, he is to be treated as carrying on that activity by way of business. (3A) Subject to paragraph (7), there is excluded from article 39A any activity carried on by a person acting as trustee or personal representative, unless he holds himself out as providing a service comprising an activity of the kind specified by article 39A. (4) Subject to paragraph (7), there is excluded from article 40 any activity carried on by a person acting as trustee or personal representative, unless he holds himself out as providing a service comprising an activity of the kind specified by article 40.

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(4A) There is excluded from article 40 any activity carried on by a person acting as trustee which consists of arranging for one or more other persons to safeguard and administer trust assets where— (a) that other person is a qualifying custodian; or (b) that safeguarding and administration is also arranged by a qualifying custodian. In this paragraph, ‘‘qualifying custodian’’ has the meaning given by article 41(2). (5) A person does not, by sending or causing to be sent a dematerialised instruction (within the meaning of article 45), carry on an activity of the kind specified by that article if the instruction relates to an investment which that person holds as trustee or personal representative. (6) Subject to paragraph (7), there is excluded from articles 53, 53A, 53B and 53C the giving of advice by a person acting as trustee or personal representative where he gives the advice to— (a) a fellow trustee or personal representative for the purposes of the trust or the estate; or (b) a beneficiary under the trust, will or intestacy concerning his interest in the trust fund or estate. (6A) Subject to paragraph (7), a person acting as trustee or personal representative does not carry on an activity of the kind specified by article 61(1) or (2) where the borrower under the regulated mortgage contract in question is a beneficiary under the trust, will or intestacy. (6B) Subject to paragraph (7), a person acting as trustee or personal representative does not carry on an activity of the kind specified by article 63B(1) or (2) where the reversion seller under the regulated home reversion plan in question is a beneficiary under the trust, will or intestacy. (6C) Subject to paragraph (7), a person acting as trustee or personal representative does not carry on an activity of the kind specified by article 63F(1) or (2) where the home purchaser under the regulated home purchase plan in question is a beneficiary under the trust, will or intestacy. (7) Paragraphs (2), (3), (3A), (4), (6), (6A), (6B) and (6C) do not apply if the person carrying on the activity is remunerated for what he does in addition to any remuneration he receives as trustee or personal representative, and for these purposes a person is not to be regarded as receiving additional remuneration merely because his remuneration is calculated by reference to time spent. (8) This article is subject to article 4(4A). Notes Paragraph (2) amended to refer to art 25A by SI 2003 No 1475 which deals with regulated mortgage contracts. References to arts 25B and 25C inserted by SI 2006 No 2383. Paragraph (3A) inserted by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation; paragraph (7) amended accordingly. Paragraph (4A) inserted by SI 2005 No 593. Paragraph (6) reference to art 53A inserted by SI 2003 No 1475 which deals with regulated mortgage contracts. Furter amended to refer to arts 53B and 53C by SI 2006 No 2383. Paragraph (6A) inserted by SI 2003 No 1475 which deals with regulated mortgage contracts; paragraph (7) amended accordingly. Paragraphs (6B) and (6C) inserted by SI 2006 No 2383; paragraph (7) amended accordingly. Paragraph (8) inserted by SI 2006 No 3384, implementing in part Directive 2004/39/EC of 21 April 2004 of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (OJ No L145, 30.4.2004, p.1) (‘‘MiFID’’).

Activities carried on in the course of a profession or non-investment business 67.—(1) There is excluded from articles 21, 25(1) and (2), 25A, 25B, 25C, 39A, 40, 53, 53A, 53B and 53C any activity which— (a) is carried on in the course of carrying on any profession or business which does not otherwise consist of the carrying on of regulated activities in the United Kingdom; and (b) may reasonably be regarded as a necessary part of other services provided in the course of that profession or business.

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The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 1.34 (2) But the exclusion in paragraph (1) does not apply if the activity in question is remunerated separately from the other services. (3) This article is subject to article 4(4) and (4A). Notes Paragraph (1) reference to art 39A inserted by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation; reference to arts 25A and 53A inserted by SI 2003 No 1475 which deals with regulated mortgage contracts. Further amended to refer to Arts 25B, 25C, 53B and 53C by SI 2006 No 2383. Sub-paragraph (1)(a) the words ‘‘the carrying on of regulated activities in the United Kingdom’’ substituted for the words ‘‘regulated activities’’ by SI 2001 No 3544. Paragraph (3) inserted by SI 2006 No 3384, implementing in part Directive 2004/39/EC of 21 April 2004 of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (OJ No L145, 30.4.2004, p.1) (‘‘MiFID’’).

Activities carried on in connection with the sale of goods or supply of services 68.—(1) Subject to paragraphs (9), (10) and (11), this article concerns certain activities carried on for the purposes of or in connection with the sale of goods or supply of services by a supplier to a customer, where— ‘‘supplier’’ means a person whose main business is to sell goods or supply services and not to carry on any activities of the kind specified by any of articles 14, 21, 25, 37, 39A, 40, 45, 51, 52 and 53 and, where the supplier is a member of a group, also means any other member of that group; and ‘‘customer’’ means a person, other than an individual, to whom a supplier sells goods or supplies services, or agrees to do so, and, where the customer is a member of a group, also means any other member of that group; and in this article ‘‘related sale or supply’’ means a sale of goods or supply of services to the customer otherwise than by the supplier, but for or in connection with the same purpose as the sale or supply mentioned above. (2) There is excluded from article 14 any transaction entered into by a supplier with a customer, if the transaction is entered into for the purposes of or in connection with the sale of goods or supply of services, or a related sale or supply. (3) There is excluded from article 21 any transaction entered into by a supplier as agent for a customer, if the transaction is entered into for the purposes of or in connection with the sale of goods or supply of services, or a related sale or supply, and provided that— (a) where the investment to which the transaction relates is a security, the supplier does not hold himself out (other than to the customer) as engaging in the business of buying securities of the kind to which the transaction relates with a view to selling them, and does not regularly solicit members of the public for the purpose of inducing them (as principals or agents) to buy, sell, subscribe for or underwrite securities; (b) where the investment to which the transaction relates is a contractually based investment, the supplier enters into the transaction— (i) with or through an authorised person, or an exempt person acting in the course of a business comprising a regulated activity in relation to which he is exempt; or (ii) through an office outside the United Kingdom maintained by a party to the transaction, and with or through a person whose head office is situated outside the United Kingdom and whose ordinary business involves him in carrying on activities of the kind specified by any of articles 14, 21, 25, 37, 40, 45, 51, 52 and 53 or, so far as relevant to any of those articles, article 64, or would do so apart from any exclusion from any of those articles made by this Order. (4) In paragraph (3)(a), ‘‘members of the public’’ has the meaning given by article 15(2), references to ‘‘A’’ being read as references to the supplier. (5) There are excluded from article 25(1) and (2) arrangements made by a supplier for, or with a view to, a transaction which is or is to be entered into by a customer for the purposes of or in connection with the sale of goods or supply of services, or a related sale or supply. (6) There is excluded from article 37 any activity carried on by a supplier where the assets in question—

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(a) are those of a customer; and (b) are managed for the purposes of or in connection with the sale of goods or supply of services, or a related sale or supply. (7) There is excluded from article 40 any activity carried on by a supplier where the assets in question are or are to be safeguarded and administered for the purposes of or in connection with the sale of goods or supply of services, or a related sale or supply. (8) There is excluded from article 53 the giving of advice by a supplier to a customer for the purposes of or in connection with the sale of goods or supply of services, or a related sale or supply, or to a person with whom the customer proposes to enter into a transaction for the purposes of or in connection with such a sale or supply or related sale or supply. (9) Paragraphs (2), (3) and (5) do not apply in the case of a transaction for the sale or purchase of a contract of insurance, an investment of the kind specified by article 81, or an investment of the kind specified by article 89 so far as relevant to such a contract or such an investment. (10) Paragraph (6) does not apply where the assets managed consist of qualifying contracts of insurance, investments of the kind specified by article 81, or investments of the kind specified by article 89 so far as relevant to such contracts or such investments. (11) Paragraph (8) does not apply in the case of advice in relation to an investment which is a contract of insurance, is of the kind specified by article 81, or is of the kind specified by article 89 so far as relevant to such a contract or such an investment. (12) This article is subject to article 4(4). Notes Paragraph (1) reference to art 39A inserted by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation. Paragraph (3) the words ‘‘by a supplier as agent for a customer’’ substituted for the words ‘‘as agent by a supplier with a customer’’ inserted by SI 2001 No 3544. Paragraphs (9) and (10) the references to ‘‘contract of insurance’’ were originally references to ‘‘qualifying contract of insurance’’; modified by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation. Paragraph (12) inserted by SI 2006 No 3384, implementing in part Directive 2004/39/EC of 21 April 2004 of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (OJ No L145, 30.4.2004, p.1) (‘‘MiFID’’).

Groups and joint enterprises 69.—(1) There is excluded from article 14 any transaction into which a person enters as principal with another person if that other person is also acting as principal and— (a) they are members of the same group; or (b) they are, or propose to become, participators in a joint enterprise and the transaction is entered into for the purposes of or in connection with that enterprise. (2) There is excluded from article 21 any transaction into which a person enters as agent for another person if that other person is acting as principal, and the condition in paragraph (1)(a) or (b) is met, provided that— (a) where the investment to which the transaction relates is a security, the agent does not hold himself out (other than to members of the same group or persons who are or propose to become participators with him in a joint enterprise) as engaging in the business of buying securities of the kind to which the transaction relates with a view to selling them, and does not regularly solicit members of the public for the purpose of inducing them (as principals or agents) to buy, sell, subscribe for or underwrite securities; (b) where the investment to which the transaction relates is a contractually based investment, the agent enters into the transaction— (i) with or through an authorised person, or an exempt person acting in the course of a business comprising a regulated activity in relation to which he is exempt; or (ii) through an office outside the United Kingdom maintained by a party to the transaction, and with or through a person whose head office is situated outside the United Kingdom and whose ordinary business involves him in carrying on

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The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 1.34 activities of the kind specified by any of articles 14, 21, 25, 37, 40, 45, 51, 52 and 53 or, so far as relevant to any of those articles, article 64, or would do so apart from any exclusion from any of those articles made by this Order. (3) In paragraph (2)(a), ‘‘members of the public’’ has the meaning given by article 15(2), references to ‘‘A’’ being read as references to the agent. (4) There are excluded from article 25(1) and (2) arrangements made by a person if— (a) he is a member of a group and the arrangements in question are for, or with a view to, a transaction which is or is to be entered into, as principal, by another member of the same group; or (b) he is or proposes to become a participator in a joint enterprise, and the arrangements in question are for, or with a view to, a transaction which is or is to be entered into, as principal, by another person who is or proposes to become a participator in that enterprise, for the purposes of or in connection with that enterprise. (5) There is excluded from article 37 any activity carried on by a person if— (a) he is a member of a group and the assets in question belong to another member of the same group; or (b) he is or proposes to become a participator in a joint enterprise with the person to whom the assets belong, and the assets are managed for the purposes of or in connection with that enterprise. (6) There is excluded from article 40 any activity carried on by a person if— (a) he is a member of a group and the assets in question belong to another member of the same group; or (b) he is or proposes to become a participator in a joint enterprise, and the assets in question— (i) belong to another person who is or proposes to become a participator in that joint enterprise; and (ii) are or are to be safeguarded and administered for the purposes of or in connection with that enterprise. (7) A person who is a member of a group does not carry on an activity of the kind specified by article 45 where he sends a dematerialised instruction, or causes one to be sent, on behalf of another member of the same group, if the investment to which the instruction relates is one in respect of which a member of the same group is registered as holder in the appropriate register of securities, or will be so registered as a result of the instruction. (8) In paragraph (7), ‘‘dematerialised instruction’’ and ‘‘register of securities’’ have the meaning given by regulation 3 of the Uncertificated Securities Regulations 1995. (9) There is excluded from article 53 the giving of advice by a person if— (a) he is a member of a group and gives the advice in question to another member of the same group; or (b) he is, or proposes to become, a participator in a joint enterprise and the advice in question is given to another person who is, or proposes to become, a participator in that enterprise for the purposes of or in connection with that enterprise. (10) Paragraph (2) does not apply to a transaction for the sale or purchase of a contract of insurance. (11) Paragraph (4) does not apply to arrangements for, or with a view to, a transaction for the sale or purchase of a contract of insurance. (12) Paragraph (9) does not apply where the advice relates to a transaction for the sale or purchase of a contract of insurance. (13) This article is subject to article 4(4). Notes Paragraphs (10), (11) and (12) inserted by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation. Paragraph (13) inserted by SI 2006 No 3384, implementing in part Directive 2004/39/EC of 21 April 2004 of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (OJ No L145, 30.4.2004, p 1) (‘‘MiFID’’). Arts 70 and 71 omitted from this work.

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Overseas persons 72.—(1) An overseas person does not carry on an activity of the kind specified by article 14 or 25D by— (a) entering into a transaction as principal with or though an authorised person, or an exempt person acting in the course of a business comprising a regulated activity in relation to which he is exempt; or (b) entering into a transaction as principal with a person in the United Kingdom, if the transaction is the result of a legitimate approach. (2) An overseas person does not carry on an activity of the kind specified by article 21 or 25D by— (a) entering into a transaction as agent for any person with or through an authorised person or an exempt person acting in the course of a business comprising a regulated activity in relation to which he is exempt; or (b) entering into a transaction with another party (‘‘X’’) as agent for any person (‘‘Y’’), other than with or through an authorised person or such an exempt person, unless— (i) either X or Y is in the United Kingdom; and (ii) the transaction is the result of an approach (other than a legitimate approach) made by or on behalf of, or to, whichever of X or Y is in the United Kingdom. (3) There are excluded from article 25(1) or 25D arrangements made by an overseas person with an authorised person, or an exempt person acting in the course of a business comprising a regulated activity in relation to which he is exempt. (4) There are excluded from article 25(2) or 25D arrangements made by an overseas person with a view to transactions which are, as respects transactions in the United Kingdom, confined to— (a) transactions entered into by authorised persons as principal or agent; and (b) transactions entered into by exempt persons, as principal or agent, in the course of business comprising regulated activities in relation to which they are exempt. (5) There is excluded from article 53 the giving of advice by an overseas person as a result of a legitimate approach. (5A) An overseas person does not carry on an activity of the kind specified by article 25A(1)(a), 25B(1)(a) or 25C(1)(a) if each person who may be contemplating entering into the relevant type of agreement in the relevant capacity is non-resident. (5B) There are excluded from articles 25A(1)(b), 25B(1)(b) and 25C(1)(b) arrangements made by an overseas person to vary the terms of a qualifying agreement. (5C) There are excluded from articles 25A(2), 25B(2) and 25C(2), arrangements made by an overseas person which are made solely with a view to non-resident persons who participate in those arrangements entering, in the relevant capacity, into the relevant type of agreement. (5D) An overseas person does not carry on an activity of the kind specified in article 61(1), 63B(1) or 63F(1) by entering into a qualifying agreement. (5E) An overseas person does not carry on an activity of the kind specified in article 61(2), 63B(2) or 63F(2) where he administers a qualifying agreement. (5F) In paragraphs (5A) to (5E)— (a) ‘‘non-resident’’ means not normally resident in the United Kingdom; (b) ‘‘qualifying agreement’’ means— (i) in relation to articles 25A and 61, a regulated mortgage contract where the borrower (or each borrower) is non-resident when he enters into it; (ii) in relation to articles 25B and 63B, a regulated home reversion plan where the reversion seller (or each reversion seller) is non-resident when he enters into it; (iii) in relation to articles 25C and 63F, a regulated home purchase plan where the home purchaser (or each home purchaser) is non-resident when he enters into it; (c) ‘‘the relevant capacity’’ means— (i) in the case of a regulated mortgage contract, as borrower; (ii) in the case of a regulated home reversion plan, as reversion seller or plan provider; (iii) in the case of a regulated home purchase plan, as home purchaser;

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The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 1.34 (d) ‘‘the relevant type of agreement’’ means— (i) in relation to article 25A, a regulated mortgage contract; (ii) in relation to article 25B, a regulated home reversion plan; (iii) in relation to article 25C, a regulated home purchase plan. (6) There is excluded from article 64 any agreement made by an overseas person to carry on an activity of the kind specified by article 25(1) or (2), 37, 39A, 40 or 45 if the agreement is the result of a legitimate approach. (7) In this article, ‘‘legitimate approach’’ means— (a) an approach made to the overseas person which has not been solicited by him in any way, or has been solicited by him in a way which does not contravene section 21 of the Act; or (b) an approach made by or on behalf of the overseas person in a way which does not contravene that section. (8) Paragraphs (1) to (5) do not apply where the overseas person is an investment firm or credit institution— (a) who is providing or performing investment services and activities on a professional basis; and (b) whose home Member State is the United Kingdom. Notes Paragraphs (1), (2), (3) and (4) references to art 25D inserted by SI 2006 No 3384, implementing in part Directive 2004/39/EC of 21 April 2004 of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (OJ No L145, 30.4.2004, p.1) (‘‘MiFID’’). Paragraphs (5A), (5B), (5C), (5D), (5E), (5F) first inserted by SI 2003 No 1475 which deals with regulated mortgage contracts; substantially revised by SI 2006 No 2383. Paragraph (6) reference to art 39A inserted by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation. Paragraph (8) inserted by SI 2006 No 3384, implementing in part Directive 2004/39/EC of 21 April 2004 of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (OJ No L145, 30.4.2004, p.1) (‘‘MiFID’’).

Information society services 72A.—(1) There is excluded from this Part any activity consisting of the provision of an information society service from an EEA State other than the United Kingdom. (2) The exclusion in paragraph (1) does not apply to the activity of effecting or carrying out a contract of insurance as principal, where— (a) the activity is carried on by an undertaking which has received official authorisation in accordance with Article 4 of the life assurance consolidation directive or [Article 6 of] the first non-life insurance directive, and (b) the insurance falls within the scope of any of the insurance directives. Notes Art 72A inserted by SI 2002 No 1776 to reflect the European Parliament and Council Directive of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce in the Internal Market (No 2000/31/EC). Sub-paragraph (2)(a) amended by SI 2004 No 3379, Reg 17 to reflect the introduction of the life assurance consolidation directive; reference to ‘‘Article 6’’ (of the first non-life directive) deleted, it is believed in error.

Activities carried on by a provider of relevant goods or services 72B.—(1) In this article— ‘‘connected contract of insurance’’ means a contract of insurance which— (a) is not a contract of long-term insurance; (b) has a total duration (or would have a total duration were any right to renew conferred by the contract exercised) of five years or less; (c) has an annual premium (or, where the premium is paid otherwise than by way of annual premium, the equivalent of an annual premium) of 500 euro or less, or the equivalent amount in sterling or other currency;

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(d) covers the risk of— (i) breakdown, loss of, or damage to, non-motor goods supplied by the provider; or (ii) damage to, or loss of, baggage and other risks linked to the travel booked with the provider (‘‘travel risks’’); (e) does not cover any liability risks (except, in the case of a contract which covers travel risks, where that cover is ancillary to the main cover provided by the contract); (f) is complementary to the non-motor goods being supplied or service being provided by the provider; and (g) is of such a nature that the only information that a person requires in order to carry on an activity of the kind specified by article 21, 25, 39A or 53 in relation to it is the cover provided by the contract; ‘‘non-motor goods’’ means goods which are not mechanically propelled road vehicles; ‘‘provider’’ means a person who supplies non-motor goods or provides services related to travel in the course of carrying on a profession or business which does not otherwise consist of the carrying on of regulated activities. (2) There is excluded from article 21 any transaction for the sale or purchase of a connected contract of insurance into which a provider enters as agent. (3) There are excluded from article 25(1) and (2) any arrangements made by a provider for, or with a view to, a transaction for the sale or purchase of a connected contract of insurance. (4) There is excluded from article 39A any activity carried on by a provider where the contract of insurance in question is a connected contract of insurance. (5) There is excluded from article 53 the giving of advice by a provider in relation to a transaction for the sale or purchase of a connected contract of insurance. (6) For the purposes of this article, a contract of insurance which covers travel risks is not to be treated as a contract of long-term insurance, notwithstanding the fact that it contains related and subsidiary provisions such that it might be regarded as a contract of long-term insurance, if the cover to which those provisions relate is ancillary to the main cover provided by the contract. Notes Arts 72B, 72C and 72D inserted by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation.

Provision of information on an incidental basis 72C.—(1) There is excluded from articles 25(1) and (2) the making of arrangements for, or with a view to, a transaction for the sale or purchase of a contract of insurance or an investment of the kind specified by article 89, so far as relevant to such a contract, where that activity meets the conditions specified in paragraph (4). (2) There is excluded from articles 37 and 40 any activity— (a) where the assets in question are rights under a contract of insurance or an investment of the kind specified by article 89, so far as relevant to such a contract; and (b) which meets the conditions specified in paragraph (4). (3) There is excluded from article 39A any activity which meets the conditions specified in paragraph (4). (4) The conditions specified in this paragraph are that the activity— (a) consists of the provision of information to the policyholder or potential policyholder; (b) is carried on by a person in the course of carrying on a profession or business which does not otherwise consist of the carrying on of regulated activities; and (c) may reasonably be regarded as being incidental to that profession or business. Notes Arts 72B, 72C and 72D inserted by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation.

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The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 1.34 Large risks contracts where risk situated outside the EEA 72D.—(1) There is excluded from articles 21, 25(1) and (2), 39A and 53 any activity which is carried on in relation to a large risks contract of insurance, to the extent that the risk or commitment covered by the contract is not situated in an EEA State. (2) In this article, a ‘‘large risks contract of insurance’’ is a contract of insurance the principal object of which is to cover— (a) risks falling within paragraph 4 (railway rolling stock), 5 (aircraft), 6 (ships), 7 (goods in transit), 11 (aircraft liability) or 12 (liability of ships) of Part 1 of Schedule 1; (b) risks falling within paragraph 14 (credit) or 15 (suretyship) of that Part provided that the risks relate to a business carried on by the policyholder; or (c) risks falling within paragraph 3 (land vehicles), 8 (fire and natural forces), 9 (damage to property), 10 (motor vehicle liability), 13 (general liability) or 16 (miscellaneous financial loss) of that Part provided that the risks relate to a business carried on by the policyholder and that the condition specified in paragraph (3) is met in relation to that business. (3) The condition specified in this paragraph is that at least two of the three following criteria were met in the most recent financial year for which information is available— (a) the balance sheet total of the business (within the meaning of section 247(5) of the Companies Act 1985 or article 255(5) of the Companies (Northern Ireland) Order 1986) exceeded 6.2 million euro, (b) the net turnover (within the meaning given to ‘‘turnover’’ by section 262(1) of that Act or article 270(1) of that Order) exceeded 12.8 million euro, (c) the number of employees (within the meaning given by section 247(6) of that Act or article 255(6) of that Order) exceeded 250, and for a financial year which is a company’s financial year but not in fact a year, the net turnover of the policyholder shall be proportionately adjusted. (4) For the purposes of paragraph (3), where the policyholder is a member of a group for which consolidated accounts (within the meaning of the Seventh Company Law Directive) are drawn up, the question whether the condition specified by that paragraph is met is to be determined by reference to those accounts. Notes Arts 72B, 72C and 72D inserted by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation.

Business Angel-led Enterprise Capital Funds 72E.—(1) A body corporate of a type specified in paragraph (7) does not carry on the activity of the kind specified by article 21 by entering as agent into a transaction on behalf of the participants of a Business Angel-led Enterprise Capital Fund. (2) There are excluded from article 25(1) and (2) arrangements, made by a body corporate of a type specified in paragraph (7), for or with a view to a transaction which is or is to be entered into by or on behalf of the participants in a Business Angel-led Enterprise Capital Fund. (3) There is excluded from article 37 any activity, carried on by a body corporate of a type specified in paragraph (7), which consists in the managing of assets belonging to the participants in a Business Angel-led Enterprise Capital Fund. (4) There is excluded from article 40 any activity, carried on by a body corporate of a type specified in paragraph (7), in respect of assets belonging to the participants in a Business Angelled Enterprise Capital Fund. (5) A body corporate of a type specified in paragraph (7) does not carry on the activity of the kind specified in article 51(1)(a) where it carries on the activity of establishing, operating or winding up a Business Angel-led Enterprise Capital Fund. (6) A body corporate of a type specified in paragraph (7) does not carry on the activity of the kind specified in article 53 where it is advising the participants in a Business Angel-led Enterprise Capital Fund on investments to be made by or on behalf of the participants of that Business Angel-led Enterprise Capital Fund. (7) The type of body corporate specified is a limited company—

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(i) which operates a Business Angel-led Enterprise Capital Fund; and (ii) the members of which are participants in the Business Angel-led Enterprise Capital Fund operated by that limited company and between them have invested at least 50 per cent of the total investment in that Business Angel-led Enterprise Capital Fund excluding any investment made by the Secretary of State. (8) For the purposes of paragraph (7), ‘‘a limited company’’ means a body corporate with limited liability which is a company or firm formed in accordance with the law of an EEA State and having its registered office, central administration or principal place of business within the territory of an EEA State. (9) Nothing in this article has the effect of excluding a body corporate from the application of the Money Laundering Regulations 2007, in so far as those Regulations would have applied to it but for this article. (10) Nothing in this article has the effect of excluding a body corporate from the application of section 397 of the Act (misleading statements and practices), in so far as that section would have applied to it but for this article. (11) This article is subject to article 4(4). Notes Art 72E was inserted, together with 72F, by SI 2005 No 1518. Paragraph (9) modified by SI 2007 No 2157 to refer to the Money Laundering Regulations 2007. Paragraph (11) was inserted by SI 2006 No 3384, implementing in part Directive 2004/39/EC of 21 April 2004 of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (OJ No L 145, 30.4.2004, p.1) (‘‘MiFID’’).

Interpretation 72F.—(1) For the purposes of this article and of article 72E— ‘‘Business Angel-led Enterprise Capital Fund’’ means a collective investment scheme which— (a) is established for the purpose of enabling participants to participate in or receive profits or income arising from the acquisition, holding, management or disposal of investments falling within one or more of— (i) article 76, being shares in an unlisted company; (ii) article 77, being instruments creating or acknowledging indebtedness in respect of an unlisted company; and (iii) article 79, being warrants or other instruments entitling the holder to subscribe for shares in an unlisted company; (b) has only the following as its participants— (i) the Secretary of State; (ii) a body corporate of a type specified in article 72E(7); and (iii) one or more persons each of whom at the time they became a participant was— (aa) a sophisticated investor; (bb) a high net worth individual; (cc) a high net worth company; (dd) a high net worth unincorporated association; (ee) a trustee of a high value trust; or (ff) a self-certified sophisticated investor; (c) is prevented, by the arrangements by which it is established, from— (i) acquiring investments, other than those falling within paragraphs (i) to (iii) of sub-paragraph (a); and (ii) acquiring investments falling within paragraphs (i) to (iii) of sub-paragraph (a) in an unlisted company, where the aggregated cost of those investments exceeds £2 million, unless that acquisition is necessary to prevent or reduce the dilution of an existing share-holding in that unlisted company; ‘‘high net worth company’’ means a body corporate which— (a) falls within article 49(2)(a) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 (high net worth companies, unincorporated associations etc.); and

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The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 1.34 (b) has executed a document (in a manner which binds the company) in the following terms: ‘‘This company is a high net worth company and falls within article 49(2)(a) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001. We understand that any Business Angel-led Enterprise Capital Fund (within the meaning of article 72F of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001), in which this company participates, or any person who operates that Business Angel-led Enterprise Capital Fund, in which this company participates, will not be authorised under the Financial Services and Markets Act 2000 (and so will not have to satisfy the threshold conditions set out in Part I of Schedule 6 to that Act and will not be subject to Financial Services Authority rules such as those on holding client money). We understand that this means that redress through the Financial Services Authority, the Financial Ombudsman Scheme or the Financial Services Compensation Scheme will not be available. We also understand the risks associated in investing in a Business Angel-led Enterprise Capital Fund and are aware that it is open to us to seek advice from someone who is authorised under the Financial Services and Markets Act 2000 and who specialises in advising on this kind of investment.’’ ‘‘high net worth individual’’ means an individual who— (a) is a ‘‘certified high net worth individual’’ within the meaning of article 48(2) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 (certified high net worth individuals); and (b) has signed a statement in the following terms: ‘‘I declare that I am a certified high net worth individual within the meaning of article 48(2) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 and that I understand that any Business Angel-led Enterprise Capital Fund (within the meaning of article 72F of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001), in which I participate, or any person who operates that Business Angel-led Enterprise Capital Fund, in which I participate, will not be authorised under the Financial Services and Markets Act 2000 (and so will not have to satisfy the threshold conditions set out in Part I of Schedule 6 to that Act and will not be subject to Financial Services Authority rules such as those on holding client money). I understand that this means that redress through the Financial Services Authority, the Financial Ombudsman Scheme or the Financial Services Compensation Scheme will not be available. I also understand the risks associated in investing in a Business Angel-led Enterprise Capital Fund and am aware that it is open to me to seek advice from someone who is authorised under the Financial Services and Markets Act 2000 and who specialises in advising on this kind of investment.’’; ‘‘high net worth unincorporated association’’ means an unincorporated association— (a) which falls within article 49(2)(b) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001; and (b) on behalf of which an officer of that association or a member of its governing body has signed a statement in the following terms: ‘‘This unincorporated association is a high net worth unincorporated association and falls within article 49(2)(b) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001. I understand that any Business Angel-led Enterprise Capital Fund (within the meaning of article 72F of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001), in which this association participates, or any person who operates that Business Angel-led Enterprise Capital Fund, in which this association participates, will not be authorised under the Financial Services and Markets Act 2000 (and so will not have to satisfy the threshold conditions set out in Part I of Schedule 6 to that Act and will not be subject to Financial Services Authority rules such as those on holding client money). I understand that this means that redress through the Financial Services Authority, the Financial

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Ombudsman Scheme or the Financial Services Compensation Scheme will not be available. I also understand the risks associated in investing in a Business Angel-led Enterprise Capital Fund and am aware that it is open to the association to seek advice from someone who is authorised under the Financial Services and Markets Act 2000 and who specialises in advising on this kind of investment.’’; ‘‘high value trust’’ means a trust— (a) where the aggregate value of the cash and investments which form a part of the trust’s assets (before deducting the amount of its liabilities) is £10 million or more; (b) on behalf of which a trustee has signed a statement in the following terms: ‘‘This trust is a high value trust. I understand that any Business Angel-led Enterprise Capital Fund (within the meaning of article 72F of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001), in which this trust participates, or any person who operates that Business Angel-led Enterprise Capital Fund, in which this trust participates, will not be authorised under the Financial Services and Markets Act 2000 (and so will not have to satisfy the threshold conditions set out in Part I of Schedule 6 to that Act and will not be subject to Financial Services Authority rules such as those on holding client money). I understand that this means that redress through the Financial Services Authority, the Financial Ombudsman Scheme or the Financial Services Compensation Scheme will not be available. I also understand the risks associated in investing in a Business Angel-led Enterprise Capital Fund and am aware that it is open to the trust to seek advice from someone who is authorised under the Financial Services and Markets Act 2000 and who specialises in advising on this kind of investment. ‘‘; ‘‘self-certified sophisticated investor’’ means an individual who— (a) is a ‘‘self-certified sophisticated investor’’ within the meaning of article 50A of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001(a); (b) has signed a statement in the following terms: ‘‘I declare that I am a self-certified sophisticated investor within the meaning of article 50A of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 and that I understand that any Business Angel-led Enterprise Capital Fund (within the meaning of article 72F of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001), in which I participate, or any person who operates that Business Angel-led Enterprise Capital Fund, in which I participate, will not be authorised under the Financial Services and Markets Act 2000 (and so will not have to satisfy the threshold conditions set out in Part I of Schedule 6 to that Act and will not be subject to Financial Services Authority rules such as those on holding client money). I understand that this means that redress through the Financial Services Authority, the Financial Ombudsman Scheme or the Financial Services Compensation Scheme will not be available. I also understand the risks associated in investing in a Business Angel-led Enterprise Capital Fund and am aware that it is open to me to seek advice from someone who is authorised under the Financial Services and Markets Act 2000 and who specialises in advising on this kind of investment.’’; ‘‘sophisticated investor’’ means an individual who— (a) is a ‘‘certified sophisticated investor’’ within the meaning of article 50(1) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001; and (b) has signed a statement in the following terms: ‘‘I declare that I am a certified sophisticated investor within the meaning of article 50(1) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 and that I understand that any Business Angel-led Enterprise Capital Fund (within the meaning of article 72F of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001), in which I participate, or any person who operates that Business Angel-led Enterprise

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The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 1.34 Capital Fund, in which I participate, will not be authorised under the Financial Services and Markets Act 2000 (and so will not have to satisfy the threshold conditions set out in Part I of Schedule 6 to that Act and will not be subject to Financial Services Authority rules such as those on holding client money). I understand that this means that redress through the Financial Services Authority, the Financial Ombudsman Scheme or the Financial Services Compensation Scheme will not be available. I also understand the risks associated in investing in a Business Angel-led Enterprise Capital Fund and am aware that it is open to me to seek advice from someone who is authorised under the Financial Services and Markets Act 2000 and who specialises in advising on this kind of investment.’’; ‘‘unlisted company’’ has the meaning given by article 3 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001. (2) References in this Article and in Article 72E to a participant in a Business Angel-led Enterprise Capital Fund, doing things on behalf of such a participant and property belonging to such a participant are, respectively, references to that participant in that capacity, to doing things on behalf of that participant in that capacity or to the property of that participant held in that capacity. Notes Art 72F was inserted, together with 72E, by SI 2005 No 1518. Definition of ‘‘high net worth company’’ slightly amended by SI 2006 No 2383.

PA RT I I I

SPECIFIED INVESTMENTS

General Note This Part lists and defines the types of investment for the purpose of s 22, FSMA 2000. Only arts dealing with relevant types of investments have been included here.

Investments: general 73. The following kinds of investment are specified for the purposes of section 22 of the Act. Contracts of insurance 75. Rights under a contract of insurance. Units in a collective investment scheme 81. Units in a collective investment scheme (within the meaning of Part XVII of the Act). Rights under a pension scheme 82.—(1) Rights under a stakeholder pension scheme. (2) Rights under a personal pension scheme. Notes Art 82 modified by SI 2006 No 1969.

Lloyd’s syndicate capacity and syndicate membership 86.—(1) The underwriting capacity of a Lloyd’s syndicate. (2) A person’s membership (or prospective membership) of a Lloyd’s syndicate. [Part IV applies to regulated mortgage contracts and is omitted here.]

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Regulation of Insurers U N A U T H O R I S E D P E R S O N S C A R RY I N G O N I N S U R A N C E M E D I AT I O N A C T I V I T I E S

Interpretation 92. In this Part— ‘‘designated professional body’’ means a body which is for the time being designated by the Treasury under section 326 of the Act (designation of professional bodies); ‘‘insurance mediation activity’’ means any regulated activity of the kind specified by article 21, 25(1) or (2), 39A or 53, or, so far as relevant to any of those articles, article 64, which is carried on in relation to a contract of insurance; ‘‘the record’’ means the record maintained by the Authority under section 347 of the Act (public record of authorised persons etc.); ‘‘recorded insurance intermediary’’ has the meaning given by article 93(4); ‘‘a relevant member’’, in relation to a designated professional body, means a member (within the meaning of section 325(2) of the Act) of the profession in relation to which that designated professional body is established, or a person who is controlled or managed by one or more such members. Notes Part V, arts 92, 93, 94, 95 and 96 inserted by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation.

Duty to maintain a record of unauthorised persons carrying on insurance mediation activities 93.—(1) Subject to articles 95 and 96, the Authority must include in the record every person who— (a) as a result of information obtained by virtue of its rules or by virtue of a direction given, or requirement imposed, under section 51(3) of the Act (procedure for applications under Part IV), appears to the Authority to fall within paragraph (2); or (b) as a result of information obtained by virtue of article 94, appears to the Authority to fall within paragraph (3). (2) A person falls within this paragraph if he is, or has entered into a contract by virtue of which he will be, an appointed representative who carries on any insurance mediation activity. (3) A person falls within this paragraph if— (a) he is a relevant member of a designated professional body who carries on, or is proposing to carry on, any insurance mediation activity; and (b) the general prohibition does not (or will not) apply to the carrying on of those activities by virtue of section 327 of the Act (exemption from the general prohibition). (4) In this Part, ‘‘recorded insurance intermediary’’ means a person who is included in the record by virtue of paragraph (1). (5) The record must include— (a) in the case of any recorded insurance intermediary, its address; and (b) in the case of a recorded insurance intermediary which is not an individual, the name of the individuals who are responsible for the management of the business carried on by the intermediary, so far as it relates to insurance mediation activities. Notes Art 93 inserted by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation.

Members of designated professional bodies 94.—(1) A designated professional body must, by notice in writing, inform the Authority of— (a) the name, (b) the address, and

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The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 1.34 (c) in the case of a relevant member which is not an individual, the name of the individuals who are responsible for the management of the business carried on by the member, so far as it relates to insurance mediation activities, of any relevant member who falls within paragraph (2). (2) A relevant member of a designated professional body falls within this paragraph if, in accordance with the rules of that body, he carries on, or proposes to carry on any insurance mediation activity but does not have, and does not propose to apply for, Part IV permission on the basis that the general prohibition does not (or will not) apply to the carrying on of that activity by virtue of section 327 of the Act. (3) A designated professional body must also, by notice in writing, inform the Authority of any change in relation to the matters specified in sub-paragraphs (a) to (c) of paragraph (1). (4) A designated professional body must inform the Authority when a relevant member to whom paragraph (2) applies ceases, for whatever reason, to carry on insurance mediation activities. (5) The Authority may give directions to a designated professional body as to the manner in which the information referred to in paragraphs (1), (3) and (4) must be provided. Notes Art 94 inserted by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation.

Exclusion from record where not fit and proper to carry on insurance mediation activities 95.—(1) If it appears to the Authority that a person who falls within article 93(2) (appointed representatives) (‘‘AR’’) is not a fit and proper person to carry on insurance mediation activities, it may decide not to include him in the record or, if that person is already included in the record, to remove him from the record. (2) Where the Authority proposes to make a determination under paragraph (1), it must give AR a warning notice. (3) If the Authority makes a determination under paragraph (1), it must give AR a decision notice. (4) If the Authority gives AR a decision notice under paragraph (3), AR may refer the matter to the Tribunal. (5) The Authority may, on the application of AR, revoke a determination under paragraph (1). (6) If the Authority decides to grant the application, it must give AR written notice of its decision. (7) If the Authority proposes to refuse the application, it must give AR a warning notice. (8) If the Authority decides to refuse the application, it must give AR a decision notice. (9) If the Authority gives AR a decision notice under paragraph (8), AR may refer the matter to the Tribunal. (10) Sections 393 and 394 of the Act (third party rights and access to Authority material) apply to a warning notice given in accordance with paragraph (2) or (7) and to a decision notice given in accordance with paragraph (3) or (8). Notes Art 95 inserted by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation.

Exclusion from the record where Authority has exercised its powers under Part XX of the Act 96.—(1) If a person who appears to the Authority to fall within article 93(3) (member of a designated professional body) falls within paragraph (2) or (3), the Authority must not include him in the record or, if that person is already included in the record, must remove him from the record. (2) A person falls within this paragraph if, by virtue of a direction given by the Authority under section 328(1) of the Act (directions in relation to the general prohibition), section

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327(1) of the Act does not apply in relation to the carrying on by him of any insurance mediation activity. (3) A person falls within this paragraph if the Authority has made an order under section 329(2) of the Act (orders in relation to the general prohibition) disapplying section 327(1) of the Act in relation to the carrying on by him of any insurance mediation activity. Notes Art 96 inserted by SI 2003 No 1476 to reflect the European Parliament and Council Directive 2002/92/EC on insurance mediation.

Disapplication of section 49(2) of the Act 97. In section 49 of the Act (persons connected with an applicant for Part 4 permission), after subsection (2) insert— ‘‘(2A) But subsection (2) does not apply to the extent that the permission relates to— (a) an insurance mediation activity (within the meaning given by paragraph 2(5) of Schedule 6); or (b) a regulated activity involving a regulated mortgage contract.’’ Notes Art 97 inserted in SI 2001 No 544 by SI 2004 No 1610, Reg 3.

SCHEDULE 1 PA RT I

CONTRACTS OF INSURANCE

CONTRACTS OF GENERAL INSURANCE

Accident 1. Contracts of insurance providing fixed pecuniary benefits or benefits in the nature of indemnity (or a combination of both) against risks of the person insured or, in the case of a contract made by virtue of section 140, 140A or 140B of the Local Government Act 1972 (or, in Scotland, section 86(1) of the Local Government (Scotland) Act 1973), a person for whose benefit the contract is made— (a) sustaining injury as the result of an accident or of an accident of a specified class; or (b) dying as a result of an accident or of an accident of a specified class; or (c) becoming incapacitated in consequence of disease or of disease of a specified class, including contracts relating to industrial injury and occupational disease but excluding contracts falling within paragraph 2 of Part I of, or paragraph IV of Part II of, this Schedule. Sickness 2. Contracts of insurance providing fixed pecuniary benefits or benefits in the nature of indemnity (or a combination of both) against risks of loss to the persons insured attributable to sickness or infirmity but excluding contracts falling within paragraph IV of Part II of this Schedule. Land vehicles 3. Contracts of insurance against loss of or damage to vehicles used on land, including motor vehicles but excluding railway rolling stock. Railway rolling stock 4. Contract of insurance against loss of or damage to railway rolling stock.

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The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 1.34 Aircraft 5. Contracts of insurance upon aircraft or upon the machinery, tackle, furniture or equipment of aircraft. Ships 6. Contracts of insurance upon vessels used on the sea or on inland water, or upon the machinery, tackle, furniture or equipment of such vessels. Goods in transit 7. Contracts of insurance against loss of or damage to merchandise, baggage and all other goods in transit, irrespective of the form of transport. Fire and natural forces 8. Contracts of insurance against loss of or damage to property (other than property to which paragraphs 3 to 7 relate) due to fire, explosion, storm, natural forces other than storm, nuclear energy or land subsidence. Damage to property 9. Contracts of insurance against loss of or damage to property (other than property to which paragraphs 3 to 7 relate) due to hail or frost or any other event (such as theft) other than those mentioned in paragraph 8. Motor vehicle liability 10. Contracts of insurance against damage arising out of or in connection with the use of motor vehicles on land, including third-party risks and carrier’s liability. Aircraft liability 11. Contracts of insurance against damage arising out of or in connection with the use of aircraft, including third-party risks and carrier’s liability. Liability of ships 12. Contracts of insurance against damage arising out of or in connection with the use of vessels on the sea or on inland water, including third party risks and carrier’s liability. General liability 13. Contracts of insurance against risks of the persons insured incurring liabilities to third parties, the risks in question not being risks to which paragraph 10, 11 or 12 relates. Credit 14. Contracts of insurance against risks of loss to the persons insured arising from the insolvency of debtors of theirs or from the failure (otherwise than through insolvency) of debtors of theirs to pay their debts when due. Suretyship 15.—(1) Contracts of insurance against the risks of loss to the persons insured arising from their having to perform contracts of guarantee entered into by them. (2) Fidelity bonds, performance bonds, administration bonds, bail bonds or customs bonds or similar contracts of guarantee, where these are—

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(a) effected or carried out by a person not carrying on a banking business; (b) not effected merely incidentally to some other business carried on by the person effecting them; and (c) effected in return for the payment of one or more premiums. Miscellaneous financial loss 16. Contracts of insurance against any of the following risks, namely— (a) risks of loss to the persons insured attributable to interruptions of the carrying on of business carried on by them or to reduction of the scope of business so carried on; (b) risks of loss to the persons insured attributable to their incurring unforeseen expense (other than loss such as is covered by contracts falling within paragraph 18); (c) risks which do not fall within sub-paragraph (a) or (b) and which are not of a kind such that contracts of insurance against them fall within any other provision of this Schedule. Legal expenses 17. Contracts of insurance against risks of loss to the persons insured attributable to their incurring legal expenses (including costs of litigation). Assistance 18. Contracts of insurance providing either or both of the following benefits, namely— (a) assistance (whether in cash or in kind) for persons who get into difficulties while travelling, while away from home or while away from their permanent residence; or (b) assistance (whether in cash or in kind) for persons who get into difficulties otherwise than as mentioned in sub-paragraph (a). PA RT I I

CONTRACTS OF LONG-TERM INSURANCE

Life and annuity I. Contracts of insurance on human life or contracts to pay annuities on human life, but excluding (in each case) contracts within paragraph III. Marriage and birth II. Contract of insurance to provide a sum on marriage or the formation of a civil partnership or on the birth of a child, being contracts expressed to be in effect for a period of more than one year. Notes Paragraph II amended to refer to civil partnerships by SI 2005 No 2114.

Linked long term III. Contracts of insurance on human life or contracts to pay annuities on human life where the benefits are wholly or party to be determined by references to the value of, or the income from, property of any description (whether or not specified in the contracts) or by reference to fluctuations in, or in an index of, the value of property of any description (whether or not so specified). Permanent health IV. Contracts of insurance providing specified benefits against risks of persons becoming incapacitated in consequence of sustaining injury as a result of an accident or of an accident of a specified class or of sickness or infirmity, being contracts that— (a) are expressed to be in effect for a period of not less than five years, or until the normal retirement age for the persons concerned, or without limit of time; and

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The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 1.34 (b) either are not expressed to be terminable by the insurer, or are expressed to be so terminable only in special circumstances mentioned in the contract. Tontines V. Tontines. Capital redemption contracts VI. Capital redemption contracts, where effected or carried out by a person who does not carry on a banking business, and otherwise carries on a regulated activity of the kind specified by article 10(1) or (2). Pension fund management VII. (a) Pension fund management contracts, and (b) pension fund management contracts which are combined with contracts of insurance covering either conservation of capital or payment of a minimum interest, where effected or carried out by a person who does not carry on a banking business, and otherwise carries on a regulated activity of the kind specified by article 10(1) or (2). Collective insurance etc. VIII. Contracts of a kind referred to in article 1(2)(e) of the first life insurance directive. Social insurance IX. Contracts of a kind referred to in article 1(3) of the first life insurance directive.

SCHEDULE 4

R E L E VA N T T E X T O F T H E I N S U R A N C E M E D I AT I O N DIRECTIVE PA RT I

A RT I C L E 1 . 2

‘‘This Directive shall not apply to persons providing mediation services for insurance contracts if all the following conditions are met: (a) the insurance contract only requires knowledge of the insurance cover that is provided; (b) the insurance contract is not a life assurance contract; (c) the insurance contract does not cover any liability risks; (d) the principal professional activity of the person is other than insurance mediation; (e) the insurance is complementary to the product or service supplied by any provider, where such insurance covers: (i) the risk of breakdown, loss of or damage to goods supplied by that provider; or (ii) damage to or loss of baggage and other risks linked to the travel booked with that provider, even if the insurance covers life assurance or liability risks, provided that the cover is ancillary to the main cover for the risks linked to that travel; (f) the amount of the annual premium does not exceed EUR 500 and the total duration of the insurance contract, including any renewals, does not exceed five years.’’

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A RT I C L E 2 . 3

‘‘ ‘Insurance mediation’ means the activities of introducing, proposing or carrying out other work preparatory to the conclusion of contracts of insurance, or of concluding such contracts, or of assisting in the administration and performance of such contracts, in particular in the event of a claim. These activities when undertaken by an insurance undertaking or an employee of an insurance undertaking who is acting under the responsibility of the insurance undertaking shall not be considered as insurance mediation. The provision of information on an incidental basis in the context of another professional activity provided that the purpose of that activity is not to assist the customer in concluding or performing an insurance contract, the management of claims of an insurance undertaking on a professional basis, and loss adjusting and expert appraisal of claims shall also not be considered as insurance mediation.’’ PA RT I I I

A RT I C L E 2 . 4

‘‘ ‘Reinsurance mediation’ means the activities of introducing, proposing or carrying out other work preparatory to the conclusion of contracts of reinsurance, or of concluding such contracts, or of assisting in the administration and performance of such contracts, in particular in the event of a claim. These activities when undertaken by a reinsurance undertaking or an employee of a reinsurance undertaking who is acting under the responsibility of the reinsurance undertaking are not considered as reinsurance mediation. The provision of information on an incidental basis in the context of another professional activity provided that the purpose of that activity is not to assist the customer in concluding or performing a reinsurance contract, the management of claims of a reinsurance undertaking on a professional basis, and loss adjusting and expert appraisal of claims shall also not be considered as reinsurance mediation.’’’’.

1.35 THE FINANCIAL SERVICES AND MARKETS ACT 2000 (CARRYING ON REGULATED ACTIVITIES BY WAY OF BUSINESS) ORDER 2001 (SI 2001 No 1177) Citation, commencement and interpretation 1.—(1) This Order may be cited as the Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001, and comes into force on the day on which section 19 of the Financial Services and Markets Act 2000 comes into force. (2) In this Order— (a) the ‘‘Regulated Activities Order’’ means the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001; (b) ‘‘contract of insurance’’, ‘‘contractually based investment’’, ‘‘deposit’’, ‘‘overseas person’’ and ‘‘security’’ have the same meaning as in that Order; (c) ‘‘shares’’ and ‘‘debentures’’ mean any investment of the kind specified by article 76 or 77 of that Order; (d) ‘‘units in a collective investment scheme’’ means any investment of the kind specified by article 81 of that Order; (e) ‘‘warrants’’ means any investment of the kind specified by article 79 of that Order. Notes Sub-paragraph (2)(a) the Order referred to is SI 2001 No 544. Sub-paragraph (2)(b) reference to ‘‘contract of insurance’’ inserted by The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No 2) Order 2003, SI 2003 No 1476.

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Deposit taking business 2.—(1) A person who carries on an activity of the kind specified by article 5 of the Regulated Activities Order (accepting deposits) is not to be regarded as doing so by way of business if— (a) he does not hold himself out as accepting deposits on a day to day basis; and (b) any deposits which he accepts are accepted only on particular occasions, whether or not involving the issue of any securities. (2) In determining for the purposes of paragraph (1)(b) whether deposits are accepted only on particular occasions, regard is to be had to the frequency of those occasions and to any characteristics distinguishing them from each other. Investment business 3.—(1) A person is not to be regarded as carrying on by way of business an activity to which paragraph (2) applies, unless he carries on the business of engaging in one or more such activities. (2) This paragraph applies to an activity of the kind specified by any of the following provisions of the Regulated Activities Order, namely— (a) article 14 (dealing in investments as principal); (b) article 21 (dealing in investments as agent); (c) article 25 (arranging deals in investments), except in so far as that activity relates to an investment of the kind specified by article 86 of that Order (Lloyd’s syndicate capacity and syndicate membership), or article 89 of that Order (rights and interests) so far as relevant to that article; (ca) article 25D (operating a multilateral trading facility); (d) article 37 (managing investments); (e) article 40 (safeguarding and administering investments); (f) article 45 (sending dematerialised instructions); (g) article 51 (establishing etc. a collective investment scheme); (h) article 52 (establishing etc. a pension scheme); (i) article 53 (advising on investments); and (j) article 64 (agreeing) so far as relevant to any of the articles mentioned in subparagraphs (a) to (i), but does not apply to any insurance mediation activity. (3) Paragraph (1) is without prejudice to article 4 of this Order. (4) A person is not to be regarded as carrying on by way of business any insurance mediation activity unless he takes up or pursues that activity for remuneration. (5) In this article, ‘‘insurance mediation activity’’ means any activity of the kind specified by article 21, 25(1) or (2), 39A or 53 of the Regulated Activities Order, or, so far as relevant to any of those articles, article 64 of that Order, which is carried on in relation to a contract of insurance. Notes Paragraph (2) the closing words in the paragraph, referring to insurance mediation activities, inserted by The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No 2) Order 2003, SI 2003 No 1476, art 18. Sub-paragraph (2)(ca) inserted by The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment No 3) Order 2006, SI 2006 No 3384, art 37. Sub-paragraph (2)(h) amended by The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2006, SI 2006 No 1969, art 9. Paragraph (4) inserted by The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No 2) Order 2003, SI 2003 No 1476, art 18. Paragraph (5) inserted by The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No 2) Order 2003, SI 2003 No 1476, art 18.

Arranging and advising on regulated mortgage contracts 3A. A person is not to be regarded as carrying on by way of business an activity of the kind specified by—

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(a) article 25A of the Regulated Activities Order (arranging regulated mortgage contracts); (b) article 53A of that Order (advising on regulated mortgage contracts); or (c) article 64 of that Order (agreeing), so far as relevant to any of the articles mentioned in sub-paragraphs (a) and (b), unless he carries on the business of engaging in that activity. Notes Art 3A inserted by The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No 1) Order 2003, SI 2003 No 1475, art 25.

Arranging and advising on regulated home reversion plans 3B. A person is not to be regarded as carrying on by way of business an activity specified by— (a) article 25B of the Regulated Activities Order (arranging regulated home reversion plans); (b) article 53B of that Order (advising on regulated home reversion plans); or (c) article 64 of that Order (agreeing), so far as relevant to either of the articles mentioned in sub-paragraphs (a) and (b), unless he carries on the business of engaging in that activity. Notes Art 3B inserted by The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No 2) Order 2006, SI 2006 No 2383, art 29.

Arranging and advising on regulated home purchase plans 3C. A person is not to be regarded as carrying on by way of business an activity specified by— (a) article 25C of the Regulated Activities Order (arranging regulated home purchase plans); (b) article 53C of that Order (advising on regulated home purchase plans); or (c) article 64 of that Order (agreeing), so far as relevant to either of the articles mentioned in sub-paragraphs (a) and (b), unless he carries on the business of engaging in that activity. Notes Art 3C inserted by The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No 2) Order 2006, SI 2006 No 2383, art 29.

Managing investments: occupational pension schemes 4.—(1) A person who carries on an activity of the kind specified by article 37 of the Regulated Activities Order (managing investments), where the assets in question are held for the purposes of an occupational pension scheme, is to be regarded as carrying on that activity by way of business, except where— (a) he is a person to whom paragraph (2) applies; or (b) all day to day decisions in the carrying on of that activity (other than decisions falling within paragraph (6)), so far as relating to relevant assets, are taken on his behalf by— (i) an authorised person who has permission to carry on activities of the kind specified by article 37 of the Regulated Activities Order; (ii) a person who is an exempt person in relation to activities of that kind; or (iii) an overseas person. (2) This paragraph applies to— (a) any trustee of a relevant scheme who is a beneficiary or potential beneficiary under the scheme; and

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(b) any other trustee of a relevant scheme who takes no day to day decisions relating to the management of any relevant assets. (3) In this article— ‘‘occupational pension scheme’’ has the meaning given by section 1 of the Pension Schemes Act 1993 but with paragraph (b) of the definition omitted; ‘‘relevant assets’’ means assets of the scheme in question which are securities or contractually based investments; ‘‘relevant scheme’’ means any occupational pension scheme of a kind falling within paragraph (4) or (5). (4) A scheme falls within this paragraph if— (a) it is constituted under an irrevocable trust: (b) it has no more than twelve relevant members; (c) all relevant members, other than any relevant member who is unfit to act, or is incapable of acting, as trustee of the scheme, are trustees of it; and (d) all day to day decisions relating to the management of the assets of the scheme which are relevant assets are required to be taken by all, or a majority of, relevant members who are trustees of the scheme or by a person of a kind falling within paragraph (1)(b)(i) or (ii) acting alone or jointly with all, or a majority of, such relevant members; and for these purposes a person is a relevant member of a scheme if he is an employee or former employee by or in respect of whom contributions to the scheme are being or have been made and to or in respect of whom benefits are or may become payable under the scheme. (5) A scheme falls within this paragraph if— (a) it has no more than fifty members; (b) the contributions made by or in respect of each member of the scheme are used in the acquisition of a contract of insurance on the life of that member or in the acquisition of a contract to pay an annuity on that life; (c) the only decision of a kind described in paragraph (1)(b) which may be taken in relation to the scheme is the selection of such contracts; and (d) each member is given the opportunity to select the contract which the contributions made by or in respect of him will be used to acquire. (6) A decision falls within this paragraph if— (a) it is a decision by the trustees of an occupational pension scheme to buy, sell or subscribe for— (i) units in a collective investment scheme; (ii) shares or debentures (or warrants relating to such shares or debentures) issued by a body corporate having as its purpose the investment of its funds with the aim of spreading investment risk and giving its members the benefit of the results of the management of those funds by or on behalf of that body; or (iii) rights under (or rights to or interests in) any contract of insurance; (b) the decision is taken after advice has been obtained and considered from a person who falls within any of the cases in paragraph (7); (7) The cases are where the person is— (a) an authorised person who has permission to carry on activities of the kind specified by article 53 of the Regulated Activities Order in relation to the decision in question; (b) an exempt person in relation to such activities; (c) exempt from the general prohibition by virtue of section 327 of the Financial Services and Markets Act 2000; or (d) an overseas person. Notes Sub-paragraph (1)(b) amended by The Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) (Amendment) Order 2005, SI 2005 No 922, art 2. Sub-paragraph (2)(b) amended by The Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) (Amendment) Order 2005, SI 2005 No 922, art 2. Sub-paragraph (3) definition of ‘‘occupational pension scheme’’ amended by The Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) (Amendment) Order 2005, SI 2005 No 922, art 2 and again by The Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) (Amendment) Order 2006, SI 2006 No 1969, art 9.

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Sub-paragraph (4)(d), amended by The Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) (Amendment) Order 2005, SI 2005 No 922, art 2. Sub-paragraph 6(a) amended by The Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) (Amendment) Order 2005, SI 2005 No 922, art 2. Sub-paragraph 6(b) amended by The Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) (Amendment) Order 2005, SI 2005 No 922, art 2. Sub-paragraph 6(c) repealed by The Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) (Amendment) Order 2005, SI 2005 No 922, art 2. Sub-paragraph 6(d) repealed by The Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) (Amendment) Order 2005, SI 2005 No 922, art 2. Sub-paragraph (7) amended by The Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) (Amendment) Order 2005, SI 2005 No 922, art 2; the word ‘‘cases’’ refers to sub-paragraph (6)(b).

1.36 THE FINANCIAL SERVICES AND MARKETS ACT 2000 (EXEMPTION) ORDER 2001 (SI 2001 No 1201) Whereas this Order is the first Order to be made, or to contain provisions made, under section 38 of the Financial Services and Markets Act 2000; And whereas a draft of this Order has been approved by a resolution of each House of Parliament pursuant to section 429(3) and (5) of that Act; Now, therefore, the Treasury, in exercise of the powers conferred on them by sections 38 and 428(3) of that Act, hereby make the following Order:

Citation and commencement 1. This Order may be cited as the Financial Services and Markets Act 2000 (Exemption) Order 2001 and comes into force on the day on which section 19 of the Act comes into force. Interpretation 2. In this Order— ‘‘the Act’’ means the Financial Services and Markets Act 2000; ‘‘charity’’— (a) in relation to Scotland, means a body entered in the Scottish Charity Register; and (b) otherwise, has the meaning given by section 96(1) of the Charities Act 1993 or by section 35 of the Charities Act (Northern Ireland) 1964; ‘‘credit institution’’ has the meaning given by the Regulated Activities Order; ‘‘deposit’’ has the meaning given by the Regulated Activities Order; ‘‘industrial and provident society’’ has the meaning given by section 417(1) of the Act but does not include a credit union within the meaning of the Credit Unions Act 1979 or the Credit Unions (Northern Ireland) Order 1985; ‘‘investment firm’’ has the meaning given by the Regulated Activities Order; ‘‘local authority’’ means— (a) in England and Wales, a local authority within the meaning of the Local Government Act 1972, the Greater London Authority, the Common Council of the City of London or the Council of the Isles of Scilly; (b) in Scotland, a local authority within the meaning of the Local Government (Scotland) Act 1973; and (c) in Northern Ireland, a district council within the meaning of the Local Government Act (Northern Ireland) 1972; ‘‘non-qualifying contract of insurance’’ means a contract of insurance (within the meaning of the Regulated Activities Order) which is not a qualifying contract of insurance (within the meaning of that Order);

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‘‘the Regulated Activities Order’’ means the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. Notes Definition of ‘‘charity’’ paragraph (a) modified by The Charities and Trustee Investment (Scotland) Act 2005 (Consequential Provisions and Modifications) Order 2006, SI 2006 No 242 (S.2), art 11. Definition of ‘‘credit institution’’ inserted by The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2007, SI 2007 No 125, art 3; entry into force on 1 November 2007. Definition of ‘‘investment firm’’ inserted by The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2007, SI 2007 No 125, art 3; entry into force on 1 November 2007. Definition of ‘‘non-qualifying contract of insurance’’ inserted by The Financial Services and Markets Act 2000 (Exemption) (Amendment) (No 2) Order 2003, SI 2003 No 1675, art 2.

Persons exempt in respect of any regulated activity other than insurance business 3. Each of the persons listed in Part I of the Schedule is exempt from the general prohibition in respect of any regulated activity other than an activity of the kind specified by article 10 of the Regulated Activities Order (effecting and carrying out contracts of insurance). Persons exempt in respect of accepting deposits 4. Subject to the limitations, if any, expressed in relation to him, each of the persons listed in Part II of the Schedule is exempt from the general prohibition in respect of any regulated activity of the kind specified by article 5 of the Regulated Activities Order (accepting deposits). Persons exempt in respect of particular regulated activities 5.—(1) Subject to the limitation, if any, expressed in relation to him, each of the persons listed in Part III of the Schedule is exempt from the general prohibition in respect of any regulated activity of the kind specified by any of the following provisions of the Regulated Activities Order, or article 64 of that Order (agreeing to carry on specified kinds of activity) so far as relevant to any such activity— (a) article 14 (dealing in investments as principal); (b) article 21 (dealing in investments as agent); (c) article 25 (arranging deals in investments); (ca) article 25D (operating a multilateral trading facility); (d) article 37 (managing investments); (da) article 39A (assisting in the administration and performance of a contract of insurance); (e) article 40 (safeguarding and administering investments); (f) article 45 (sending dematerialised instructions); (g) article 51 (establishing etc. a collective investment scheme); (h) article 52 (establishing etc. a pension scheme); (i) article 53 (advising on investments). (2) Subject to the limitation, if any, expressed in relation to him, each of the persons listed in Part IV of the Schedule is exempt from the general prohibition in respect of any regulated activity of the kind referred to in relation to him, or an activity of the kind specified by article 64 of the Regulated Activities Order so far as relevant to any such activity. Notes Art 5(1)(da) was inserted by The Financial Services and Markets Act 2000 (Exemption) (Amendment) (No 2) Order 2001, SI 2003 No 1675, art 3. Sub-paragraph (1)(ca) inserted by The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2007, SI 2007 No 125, art 4; entry into force on 1 November 2007. Sub-paragraph (1)(h) the word ‘‘stakeholder’’ was deleted by The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2006, SI 2006 No 1969, art 10.

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Transitional exemption for credit unions 6. [obsolete—contained an exemption for credit unions, valid until 1st July 2002.] Notes Art 6 had been amended by The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2001, SI 2001 No 3623, art 3.

SCHEDULE Articles 3 to 5 PA RT I

P E R S O N S E X E M P T I N R E S P E C T O F A N Y R E G U L AT E D A C T I V I T Y O T H E R T H A N INSURANCE BUSINESS

1. The Bank of England. 2. The central bank of an EEA State other than the United Kingdom. 3. The European Central Bank. 4. The European Community. 5. The European Atomic Energy Community. 6. The European Coal and Steel Community. 7. The European Investment Bank. 8. The International Bank for Reconstruction and Development. 9. The International Finance Corporation. 10. The International Monetary Fund. 11. The African Development Bank. 12. The Asian Development Bank. 13. The Caribbean Development Bank. 14. The Inter-American Development Bank. 15. The European Bank for Reconstruction and Development. 15A. Bank for International Settlements. Notes Paragraph 15A inserted by The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2003, SI 2003 No 47. PA RT I I

PERSONS EXEMPT IN RESPECT OF ACCEPTING DEPOSITS

16. A municipal bank, that is to say a company which was, immediately before the coming into force of this Order, exempted from the prohibition in section 3 of the Banking Act 1987 by virtue of section 4(1) of, and paragraph 4 of Schedule 2 to, that Act. 17.—(1) Keesler Federal Credit Union, in so far as it accepts deposits from members, or dependants of members, of a visiting force of the United States of America, or from members, or dependants of members, of a civilian component of such a force. (2) In sub-paragraph (1), ‘‘member’’, ‘‘dependent’’ and ‘‘visiting force’’ have the meanings given by section 12 of the Visiting Forces Act 1952 and ‘‘member of a civilian component’’ has the meaning given by section 10 of that Act. 18. A body of persons certified as a school bank by the National Savings Bank or by an authorised person who has permission to accept deposits. 19. A local authority. 20.—(1) Any body which by virtue of any enactment has power to issue a precept to a local authority in England or Wales or a requisition to a local authority in Scotland, or to the expenses of which, by virtue of any enactment, a local authority in the United Kingdom is or can be required to contribute. (2) In sub-paragraph (1), ‘‘enactment’’ includes an enactment comprised in, or in an instrument made under, an Act of the Scottish Parliament. 21. The Council of Europe Development Bank.

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Notes Paragraph 21 amended by The Financial Services and Markets Act 2000 (Financial Promotion and Miscellaneous Amendments) Order 2002, SI 2002 No 1310, 4(2).

22. A charity, in so far as it accepts deposits— (a) from another charity; or (b) in respect of which no interest or premium is payable. 23. The National Children’s Charities Fund in so far as— (a) it accepts deposits in respect of which no interest or premium is payable; and (b) the total value of the deposits made by any one person does not exceed £10,000. 24. An industrial and provident society, in so far as it accepts deposits in the form of withdrawable share capital. 24A. A credit union, within the meaning of the Credit Unions (Northern Ireland) Order 1985. Notes Paragraph 24A inserted by The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2001, SI 2001 No 3623, art 4.

25.—(1) The Student Loans Company Limited, in so far as it accepts deposits from the Secretary of State or the Scottish Ministers in connection with, or for the purposes of, enabling eligible students to receive loans. (2) In sub-paragraph (1), ‘‘eligible student’’ means— (a) any person who is an eligible student pursuant to regulations made under Part II of the Teaching and Higher Education Act 1998; (b) any person to whom, or in respect of whom, loans may be paid under section 73(f) of the Education (Scotland) Act 1980; (c) any person who is an eligible student pursuant to regulations made under article 3 of the Education (Student Support) (Northern Ireland) Order 1998; or (d) any person who is in receipt of or who is eligible to receive a loan of the kind mentioned in article 3(1) of the Teaching and Higher Education Act 1998 (Commencement No 2 and Transitional Provisions) Order 1998 or article 3(1) of the Education (Student Support) (Northern Ireland) Order 1998 (Commencement and Transitional Provisions) Order (Northern Ireland) 1998. PA RT I I I

P E R S O N S E X E M P T I N R E S P E C T O F A N Y R E G U L AT E D A C T I V I T Y M E N T I O N E D I N A RT I C L E 5 ( 1 )

26. The National Debt Commissioners. 27. Partnerships UK. Notes Paragraph 27 amended by The Financial Services and Markets Act 2000 (Exemption) (Amendment) (No 2) Order 2003, 2003 No 1675, art 2.

28. 29. 30. 31.

The International Development Association. The English Tourist Board. The Wales Tourist Board. Visit Scotland.

Notes Paragraph 31 amended by The Tourist Boards (Scotland) Act 2006 (Consequential Modifications) Order 2007, SI 2007 No 1103, Part II of the Schedule, art 6.

32. The Northern Ireland Tourist Board. 33. Scottish Enterprise. 34. The Multilateral Investment Guarantee Agency. 34A. The Board of the Pension Protection Fund.

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Notes Paragraph 34A inserted by The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2005, 2005 No 592, art 2.

35. A person acting as an official receiver within the meaning of section 399 of the Insolvency Act 1986 or article 2 of the Insolvency (Northern Ireland) Order 1989. 36.—(1) A person who provides the trading facilities which constitute a regulated market, in so far as he carries on a regulated activity in connection with, or for the purposes of, the provision of those trading facilities. (2) In sub-paragraph (1), ‘‘regulated market’’ means a market which— (a) appears on the list drawn up by an EEA State other than the United Kingdom pursuant to Article 16 of the investment services directive; and (b) operates without any requirement that a person dealing on the market should have a physical presence in the EEA State from which the trading facilities are provided or on any trading floor that the market may have. Notes Paragraph 36 revoked by The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2007, SI 2007 No 125, art 5, which enters into force on 1 November 2007.

37.—(1) An Operator, in so far he carries on— (a) any regulated activity for the purposes of the performance of his functions as an Operator under the Uncertificated Securities Regulations 1995; or (b) any other regulated activity for the purposes of operating a computer-based system and procedures which(i) enable title to investments to be evidenced and transferred without a written instrument; or (ii) facilitate matters supplementary or incidental to those specified in sub-paragraph (i), other than a regulated activity in respect of which a recognised clearing house is exempt from the general prohibition by virtue of section 285(3) of the Act. (2) In sub-paragraph (1), ‘‘Operator’’ means a person approved as such by the Treasury under the Uncertificated Securities Regulations 1995. Notes Sub-paragraph (1) was revised by The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2001, SI 2001 No 3623, art 5.

38. A person acting as a judicial factor. 39. A person acting as an insolvency practitioner within the meaning of section 388 of the Insolvency Act 1986 or article 3 of the Insolvency (Northern Ireland) Order 1989. Notes Paragraph 39 was amended by The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2001, SI 2001 No 3623, art 6.

PA RT I V

P E R S O N S E X E M P T I N R E S P E C T O F PA RT I C U L A R R E G U L AT E D A C T I V I T I E S

Enterprise schemes 40.—(1) Any body corporate which has as its principal object (or one of its principal objects)— (a) the promotion or encouragement of industrial or commercial activity or enterprise in the United Kingdom or in any particular area of it; or (b) the dissemination of information concerning persons engaged in such activity or enterprise or requiring capital to become so engaged;

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is exempt from the general prohibition in respect of any regulated activity of the kind specified by article 25 of the Regulated Activities Order (arranging deals in investments) so long as it does not carry on that activity for, or with the prospect of, direct or indirect pecuniary gain. (2) For the purposes of this paragraph, such sums as may reasonably be regarded as necessary to meet the costs of carrying on the activity mentioned in sub-paragraph (1) do not constitute a pecuniary gain. (3) This paragraph does not apply where an investment firm or credit institution— (a) provides or performs investment services and activities on a professional basis, and (b) in doing so, but for the operation of this paragraph, it would be treated as carrying on an activity of a kind specified by Part 2 of the Regulated Activities Order. Notes Sub-paragraph (3) inserted by The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2007, SI 2007 No 125, art 5, which enters into force on 1 November 2007.

Employee share schemes in electricity industry shares 41.—(1) Each of the persons to whom this paragraph applies is exempt from the general prohibition in respect of any regulated activity of the kind specified by article 14, 21 or 25 of the Regulated Activities Order (dealing in investments as principal or agent or arranging deals in investments) which he carries on for the purpose of— (a) enabling or facilitating transactions in electricity industry shares or debentures between or for the benefit of any qualifying person; or (b) the holding of electricity industry shares or debentures by or for the benefit of any qualifying person. (2) This paragraph applies to— (a) The National Grid Holding plc; (b) Electricity Association Limited; (c) any body corporate in the same group as the person mentioned in sub-paragraph (a) or (b); (d) any company listed in Schedule 1 to the Electricity Act 1989 (Nominated Companies) (England and Wales) Order 1990; and (e) a person holding shares in or debentures of a body corporate as trustee in pursuance of arrangements made for either of the purposes mentioned in sub-paragraph (1) by the Secretary of State, by any of the bodies mentioned in sub-paragraphs (a) to (c) or by an electricity successor company or by some or all of them. (3) In this paragraph— (a) ‘‘electricity industry shares or debentures’’ means— (i) any investment of the kind specified by article 76 or 77 of the Regulated Activities Order (shares or instruments creating or acknowledging indebtedness) in or of an electricity successor company; (ii) any investment of the kind specified by article 79 or 80 of that Order (instruments giving entitlement to investments and certificates representing certain securities), so far as relevant to the investments mentioned in sub-paragraph (i); and (iii) any investment of the kind specified by article 89 of that Order (rights to or interests in investments) so far as relevant to the investments mentioned in subparagraphs (i) and (ii); (b) ‘‘qualifying person’’ means— (i) the bona fide employees or former employees of The National Grid Holding plc, Electricity Association Limited or any other body corporate in the same group as either of them; and (ii) the wives, husbands, widows, widowers, civil partners, surviving civil partners, or children (including, in Northern Ireland, adopted children) or step-children under the age of eighteen of such employees or former employees; (c) references to an electricity successor company include any body corporate that is in the same group and ‘‘electricity successor company’’ means a body corporate which is a successor company for the purposes of Part II of the Electricity Act 1989;

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(d) ‘‘former employees’’ of a person (‘‘the employer’’) include any person who has never been employed by the employer so long as he occupied a position in relation to some other person of such a kind that it may reasonably be assumed that he would have been a former employee of the employer had the reorganisation of the electricity industry under Part II of the Electricity Act 1989 been affected before he ceased to occupy the relevant position. Notes Sub-paragraph (3)(b)(ii) the words ‘‘civil partners, surviving civil partners,’’ inserted by The Civil Partnership Act 2004 (Amendments to Subordinate Legislation) Order 2005, SI 2005 No 2114, Schedule 16, Part I, art 4. See also Civil Partnerships Act 2004 and The Civil Partnership Act 2004 (Relationships Arising Through Civil Partnership) Order 2005, SI 2005 No 3137, art 108 in the Schedule.

Gas industry 42.—(1) Transco plc is exempt from the general prohibition in respect of any regulated activity of the kind specified by article 14, 21, 25 or 25D of the Regulated Activities Order (dealing in investments as principal or agent or arranging deals in investments) which it carries on— (a) in its capacity as a gas transporter under the Transco Licence; and (b) for the purposes of enabling or facilitating gas shippers to buy or sell an investment of the kind specified by article 84 or 85 of the Regulated Activities Order (futures or contracts for differences etc.). (2) ENMO Ltd. is exempt from the general prohibition in respect of any regulated activity of the kind specified by article 14, 21, 25 or 25D of the Regulated Activities Order (dealing in investments as principal or agent or arranging deals in investments) which it carries on— (a) in its capacity as the operator of the balancing market; and (b) for the purpose of enabling or facilitating Transco plc and relevant gas shippers, for the purpose of participating in the balancing market, to buy or sell investments of the kind specified by article 84 or 85 of that Order (futures or contracts for differences etc.). (3) Transco plc and relevant gas shippers are exempt from the general prohibition in respect of any regulated activity of the kind specified by article 14 or 21 of the Regulated Activities Order (dealing in investments as principal or agent) in so far as that activity relates to an investment of the kind specified by article 84 or 85 of that Order (futures or contracts for differences etc.) and is carried on for the purpose of participating in the balancing market. (4) In this paragraph— (a) ‘‘the balancing market’’ means the market to regulate the delivery and off-take of gas in Transco plc’s pipeline system for the purpose of balancing the volume of gas in that system; (b) ‘‘gas shipper’’ has the same meaning as in Part I of the Gas Act 1986; (c) ‘‘relevant gas shippers’’ means gas shippers who have entered into a subscription agreement with ENMO Ltd. for the purpose of participating in the balancing market; (d) ‘‘Transco Licence’’ means the licence treated as granted to Transco plc as a gas transporter under section 7 of the Gas Act 1986; (e) the reference to enabling or facilitating includes acting pursuant to rules governing the operation of the balancing market which apply in the event of one of the participants appearing to be unable, or likely to become unable, to meet his obligations in respect of one or more contracts entered into through the balancing market. Notes Sub-paragraph (1) amended by The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2007, SI 2007 No 125, art 6, which enters into force on 1 November 2007. Sub-paragraph (2) amended by The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2007, SI 2007 No 125, art 6, which enters into force on 1 November 2007.

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Trade unions and employers’ associations 43.—(1) A trade union or employers’ association is exempt from the general prohibition in respect of any regulated activity of the kind specified by article 10 of the Regulated Activities Order (effecting and carrying out contracts of insurance) which it carries on in order to provide provident benefits or strike benefits for its members. (2) In sub-paragraph (1), ‘‘trade union’’ and ‘‘employers’ association’’ have the meanings given by section 1 and section 122(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 or, in Northern Ireland, the meanings given by article 3(1) and article 4(1) of the Industrial Relations (Northern Ireland) Order 1992. Charities 44.—(1) A charity is exempt from the general prohibition in respect of any regulated activity of the kind specified by article 51 of the Regulated Activities Order (establishing etc. a collective investment scheme) which it carries on in relation to a fund established under— (a) section 22A of the Charities Act 1960; (b) section 25 of the Charities Act 1993; or (c) section 25 of the Charities Act (Northern Ireland) 1964. (2) A charity is exempt from the general prohibition in respect of any regulated activity of the kind specified by article 51 of the Regulated Activities Order (establishing etc. a collective investment scheme) which it carries on in relation to a pooling scheme fund established under— (a) section 22 of the Charities Act 1960; or (b) section 24 of the Charities Act 1993. (3) In sub-paragraph (2), ‘‘pooling scheme fund’’ means a fund established by a common investment scheme the trusts of which provide that property is not to be transferred to the fund except by or on behalf of a charity, the charity trustees (within the meaning of section 97(1) of the Charities Act 1993) of which are the trustees appointed to manage the fund. Schemes established under the Trustee Investments Act 1961 45. A person acting in his capacity as manager or operator of a fund established under section 11 of the Trustee Investments Act 1961 is exempt from the general prohibition in respect of any regulated activity of the kind specified by article 51 of the Regulated Activities Order (establishing etc. a collective investment scheme) which he carries on in relation to that fund. Former members of Lloyd’s 46. Any person who ceased to be an underwriting member (within the meaning of Lloyd’s Act 1982) of Lloyd’s before 24th December 1996 is exempt from the general prohibition in respect of any regulated activity of the kind specified by article 10(2) of the Regulated Activities Order (carrying out contracts of insurance) which relates to contracts of insurance that he has underwritten at Lloyd’s. Local authorities 47. A local authority is exempt from the general prohibition in respect of any regulated activity of the kind specified by— (a) article 21, 25(1) or (2), 39A or 53 of the Regulated Activities Order (dealing in investments as agent, arranging deals in investments, assisting in the administration and performance of a contract of insurance or advising on investments) which relates to a non-qualifying contract of insurance; or (b) article 25A, 53A or 61 of that Order (arranging, advising on, entering into or administering a regulated mortgage contract) ;

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(c) article 25B, 53B or 63B of that Order (arranging, advising on, entering into or administering a regulated home reversion plan); or (d) article 25C, 53C or 63F of that Order (arranging, advising on, entering into or administering a regulated home purchase plan). Notes Paragraph 47 revised by The Financial Services and Markets Act 2000 (Exemption) (Amendment) (No 2) Order 2003, 2003 No 1675, art 2. Sub-paragraphs (c) and (d) inserted by The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No 2) Order 2006, SI 2006 No 2383, art 30.

Social housing 48.—(1) A relevant housing body is exempt from the general prohibition in respect of any regulated activity of the kind specified by— (a) article 21, 25(1) or (2), 39A or 53 of the Regulated Activities Order (dealing in investments as agent, arranging deals in investments, assisting in the administration and performance of a contract of insurance or advising on investments) which relates to a non-qualifying contract of insurance; or (b) article 25A, 53A or 61 of that Order (arranging, advising on, entering into or administering a regulated mortgage contract); (c) article 25B, 53B or 63B of that Order (arranging, advising on, entering into or administering a regulated home reversion plan); or (d) article 25C, 53C or 63F of that Order (arranging, advising on, entering into or administering a regulated home purchase plan). (2) In this paragraph, ‘‘relevant housing body’’ means any of the following— (a) a registered social landlord within the meaning of Part I of the Housing Act 1996; (b) a registered social landlord within the meaning of the Housing (Scotland) Act 2001; (c) the Housing Corporation; (d) Scottish Homes; (e) the body established under article 9 of the Housing (Northern Ireland) Order 1981 known as the Northern Ireland Housing Executive; (f) Communities Scotland. Notes Paragraph 48 was revised by The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2001, SI 2003 No 1675, art 2. Sub-paragraphs (1)(c) and (d) inserted by The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No 2) Order 2006, SI 2006 No 2383, art 30. Sub-paragraph (2)(f) inserted by The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2005, SI 2005 No 592, art 2.

Electricity industry 49.—(1) NGC is exempt from the general prohibition in respect of any regulated activity of the kind specified by article 14, 21, 25, 25D or 53 of the Regulated Activities Order (dealing in investments as principal or agent, arranging deals in investments, operating a multilateral trading facility or advising on investments) which it carries on in the course of— (a) its participation in the Balancing and Settlement Arrangements as operator of the electricity transmission system in Great Britain under the Transmission Licence; or (b) the acquisition by it of Balancing Services in accordance with the Electricity Act 1989 and the Transmission Licence. (2) ELEXON Clear Limited is exempt from the general prohibition in respect of any regulated activity of the kind specified by article 14, 21, 25 or 25D of that Order which it carries on in the course of its participation in the Balancing and Settlement Arrangements as clearer for the purposes of (among other things) receiving from and paying to BSC Parties trading and reconciliation charges arising under the Balancing and Settlement Arrangements.

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(3) Each BSC Party is exempt from the general prohibition in respect of any regulated activity of the kind specified by article 14, 21, 25, 25D or 53 of that Order which it carries on in the course of— (a) its participation in the Balancing and Settlement Arrangements; or (b) the provision by it (or, in the case of an activity of the kind specified by article 21 of that Order, its principal) of Balancing Services to NGC. (4) ELEXON Limited is exempt from the general prohibition in respect of any regulated activity of the kind specified by article 25, or 25D of that Order which it carries on in the course of its participation in the Balancing and Settlement Arrangements as administrator. (5) Each BSC Agent and each Volume Notification Agent is exempt from the general prohibition in respect of any regulated activity of the kind specified by article 25, or 25D of that Order which it carries on in that capacity. (6) [deleted] (7) In this paragraph— ‘‘Ancillary Services’’ means services which generators and suppliers of electricity and those making transfers of electricity across an Interconnector are required (as a condition of their connection to the transmission system in Great Britain), or have agreed, to make available to NGC for the purpose of securing the stability of the electricity transmission or any distribution system in Great Britain or any system linked to it by an Interconnector; ‘‘Balancing and Settlement Arrangements’’ means— (a) the Balancing Mechanism; and (b) arrangements— (i) for the determination and allocation to BSC Parties of the quantities of electricity that have been delivered to and taken off the electricity transmission system and any distribution system in Great Britain; and (ii) which set, and provide for the determination and financial settlement of, BSC Parties’ obligations arising by reference to the quantities referred to in subparagraph (i), including the difference between such quantities (after taking account of accepted bids and offers in the Balancing Mechanism) and the quantities of electricity contracted for sale and purchase between BSC Parties; ‘‘Balancing Mechanism’’ means the arrangements pursuant to which BSC Parties may make, and NGC may accept, offers or bids to increase or decrease the quantities of electricity to be delviered to or taken off the electricity transmission system or any distribution system in Great Britain at any time or during any period so as to assist NGC in operating and balancing the electricity transmission system, and arrangements for the settlement of financial obligations arising from the acceptance of such offers and bids; ‘‘Balancing Services’’ means— (a) offers and bids made in the Balancing Mechanism; (b) Ancillary Services; and (c) other services available to NGC which assist it in operating the electricity transmission system in accordance with the Electricity Act 1989 and the Transmission Licence; ‘‘BSC Agents’’ means the persons for the time being engaged by or on behalf of ELEXON Limited for the purpose of providing services to all BSC Parties, NGC, ELEXON Limited and ELEXON Clear Limited in connection with the operation of the Balancing and Settlement Arrangements; ‘‘BSC Framework Agreement’’ means the agreement of that title in the form approved by the Secretary of State for the purpose of conditions of the Transmission Licence and which is dated 14 August 2000; and ‘‘conditions’’ for the purposes of this definition means conditions determined by the Secretary of State under powers granted by section 137(1) of the Energy Act 2004. and incorporated into existing electricity transmission licences by a scheme made by the Secretary of State pursuant to section 138 of, and Schedule 17 to, that Act; ‘‘BSC Parties’’ means those persons (other than NGC, ELEXON Limited and ELEXON Clear Limited) who have signed or acceded to (in accordance with the terms of the

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BSC Framework Agreement), and not withdrawn from, the BSC Framework Agreement; ‘‘Interconnector’’ means the electric lines and electrical plant and meters used solely for the transfer of electricity to or from the electricity transmission system in Great Britain into or out of Great Britain; ‘‘NGC’’ means National Grid Company plc; ‘‘the Transmission Licence’’ means the licence to participate in the transmission of electricity in Great Britain granted, or treated as granted, to NGC under section 6(1)(b) of the Electricity Act 1989; and ‘‘Volume Notification Agents’’ means the persons for the time being appointed and authorised under and in accordance with the Balancing and Settlement Arrangements on behalf of BSC Parties to notify to the BSC Agent designated for that purpose pursuant to the Balancing and Settlement Arrangements quantities of electricity contracted for the sale and purchase between those BSC Parties to be taken into account for the purposes of the Balancing and Settlement Arrangements. Notes Paragraph 49 inserted by The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2001, SI 2001 No 3623, art 8. Amended to refer to Great Britain instead of England and Wales by The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2005, SI 2005 No 592, art 3. Sub-paragraphs (1), (2), (3), (4) and (5) amended by The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2007, SI 2007 No 125, art 6, which enters into force on 1 November 2007. Sub-paragraph (6) deleted by The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2005, SI 2005 No 592, art 3. Definitions of ‘‘BSC Framework Agreement’’, ‘‘Interconnector’’, ‘‘NGC’’ and ‘‘Transmission Licence’’ revised by The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2005, SI 2005 No 592, art 3 which also omitted the definition of ‘‘Pooling and Settlement Agreement’’.

1.37 THE FINANCIAL SERVICES AND MARKETS ACT 2000 (VARIATION OF THRESHOLD CONDITIONS) ORDER 2001 (SI 2001 No 2507) Citation, commencement and interpretation 1.—(1) This Order may be cited as the Financial Services and Markets Act 2000 (Variation of Threshold Conditions) Order 2001 and comes into force on the day on which paragraphs 1 to 7 of Schedule 6 come into force. (2) In this Order— ‘‘section 41’’ and ‘‘Schedule 6’’ mean (respectively) section 41 of, and Schedule 6 to, the Financial Services and Markets Act 2000; ‘‘supervisory authority’’ means an authority responsible for supervising persons carrying on insurance business; ‘‘Swiss general insurance company’’ means a person— (a) whose head office is in Switzerland; (b) who is authorised by the supervisory authority in Switzerland as mentioned in Article 7.1 of the Agreement between the European Economic Community and the Swiss Confederation on direct insurance other than life insurance, signed at Luxembourg on 10 October 1989; (c) who is seeking to carry on, or is carrying on, from a branch in the United Kingdom, a regulated activity consisting of the effecting or carrying out of contracts of insurance of a kind which is subject to that Agreement. Notes Sub-paragraph (2)(c) the agreement referred to is annexed to Council Decision 91/370/EEC, OJ No L205, 27.07.1991, p 2.

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Limited liability partnerships 2. [omitted] Notes Art 2 amends Schedule 6 of the Financial Services and Markets Act 2000, paragraph 1(1) and is consequently not reproduced here.

Non-EEA insurers 3.—(1) If paragraph 8 of Schedule 6 (additional conditions applying to non-EEA insurers) applies to the person concerned, it must, for the purposes of section 41 and Schedule 6, satisfy the following additional conditions— (a) it must have a representative who is resident in the United Kingdom and who has authority to bind it in its relations with third parties and to represent it in its relations with the Authority and the courts in the United Kingdom; (b) subject to paragraph (2), if the person concerned is not a Swiss general insurance company— (i) it must be a body corporate entitled under the law of the place where its head office is situated to effect and carry out contracts of insurance; (ii) it must have in the United Kingdom assets of such value as may be specified; (iii) unless the regulated activity in question relates solely to reinsurance, it must have made a deposit (of money or securities, as may be specified) of such an amount and with such a person as may be specified, and on such terms and subject to such other provisions as may be specified. (2) Where the person concerned is seeking to carry on an activity relating to insurance business in one or more other EEA States (as well as in the United Kingdom), and the Authority and the supervisory authority in the other EEA State or States concerned so agree— (a) the reference in paragraph (1)(b)(ii) to the United Kingdom is to be read as a reference to the United Kingdom and the other EEA State or States concerned; and (b) the reference in paragraph (1)(b)(iii) to such a person as may be specified is to be read as a reference to such a person as may be agreed between the Authority and the other supervisory authority or authorities concerned. (3) The conditions set out in paragraphs 4 and 5 of Schedule 6 (adequate resources and suitability) are removed in relation to a Swiss general insurance company. (4) In this article, ‘‘specified’’ means specified in rules. Notes Paragraph (3) was amended by The Financial Services and Markets Act 2000 (Variation of Threshold Conditions) (Amendment) Order 2005 (SI 2005 No 680), art 2.

Swiss general insurance companies 4.—(1) A Swiss general insurance company must, for the purposes of section 41 and Schedule 6, satisfy the following additional conditions— (a) the value of the assets of the business carried on by it in the United Kingdom must not fall below the amount of the liabilities of that business, that value and amount being determined in such manner as may be specified; (b) such assets must be maintained in such places as may be specified and must be of such a nature as may be specified as being appropriate in relation to the currency in which the liabilities of the company are or may be required to be met; and (c) when applying to the Authority for permission to carry on a regulated activity it must submit to the Authority a statement from the supervisory authorities in Switzerland— (i) stating the classes of insurance business which the company is authorised to carry on in Switzerland, (ii) specifying the risks covered there,

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(iii) declaring that the company is constituted in Switzerland in a form permitted by Annex 3 of the Agreement signed on 10th October 1989 between the European Economic Community and the Swiss Confederation on direct insurance other than life assurance, (iv) confirming that the company limits its business activities to insurance and to operations directly arising therefrom to the exclusion of all other commercial business, and (v) declaring that the company has the required solvency margin or minimum guarantee fund. (2) In this article, ‘‘specified’’ means specified in rules. Notes Art 4 was inserted by The Financial Services and Markets Act 2000 (Variation of Threshold Conditions) (Amendment) Order 2005 (SI 2005 No 680), art 2.

1.38 THE FINANCIAL SERVICES AND MARKETS ACT 2000 (CONSULTATION WITH COMPETENT AUTHORITIES) REGULATIONS 2001 (SI 2001 No 2509) The Treasury, in exercise of the powers conferred on them by sections 183(2), 188(2), 417(1) and 428(3) of the Financial Services and Markets Act 2000, hereby make the following Regulations:

1. These Regulations may be cited as the Financial Services and Markets Act 2000 (Consultation with Competent Authorities) Regulations 2001 and come into force on the day on which section 19 of the Act comes into force. 2. In these Regulations— ‘‘the Act’’ means the Financial Services and Markets Act 2000; ‘‘EEA credit institution’’ means an EEA firm falling within paragraph 5(b) of Schedule 3 to the Act; ‘‘capital adequacy directive’’ means Council Directive 2006/49/EC of the European Parliament and of the Council of 14 June 2006 relating to the capital adequacy of investment firms and credit institutions; ‘‘EEA consolidated supervisor’’ means the competent authority responsible, under Articles 71 or 72 of the banking consolidation directive or under Articles 71 or 72 of the banking consolidation directive as applied by Articles 2(2) and 37(1) of the capital adequacy directive, for the exercise of supervision of— (a) an EEA parent credit institution; (b) an EEA parent investment firm; or (c) credit institutions or investment firms controlled by an EEA parent financial holding company where the parent is authorised in a different EEA State to at least one of the subsidiary undertakings; ‘‘EEA insurance undertaking’’ means an EEA firm falling within paragraph 5(d) of Schedule 3 to the Act; ‘‘EEA investment firm’’ means an EEA firm falling within paragraph 5(a) of Schedule 3 to the Act; ‘‘EEA management company’’ means an EEA firm falling within paragraph 5(f) of Schedule 3 to the Act; ‘‘investment firm’’, except in the term ‘‘EEA investment firm’’, has the meaning given by article 4(5) of the Regulated Activities Order; ‘‘EEA parent credit institution’’ means a parent credit institution in an EEA State which is not a subsidiary undertaking of another credit institution or investment firm authorised in any EEA State, or of a financial holding company set up in any EEA State; ‘‘EEA parent investment firm’’ means a parent investment firm in an EEA State which is not a subsidiary undertaking of another credit institution or investment firm

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authorised in any EEA State or of a financial holding company set up in any EEA State; ‘‘EEA parent financial holding company’’ means a parent financial holding company in an EEA State which is not a subsidiary undertaking of a credit institution or investment firm authorised in any EEA State or of another financial holding company set up in any EEA State; ‘‘financial holding company’’ has the meaning given by Article 4(19) of the banking consolidation directive; ‘‘the Regulated Activities Order’’ means the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001; ‘‘relevant competent authority’’ means a competent authority which is not the EEA consolidated supervisor and which has authorised a subsidiary undertaking of an EEA parent credit institution, a subsidiary undertaking of an EEA parent investment firm or a subsidiary undertaking of an EEA parent financial holding company. ‘‘UK authorised person’’ has the meaning given by section 178(4) of the Act. Notes Definition of ‘‘EEA insurance undertaking’’ inserted by SI 2004 No 1862. Definition of ‘‘EEA management company’’ inserted by SI 2003 No 2066. Definitions of ‘‘capital adequacy directive’’, ‘‘EEA consolidated supervisor’’, ‘‘EEA parent credit institution’’, ‘‘EEA parent investment firm’’, ‘‘EEA parent financial holding company’’, ‘‘financial holding company’’, ‘‘relevant competent authority’’ inserted by SI 2006 No 3221, implementing the Directive 2006/48/EC of the European Parliament and of the Council relating to the taking up and pursuit of the business of credit institutions (the Banking Consolidation Directive) and Directive 2006/49/EC of the European Parliament and of the Council on the capital adequacy of investment firms and credit institutions (the Capital Adequacy Directive). The regulation originally contained a definition of ‘‘investment firm’’, deleted by SI 2006 No 3384.

3. Where paragraph (1), (2), (3) or (4) of regulation 5 applies, the requirement specified by regulation 6 is prescribed for the purposes of section 183(2) of the Act (and so must be complied with by the Authority before determining whether to approve of the change of control or to give a warning notice under section 183(3) or 185(3) of the Act). Notes References to paras (3) and (4) of reg 5 inserted by SI 2003 No 2066 and SI 2004 No 1862 respectively.

4. Where— (a) paragraph (1), (2), (3) or (4) of regulation 5 applies; and (b) the Authority proposes to give a notice of objection under 187(1) of the Act; the requirement specified by regulation 6 is prescribed for the purposes of section 188(2) of the Act (and so must be complied with by the Authority before it gives a warning notice under section 188(1) of the Act). Notes Paragraph (4)(a) reference to para (3) of reg 5 inserted by SI 2003 No 2066; reference to para (4) of reg 5 inserted by SI 2004 No 1862.

5.—(1) This paragraph applies where— (a) a person (‘‘the acquirer’’) proposes to acquire or has acquired control, an additional kind of control or an increase in a relevant kind of control over a UK authorised person in circumstances falling within section 178 (1) or (2) of the Act; (b) that UK authorised person is an investment firm; (c) the acquirer is any of the following— (i) an EEA investment firm; (ii) an EEA credit institution; (iii) an EEA insurance undertaking; or (iv) the parent undertaking of an EEA firm of a kind specified by paragraph (i), (ii) or (iii);

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(d) as a result of the acquisition or proposed acquisition, the acquirer is or would become a parent undertaking of the UK authorised person. (2) This paragraph applies where— (a) a person (‘‘the acquirer’’) proposes to acquire or has acquired control, an additional kind of control or an increase in a relevant kind of control over a UK authorised person in circumstances falling within section 178 (1) or (2) of the Act; (b) that UK authorised person has permission to accept deposits (within the meaning of the Regulated Activities Order), (c) the acquirer is any of the following— (i) an EEA investment firm; (ii) an EEA credit institution; (iii) an EEA insurance undertaking; or (iv) the parent undertaking of an EEA firm of a kind specified by paragraph (i), (ii) or (iii); (d) as a result of the acquisition or proposed acquisition, the acquirer is or would become a parent undertaking of the UK authorised person. (3) This paragraph applies where— (a) a person (‘‘the acquirer’’) proposes to acquire or has acquired control, an additional kind of control or an increase in a relevant kind of control over a UK authorised person in circumstances falling within section 178(1) or (2) of the Act; (b) that UK authorised person has permission to operate a collective investment scheme; (c) the acquirer is any of the following— (i) an EEA investment firm; (ii) an EEA credit institution; (iii) an EEA insurance undertaking; (iv) an EEA management company; or (v) the parent undertaking of an EEA firm of a kind specified by paragraph (i), (ii), (iii) or (iv); and (d) as a result of the acquisition or proposed acquisition, the acquirer is or would become a parent undertaking of the UK authorised person. (4) This paragraph applies where— (a) a person (‘‘the acquirer’’) proposes to acquire or has acquired control, an additional kind of control or an increase in a relevant kind of control over a UK authorised person in circumstances falling within section 178 (1) or (2) of the Act; (b) that UK authorised person has permission to effect or carry on contracts of insurance (within the meaning of the Regulated Activities Order); (c) the acquirer is any of the following— (i) an EEA investment firm; (ii) an EEA credit institution; (iii) an EEA insurance undertaking; or (iv) the parent undertaking of an EEA firm of a kind specified by paragraph (i), (ii) or (iii); and (d) as a result of the acquisition or proposed acquisition, the acquirer is or would become a parent undertaking of the UK authorised person. Notes Sub-paragraph (1)(c) substantially modified by SI 2004 No 1862, reg 13. Sub-paragraph (2)(c) substantially modified by SI 2004 No 1862, reg 13. Paragraph (3) first inserted by SI 2003 No 2066, reg 6. Sub-paragraph (3)(c) substantially modified by SI 2004 No 1862, reg 13. Paragraph (4) inserted by SI 2004 No 1862, reg 13.

6. The requirement specified by this regulation is that the Authority must, as the case may be, consult the home state regulator of any EEA firm that is mentioned in para (1)(c), (2)(c), (3)(c) or (4)(c) of regulation 5.

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Notes Regulation 6 substantially modified by SI 2004 No 1862; previously amended by SI 2003 No 2066, reg 6.

7.—(1) Where paragraph (3) applies, the requirement specified by paragraph (5) is prescribed for the purposes of section 183(2) of the Act and so must be complied with by the Authority before it determines whether to approve the change of control or give a warning notice under section 183(3) or 185 (3) of the Act. (2) Where paragraph (4) applies, the requirement specified by paragraph (5) is prescribed for the purposes of section 188(2) of the Act and so must be complied with by the Authority before it gives a warning notice under section 188(1) of the Act. (3) This paragraph applies where— (a) a person (‘‘the acquirer’’) proposes to acquire or has acquired control, an additional kind of control or an increase in a relevant kind of control over a UK authorised person in circumstances falling within section 178(1) or (2) of the Act; (b) that UK authorised person has an EEA right to carry on an activity in an EEA State other than the United Kingdom which derives from any of— (i) the insurance directives; (ii) the banking consolidation directive; (iii) the markets in financial instruments directive; or (iv) the UCITS directive; and (c) that UK authorised person is a member of a financial conglomerate (within the meaning of article 2(14) of Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 93/6/EEC, 93/22/EEC and Directives 98/78/EC and 2000/12/EC of the European Parliament and of the Council). (4) This paragraph applies where— (a) a circumstance has arisen in respect of which the Authority may give a decision notice to a UK authorised person under section 187 of the Act; (b) that UK authorised person has an EEA right to carry on activity in an EEA State other than the United Kingdom which derives from any of— (i) the insurance directives; (ii) the banking consolidation directive; (iii) the markets in financial instruments directive; or (iv) the UCITS directive; (c) that UK authorised person is a member of a financial conglomerate (within the meaning of article 2(14) of Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 93/6/EEC, 93/22/EEC and Directives 98/78/EC and 2000/12/EC of the European Parliament and of the Council). (5) The requirement specified by this paragraph is that the Authority must, where it considers that the action it proposes to take— (a) constitutes a major sanction or an exceptional measure; and (b) is of importance for the supervisory tasks of the home state regulator of any EEA firm that is a member of a financial conglomerate and is— (i) an EEA investment firm; (ii) an EEA credit institution; or (iii) an EEA insurance undertaking, consult that home state regulator. (6) But paragraph (5) does not apply where the Authority— (a) considers that there is an urgent need to act; (b) considers that such consultation may jeopardise the effectiveness of any action to be taken by it; or (c) has already consulted that home state regulator regarding that matter.

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(7) Where paragraph (5) does not apply by virtue of paragraph (6)(a) or (b), the Authority must inform the home state regulator in question as soon as is reasonably practicable. Notes Regulation 7 inserted by SI 2004 No 1862, reg 13. Sub-paragraph (3)(b)(iii) amended by SI 2007 No 126, reg 16 implementing Directive 2004/39/EC of the European Parliament and of the Council on markets in financial instruments (OJ No L145, 30.4.2004, p1) to refer to ‘‘markets in financial instruments directive’’ rather than ‘‘investment services directive’’. Sub-paragraph (4)(b)(iii) amended by SI 2007 No 126, reg 16 implementing Directive 2004/39/EC of the European Parliament and of the Council on markets in financial instruments (OJ No L145, 30.4.2004, p1) to refer to ‘markets in financial instruments directive’ rather than ‘investment services directive’.

8.—(1) Where paragraph (3) applies, the requirement specified by paragraph (5) is prescribed for the purposes of section 183(2) of the Act and so must be complied with by the Authority before it determines whether to approve the change of control or give a warning notice under section 183(3) or 185(3) of the Act. (2) Where paragraph (4) applies, the requirement specified by paragraph (5) is prescribed for the purposes of section 188(2) of the Act and so must be complied with by the Authority before it gives a warning notice under section 188(1) of the Act. (3) This paragraph applies where— (a) a person (‘‘the acquirer’’) proposes to acquire or has acquired control or an additional kind of control over a UK authorised person in circumstances falling within section 178(1) or (2) of the Act; (b) that UK authorised person is, or is controlled by, an EEA parent credit institution or an EEA parent investment firm or is controlled by an EEA parent financial holding company which is subject to supervision on a consolidated basis in accordance with the banking consolidation directive or with the banking consolidation directive as applied by Articles 2(2) and 37(1) of the capital adequacy directive. (4) This paragraph applies where— (a) a circumstance has arisen in respect of which the Authority may give a decision notice to a UK authorised person under section 187 of the Act; (b) that UK authorised person is, or is controlled by, an EEA parent credit institution or an EEA parent investment firm or is controlled by an EEA parent financial holding company which is subject to supervision on a consolidated basis in accordance with the banking consolidation directive or with the banking consolidation directive as applied by Articles 2(2) and 37(1) of the capital adequacy directive. (5) The requirement specified by this paragraph is that the Authority must consult— (a) the EEA consolidated supervisor where it considers that the action it proposes to take constitutes a major sanction or an exceptional measure; and (b) a relevant competent authority where it considers that the action it proposes to take constitutes a major sanction or an exceptional measure which is of importance for the supervisory tasks of that relevant competent authority. (6) Paragraphs (1) and (2) of this regulation do not apply where the Authority considers that— (a) there is an urgent need to act; or (b) such consultation may jeopardise the effectiveness of the actions referred to in paragraph (5), but in such a case the Authority must, without delay, inform the EEA consolidated supervisor and the relevant competent authorities referred to in paragraph (5)(b) of the action that it has taken. Notes Regulation 8 inserted by SI 2006 No 3221, implementing Directive 2006/48/EC of the European Parliament and of the Council relating to the taking up and pursuit of the business of credit institutions (the Banking Consolidation Directive) and Directive 2006/49/EC of the European Parliament and of the Council on the capital adequacy of investment firms and credit institutions (the Capital Adequacy Directive).

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1.39 THE FINANCIAL SERVICES AND MARKETS ACT 2000 (EEA PASSPORT RIGHTS) REGULATIONS 2001 (SI 2001 No 2511) The Treasury, in exercise of the powers conferred on them by paragraphs 13(1)(b)(iii), 14(1)(b), 17(a), (b) and (c), 18 and 22 of Schedule 3 to, and sections 417(1) and 426 to 428 of, the Financial Services and Markets Act 2000, hereby make the following Regulations:

PA RT I

GENERAL

Citation, commencement and interpretation 1.—(1) These Regulations may be cited as the Financial Services and Markets Act 2000 (EEA Passport Rights) Regulations 2001, and come into force on the day on which section 19 of the Act comes into force. (2) In these Regulations— ‘‘the 2BCD Regulations’’ means the Banking Coordination (Second Council Directive) Regulations 1992; ‘‘the Act’’ means the Financial Services and Markets Act 2000; ‘‘authorised agent’’ means, in relation to an EEA firm or UK firm, an agent or employee of the firm who has authority to bind the firm in its relations with third parties, and to represent the firm in its relations with the Authority or the host state regulator (as the case may be) and with the courts in the United Kingdom or the EEA State concerned (as the case may be); ‘‘claims representative’’, in relation to a UK firm and an EEA State, means a person who has been designated as the firm’s representative in that EEA State, and has authority— (a) to act on behalf of the firm and to represent, or to instruct others to represent, the firm in relation to any matters giving rise to claims made against policies issued by the firm, to the extent that they cover motor vehicles risks situated in the EEA State; (b) to pay sums in settlement of such claims (but not to settle such claims); and (c) to accept service on behalf of the firm of proceedings in respect of such claims; ‘‘commencement’’ means the beginning of the day on which section 19 of the Act comes into force; ‘‘contract of insurance’’, ‘‘contract of general insurance’’ and ‘‘contract of long-term insurance’’ have the same meaning as in the Regulated Activities Order; ‘‘credit institution’’ means an EEA firm falling within paragraph 5(b) of Schedule 3; ‘‘electronic money institution’’ means an electronic money institution as defined in Article 1 of directive 2000/46/EC of the European Parliament and of the Council of 18th September 2000 on the taking up, pursuit of and prudential supervision of the business of electronic money institutions; ‘‘EEA activities’’ means— (a) in relation to an EEA firm, activities which the firm is seeking to carry on in the United Kingdom in exercise of an EEA right; (b) in relation to a UK firm, activities which the firm is seeking to carry on in another EEA State in exercise of an EEA right; ‘‘financial institution’’ means an EEA firm falling within paragraph 5(c) of Schedule 3; ‘‘the Friendly Societies Act’’ means the Friendly Societies Act 1992; ‘‘health insurance risks’’, in relation to an EEA State, means risks of a kind mentioned in paragraph 2 of Schedule 1 to the Regulated Activities Order (sickness), where— (a) contracts of insurance covering those risks serve as a partial or complete alternative to the health cover provided by the statutory social security system in that EEA State; and

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(b) the law of that EEA State requires such contracts to be operated on a technical basis similar to life assurance in accordance with all the conditions listed in the first sub-paragraph of Article 54(2) of the third non-life insurance directive; ‘‘the Insurance Companies Act’’ means the Insurance Companies Act 1982; ‘‘insurance firm’’ means an EEA firm falling within paragraph 5(d) of Schedule 3; ‘‘insurance intermediary’’ means an EEA firm falling within paragraph 5(e) of Schedule 3; ‘‘investment firm’’ means an EEA firm falling within paragraph 5(a) of Schedule 3; ‘‘the ISD Regulations’’ means the Investment Services Regulations 1995; ‘‘management company’’ means an EEA firm falling within paragraph 5(f) of Schedule 3; ‘‘national bureau’’, in relation to an EEA State, means a professional organisation— (a) which has been constituted in that EEA State in accordance with Recommendation No 5 adopted on 25th January 1949 by the Road Transport Sub-committee of the Inland Transport Committee of the United Nations Economic Commission for Europe; and (b) which groups together undertakings which in that EEA State are authorised to conduct the business of motor vehicle liability insurance; ‘‘national guarantee fund’’, in relation to an EEA State, means a body— (a) which has been set up or authorised in that EEA State in accordance with Article 1(4) of Council Directive 84/5/EEC on the approximation of laws of the Member States relating to insurance against civil liability in respect of the use of motor vehicles; and (b) which provides compensation for damage to property or personal injuries caused by unidentified vehicles or vehicles for which the insurance obligation provided for in Article 1(1) of that Directive has not been satisfied; ‘‘the Regulated Activities Order’’ means the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001; ‘‘relevant motor vehicle risks’’ means risks of damage arising out of or in connection with the use of motor vehicles on land, including third party risks (but excluding carrier’s liability); ‘‘requisite details’’, in relation to a branch, means— (a) particulars of the programme of operations carried on, or to be carried on, from the branch, including a description of the particular EEA activities to be carried on, and of the structural organisation of the branch; (b) the address in the EEA State in which the branch is, or is to be, established from which information about the business may be obtained; and (c) the names of the managers of the business; ‘‘Schedule 3’’ means Schedule 3 to the Act; ‘‘tied agent’’ has the meaning given in Article 4.1.25 of the markets in financial instruments directive; ‘‘UK investment firm’’ means a UK firm— (a) which is an investment firm (within the meaning of section 424A of the Act), (b) whose EEA right derives from the markets in financial instruments directive. Notes Definition of ‘‘contract of insurance’’ inserted by SI 2002 No 765. Definition of ‘‘electronic money institution’’ inserted by SI 2002 No 765, reg 10. Definition of ‘‘insurance intermediary’’ inserted by SI 2003 No 1473, reg 8. Definition of ‘‘management company’’ inserted by SI 2003 No 2066. Definition of ‘‘tied agent’’ inserted by SI 2006 No 3385, reg 3. Definition of ‘‘UK investment firm’’ inserted by SI 2006 No 3385, reg 3; sub-paragraph (a) the words ‘‘(within the meaning of section 424A of the Act)’’ were inserted by SI 2007 No 763 and enter into force on 1 November 2007. The application of these Regulations to Gibraltar is laid out in SI 2001 No 3084, amended by SI 2005 No 1 and SI 2006 No 1805.

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1.40 THE FINANCIAL SERVICES AND MARKETS ACT 2000 (INSOLVENCY) (DEFINITION OF ‘‘INSURER’’) ORDER 2001 (SI 2001 No 2634) 1.—(1) This Order may be cited as the Financial Services and Markets Act 2000 (Insolvency) (Definition of ‘‘Insurer’’) Order 2001 and comes into force on the day on which section 19 of the Act comes into force. (2) In this Order, the ‘‘Regulated Activities Order’’ means the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. Notes Paragraph (2) refers to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, SI 2001 No 544 as amended.

2. In Part XXIV of the Act (insolvency), ‘‘insurer’’ means any person who is carrying on a regulated activity of the kind specified by article 10(1) or (2) of the Regulated Activities Order (effecting and carrying out contracts of insurance) but who is not— (a) exempt from the general prohibition in respect of that regulated activity; (b) a friendly society; or (c) a person who effects or carries out contracts of insurance all of which fall within paragraphs 14 to 18 of Part I of Schedule 1 to the Regulated Activities Order in the course of, or for the purposes of, a banking business. Notes Opening words modified by The Financial Services and Markets Act 2000 (Administration Orders Relating to Insurers) Order 2002, SI 2002 No 1242, article 2.

1.41 THE FINANCIAL SERVICES AND MARKETS ACT 2000 (TREATMENT OF ASSETS OF INSURERS ON WINDING UP) REGULATIONS 2001 (SI 2001 No 2968) General Note This SI was revoked by The Insurers (Reorganisation and Winding Up) Regulations 2003, SI 2003 No 1102, reg 51.

1.42 THE FINANCIAL SERVICES AND MARKETS ACT 2000 (EXEMPTION) (AMENDMENT) ORDER 2001 (SI 2001 No 3623) General Note This Order amends The Financial Services and Markets Act 2000 (Exemption) Order 2001, SI 2001 No 1201 and consequently is not reproduced separately here.

1.43 THE FINANCIAL SERVICES AND MARKETS ACT 2000 (CONTROL OF BUSINESS TRANSFERS) (REQUIREMENTS ON APPLICANTS) REGULATIONS 2001 (SI 2001 No 3625) Citation, commencement and interpretation 1.—(1) These Regulations may be cited as the Financial Services and Markets Act 2000 (Control of Business Transfers) (Requirements on Applicants) Regulations 2001 and come into force on 1st December 2001.

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(2) In these Regulations— ‘‘the Act’’ means the Financial Services and Markets Act 2000; ‘‘the parties’’ means the authorised person concerned and the transferee (within the meaning of section 105(2) or, as the case may be, section 106(2) of the Act); ‘‘the report’’ means the scheme report mentioned in section 109(1) of the Act; ‘‘State of the commitment’’ has the meaning given by paragraph 6(1) of Schedule 12 to the Act; ‘‘State in which the risk is situated’’ has the meaning given by paragraph 6(3) of Schedule 12 to the Act; ‘‘a summary of the report’’ means a summary of the report sufficient to indicate the opinion of the person making the report of the likely effects of the insurance business transfer scheme on the policyholders of the parties. Meaning of ‘‘commitment’’ 2. There is prescribed for the purposes of paragraph 6(2) of Schedule 12 to the Act any contract of insurance of a kind referred to in Article 2 of the life assurance consolidation directive. Notes Regulation 2 was amended by the Life Assurance Consolidation Directive (Consequential Amendments) Regulations 2004, SI 2004 No 3379, reg 20.

Transfer of an insurance business 3.—(1) An applicant under section 107 of the Act for an order sanctioning an insurance business transfer scheme (‘‘the scheme’’) must comply with the following requirements. (2) A notice stating that the application has been made must be— (a) published— (i) in the London, Edinburgh and Belfast Gazettes; (ii) in two national newspapers in the United Kingdom; and (iii) where, as regards any policy included in the proposed transfer, an EEA State other than the United Kingdom is the State of the commitment or the State in which the risk is situated, in two national newspapers in that EEA State; and (b) sent to every policyholder of the parties. (3) The notices mentioned in paragraph (2) must— (a) be approved by the Authority prior to publication (or, as the case may be, being sent); and (b) contain the address from which the documents mentioned in paragraph (4) may be obtained. (4) A copy of the report and a statement setting out the terms of the scheme and containing a summary of the report must be given free of charge to any person who requests them. (5) A copy of the application, the report and the statement mentioned in paragraph (4) must be given free of charge to the Authority. (6) In the case of any such scheme as is mentioned in section 105(5) of the Act, copies of the documents listed in paragraph 6(1) of Schedule 15B to the Companies Act 1985 or in paragraph 6(1) of Schedule 15B to the Companies (Northern Ireland) Order 1986 (application of provisions about compromises and arrangements to mergers and divisions of public companies) must be given to the Authority by the beginning of the period referred to in paragraph 3(e) of that Schedule. 4.—(1) Subject to paragraph (2), the court may not determine an application under section 107 for an order sanctioning an insurance business transfer scheme— (a) where the applicant has failed to comply with the requirements in regulation 3(2), (3) or (6); and (b) until a period of not less than twenty-one days has elapsed since the Authority was given the documents mentioned in regulation 3(5). (2) The requirements in regulation 3(2)(a)(ii) and (iii) and (b) may be waived by the court in such circumstances and subject to such conditions as the court considers appropriate.

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Transfer of a banking business 5.—(1) An applicant under section 107 of the Act for an order sanctioning a banking business transfer scheme (‘‘the scheme’’) must comply with the following requirements. (2) A notice stating that the application has been made must be published— (a) in the London, Edinburgh and Belfast Gazettes; and (b) in two national newspapers in the United Kingdom. (3) The notice mentioned in paragraph (2) must— (a) be approved by the Authority prior to its publication; and (b) contain the address from which the statement mentioned in paragraph (4) may be obtained. (4) A statement setting out the terms of the scheme must be given free of charge to any person who requests it. (5) Copies of the application and the statement mentioned in paragraph (4) must be given free of charge to the Authority. 6.—(1) Subject to paragraph (2), the court may not determine an application under section 107 for an order sanctioning a banking business transfer scheme— (a) where the applicant has failed to comply with the requirements in regulation 5(2) or (3); and (b) until a period of not less than twenty-one days has elapsed since the Authority was given the documents mentioned in regulation 5(5). (2) The requirement in regulation 5(2)(b) may be waived by the court in such circumstances and subject to such conditions as the court considers appropriate.

1.44 THE FINANCIAL SERVICES AND MARKETS ACT 2000 (CONTROL OF TRANSFERS OF BUSINESS DONE AT LLOYD’S) ORDER 2001 (SI 2001 No 3626) Citation and commencement 1. This Order may be cited as the Financial Services and Markets Act 2000 (Control of Transfers of Business Done at Lloyd’s) Order 2001 and comes into force on 1st December 2001. Interpretation 2. In this Order— ‘‘the Act’’ means the Financial Services and Markets Act 2000; ‘‘the Council’’ and ‘‘the Society’’ have the same meaning as in Lloyd’s Act 1982; ‘‘former underwriting member’’ has the meaning given by section 324(1) of the Act. 3. The following provisions, that is to say— (a) sections 104 and 107 to 114 of the Act; (b) any regulations made under section 108 of the Act; and (c) Part I of Schedule 12 to the Act; apply in relation to schemes for the transfer of the whole or any part of the business carried on by one or more members of the Society or former underwriting members (‘‘the members concerned’’) in the same way as they apply in relation to insurance business transfer schemes, but only if the conditions specified by article 4 are satisfied. 4. The conditions referred to in article 3 are— (a) that the scheme results in the business transferred being carried on from an establishment of the transferee in an EEA State; (b) that the Council of Lloyd’s has by resolution authorised one person to act, in connection with the transfer for the members concerned, as transferor; and (c) that a copy of the resolution has been given to the Authority. 5.—(1) The provisions which apply by virtue of paragraph (a) and (b) of article 3 do so as if—

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(a) any reference to the authorised person concerned were a reference to the members concerned; and (b) anything done in connection with the transfer by the person authorised in accordance with paragraph (a) of article 4 had been done by the members concerned for whom he acted. (2) In the application of Part I of Schedule 12 to the Act to the members concerned, the conditions in sub-paragraphs (2)(a), (3)(a) and (4)(a) of paragraph 1 of that Schedule are treated as satisfied.

1.45 THE INSURERS (WINDING UP) RULES 2001 (SI 2001 No 3635) Citation, commencement and revocation 1.—(1) These Rules may be cited as the Insurers (Winding Up) Rules 2001 and come into force on 1st December 2001. (2) The Insurance Companies (Winding Up) Rules 1985 are revoked. Notes Paragraph (2) revokes The Insurance Companies (Winding Up) Rules 1985, SI 1985 No 95.

Interpretation 2.—(1) In these Rules, unless the context otherwise requires‘‘the 1923 Act’’ means the Industrial Assurance Act 1923; ‘‘the 1985 Act’’ means the Companies Act 1985; ‘‘the 1986 Act’’ means the Insolvency Act 1986; ‘‘the 2000 Act’’ means the Financial Services and Markets Act 2000; ‘‘the Authority’’ means the Financial Services Authority; ‘‘company’’ means an insurer which is being wound up; ‘‘contract of general insurance’’ and ‘‘contract of long-term insurance’’ have the meaning given by article 3(1) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001; ‘‘excess of the long-term business assets’’ means the amount, if any, by which the value of the assets representing the fund or funds maintained by the company in respect of its long-term business as at the liquidation date exceeds the value as at that date of the liabilities of the company attributable to that business; ‘‘excess of the other business assets’’ means the amount, if any, by which the value of the assets of the company which do not represent the fund or funds maintained by the company in respect of its long-term business as at the liquidation date exceeds the value as at that date of the liabilities of the company (other than liabilities in respect of share capital) which are not attributable to that business; ‘‘Financial Services Compensation Scheme’’ means the scheme established under section 213 of the 2000 Act; ‘‘general business’’ means the business of effecting or carrying out a contract of general insurance; ‘‘the general regulations’’ means the Insolvency Regulations 1994; ‘‘the Industrial Assurance Acts’’ means the 1923 Act and the Industrial Assurance and Friendly Societies Act 1948; ‘‘insurer’’ has the meaning given by article 2 of the Financial Services and Markets Act 2000 (Insolvency) (Definition of ‘‘Insurer’’) Order 2001; ‘‘linked liability’’ means any liability under a policy the effecting of which constitutes the carrying on of long-term business the amount of which is determined by reference to— (a) the value of property of any description (whether or not specified in the policy),

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(b) fluctuations in the value of such property, (c) income from any such property, or (d) fluctuations in an index of the value of such property; ‘‘linked policy’’ means a policy which provides for linked liabilities and a policy which when made provided for linked liabilities is deemed to be a linked policy even if the policy holder has elected to convert his rights under the policy so that at the liquidation date there are no longer linked liabilities under the policy; ‘‘liquidation date’’ means the date of the winding-up order or the date on which a resolution for the winding up of the company is passed by the members of the company (or the policyholders in the case of a mutual insurance company) and, if both a winding-up order and winding-up resolution have been made, the earlier date; ‘‘long-term business’’ means the business of effecting or carrying out any contract of longterm insurance; ‘‘non-linked policy’’ means a policy which is not a linked policy; ‘‘other business’’, in relation to a company carrying on long-term business, means such of the business of the company as is not long-term business; ‘‘the principal rules’’ means the Insolvency Rules 1986; ‘‘stop order’’, in relation to a company, means an order of the court, made under section 376(2) of the 2000 Act, ordering the liquidator to stop carrying on the long-term business of the company; ‘‘unit’’ in relation to a policy means any unit (whether or not described as a unit in the policy) by reference to the numbers and value of which the amount of the liabilities under the policy at any time is measured. (2) Unless the context otherwise requires, words or expressions contained in these Rules bear the same meaning as in the principal rules, the general regulations, the 1986 Act, the 2000 Act or any statutory modification thereof respectively. Notes Paragraph (1) the definitions of ‘‘contract of general insurance’’ and ‘‘contract of long-term insurance’’ refer to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, SI 2001 No 544; the definition of ‘‘the general regulations’’ refers to the Insolvency Regulations 1994, SI 1994 No 2507; the definition of ‘‘insurer’’ refers to article 2 of the Financial Services and Markets Act 2000 (Insolvency) (Definition of ‘‘Insurer’’) Order 2001, SI 2001 No 2634; in the definition of ‘‘the principal rules’’, the Insolvency Rules 1986 means SI 1986 No 1925.

Application 3.—(1) These Rules apply to proceedings for the winding up of an insurer which commence on or after the date on which these Rules come into force. (2) These Rules supplement the principal rules and the general regulations which continue to apply to the proceedings in the winding up of an insurer under the 1986 Act as they apply to proceedings in the winding up of any company under that Act; but in the event of a conflict between these Rules and the principal rules or the general regulations these Rules prevail. Appointment of liquidator 4. Where the court is considering whether to appoint a liquidator under— (a) section 139(4) of the 1986 Act (appointment of liquidator where conflict between creditors and contributories), or (b) section 140 of the 1986 Act (appointment of liquidator following administration or voluntary arrangement), the manager of the Financial Services Compensation Scheme may appear and make representations to the court as to the person to be appointed. Maintenance of separate financial records for long-term and other business in winding up 5.—(1) This rule applies in the case of a company carrying on long-term business in whose case no stop order has been made.

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(2) The liquidator shall prepare and keep separate financial records in respect of the longterm business and the other business of the company. (3) Paragraphs (4) and (5) apply in the case of a company to which this rule applies which also carries on permitted general business (‘a hybrid insurer’). (4) Where, before the liquidation date, a hybrid insurer has, or should properly have, apportioned the assets and liabilities attributable to its permitted general business to its long term business for the purposes of any accounts, those assets and liabilities must be apportioned to its long term business for the purposes of complying with paragraph (2) of this rule. (5) Where, before the liquidation date, a hybrid insurer has, or should properly have, apportioned the assets and liabilities attributable to its permitted general business other than to its long term business for the purposes of any accounts, those assets and liabilities must be apportioned to its other business for the purposes of complying with paragraph (2) of this rule. (6) Regulation 10 of the general regulations (financial records) applies only in relation to the company’s other business. (7) In relation to the long-term business, the liquidator shall, with a view to the long-term business of the company being transferred to another insurer, maintain such accounting, valuation and other records as will enable such other insurer upon the transfer being effected to comply with the requirements of any rules made by the Authority under Part X of the 2000 Act relating to accounts and statements of insurers. (8) In paragraphs (4) and (5)— (a) ‘‘accounts’’ means any accounts or statements maintained by the company in compliance with a requirement under the Companies Act 1985 or any rules made by the Authority under Part X of the 2000 Act; (b) ‘‘permitted general business’’ means the business of effecting or carrying out a contract of general insurance where the risk insured against relates to either accident or sickness. Notes Rule 5 was inserted by The Insurers (Reorganisation and Winding Up) Regulations 2003, SI 2003 No 1102, reg 53.

Valuation of general business policies 6. Except in relation to amounts which have fallen due for payment before the liquidation date and liabilities referred to in paragraph 2(1)(b) of Schedule 1, the holder of a general business policy shall be admitted as a creditor in relation to his policy without proof for an amount equal to the value of the policy and for this purpose the value of a policy shall be determined in accordance with Schedule 1. Valuation of long-term policies 7.—(1) This rule applies in relation to a company’s long-term business where no stop order has been made. (2) In relation to a claim under a policy which has fallen due for payment before the liquidation date, a policy holder shall be admitted as a creditor without proof for such amount as appears from the records of the company to be due in respect of that claim. (3) In all other respects a policy holder shall be admitted as a creditor in relation to his policy without proof for an amount equal to the value of the policy and for this purpose the value of a policy of any class shall be determined in the manner applicable to policies of that class provided by Schedules 2, 3 and 4. (4) This rule applies in relation to a person entitled to apply for a free paid-up policy under section 24 of the 1923 Act (provisions as to forfeited policies) and to whom no such policy has been issued before the liquidation date (whether or not it was applied for) as if such a policy had been issued immediately before the liquidation date— (a) for the minimum amount determined in accordance with section 24(2) of the 1923 Act, or

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(b) if the liquidator is satisfied that it was the practice of the company during the five years immediately before the liquidation date to issue policies under that section in excess of the minimum amounts so determined, for the amount determined in accordance with that practice. 8.—(1) This rule applies in relation to a company’s long-term business where a stop order has been made. (2) In relation to a claim under a policy which has fallen due for payment on or after the liquidation date and before the date of the stop order, a policy holder shall be admitted as a creditor without proof for such amount as appears from the records of the company and of the liquidator to be due in respect of that claim. (3) In all other respects a policy holder shall be admitted as a creditor in relation to his policy without proof for an amount equal to the value of the policy and for this purpose the value of a policy of any class shall be determined in the manner applicable to policies of that class provided by Schedule 5. (4) Paragraph (4) of rule 7 applies for the purposes of this rule as if references to the liquidation date (other than that in sub-paragraph (b) of that paragraph) were references to the date of the stop order. Attribution of liabilities to company’s long-term business 9.—(1) This rule applies in the case of a company carrying on long-term business if at the liquidation date there are liabilities of the company in respect of which it is not clear from the accounting and other records of the company whether they are or are not attributable to the company’s long-term business. (2) The liquidator shall, in such manner and according to such accounting principles as he shall determine, identify the liabilities referred to in paragraph (1) as attributable or not attributable to a company’s long-term business and those liabilities shall for the purposes of the winding-up be deemed as at the liquidation date to be attributable or not as the case may be. (3) For the purposes of paragraph (2) the liquidator may— (a) determine that some liabilities are attributable to the company’s long-term business and that others are not (the first method); or (b) determine that a part of a liability shall be attributable to the company’s long-term business and that the remainder of the liability is not (the second method), and he may use the first method for some of the liabilities and the second method for the remainder of them. (4) Notwithstanding anything in the preceding paragraphs of this rule, the court may order that the determination of which (if any) of the liabilities referred to in paragraph (1) are attributable to the company’s long-term business and which (if any) are not shall be made in such manner and by such methods as the court may direct or the court may itself make the determination. Attribution of assets to company’s long-term business 10.—(1) This rule applies in the case of a company carrying on long-term business if at the liquidation date there are assets of the company in respect of which— (a) it is not clear from the accounting and other records of the company whether they do or do not represent the fund or funds maintained by the company in respect of its long-term business, and (b) it cannot be inferred from the source of the income out of which those assets were provided whether they do or do not represent those funds. (2) Subject to paragraph (6) the liquidator shall determine which (if any) of the assets referred to in paragraph (1) are attributable to those funds and which (if any) are not and those assets shall, for the purposes of the winding up, be deemed as at the liquidation date to represent those funds or not in accordance with the liquidator’s determination. (3) For the purposes of paragraph (2) the liquidator may— (a) determine that some of those assets shall be attributable to those funds and that others of them shall not (the first method); or

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(b) determine that a part of the value of one of those assets shall be attributable to those funds and that the remainder of that value shall not (the second method), and he may use the first method for some of those assets and the second method for others of them. (4) (a) In making the attribution the liquidator’s objective shall in the first instance be so far as possible to reduce any deficit that may exist, at the liquidation date and before any attribution is made, either in the company’s long-term business or in its other business. (b) If there is a deficit in both the company’s long-term business and its other business the attribution shall be in the ratio that the amount of the one deficit bears to the amount of the other until the deficits are eliminated. (c) Thereafter the attribution shall be in the ratio which the aggregate amount of the liabilities attributable to the company’s long-term business bears to the aggregate amount of the liabilities not so attributable. (5) For the purposes of paragraph (4) the value of a liability of the company shall, if it falls to be valued under rule 6 or 7, have the same value as it has under that rule but otherwise it shall have such value as would have been included in relation to it in a balance sheet of the company prepared in accordance with the 1985 Act as at the liquidation date; and, for the purpose of determining the ratio referred to in paragraph (4) but not for the purpose of determining the amount of any deficit therein referred to, the net balance of shareholders’ funds shall be included in the liabilities not attributable to the company’s long-term business. (6) Notwithstanding anything in the preceding paragraphs of this rule, the court may order that the determination of which (if any) of the assets referred to in paragraph (1) are attributable to the fund or funds maintained by the company in respect of its long-term business and which (if any) are not shall be made in such manner and by such methods as the court may direct or the court may itself make the determination. Excess of long-term business assets 11.—(1) Where the company is one carrying on long-term business and in whose case no stop order has been made, for the purpose of determining the amount, if any, of the excess of the long-term business assets, there shall be included amongst the liabilities of the company attributable to its long-term business an amount determined by the liquidator in respect of liabilities and expenses likely to be incurred in connection with the transfer of the company’s long-term business as a going concern to another insurance company being liabilities not included in the valuation of the long-term policies made in pursuance of rule 7. (2) Where the liquidator is carrying on the long-term business of an insurer with a view to that business being transferred as a going concern to a person or persons (‘‘transferee’’) who may lawfully carry out those contracts (or substitute policies being issued by another insurer), the liquidator may, in addition to any amounts paid by the Financial Services Compensation Scheme for the benefit of the transferee to secure such a transfer or to procure substitute policies being issued, pay to the transferee or other insurer all or part of such funds or assets as are attributable to the long-term business being transferred or substituted. Notes Paragraph (1) the words ‘‘and in whose case no stop order has been made’’ were inserted by The Insurers (Reorganisation and Winding Up) Regulations 2003, SI 2003 No 1102, reg 54.

Actuarial advice 12.—(1) Before doing any of the following, that is to say— (a) determining the value of a policy in accordance with Schedules 1 to 5 (other than paragraph 3 of Schedule 1); (b) identifying long-term liabilities and assets in accordance with rules 9 and 10; (c) determining the amount (if any) of the excess of the long-term business assets in accordance with rule 11;

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(d) determining the terms on which he will accept payment of overdue premiums under rule 21(1) or the amount and nature of any compensation under rule 21(2); the liquidator shall obtain and consider advice thereon (including an estimate of any value or amount required to be determined) from an actuary. (2) Before seeking, for the purpose of valuing a policy, the direction of the court as to the assumption of a particular rate of interest or the employment of any rates of mortality or disability, the liquidator shall obtain and consider advice thereon from an actuary. Utilisation of excess of assets 13.—(1) Except at the direction of the court, no distribution may be made out of and no transfer to another insurer may be made of— (a) any part of the excess of the long-term business assets which has been transferred to the other business; or (b) any part of the excess of the other business assets, which has been transferred to the long-term business. (2) Before giving a direction under paragraph (1) the court may require the liquidator to advertise the proposal to make a distribution or a transfer in such manner as the court shall direct. 14. In the case of a company carrying on long-term business in whose case no stop order has been made, regulation 5 of the general regulations (payments into the Insolvency Services Account) applies only in relation to the company’s other business. Custody of assets 15.—(1) The Secretary of State may, in the case of a company carrying on long-term business in whose case no stop order has been made, require that the whole or a specified proportion of the assets representing the fund or funds maintained by the company in respect of its longterm business shall be held by a person approved by him for the purpose as trustee for the company. (2) No assets held by a person as trustee for a company in compliance with a requirement imposed under this rule shall, so long as the requirement is in force, be released except with the consent of the Secretary of State but they may be transposed by the trustee into other assets by any transaction or series of transactions on the written instructions of the liquidator. (3) The liquidator may not grant any mortgage or charge of assets which are held by a person as trustee for the company in compliance with a requirement imposed under this rule except with the consent of the Secretary of State. Maintenance of accounting, valuation and other records 16.—(1) In the case of a company carrying on long-term business in whose case no stop order has been made, regulation 10 of the general regulations (financial records) applies only in relation to the company’s other business. (2) The liquidator of such company shall, with a view to the long-term business of the company being transferred to another insurer, maintain such accounting, valuation and other records as will enable such other insurer upon the transfer being effected to comply with the requirements of any rules made by the Authority under Part X of the 2000 Act relating to accounts and statements of insurers. Additional powers in relation to long-term business 17.—(1) In the case of a company carrying on long-term business in whose case no stop order has been made, regulation 9 of the general regulations (investment or otherwise handling of funds in winding up of companies and payment of interest) applies only in relation to the company’s other business. (2) The liquidator of a company carrying on long-term business shall, so long as no stop order has been made, have power to do all such things as may be necessary to the performance of his duties under section 376(2) of the 2000 Act (continuation of contracts of long-term insurance where insurer in liquidation) but the Secretary of State may require him—

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(a) not to make investments of a specified class or description, (b) to realise, before the expiration of a specified period, the whole or a specified proportion of investments of a specified class or description held by the liquidator. Accounts and audit 18.—(1) In the case of a company carrying on long-term business in whose case no stop order has been made, regulation 12 of the general regulations (liquidator carrying on business) applies only in relation to the company’s other business. (2) The liquidator of such a company shall supply the Secretary of State, at such times or intervals as he may specify, with such accounts as he may specify and audited in such manner as he may require and with such information about specified matters and verified in such specified manner as he may require. (3) The liquidator of such a company shall, if required to do so by the Secretary of State, instruct at actuary to investigate the financial condition of the company’s long-term business and to report thereon in such manner as the Secretary of State may specify. Security by the liquidator and special manager 19. In the case of a company carrying on long-term business in whose case no stop order has been made, rule 4.207 of the principal rules (security) applies separately to the company’s longterm business and to its other business. Proof of debts 20.—(1) This rule applies in the case of a company carrying on long-term business in whose case no stop order has been made. (2) The liquidator may in relation to the company’s long-term business and to its other business fix different days on or before which the creditors of the company who are required to prove their debts or claims are to prove their debts or claims and he may fix one of those days without at the same time fixing the other. (3) In submitting a proof of any debt a creditor may claim the whole or any part of such debt as attributable to the company’s long-term business or to its other business or he may make no such attribution. (4) When he admits any debt, in whole or in part, the liquidator shall state in writing how much of what he admits is attributable to the company’s long-tem business and how much to the company’s other business. Notes Paragraph (1) the words ‘‘in whose case no stop order has been made’’ were inserted by the Insurers (Reorganisation and Winding Up) Regulations 2003, SI 2003 No 1102, reg 55.

Failure to pay premiums 21.—(1) The liquidator may in the course of carrying on the company’s long-term business and on such terms as he thinks fit accept payment of a premium even though the payment is tendered after the date on which under the terms of the policy it was finally due to be paid. (2) The liquidator may in the course of carrying on the company’s long-term business, and having regard to the general practice of insurers, compensate a policy holder whose policy has lapsed in consequence of a failure to pay any premium by issuing a free paid-up policy for reduced benefits or otherwise as the liquidator thinks fit. Notice of valuation of policy 22.—(1) Before paying a dividend respect of claims other than under contracts of long-term insurance, the liquidator shall give notice of the value of each general business policy, as determined by him in accordance with rule 6, to the persons appearing from the records of the company or otherwise to be entitled to an interest in that policy and he shall do so in such manner as the court may direct.

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(2) Before paying a dividend in respect of claims under contracts of long-term insurance and where a stop order has not been made in relation to the company, the liquidator shall give notice to the persons appearing from the records of the company or otherwise to be entitled to a payment under or to an interest in a long-term policy of the amount of that payment or the value of that policy as determined by him in accordance with rule 7(2) or (3), as the case may be. (3) If a stop order is made in relation to the company, the liquidator shall give notice to all the persons appearing from the records of the company or otherwise to be entitled to a payment under or to an interest in a long-term policy of the amount of that payment or the value of that policy as determined by him in accordance with rule 8(2) or (3), as the case may be, and he shall give that notice in such manner as the court may direct. (4) Any person to whom notice is so given shall be bound by the value so determined unless and until the court otherwise orders. (5) Paragraphs (2) and (3) of this rule have effect as though references therein to persons appearing to be entitled to an interest in a long-term policy and to the value of that policy included, respectively, references to persons appearing to be entitled to apply for a free paid-up policy under section 24 of the 1923 Act and to the value of that entitlement under rule 7 (in the case of paragraph (2) of this rule) or under rule 8 (in the case of paragraph (3) of this rule). (6) Where the liquidator summons a meeting of creditors in respect of liabilities of the company attributable to either or both its long-tem business or other business, he may adopt any valuation carried out in accordance with rules 6, 7 or 8 as the case may be or, if no such valuation has been carried out by the time of the meeting, he may conduct the meeting using such estimates of the value of policies as he thinks fit. Notes Paragraph (6) amended by The Insurers (Reorganisation and Winding Up) Regulations 2003, SI 2003 No 1102, reg 56.

Dividends to creditors 23.—(1) This rule applies in the case of a company carrying on long-term business. (2) Part II of the principal rules applies separately in relation to the two separate companies assumed for the purposes of rule 5 above. (3) The court may, at any time before the making of a stop order, permit a dividend to be declared and paid on such terms as thinks fit in respect only of debts which fell due to payment before the liquidation date or, in the case of claims under long-term policies, which have fallen due for payment on or after the liquidation date. Meetings of creditors 24.—(1) In the case of a company carrying on long-term business in whose case no stop order has been made, the creditors entitled to participate in creditors’ meetings may be— (a) in relation to the long-term business assets of the company, only those who are creditors in respect of liabilities attributable to the long-term business of the company; and (b) in relation to the other business assets of the company, only those who are creditors in respect of liabilities attributable to the other business of the company. (1A) In a case where separate general meetings of the creditors are summoned by the liquidator pursuant to— (a) paragraph (1) above; or (b) regulation 29 of the Insurers (Reorganisation and Winding Up) Regulations 2004 (composite insurers: general meetings of creditors), chapter 8 of Part 4 and Part 8 of the principal rules apply to each such separate meeting. (2) In relation to any such separate meeting— (a) rule 4.61(3) of the principal rules (expenses of summoning meetings) has effect as if the reference therein to assets were a reference to the assets available under the above-

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mentioned Regulations for meeting the liabilities of the company owed to the creditors summoned to the meeting, and (b) rule 4.63 of the principal rules (resolutions) applies as if the reference therein to value in relation to a creditor who is not, by virtue of rule 6, 7 or 8 above, required to prove his debt, were a reference to the value most recently notified to him under rule 22 above or, if the court has determined a different value in accordance with rule 22(4), as if it were a reference to that different value. (3) In paragraph (1)— ‘‘long-term business assets’’ means the assets representing the fund or funds maintained by the company in respect of its long-term business; ‘‘other business assets’’ means any assets of the company which are not long-term business assets. Notes Paragraph (1) amended by The Insurers (Reorganisation and Winding Up) Regulations 2003, SI 2003 No 1102, reg 57. Paragraph (1A) inserted by The Insurers (Reorganisation and Winding Up) Regulations 2003, SI 2003 No 1102, reg 57. Sub-paragraph (1A)(b) amended by The Insurers (Reorganisation and Winding Up) Regulations 2003, SI 2004 No 353, reg 51 and again by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2004, SI 2004 No 546, reg 2. Paragraph (3) inserted by The Insurers (Reorganisation and Winding Up) Regulations 2003, SI 2003 No 1102, reg 57.

Remuneration of liquidator carrying on long-term business 25.—(1) So long as no stop order has been made in relation to a company carrying on longterm business, the liquidator is entitled to receive remuneration for his services as such in relation to the carrying on of that business provided for in this rule. (2) The remuneration shall be fixed by the liquidation committee by reference to the time properly given by the liquidator and his staff in attending to matters arising in the winding up. (3) If there is no liquidation committee or the committee does not make the requisite determination, the liquidator’s remuneration may be fixed (in accordance with paragraph (2)) by a resolution of a meeting of creditors. (4) If not fixed as above, the liquidator’s remuneration shall be in accordance with the scale laid down for the Official Receiver by the general regulations. (5) If the liquidator’s remuneration has been fixed by the liquidation committee, and the liquidator considers the amount to be insufficient, he may request that it be increased by resolution of the creditors. Apportionment of costs payable out of the assets 26.—(1) Where no stop order has been made in relation to a company, rule 4.218 of the principal rules (general rule as to priority) applies separately to the assets of the company’s long-term business and to the assets of the company’s other business. (2) But where any fee, expense, cost, charge, disbursement or remuneration does not relate exclusively to the assets of the company’s long-tem business or to the assets of the company’s other business, the liquidator shall apportion it amongst those assets in such manner as he shall determine. Notes Paragraph (1) the first twelve words were inserted by the Insurers (Reorganisation and Winding Up) Regulations 2003, SI 2003 No 1102, reg 58.

Notice of stop order 27.—(1) When a stop order has been made in relation to the company, the court shall, on the same day send to the Official Receiver a notice informing him that the stop order has been made.

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(2) The notice shall be in Form No 1 set out in Schedule 6 with such variation as circumstances may require. (3) Three copies of the stop order sealed with the seal of the court shall forthwith be sent by the court to the Official Receiver. (4) The Official Receiver shall cause a sealed copy of the order to be served upon the liquidator by prepaid letter or upon such other person or persons, or in such other manner as the court may direct, and shall forward a copy of the order to the registrar of companies. (5) The liquidator shall forthwith on receipt of a sealed copy of the order— (a) cause notice of the order in Form 2 set out in Schedule 6 to be gazetted, and (b) advertise the making of the order in the newspaper in which the liquidation date was advertised, by notice in Form No 3 set out in Schedule 6. SCHEDULE 1 Rule 6 R U L E S F O R VA L U I N G G E N E R A L B U S I N E S S P O L I C I E S

1.—(1) This paragraph applies in relation to periodic payments under a general business policy which fall due for payment after the liquidation date where the event giving rise to the liability to make the payments occurred before the liquidation date. (2) The value to be attributed to such periodic payments shall be determined on such actuarial principles and assumptions in regard to all relevant factors as the court shall direct. 2.—(1) This paragraph applies in relation to liabilities under a general business policy which arise from events which occurred before the liquidation date but which have not— (a) fallen due for payment before the liquidation date; or (b) been notified to the company before the liquidation date. (2) The value to be attributed to such liabilities shall be determined on such actuarial principles and assumptions in regard to all relevant factors as the court shall direct. 3.—(1) This paragraph applies in relation to liabilities under a general business policy not dealt with by paragraphs 1 or 2. (2) The value to be attributed to those liabilities shall— (a) if the terms of the policy provide for a repayment of premium upon the early termination of the policy or the policy is expressed to run from one definite date to another or the policy may be terminated by any of the parties with effect from a definite date, be the greater of the following two amounts: (i) the amount (if any) which under the terms of the policy would have been repayable on early termination of the policy had the policy terminated on the liquidation date, and (ii) where the policy is expressed to run from one definite date to another or may be terminated by any of the parties with effect from a definite date, such proportion of the last premium paid as is proportionate to the unexpired portion of the period in respect of which that premium was paid; and (b) in any other case, be a just estimate of that value. SCHEDULE 2 Rule 7 R U L E S F O R VA L U I N G N O N - L I N K E D L I F E P O L I C I E S , N O N - L I N K E D D E F E R R E D A N N U I T Y P O L I C I E S , N O N - L I N K E D A N N U I T I E S I N PAY M E N T, U N I T I S E D N O N - L I N K E D P O L I C I E S A N D C A P I TA L R E D E M P T I O N P O L I C I E S

General 1. In valuing a policy— (a) where it is necessary to calculate the present value of future payments by or to the company, interest shall be assumed at such fair and reasonable rate or rates as the court may direct;

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(b) where relevant, the rates of mortality and the rates of disability to be employed shall be such rates as the court considers appropriate after taking into account: (i) relevant published tables of rates of mortality and rates of disability, and (ii) the rates of mortality and the rates of disability experienced in connection with similar policies issued by the company; (c) there shall be determined: (i) the present value of the ordinary benefits, (ii) the present value of additional benefits; (iii) the present value of options, and (iv) if further premiums fall to be paid under the policy on or after the liquidation date, the present value of the premiums; and for the purposes of this Schedule if the ordinary benefits only take into account premiums paid to date, the present value of future premiums shall be taken as nil. Present value of the ordinary benefits 2.—(1) Ordinary benefits are the benefits which will become payable to the policy holder on or after the liquidation date without his having to exercise any option under the policy (including any bonus or addition to the sum assured or the amount of annuity declared before the liquidation date) and for this purpose ‘‘option’’ includes a right to surrender the policy. (2) Subject to sub-paragraph (3), the present value of the ordinary benefits shall be the value at the liquidation date of the reversion in the ordinary benefits according to the contingency upon which those benefits are payable calculated on the basis of the rates of interest, mortality and disability referred to in paragraph 1. (3) For accumulating with profits policies— (a) where the benefits are not expressed in the form of units in a with-profits fund, the value of the ordinary benefits is the amount that would have been payable, excluding any discretionary additions, if the policyholder had been able to exercise a right to terminate the policy at the liquidation date; and (b) where the benefits are expressed in the form of units in a with-profits fund, the value of the ordinary benefits is the number of units held by the policy holder at the liquidation date valued at the unit price in force at that time or, if that price is not calculated on a daily basis, such price as the court may determine having regard to the last published unit price and any change in the value of assets attributable to the fund since the date of the last published unit price. (4) Where— (a) sub-paragraph (3) applies, and (b) paragraph 3(1) of Schedule 3 applies to the calculation of the unit price (or as the case may be) the fund value, the value shall be adjusted on the basis set out in paragraph 3(3) to (5) of Schedule 3. (5) Where sub-paragraph (3) applies, the value may be further adjusted by reference to the value of the assets underlying the unit price (or as the case may be) the value of the fund, if the liquidator considers such an adjustment to be necessary. Present value of additional benefits 3.—(1) Where under the terms of the policy or on the basis of the company’s established practice the policy holder has a right to receive or an expectation of receiving benefits additional to the minimum benefits guaranteed under those terms, the court shall determine rates of interest, bonus (whether reversionary, terminal or any other type of bonus used by the company), mortality and disability to provide for the present value (if any) of that right or expectation. (2) In determining what (if any) value to attribute to any such expectations the court shall have regard to the premium payable in relation to the minimum guaranteed benefits and the amount (if any) an insurer is required to provide in respect of those expectations in any rules made by the Authority under Part X of the 2000 Act.

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Present value of options 4. The amount of the present value of options shall be the amount which, in the opinion of the liquidator, is necessary to be provided at the liquidation date (in addition to the amount of the present value of the ordinary benefits) to cover the additional liabilities likely to arise upon the exercise on or after that date by the policy holder of any option conferred upon him by the terms of the policy or, in the case of an industrial assurance policy, by the Industrial Assurance Acts other than an option whereby the policy holder can secure a guaranteed cash payment within the period of 12 months beginning with that date. Present value of premiums 5. The present value of the premiums shall be the value at the liquidation date of the premiums which fall due to be paid by the policy holder after the liquidation date calculated on the basis of the rates of interest, mortality and disability referred to in paragraph 1. Value of the policy 6.—(1) Subject to sub-paragraph (2)— (a) if no further premiums fall due to be paid under the policy on or after the liquidation date, the value of the policy shall be the aggregate of: (i) the present value of the ordinary benefits; (ii) the present value of options; and (iii) the present value of additional benefits; (b) if further premiums fall due to be so paid and the aggregate value referred to in subparagraph (a) exceeds the present value of the premiums, the value of the policy shall be the amount of that excess; and (c) if further premiums fall due to be so paid and that aggregate does not exceed the present value of the premiums, the policy shall have no value. (2) Where the policy holder has a right conferred upon him by the terms of the policy or by the Industrial Assurance Acts whereby the policy holder can secure a guaranteed cash payment within the period of 12 months beginning with the liquidation date, the liquidator shall determine the amount which in his opinion it is necessary to provide at that date to cover the liabilities which will accrue when that option is exercised (on the assumption that it will be exercised) and the value of the policy shall be that amount if it exceeds the value of the policy (if any) determined in accordance with sub-paragraph (1). SCHEDULE 3 Rule 7 R U L E S F O R VA L U I N G L I F E P O L I C I E S A N D D E F E R R E D A N N U I T Y P O L I C I E S W H I C H A R E L I N K E D POLICIES

1.—(1) Subject to sub-paragraph (2) the value of the policy shall be the aggregate of the value of the linked liabilities (calculated in accordance with paragraphs 2 or 4) and the value of other than linked liabilities (calculated in accordance with paragraph 5) except where that aggregate is a negative amount it which case the policy shall have no value. (2) Where the terms of the policy include a right whereby the policy holder can secure a guaranteed cash payment within the period of 12 months beginning with the liquidation date then, if the amount which in the opinion of the liquidator is necessary to be provided at that date to cover any liabilities which will accrue when that option is exercised (on the assumption that it will be exercised) is greater than the value determined under sub-paragraph (1) of this paragraph, the value of the policy shall be that greater amount. 2.—(1) Where the linked liabilities are expressed in terms of units the value of those liabilities shall, subject to paragraph 3, be the amount arrived at by taking the product of the number of units of each class of units allocated to the policy on the liquidation date and the value of each such unit on that date and then adding those products. (2) For the purposes of sub-paragraph (1)—

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(a) where under the terms of the policy the value of a unit at any time falls to be determined by reference to the value at that time of the assets of a particular fund maintained by the company in relation to that and other policies, the value of a unit on the liquidation date shall be determined by reference to the net realisable value of the assets credited to that fund on that date (after taking account of disposal costs, any tax liabilities resulting from the disposal of assets insofar as they have not already been provided for by the company and any other amounts which under the terms of those policies are chargeable to the fund), and (b) in any other case, the value of a unit on the liquidation date shall be the value which would have been ascribed to each unit credited to the policy holder, after any deductions which may be made under the terms of the policy, for the purpose of determining the benefits payable under the policy on the liquidation date had the policy matured on that date. 3.—(1) This paragraph applies where— (a) paragraph 2(2)(a) applies and the company has a right under the terms of the policy either to make periodic withdrawals from the fund referred to in that paragraph or to retain any part of the income accruing in respect of the assets of that fund, (b) paragraph 2(2)(b) applies and the company has a right under the terms of the policy to receive the whole or any part of any distributions made in respect of the units referred to in that paragraph, or (c) paragraph 2(2)(a) or paragraph 2(2)(b) applies and the company has a right under the terms of the policy to make periodic cancellations of a proportion of the number of units credited to the policy. (2) Where this paragraph applies, the value of the linked liabilities calculated in accordance with paragraph 2(1) shall be reduced by an amount calculated in accordance with subparagraph (3) of this paragraph. (3) The said amount is— (a) where this paragraph applies by virtue of head (a) or (b) of sub-paragraph (1), the value as at the liquidation date, calculated on actuarial principles, of the future income of the company in respect of the units in question arising from the rights referred to in head (a) or (b) of sub-paragraph (1) as the case may be, or (b) where this paragraph applies by virtue of head (c) of sub-paragraph (1), the value as at the liquidation date, calculated on actuarial principles, of the liabilities of the company in respect of the units which fall to be cancelled in the future under the right referred to in head (c) of sub-paragraph (1). (4) In calculating any amount in accordance with sub-paragraph (3) there shall be disregarded— (a) such part of the rights referred to in the relevant head of sub-paragraph (1) which in the opinion of the liquidator constitutes appropriate provision for future expenses and mortality risks, and (b) such part of those rights (if any) which the court considers to constitute appropriate provision for any right or expectation of the policy holder to receive benefits additional to the benefits guaranteed under the terms of the policy. (5) In determining the said amount— (a) interest shall be assumed at such rate or rates as the court may direct, and (b) where relevant, the rates of mortality and the rates of disability to be employed shall be such rates as the court considers appropriate after taking into account: (i) relevant published tables of rates of mortality and rates of disability, and (ii) the rates of mortality and the rates of disability experienced in connection with similar policies issued by the company. 4. Where the linked liabilities are not expressed in terms of units the value of those liabilities shall be the value (subject to adjustment for any amounts which would have been deducted for taxation) which would have been ascribed to those liabilities had the policy matured on the liquidation date. 5.—(1) The value of any liabilities other than linked liabilities including reserves for future expenses, options and guarantees shall be determined on actuarial principles and appropriate assumptions in regard to all relevant factors including the assumption of such rate or rates of interest, mortality and disability as the court may direct.

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(2) In valuing liabilities under this paragraph credit shall be taken for those parts of future premiums which do not fall to be applied in the allocation of further units to the policy and for any rights of the company which have been disregarded under paragraph 3(4)(a) in valuing the linked liabilities. SCHEDULE 4 Rule 7 R U L E S F O R VA L U I N G L O N G - T E R M P O L I C I E S W H I C H A R E N O T D E A LT W I T H I N S C H E D U L E S 2 OR 3

The value of a long-term policy not covered by Schedule 2 or 3 shall be the value of the benefits due to the policy holder determined on such actuarial principles and assumptions in regard to all relevant factors as the court shall determine. SCHEDULE 5 Rule 8 R U L E S F O R VA L U I N G L O N G - T E R M P O L I C I E S W H E R E A S T O P O R D E R H A S B E E N M A D E

1. Subject to paragraphs 2 and 3, in valuing a policy Schedules 2, 3 or 4 shall apply according to the class of that policy as if those Schedules were herein repeated but with a view to a fresh valuation of each policy on appropriate assumptions in regard to all relevant factors and subject to the following modifications— (a) references to the stop order shall be substituted for references to the liquidation date, (b) in paragraph 4 of Schedule 2 for the words ‘‘whereby the policy holder can secure a guaranteed cash payment within the period of 12 months beginning with that date’’ there shall be substituted the words ‘‘to surrender the policy which can be exercised on that date’’, (c) paragraph 6(2) of Schedule 2 shall be deleted, and (d) paragraph 1(2) of Schedule 3 shall be deleted. 2.—(1) This paragraph applies where the policy holder has a right conferred upon him under the terms of the policy or by the Industrial Assurance Acts to surrender the policy and that right is exercisable on the date of the stop order. (2) Where this paragraph applies and the amount required at the date of the stop order to provide for the benefits payable upon surrender of the policy (on the assumption that the policy is surrendered on the date of the stop order) is greater than the value of the policy determined in accordance with paragraph 1, the value of the policy shall, subject to paragraph 3, be the said amount so required. (3) Where any part of the surrender value is payable after the date of the stop order, subparagraph (2) shall apply but the value therein referred to shall be discounted at such a rate of interest as the court may direct. 3.—(1) This paragraph applies in the case of a linked policy where— (a) the terms of the policy include a guarantee that the amount assured will on maturity of the policy be worth a minimum amount calculable in money terms, or (b) the terms of the policy include a right on the part of the policy holder to surrender the policy and a guarantee that the payment on surrender will be worth a minimum amount calculable in money terms and that right is exercisable on or after the date of the stop order. (2) Where this paragraph applies the value of the policy shall be the greater of the following two amounts— (a) the value the policy would have had at the date of the stop order had the policy been a non-linked policy, that is to say, had the linked liabilities provided by the policy not been so provided but the policy had otherwise been on the same terms, and

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(b) the value the policy would have had at the date of the stop order had the policy not included any guarantees of payments on maturity or surrender worth a minimum amount calculable in money terms.

SCHEDULE 6 Rule 27 FORMS Form No 1 Notification to Official Receiver of order made under section 376(2) of the Financial Services and Markets Act 2000 (Title) To the Official Receiver of the Court (Address) Order made this day by the Honourable Mr Justice .................... (or, as the case may be) that the liquidator or (insert name of company) shall not carry on the long-term business of the company. Form No 2 Notice for London Gazette Notice of order made under section 376(2) of the Financial Services and Markets Act 2000 for cessation of long-term business Name of Company .................... Address of Registered Office Court .................... Number of Matter .................... Date of Order Date of liquidation date Form No 3 Notice for Newspaper Notice of order made under section 376(2) of the Financial Services and Markets Act 2000 for cessationof long-term business Name of Company Date of Liquidation date Date of Order [Liquidator]

1.46 THE FINANCIAL SERVICES AND MARKETS ACT 2000 (ADMINISTRATION ORDERS RELATING TO INSURERS) ORDER 2002 (SI 2002 No 1242) General Note This Order was modified by The Financial Services and Markets Act 2000 (Administration Orders Relating to Insurers) (Amendment) Order 2003, SI 2003 No 2134.

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Citation, commencement and interpretation 1.—(1) This Order may be cited as the Financial Services and Markets Act 2000 (Administration Orders Relating to Insurers) Order 2002 and comes into force on 31st May 2002. (2) In this Order— ‘‘the 1986 Act’’ means the Insolvency Act 1986; ‘‘initial creditors’ meeting’’ has the meaning given by paragraph 51(1) of Schedule B1; ‘‘Schedule B1’’ means Schedule B1 to the 1986 Act. Notes Definitions of ‘‘initial creditors’ meeting’’ and ‘‘Schedule B1’’ inserted by The Financial Services and Markets Act 2000 (Administration Orders Relating to Insurers) (Amendment) Order 2003, SI 2003 No 2134, art 1.

Meaning of insurer in section 360 of the Financial Services and Markets Act 2000 2. [Article 2 amends article 2 of the Financial Services and Markets Act 2000 (Insolvency) (Definition of ‘‘Insurer’’) Order 2001 and is consequently not reproduced here.] Modification of Part II of the 1986 Act in relation to insurers 3. Part II of the 1986 Act (administration orders) applies in relation to insurers with the modifications specified in the Schedule to this Order, and accordingly paragraph 9(2) of Schedule B1 does not preclude the making of an administration order in relation to an insurer. Notes Art 3 was amended by The Financial Services and Markets Act 2000 (Administration Orders Relating to Insurers) (Amendment) Order 2003, SI 2003 No 2134, art 4.

Modification of the Insolvency Rules 1986 in relation to insurers 4. [Article 4 amends the Insolvency Rules 1986 (SI 1986 No 1925) to refer to the Financial Services Authority and is not reproduced here.] Mutual credit and set-off 5. Where an insurer, in relation to which an administration order has been made, subsequently goes into liquidation, sums due from the insurer to another party are not to be included in the account of mutual dealings rendered under rule 4.90 of the Insolvency Rules 1986 (mutual credit and set-off) if, at the time they became due— (a) an administration application had been made under paragraph 12 of Schedule B1 in relation to the insurer; (b) in the case of an appointment of an administrator under paragraph 14 of Schedule B1, a notice of appointment had been filed with the court under paragraph 18 of that Schedule in relation to the insurer; or (c) in the case of an appointment of an administrator under paragraph 22 of Schedule B1, a notice of intention to appoint had been filed with the court under paragraph 27 of that Schedule in relation to the insurer. Notes Art 5 revised by The Financial Services and Markets Act 2000 (Administration Orders Relating to Insurers) (Amendment) Order 2003, SI 2003 No 2134, art 6.

SCHEDULE Article 3 M O D I F I C AT I O N S O F PA RT I I O F T H E I N S O LV E N C Y A C T 1 9 8 6 I N R E L AT I O N T O I N S U R E R S

General Note The original paragraphs 1 to 5 of the Schedule amended Part II of the Insolvency Act 1986 in relation to insurers. The paragraphs 1 to 7 currently in force were introduced by The Financial Services and Markets

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Act 2000 (Administration Orders Relating to Insurers) (Amendment) Order 2003, SI 2003 No 2134, article 7. They amend Schedule B1 to the Insolvency Act 1986 and are not reproduced here.

8.—(1) The powers of the administrator referred to in Schedule 1 to the 1986 Act (powers of administrator or administrative receiver) include the power to make— (a) any payments due to a creditor; or (b) any payments on account of any sum which may become due to a creditor. (2) Any payments to a creditor made pursuant to sub-paragraph (1) must not exceed, in aggregate, the amount which the administrator reasonably considers that the creditor would be entitled to receive on a distribution of the insurer’s assets in a winding up. (3) The powers conferred by sub-paragraph (1) may be exercised until an initial creditors’ meeting but may only be exercised thereafter— (a) if the following conditions are met— (i) the administrator has laid before that meeting or any subsequent creditors’ meeting (‘‘the relevant meeting’’) a statement containing the information mentioned in sub-paragraph (4); and (ii) the powers are exercised with the consent of a majority in number representing three-fourths in value of the creditors present and voting either in person or by proxy at the relevant meeting; or (b) with the consent of the court. (4) The information referred to in sub-paragraph (3)(a) is an estimate of the aggregate amount of— (a) the insurer’s assets and liabilities (whether actual, contingent or prospective); and (b) all payments which the administrator proposes to make to creditors pursuant to subparagraph (1); including any assumptions which the administrator has made in calculating that estimate. Notes Paragraph 8 was originally paragraph 6; renumbered by The Financial Services and Markets Act 2000 (Administration Orders Relating to Insurers) (Amendment) Order 2003, SI 2003 No 2134, art 7. Paragraph 8(3) amended by The Financial Services and Markets Act 2000 (Administration Orders Relating to Insurers) (Amendment) Order 2003, SI 2003 No 2134, art 7.

1.47 THE FINANCIAL SERVICES AND MARKETS ACT 2000 (VARIATION OF THRESHOLD CONDITIONS) ORDER 2002 (SI 2002 No 2707)

General Note This Order amends Schedule 6 of the Financial Services and Markets Act and consequently is not reproduced here.

1.48 THE FINANCIAL SERVICES AND MARKETS ACT 2000 (EXEMPTION) (AMENDMENT) ORDER 2003 (SI 2003 No 47)

General Note This Order amends The Financial Services and Markets Act 2000 (Exemption) Order 2001, SI 2001 No 1201 and consequently is not reproduced here.

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1.49 THE INSURERS (REORGANISATION AND WINDING UP) REGULATIONS 2003 (SI 2003 No 1102)

General Note These Insurers (Reorganisation and Winding Up) Regulations 2003, SI 2003 No 1102, were revoked and replaced in their entirety by the Insurers (Reorganisation and Winding Up) Regulations 2004, SI 2004 No 353, reg 53, which reads: ‘‘Revocation and Transitional 53.—(1) Except as provided in this regulation, the Insurers (Reorganisation and Winding Up) Regulations 2003 are revoked. (2) Subject to (3), the provisions of Parts III and IV shall continue in force in respect of decisions orders or appointments referred to therein and made before the coming into force of these Regulations. (3) Where an administrator has been appointed in respect of a UK insurer on or after 15th September 2003, he shall be treated as being so appointed on the date these regulations come into force.’’

1.50 THE FINANCIAL SERVICES AND MARKETS ACT 2000 (EXEMPTION) (AMENDMENT) (NO 2) ORDER 2003 (SI 2003 No 1675) General Note This Order consists of amendments to The Financial Services and Markets Act 2000 (Exemption) Order 2001, SI 2001 No 1201, see para 1.36, and consequently is not reproduced here.

1.51 THE INSURERS (REORGANISATION AND WINDING UP) REGULATIONS 2004 (SI 2004 No 353) PA RT I

GENERAL

Citation and commencement 1. These Regulations may be cited as the Insurers (Reorganisation and Winding Up) Regulations 2004, and come into force on 18th February 2004. Interpretation 2.—(1) In these Regulations— ‘‘the 1985 Act’’ means the Companies Act 1985; ‘‘the 1986 Act’’ means the Insolvency Act 1986; ‘‘the 2000 Act’’ means the Financial Services and Markets Act 2000; ‘‘the 1989 Order’’ means the Insolvency (Northern Ireland) Order 1989; ‘‘administrator’’ has the meaning given by paragraph 13 of Schedule B1, or by paragraph 14 of Schedule B1 to the 1989 Order; ‘‘Article 418 compromise or arrangement’’ means a compromise or arrangement sanctioned by the court in relation to a UK insurer under Article 418 of the Companies Order, but does not include a compromise or arrangement falling within Article 420 or Articles 420A of that Order (reconstruction and amalgamations); ‘‘the Authority’’ means the Financial Services Authority; ‘‘branch’’, in relation to an EEA or UK insurer has the meaning given by Article 1(b) of the life insurance directive or the third non-life insurance directive; ‘‘claim’’ means a claim submitted by a creditor of a UK insurer in the course of—

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(a) a winding up, (b) an administration, or (c) a voluntary arrangement, with a view to recovering his debt in whole or in part, and includes a proof of debt, within the meaning of Rule 4.73(4) of the Insolvency Rules, Rule 4.079(4) of the Insolvency Rules (Northern Ireland) or in Scotland a claim made in accordance with rule 4.15 of the Insolvency (Scotland) Rules; ‘‘the Companies Order’’ means the Companies (Northern Ireland) Order 1986; ‘‘creditors’ voluntary winding up’’ has the meaning given by section 90 of the 1986 Act or Article 76 of the 1989 Order; ‘‘debt’’— (a) in England and Wales and Northern Ireland— (i) in relation to a winding up or administration of a UK insurer, has the meaning given by Rule 13.12 of the Insolvency Rules or Article 5 of the 1989 Order, and (ii) in a case where a voluntary arrangement has effect, in relation to a UK insurer, means a debt which would constitute a debt in relation to the winding up of that insurer, except that references in paragraph (1) of Rule 13.12 or paragraph (1) of Article 5 of the 1989 Order to the date on which the company goes into liquidation are to be read as references to the date on which the voluntary arrangement has effect; (b) in Scotland— (i) in relation to a winding up of a UK insurer, shall be interpreted in accordance with Schedule 1 to the Bankruptcy (Scotland) Act 1985 as applied by Chapter 5 of Part 4 of the Insolvency (Scotland) Rules, and (ii) in a case where a voluntary arrangement has effect in relation to a UK insurer, means a debt which would constitute a debt in relation to the winding up of that insurer, except that references in Chapter 5 of Part 4 of the Insolvency (Scotland) Rules to the date of commencement of winding up are to be read as references to the date on which the voluntary arrangement has effect; ‘‘directive reorganisation measure’’ means a reorganisation measure as defined in Article 2(c) of the reorganisation and winding-up directive which was adopted or imposed on or after 20th April 2003; ‘‘directive winding up proceedings’’ means winding up proceedings as defined in Article 2(d) of the reorganisation and winding-up directive which were opened on or after 20th April 2003; ‘‘EEA creditor’’ means a creditor of a UK insurer who— (a) in the case of an individual, is ordinarily resident in an EEA State, and (b) in the case of a body corporate or unincorporated association of persons, has its head office in an EEA State; ‘‘EEA insurer’’ means an undertaking, other than a UK insurer, pursuing the activity of direct insurance (within the meaning of Article 1 of the first life insurance directive or the first non-life insurance directive) which has received authorisation under Article 6 from its home state regulator; ‘‘EEA regulator’’ means a competent authority (within the meaning of Article 1(1) of the life insurance directive or Article 1(k) of the third non-life insurance directive, as the case may be) of an EEA State; ‘‘EEA State’’ has the meaning given by Schedule 1 to the Interpretation Act 1978; ‘‘the first non-life insurance directive’’ means the Council Directive (73/239/EEC) of 24 July 1973 on the co-ordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct insurance other than life assurance; ‘‘home state regulator’’, in relation to an EEA insurer, means the relevant EEA regulator in the EEA State where its head office is located; ‘‘the Insolvency Rules’’ means the Insolvency Rules 1986; ‘‘the Insolvency Rules (Northern Ireland)’’ means the Insolvency Rules (Northern Ireland) 1991; ‘‘the Insolvency (Scotland) Rules’’ means the Insolvency (Scotland) Rules 1986;

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‘‘insurance claim’’ means any claim in relation to an insurance debt; ‘‘insurance creditor’’ means a person who has an insurance claim against a UK insurer (whether or not he has claims other than insurance claims against that insurer); ‘‘insurance debt’’ means a debt to which a UK insurer is, or may become liable, pursuant to a contract of insurance, to a policyholder or to any person who has a direct right of action against that insurer, and includes any premium paid in connection with a contract of insurance (whether or not that contract was concluded) which the insurer is liable to refund; ‘‘life insurance directive’’ means the Directive (2002/83/EC) of the European Parliament and of the Council concerning life assurance; ‘‘officer’’, in relation to a company, has the meaning given by section 744 of the 1985 Act or Article 2 of the Companies Order; ‘‘official language’’ means a language specified in Article 1 of Council Regulation No 1 of 15th April 1958 determining the languages to be used by the European Economic Community (Regulation 1/58/EEC), most recently amended by paragraph (a) of Part XVIII of Annex I to the Act of Accession 1994 (194 N); ‘‘policyholder’’ has the meaning given by the Financial Services and Markets Act 2000 (Meaning of ‘‘Policy’’ and ‘‘Policyholder’’) Order 2001; ‘‘the reorganisation and winding-up directive’’ means the Directive (2001/17/EC) of the European Parliament and of the Council of 19 March 2001 on the reorganisation and winding-up of insurance undertakings; ‘‘Schedule Bl’’ means Schedule B1 to the 1986 Act as inserted by section 248 of the Enterprise Act 2002, unless specified otherwise; ‘‘section 425 compromise or arrangement’’ means a compromise or arrangement sanctioned by the court in relation to a UK insurer under section 425 of the 1985 Act, but does not include a compromise or arrangement falling within section 427 or section 427A of that Act (reconstructions or amalgamations); ‘‘section 425 or Article 418 compromise or arrangement’’ means a section 425 compromise or arrangement or an Article 418 compromise or arrangement; ‘‘supervisor’’ has the meaning given by section 7 of the 1986 Act or Article 20 of the 1989 Order; ‘‘the third non-life insurance directive’’ means the Council Directive (92/49/EEC) of 18th June 1992 on the co-ordination of laws, etc, and amending directives 73/239/EEC and 88/357/EEC); ‘‘UK insurer’’ means a person who has permission under Part IV of the 2000 Act to effect or carry out contracts of insurance, but does not include a person who, in accordance with that permission, carries on that activity exclusively in relation to reinsurance contracts; ‘‘voluntary arrangement’’ means a voluntary arrangement which has effect in relation to a UK insurer in accordance with section 4A of the 1986 Act or Article 17A of the 1989 Order; and ‘‘winding up’’ means— (a) winding up by the court, or (b) a creditors’ voluntary winding up. (2) In paragraph (1)— (a) for the purposes of the definition of ‘‘directive reorganisation measure’’, a reorganisation measure is adopted or imposed at the time when it is treated as adopted or imposed by the law of the relevant EEA State; and (b) for the purposes of the definition of ‘‘directive winding up proceedings’’, winding up proceedings are opened at the time when they are treated as opened by the law of the relevant EEA State, and in this paragraph ‘‘relevant EEA State’’ means the EEA State under the law of which the reorganisation is adopted or imposed, or the winding up proceedings are opened, as the case may be. (3) In these Regulations, references to the general law of insolvency of the United Kingdom include references to every provision made by or under the 1986 Act or the 1989 Order; and in relation to friendly societies or to industrial and provident societies references to the law of insolvency or to any provision of the 1986 Act or the 1989 Order are to that law as modified by

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the Friendly Societies Act 1992 or by the Industrial and Provident Societies Act 1965 or the Industrial and Provident Societies Act (Northern Ireland) 1969 (as the case may be). (4) References in these Regulations to a ‘‘contract of insurance’’ must be read with— (a) section 22 of the 2000 Act; (b) any relevant order made under that section; and (c) Schedule 2 to that Act, but for the purposes of these Regulations a contract of insurance does not include a reinsurance contract. (5) Functions imposed or falling on the Authority by or under these Regulations shall be deemed to be functions under the 2000 Act. Notes Paragraph (1) document references: definition of ‘‘the first non-life insurance directive’’, OJ No L228, 16.8.73, p. 3; definition of ‘‘the Insolvency Rules’’, SI 1986 No 1925; definition of ‘‘the Insolvency Rules (Northern Ireland)’’, SI 1991 No 364; definition of ‘‘the Insolvency (Scotland) Rules’’, SI 1986 No 1915; definition of ‘‘official language’’, OJ No 17, 6.10.1958, p. 385/58; Special Edition, Series I, Chapter 1952-1958, p. 0059 and OJ No C241. 29.08.94, p. 258; definition of ‘‘policyholder’’, Financial Services and Markets Act 2000 (Meaning of ‘‘Policy’’ and ‘‘Policyholder’’) Order 2001 SI 2001, No 2361; definition of ‘‘the reorganisation and winding-up directive’’, OJ No L110, 20.4.2001, p. 28; ‘‘the third non-life insurance directive’’, OJ No L228, 11.8.92, p. 1. Definition of ‘‘administrator’’ amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 2. Definition of ‘‘EEA State’’ modified by The Financial Services (EEA State) Regulations 2007, SI 2007 No 108, reg 8. Definition of ‘‘Schedule B1’’ amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 2.

Scope 3. For the purposes of these Regulations, neither the Society of Lloyd’s nor the persons specified in section 316(1) of the 2000 Act are UK insurers. PA RT I I

I N S O LV E N C Y M E A S U R E S A N D P R O C E E D I N G S : J U R I S D I C T I O N I N R E L AT I O N T O INSURERS

Prohibition against winding up etc. EEA insurers in the United Kingdom 4.—(1) On or after the relevant date a court in the United Kingdom may not, in relation to an EEA insurer or any branch of an EEA insurer— (a) make a winding up order pursuant to section 221 of the 1986 Act or Article 185 of the 1989 Order; (b) appoint a provisional liquidator; (c) make an administration order. (2) Paragraph (1)(a) does not prevent— (a) the court from making a winding up order after the relevant date in relation to an EEA insurer if— (i) a provisional liquidator was appointed in relation to that insurer before the relevant date, and (ii) that appointment continues in force until immediately before that winding up order is made; (b) the winding up of an EEA insurer after the relevant date pursuant to a winding up order which was made, and has not been discharged, before that date. (3) Paragraph (1)(b) does not prevent a provisional liquidator of an EEA insurer appointed before the relevant date from acting in relation to that insurer after that date. (4) Paragraph (1)(c) does not prevent an administrator appointed before the relevant date from acting after that date in a case in which the administration order under which he or his predecessor was appointed remains in force after that date.

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(5) An administrator may not, in relation to an EEA insurer, be appointed under paragraphs 14 or 22 of Schedule B1 or paragraph 15 or 23 of Schedule B1 to the 1989 Order. (6) A proposed voluntary arrangement shall not have effect in relation to an EEA insurer if a decision, under section 4 of the 1986 Act or Article 17 of the 1989 Order, with respect to the approval of that arrangement was made after the relevant date. (7) Section 377 of the 2000 Act (reducing the value of contracts instead of winding up) does not apply in relation to an EEA insurer. (8) An order under section 254 of the Enterprise Act 2002 (application of insolvency law to a foreign company) or under Article 9 of the Insolvency (Northern Ireland) Order 2005 (application of insolvency law to company incorporated outside Northern Ireland) may not provide for any of the following provisions of the 1986 Act or of the 1989 Order to apply in relation to an EEA insurer— (a) Part I of the 1986 Act or Part II of the 1989 Order (company voluntary arrangements); (b) Part II of the 1986 Act or Part III of the 1989 Order (administration); (c) Chapter VI of Part IV of the 1986 Act (winding up by the Court) or Chapter VI of Part V of the 1989 Order (winding up by the High Court). (9) In this regulation and regulation 5, ‘‘relevant date’’ means 20th April 2003. Notes Paragraph (5) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 2. Paragraph (8) new text substituted by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 2.

Schemes of arrangement: EEA insurers 5.—(1) For the purposes of section 425(6)(a) of the 1985 Act or Article 418(5)(a) of the Companies Order, an EEA insurer or a branch of an EEA insurer is to be treated as a company liable to be wound up under the 1986 Act or the 1989 Order if it would be liable to be wound up under that Act or Order but for the prohibition in regulation 4(1)(a). (2) But a court may not make a relevant order under section 425(2) of the 1985 Act or Article 418(2) of the Companies Order in relation to an EEA insurer which is subject to a directive reorganisation measure or directive winding up proceedings, or a branch of an EEA insurer which is subject to such a measure or proceedings unless the conditions set out in paragraph (3) are satisfied. (3) Those conditions are— (a) the person proposing the section 425 or Article 418 compromise or arrangement (‘‘the proposal’’) has given— (i) the administrator or liquidator, and (ii) the relevant competent authority, reasonable notice of the details of that proposal; and (b) no person notified in accordance with sub-paragraph (a) has objected to the proposal. (4) Nothing in this regulation invalidates a compromise or arrangement which was sanctioned by the court by an order made before the relevant date. (5) For the purposes of paragraph (2), a relevant order means an order sanctioning a section 425 or Article 418 compromise or arrangement which— (a) is intended to enable the insurer, and the whole or any part of its undertaking, to survive as a going concern and which affects the rights of persons other than the insurer or its contributories; or (b) includes among its purposes a realisation of some or all of the assets of the EEA insurer to which the order relates and the distribution of the proceeds to creditors, with a view to terminating the whole or any part of the business of that insurer. (6) For the purposes of this regulation— (a) ‘‘administrator’’ means an administrator, as defined by Article 2(i) of the reorganisation and winding up directive, who is appointed in relation to the EEA insurer in relation to which the proposal is made;

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(b) ‘‘liquidator’’ means a liquidator, as defined by Article 2(j) of the reorganisation and winding up directive, who is appointed in relation to the EEA insurer in relation to which the proposal is made; (c) ‘‘competent authority’’ means the competent authority, as defined by Article 2(g) of the reorganisation and winding up directive, which is competent for the purposes of the directive reorganisation measure or directive winding up proceedings mentioned in paragraph (2). Reorganisation measures and winding up proceedings in respect of EEA insurers effective in the United Kingdom 6.—(1) An EEA insolvency measure has effect in the United Kingdom in relation to— (a) any branch of an EEA insurer, (b) any property or other assets of that insurer, (c) any debt or liability of that insurer as if it were part of the general law of insolvency of the United Kingdom. (2) Subject to paragraph (4)— (a) a competent officer who satisfies the condition mentioned in paragraph (3); or (b) a qualifying agent appointed by a competent officer who satisfies the condition mentioned in paragraph (3), may exercise in the United Kingdom, in relation to the EEA insurer which is subject to an EEA insolvency measure, any function which, pursuant to that measure, he is entitled to exercise in relation to that insurer in the relevant EEA State. (3) The condition mentioned in paragraph (2) is that the appointment of the competent officer is evidenced— (a) by a certified copy of the order or decision by a judicial or administrative authority in the relevant EEA State by or under which the competent officer was appointed; or (b) by any other certificate issued by the judicial or administrative authority which has jurisdiction in relation to the EEA insolvency measure, and accompanied by a certified translation of that order, decision or certificate (as the case may be). (4) In exercising functions of the kind mentioned in paragraph (2), the competent officer or qualifying agent— (a) may not take any action which would constitute an unlawful use of force in the part of the United Kingdom in which he is exercising those functions; (b) may not rule on any dispute arising from a matter falling within Part V of these Regulations which is justiciable by a court in the part of the United Kingdom in which he is exercising those functions; and (c) notwithstanding the way in which functions may be exercised in the relevant EEA State, must act in accordance with relevant laws or rules as to procedure which have effect in the part of the United Kingdom in which he is exercising those functions. (5) For the purposes of paragraph (4)(c), ‘‘relevant laws or rules as to procedure’’ mean— (a) requirements as to consultation with or notification of employees of an EEA insurer; (b) law and procedures relevant to the realisation of assets; (c) where the competent officer is bringing or defending legal proceedings in the name of, or on behalf of, an EEA insurer, the relevant rules of court. (6) In this regulation— ‘‘competent officer’’ means a person appointed under or in connection with an EEA insolvency measure for the purpose of administering that measure; ‘‘qualifying agent’’ means an agent validly appointed (whether in the United Kingdom or elsewhere) by a competent officer in accordance with the relevant law in the relevant EEA State; ‘‘EEA insolvency measure’’ means, as the case may be, a directive reorganisation measure or directive winding up proceedings which has effect in relation to an EEA insurer by virtue of the law of the relevant EEA State;

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‘‘relevant EEA State’’, in relation to an EEA insurer, means the EEA State in which that insurer has been authorised in accordance with Article 4 of the life insurance directive or Article 6 of the first non-life insurance directive. Confirmation by the court of a creditors’ voluntary winding up 7.—(1) Rule 7.62 of the Insolvency Rules or Rule 7.56 of the Insolvency Rules (Northern Ireland) applies in relation to a UK insurer with the modification specified in paragraph (2) or (3). (2) In Rule 7.62 r paragraph (1), after the words ‘‘the Insurers (Reorganisation and Winding Up) Regulations 2003’’ insert the words ‘‘or the Insurers (Reorganisation and Winding Up) Regulations 2004’’. In Rule 7.56 of the Insolvency Rules (Northern Ireland) paragraph (1), after the words ‘‘the Insurers (Reorganisation and Winding Up) Regulations 2003’’ insert the words ‘‘or the Insurers (Reorganisation and Winding Up) Regulations 2004’’. PA RT I I I

M O D I F I C AT I O N S O F T H E L AW O F I N S O LV E N C Y : N O T I F I C AT I O N A N D P U B L I C AT I O N

Modifications of the law of insolvency 8. The general law of insolvency has effect in relation to UK insurers subject to the provisions of this Part. Notification of relevant decision to the Authority 9.—(1) Where on or after 3rd March 2004 the court makes a decision, order or appointment of any of the following kinds— (a) an administration order under paragraph 13 of Schedule B1, or paragraph 14 of Schedule B1 to the 1989 Order; (b) a winding up order under section 125 of the 1986 Act or Article 105 of the 1989 Order; [(ba) a bankruptcy order under section 264 of the 1986 Act or under Article 238 of the 1989 Order; (bb) an award of sequestration under the Bankruptcy (Scotland) Act 1985;] (c) the appointment of a provisional liquidator under section 135(1) of the 1986 Act or Article 115(1) of the 1989 Order; [(ca) the appointment of an interim trustee under section 286 or 287 of the 1986 Act or under Article 259 or 260 of the 1989 Order; (cb) the appointment of a trustee in bankruptcy under sections 295, 296 or 300 of that Act or under Articles 268, 269 or 273 of that Order; (cc) the appointment of an interim or permanent trustee under the Bankruptcy (Scotland) Act 1985;] (d) an interim order under paragraph 13(1)(d) of Schedule B1 or paragraph 14(1)(d) of Schedule B1 to the 1989 Order; (e) a decision to reduce the value of one or more of the insurer’s contracts, in accordance with section 377 of the 2000 Act, it must immediately inform the Authority, or cause the Authority to be informed of the decision, order or appointment which has been made. (2) Where a decision with respect to the approval of a voluntary arrangement [or individual voluntary arrangement] has effect, and the arrangement which is the subject of that decision is a qualifying arrangement, the supervisor [or nominee (as the case may be)] must forthwith inform the Authority of the arrangement. (3) Where a liquidator is appointed as mentioned in section 100 of the 1986 Act, paragraph 83 of Schedule B1, paragraph 84 of Schedule B1 to the 1989 Order or Article 86 of the 1989 Order (appointment of liquidator in a creditors’ voluntary winding up), the liquidator must inform the Authority forthwith of his appointment.

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(4) Where in the case of a members’ voluntary winding up, section 95 of the 1986 Act (effect of company’s insolvency) or Article 81 of the 1989 Order applies, the liquidator must inform the Authority forthwith that he is of that opinion. (6) Paragraphs (1), (2) and (3) do not apply in any case where the Authority was represented at all hearings in connection with the application in relation to which the decision, order or appointment is made. (7) For the purposes of paragraph (2), a ‘‘qualifying arrangement’’ means a voluntary arrangement [or individual voluntary arrangement] which— (a) varies the rights of creditors as against the insurer [member or former member] and is intended to enable the insurer [member or former member], and the whole or any part of its undertaking, to survive as a going concern; or (b) includes a realisation of some or all of the assets of the insurer [member or former member] and distribution of the proceeds to creditors, with a view to terminating the whole or any part of the business of that insurer. (8) An administrator, supervisor[, nominee, trustee in bankruptcy, trustee under a trust deed for creditors] or liquidator who fails without reasonable excuse to comply with paragraph (2), (3), or (4) (as the case may be) commits an offence and is liable on summary conviction to a fine not exceeding level 3 on the standard scale. Notes Paragraph (1) the date inserted by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2004, SI 2004 No 546, reg 2. Sub-paragraph (1)(a) amended by The Insurers (Reorganisation and Winding Up)(Amendment) Regulations 2007, SI 2007 No 851, reg 2. Sub-paragraph (1)(ba) was inserted by The Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005, reg 33, SI 2005 No 1998 for the purpose of application to Lloyd’s. Amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, Reg 3. Sub-paragraph (1)(bb) was inserted by The Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005, reg 33, SI 2005 No 1998 for the purpose of application to Lloyd’s. Sub-paragraph (1)(ca) was inserted by The Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005, reg 33, SI 2005 No 1998 for the purpose of application to Lloyd’s. Sub-paragraph (1)(cb) was inserted by The Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005, reg 33, SI 2005 No 1998 for the purpose of application to Lloyd’s. Sub-paragraph (1)(cc) was inserted by The Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005, reg 33, SI 2005 No 1998 for the purpose of application to Lloyd’s. Sub-paragraph (1)(d) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 2. Paragraph (2) the words in square brackets were inserted by The Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005, reg 33, SI 2005 No 1998 for the purpose of application to Lloyd’s. Paragraph (3) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 2. Paragraph (7) the words in square brackets were inserted by The Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005, reg 33, SI 2005 No 1998 for the purpose of application to Lloyd’s. Paragraph (8) the words in square brackets were inserted by The Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005, reg 33, SI 2005 No 1998 for the purpose of application to Lloyd’s.

Notification of relevant decision to EEA regulators 10.—(1) Where the Authority is informed of a decision, order or appointment in accordance with regulation 9, the Authority must as soon as is practicable inform the EEA regulators in every EEA State— (a) that the decision, order or appointment has been made; and (b) in general terms, of the possible effect of a decision, order or appointment of that kind on— (i) the business of an insurer [the insurance business of a member or former member], and (ii) the rights of policyholders under contracts of insurance effected and carried out by an insurer [a member or former member]. (2) Where the Authority has been represented at all hearings in connection with the application in relation to which the decision, order or appointment has been made, the

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Authority must inform the EEA regulators in every EEA State of the matters mentioned in paragraph (1) as soon as is practicable after that decision, order or appointment has been made. Notes Paragraph (1)(b)(i) and (ii) the words in square brackets were inserted by The Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005, reg 33, SI 2005 No 1998 for the purpose of application to Lloyd’s.

Publication of voluntary arrangement, administration order, winding up order or scheme of arrangement 11.—(1) This regulation applies where a qualifying decision has effect, or a qualifying order or qualifying appointment is made, in relation to a UK insurer on or after 20 April 2003. (2) For the purposes of this regulation— (a) a qualifying decision means a decision with respect to the approval of a proposed voluntary arrangement, in accordance with section 4A of the 1986 Act or Article 17A of the 1989 Order; (b) a qualifying order means— (i) an administration order under paragraph 13 of Schedule B1 or under paragraph 14 of Schedule B1 to the 1989 Order, (ii) an order appointing a provisional liquidator in accordance with section 135 of the 1986 Act or Article 115 of the 1989 Order, or (iii) a winding up order made by the court under Part IV of the 1986 Act or Part V of the 1989 Order. (c) a qualifying appointment means the appointment of a liquidator as mentioned in section 100 of the 1986 Act or Article 86 of the 1989 Order (appointment of liquidator in a creditors’ voluntary winding up). (3) Subject to paragraph (8), as soon as is reasonably practicable after a qualifying decision has effect, or a qualifying order or a qualifying appointment has been made, the relevant officer must publish, or cause to be published, in the Official Journal of the European Communities the information mentioned in paragraph (4) and (if applicable) paragraphs (5), (6) or (7). (4) That information is— (a) a summary of the terms of the qualifying decision or qualifying appointment or the provisions of the qualifying order (as the case may be); (b) the identity of the relevant officer; and (c) the statutory provisions in accordance with which the qualifying decision has effect or the qualifying order or appointment has been made or takes effect. (5) In the case of a qualifying appointment falling within paragraph (2)(c), that information includes the court to which an application under section 112 of the 1986 Act (reference of questions to the court) or Article 98 of the 1989 Order (reference of questions to the High Court) may be made. (6) In the case of a qualifying decision, that information includes the court to which an application under section 6 of the 1986 Act or Article 19 of the 1989 Order (challenge of decisions) may be made. (7) Paragraph (3) does not apply where a qualifying decision or qualifying order falling within paragraph (2)(b)(i) affects the interests only of the members, or any class of members, or employees of the insurer (in their capacity as members or employees). (8) This regulation is without prejudice to any requirement to publish information imposed upon a relevant officer under any provision of the general law of insolvency. (9) A relevant officer who fails to comply with paragraph (3) of this regulation commits an offence and is liable on summary conviction to a fine not exceeding level 3 on the standard scale. (10) A qualifying decision, qualifying order or qualifying appointment is not invalid or ineffective if the relevant official fails to comply with paragraph (3) of this regulation. (11) In this regulation, ‘‘relevant officer’’ means— (a) in the case of a voluntary arrangement, the supervisor;

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(b) in the case of an administration order or the appointment of an administrator, the administrator; (c) in the case of a creditors’ voluntary winding up, the liquidator; (d) in the case of winding up order, the liquidator; (e) in the case of an order appointing a provisional liquidator, the provisional liquidator. Notes Application to Lloyd’s: The Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005, reg 35, SI 2005 No 1998. Sub-paragraph (2)(b)(i) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 2.

Notification to creditors: winding up proceedings 12.—(1) When a relevant order or appointment is made, or a relevant decision is taken, in relation to a UK insurer on or after 20 April 2003, the appointed officer must as soon as is reasonably practicable— (a) notify all known creditors of that insurer in writing of— (i) the matters mentioned in paragraph (4), and (ii) the matters mentioned in paragraph (5); and (b) notify all known insurance creditors of that insurer in writing of the matters mentioned in paragraph 6, in any case. (2) The appointed officer may comply with the requirement in paragraph (1)(a)(i) and the requirement in paragraph (1)(a)(ii) by separate notifications. (3) For the purposes of this regulation— (a) ‘‘relevant order’’ means— (i) an administration order made under section 8 of the 1986 Act before 15 September 2003, or made on or after that date under paragraph 13 of Schedule B1 in the prescribed circumstances or under paragraph 14 of Schedule B1 to the 1989 Order in the prescribed circumstances, (ii) a winding up order under section 125 of the 1986 Act (powers of the court on hearing a petition) or Article 105 of the 1989 Order (powers of High Court on hearing of petition), (iii) the appointment of a liquidator in accordance with section 138 of the 1986 Act (appointment of a liquidator in Scotland), and (iv) an order appointing a provisional liquidator in accordance with section 135 of that Act or Article 115 of the 1989 Order; (b) ‘‘relevant appointment’’ means the appointment of a liquidator as mentioned in section 100 of the 1986 Act or Article 86 of the 1989 Order (appointment of liquidator in a creditors’ voluntary winding up); and (c) ‘‘relevant decision’’ means a decision as a result of which a qualifying voluntary arrangement has effect. (4) The matters which must be notified to all known creditors in accordance with paragraph (1)(a)(i) are as follows— (a) that a relevant order or appointment has been made, or a relevant decision taken, in relation to the UK insurer; and (b) the date from which that order, appointment or decision has effect. (5) The matters which must be notified to all known creditors in accordance with paragraph (1)(a)(ii) are as follows— (a) if applicable, the date by which a creditor must submit his claim in writing; (b) the matters which must be stated in a creditor’s claim; (c) details of any category of debt in relation to which a claim is not required; (d) the person to whom any such claim or any observations on a claim must be submitted; and (e) the consequences of any failure to submit a claim by any specified deadline. (6) The matters which must be notified to all known insurance creditors, in accordance with paragraph (1)(b), are as follows—

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(a) the effect which the relevant order, appointment or decision will, or is likely, to have on the kind of contract of insurance under, or in connection with, which that creditor’s insurance claim against the insurer is founded; and (b) the date from which any variation (resulting from the relevant order or relevant decision) to the risks covered by, or the sums recoverable under, that contract has effect. (7) Subject to paragraph (8), where a creditor is notified in accordance with paragraph (1)(a)(ii), the notification must be headed with the words ‘‘Invitation to lodge a claim: time limits to be observed’’, and that heading must be given in— (a) the official language, or one of the official languages, of the EEA State in which that creditor is ordinarily resident; or (b) every official language. (8) Where a creditor notified in accordance with paragraph (1) is— (a) an insurance creditor; and (b) ordinarily resident in an EEA State, the notification must be given in the official language, or one of the official languages, of that EEA State. (9) The obligation under paragraph (1)(a)(ii) may be discharged by sending a form of proof in accordance with Rule 4.74 of the Insolvency Rules, Rule 4.080 of the Insolvency Rules (Northern Ireland) or Rule 4.15(2) of the Insolvency (Scotland) Rules as applicable in cases where any of those rules applies, provided that the form of proof complies with paragraph (7) or (8) (whichever is applicable). (10) The prescribed circumstances are where the administrator includes in the statement required under Rule 2.3 of the Insolvency Rules or under Rule 2.003 of the Insolvency Rules (Northern Ireland) a statement to the effect that the objective set out in paragraph 3(1)(a) of Schedule B1 or in paragraph 4(1)(a) of Schedule B1 to the 1989 Order is not reasonably likely to be achieved. (11) Where, after the appointment of an administrator, the administrator concludes that it is not reasonably practicable to achieve the objective specified in paragraph 3(1)(a) of Schedule B1 or in paragraph 4(1)(a) of Schedule B1 to the 1989 Order, he shall inform the court and the Authority in writing of that conclusion and upon so doing the order by which he was appointed shall be a relevant order for the purposes of this regulation and the obligation under paragraph (1) shall apply as from the date on which he so informs the court and the Authority. (12) An appointed officer commits an offence if he fails without reasonable excuse to comply with an applicable requirement under this regulation, and is liable on summary conviction to a fine not exceeding level 3 on the standard scale. (13) For the purposes of this regulation— (a) ‘‘appointed officer’’ means— (i) in the case of a relevant order falling within paragraph (3)(a)(i) or a relevant appointment falling within paragraph (3)(b)(i), the administrator, (ii) in the case of a relevant order falling within paragraph (3)(a)(ii) or (iii) or a relevant appointment falling within paragraph (3)(b)(ii), the liquidator, (iii) in the case of a relevant order falling within paragraph (3)(a)(iv), the provisional liquidator, or (iv) in the case of a relevant decision, the supervisor; and (b) a creditor is a ‘‘known’’ creditor if the appointed officer is aware, or should reasonably be aware of— (i) his identity, (ii) his claim or potential claim, and (iii) a recent address where he is likely to receive a communication. (14) For the purposes of paragraph (3), and of regulations 13 and 14, a voluntary arrangement is a qualifying voluntary arrangement if its purposes include a realisation of some or all of the assets of the UK insurer to which the order relates and a distribution of the proceeds to creditors, with a view to terminating the whole or any part of the business of that insurer.

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Notes Application to Lloyd’s: The Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005, reg 36, SI 2005 No 1998. Sub-paragraph (3)(a)(i) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 2. Paragraph (10) revised by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 2. Paragraph (11) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 2.

Submission of claims by EEA creditors 13.—(1) An EEA creditor who on or after 20th April 2003 submits a claim or observations relating to his claim in any relevant proceedings (irrespective of when those proceedings were commenced or had effect) may do so in his domestic language, provided that the requirements in paragraphs (3) and (4) are complied with. (2) For the purposes of this regulation, ‘‘relevant proceedings’’ means— (a) a winding up; (b) a qualifying voluntary arrangement; (c) administration. (3) Where an EEA creditor submits a claim in his domestic language, the document must be headed with the words ‘‘Lodgement of claim’’ (in English). (4) Where an EEA creditor submits observations on his claim (otherwise than in the document by which he submits his claim), the observations must be headed with the words ‘‘Submission of observations relating to claims’’ (in English). (5) Paragraph (3) does not apply where an EEA creditor submits his claim using— (a) in the case of a winding up, a form of proof supplied by the liquidator in accordance with Rule 4.74 of the Insolvency Rules, Rule 4.080 of the Insolvency Rules (Northern Ireland) or rule 4.15(2) of the Insolvency (Scotland) Rules as the case may be; (b) in the case of a qualifying voluntary arrangement, a form approved by the court for that purpose. (6) In this regulation— (a) ‘‘domestic language’’, in relation to an EEA creditor, means the official language, or one of the official languages, of the EEA State in which he is ordinarily resident or, if the creditor is not an individual, in which the creditor’s head office is located; and (b) ‘‘qualifying voluntary arrangement’’ has the meaning given by regulation 12(12). Notes Application to Lloyd’s: The Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005, reg 37, SI 2005 No 1998.

Reports to creditors 14.—(1) This regulation applies where, on or after 20th April 2003— (a) a liquidator is appointed in accordance with section 100 of the 1986 Act or Article 86 of the 1989 Order (creditors’ voluntary winding up: appointment of liquidator) or, on or after 15th September 2003, paragraph 83 of Schedule B1 or paragraph 84 of Schedule B1 to the 1989 Order (moving from administration to creditors’ voluntary liquidation); (b) a winding up order is made by the court; (c) a provisional liquidator is appointed; or (d) an administrator is appointed under paragraph 13 of Schedule B1 or under paragraph 14 of Schedule B1 to the 1989 Order. (2) The liquidator or provisional liquidator (as the case may be) must send to every known creditor a report once in every 12 months beginning with the date when his appointment has effect. (3) The requirement in paragraph (2) does not apply where a liquidator or provisional liquidator is required by order of the court to send a report to creditors at intervals which are more frequent than those required by this regulation.

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(4) This regulation is without prejudice to any requirement to send a report to creditors, imposed by the court on the liquidator or provisional liquidator, which is supplementary to the requirements of this regulation. (5) A liquidator or provisional liquidator commits an offence if he fails without reasonable excuse to comply with an applicable requirement under this regulation, and is liable on summary conviction to a fine not exceeding level 3 on the standard scale. (6) For the purposes of this regulation— (a) ‘‘known creditor’’ means— (i) a creditor who is known to the liquidator or provisional liquidator, and (ii) in a case falling within paragraph (1)(b) or (c), a creditor who is specified in the insurer’s statement of affairs (within the meaning of section 131 of the 1986 Act or Article 111 of the 1989 Order); and (b) ‘‘report’’ means a written report setting out the position generally as regards the progress of the winding up or provisional liquidation (as the case may be). Notes Sub-paragraph (1)(a) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 2. Sub-paragraph (1)(d) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 2. Sub-paragraph (14)(1)(d) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2004, SI 2004 No 546, reg 2. Application to Lloyd’s: The Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005, reg 38, SI 2005 No 1998.

Service of notices and documents 15.—(1) This regulation applies to any notification, report or other document which is required to be sent to a creditor of a UK insurer by a provision of this Part (‘‘a relevant notification’’). (2) A relevant notification may be sent to a creditor by either of the following methods— (a) posting it to the proper address of the creditor; (b) transmitting it electronically, in accordance with paragraph (4). (3) For the purposes of paragraph (2)(a), the proper address of a creditor is any current address provided by that creditor as an address for service of a relevant notification or, if no such address is provided— (a) the last known address of that creditor (whether his residence or a place where he carries on business); (b) in the case of a body corporate, the address of its registered or principal office; or (c) in the case of an unincorporated association, the address of its principal office. (4) A relevant notification may be transmitted electronically only if it is sent to— (a) an electronic address notified to the relevant officer by the creditor for this purpose; or (b) if no such address has been notified, an electronic address at which the relevant officer reasonably believes the creditor will receive the notification. (5) Any requirement in this part to send a relevant notification to a creditor shall also be treated as satisfied if— (a) the creditor has agreed with— (i) the UK insurer which is liable under the creditor’s claim, or (ii) the relevant officer, that information which is required to be sent to him (whether pursuant to a statutory or contractual obligation, or otherwise) may instead be accessed by him on a web site; (b) the agreement applies to the relevant notification in question; (c) the creditor is notified of— (i) the publication of the relevant notification on a web site, (ii) the address of that web site, (iii) the place on that web site where the relevant notification may be accessed, and how it may be accessed; and

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(d) the relevant notification is published on that web site throughout a period of at least one month beginning with the date on which the creditor is notified in accordance with sub-paragraph (c): (6) Where, in a case in which paragraph (5) is relied on for compliance with a requirement of regulation 12 or 14— (a) a irrelevant notification is published for a part, but not all, of the period mentioned in paragraph (5)(d); but (b) the failure to publish it throughout that period is wholly attributable to circumstances which it would not be reasonable to have expected the relevant officer to prevent or avoid, no offence is committed under regulation 12(10) or regulation 14(5) (as the case may be) by reason of that failure. (7) In this regulation— (a) ‘‘electronic address’’ includes any number or address used for the purposes of receiving electronic communications; (b) ‘‘electronic communication’’ means an electronic communication within the meaning of the Electronic Communications Act 2000 the processing of which on receipt is intended to produce writing; and (c) ‘‘relevant officer’’ means (as the case may be) an administrator, liquidator, provisional liquidator or supervisor who is required to send a relevant notification to a creditor by a provision of this Part. Notes Application to Lloyd’s: The Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005, reg 39, SI 2005 No 1998.

Disclosure of confidential information received from an EEA regulator 16.—(1) This regulation applies to information (‘‘insolvency information’’) which— (a) relates to the business or affairs of any other person; and (b) is supplied to the Authority by an EEA regulator acting in accordance with Articles 5, 8 or 30 of the reorganisation and winding up directive. (2) Subject to paragraphs (3) and (4), sections 348, 349 and 352 of the 2000 Act apply in relation to insolvency information in the same way as they apply in relation to confidential information within the meaning of section 348(2) of the 2000 Act. (3) Insolvency information is not subject to the restrictions on disclosure imposed by section 348(1) of the 2000 Act (as it applies by virtue of paragraph (2)) if it satisfies any of the criteria set out in section 348(4) of the 2000 Act. (4) The Disclosure Regulations apply in relation to insolvency information as they apply in relation to single market directive information (within the meaning of those Regulations). (5) In this regulation, ‘‘the Disclosure Regulations’’ means the Financial Services and Markets Act 2000 (Disclosure of Confidential Information) Regulations 2001. Notes The Financial Services and Markets Act 2000 (Disclosure of Confidential Information) Regulations 2001 are SI 2001 No 2188, amended by SI 2001 No 3437 and 3624 and SI 2002 No 1775, and SI 2003 No 693, 1473, 2066, 2174 and 2817.

PA RT I V

P R I O R I T Y O F PAY M E N T O F I N S U R A N C E C L A I M S I N W I N D I N G U P E T C .

Notes Application of Part IV to Lloyd’s: The Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005, reg 40–44, SI 2005 No 1998.

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Interpretation of this Part 17.—(1) For the purposes of this Part— ‘‘composite insurer’’ means a UK insurer who is authorised to carry on both general business and long term business, in accordance with article 18(2) of the life insurance directive; ‘‘floating charge’’ has the meaning given by section 251 of the 1986 Act or paragraph (1) of Article 5 of the 1989 Order; ‘‘general business’’ means the business of effecting or carrying out a contract of general insurance; ‘‘general business assets’’ means the assets of a composite insurer which are, or should properly be, apportioned to that insurer’s general business, in accordance with the requirements of Article 18(3) of the life insurance directive (separate management of long term and general business of a composite insurer); ‘‘general business liabilities’’ means the debts of a composite insurer which are attributable to the general business carried on by that insurer; ‘‘general insurer’’ means a UK insurer who carries on exclusively general business; ‘‘long term business’’ means the business of effecting or carrying out a contract of long term insurance; ‘‘long term business assets’’ means the assets of a composite insurer which are, or should properly be, apportioned to that insurer’s long term business, in accordance with the requirements of Article 18(3) of the first life insurance directive (separate management of long term and general business of a composite insurer); ‘‘long term business liabilities’’ means the debts of a composite insurer which are attributable to the long term business carried on by that insurer; ‘‘long term insurer’’ means a UK insurer who— (a) carries on long term business exclusively, or (b) carries on long term business and permitted general business; ‘‘non-transferring composite insurer’’ means a composite insurer the long term business of which has not been, and is not to be, transferred as a going concern to a person who may lawfully carry out those contracts, in accordance with section 376(2) of the 2000 Act; ‘‘other assets’’ means any assets of a composite insurer which are not long term business assets or general business assets; ‘‘other business’’, in relation to a composite insurer, means such of the business (if any) of the insurer as is not long term business or general business; ‘‘permitted general business’’ means the business of effecting or carrying out a contract of general insurance where the risk insured against relates to either accident or sickness; ‘‘preferential debt’’ means a debt falling into any of categories 4 or 5 of the debts listed in Schedule 6 to the 1986 Act or Schedule 4 to the 1989 Order, that is— (a) contributions to occupational pension schemes, etc., and (b) remuneration etc. of employees; ‘‘society’’ means— (a) a friendly society incorporated under the Friendly Societies Act 1992, (b) a society which is a friendly society within the meaning of section 7(1)(a) of the Friendly Societies Act 1974, and registered within the meaning of that Act, or (c) an industrial and provident society registered or deemed to be registered under the Industrial and Provident Societies Act 1965 or the Industrial and Provident Societies Act (Northern Ireland) 1969. (2) In this Part, references to assets include a reference to proceeds where an asset has been realised, and any other sums representing assets. (3) References in paragraph (1) to a contract of long term or of general insurance must be read with— (a) section 22 of the 2000 Act; (b) any relevant order made under that section; and (c) Schedule 2 to that Act.

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Application of regulations 19 to 27 18.—(1) Subject to paragraph (2), regulations 19 to 27 apply in the winding up of a UK insurer where— (a) in the case of a winding up by the court, the winding up order is made on or after 20th April 2003; or (b) in the case of a creditors’ voluntary winding up, the liquidator is appointed, as mentioned in section 100 of the 1986 Act, paragraph 83 of Schedule B1, paragraph 84 of Schedule B1 to the 1989 Order or Article 86 of the 1989 Order, on or after 20th April 2003. (2) Where a relevant section 425 or Article 418 compromise or arrangement is in place, (a) no winding up proceedings may be opened without the permission of the court, and (b) the permission of the court is to be granted only if required by the exceptional circumstances of the case. (3) For the purposes of paragraph (2), winding up proceedings include proceedings for a winding up order or for a creditors’ voluntary liquidation with confirmation by the court. (4) Regulations 20 to 27 do not apply to a winding up falling within paragraph (1) where, in relation to a UK insurer— (a) an administration order was made before 20th April 2003, and that order is not discharged until the commencement date; or (b) a provisional liquidator was appointed before 20th April 2003, and that appointment is not discharged until the commencement date. (5) For purposes of this regulation, ‘‘the commencement date’’ means the date when a UK insurer goes into liquidation within the meaning given by section 247(2) of the 1986 Act or Article 6(2) of the 1989 Order. Notes Sub-paragraph (1)(b) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 2.

Application of this Part: assets subject to a section 425 or Article 418 compromise or arrangement 19.—(1) For the purposes of this Part, the insolvent estate of a UK insurer shall not include any assets which at the commencement date are subject to a relevant section 425 or Article 418 compromise or arrangement. (2) In this regulation— (a) ‘‘assets’’ has the same meaning as ‘‘property’’ in section 436 of the 1986 Act or Article 2(2) of the 1989 Order; (b) ‘‘commencement date’’ has the meaning given in regulation 18(5); (c) ‘‘insolvent estate’’— (i) in England, Wales and Northern Ireland has the meaning given by Rule 13.8 of the Insolvency Rules or Rule 0.2 of the Insolvency Rules (Northern Ireland), and (ii) in Scotland means the company’s assets; (d) ‘‘relevant section 425 or Article 418 compromise or arrangement’’ means (i) a section 425 or Article 418 compromise or arrangement which was sanctioned by the court before 20th April 2003, or (ii) any subsequent section 425 or Article 418 compromise or arrangement sanctioned by the court to amend or replace a compromise or arrangement of a kind mentioned in paragraph (i). Notes Paragraph (2) amended by The Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005, SI 2005 No 1998, reg 49.

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Preferential debts: disapplication of section 175 of the 1986 Act or Article 149 of the 1989 Order 20. Except to the extent that they are applied by regulation 27, section 175 of the 1986 Act or Article 149 of the 1989 Order (preferential debts (general provision)) does not apply in the case of a winding up of a UK insurer, and instead the provisions of regulations 21 to 26 have effect. Preferential debts: long term insurers and general insurers 21.—(1) This regulation applies in the case of a winding up of— (a) a long term insurer; (b) a general insurer; (c) a composite insurer, where the long term business of that insurer has been or is to be transferred as a going concern to a person who may lawfully carry out the contracts in that long term business in accordance with section 376(2) of the 2000 Act. (2) Subject to paragraph (3), the debts of the insurer must be paid in the following order of priority— (a) preferential debts; (b) insurance debts; (c) all other debts. (3) Preferential debts rank equally among themselves after the expenses of the winding up and must be paid in full, unless the assets are insufficient to meet them, in which case they abate in equal proportions. (4) Insurance debts rank equally among themselves and must be paid in full, unless the assets available after the payment of preferential debts are insufficient to meet them, in which case they abate in equal proportions. (5) Subject to paragraph (6), so far as the assets of the insurer available for the payment of unsecured creditors are insufficient to meet the preferential debts, those debts (and only those debts) have priority over the claims of holders of debentures secured by, or holders of, any floating charge created by the insurer, and must be paid accordingly out of any property comprised in or subject to that charge. (6) The order of priority specified in paragraph (2)(a) and (b) applies for the purposes of any payment made in accordance with paragraph (5). (7) Section 176A of the 1986 Act and Article 150A of the 1989 Order have effect with regard to an insurer so that insurance debts must be paid out of the prescribed part in priority to all other unsecured debts. Notes Paragraph (3) the words ‘‘after the expenses of the winding up’’ inserted by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2004, SI 2004 No 546, reg 2. Paragraph (7) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 2.

Composite insurers: preferential debts attributable to long term and general business 22.—(1) This regulation applies in the case of the winding up of a non-transferring composite insurer. (2) Subject to the payment of costs in accordance with regulation 30, the long term business assets and the general business assets must be applied separately in accordance with paragraphs (3) and (4). (3) Subject to paragraph (6), the long term business assets must be applied in discharge of the long term business preferential debts in the order of priority specified in regulation 23(1). (4) Subject to paragraph (8), the general business assets must be applied in discharge of the general business preferential debts in the order of priority specified in regulation 24(1). (5) Paragraph (6) applies where the value of the long term business assets exceeds the long term business preferential debts and the general business assets are insufficient to meet the general business preferential debts.

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(6) Those long term business assets which represent the excess must be applied in discharge of the outstanding general business preferential debts of the insurer, in accordance with the order of priority specified in regulation 24(1). (7) Paragraph (8) applies where the value of the general business assets exceeds the general business preferential debts, and the long term business assets are insufficient to meet the long term business preferential debts. (8) Those general business assets which represent the excess must be applied in discharge of the outstanding long term business preferential debts of the insurer, in accordance with the order of priority specified in regulation 23(1). (9) For the purposes of this regulation and regulations 23 and 24— ‘‘long term business preferential debts’’ means those debts mentioned in regulation 23(1) and, unless the court orders otherwise, any expenses of the winding up which are apportioned to the long term business assets in accordance with regulation 30; ‘‘general business preferential debts’’ means those debts mentioned in regulation 24(1) and, unless the court orders otherwise, any expenses of the winding up which are apportioned to the general business assets in accordance with regulation 30. (10) For the purposes of paragraphs (6) and (8)— ‘‘outstanding long term business preferential debts’’ means those long term business preferential debts, if any, which remain unpaid, either in whole or in part, after the application of the long term business assets, in accordance with paragraph (3); ‘‘outstanding general business preferential debts’’ means those general business preferential debts, if any, which remain unpaid, either in whole or in part, after the application of the general business assets, in accordance with paragraph (3).

Preferential debts: long term business of a non-transferring composite insurer 23.—(1) For the purpose of compliance with the requirement in regulation 22(3), the long term business assets of a non-transferring composite insurer must be applied in discharge of the following debts and in the following order of priority— (a) relevant preferential debts; (b) long term insurance debts. (2) Relevant preferential debts rank equally among themselves, unless the long term business assets, any available general business assets and other assets (if any) applied in accordance with regulation 24 are insufficient to meet them, in which case they abate in equal proportions. (3) Long term insurance debts rank equally among themselves, unless the long term business assets available after the payment of relevant preferential debts and any available general business assets and other assets (if any) applied in accordance with regulation 25 are insufficient to meet them, in which case they abate in equal proportions. (4) So far as the long term business assets, and any available general business assets, which are available for the payment of unsecured creditors are insufficient to meet the relevant preferential debts, those debts (and only those debts) have priority over the claims of holders of debentures secured by, or holders of, any floating charge created by the insurer over any of its long term business assets, and must be paid accordingly out of any property comprised in or subject to that charge. (5) The order of priority specified in paragraph (1) applies for the purposes of any payment made in accordance with paragraph (4). (6) For the purposes of this regulation— ‘‘available general business assets’’ means those general business assets which must be applied in discharge of the insurer’s outstanding long term business preferential debts, in accordance with regulation 22(8); ‘‘long term insurance debt’’ means an insurance debt which is attributable to the long term business of the insurer; ‘‘relevant preferential debt’’ means a preferential debt which is attributable to the long term business of the insurer.

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Preferential debts: general business of a composite insurer 24.—(1) For the purpose of compliance with the requirement in regulation 22(4), the long term business assets of a non-transferring composite insurer must be applied in discharge of the following debts and in the following order of priority— (a) relevant preferential debts; (b) general insurance debts. (2) Relevant preferential debts rank equally among themselves, unless the general business assets, any available long term business assets, and other assets (if any) applied in accordance with regulation 25 are insufficient to meet them, in which case they abate in equal proportions. (3) General insurance debts rank equally among themselves, unless the general business assets available after the payment of relevant preferential debts, any available long term business assets, and other assets (if any) applied in accordance with regulation 26 are insufficient to meet them, in which case they abate in equal proportions. (4) So far as the other business assets and available long term assets of the insurer which are available for the payment of unsecured creditors are insufficient to meet relevant preferential debts, those debts (and only those debts) have priority over the claims of holders of debentures secured by, or holders of, any floating charge created by the insurer, and must be paid accordingly out of any property comprised in or subject to that charge. (5) The order of priority specified in paragraph (1) applies for the purposes of any payment made in accordance with paragraph (4). (6) For the purposes of this regulation— ‘‘available long term business assets’’ means those long term business assets which must be applied in discharge of the insurer’s outstanding general business preferential debts, in accordance with regulation 22(6); ‘‘general insurance debt’’ means an insurance debt which is attributable to the general business of the insurer; ‘‘relevant preferential debt’’ means a preferential debt which is attributable to the general business of the insurer. Insufficiency of long term business assets and general business assets 25.—(1) This regulation applies in the case of the winding up of a non-transferring composite insurer where the long term business assets and the general business assets, applied in accordance with regulation 22, are insufficient to meet in full the preferential debts and insurance debts. (2) In a case in which this regulation applies, the other assets (if any) of the insurer must be applied in the following order of priority— (a) outstanding preferential debts; (b) unattributed preferential debts; (c) outstanding insurance debts; (d) all other debts. (3) So far as the long term business assets, and any available general business assets, which are available for the payment of unsecured creditors are insufficient to meet the outstanding preferential debts and the unattributed preferential debts, those debts (and only those debts) have priority over the claims of holders of debentures secured by, or holders of, any floating charge created by the insurer over any of its other assets, and must be paid accordingly out of any property comprised in or subject to that charge. (4) For the purposes of this regulation— ‘‘outstanding insurance debt’’ means any insurance debt, or any part of an insurance debt, which was not discharged by the application of the long term business assets and the general business assets in accordance with regulation 22; ‘‘outstanding preferential debt’’ means any preferential debt attributable either to the long term business or the general business of the insurer which was not discharged by the application of the long term business assets and the general business assets in accordance with regulation 23; ‘‘unattributed preferential debt’’ means a preferential debt which is not attributable to either the long term business or the general business of the insurer.

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Composite insurers: excess of long term business assets and general business assets 26.—(1) This regulation applies in the case of the winding up of a non-transferring composite insurer where the value of the long term business assets and the general business assets, applied in accordance with regulation 22, exceeds the value of the sum of the long term business preferential debts and the general business preferential debts. (2) In a case to which this regulation applies, long term business assets or general business assets which have not been applied in discharge of long term business preferential debts or general business preferential debts must be applied in accordance with regulation 27. (3) In this regulation, ‘‘long term business preferential debts’’ and ‘‘general business preferential debts’’ have the same meaning as in regulation 22. Composite insurers: application of other assets 27.—(1) This regulation applies in the case of the winding up of a non-transferring composite insurer where regulation 25 does not apply. (2) The other assets of the insurer, together with any outstanding business assets, must be paid in discharge of the following debts in accordance with section 175 of the 1986 Act or Article 149 of the 1989 Order— (a) unattributed preferential debts; (b) all other debts. (3) In this regulation— ‘‘unattributed preferential debt’’ has the same meaning as in regulation 25; ‘‘outstanding business assets’’ means assets of the kind mentioned in regulation 26(2). Composite insurers: proof of debts 28.—(1) This regulation applies in the case of the winding up of a non-transferring composite insurer in compliance with the requirement in regulation 23(2). (2) The liquidator may in relation to the insurer’s long term business assets and its general business assets fix different days on or before which the creditors of the company who are required to prove their debts or claims are to prove their debts or claims, and he may fix one of those days without at the same time fixing the other. (3) In submitting a proof of any debt a creditor may claim the whole or any part of such debt as is attributable to the company’s long term business or to its general business, or he may make no such attribution. (4) When he admits any debt, in whole or in part, the liquidator must state in writing how much of what he admits is attributable to the company’s long term business, how much is attributable to the company’s general business, and how much is attributable to its other business (if any). (5) Paragraph (2) does not apply in Scotland. Composite insurers: general meetings of creditors 29.—(1) This regulation applies in the same circumstances as regulation 28. (2) The creditors mentioned in section 168(2) of the 1986 Act, Article 143(2) of the 1989 Order or rule 4.13 of the Insolvency (Scotland) Rules (power of liquidator to summon general meetings of creditors) are to be— (a) in relation to the long term business assets of that insurer, only those who are creditors in respect of long term business liabilities; and (b) in relation to the general business assets of that insurer, only those who are creditors in respect of general business liabilities, and, accordingly, any general meetings of creditors summoned for the purposes of that section, Article or rule are to be separate general meetings of creditors in respect of long term business liabilities and general business liabilities. [(3) If the general meeting of the bankrupt’s creditors proposes to establish a creditors’ committee pursuant to section 301(1) of the 1986 Act or Article 274(1) of the 1989 Order, it must establish separate committees of creditors in respect of long-term business liabilities and creditors in respect of general business liabilities.]

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[(4) The committee of creditors in respect of long-term business liabilities may exercise the functions of a creditors’ committee under the 1986 Act or the 1989 Order in relation to long term business liabilities only.] [(5) The committee of creditors in respect of general business liabilities may exercise the functions of a creditors’ committee under the 1986 Act or the 1989 Order in relation to general business liabilities only.] [(6) If, in terms of section 30(1) of the Bankruptcy (Scotland) Act 1985, at the statutory meeting or any subsequent meeting of creditors it is proposed to elect one or more commissioners (or new or additional commissioners) in the sequestration, it shall elect separate commissioners in respect of the long-term business liabilities and the general business liabilities.] [(7) Any commissioner elected in respect of the long-term business liabilities shall exercise his functions under the Bankruptcy (Scotland) Act 1985 in respect of the long-term business liabilities only.] [(8) Any commissioner elected in respect of the general business liabilities shall exercise his functions under the Bankruptcy (Scotland) Act 1985 in respect of the general business liabilities only.] Notes Paragraphs (3), (4), (5), (6), (7) and (8) were inserted by The Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005, SI 2005 No 1998, reg 40(8), for the purpose of application to Lloyd’s.

Composite insurers: apportionment of costs payable out of the assets 30.—(1) In the case of the winding up of a non-transferring composite insurer, Rule 4.218 of the Insolvency Rules or Rule 4.228 of the Insolvency Rules (Northern Ireland) (general rules as to priority) or rule 4.67 (order of priority of expenses of liquidation) of the Insolvency (Scotland) Rules applies separately to long-term business assets and to the general business assets of that insurer. (2) But where any fee, expense, cost, charge, or remuneration does not relate exclusively to the long-term business assets or to the general business assets of that insurer, the liquidator must apportion it amongst those assets in such manner as he shall determine. Summary remedy against liquidators 31. Section 212 of the 1986 Act or Article 176 of the 1989 Order (summary remedy against delinquent directors, liquidators etc.) applies in relation to a liquidator who is required to comply with regulations 21 to 27, as it applies in relation to a liquidator who is required to comply with section 175 of the 1986 Act or Article 149 of the 1989 Order. Priority of subrogated claims by the Financial Services Compensation Scheme 32.—(1) This regulation applies where an insurance creditor has assigned a relevant right to the scheme manager (‘‘a relevant assignment’’). (2) For the purposes of regulations 21, 23 and 24, where the scheme manager proves for an insurance debt in the winding up of a UK insurer pursuant to a relevant assignment, that debt must be paid to the scheme manager in the same order of priority as any other insurance debt. (3) In this regulation— ‘‘relevant right’’ means any direct right of action against a UK insurer under a contract of insurance, including the right to prove for a debt under that contract in a winding up of that insurer; ‘‘scheme manager’’ has the meaning given by section 212(1) of the 2000 Act. Voluntary arrangements: treatment of insurance debts 33.—(1) The modifications made by paragraph (2) apply where a voluntary arrangement is proposed under section 1 of the 1986 Act or Article 14 of the 1989 Order in relation to a UK insurer, and that arrangement includes—

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(a) a composition in satisfaction of any insurance debts; and (b) a distribution to creditors of some or all of the assets of that insurer in the course of, or with a view to, terminating the whole or any part of the business of that insurer. (2) Section 4 of the 1986 Act (decisions of meetings) has effect as if— (a) after subsection (4) there were inserted— ‘‘(4A) A meeting so summoned and taking place on or after 20th April 2003 shall not approve any proposal or modification under which any insurance debt of the company is to be paid otherwise than in priority to such of its debts as are not insurance debts or preferential debts. (4B) Paragraph (4A) does not apply where— (a) a winding up order made before 20th April 2003 is in force; or (b) a relevant insolvency appointment made before 20th April 2003 has effect, in relation to the company.’’; (b) for subsection (7) there were substituted— ‘‘(7) References in this section to preferential debts mean debts falling into any of categories 4 and 5 of the debts listed in Schedule 6 to this Act; and references to preferential creditors are to be construed accordingly.’’; and (c) after subsection (7) as so substituted there were inserted— ‘‘(8) For the purposes of this section— (a) ‘‘insurance debt’’ has the meaning it has in the Insurers (Reorganisation and Winding up) Regulations 2004; and(b) ‘‘relevant insolvency measure’’ means— (i) the appointment of a provisional liquidator, or(ii) the appointment of an administrator, where an effect of the appointment will be, or is intended to be, a realisation of some or all of the assets of the insurer and the distribution of the proceeds to creditors, with a view to terminating the whole or any part of the business of that insurer.’’. (3) Article 17 of the 1989 Order (decisions of meetings) has effect as if— (a) after paragraph (4) there were inserted— ‘‘(4A) A meeting so summoned and taking place on or after 20th April 2003 shall not approve any proposal or modification under which any insurance debt of the company is to be paid otherwise than in priority to such of its debts as are not insurance debts or preferential debts. (4B) Paragraph (4A) does not apply where— (a) a winding up order made before 20th April 2003 is in force; or (b) a relevant insolvency appointment made before 20th April 2003 has effect, in relation to the company.’’; (b) for paragraph (7) there were substituted— ‘‘(7) References in this Article to preferential debts mean debts falling into any of categories 4 and 5 of the debts listed in Schedule 4 to this Order, and references to preferential creditors are to be construed accordingly.’’; and (c) after paragraph (7) as so substituted there were inserted— ‘‘(8) For the purposes of this section— (a) ‘‘insurance debt’’ has the meaning it has in the Insurers (Reorganisation and Winding Up) Regulations 2004 and(b) ‘‘relevant insolvency measure’’ means— (i) the appointment of a provisional liquidator, or (ii) the appointment of an administrator, where an effect of the appointment will be, or is intended to be, a realisation of some or all of the assets of the insurer and the distribution of the proceeds to creditors, with a view to terminating the whole or any part of the business of that insurer.’’. Notes Regulation 33 amended for the purpose of application to Lloyd’s by The Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005, SI 2005 No 1998, reg 40(11).

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Notes Application of Part V to Lloyd’s: The Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005, reg 45–49, SI 2005 No 1998.

Application of this Part 34.—(1) This Part applies— (a) where a decision with respect to the approval of a proposed voluntary arrangement having a qualifying purpose is made under section 4A of the 1986 Act or Article 17A of the 1989 Order on or after 20th April 2003 in relation to a UK insurer; (b) where an administration order made under section 8 of the 1986 Act on or after 20th April 2003 or, on or after 15th September 2003, made under paragraph 13 of Schedule B1 or under paragraph 14 of Schedule B1 to the 1989 Order is in force in relation to a UK insurer; (c) where on or after 20th April 2003 the court reduces the value of one or more of the contracts of a UK insurer under section 377 of the 2000 Act or section 24(5) of the Friendly Societies Act 1992; (d) where a UK insurer is subject to a relevant winding up; (e) where a provisional liquidator is appointed in relation to a UK insurer on or after 20th April 2003. (2) For the purposes of paragraph (1)(a), a voluntary arrangement has a qualifying purpose if it— (a) varies the rights of the creditors as against the insurer and is intended to enable the insurer, and the whole or any part of its undertaking, to survive as a going concern; or (b) includes a realisation of some or all of the assets of the insurer to which it relates and the distribution of the proceeds to creditors, with a view to terminating the whole or any part of the business of that insurer. (3) For the purposes of paragraph (1)(d), a winding up is a relevant winding up if— (a) in the case of a winding up by the court, the winding up order is made on or after 20th April 2003; or (b) in the case of a creditors’ voluntary winding up, the liquidator is appointed in accordance with section 100 of the 1986 Act, paragraph 83 of Schedule B1, paragraph 84 of Schedule B1 to the 1989 Order or Article 86 of the 1989 Order on or after 20th April 2003. Notes Sub-paragraph (1)(b) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 2. Sub-paragraph (3)(b) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 2.

Application of this Part: assets subject to a section 425 or Article 418 compromise or arrangement 35.—(1) For the purposes of this Part, the insolvent estate of a UK insurer shall not include any assets which at the commencement date are subject to a relevant section 425 or Article 418 compromise or arrangement. (2) In this regulation— (a) ‘‘assets’’ has the same meaning as ‘‘property’’ in section 436 of the 1986 Act or Article 2(2) of the 1989 Order; (b) ‘‘commencement date’’ has the meaning given in regulation 18(4); (c) ‘‘insolvent estate’’ in England and Wales and Northern Ireland has the meaning given by Rule 13.8 of the Insolvency Rules or Rule 0.2 of the Insolvency Rules (Northern Ireland) and in Scotland means the company’s assets; (d) ‘‘relevant section 425 or Article 418 compromise or arrangement’’ means—

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Interpretation of this Part 36.—(1) For the purposes of this Part— (a) ‘‘affected insurer’’ means a UK insurer which is the subject of a relevant reorganisation or a relevant winding up; (b) ‘‘relevant reorganisation or a relevant winding up’’ means any voluntary arrangement, administration order, winding up, or order referred to in regulation 34(1)(d) to which this Part applies; and (c) ‘‘relevant time’’ means the date of the opening of a relevant reorganisation or a relevant winding up. (2) In this Part, references to the opening of a relevant reorganisation or a relevant winding up mean— (a) in the case of winding up proceedings— (i) in the case of a winding up by the court, the date on which the winding up order is made, or (ii) in the case of a creditors’ voluntary winding up, the date on which the liquidator is appointed in accordance with section 100 of the 1986 Act, paragraph 83 of Schedule B1 or Article 86 of the 1989 Order or paragraph 84 of Schedule B1 to the 1989 Order; (b) in the case of a voluntary arrangement, the date when a decision with respect to that voluntary arrangement has effect in accordance with section 4A(2) of the 1986 Act or Article 17A(2) of the 1989 Order; (c) in a case where an administration order under paragraph 13 of Schedule B1 or under paragraph 14 of Schedule B1 to the 1989 Order is in force, the date of the making of that order; (d) in a case where an administrator is appointed under paragraphs 14 or 22 of Schedule B1 or under paragraph 15 or 23 of Schedule B1 to the 1989 Order, the date on which that appointment takes effect; (e) in a case where the court reduces the value of one or more of the contracts of a UK insurer under section 377 of the 2000 Act or section 24(5) of the Friendly Societies Act 1992, the date the court exercises that power; and (f) in a case where a provisional liquidator has been appointed, the date of that appointment, and references to the time of an opening must be construed accordingly. Notes Sub-paragraph (2)(a)(ii) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 2. Sub-paragraph (2)(c) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 2. Sub-paragraph (2)(d) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 2.

EEA rights: applicable law in the winding up of a UK insurer 37.—(1) This regulation is subject to the provisions of regulations 38 to 47. (2) In a relevant winding up, the matters mentioned in paragraph (3) in particular are to be determined in accordance with the general law of insolvency of the United Kingdom. (3) Those matters are— (a) the assets which form part of the estate of the affected insurer; (b) the treatment of assets acquired by, or devolving on, the affected insurer after the opening of the relevant winding up;

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(c) the respective powers of the affected insurer and the liquidator or provisional liquidator; (d) the conditions under which set-off may be revoked; (e) the effects of the relevant winding up on current contracts to which the affected insurer is a party; (f) the effects of the relevant winding up on proceedings brought by creditors; (g) the claims which are to be lodged against the estate of the affected insurer; (h) the treatment of claims against the affected insurer arising after the opening of the relevant winding up; (i) the rules governing— (i) the lodging, verification and admission of claims, (ii) the distribution of proceeds from the realisation of assets, (iii) the ranking of claims, (iv) the rights of creditors who have obtained partial satisfaction after the opening of the relevant winding up by virtue of a right in rem or through set-off; (j) the conditions for and the effects of the closure of the relevant winding up, in particular by composition; (k) the rights of creditors after the closure of the relevant winding up; (l) who is to bear the cost and expenses incurred in the relevant winding up; (m) the rules relating to the voidness, voidability or unenforceability of legal acts detrimental to all the creditors. (4) In this regulation, ‘‘relevant winding up’’ has the meaning given by regulation 34(3). Employment contracts and relationships 38.—(1) The effects of a relevant reorganisation or a relevant winding up on any EEA employment contract and any EEA employment relationship are to be determined in accordance with the law of the EEA State to which that contract or that relationship is subject. (2) In this regulation, an employment contract is an EEA employment contract, and an employment relationship is an EEA employment relationship, if it is subject to the law of an EEA State. Contracts in connection with immovable property 39. The effects of a relevant reorganisation or a relevant winding up on a contract conferring the right to make use of or acquire immovable property situated within the territory of an EEA State are to be determined in accordance with the law of that State. Registrable rights 40. The effects of a relevant reorganisation or a relevant winding up on rights of the affected insurer with respect to— (a) immovable property, (b) a ship, or (c) an aircraft which is subject to registration in a public register kept under the authority of an EEA State are to be determined in accordance with the law of that State. Third parties’ rights in rem 41.—(1) A relevant reorganisation or a relevant winding up shall not affect the rights in rem of creditors or third parties in respect of tangible or intangible, movable or immovable assets (including both specific assets and collections of indefinite assets as a whole which change from time to time) belonging to the affected insurer which are situated within the territory of an EEA State at the relevant time. (2) The rights in rem referred to in paragraph (1) shall in particular include—

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(a) the right to dispose of the assets in question or have them disposed of and to obtain satisfaction from the proceeds of or the income from those assets, in particular by virtue of a lien or a mortgage; (b) the exclusive right to have a claim met out of the assets in question, in particular a right guaranteed by a lien in respect of the claim or by assignment of the claim by way of guarantee; (c) the right to demand the assets in question from, or to require restitution by, any person having possession or use of them contrary to the wishes of the party otherwise entitled to the assets; (d) a right in rem to the beneficial use of assets. (3) A right, recorded in a public register and enforceable against third parties, under which a right in rem within the meaning of paragraph (1) may be obtained, is also to be treated as a right in rem for the purposes of this regulation. (4) Paragraph (1) does not preclude actions for voidness, voidability or unenforceability of legal acts detrimental to creditors under the general law of insolvency of the United Kingdom, as referred to in regulation 37(3)(m). Reservation of title agreements etc. 42.—(1) The opening of a relevant reorganisation or a relevant winding up in relation to an insurer purchasing an asset shall not affect the seller’s rights based on a reservation of title where at the time of that opening the asset is situated within the territory of an EEA State. (2) The opening of a relevant reorganisation or a relevant winding up in relation to an insurer selling an asset, after delivery of the asset, shall not constitute grounds for rescinding or terminating the sale and shall not prevent the purchaser from acquiring title where at the time of that opening the asset sold is situated within the territory of an EEA State. (3) Paragraphs (1) and (2) do not preclude actions for voidness, voidability or unenforceability of legal acts detrimental to creditors under the general law of insolvency of the United Kingdom, as referred to in regulation 37(3)(m). Creditors’ rights to set off 43.—(1) A relevant reorganisation or a relevant winding up shall not affect the right of creditors to demand the set-off of their claims against the claims of the affected insurer, where such a set-off is permitted by the applicable EEA law. (2) In paragraph (1), ‘‘applicable EEA law’’ means the law of the EEA State which is applicable to the claim of the affected insurer. (3) Paragraph (1) does not preclude actions for voidness, voidability or unenforceability of legal acts detrimental to creditors under the general law of insolvency of the United Kingdom, as referred to in regulation 37(3)(m). Regulated markets 44.—(1) Without prejudice to regulation 40, the effects of a relevant reorganisation measure or winding up on the rights and obligations of the parties to a regulated market operating in an EEA State must be determined in accordance with the law applicable to that market. (2) Paragraph (1) does not preclude actions for voidness, voidability or unenforceability of legal acts detrimental to creditors under the general law of insolvency of the United Kingdom, as referred to in regulation 37(3)(m). (3) For the purposes of this regulation, ‘‘regulated market’’ has the meaning given by Council Directive (93/22/EEC) of 10th May 1993 on investment services in the securities field. Notes Paragraph (3) document reference: OJ No L141, 11.6.93, p. 27, as amended by European Parliament and Council Directive 95/26/EC (OJ No L168, 18.7.95, p. 7) and European Parliament and Council Directive 97/9/EC (OJ No L84, 26.3.97, p. 22).

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Detrimental acts pursuant to the law of an EEA State 45.—(1) In a relevant reorganisation or a relevant winding up, the rules relating to detrimental transactions shall not apply where a person who has benefited from a legal act detrimental to all the creditors provides proof that— (a) the said act is subject to the law of an EEA State; and (b) that law does not allow any means of challenging that act in the relevant case. (2) For the purposes of paragraph (1), ‘‘the rules relating to detrimental transactions’’ means any provisions of the general law of insolvency relating to the voidness, voidability or unenforceability of legal acts detrimental to all the creditors, as referred to in regulation 37(3)(m). Protection of third party purchasers 46.—(1) This regulation applies where, by an act concluded after the opening of a relevant reorganisation or a relevant winding up, an affected insurer disposes for a consideration of— (a) an immovable asset situated within the territory of an EEA State; (b) a ship or an aircraft subject to registration in a public register kept under the authority of an EEA State; or (c) securities whose existence or transfer presupposes entry into a register or account laid down by the law of an EEA State or which are placed in a central deposit system governed by the law of an EEA State. (2) The validity of that act is to be determined in accordance with the law of the EEA State within whose territory the immovable asset is situated or under whose authority the register, account or system is kept, as the case may be. Lawsuits pending 47.—(1) The effects of a relevant reorganisation or a relevant winding up on a relevant lawsuit pending in an EEA State shall be determined solely in accordance with the law of that EEA State. (2) In paragraph (1), ‘‘relevant lawsuit’’ means a lawsuit concerning an asset or right of which the affected insurer has been divested. PA RT V I

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Interpretation of this Part 48.—(1) In this Part— (a) ‘‘relevant measure’’, in relation to a third country insurer, means (i) a winding up; (ii) an administration order made under paragraph 13 of Schedule B1 or under paragraph 14 of Schedule B1 to the 1989 Order; or (iii) a decision of the court to reduce the value of one or more of the insurer’s contracts, in accordance with section 377 of the 2000 Act; (b) ‘‘third country insurer’’ means a person— (i) who has permission under the 2000 Act to effect or carry out contracts of insurance; and (ii) whose head office is not in the United Kingdom or an EEA State. (2) In paragraph (1), the definition of ‘‘third country insurer’’ must be read with— (a) section 22 of the 2000 Act; (b) any relevant order made under that section; and (c) Schedule 2 to that Act. Notes Sub-paragraph (1)(a)(ii) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 2.

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Application of these Regulations to a third country insurer 49. Parts III, IV and V of these Regulations apply where a third country insurer is subject to a relevant measure, as if references in those Parts to a UK insurer included a reference to a third country insurer. Disclosure of confidential information: third country insurers 50.—(1) This regulation applies to information (‘‘insolvency practitioner information’’) which— (a) relates to the business or other affairs of any person; and (b) is information of a kind mentioned in paragraph (2). (2) Information falls within paragraph (1)(b) if it is supplied to— (a) the Authority by an EEA regulator; or (b) an insolvency practitioner by an EEA administrator or liquidator, in accordance with or pursuant to Article 30 of the reorganisation and winding up directive. (3) Subject to paragraphs (4), (5) and (6), sections 348, 349 and 352 of the 2000 Act apply in relation to insolvency practitioner information in the same way as they apply in relation to confidential information within the meaning of section 348(2) of that Act. (4) For the purposes of this regulation, sections 348, 349 and 352 of the 2000 Act and the Disclosure Regulations have effect as if the primary recipients specified in subsection (5) of section 348 of the 2000 Act included an insolvency practitioner. (5) Insolvency practitioner information is not subject to the restrictions on disclosure imposed by section 348(1) of the 2000 Act (as it applies by virtue of paragraph (3)) if it satisfies any of the criteria set out in section 348(4) of the 2000 Act. (6) The Disclosure Regulations apply in relation to insolvency practitioner information as they apply in relation to single market directive information (within the meaning of those Regulations). (7) In this regulation— ‘‘the Disclosure Regulations’’ means the Financial Services and Markets Act 2000 (Disclosure of Confidential Information) Regulations 2001; ‘‘EEA administrator’’ and ‘‘EEA liquidator’’ mean respectively an administrator or liquidator within the meaning of the reorganisation and winding up directive; ‘‘insolvency practitioner’’ means an insolvency practitioner, within the meaning of section 388 of the 1986 Act or Article 3 of the 1989 Order, who is appointed or acts in relation to a third country insurer. Notes Paragraph (7) the Financial Services and Markets Act 2000 (Disclosure of Confidential Information) Regulations 2001, SI 2001 No 2188. PA RT V I I

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General Note Regulations 51 to 53 amend other regulations and are not reproduced here.

1.52 THE FINANCIAL CONGLOMERATES AND OTHER FINANCIAL GROUPS REGULATIONS 2004 (SI 2004 No 1862) Whereas the Treasury are a government department designated for the purposes of section 2(2) of the European Communities Act 1972 in relation to— (a) the authorisation of the carrying on of insurance business and the regulation of such business and its conduct; (b) credit and financial institutions and the taking of deposits or other repayable funds from the public;

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(c) measures relating to investment firms and to the provision of investment services; and (d) collective investment in transferable securities and other liquid assets; Now therefore the Treasury, in exercise of the powers conferred upon them by section 2(2) of the European Communities Act 1972 and sections 183(2), 188(2), 417(1) and 428(3) of the Financial Services and Markets Act 2000 hereby make the following Regulations: PA RT 1

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Citation, commencement and interpretation 1.—(1) These Regulations may be cited as the Financial Conglomerates and Other Financial Groups Regulations 2004 and come into force on 10th August 2004. (2) In these Regulations— ‘‘the Act’’ means the Financial Services and Markets Act 2000; ‘‘the Banking Advisory Committee’’ means the Committee established pursuant to Article 57 of the banking consolidation directive; ‘‘the capital adequacy directive’’ means Council Directive 93/6/EEC of 15th March 1993 on the capital adequacy of investment firms and credit institutions; ‘‘competent authority’’, except in the term ‘‘third-country competent authority’’ as defined in regulation 7(1), means any national authority of an EEA State which is empowered by law or regulation to supervise regulated entities, whether on an individual or group-wide basis; ‘‘the conglomerates directive’’ means Directive 2002/87/EC of the European Parliament and of the Council of 16th December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC, 93/22/EEC, and Directives 98/78/EC and 2000/12/EC of the European Parliament and of the Council; ‘‘co-ordinator’’ means the competent authority which has been appointed, for the purposes of Article 10 of the conglomerates directive, as the competent authority which is responsible for the co-ordination and exercise of supplementary supervision of a financial conglomerate; ‘‘directive requirement’’ means any procedural requirement (including a requirement to consult or obtain consent) imposed on a competent authority by— (a) the conglomerates directive; or (b) Article 56a of the banking consolidation directive (as it is applied by that directive or by Article 7(2) of the capital adequacy directive); ‘‘financial conglomerate’’, except in the term ‘‘third-country financial conglomerate’’ as defined in regulation 7(1), has the meaning given by Article 2(14) of the conglomerates directive; ‘‘the Financial Conglomerates Committee’’ means the Committee established pursuant to Article 21 of the conglomerates directive; ‘‘relevant competent authorities’’ means those competent authorities, within the meaning of Article 2(17) of the conglomerates directive, which are, or which have been appointed as, relevant competent authorities in relation to a financial conglomerate; ‘‘regulated entity’’ means— (a) a credit institution (within the meaning of the second sub-paragraph of Article 1(1) of the banking consolidation directive); (b) an insurance undertaking (within the meaning of Article 4 of Directive 2002/83/EC of the European Parliament and of the Council of 5th November 2002 concerning life assurance, Article 6 of the first non-life insurance directive or Article 1(b) of Directive 98/78/EC of the European Parliament and of the Council of 27th October 1998 on the supplementary supervision of insurance undertakings in an insurance group); (c) a management company (within the meaning of Article 1a(2) of the UCITS directive) or an undertaking which is outside the EEA but which would require

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authorisation in accordance with Article 5 of the UCITS directive if it had its registered office in the EEA; or (d) an investment firm (within the meaning of Article 1(2) of the investment services directive, including the undertakings referred to in Article 2(4) of the capital adequacy directive); and ‘‘supplementary supervision’’ means the supervision of a regulated entity to the extent and in the manner prescribed by the conglomerates directive. (3) Save as is otherwise provided, any expression used in these Regulations which is defined for the purposes of the Act has the meaning given by the Act.

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Notification of identification as a financial conglomerate and choice of co-ordinator 2.—(1) Where the Authority has become the co-ordinator for a financial conglomerate, it must notify— (a) the relevant member of that financial conglomerate; (b) any competent authority which has given EEA authorisation to a regulated entity which is a member of that financial conglomerate; (c) the competent authorities of the EEA State in which the parent undertaking of that financial conglomerate has its head office, unless that parent undertaking is a regulated entity; and (d) the Commission, that the group has been identified as a financial conglomerate for the purposes of Article 4 of the conglomerates directive and that the Authority is the co-ordinator for that financial conglomerate. (2) Paragraph (3) applies if— (a) the Authority is a relevant competent authority in relation to a financial conglomerate, and (b) the Authority, in conjunction with the other relevant competent authorities, proposes to waive the criteria specified in Article 10(2) of the conglomerates directive (selection of the co-ordinator) and appoint a different competent authority as co-ordinator. (3) Before the Authority, in conjunction with the other relevant competent authorities, waives the criteria specified in Article 10(2) of the conglomerates directive and appoints a different competent authority as co-ordinator, the Authority must, where there is a directive requirement to do so, give the financial conglomerate an opportunity to make representations. (4) In this regulation, ‘‘the relevant member’’ of a financial conglomerate is— (a) the parent undertaking at the head of the financial conglomerate; or (b) where there is no parent undertaking at the head of the financial conglomerate, the regulated entity which— (i) is in the most important financial sector (within the meaning given by Article 3(2) of the conglomerates directive); and (ii) has the largest balance-sheet total in that sector. Exercise of functions under Part IV of the Act for the purposes of carrying on supplementary supervision 3.—(1) This regulation applies if the Authority is considering varying the Part IV permission of any person (‘‘A’’) where— (a) A is a member of a financial conglomerate; and (b) the Authority is acting in the course of carrying on supplementary supervision for the purposes of any provision (other than Article 11, 12, 16, 17 or 18(3)) of the conglomerates directive. (2) Section 49(2) of the Act (obligation to consult home state regulators of connected persons) does not apply.

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(3) Before varying the Part IV permission of A, the Authority must, where there is a directive requirement to do so— (a) consult the relevant competent authorities in relation to the financial conglomerate of which A is a member; (b) obtain the consent of those competent authorities; and (c) consult the financial conglomerate of which A is a member. Exercise of functions under section 148 of the Act for the purposes of carrying on supplementary supervision 4.—(1) Paragraph (2) applies if the Authority is considering exercising any of the powers conferred on it by section 148 of the Act (modification or waiver of rules) in the course of carrying on supplementary supervision of a financial conglomerate for the purposes of any provision (other than Article 11, 12, 16, 17 or 18(3)) of the conglomerates directive. (2) Before the Authority exercises such a power in relation to an authorised person who is a member of a financial conglomerate, the Authority must, where there is a directive requirement to do so— (a) consult the relevant competent authorities in relation to the financial conglomerate of which that person is a member; (b) obtain the consent of those competent authorities; and (c) consult the financial conglomerate of which that person is a member. Consultation in the case of major sanctions or exceptional measures 5.—(1) Before the Authority— (a) varies the Part IV permission of a member of a financial conglomerate (‘‘D’’); (b) publishes a statement under section 205 of the Act (public censure) that it considers that D has contravened a requirement imposed on him by or under the Act; (c) imposes a penalty on D in respect of such a contravention under section 206 of the Act (financial penalties); or (d) exercises any of its powers (other than its powers under section 381, 383 or 384(2)) under Part XXV of the Act (injunctions and restitution) in relation to D, it must, if it considers that the action constitutes a major sanction or an exceptional measure and is of importance for the supervisory tasks of the competent authority of any regulated entity which is a member of the same financial conglomerate as D, consult that competent authority. (2) But paragraph (1) does not apply— (a) where the Authority considers that there is an urgent need to act; (b) where the Authority considers that such consultation may jeopardise the effectiveness of the action mentioned in paragraph (1); or (c) where regulation 3, 8(3) or (4), 9 or 10 applies. (3) Where paragraph (1) does not apply by virtue of paragraph (2)(a) or (b), the Authority must, as soon as is reasonably practicable, inform the competent authority referred to in paragraph (1) of the action that it has taken. Authority functions and service of notifications 6.—(1) Any function carried out by the Authority (whether in the capacity of a co-ordinator, a relevant competent authority or otherwise) for the purposes of the conglomerates directive (including a function conferred by these Regulations) is to be treated as a function conferred on the Authority by a provision of the Act. (2) The Financial Services and Markets Act 2000 (Service of Notices) Regulations 2001 apply to any notifications given under regulation 2(1)(a) as they apply to any notice, direction or document of any kind given under the Act.

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Regulation of Insurers S U P P L E M E N TA RY S U P E R V I S I O N O F T H I R D - C O U N T RY F I N A N C I A L C O N G L O M E R AT E S A N D T H I R D - C O U N T RY G R O U P S

Supervision of third-country financial conglomerates and third-country groups—interpretation 7.—(1) For the purposes of this Part— ‘‘asset management company’’ means— (a) any EEA firm falling within paragraph 5(f) of Schedule 3 to the Act; or (b) any UK firm whose EEA right derives from the UCITS directive; ‘‘credit institution’’ means— (a) any EEA firm falling within paragraph 5(b) of Schedule 3 to the Act; or (b) any UK firm whose EEA right derives from the banking consolidation directive; ‘‘investment firm’’ means— (a) any EEA firm falling within paragraph 5(a) of Schedule 3 to the Act; or (b) any UK firm whose EEA right derives from the investment services directive; ‘‘third-country competent authority’’ means the authority of a country or territory which is not an EEA State which is empowered by law or regulation to supervise (whether on an individual or group-wide basis) regulated entities; ‘‘third-country financial conglomerate’’ means a group— (a) which, subject to Article 3 of the conglomerates directive, meets the conditions in Article 2(14) of that directive, and (b) in which the parent undertaking has its head office outside the EEA; ‘‘third-country group’’ means a group of which the parent undertaking has its head office outside the EEA. (2) For the purposes of this Part a regulated entity is in a third-country group if the parent undertaking of the group in which it is a member has its head office outside the EEA.

Supervision of third-country financial conglomerates 8.—(1) Where the Authority is, for the purposes of Article 18(1) of the conglomerates directive (parent undertakings outside the Community), verifying whether the regulated entities in a third-country financial conglomerate are subject to supervision, by a third-country competent authority, which is equivalent to that provided for by the provisions of the conglomerates directive, it must, where there is a directive requirement to do so, before completing this verification— (a) consult the other relevant competent authorities in relation to that third-county financial conglomerate; (b) consult the Financial Conglomerates Committee for the purposes of obtaining any applicable guidance prepared by that Committee in accordance with Article 21(5) of the conglomerates directive (guidance on whether third-country competent authorities are likely to achieve objectives of supplementary supervision); and (c) take into account any such guidance. (2) Paragraphs (3) and (4) apply if the Authority, for the purposes of Article 18(3) of the conglomerates directive (application of other methods for the purposes of ensuring appropriate supplementary supervision of the regulated entities in a third-country financial conglomerate), exercises its powers to— (a) vary the Part IV permission of a regulated entity in a third-country financial conglomerate; (b) disapply from, or apply in a modified form to, such a regulated entity the rules specified in subsection (1) of section 148 of the Act (modification or waiver of rules) in accordance with that section; (c) impose conditions under section 185 of the Act (conditions attached to approval of change of control) on a person who is, or proposes to be, a controller of such a regulated entity; or (d) give a notice under section 186 or 187 of the Act (notice of objection to acquisition of, or existing, control) to a person who is, or proposes to be, a controller of such a regulated entity.

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(3) Where there is a directive requirement to do so, the Authority must before taking the action specified in paragraph (2)— (a) where the Authority is the co-ordinator, consult the relevant competent authorities in relation to that third-country financial conglomerate; or (b) where the Authority is not the co-ordinator, obtain the consent of the co-ordinator for that third-country financial conglomerate to take that action. (4) If the Authority decides to take that action, it must, where there is a directive requirement to do so, notify— (a) the competent authority of each regulated entity in that third-country financial conglomerate, and (b) the Commission, that it has done so. Supervision of third-country banking groups 9.—(1) Where the Authority is, for the purposes of Article 56a of the banking consolidation directive (third-country parent undertakings), verifying whether a credit institution in a thirdcountry group is subject to supervision by a third-country competent authority which is equivalent to that governed by the principles laid down in Article 52 of that directive (supervision on a consolidated basis of credit institutions), it must, where there is a directive requirement to do so, before completing this verification— (a) consult any competent authority which supervises a credit institution in that thirdcountry group; (b) consult the Banking Advisory Committee for the purposes of obtaining any applicable guidance prepared by that Committee in accordance with the second paragraph of Article 56a of that directive; and (c) take into account any such guidance. (2) Paragraphs (3) and (4) apply if the Authority exercises, for the purposes of the fifth paragraph of Article 56a of the banking consolidation directive, its powers to— (a) vary the Part IV permission of a credit institution in a third-country group; (b) disapply from, or apply in modified form to, such a credit institution, the rules specified in subsection (1) of section 148 of the Act in accordance with that section; (c) impose conditions under section 185 of the Act on a person who is, or proposes to be, a controller of such a credit institution; or (d) give a notice under section 186 or 187 of the Act to a person who is, or proposes to be, a controller of such a credit institution. (3) Where there is a directive requirement to do so, the Authority must before exercising its powers to take the action specified in paragraph (2)— (a) where the Authority would be responsible for supervising that third-country group for the purposes of Article 53 of the banking consolidation directive (competent authorities responsible for exercising supervision on a consolidated basis) if alternative techniques were not applied, consult the competent authorities which are involved in the supervision of any of the credit institutions in that third-country group; and (b) where the Authority would not be so responsible, obtain the consent of the competent authority which would be responsible for supervising that third-country group for the purposes of Article 53 of the banking consolidation directive if alternative techniques were not applied. (4) If the Authority decides to take that action, it must, where there is a directive requirement to do so, notify— (a) any competent authority which supervises a credit institution in that third-country group; and (b) the Commission, that it has done so. (5) Where the Authority has, for the purposes of Article 30 of the conglomerates directive (asset management companies), included an asset management company in the scope of supervision of a credit institution in a third-country group, each reference in this regulation to

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a ‘‘credit institution’’ is to be treated as including a reference to that asset management company. Supervision of third-country groups subject to the capital adequacy directive 10.—(1) Paragraph (2) applies if— (a) the Authority is, for the purposes of Article 56a of the banking consolidation directive, as applied by Article 7(2) of the capital adequacy directive (groups containing both credit institutions and investment firms), verifying whether a credit institution or an investment firm in a third-country group is subject to supervision by a third-country competent authority which is equivalent to that governed by the principles laid down in Article 7(2) of the capital adequacy directive; or (b) the Authority is, for the purposes of Article 56a of the banking consolidation directive, as applied by Article 7(3) of the capital adequacy directive (groups containing investment firms but no credit institutions), verifying whether an investment firm in a third-country group is subject to supervision, by a third-country competent authority, which is equivalent to that governed by the principles laid down in Article 7(3) of the capital adequacy directive. (2) The Authority must, where there is a directive requirement to do so, before completing the verification referred to in paragraph (1)— (a) consult any competent authority which supervises an investment firm or a credit institution (if any) in that third-country group; (b) consult the Banking Advisory Committee for the purposes of obtaining any applicable guidance prepared by that Committee in accordance with the second paragraph of Article 56a of that directive; and (c) take into account any such guidance. (3) Paragraphs (4) and (5) apply if the Authority exercises, for the purposes of the fifth paragraph of Article 56a of the banking consolidation directive as applied by Article 7 of the capital adequacy directive, its powers to— (a) vary the Part IV permission of an investment firm or credit institution in a thirdcountry group; (b) disapply from or apply in modified form to, such an investment firm or credit institution the rules specified in subsection (1) of section 148 of the Act in accordance with that section; (c) impose conditions under section 185 of the Act on a person who is, or proposes to be, a controller of such an investment firm or credit institution; or (d) give a notice under section 186 or 187 of the Act to a person who is, or proposes to be, a controller of such an investment firm or credit institution. (4) Where there is a directive requirement to do so, the Authority must, before exercising its powers to take the action specified in paragraph (3)— (a) where the Authority would be responsible for supervision of that third-country group for the purposes of Article 53 of the banking consolidation directive, as applied by article 7 of the capital adequacy directive, if alternative techniques were not applied, consult the competent authorities which are involved in the supervision of any of the investment firms or credit institutions (if any) in that third-country group; and (b) where the Authority would not be so responsible, obtain the consent of the competent authority which would be responsible for supervision of that third-country group for the purposes of Article 53 of the banking consolidation directive, as applied by Article 7 of the capital adequacy directive, if alternative techniques were not applied. (5) If the Authority decides to take that action, it must, where there is a directive requirement to do so, notify— (a) any competent authority which supervises an investment firm or a credit institution (if any) in that third-country group; and (b) the Commission, that it has done so. (6) If the Authority has, for the purposes of Article 30 of the conglomerates directive, included an asset management company in the scope of supervision of— (a) credit institutions and investment firms in a third-country group; or

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(b) investment firms in a third-country group, each reference in this regulation to an ‘‘investment firm’’ is to be treated as including a reference to that asset management company. PA RT 4

P R O V I S I O N S R E L AT I N G T O I N F O R M AT I O N

Disclosure of confidential information 11. [omitted] Notes Regulation 11 amends regulation 2 of the Financial Services and Markets Act 2000 (Disclosure of Confidential Information) Regulations 2001 and is not reproduced here.

Obtaining information—avoidance of duplication of reporting 12.—(1) Paragraph (2) applies if the Authority is the co-ordinator in relation to any financial conglomerate. (2) If the Authority requires any disclosed information in connection with its functions as the co-ordinator, it must so far as possible obtain that information by requesting the competent authority which holds that information to disclose it to the Authority. (3) In this regulation, ‘‘disclosed information’’ means information which a regulated entity in a financial conglomerate has disclosed to its competent authority. PA RT 5

MISCELLANEOUS

Consultation on change of control 13.—[omitted] Notes Regulation 13 amends The Financial Services and Markets Act 2000 (Consultation with Competent Authorities) Regulations 2001 (SI 2001 No 2509) and is not reproduced here.

References to existing directives 14.—[omitted] Notes Regulation 14 amends s 119(2B) of the Building Societies Act 1986, s 17(7C) of the Bank of England Act 1998, art 2(3) of the Cash Ratio Deposits (Eligible Liabilities) Order 1998 and the Financial Services and Markets Act 2000 (EEA Passport Rights) Regulations 2001 (SI 2001 No 2511), regulation 2(5)(e)(i) and regulation 3(3)(e)(i) to make reference to Directive 2002/87/EC of the European Parliament and of the Council and is not reproduced here.

Extension of power to vary Part IV permissions 15.—(1) Subject to paragraph (2), the Authority may exercise its own-initiative power (within the meaning of section 45 of the Act (variation etc. on the Authority’s own initiative)) in relation to an authorised person, if it appears to it that it is desirable to do so for the purpose of— (a) carrying out supplementary supervision in accordance with the conglomerates directive; (b) acting in accordance with any of Articles 54, 55a or 56 of the banking consolidation directive (as they are applied by that directive or by article 7(2) or (3) of the capital adequacy directive); or (c) acting in accordance with Article 8(2) or Annex I.1.B of Directive 98/78/EC of the European Parliament and of the Council of 27 October 1998 on the supplementary supervision of insurance undertakings in an insurance group.

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(2) The Authority may exercise its own-initiative power, for the purposes set out in paragraph (1), to vary a Part IV permission in any of the ways mentioned in section 44(1) of the Act (variation etc. at request of authorised person); and this extends to including any provision in the permission as varied that could be included if a fresh permission were given in response to an application under section 40 of the Act (application for permission). (3) The duty imposed by subsection (2) of section 41 of the Act (the threshold conditions) does not prevent the Authority from exercising its own-initiative power for the purposes set out in paragraph (1).

1.53 THE FINANCIAL SERVICES AND MARKETS ACT 2000 (EXEMPTION) (AMENDMENT) ORDER 2005 (SI 2005 No 592) General Note This Order contains amendments to The Financial Services and Markets Act 2000 (Exemption) Order 2001, SI 2001 No 1201, in para 1.36 and consequently is not reproduced here.

1.54 THE FINANCIAL SERVICES AND MARKETS ACT 2000 (VARIATION OF THRESHOLD CONDITIONS) (AMENDMENT) ORDER 2005 (SI 2005 No 680) General Note This Order amends the Financial Services and Markets Act 2000 (Variation of Threshold Conditions) Order 2001, SI 2001 No 2507, in para 1.37, and consequently is not reproduced here.

1.55 THE FINANCIAL SERVICES AND MARKETS ACT 2000 (CARRYING ON REGULATED ACTIVITIES BY WAY OF BUSINESS) (AMENDMENT) ORDER 2005 (SI 2005 No 922) General Note This Order amends The Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001 (SI 2001 No 1177) and consequently is not reproduced separately.

1.56 THE INSURERS (REORGANISATION AND WINDING UP) (LLOYD’S) REGULATIONS 2005 (SI 2005 No 1998) PA RT 1

GENERAL

Citation and commencement 1. These Regulations may be cited as the Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005, and come into force on 10 August 2005. Interpretation 2.—(1) In these Regulations— ‘‘the Administration for Insurers Order’’ means the Financial Services and Markets Act 2000 (Administration Orders Relating to Insurers) Order 2002 and the ‘‘Administration for Insurers (Northern Ireland) Order’’ means the Financial Services and Markets Act 2000 (Administration Relating to Insurers)(Northern Ireland) Order 2007;

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‘‘affected market participant’’ means any member, former member, managing agent, members’ agent, Lloyd’s broker, approved run-off company or coverholder to whom the Lloyd’s market reorganisation order applies; ‘‘approved run-off company’’ means a company with the permission of the Society to perform executive functions, insurance functions or administrative and processing functions on behalf of a managing agent; ‘‘the association of underwriters known as Lloyd’s’’ has the meaning it has for the purposes of the First Council Directive of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking and pursuit of the business of direct insurance other than life assurance (73/239/EEC) and Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance; ‘‘central funds’’ means the New Central Fund as provided for in the New Central Fund Byelaw (No 23 of 1996) and the Central Fund as provided for in the Central Fund Byelaw (No 4 of 1986); ‘‘company’’ means a company within the meaning of section 735 of the 1985 Act or Article 3 of the Companies Order or a company incorporated elsewhere than in Great Britain that is a member of Lloyd’s; ‘‘corporate member’’ means a company admitted to membership of Lloyd’s as an underwriting member; ‘‘coverholder’’ means a company or partnership authorised by a managing agent to enter into, in accordance with the terms of a binding authority, a contract or contracts of insurance to be underwritten by the members of a syndicate managed by that managing agent; ‘‘former member’’ means a person who has ceased to be a member, whether by resignation or otherwise, in accordance with Lloyd’s Act 1982 and any byelaw made under it or in accordance with the provisions of Lloyd’s Acts 1871—1982 then in force at the time the person ceased to be a member; ‘‘Gazette’’ means the London Gazette, the Edinburgh Gazette and the Belfast Gazette; ‘‘individual member’’ means a member or former member who is an individual; ‘‘insurance market activity’’ has the meaning given by section 316(3) of the 2000 Act; ‘‘insurance market debt’’ means an insurance debt under or in connection with a contract of insurance written at Lloyd’s; ‘‘Lloyd’s Acts 1871-1982’’ means Lloyd’s Act 1871, Lloyd’s Act 1911, Lloyd’s Act 1951 and Lloyd’s Act 1982; ‘‘Lloyd’s broker’’ has the meaning given by section 2(1) of Lloyd’s Act 1982; ‘‘managing agent’’ has the meaning given by article 3(1) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001; ‘‘member’’ means an underwriting member of the Society; ‘‘members’ agent’’ means a person who carries out the activity of advising a person to become, or continue or cease to be, a member of a particular Lloyd’s syndicate; ‘‘overseas business regulatory deposit’’ means a deposit provided or maintained in respect of the overseas insurance and reinsurance business carried on by members in accordance with binding legal or regulatory requirements from time to time in force in the country or territory in which the deposit is held; ‘‘overseas insurance business’’ means insurance business and reinsurance business transacted by members in a country or territory that is not or is not part of an EEA State; ‘‘the principal Regulations’’ means the Insurers (Reorganisation and Winding Up) Regulations 2004; ‘‘relevant trust fund’’ means any funds held on trust under a trust deed entered into by the member in accordance with the requirements of the Authority and the Byelaws of the Society for the payment of an obligation arising in connection with insurance market activity carried on by the member or for the establishment of a Lloyd’s deposit and includes funds held on further trusts declared by the Society or the trustee of such a trust deed in respect of any class of insurance market activity; ‘‘the Room’’ has the meaning given by section 2(1) of Lloyd’s Act 1982; ‘‘the Society’’ means the Society incorporated by Lloyd’s Act 1871;

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‘‘subsidiary of the Society’’ means a company that is a subsidiary of the Society within the meaning of section 736 of the 1985 Act or Article 4 of the Companies Order; ‘‘syndicate’’ has the meaning given by article 3(1) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. (2) Subject to paragraph (3), words and phrases used in these Regulations have the same meaning as in the principal Regulations except where otherwise specified or where the context requires otherwise. (3) For the purposes of these Regulations, ‘‘UK insurer’’ is to be treated as including a member or a former member. (4) These Regulations have effect notwithstanding the provisions of section 360 of the 2000 Act. Notes Paragraph (1) definition of ‘‘the Administration for Insurers Order’’, the Financial Services and Markets Act 2000 (Administration Orders Relating to Insurers) Order 2002 (SI 2002 No 1242, see in para 1.46) as amended by SI 2003 No 2134 and the Insurers (Reorganisation and Winding Up)(Amendment) Regulations 2007 (SI 2007 No 851), reg 3. The definition of ‘‘the association of underwriters known as Lloyd’s’’ refers to the First Nonlife Insurance Directive see in para 1.59 and the Consolidated Life Insurance Directive see in para 3.29. The definition of ‘‘managing agent’’ refers to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001 No 544) as amended. The definition of ‘‘principal Regulations’’ refers to Insurers (Reorganisation and Winding Up) Regulations 2004 (SI 2004 No 353, see in para 1.51) as amended by SI 2004 No 546.

PA RT 2

L L O Y D ’ S M A R K E T R E O R G A N I S AT I O N O R D E R

Lloyd’s market reorganisation order 3.—(1) In these Regulations ‘‘Lloyd’s market reorganisation order’’ means an order which— (a) is made by the court in relation to the association of underwriters known as Lloyd’s; (b) appoints a reorganisation controller; and (c) on the making of which there comes into force a moratorium on the commencement of— (i) proceedings, or (ii) other legal processes set out in regulation 8 in respect of affected market participants, the Society and subsidiaries of the Society. (2) A Lloyd’s market reorganisation order applies to— (a) every member, former member, managing agent, members’ agent, Lloyd’s broker and approved run-off company who has not been excluded from the order in accordance with regulation 7; (b) every coverholder who has been included in the order in accordance with regulation 7; (c) the Society; and (d) subsidiaries of the Society. Condition for making order 4.—(1) The court may make a Lloyd’s market reorganisation order if it is satisfied that— (a) any regulatory solvency requirement is not, or may not be, met; and (b) an order is likely to achieve one or both of the objectives in regulation 5. (2) In paragraph (1), ‘‘regulatory solvency requirement’’ means a requirement to maintain adequate financial resources in respect of insurance business at Lloyd’s, imposed under the 2000 Act, whether on a member or former underwriting member, either singly or together with other members or former underwriting members, or on the Society and includes a requirement to maintain a margin of solvency. (3) In paragraph (2), ‘‘former underwriting member’’ has the meaning given by section 324(1) of the 2000 Act.

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Objectives of a Lloyd’s market reorganisation order 5. The objectives of a Lloyd’s market reorganisation order are— (a) to preserve or restore the financial situation of, or market confidence in, the association of underwriters known as Lloyd’s in order to facilitate the carrying on of insurance market activities by members at Lloyd’s; (b) to assist in achieving an outcome that is in the interests of creditors of members, and insurance creditors in particular. Application for a Lloyd’s market reorganisation order 6.—(1) An application for a Lloyd’s market reorganisation order may be made by the Authority or by the Society, or by both. (2) If the application is made by only one of those bodies it must inform the other body of its intention to make the application as soon as possible, and in any event before the application is lodged at the court. (3) The Authority and the Society are entitled to be heard at the hearing of the application, regardless of which body makes the application. (4) An application must clearly designate— (a) any member, former member, managing agent, members’ agent, Lloyd’s broker, or approved run-off company to whom the order should not apply; and (b) every coverholder to whom the order should apply. (5) The applicant must give notice of the application by— (a) ensuring the posting of a copy in the Room, (b) displaying a copy on its website, and (c) publishing a copy (i) in the Gazette, and (ii) in such newspaper or newspapers within the United Kingdom and elsewhere as the applicant considers appropriate to bring the application to the attention of those likely to be affected by it. (6) The notice must be given as soon as reasonably practicable after the making of the application, unless the court orders otherwise. Powers of the court 7.—(1) On hearing an application for a Lloyd’s market reorganisation order, the court may make— (a) a Lloyd’s market reorganisation order, and (b) any other order in addition to a Lloyd’s market reorganisation order which the court thinks appropriate for the attainment of either or both of the objectives in regulation 5. (2) A Lloyd’s market reorganisation order comes into force— (a) at the time appointed by the court; or (b) if no time is so appointed, when the order is made and remains in force until revoked by the court. (3) The court may on an application made by the Authority or the Society at the same time as an application under regulation 6 or the reorganisation controller, the Authority, the Society, a subsidiary of the Society or any affected market participant at any time while the Lloyd’s market reorganisation order is in force, amend or vary a Lloyd’s market reorganisation order so that it— (a) does not apply to— (i) particular assets, or (ii) particular members, former members, member’s agents, managing agents, Lloyd’s brokers, approved run-off companies or subsidiaries of the Society, specified in the order; and (b) does apply to any coverholder specified in the order. (4) The court— (a) must appoint one or more persons to be the reorganisation controller; (b) must specify the powers and duties of the reorganisation controller;

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(c) may establish or approve the respective duties and functions of two or more persons appointed to be the reorganisation controller, including specifying that one of them shall have precedence; and (d) may from time to time vary the powers of a reorganisation controller. (5) An application made under paragraph (3) other than at the time of the application under regulation 6 shall be served on the reorganisation controller and the Authority who shall each be entitled to attend and be heard at a hearing of such an application. Moratorium 8.—(1) Except with the permission of the court, for the period during which a Lloyd’s market reorganisation order is in force, no proceedings or other legal process may be commenced or continued against: (a) an affected market participant; (b) the Society; or (c) a subsidiary of the Society to which the order applies. (2) In paragraph (1), (a) ‘‘court’’ means in England and Wales the High Court, in Northern Ireland the High Court and in Scotland the Court of Session; and (b) ‘‘proceedings’’ means proceedings of every description and includes: (i) a petition under section 124 or 124A of the 1986 Act or Article 104 or 104A of the 1989 Order for the appointment of a liquidator or provisional liquidator; (ii) an application under section 252 of the 1986 Act or Article 226 of the 1989 Order for an interim order; (iii) a petition for a bankruptcy order under Part 9 of the 1986 Act or Part 9 of the 1989 Order; and (iv) a petition for sequestration under section 5 or 6 of the Bankruptcy (Scotland) Act, but does not include prosecution for a criminal offence. (3) Except with the permission of the court, for the period during which a Lloyd’s market reorganisation order is in force, no execution may be commenced or continued, no security may be enforced, and no distress may be levied, against (or against the assets of or in the possession of): (a) any person specified in paragraph (1); (b) a relevant trust fund (or the trustees of a relevant trust fund); and (c) an overseas business regulatory deposit. (4) Paragraph (3) does not prevent the enforcement of— (a) approved security granted to secure payment of approved debts of a member incurred in connection with an overseas regulatory deposit arrangement; or (b) security granted by a Lloyd’s broker over assets not being assets constituting or representing assets received or held by the Lloyd’s broker as intermediary in respect of any contract of insurance or reinsurance written at Lloyd’s or any contract of reinsurance reinsuring a member of Lloyd’s in respect of a contract or contracts of insurance or reinsurance written by that member at Lloyd’s. (5) In the application of paragraph (3) to Scotland, references to execution being commenced or continued include references to diligence being carried out or continued, and references to distress being levied shall be omitted. (6) For the period during which a Lloyd’s market reorganisation order is in force, no action or step may be taken in respect of any of the persons specified in paragraph (1) by any person who is or may be entitled— (a) under any provision in Schedule B1 or in Schedule B1 to the 1989 Order to appoint an administrator; (b) to appoint an administrative receiver or receiver; (c) under section 425 of the 1985 Act or Article 418 of the Companies Order to propose a compromise or arrangement, unless he has complied with paragraph (7) (7) A person intending to take any such action or step shall give notice in writing to the reorganisation controller before doing so.

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(8) Where a person fails to comply with paragraph (7), (a) an appointment to which sub-paragraph (6)(a) or (b) applies shall be void, and (b) no application under section 425 or Article 418 may be entertained by the court, except where the court, having heard the reorganisation controller, orders otherwise. (9) Every application pursuant to paragraph (1) or paragraph (3) must be served on the reorganisation controller. (10) For the period during which a Lloyd’s market reorganisation order is in force, an affected market participant in Scotland may not grant a trust deed for his creditors without the consent of the reorganisation controller. (11) Where a person who is subject to a Lloyd’s market reorganisation order is, at the date of the order, in administration or liquidation or has been adjudged bankrupt or is a person whose estate is being sequestrated or who has granted a trust deed for his creditors— (a) any application to the court for permission to take any action that would be subject to a moratorium arising in those earlier proceedings shall be served on the reorganisation controller and the reorganisation controller shall be entitled to be heard on the application; and (b) the court shall take into account the achievement of the objectives for which the Lloyd’s market reorganisation order was made. (12) In this regulation— (a) ‘‘approved debt’’ means a debt approved by the Society at the time it is incurred; (b) ‘‘approved security’’ means security approved by the Society at the time it is granted over or in respect of assets comprised in the member’s premiums trust funds or liable in the future to become comprised therein; (c) ‘‘overseas regulatory deposit arrangement’’ means an arrangement approved by the Society and notified to the Authority whose purpose is to facilitate funding of any overseas business regulatory deposit. Notes Sub-paragraph (6)(a) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3. Paragraph (7) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3.

Reorganisation controller 9.—(1) The reorganisation controller is an officer of the court. (2) A person may be appointed as reorganisation controller only if he is qualified to act as an insolvency practitioner under Part 13 of the 1986 Act or under Part 12 of the 1989 Order and the court considers that he has appropriate knowledge, expertise and experience. (3) On an application by the reorganisation controller, the court may appoint one or more additional reorganisation controllers to act jointly or severally with the first reorganisation controller on such terms as the court sees fit. Notes Paragraph (2) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3.

Announcement of appointment of controller 10.—(1) This regulation applies when the court makes a Lloyd’s market reorganisation order. (2) As soon as is practicable after the order has been made, the Authority must inform the EEA regulators in every EEA State— (a) that the order has been made; and (b) in general terms, of the possible effect of a Lloyd’s market reorganisation order on— (i) the effecting or carrying out of contracts of insurance at Lloyd’s, and (ii) the rights of policyholders under or in respect of contracts of insurance written at Lloyd’s.

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(3) As soon as is reasonably practicable after a person becomes the reorganisation controller, he must— (a) procure that notice of his appointment is posted— (i) in the Room, (ii) on the Society’s website, and (iii) on the Authority’s website; and (b) publish a notice of his appointment— (i) once in the Gazette, and (ii) once in such newspapers as he thinks most appropriate for securing so far as possible that the Lloyd’s market reorganisation order comes to the notice of those who may be affected by it. Market reorganisation plan 11.—(1) The reorganisation controller may require any affected market participant, and any Lloyd’s broker, approved run-off company, coverholder, the Society, subsidiary of the Society or trustee of a relevant trust fund— (a) to provide him with any information he considers useful to him in the achievement of the objectives set out in regulation 5; and (b) to carry out such work as may be necessary to prepare or organise information as the reorganisation controller may consider useful to him in the achievement of those objectives. (2) As soon as is reasonably practicable and in any event by such date as the court may require, the reorganisation controller must prepare a plan (‘‘the market reorganisation plan’’) for achieving the objectives of the Lloyd’s market reorganisation order. (3) The reorganisation controller must send a copy of the market reorganisation plan to the Authority and to the Society. (4) Before the end of a period of one month beginning with the day on which it receives the market reorganisation plan, the Authority must notify the reorganisation controller and the Society in writing of its decision to— (a) approve the plan; (b) reject the plan; or (c) approve the plan provisionally, subject to modifications set out in the notification. (5) Where the Authority rejects the plan, the notification must— (a) give reasons for its decision; and (b) specify a date by which the reorganisation controller may submit a new market reorganisation plan. (6) Where the reorganisation controller submits a new market reorganisation plan, he must send a copy to the Authority and to the Society. (7) Before the end of a period of one month beginning with the day on which the Authority receives that plan, the Authority must— (a) accept it; (b) reject it; or (c) accept it provisionally subject to modifications. (8) Before the end of a period of one month beginning with the day on which he receives the notification from the Authority of the modifications required by it, the reorganisation controller must(a) accept the plan as modified by the Authority; or (b) reject the plan as so modified. (9) The reorganisation controller must— (a) file with the court the market reorganisation plan that has been approved by him and the Authority, and (b) send a copy of it to— (i) every member, former member, managing agent and member’s agent who requests it, and (ii) every other person who requests it, on payment of a reasonable charge. (10) Paragraph (11) applies if—

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(a) the Authority rejects the market reorganisation plan and the reorganisation controller decides not to submit a new market reorganisation plan; (b) the Authority rejects the new market reorganisation plan submitted by the reorganisation controller; or (c) the reorganisation controller rejects the modifications made by the Authority to a new market reorganisation plan. (11) As soon as is reasonably practicable after any such rejection, the reorganisation controller must apply to the court for directions. (12) The Authority or the reorganisation controller as the case may be may apply to the court for an extension of the period specified in paragraph (4), (7) or (8) by a period of not more than one month. The court may not grant more than one such extension in respect of each period. (13) Where any person is under an obligation to publish anything under this regulation, that obligation is subject to the provisions of sections 348 and 349 of the 2000 Act. Remuneration of the reorganisation controller 12.—(1) The reorganisation controller shall be entitled to receive remuneration and to recover expenses properly incurred in connection with the performance of his functions under or in connection with a Lloyd’s market reorganisation order. (2) Subject to paragraph (3), the remuneration so charged is payable by— (a) members, (b) former members, (c) the Society, and (d) managing agents. (3) The court must give directions as to the payment of the remuneration and expenses of the reorganisation controller and in particular may provide for— (a) apportionment of the amounts so charged between the classes of persons set out in paragraph (2) and between groups of persons within those classes; and (b) payment of such remuneration and expenses out of relevant trust funds. (4) Amounts of such remuneration and expenses paid by any of the persons described in paragraph (2) are to be treated as payments of the expenses of a liquidator, administrator, trustee in bankruptcy or in Scotland an interim or permanent trustee. (5) The reorganisation controller may pay the reasonable charges of those to whom he has addressed a request for assistance or information under regulation 11 or anyone else from whom he has requested assistance in the performance of his functions. (6) The provision of such information or assistance in good faith does not constitute a breach of (a) any duty owed by any person involved in its preparation or delivery to any company or partnership of which he is an officer, member or employee, (b) any duty owed by an agent to his principal, or (c) any duty of confidence, subject to sections 348 and 349 of the 2000 Act. Treatment of members 13.—(1) Paragraph (2) applies where, after the making of a Lloyd’s market reorganisation order, any of the following occurs pursuant to the 1986 Act, the 1989 Order or the Bankruptcy (Scotland) Act— (a) a person seeks to exercise an entitlement to appoint an administrator, (b) an application is made to the court for the appointment of an administrator, (c) a petition for the winding up of a corporate member is presented to the court, (d) a petition for a bankruptcy order or sequestration is presented to the court, in respect of a member. (2) These Regulations, the principal Regulations the Administration for Insurers Order and the Administration for Insurers (Northern Ireland) Order shall apply to the member and— (a) for the purposes of the principal Regulations (notwithstanding regulation 3 of those Regulations), the member shall be treated as if it, he or she were a UK insurer; and

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(b) for the purposes of the Administration for Insurers Order or the Administration for Insurers (Northern Ireland) Order, a member that is a company shall be treated as if it were an insurance company. (3) Paragraph (2) does not apply where the court so orders, on the application of the administrator, liquidator, provisional liquidator, receiver or trustee in bankruptcy, the Accountant in Bankruptcy or trustee under a trust deed for creditors or the person referred to in paragraph (1)(b) or (c) seeking the appointment or presenting the petition. (4) A person who exercises an entitlement, makes an application or submits a petition to which paragraph (1) applies shall— (a) if he intends to make an application under paragraph (3) make the application before doing any of those things; and (b) include in any statement to be made under Schedule B1 or in Schedule B1 to the 1989 Order, or in any application or petition, a statement as to whether an order under paragraph (3) has been made in respect of the member concerned. (5) An application under paragraph (3) must be notified in writing to the reorganisation controller. (6) The court must take account of any representation made by the reorganisation controller in relation to the application. (7) The court may not make an order under paragraph (3) unless the court considers it likely that the insurance market debts of the member will be satisfied. (8) In this regulation and regulation 14, references to a member include references to a former member. Notes Paragraph (2) amended by The Insurers (Reorganisation and Winding Up)(Amendment) Regulations 2007, SI 2007 No 851, reg 3. Sub-paragraph (2)(b) amended by The Insurers (Reorganisation and Winding Up)(Amendment) Regulations 2007, SI 2007 No 851, reg 3. Sub-paragraph (4)(b) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3. Paragraph (5) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3.

Revocation of an order under regulation 13 14.—(1) This regulation applies in the case of a member in respect of whom an order has been made under regulation 13(3). (2) If the Society does not meet any request for payment of a cash call made by or on behalf of such a member, it must so inform the reorganisation controller, the Authority and the court. (3) If it appears to the reorganisation controller that, in respect of any such member, the insurance market debts of the member are not likely to be satisfied, he must apply to the court for the revocation of that order. (4) If the court revokes an order made under regulation 13(3), the provisions of these Regulations, the principal Regulations and the Administration for Insurers Order or the Administration for Insurers (Northern Ireland) Order apply to the member and from the date of the revocation a relevant officer is to be treated as having been appointed by the court. (5) For the purposes of paragraph (4), a relevant officer means— (a) an administrator, (b) a liquidator, (c) a receiver, (d) a trustee in bankruptcy, or (e) in Scotland, an interim or permanent trustee, as the case may be. (6) For the purposes of this regulation, a ‘‘cash call’’ means a request or demand made by a managing agent to a member of a syndicate to make payments to the trustees of any relevant trust fund to be held for the purpose of discharging or providing for the liabilities incurred by that member as a member of the syndicate.

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Notes Paragraph (4) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3.

Reorganisation controller’s powers: voluntary arrangements in respect of a member 15.—(1) The directors of a corporate member or former corporate member may make a proposal for a voluntary arrangement under Part 1 of the 1986 Act (or Part 2 of the 1989 Order) in relation to the member only if the reorganisation controller consents to the terms of that arrangement. (2) Section 1A of that Act or Article 14A of that Order do not apply to a corporate member or former corporate member if— (a) a Lloyd’s market reorganisation order applies to it; and (b) there is no order under regulation 13(3) in force in relation to it. (3) The reorganisation controller is entitled to be heard at any hearing of an application relating to the arrangement. Reorganisation controller’s powers: individual voluntary arrangements in respect of a member 16.—(1) The reorganisation controller is entitled to be heard on an application under section 253 of the 1986 Act (or Article 227 of the 1989 Order) by an individual member or former member. (2) When considering such an application the court shall have regard to the objectives of the Lloyd’s market reorganisation order. (3) Paragraphs (4) to (7) apply if an interim order is made on the application of such a person. (4) The reorganisation controller, or a person appointed by him for that purpose, may attend any meeting of creditors of the member or former member summoned under section 257 of the 1986 Act (or Article 231 of the 1989 Order) (summoning of creditors meeting). (5) Notice of the result of a meeting so summoned must be given in writing to the reorganisation controller by the chairman of the meeting. (6) The reorganisation controller may apply to the court under section 262 (challenge of meeting’s decision) or 263 (implementation and supervision of approved voluntary arrangement) of the 1986 Act (or Article 236 or 237 or the 1989 Order). (7) If a person other than the reorganisation controller makes an application to the court under any provision mentioned in paragraph (6), the reorganisation controller is entitled to be heard at any hearing relating to the application. Notes Paragraph (5) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3.

Reorganisation controller’s powers: trust deeds for creditors in Scotland 17.—(1) This regulation applies to the granting at any time by a debtor who is a member or former member of a trust deed for creditors. (2) The debtor must inform the person who is or is proposed to be the trustee at or before the time that the trust deed is granted that he is a member or former member of Lloyd’s. (3) As soon as practicable after the making of the Lloyd’s market reorganisation order the trustee must send to the reorganisation controller— (a) in every case, a copy of the trust deed; (b) where any other document or information is sent to every creditor known to the trustee in pursuance of paragraph 5(1)(c) of Schedule 5 to the Bankruptcy (Scotland) Act 1985, a copy of such document or information. (4) If the debtor or the trustee fails without reasonable excuse to comply with any obligation in paragraph (2) or (3) he shall be guilty of an offence and shall be liable on summary conviction to a fine not exceeding level 5 on the statutory scale or to imprisonment for a term not exceeding 3 months or both.

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(5) Paragraph 7 of that Schedule applies to the reorganisation controller as if he were a qualified creditor who has not been sent a copy of the notice as mentioned in paragraph 5(1)(c) of the Schedule. (6) The reorganisation controller must be given the same notice as the creditors of any meeting of creditors held in relation to the trust deed. (7) The reorganisation controller, or a person appointed by him for the purpose, is entitled to attend and participate in (but not to vote at) any such meeting of creditors as if the reorganisation controller were a creditor under the deed. (8) Expressions used in this regulation and in the Bankruptcy (Scotland) Act 1985 have the same meaning in this regulation as in that Act. Powers of reorganisation controller: section 425 or Article 418 compromise or arrangement 18.—(1) The reorganisation controller may apply to the court for an order that a meeting or meetings be summoned under section 425(1) of the 1985 Act or Article 418(1) of the Companies Order (power of company to compromise with creditors and members) in connection with a compromise or arrangement in relation to a member or former member. (2) Where a member, its creditors or members make an application under section 425(1) or Article 418 the reorganisation controller is entitled to attend and be heard at any hearing. (3) Where a meeting is summoned under section 425(1) or Article 418(1), the reorganisation controller is entitled to attend the meeting so summoned and to participate in it (but not to vote at it). Appointment of an administrator, receiver or interim trustee in relation to a member 19.—(1) Where a Lloyd’s market reorganisation order is in force, the following appointments may be made in relation to a member or former member only where an order has been made under regulation 13(3) and has not been revoked and shall be notified to the reorganisation controller— (a) the appointment of an administrator under paragraph 14 of Schedule B1 or under paragraph 15 of Schedule B1 to the 1989 Order; (b) the appointment of an administrator under paragraph 22 of Schedule B1 or under paragraph 23 of Schedule B1 to the 1989 Order; (c) the appointment of an administrative receiver; (d) the appointment of an interim receiver; and (e) the appointment of an interim trustee, within the meaning of the Bankruptcy (Scotland) Act 1985. (2) The notification to the reorganisation controller under paragraph (1) must be in writing. (3) If the requirement to notify the reorganisation controller in paragraph (1) is not complied with the administrator, administrative receiver, interim receiver or interim trustee is guilty of an offence and is liable on conviction to a fine not exceeding level 3 on the standard scale. Notes Sub-paragraph (1)(a) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3. Sub-paragraph (1)(b) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3.

Reorganisation controller’s powers: administration orders in respect of members 20.—(1) The reorganisation controller may make an administration application under paragraph 12 of Schedule B1 or under paragraph 13 of Schedule B1 to the 1989 Order in respect of a member or former member. (2) Paragraphs (3) to (5) apply if— (a) a person other than the reorganisation controller makes an administration application under Schedule B1 ‘‘, or under Schedule B1 to the 1989 Order, in relation to a member or former member; and

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(b) an order under regulation 13(3) is not in force in respect of that member. (3) The reorganisation controller is entitled to be heard— (a) at the hearing of the administration application; and (b) at any other hearing of the court in relation to the member under Schedule B1 or under Schedule B1 to the 1989 Order. (4) Any notice or other document required to be sent to a creditor of the member must also be sent to the reorganisation controller. (5) The reorganisation controller, or a person appointed by him for the purpose, may— (a) attend any meeting of creditors of the member summoned under any enactment; (b) attend any meeting of a committee established under paragraph 57 of Schedule B1 or under paragraph 58 of Schedule B1 to the 1989 Order; and (c) make representations as to any matter for decision at such a meeting. (6) If, during the course of the administration of a member, a compromise or arrangement is proposed between the member and its creditors, or any class of them, the reorganisation controller may apply to court under section 425 of the 1985 Act (or Article 418 of the Companies Order). Notes Paragraph (1) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3. Sub-paragraph (2)(a) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3. Sub-paragraph (3)(b) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3. Sub-paragraph (5)(b) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3.

Reorganisation controller’s powers: receivership in relation to members 21.—(1) This regulation applies if a receiver has been appointed in relation to a member or former member. (2) The reorganisation controller may be heard on an application made under section 35 or 63 of the 1986 Act (or Article 45 of the 1989 Order). (3) The reorganisation controller may make an application under section 41(1)(a) or 69(1)(a) of the 1986 Act (or Article 51(1)(a) of the 1989 Order). (4) A report under section 48(1) or 67(1) of the 1986 Act (or Article 58(1) of the 1989 Order) must be sent by the person making it to the reorganisation controller. (5) The reorganisation controller, or a person appointed by him for the purpose, may— (a) attend any meeting of creditors of the member or former member summoned under any enactment; (b) attend any meeting of a committee established under section 49 or 68 of the 1986 Act (or Article 59 of the 1989 Order); (c) attend any meeting of a committee of creditors of a member or former member in Scotland; and (d) make representations as to any matter for decision at such a meeting. (6) Where an administration application is made in respect of a member by the reorganisation controller (and there is an administrative receiver, or in Scotland a receiver, of that member), paragraph 39 of Schedule B1 or paragraph 40 of Schedule B1 to the 1989 Order does not require the court to dismiss the application if it thinks that(a) the objectives of the Lloyd’s market reorganisation order are more likely to be achieved by the appointment of an administrator than by the appointment or continued appointment of a receiver in respect of that member, and (b) the interests of the person by or on behalf of whom the receiver was appointed will be adequately protected. Notes Sub-paragraph (5)(b) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3.

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Paragraph (6) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3.

Syndicate set-off 22.—(1) This regulation applies where— (a) a member (‘‘the debtor’’) is subject to a relevant insolvency proceeding; and (b) no order under regulation 13(3) is in effect in relation to the debtor. (2) In the application of section 323 of the 1986 Act or Article 296 of the 1989 Order, Rule 2.85 and Rule 4.90 of the Insolvency Rules or Rule 2.086 and R4.096 of the Insolvency Rules (Northern Ireland) to the debtor, the following paragraphs apply in relation to each syndicate of which the debtor is a member, and for that purpose each reference to the debtor is to the debtor as a member of that syndicate only. (3) Subject to paragraphs (4) and (5), where there have been mutual credits, mutual debts or other mutual dealings between the debtor in the course of his business as a member of the syndicate (‘‘syndicate A’’) and a creditor, an account shall be taken of what is due from the debtor to that creditor, and of what is due from that creditor to the debtor, such account to be taken in respect of business transacted by the debtor as a member of syndicate A only and the sums due from one party shall be set off against the sums due from the other. (4) Where the creditor is a member (whether or not a member of syndicate A) and there have been mutual credits, mutual debts or other mutual dealings between the debtor as a member of syndicate A and the creditor in the course of the creditor’s business as a member of syndicate A or of another syndicate of which he is a member, paragraph (5) applies. (5) A separate account must be taken in relation to each syndicate of which the creditor is a member of what is due from the debtor to the creditor, and of what is due from the creditor to the debtor, in respect only of business transacted between the debtor as a member of syndicate A and the creditor as a member of the syndicate in question (and not in respect of business transacted by the creditor as a member of any other syndicate or otherwise), and the sums due from one party shall be set off against the sums due from the other. (6) In this regulation— (a) references to a member include references to a former member; and (b) ‘‘relevant insolvency proceedings’’ means proceedings in respect of an application or petition referred to in regulation 13(1). Notes Paragraph (2) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3.

Voluntary winding up of members: consent of reorganisation controller 23.—(1) During any period in which a Lloyd’s market reorganisation order is in force, a member or former member that is a company may not be wound up voluntarily without the consent of the reorganisation controller. (2) Before a member or former member passes a resolution for voluntary winding up it must give written notice to the reorganisation controller. (3) Where notice is given under paragraph (2), a resolution for voluntary winding up may be passed only— (a) after the end of a period of five business days beginning with the day on which the notice was given, if the reorganisation controller has not refused his consent, or (b) if the reorganisation controller has consented in writing to the passing of the resolution. (4) A copy of a resolution for the voluntary winding up of a member forwarded to the registrar of companies in accordance with section 380 of the 1985 Act (or Article 388 of the Companies Order) must be accompanied by a certificate issued by the reorganisation controller stating that he consents to the voluntary winding up of the member. (5) If paragraph (4) is complied with, the voluntary winding up is to be treated as having commenced at the time the resolution was passed. (6) If paragraph (4) is not complied with, the resolution has no effect.

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Voluntary winding up of members: powers of reorganisation controller 24.—(1) This regulation applies in relation to a member or former member that is a company and which is being wound up voluntarily with the consent of the reorganisation controller. (2) The reorganisation controller may apply to the court under section 112 of the 1986 Act (reference of questions to court) (or Article 98 of the 1989 Order) in respect of the member. (3) The reorganisation controller is entitled to be heard at any hearing of the court in relation to the voluntary winding up of the member. (4) Any notice or other document required to be sent to a creditor of the member must also be sent to the reorganisation controller. (5) The reorganisation controller, or a person appointed by him for the purpose, is entitled— (a) to attend any meeting of creditors of the member summoned under any enactment; (b) to attend any meeting of a committee established under section 101 of the 1986 Act (or Article 87 of the 1989 Order); and (c) to make representations as to any matter for decision at such a meeting. (6) If, during the course of the winding up of the member, a compromise or arrangement is proposed between the member and its creditors, or any class of them, the reorganisation controller may apply to court under section 425 of the 1985 Act (or Article 418 of the Companies Order). Petition for winding up of a member by reorganisation controller 25.—(1) The reorganisation controller may present a petition to the court for the winding up of a member or former member that is a company. (2) The petition is to be treated as made under section 124 of the 1986 Act or Article 104 of the 1989 Order. (3) Section 122(1) of the 1986 Act, or Article 102 of the 1989 Order must, in the case of an application made by the reorganisation controller be read as if they included the following grounds(a) the member is in default of an obligation to pay an insurance market debt which is due and payable; or (b) the court considers that the member is or is likely to be unable to pay insurance market debts as they fall due; and (c) in the case of either (a) or (b), the court thinks that the winding up of the member is necessary or desirable for achieving the objectives of the Lloyd’s market reorganisation order. Notes Paragraph (3) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3.

Winding up of a member: powers of reorganisation controller 26.—(1) This regulation applies if a person other than the reorganisation controller presents a petition for the winding up of a member or former member that is a company. (2) Any notice or other document required to be sent to a creditor of the member must also be sent to the reorganisation controller. (3) The reorganisation controller may be heard— (a) at the hearing of the petition; and (b) at any other hearing of the court in relation to the member under or by virtue of Part 4 or 5 of the 1986 Act (or Part 5 or 6 of the 1989 Order). (4) The reorganisation controller, or a person appointed by him for the purpose, may— (a) attend any meeting of the creditors of the member; (b) attend any meeting of a committee established for the purposes of Part 4 or 5 of the 1986 Act under section 101 of that Act or under section 141 or 142 of that Act;

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(c) attend any meeting of a committee established for the purposes of Part 5 or 6 of the 1989 Order under Article 87 or Article 120 of that Order; (d) make representations as to any matter for decision at such a meeting. (5) If, during the course of the winding up of a member, a compromise or arrangement is proposed between the member and its creditors, or any class of them, the reorganisation controller may apply to the court under section 425 of the 1985 Act (or Article 418 of the Companies Order). Petition for bankruptcy of a member by reorganisation controller 27.—(1) The reorganisation controller may present a petition to the court for a bankruptcy order to be made against an individual member or, in Scotland, for the sequestration of the estate of an individual. (2) The application shall be treated as made under section 264 of the 1986 Act (or Article 238 of the 1989 Order) or in Scotland under section 5 or 6 of the Bankruptcy (Scotland) Act 1985. (3) On such a petition, the court may make a bankruptcy order or in Scotland an award of sequestration if (and only if)— (a) the member is in default of an obligation to pay an insurance market debt which is due and payable; and (b) the court thinks that the making of a bankruptcy order or award of sequestration in respect of that member is necessary or desirable for achieving the objectives of the Lloyd’s market reorganisation order. Bankruptcy of a member: powers of reorganisation controller 28.—(1) This regulation applies if a person other than the reorganisation controller presents a petition to the court— (a) under section 264 of the 1986 Act (or Article 238 of the 1989 Order) for a bankruptcy order to be made against an individual member; (b) under section 5 of the Bankruptcy (Scotland) Act 1985 for the sequestration of the estate of an individual member; or (c) under section 6 of that Act for the sequestration of the estate belonging to or held for or jointly by the members of an entity mentioned in subsection (1) of that section. (2) The reorganisation controller is entitled to be heard— (a) at the hearing of the petition, and (b) at any other hearing in relation to the individual member or entity under(i) Part 9 of the 1986 Act, (ii) Part 9 of the 1989 Order; or (iii) the Bankruptcy (Scotland) Act 1985. (3) A copy of the report prepared under section 274 of the 1986 Act (or Article 248 of the 1989 Order) must also be sent to the reorganisation controller. (4) The reorganisation controller, or a person appointed by him for the purpose, is entitled— (a) to attend any meeting of the creditors of the individual member or entity; (b) to attend any meeting of a committee established under section 301 of the 1986 Act (or Article 274 of the 1989 Order); (c) to attend any meeting of commissioners held under paragraph 17 or 18 of Schedule 6 to the Bankruptcy (Scotland) Act; and (d) to make representations as to any matter for decision at such a meeting. (5) In this regulation— (a) references to an individual member include references to a former member who is an individual; (b) ‘‘entity’’ means an entity which is a member or a former member.

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Petition for winding up of the Society by reorganisation controller 29.—(1) The reorganisation controller may present a petition to the court for the winding up of the Society in the circumstances set out in section 221(5) (winding up of unregistered companies) of the 1986 Act. (2) Section 221(1) of that Act shall apply in respect of a petition presented by the reorganisation controller. Winding up of the Society: service of petition etc. on reorganisation controller 30.—(1) This regulation applies if a person other than the reorganisation controller presents a petition for the winding up of the Society. (2) The petitioner must serve a copy of the petition on the reorganisation controller. (3) Any notice or other document required to be sent to a creditor of the Society must also be sent to the reorganisation controller. (4) The reorganisation controller is entitled to be heard— (a) at the hearing of the petition; and (b) at any other hearing of the court in relation to the Society under or by virtue of Part 5 of the 1986 Act (winding up of unregistered companies). (5) The reorganisation controller, or a person appointed by him for the purpose, is entitled— (a) to attend any meeting of the creditors of the Society; (b) to attend any meeting of a committee established for the purposes of Part 5 of the 1986 Act under section 101 of that Act (appointment of liquidation committee); (c) to make representations as to any matter for decision at such a meeting. (6) If, during the course of the winding up of the Society, a compromise or arrangement is proposed between the Society and its creditors, or any class of them, the reorganisation controller may apply to the court under section 425 of the 1985 Act. Payments from central funds 31.—(1) Unless otherwise agreed in writing between the Society, the reorganisation controller and the Authority, before making a payment from central funds during the period of the Lloyd’s market reorganisation order, the Society must give 5 working days written notice to the reorganisation controller. (2) Notice under paragraph (1) must specify— (a) the amount of the proposed payment; (b) the purpose for which it is proposed to be made; (c) the recipient of the proposed payment. (3) An agreement under paragraph (1) may in particular provide for payments— (a) to a specified person; (b) to a specified class of person; (c) for a specified purpose; (d) for a specified class of purposes, to be made without the notice provided for in paragraph (1) (4) If before the end of the period of 5 working days from the date on which he receives the notice under paragraph (1) the reorganisation controller considers that the payment should not be made, he must within that period— (a) apply to the court for a determination that the payment not be made; and (b) give notice in writing of his application to the Society and the Authority on or before the making of the application, and the Society must not make payment without the permission of the court. (5) The Society and the Authority may be heard at any hearing in connection with any such application. (6) Where the reorganisation controller makes an application under paragraph (4), the Society commits an offence if it makes a payment from central funds without the permission of the court.

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(7) If an offence under paragraph (6) is shown to have been committed with the consent or connivance of an officer of the Society, the officer as well as the Society is guilty of the offence. (8) A person guilty of an offence under this regulation is liable— (a) on summary conviction, to a fine not exceeding the statutory maximum; (b) on conviction on indictment, to a fine. (9) In this regulation ‘‘working day’’ means any day other than a Saturday, a Sunday, Christmas Day, Good Friday or a day which is a bank holiday under the Banking and Financial Dealings Act 1971 in any part of the United Kingdom. (10) In paragraph (7), ‘‘officer’’, in relation to the Society, means the Chairman of Lloyd’s, a Deputy Chairman of Lloyd’s, the Chairman of the Committee established by section 5 of Lloyd’s Act 1982, a deputy Chairman of the Committee, or a member of the Council established by section 3 of that Act. Notes Paragraph (1) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3. Sub-paragraph (4)(b) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3. PA RT 3

M O D I F I C AT I O N O F L AW O F I N S O LV E N C Y : N O T I F I C AT I O N A N D P U B L I C AT I O N

Application of Parts 3 and 4 32. Parts 3 and 4 of these Regulations apply where a Lloyd’s market reorganisation order is in force and in respect of a member or former member in relation to whom no order under regulation 13(3) is in force. Notification of relevant decision to Authority 33.—(1) Regulation 9 of the principal Regulations applies to a member or former member in the circumstances set out in paragraph (2) and has effect as if the modifications set out in paragraphs (3) and (4) were included in it as regards members or former members. (2) The circumstances are where— (a) the member or former member is subject to a Lloyd’s market reorganisation order which remains in force; and (b) no order has been made in respect of that member or former member under regulation 13(3) of these Regulations and has not been revoked. Notes Paragraphs (3)—(6) modify The Insurers (Reorganisation and Winding Up) Regulations 2004, SI 2004, No 353 for the purpose of application to Lloyd’s and consequently are not reproduced here. Regulation 34 modifies The Insurers (Reorganisation and Winding Up) Regulations 2004, SI 2004, No 353 for the purpose of application to Lloyd’s and consequently are not reproduced here.

Application of certain publication requirements in the principal Regulations to members 35.—(1) Regulation 11 of the principal Regulations (publication of voluntary arrangement, administration order, winding up order or scheme of arrangement) applies, with the following, where a qualifying decision has effect, or a qualifying order or appointment is made, in relation to a member or former member. (2) References in regulation 11(2) to a ‘‘qualifying decision’’, a ‘‘qualifying order’’ and a ‘‘qualifying appointment’’ have the same meaning as in that regulation, subject to the modifications set out in paragraphs (3) and (5). (3) Regulation 11(2)(a) has effect as if a qualifying decision included a decision with respect to the approval of a proposed individual voluntary arrangement in relation to a member in accordance with section 258 of the 1986 Act or Article 232 of the 1989 Order (decisions of creditors’ meeting: individual voluntary arrangements) or in Scotland the grant of a trust deed (within the meaning of the Bankruptcy (Scotland) Act 1985).

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(4) In the case of a qualifying decision of a kind mentioned in paragraph (3) above, regulation 11(4) has effect as if the information mentioned therein included the court to which an application under sections 262 (challenge of the meeting’s decision) and 263(3) (implementation and supervision of approved voluntary arrangement) of the 1986 Act may be made or Articles 236 (challenge of the meeting’s decision) and 237(3) (implementation and supervision of approved voluntary arrangement) of the 1989 Order, or in Scotland under paragraph 12 of Schedule 5 to the Bankruptcy (Scotland) Act 1985. (5) Regulation 11(2)(b) has effect as if a qualifying order included in relation to a member or former member a bankruptcy order under Part 9 of the 1986 Act or Part 9 of the 1989 Order, or in Scotland, an award of sequestration under the Bankruptcy (Scotland) Act. (6) In the case of a qualifying order of the kind mentioned in paragraph (5) above, regulation 11(4) has effect as if the information mentioned therein included the court to which an application may be made under section 303 or 375 of the 1986 Act or Article 276 of the 1989 Order, or in Scotland included the court having jurisdiction to sequestrate. (7) Regulation 11(11) has effect as if the meaning of ‘‘relevant officer’’ included— (a) in the case of a voluntary arrangement under Part 9 of the 1986 Act or Part 9 of the 1989 Order, the nominee; (b) in the case of a bankruptcy order, the trustee in bankruptcy; (c) in Scotland, (i) the trustee acting under a trust deed; (ii) in the case of an award of sequestration, the interim or permanent trustee, as the case may be. Notification to creditors: winding up proceedings relating to members 36.—(1) Regulation 12 of the principal Regulations (notification to creditors: winding up proceedings) applies, with the following modifications, where a relevant order or appointment is made, or a relevant decision is taken, in relation to a member or former member. (2) References in paragraph (3) of that regulation to a ‘‘relevant order’’, a ‘‘relevant appointment’’ and a ‘‘relevant decision’’ have the meaning they have in that regulation, subject to the modifications set out in paragraphs (3) and (7). (3) Paragraph (3) of that regulation has effect, for the purposes of this regulation, as if— (a) a relevant order included a bankruptcy order made in relation to a member or former member under Part 9 of the 1986 Act or Part 9 of the 1989 Order or an award of sequestration under the Bankruptcy (Scotland) Act 1985; and (b) a relevant decision included a decision as a result of which a qualifying individual voluntary arrangement in relation to a member or former member has effect in accordance with section 258 of the 1986 Act or Article 232 of the 1989 Order (decisions of creditors’ meeting: individual voluntary arrangements) or in Scotland the grant of a qualifying trust deed. (4) Paragraph (4)(a) of that regulation has effect as if the reference to a UK insurer included a reference to a member or former member who is to be treated as a UK insurer for the purposes of the application of the principal Regulations. (5) Paragraph (9) of that regulation has effect as if, in a case where a bankruptcy order is made in relation to a member or former member, it permitted the obligation under paragraph (1)(a)(ii) of that regulation to be discharged by sending a form of proof in accordance with rule 6.97 of the Insolvency Rules or Rule 6.095 of the Insolvency Rules (Northern Ireland) or submitting a claim in accordance with section 48 of the Bankruptcy (Scotland) Act 1985, provided that the form of proof or submission of claim complies with paragraph (7) or (8) of that regulation (whichever is applicable) . (6) Paragraph (13)(a) of that regulation has effect as if the meaning of ‘‘appointed officer’’ included— (a) in the case of a qualifying individual voluntary arrangement approved in relation to a member or former member, the nominee; (b) in the case of a bankruptcy order in relation to an individual member or former member, the trustee in bankruptcy; (c) in Scotland in the case of a sequestration, the interim or permanent trustee; and (d) in Scotland in the case of a relevant decision, the trustee.

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(7) For the purposes of paragraph (3) of that regulation, an individual voluntary arrangement approved in relation to an individual member or former member is a qualifying individual voluntary arrangement and a trust deed within section 5(4A) of the Bankruptcy (Scotland) Act 1985 is a qualifying trust deed if its purposes or objects, as the case may be, include a realisation of some or all of the assets of that member or former member and a distribution of the proceeds to creditors, with a view to terminating the whole or any part of the business of that member carried on or formerly carried on in connection with contracts of insurance written at Lloyd’s. Submission of claims by EEA creditor 37.—(1) Regulation 13 of the principal Regulations (submission of claims by EEA creditors) applies, with the modifications set out in paragraphs (3) to (6) below, in the circumstances set out in paragraph (2) below, in the same way as it applies where an EEA creditor submits a claim or observations in the circumstances set out in paragraph (1) of that regulation. (2) Those circumstances are where, after the date these Regulations come into force an EEA creditor submits a claim or observations relating to his claim in any relevant proceedings in respect of a member or former member (irrespective of when those proceedings were commenced or had effect). (3) Paragraph (2) of that regulation has effect as if the ‘‘relevant proceedings’’ included— (a) bankruptcy or sequestration; or (b) a qualifying individual voluntary arrangement or in Scotland a qualifying trust deed for creditors. (4) Paragraph (5) of that regulation has effect as if it also provided that paragraph (3) of that regulation does not apply where an EEA creditor submits his claim using— (a) in a case of a bankruptcy or an award of sequestration of a member or former member, a form of proof in accordance with Rule 6.97 of Insolvency Rules or Rule 4.080 of the Insolvency Rules (Northern Ireland) or section 48 of the Bankruptcy (Scotland) Act 1985; (b) in the case of a qualifying trust deed, the form prescribed by the trustee; and (c) in the case of a qualifying individual voluntary arrangement, a form approved by the court for that purpose. (5) For the purposes of that regulation (as applied in the circumstances set out in paragraph (2) above), an individual voluntary arrangement approved in relation to an individual member is a qualifying individual voluntary arrangement and a trust deed for creditors within section 5(4A) of the Bankruptcy (Scotland) Act 1985 is a qualifying trust deed for creditors if its purposes or objects as the case may be include a realisation of some or all of the assets of that member or former member and a distribution of the proceeds to creditors including insurance creditors, with a view to terminating the whole or any part of the business of that member carried on in connection with effecting or carrying out contracts of insurance written at Lloyd’s. Reports to creditors 38.—(1) Regulation 14 of the principal Regulations (reports to creditors) applies with the modifications set out in paragraphs (2) to (4) where— (a) a liquidator is appointed in respect of a member or former member in accordance with— (i) section 100 of the 1986 Act or Article 86 of the 1989 Order (creditors’ voluntary winding up: appointment of a liquidator), or (ii) paragraph 83 of Schedule B1 or paragraph 84 of Schedule B1 to the 1989 Order (moving from administration to creditors’ voluntary liquidation); (b) a winding up order is made by the court in respect of a member or former member; (c) a provisional liquidator is appointed in respect of a member or former member; (d) an administrator (within the meaning given by paragraph 1(1) of Schedule B1 or paragraph 2(1) of Schedule B1 to the 1989 Order) of a member or former member includes in the statement required by Rule 2.3 of the Insolvency Rules or by Rule 2.003

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of the Insolvency Rules (Northern Ireland) a statement to the effect that the objective set out in paragraph 3(1)(a) of Schedule B1 or paragraph 4(1)(a) of Schedule B1 to the 1989 Order is not reasonably likely to be achieved; (e) a bankruptcy order or award of sequestration is made in respect of a member or former member. (2) Paragraphs (2) to (5) of that regulation have effect as if they each included a reference to— (a) an administrator who has made a statement to the effect that the objective set out in paragraph 3(1)(a) of Schedule B1 or in paragraph 4(1)(a) of Schedule B1 to the 1989 Order is not reasonably likely to be achieved; (b) the official receiver or a trustee in bankruptcy; and (c) in Scotland, an interim or permanent trustee. (3) Paragraph (6)(a) of that regulation has effect as if the meaning of ‘‘known creditor’’ included— (a) a creditor who is known to the administrator, the trustee in bankruptcy or the trustee, as the case may be; (b) in a case where a bankruptcy order is made in respect of a member or former member, a creditor who is specified in a report submitted under section 274 of the 1986 Act or Article 248 of the 1989 Order or a statement of affairs submitted under section 288 or Article 261 in respect of the member or former member; (c) in a case where an administrator of a member has made a statement to the effect that the objective set out in paragraph 3(1)(a) of Schedule B1 or in paragraph 4(1)(a) of Schedule B1 to the 1989 Order is not reasonably likely to be achieved, a creditor who is specified in the statement of the member’s affairs required by the administrator under paragraph 47(1) of Schedule B1 or under paragraph 48(1) of Schedule B1 to the 1989 Order; (d) in a case where a sequestration has been awarded, a creditor who is specified in a statement of assets and liabilities under section 19 of the Bankruptcy (Scotland) Act 1985. (4) Paragraph (6)(b) of that regulation has effect as if ‘‘report’’ included a written report setting out the position generally as regards the progress of— (a) the bankruptcy or sequestration; or (b) the administration. Notes Sub-paragraph (1)(a)(ii) amended by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3. Sub-paragraph (1)(d) revised by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3. Sub-paragraph (2)(a) revised by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3. Sub-paragraph (3)(b) revised by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3. Sub-paragraph (3)(c) revised by The Insurers (Reorganisation and Winding Up)(Amendment) Regulations 2007, SI 2007 No 851, reg 3.

Service of notices and documents 39.—(1) Regulation 15 of the principal Regulations (service of notices and documents) applies, with the modifications set out in paragraphs (2) and (3) below, to any notification, report or other document which is required to be sent to a creditor of a member or former member by a provision of Part III of those Regulations as applied and modified by regulations 33 to 35 above. (2) Paragraph 15(5)(a)(i) of that regulation has effect as if the reference to the UK insurer which is liable under the creditor’s claim included a reference to the member or former member who or which is liable under the creditor’s claim. (3) Paragraph (7)(c) of that regulation has effect as if ‘‘relevant officer’’ included a trustee in bankruptcy, nominee, receiver or, in Scotland, an interim or permanent trustee under a trust deed within the meaning of section 5(4A) of the Bankruptcy (Scotland) Act who is required to

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send a notification to a creditor by a provision of Part III of the principal Regulations as applied and modified by regulations 33 to 37 above.

PA RT 4

A P P L I C AT I O N O F PA RT S 4 A N D 5 O F T H E P R I N C I PA L R E G U L AT I O N S

Priority for insurance claims 40.—(1) Part 4 of the principal Regulations applies with the modifications set out in paragraphs (2) to (11). (2) References, in relation to a UK insurer, to a winding up by the court have effect as if they included a reference to the bankruptcy or sequestration of a member or former member. (3) References to the making of a winding up order in relation to a UK insurer have effect as if they included a reference to the making of a bankruptcy order or, in Scotland, an award of sequestration in relation to an individual member or a member or former member that is a Scottish limited partnership. (4) References to an administration order in relation to a UK insurer have effect as if they included a reference to an individual voluntary arrangement in relation to an individual member and a trust deed for creditors within the meaning of section 5(4A) of the Bankruptcy (Scotland) Act. (5) Regulation 20 (preferential debts: disapplication of section 175 of the 1986 Act or Article 149 of the 1989 Order) has effect as if the references to section 175 of the 1986 Act and Article 149 of the 1989 Order included a reference to section 328 of that Act, Article 300 of that Order and section 51(1) (d) to (h) of the Bankruptcy (Scotland) Act 1985. (6) Regulation 21(3) (preferential debts : long term insurers and general insurers) has effect as if after the words ‘‘rank equally among themselves’’ there were inserted the words ‘‘after the expenses of the bankruptcy or sequestration’’. (7) Regulation 27 (composite insurers: application of other assets) has effect as if the reference to section 175 of the 1986 Act or Article 149 of the 1989 Order included a reference to section 328 of that Act, Article 300 of that Order and section 51(1) (e) to (h) of the Bankruptcy (Scotland) Act. (8) [omitted here: inserts new paragraphs (3) to (8) in Reg 29 of The Insurers (Reorganisation and Winding Up) Regulations 2004, SI 2004 No 353 for the purpose of application to Lloyd’s.] (9) Regulation 30 (composite insurers: apportionment of costs payable out of the assets) has effect as if in its application to members or former members who are individuals or Scottish limited partnerships— (a) in England and Wales, the reference to Rule 4.218 of the Insolvency Rules (general rule as to priority) included a reference to Rule 6.224 of the Insolvency Rules (general rule as to priority (bankruptcy)); (b) in Northern Ireland, the reference to Rule 4.228 of the Insolvency Rules (Northern Ireland) (general rule as to priority) included a reference to Rule 6.222 of the Insolvency Rules (Northern Ireland) (general rule as to priority (bankruptcy)); and (c) in Scotland, the reference to Rule 4.67 of the Insolvency (Scotland) Rules includes reference to— (i) any finally determined outlays or remuneration in a sequestration within the meaning of section 53 of the Bankruptcy (Scotland) Act 1985 and shall be calculated and applied separately in respect of the long-term business assets and the general business assets of that member; and (ii) the remuneration and expenses of a trustee under a trust deed for creditors within the meaning of the Bankruptcy (Scotland) Act 1985, and references to a liquidator include references to a trustee in bankruptcy, interim or permanent trustee, trustee under a trust deed for creditors, Accountant in Bankruptcy or Commissioners where appropriate. (10) Regulation 31 (summary remedies against liquidators) has effect as if— (a) the reference to section 212 of the 1986 Act or Article 176 of the 1989 Order included a reference to section 304 of that Act or Article 277 of that Order (liability of trustee);

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(b) the references to a liquidator included a reference to a trustee in bankruptcy in respect of a qualifying insolvent member; and (c) the reference to section 175 of the1986 Act or Article 149 of the 1989 Order included a reference to section 328 of that Act or Article 300 of that Order. (11) Regulation 33 (voluntary arrangements: treatment of insurance debts) has effect as if after paragraph (3) there were inserted— ‘‘(4) The modifications made by paragraph (5) apply where an individual member proposes an individual voluntary arrangement in accordance with Part 8 of the 1986 Act or Part 8 of the 1989 Order, and that arrangement includes— (a) a composition in satisfaction of any insurance debts; and (b) a distribution to creditors of some or all of the assets of that member in the course of, or with a view to, terminating the whole or any part of the insurance business of that member carried on at Lloyd’s. (5) Section 258 of the 1986 Act (decisions of creditors’ meeting) has effect as if— (a) after subsection (5) there were inserted— ‘‘(5A) A meeting so summoned in relation to an individual member and taking place when a Lloyd’s market reorganisation order is in force shall not approve any proposal or modification under which any insurance debt of that member is to be paid otherwise than in priority to such of his debts as are not insurance debts or preferential debts.’’; (b) after subsection (7) there were inserted— ‘‘(8) For the purposes of this section— (a) ‘‘insurance debt’’ has the meaning it has in the Insurers (Reorganisation and Winding Up) Regulations 2004; (b) ‘‘Lloyd’s market reorganisation order’’ and ‘‘individual member’’ have the meaning they have in the Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005.’’. (6) Article 232 of the 1989 Order (Decisions of creditors’ meeting) has effect as if— (a) after paragraph (6) there were inserted— ‘‘(6A) A meeting so summoned in relation to an individual member and taking place when a Lloyd’s market reorganisation order is in force shall not approve any proposal or modification under which any insurance debt of that member is to be paid otherwise than in priority to such of his debts as are not insurance debts or preferential debts.’’; (b) after paragraph (9) there were inserted— ‘‘(10) For the purposes of this Article— (a) ‘‘insurance debt’’ has the meaning it has in the Insurers (Reorganisation and Winding Up) Regulations 2004; (b) ‘‘Lloyd’s market reorganisation order’’ and ‘‘individual member’’ have the meaning they have in the Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005.’’. (7) In Scotland, where a member or former member grants a trust deed for creditors, Schedule 5 to the Bankruptcy (Scotland) Act 1985 shall be read as if after paragraph 4 there were included paragraphs 4A and 4B as follows— ‘‘4A. Whether or not provision is made in any trust deed, where such a trust deed includes a composition in satisfaction of any insurance debts of a member or former member and a distribution to creditors of some or all of the assets of that member or former member in the course of or with a view to meeting obligations of his insurance business carried on at Lloyd’s, the trustee may not provide for any insurance debt to be paid otherwise than in priority to such of his debts as are not insurance debts or preferred debts within the meaning of section 51(2). 4B. For the purposes of paragraph 4A, (a) ‘‘insurance debt’’ has the meaning it has in the Insurance (Reorganisation and Winding Up) Regulations 2004; and (b) ‘‘member’’ and ‘‘former member’’ have the meaning given in regulation 2(1) of the Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005 .’’.’’.

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(12) The power to apply to court in section 303 of the 1986 Act or Article 276 of the 1989 Order or section 63 of the Bankruptcy (Scotland) Act (general control of trustee by court) may be exercised by the reorganisation controller if it appears to him that any act, omission or decision of a trustee of the estate of a member contravenes the provisions of Part 4 of the principal Regulations (as applied by this regulation). Treatment of liabilities arising in connection with a contract subject to reinsurance to close 41.—(1) Where in respect of a member or former member who is subject to a Lloyd’s market reorganisation order any of the events specified in paragraph (2)(a) have occurred, for the purposes of the application of Part 4 of the principal Regulations to that member (and only for those purposes), an obligation of that member under a reinsurance to close contract in respect of a debt due or treated as due under a contract of insurance written at Lloyd’s is to be treated as an insurance debt. (2) For the purposes of this regulation— (a) The events are— (i) in respect of a member which is a corporation the appointment of a liquidator, provisional liquidator or administrator; (ii) in respect of an individual member, the appointment of a receiver or trustee in bankruptcy; and (iii) in respect of a member in Scotland being either an individual or a Scottish limited partnership, the making of a sequestration order or the appointment of an interim or permanent trustee; (b) ‘‘reinsurance to close contract’’ means a contract under which, in accordance with the rules or practices of Lloyd’s, underwriting members (‘‘the reinsured members’’) who are members of a syndicate for a year of account (‘‘the closed year’’) agree with underwriting members who constitute that or another syndicate for a later year of account (‘‘the reinsuring members’’) that the reinsuring members will indemnify the reinsured members against all known and unknown liabilities of the reinsured members arising out of the insurance business underwritten through that syndicate and allocated to the closed year (including liabilities under any reinsurance to close contract underwritten by the reinsured members). Assets of members 42.—(1) This regulation applies where a member or former member is treated as a UK insurer in accordance with regulations 13 and 40 above. (2) Subject to paragraphs (3) and (4), the undistributed assets of the member are to be treated as assets of the insurer for the purposes of the application of Part 4 of the principal Regulations in accordance with regulation 43 below. (3) For the purposes of this regulation, the undistributed assets of the member so treated do not include any asset held in a relevant trust fund. (4) But any asset released from a relevant trust fund and received by such a member is to be treated as an asset of the insurer for the purposes of the application of Part 4 of the principal Regulations. Application of Part 4 of the principal Regulations: protection of settlements 43.—(1) This regulation applies where a member or former member is subject to an insolvency measure mentioned in paragraph (4) at the time that a Lloyd’s market reorganisation order comes into force. (2) Nothing in these Regulations or Part 4 of the principal Regulations affects the validity of any payment or disposition made, or any settlement agreed, by the relevant officer before the date when the Lloyd’s market reorganisation order came into force. (3) For the purposes of the application of Part 4 of the principal Regulations, the insolvent estate of the member or former member shall not include any assets which are subject to a relevant section 425 or Article 418 compromise or arrangement, a relevant individual voluntary arrangement, or a relevant trust deed for creditors. (4) In paragraph (2) ‘‘relevant officer’’ means—

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(a) where the insolvency measure is a voluntary arrangement, the nominee; (b) where the insolvency measure is administration, the administrator; (c) where the insolvency measure is the appointment of a provisional liquidator, the provisional liquidator; (d) where the insolvency measure is a winding up, the liquidator; (e) where the insolvency measure is an individual voluntary arrangement, the nominee or supervisor; (f) where the insolvency measure is bankruptcy, the trustee in bankruptcy ; (g) where the insolvency measure is sequestration, the interim or permanent trustee; and (h) where the insolvency measure is a trust deed for creditors, the trustee. (5) For the purposes of paragraph (3)— (a) ‘‘assets’’ has the same meaning as ‘‘property’’ in section 436 of the 1986 Act or Article 2(2) of the 1989 Order; (b) ‘‘insolvent estate’’ in England and Wales and Northern Ireland has the meaning given by Rule 13.8 of the Insolvency Rules or Rule 0.2 of the Insolvency Rules (Northern Ireland), and in Scotland means the whole estate of the member; (c) ‘‘a relevant section 425 or Article 418 compromise or arrangement’’ means— (i) a section 425 or Article 418 compromise or arrangement which was sanctioned by the court before the date on which an application for a Lloyd’s market reorganisation order was made, or (ii) any subsequent section 425 or Article 418 compromise or arrangement sanctioned by the court to amend or replace a compromise or arrangement of the kind mentioned in paragraph (i); (d) ‘‘a relevant individual voluntary arrangement’’ and ‘‘a relevant trust deed for creditors’’ mean an individual voluntary arrangement or trust deed for creditors which was sanctioned by the court or entered into before the date on which an application for a Lloyd’s market reorganisation order was made. Challenge by reorganisation controller to conduct of insolvency practitioner 44.—(1) The reorganisation controller may apply to the court claiming that a relevant officer is acting, has acted, or proposes to act in a way that fails to comply with a requirement of Part 4 of the principal Regulations. (2) The reorganisation controller must send a copy of an application under paragraph (1) to the relevant officer in respect of whom the application is made. (3) In the case of a relevant officer who is acting in respect of a member or former member subject to the jurisdiction of a Scottish court, the application must be made to the Court of Session. (4) The court may— (a) dismiss the application; (b) make an interim order; (c) make any other order it thinks appropriate. (5) In particular, an order under this regulation may— (a) regulate the relevant officer’s exercise of his functions; (b) require that officer to do or not do a specified thing; (c) make consequential provision. (6) An order may not be made under this regulation if it would impede or prevent the implementation of— (a) a voluntary arrangement approved under Part 1 of the 1986 Act or Part 2 of the 1989 Order before the date when the Lloyd’s market reorganisation order was made; (b) an individual voluntary arrangement approved under Part 8 of that Act or Part 8 of that Order before the date when the Lloyd’s market reorganisation order was made; or (c) a section 425 or Article 418 compromise or arrangement which was sanctioned by the court before the date when the Lloyd’s market reorganisation order was made. (7) In this regulation ‘‘relevant officer’’ means— (a) a liquidator,

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(b) a provisional liquidator, (c) an administrator (d) the official receiver or a trustee in bankruptcy, or (e) in Scotland, an interim or permanent trustee or a trustee for creditors, who is appointed in relation to a member or former member. Application of Part 5 of the principal Regulations 45.—(1) Part 5 of the principal Regulations (reorganisation or winding up of UK insurers: recognition of EEA rights) applies with the modifications set out in regulation 46 where, on or after the date that a Lloyd’s market reorganisation order comes into force, a member or former member is or becomes subject to a reorganisation or insolvency measure. (2) For the purposes of this regulation a ‘‘reorganisation or insolvency measure’’ means— (a) a voluntary arrangement, having a qualifying purpose, approved in accordance with section 4A of the 1986 Act or Article 17A of the 1989 Order; (b) administration pursuant to an order under paragraph 13 of Schedule B1 or under paragraph 14 of Schedule B1 to the 1989 Order; (c) the reduction by the court of the value of one or more relevant contracts of insurance under section 377 of the 2000 Act or section 24(5) of the Friendly Societies Act 1992; (d) winding up; (e) the appointment of a provisional liquidator in accordance with section 135 of the 1986 Act or Article 115 of the 1989 Order; (f) an individual voluntary arrangement, having a qualifying purpose, approved in accordance with section 258 of the 1986 Act or Article 232 of the 1989 Order; (g) in Scotland a qualifying trust deed for creditors within the meaning of section 5(4A) of the Bankruptcy (Scotland) Act 1985; (h) bankruptcy, in accordance with Part 9 of the 1986 Act or Part 9 of the1989 Order; or (i) sequestration under the Bankruptcy (Scotland) Act 1985. (3) A measure imposed under the law of a State or country other than the United Kingdom is not a reorganisation or insolvency measure for the purposes of this regulation. (4) For the purposes of sub-paragraphs (a), (f) and (g) of paragraph (2), a voluntary arrangement or individual voluntary arrangement has a qualifying purpose and a trust deed is a qualifying trust deed if it— (a) varies the rights of creditors as against the member and is intended to enable the member to continue to carry on an insurance market activity at Lloyd’s; or (b) includes a realisation of some or all of the assets of the member and the distribution of proceeds to creditors, with a view to terminating the whole or any part of that member’s business at Lloyd’s. Notes Sub-paragraph (2)(b) revised by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3.

Modification of provisions in Part 5 of the principal Regulations 46.—(1) The modifications mentioned in regulation 45(1) are as follows. (2) Regulation 35 is disapplied. (3) Regulation 36 (interpretation of Part 5) has effect as if— (a) in paragraph (1)— (i) the meaning of ‘‘affected insurer’’ included a member or former member who, on or after the date that a Lloyd’s market reorganisation order comes into force, is or becomes subject to a reorganisation or insolvency measure within the meaning given by regulation 44(2)of these Regulations; (ii) the meaning of ‘‘relevant reorganisation or relevant winding up’’ included any reorganisation or insolvency measure, in respect of a member or former member,

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to which Part 5 of the principal Regulations applies by virtue of regulation 45(1) of these Regulations; (iii) in the case of sequestration, the date of sequestration within the meaning of section 12 of the Bankruptcy (Scotland) Act 1985; and (b) in paragraph (2) references to the opening of a relevant reorganisation or a relevant winding up meant (in addition to the meaning in the cases set out in that paragraph)— (i) in the case of an individual voluntary arrangement, the date when a decision with respect to that arrangement has effect in accordance with section 258 of the 1986 Act or Article 232 of the 1989 Order; (ii) in the case of bankruptcy, the date on which the bankruptcy order is made under Part 9 of the 1986 Act or Part 9 of the 1989 Order; (iii) in the case of a trust deed for creditors under the Bankruptcy (Scotland) Act 1985 the date when the trust deed was granted. (4) Regulation 37 of the principal Regulations (EEA rights: applicable law in the winding up of a UK insurer) has effect as if— (a) references to a relevant winding up included (in each case) a reference to a reorganisation or insolvency measure within the meaning given by sub-paragraphs (d), (g) (h) and (i) of regulation 45(2) of these Regulations (winding up and bankruptcy) in respect of a member or former member; and (b) the reference in paragraph (3)(c) to the liquidator included a reference to the trustee in bankruptcy or in Scotland to the interim or permanent trustee. (5) Regulation 42 (reservation of title agreements etc.) has effect as if the reference to an insurer in paragraphs (1) and (2) included a reference to a member or former member. Application of Part 5 of the principal Regulations: protection of dispositions etc. made before a Lloyd’s market reorganisation order comes into force 47.—(1) This regulation applies where— (a) a member or former member is subject to a reorganisation or insolvency measure on the date when a Lloyd’s market reorganisation order comes into force; and (b) Part 5 of the principal Regulations applies in relation to that reorganisation or insolvency measure by virtue of regulation 45 above. (2) Nothing in Part 5 of the principal Regulations affects the validity of any payment or disposition made, or any settlement agreed, by the relevant officer before the date when the Lloyd’s market reorganisation order came into force. (3) For the purposes of the application of Part 5 of the principal Regulations, the insolvent estate of the member does not include any assets which are subject to a relevant section 425 or Article 418 compromise or arrangement, a relevant individual voluntary arrangement, or a relevant trust deed for creditors. (4) In paragraph (2) ‘‘relevant officer’’ means— (a) where the member is subject to a voluntary arrangement in accordance with section 4A of the 1986 Act or Article 17A of the 1989 Order, the supervisor; (b) where the member is in administration in accordance with Schedule B1 or with Schedule B1 to the 1989 Order, the administrator; (c) where a provisional liquidator has been appointed in relation to a member in accordance with section 135 of the 1986 Act or Article 115 of the 1989 Order, the provisional liquidator; (d) where the member is being wound up under Part 4 of the 1986 Act or Part 5 of the 1989 Order, the liquidator; (e) where the member has made a voluntary arrangement in accordance with Part 8 of the 1986 Act or Part 8 of the 1989 Order, the nominee; (f) where the member is bankrupt within the meaning of Part 9 of the 1986 Act or Part 9 of the 1989 Order, the official receiver or trustee in bankruptcy; (g) where the member is being sequestrated, the interim or permanent trustee; and (h) where a trust deed for creditors has been granted, the trustee. (5) For the purposes of paragraph (3)—

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(a) ‘‘assets’’ has the same meaning as ‘‘property’’ in section 436 of the 1986 Act or Article 2(2) of the 1989 Order, except in relation to relevant trust deeds; (b) ‘‘insolvent estate’’ in England and Wales and Northern Ireland has the meaning given by Rule 13.8 of the Insolvency Rules or Rule 0.2 of the Insolvency Rules (Northern Ireland), and in Scotland means the assets of the member; (c) ‘‘relevant section 425 or Article 418 compromise or arrangement’’ means— (i) a section 425 or Article 418 compromise or arrangement which was sanctioned by the court before the date when the Lloyd’s market reorganisation order came into force, or (ii) any subsequent section 425 or Article 418 compromise or arrangement sanctioned by the court to amend or replace a compromise or arrangement of the kind mentioned in paragraph (i); (d) ‘‘relevant individual voluntary arrangement’’ means— (i) an individual voluntary arrangement approved under Part 8 of the 1986 Act or Part 8 of the 1989 Order before the date when a Lloyd’s market reorganisation order came in to force, and (ii) any subsequent individual voluntary arrangement sanctioned by the court to amend or replace an arrangement of the kind mentioned in paragraph (i); and (e) ‘‘relevant trust deed’’ means a trust deed granted by a member or former member before the date when the Lloyd’s market reorganisation order entered into force. Notes Sub-paragraph (4)(b) revised by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3. Sub-paragraph (5)(d)(i) revised by The Insurers (Reorganisation and Winding Up) (Amendment) Regulations 2007, SI 2007 No 851, reg 3.

Non-EEA countries 48. In respect of a member or former member who is established in a country outside the EEA, the court or the Authority may, subject to sections 348 and 349 of the 2000 Act, make such disclosures as each considers appropriate to a court or to a regulator with a role equivalent to that of the Authority for the purpose of facilitating the work of the reorganisation controller.

Amendment of principal Regulations 49. [omitted; amends The Insurers (Reorganisation and Winding Up) Regulations 2004, SI 2004 No 353, reg 19(2)(b)].

1.57 THE DISABILITY DISCRIMINATION (SERVICE PROVIDERS AND PUBLIC AUTHORITIES CARRYING OUT FUNCTIONS) REGULATIONS 2005 (SI 2005 No 2901)

General Note This Statutory Instrument replaces the Disability Discrimination (Services and Premises) Regulations 1996 (SI 1996 No 1836) in relation to the provision of insurance. It specifies, for the purpose of the Disability Discrimination Act 1995, the circumstances in which less favourable treatment is justified. Regulations 7 and 8 deal with the circumstances in which less favourable treatment is justified in the provision of services and guarantees and in relation to deposits in respect of the provision of goods and facilities and are consequently omitted here, as are Parts 3 and 4 and Schedule 1 dealing with adjustments to physical features.

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I N T R O D U C T O RY

Citation and commencement 1. These Regulations may be cited as the Disability Discrimination (Service Providers and Public Authorities Carrying Out Functions) Regulations 2005 and shall come into force on 4th December 2006, except for this regulation and regulation 12 which shall come into force on 5th December 2005. Interpretation 2.—(1) In these Regulations— ‘‘the 1995 Act’’ means the Disability Discrimination Act 1995; ‘‘building’’ means an erection or structure of any kind; ‘‘incepted’’ refers to the time when the liability to risk of an insurer under a policy of insurance commenced; ‘‘insurance business’’ means business which consists of effecting or carrying out contracts of insurance; ‘‘insurer’’ means a person who may carry on insurance business without contravening the prohibition imposed by section 19 of the Financial Services and Markets Act 2000; and ‘‘public authority carrying out its functions’’ means a public authority carrying out an activity to which section 21B of the 1995 Act applies. (2) The definition of ‘‘insurance business’’ in paragraph (1) must be read with— (a) section 22 of the Financial Services and Markets Act 2000; (b) any relevant order under that section; and (c) Schedule 2 to that Act.

PA RT 2

J U S T I F I C AT I O N

Circumstances in which mental incapacity justification does not apply 3. The conditions specified in sections 20(4)(b) and 21D(4)(b) of the 1995 Act shall not apply where another person is acting for a disabled person by virtue of— (a) a power of attorney; or (b) functions conferred by or under Part 7 of the Mental Health Act 1983; or (c) powers exercisable in relation to the disabled person’s property or affairs in consequence of the appointment, under the law of Scotland, of a guardian, tutor or judicial factor. Insurance services: circumstances in which less favourable treatment is justified 4.—(1) Where, for a reason which relates to the disabled person’s disability, a provider of services treats a disabled person less favourably than he treats or would treat others to whom that reason does not or would not apply, that treatment shall be taken to be justified for the purposes of section 20 of the 1995 Act in the circumstances specified in paragraph (2). (2) The circumstances referred to in paragraph (1) are that the less favourable treatment is— (a) in connection with insurance business carried on by the provider of services; (b) based upon information (for example, actuarial or statistical data or a medical report) which is relevant to the assessment of the risk to be insured and is from a source on which it is reasonable to rely; and (c) reasonable having regard to the information relied upon and any other relevant factors.

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Insurance services: transitional provisions for existing policies 5.—(1) Subject to paragraph (2), and except where regulation 6 applies, where, for a reason which relates to the disabled person’s disability, a provider of services treats a disabled person less favourably than he treats or would treat others to whom that reason does not or would not apply, that treatment shall be taken to be justified for the purposes of section 20 of the 1995 Act if the treatment is in connection with insurance business carried on by the provider of services and relates to an existing policy. (2) Subject to paragraph (4), where an existing policy is due to be renewed, or the terms of such a policy are due to be reviewed, on or after 4th December 2006, any less favourable treatment which occurs on or after the date that the review or renewal is due shall not be taken to be justified under paragraph (1). (3) In this regulation ‘‘an existing policy’’ means a policy of insurance which incepted before 2nd December 1996 and which was not due to be renewed, or the terms of which policy were not due to be reviewed, before 4th December 2006. (4) A review of an existing policy which is part of, or incidental to, a general reassessment by the provider of services of the pricing structure for a group of policies shall not be treated as a review for the purposes of paragraphs (2) and (3). Insurance services: transitional provisions for cover documents and master policies 6.—(1) Subject to paragraphs (2) and (3), where, for a reason which relates to the disabled person’s disability, a provider of services treats a disabled person less favourably than he treats or would treat others to whom that reason does not or would not apply, that treatment shall be taken to be justified for the purposes of section 20 of the 1995 Act if the treatment is in connection with insurance business carried on by the provider of services and relates to a cover document which incepted before 2nd December 1997 and which was not due to be renewed, or the terms of which document were not due to be reviewed, before 4th December 2006. (2) Paragraph (1) does not apply in a case where— (a) the relevant master policy was entered into or renewed on or after 2nd December 1996; or (b) the terms of the relevant master policy were reviewed on or after 2nd December 1996, and for this purpose ‘‘the relevant master policy’’ means the master policy under which the cover document was issued. (3) Where a cover document is due to be renewed, or the terms of such a document are due to be reviewed, on or after 4th December 2006, any less favourable treatment which occurs on or after the date that the review or renewal is due shall not be taken to be justified under paragraph (1). (4) In this regulation— ‘‘cover document’’ means a certificate or policy issued under a master policy; ‘‘master policy’’ means a contract between an insurer and another person under which that person is entitled to issue certificates or policies to individuals, and which details the terms on which that person may do so.

1.58 THE FINANCIAL SERVICES AND MARKETS ACT 2000 (EXEMPTION) (AMENDMENT) ORDER 2007 (SI 2007 No 125) General Note This Order implements in part Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (OJ No L 145, 30.4.2004, p. 1) (‘‘the Directive’’). It amends various provisions in The Financial Services and Markets Act 2000 (Exemption) Order 2001, SI 2001 No 1201 as amended and consequently is not reproduced here.

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1.59 FIRST COUNCIL DIRECTIVE OF 24 JULY 1973 ON THE COORDINATION OF LAWS, REGULATIONS AND ADMINISTRATIVE PROVISIONS RELATING TO THE TAKING-UP AND PURSUIT OF THE BUSINESS OF DIRECT INSURANCE OTHER THAN LIFE ASSURANCE (73/239/EEC) AS AMENDED General Note The First Non-Life Directive in its original form was concerned with the right of an insurer with its head office in one member state to establish a branch or agency in another member state, subject to that establishment seeking authorisation from the regulatory authorities of the host state. The Second and Third Directives subsequently moved to the position whereby insurance could be provided by an establishment located in one member state, to persons in any other member state, without the need for the setting up of an establishment in the host state. The First Non-Life Directive remains confined to dealing with the rules for the setting up by an insurer, established and authorised in one state, of an establishment in any other member state. The amendments to the First Non-Life Directive introduced by the Third NonLife Directive dispense with the need for the establishment in the host state to be authorised by the host’s regulatory authorities, home state authorisation operating as a Single European Licence. The Directive is applicable to the European Economic Area Agreement between EC member states and EFTA states, with the modifications noted in the annotations. It does not apply to the amendments introduced by the Third Non-Life Directive. The text of the First Non-Life Directive prior to its amendment by the Third Non-Life Directive is not reproduced in this work. The general effect of the EEA agreement is to permit a member state to impose an authorisation requirement upon an EFTA insurer selling insurance by way of services, in respect of mass risks but not in respect of large risks.

THE COUNCIL OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Economic Community, and in particular Article 57(2) thereof; Having regard to the General Programme for the abolition of restrictions on freedom of establishment, and in particular Title IV C thereof; Having regard to the proposal from the Commission; Having regard to the Opinion of the European Parliament; Having regard to the Opinion of the Economic and Social Committee; Whereas by virtue of the General Programme the removal of restrictions on the establishment of agencies and branches is, in the case of the direct insurance business, dependent on the coordination of the conditions for the taking-up and pursuit of this business; whereas such coordination should be effected in the first place in respect of direct insurance other than life assurance; Whereas in order to facilitate the taking-up and pursuit of the business of insurance, it is essential to eliminate certain divergencies which exist between national supervisory legislation; whereas in order to achieve this objective, and at the same time ensure adequate protection for insured and third parties in all the Member States, it is desirable to coordinate, in particular, the provisions relating to the financial guarantees required of insurance undertakings; Whereas a classification of risks in the different classes of insurance is necessary in order to determine, in particular, the activities subject to a compulsory authorisation and the amount of the minimum guarantee fund fixed for the class of insurance concerned; Whereas it is desirable to exclude from the application of this Directive mutual associations which, by virtue of their legal status, fulfil appropriate conditions as to security and financial guarantees; whereas it is further desirable to exclude certain institutions in several Member States whose business covers a very limited sector only and is restricted by law to a specified territory or to specified persons; Whereas the various laws contain different rules as to the simultaneous undertaking of health insurance, credit and suretyship insurance and insurance in respect of recourse against third parties and legal defence, whether with one another or with other classes of insurance; whereas continuance of this divergence after the abolition of restrictions on the right of establishment in classes other than life assurance would mean that obstacles to establishment would continue to exist; whereas a solution to this problem must be provided in subsequent coordination to be effected within a relatively short period of time; Whereas it is necessary to extend supervision in each Member State to all the classes of insurance to which this Directive applies; whereas such supervision is not possible unless the

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undertaking of such classes of insurance is subject to an official authorisation; whereas it is therefore necessary to define the conditions for the granting or withdrawal of such authorisation; whereas provision must be made for a right to apply to the courts should an authorisation be refused or withdrawn; Whereas it is desirable to bring the classes of insurance known as transport classes bearing Nos 4, 5, 6, 7 and 12 in paragraph A of the Annex, and the credit insurance classes bearing Nos 14 and 15 in paragraph A of the Annex, under more flexible rules in view of the continual fluctuations in conditions affecting goods and credit; Whereas the search for a common method of calculating technical reserves is at present the subject of studies at Community level; whereas it therefore appears to be desirable to reserve the attainment of coordination in this matter, as well as questions relating to the determination of categories of investments and the valuation of assets, for subsequent Directives; Whereas it is necessary that insurance undertakings should possess, over and above technical reserves of sufficient amount to meet their underwriting liabilities, a supplementary reserve, to be known as the solvency margin, and represented by free assets, in order to provide against business fluctuations; whereas in order to ensure that the requirements imposed for such purposes are determined according to objective criteria, whereby undertakings of the same size are placed on an equal footing as regards competition, it is desirable to provide that such margin shall be related to the overall volume of business of the undertaking and be determined by reference to two indices of security, one based on premiums and the other on claims; Whereas it is desirable to require a minimum guarantee fund related to the size of the risk in the classes undertaken, in order to ensure that undertakings possess adequate resources when they are set up and that in the subsequent course of business the solvency margin shall in no event fall below a minimum of security; Whereas it is necessary to make provision for the case where the financial condition of the undertaking becomes such that it is difficult for it to meet its underwriting liabilities; Whereas the coordinated rules concerning the taking-up and pursuit of the business of direct insurance within the Community should, in principle, apply to all undertakings entering the market and, consequently, also to agencies and branches where the head office of the undertaking is situated outside the Community; whereas it is, nevertheless, desirable as regards the methods of supervision to make special provision with respect to such agencies or branches in view of the fact that the assets of the undertakings to which they belong are situated outside the Community; Whereas it is, however, desirable to permit the relaxation of such special conditions, while observing the principle that such agencies and branches should not obtain more favourable treatment than undertakings within the Community; Whereas certain transitional provisions are required in order, in particular, to permit small and medium-sized undertakings already in existence to adapt themselves to the requirements which must be imposed by the Member State in pursuance of this Directive, subject to the application of Article 53 of the Treaty; Whereas it is important to guarantee the uniform application of coordinated rules and to provide, in this respect, for close collaboration between the Commission and the Member States in this field; HAS ADOPTED THIS DIRECTIVE: TITLE I

GENERAL PROVISIONS

Article 1 1. This Directive concerns the taking-up and pursuit of the self-employed activity of direct insurance, including the provision of assistance referred to in paragraph 2, carried on by undertakings which are established in the territory of a Member State or which wish to become established there. 2. The assistance activity shall be the assistance provided for persons who get into difficulties while travelling, while away from home or while away from their permanent residence. It shall consist in undertaking, against the prior payment of a premium, to make aid immediately available to the beneficiary under an assistance contract where that person is in difficulties

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following the occurrence of a chance event, in the cases and under the conditions set out in the contract. The aid may consist in the provision of benefits in cash or in kind. The provision of benefits in kind may also be effected by means of the staff and equipment of the person providing them. The assistance activity does not cover servicing, maintenance, aftersales service or the mere indication or provision of aid as an intermediary. 3. The classification by classes of the activity referred to in this Article appears in the Annex. Notes This article was substituted by the Tourist Assistance Directive, Directive 84/641, art 1. Art 1(1) This article defines the scope of the Directive as relating to the setting up of establishments in EC member states. An ‘‘establishment’’ is the head office, branch or agency of an insurer (see the Second Non-Life Directive, art 2(c), in para 1.65), although it may also consist of a permanent presence in a member state consisting merely of an office managed by the insurer’s own staff or by an independent but authorised agent (Second Non-Life Directive, art 2(c)). Art 1(2) This provision confirms that tourist assistance is included within the scope of non-life insurance. The definition of tourist assistance is narrow, and applies only to a person away from his permanent residence who suffers a chance event. Excluded from tourist assistance insurance as so defined is accident or breakdown assistance occurring in the territory of the undertaking providing the assistance, and consisting of no more than roadside repairs and onward conveyance of the passengers or vehicle, unless the assistance is provided by an authorised insurer: art 2(3). The UK’s implementation—which treats all forms of tourist assistance insurance as insurance business unless carried on as a subsidiary part of another form of authorised general business, and which excludes from authorisation and regulation purely domestic assistance business—is found in Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, SI 2001 No 544, art 2.

Article 2 This Directive does not apply to: 1. The following kinds of insurance: (a) Life assurance, that is to say, the branch of insurance which comprises, in particular, assurance on survival to a stipulated age only, assurance on death only, assurance on survival to a stipulated age or an earlier death, life assurance with return of premiums, tontines, marriage assurance, and birth assurance; (b) Annuities; (c) Supplementary insurance carried on by life assurance undertakings, that is to say, insurance against personal injury including incapacity for employment, insurance against death resulting from an accident, and insurance against disability resulting from an accident or sickness, where these various kinds of insurance are underwritten in addition to life assurance; (d) Insurance forming part of a statutory system of social security; (e) The type of insurance existing in Ireland and the United Kingdom known as ‘‘permanent health insurance not subject to cancellation’’. 2. The following operations: (a) Capital redemption operations, as defined by the law in each Member State; (b) Operations of provident and mutual benefit institutions whose benefits vary according to the resources available and in which the contributions of the members are determined on a flat-rate basis; (c) Operations carried out by organisations not having a legal personality with the purpose of providing mutual cover for their members without there being any payment of premiums or constitution of technical reserves; (d) pending further coordination, export credit insurance operations for the account of or guaranteed by the State, or where the State is the insurer. 3. The assistance activity in which liability is limited to the following operations provided in the event of an accident or breakdown involving a road vehicle which normally occurs in the territory of the Member State of the undertaking providing cover: — an on-the-spot breakdown service for which the undertaking providing cover uses, in most circumstances, its own staff and equipment,

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— the conveyance of the vehicle to the nearest or the most appropriate location at which repairs may be carried out and the possible accompaniment, normally by the same means of assistance, of the driver and passengers to the nearest location from where they may continue their journey by other means, — if provided for by the Member State of the undertaking providing cover, the conveyance of the vehicle, possibly accompanied by the driver and passengers, to their home, point of departure or original destination within the same State, unless such operations are carried out by an undertaking subject to this Directive. In the cases referred to in the first two indents, the conditions that the accident or breakdown must have happened in the territory of the Member State of the undertaking providing cover (a) shall not apply where the latter is a body of which the beneficiary is a member and the breakdown service or conveyance of the vehicle is provided simply on presentation of a membership card, without any additional premium being paid, by a similar body in the country concerned on the basis of a reciprocal agreement; (b) shall not preclude the provision of such assistance in Ireland and the United Kingdom by a single body operating in both States. In the circumstances referred to in the third indent, where the accident or the breakdown has occurred in the territory of Ireland or, in the case of the United Kingdom, in the territory of Northern Ireland, the vehicle, possibly accompanied by the driver and passengers, may be conveyed to their home, point of departure or original destination within either territory. Moreover, the Directive does not concern assistance operations carried out on the occasion of an accident to or the breakdown of a road vehicle and consisting in conveying the vehicle which has been involved in an accident or has broken down outside the territory of the Grand Duchy of Luxembourg, possibly accompanied by the driver and passengers, to their home, where such operations are carried out by the Automobile Club of the Grand Duchy of Luxembourg. Undertakings subject to this Directive may engage in the activity referred to under this point only if they have received authorisation for class 18 in point A of the Annex without prejudice to point C of the said Annex. In that event this Directive shall apply to the operations in question. Notes Art 2(1) The forms of insurance specified here, with the exception of (d) (insurance forming part of a social security system) are outside the Non-Life Directives but are within the Consolidated Life Insurance Directive. The principles applicable to the Non-Life and Life Directives are more or less the same, although the Directives establish a strict separation of these two broad kinds of insurance to ensure that funds from one do not subsidise losses in the other. Art 2(2) These forms of activity are outside both the Non-Life and Life Directives. Art 2(2)(d) was inserted by the Credit and Suretyship Directive, Directive 87/343, art 1(1). Art 2(3) was inserted by the Tourist Assistance Directive, Directive 84/641, art 2.

Article 3 1. This Directive shall not apply to mutual associations which fulfil all the following conditions: (a) the articles of association must contain provisions for calling up additional contributions or reducing their benefits; (b) their business does not cover liability risks unless these constitute ancillary cover within the meaning of point C of the Annex or credit and suretyship risks; (c) the annual contribution income for the activities covered by this Directive must not exceed EUR5 million; and (d) at least half of the contribution income from the activities covered by this Directive must come from persons who are members of the mutual association. This Directive shall not apply to undertakings which fulfil all the following conditions: — the undertaking does not pursue any activity falling within the scope of this Directive other than the one described in class 18 in point A of the Annex, — this activity is carried out exclusively on a local basis and consists only of benefits in kind, and

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— the total annual income collected in respect of the activity of assistance to persons who get into difficulties does not exceed EUR200 000. Nevertheless, the provisions of this Article shall not prevent a mutual insurance undertaking from applying, or continuing, to be licensed under this Directive. 2. This Directive shall not, moreover, apply to mutual associations which have concluded with other associations of this nature an agreement which provides for the full reinsurance of the insurance policies issued by them or under which the concessionary undertaking is to meet the liabilities arising under such policies in the place of the ceding undertaking. In such a case the concessionary undertaking shall be subject to the rules of this Directive. Notes Art 3(1) was amended by the Tourist Assistance Directive, Directive 84/641, art 3. Art 3(1) new text was substituted by Directive 2002/13, art 1.

Article 4 This Directive shall not apply to the following institutions unless their statutes or the law are amended as regards capacity. (a) In Germany The following institutions under public law enjoying a monopoly (Monopolanstalten); 1. Badische Geb¨audeversicherungsanstalt, Karlsruhe, 2. Bayerische Landesbrandversicherungsanstalt, Munich, 3. Bayerische Landestierversicherungsanstalt, Schlachtviehversicherung, Munich, 4. Braunschweigische Landesbrandversicherungsanstalt, Brunswick, 5. Hamburger Feuerkasse, Hamburg, 6. Hessische Brandversicherungsanstalt (Hessische Brandversicherungskammer), Darmstadt, 7. Hessische Brandversicherungsanstalt, Kassel, 8. Hohenzollernsche Feuerversicherungsanstalt, Sigmaringen, 9. Lippische Landesbrandversicherungsanstalt, Detmold, 10. Nassauische Brandversicherungsanstalt, Wiesbaden, 11. Oldenburgische Landesbrandkasse, Oldenburg, 12. Ostfriesische Landschaftliche Brandkasse, Aurich, 13. Feuersoziet¨at Berlin, Berlin, 14. Wurttembergische ¨ Geb¨audebrandversicherungsanstalt, Stuttgart. However, territorial capacity shall not be regarded as modified in the case of a merger between such institutions which has the effect of maintaining for the benefit of the new institution the territorial capacity of the institutions which have merged, nor shall capacity as to the classes of insurance be regarded as modified if one of these institutions takes over in respect of the same territory one or more of the classes of another such institution. The following semi-public institutions: 1. Postbeamtenkrankenkasse, 2. Krankenversorgung der Bundesbahnbeamten, (b) In France The following institutions: 1. Caisse d´epartementale des incendi´es des Ardennes, 2. Caisse d´epartementale des incendi´es de la Cˆote-d’Or, 3. Caisse d´epartementale des incendi´es de la Marne, 4. Caisse d´epartementale des incendi´es de la Meuse, 5. Caisse d´epartementale des incendi´es de la Somme, 6. Caisse d´epartementale grˆele du Gers. 7. Caisse d´epartementale grˆele de l’Herault; (c) In Ireland Voluntary Health Insurance Board; (d) In Italy The Cassa di Previdenza per l’assicurazione degli sportivi (Sportass);

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Regulation of Insurers (e) In the United Kingdom The Crown Agents. (f) In Denmark Falcks Redningskorps A/S, Kobenhavn.

Notes Art 4(f) was added by the Tourist Assistance Directive, Directive 84/641, art 4. Art 4 is modified under the EEA Agreement in its application to Iceland, by the addition of Husaatryggingar Reykvikurborgar and Violatrygging Islands.

Article 5 For the purposes of this Directive: (a) Unit of account means the European unit of account (EUA) as defined by Commission Decision 3289/75/ECSC. Wherever this Directive refers to the unit of account, the conversion value in national currency to be adopted shall, as from 31 December of each year, be that of the last day of the preceding month of October for which EUA conversion values are available in all the Community currencies;. (b) ‘‘Matching assets’’ means the representation of underwriting liabilities expressed in a particular currency by assets expressed or realisable in the same currency; (c) ‘‘Localisation of assets’’ means the existence of assets, whether movable or immovable, within a Member State but shall not be construed as involving a requirement that movable property be deposited or that immovable property be subjected to restrictive measures such as the registration of mortgages. Assets represented by claims against debtors shall be regarded as situated in the Member State where they are to be liquidated. (d) ‘‘Large risks’’ means: (i) risks classified under classes 4, 5, 6, 7, 11 and 12 of point A of the Annex; (ii) risks classified under classes 14 and 15 of point A of the Annex, where the policyholder is engaged professionally in an industrial or commercial activity or in one of the liberal professions, and the risks relate to such activity; (iii) risks classified under classes 3, 8, 9, 10, 13 and 16 of point A of the Annex insofar as the policyholder exceeds the limits of at least two of the following three criteria: first stage: until 31 December 1992: — balance-sheet total: 12.4 million ECU, — net turnover: 24 million ECU, — average number of employees during the financial year: 500 second stage: from 1 January 1993: — balance-sheet total: 6.2 million ECU, — net turnover: 12.8 million ECU, — average number of employees during the financial year: 250. If the policyholder belongs to a group of undertakings for which consolidated accounts within the meaning of Directive 83/349/EEC are drawn up, the criteria mentioned above shall be applied on the basis of the consolidated accounts. Each Member State may add to the category mentioned under (iii) risks insured by professional associations, joint ventures or temporary groupings. Notes Art 5(a) was substituted by the ECU Directive, Directive 76/580, art 1(1). Its purpose is to provide for a fixed day on which the value of the ECU figure for the guarantee fund to be maintained under art 17 of this Directive is fixed. Art 5(b)–(c) For the rules on matching and localisation, see the note to art 15(2). Art 5(d) was added by the Second Non-Life Directive, Directive 88/357, art 5, as amended by the Motor Services Directive, Directive 90/618, art 2. The definition of large risks was primarily of significance prior to the implementation of the Third Non-Life Directive, during which period each member state was not permitted to insist upon authorisation for an insurer selling into its territory (other than from an establishment in its territory) insofar as the insurance related to large risks. The Third Non-Life Directive

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removed this right, which was in any event never taken up by the UK in relation to persons selling into the UK.

T I T L E I I R U L E S A P P L I C A B L E T O U N D E RTA K I N G S W H O S E H E A D O F F I C E S A R E S I T U AT E D W I T H I N T H E C O M M U N I T Y Section A: Conditions of admission Article 6 The taking up of the business of direct insurance shall be subject to prior official authorisation. Such authorisation shall be sought from the competent authorities of the home Member State by: (a) any undertaking which establishes its head office within the territory of that State; (b) any undertaking which, having received the authorisation referred to in the first subparagraph, extends its business to an entire class or to other classes. Notes This article was substituted by the Third Non-Life Directive, Directive 92/49, art 4. Art 4 lays down the basis for home country supervision, by providing that authorisation is required from the authorities of the territory in which the insurer has its head office.

Article 7 1. Authorisation shall be valid for the entire Community. It shall permit an undertaking to carry on business there, under either the right of establishment or the freedom to provide services. 2. Authorisation shall be granted for a particular class of insurance. It shall cover the entire class, unless the applicant wishes to cover only some of the risks pertaining to that class, as listed in point A of the Annex. However: (a) Member States may grant authorisation for the groups of classes listed in point B of the Annex, attaching to them the appropriate denominations specified therein; (b) authorisation granted for one class or a group of classes shall also be valid for the purpose of covering ancillary risks included in another class if the conditions imposed in point C of the Annex are fulfilled. Notes This article was amended by the Credit and Suretyship Directive, Directive 87/343, art 1(2), and was substituted by the Third Non-Life Directive, Directive 92/49, art 5. Art 7(1) The effect is to treat the home country authorisation obtained under art 6 as a single European licence, valid throughout the EC. The licence permits an insurer authorised in its home state: (a) to set up an establishment (branch, agency or permanent presence—see the note to art 1(1), above) in any other member state and to provide insurance in that state or any other state from the establishment; (b) to sell insurance by way of services in any member state, ie without an establishment in that state. The FSMA 2000, s 31 that authorisation to carry on insurance business in the UK is not required by an insurer with its head office in another member state which is authorised to carry on insurance business by that member state. Art 7(2)(a) Authorisation is on a class by class basis, the 18 classes being listed in Point B of the First Annex to the First Non-Life Directive, below. For UK implementation, see the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, SI 2001 No 544. Art 7(2)(b) See Point C to the First Annex to this Directive, below.

Article 8 1. The home Member State shall require every insurance undertaking for which authorisation is sought to: (a) adopt one of the following forms:

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Regulation of Insurers — in the case of the Kingdom of Belgium: ‘‘soci´et´e anonyme/naamloze vennootschap’’, ‘‘soci´et´e en commandite par actions/commanditaire vennootschap op aandelen’’, ‘‘association d’assurance mutuelle/onderlinge verzekeringsvereniging’’, ‘‘soci´et´e coop´erative/co¨operative vennootschap’’; — in the case of the Kingdom of Denmark: ‘‘aktieselskaber’’ [joint stock companies], ‘‘gensidige selskaber’’ [mutuals]; — in the case of the Federal Republic of Germany: ‘‘Aktiengesellschaft’’, ‘‘Versicherungsverein auf Gegenseitigkeit’’, ‘‘Offentlich-rechtliches ¨ Wettbewerbsversicherungsunternehmen’’; — in the case of the French Republic: ‘‘soci´et´e anonyme’’, ‘‘soci´et´e d’assurance mutuelle’’, ‘‘institution de pr´evoyance r´egie par le code de la s´ecurit´e sociale’’, ‘‘institution de pr´evoyance r´egie par le code rural’’ and ‘‘mutuelles r´egies par le code de la mutualit´e’’; — in the case of Ireland: ‘‘incorporated companies limited by shares or by guarantee or unlimited’’; — in the case of the Italian Republic: ‘‘societ`a per azioni’’, ‘‘societ`a cooperativa’’, ‘‘mutua di assicurazione’’; — in the case of the Grand Duchy of Luxembourg: ‘‘soci´et´e anonyme’’, ‘‘soci´et´e en commandite par actions’’, ‘‘association d’assurances mutuelles’’, ‘‘soci´et´e coop´erative’’; — in the case of the Kingdom of the Netherlands: ‘‘naamloze vennootschap’’, ‘‘onderlinge waarborgmaatschappij’’; — in the case of the United Kingdom: incorporated companies limited by shares or by guarantee or unlimited, societies registered under the Industrial and Provident Societies Acts, societies registered under the Friendly Societies Acts, the association of underwriters known as Lloyd’s; — in the case of the Hellenic Republic: ‘‘anwnumh ´ etair´ıa’’ ‘‘allhlasjalistikoz sunetairismoz’’; — in the case of the Kingdom of Spain: ‘‘sociedad ano´ nima’’, ‘‘sociedad mutua’’, ‘‘sociedad cooperativa’’; — in the case of the Portuguese Republic: ‘‘sociedade ano´ nima’’, ‘‘mutua ´ de seguros’’; — in the case of the Republic of Austria: ‘‘Aktiengesellschaft’’, ‘‘Versicherungsverein auf Gegenseitigkeit’’; — in the case of the Republic of Finland: ‘‘keskin¨ainen vakuutusyhti¨o—¨omsesidigt f¨ors¨akringsbolag’’—,‘‘vakuutusosakeyhti¨o—f¨ors¨akringsaktiebolag’’—,‘‘vakuutusyhdistys—f¨ors¨akringsf¨orening’’; — in the case of the Kingdom of Sweden: ‘‘f¨ors¨akringsaktiebolag’’, ‘‘¨omsesidiga f¨ors¨akringsbolag’’, ‘‘underst¨odsf¨oreningar’’; — in the case of the Czech Republic: ‘‘akciov´a spoleˇcnost’’, ‘‘druˇzstvo’’; — in the case of the Republic of Estonia: ‘‘aktsiaselts’’; — in the case of the Republic of Cyprus: ‘‘Etaire´ıa periorism´enhz euqunhz ´ me metoc´ez h´ etaire´ıa periorism´enhz euqunhz ´ cwr´ız me-tociko´ kejalaio’’; ´ — in the case of the Republic of Latvia: ‘‘apdroˇsin¯aˇsanas akciju sabiedr¯ıba’’, ‘‘savstarp¯ej¯as apdroˇsin¯aˇsanas kooperat¯ıv¯a biedr¯ıba’’; — in the case of the Republic of Lithuania: ‘‘akcines ˙ bendroves’’, ˙ ‘‘uˇzdarosios akcines ˙ bendroves’’; ˙ — in the case of the Republic of Hungary: ‘‘biztos´ıto´ r´eszv´enyt´arsas´ag’’, ‘‘biztos´ıto´ sz¨ovetkezet’’, ‘‘biztos´ıto´ egyesu¨ let’’, ‘‘ku¨ lf¨oldi sz´ekhely˝ u biztos´ıto´ magyarorsz´agi fioktelepe’’; ´ — in the_ case of the Republic of Malta: ‘‘kumpanija pubblika’’, ‘‘kumpanija privata’’, ‘‘fergha’’, ‘‘Korp ta’ l-Assikurazzjoni Rikonnoxxut’’; — in the case of the Republic of Poland: ‘‘spo´ 4ka akcyjna’’, ‘‘towarzystwo ubezpieczen´ wzajemnych’’; — in the case of the Republic of Slovenia: ‘‘delniˇska druˇzba’’, ‘‘druˇzba za vzajemno zavarovanje’’; — in the case of the Slovak Republic: ‘‘akciov´a spoloˇcnost’’; — in the case of Bulgaria: ‘‘frwbjythyj lhecndj’’;

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— in the case of Romania: ‘‘societ˘at˛i pe ac˛t iuni’’, ‘‘societ˘at˛i mutuale’’. An insurance undertaking may also adopt the form of a European Company (SE) when that has been established. Furthermore, Member States may, where appropriate, set up undertakings in any public-law form provided that such bodies have as their objects insurance operations under conditions equivalent to those under which private-law undertakings operate; (b) limit its objects to the business of insurance and operations arising directly therefrom, to the exclusion of all other commercial business; (c) submit a scheme of operations in accordance with Article 9; (d) possess the minimum guarantee fund provided for in Article 17(2); (e) be effectively run by persons of good repute with appropriate professional qualifications or experience. (f) communicate the name and address of the claims representative appointed in each Member State other than the Member State in which the authorisation is sought if the risks to be covered are classified in class 10 of point A of the Annex, other than carrier’s liability Moreover, where close links exist between the financial undertaking and other natural or legal persons, the competent authorities shall grant authorization only if those links do not prevent the effective exercise of their supervisory functions. The competent authorities shall also refuse authorization if the laws, regulations or administrative provisions of a non-member country governing one or more natural or legal persons with which the undertaking has close links, or difficulties involved in their enforcement, prevent the effective exercise of their supervisory functions. The competent authorities shall require financial undertakings to provide them with the information they require to monitor compliance with the conditions referred to in this paragraph on a continuous basis. 1a. Member States shall require that the head offices of insurance undertakings be situated in the same Member State as their registered offices. 2. An undertaking seeking authorisation to extend its business to other classes or to extend an authorisation covering only some of the risks pertaining to one class shall be required to submit a scheme of operations in accordance with Article 9. It shall, furthermore, be required to show proof that it possesses the solvency margin provided for in Article 16 and, if with regard to such other classes Article 17(2) requires a higher minimum guarantee fund than before, that it possesses that minimum. 3. Nothing in this Directive shall prevent Member States from maintaining in force or introducing laws, regulations or administrative provisions requiring approval of the memorandum and articles of association and communication of any other documents necessary for the normal exercise of supervision. Member States shall not, however, adopt provisions requiring the prior approval or systematic notification of general and special policy conditions, scales of premiums and forms and other printed documents which an undertaking intends to use in its dealings with policyholders. Member States may not retain or introduce prior notification or approval of proposed increases in premium rates except as part of general price-control systems. Nothing in this Directive shall prevent Member States from subjecting undertakings seeking or having obtained authorisation for class 18 in point A of the Annex to checks on their direct or indirect resources in staff and equipment, including the qualification of their medical teams and the quality of the equipment available to such undertakings to meet their commitments arising out of this class of insurance. 4. The abovementioned provisions may not require that any application for authorisation be considered in the light of the economic requirements of the market. Notes This article was amended by the Tourist Assistance Directive, Directive 84/641, arts 5 and 6, and was substituted by the Third Non-Life Directive, Directive 92/49, art 6. Art 8(1) has been amended by successive Acts of Accession to list the relevant corporate forms of all European Union Member States, Art 8(1)(a) is modified under the EEA Agreement in relation to Iceland, Liechtenstein and Norway by the addition of the appropriate corporate forms.

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Art 8(1)(c) See the note to art 9. Art 8(1)(d) See the note to art 17(2). Art 8(1)(e) These terms are not defined, and are left to implementation by individual member states. In the UK there is a twofold requirement: (a) the applicant must operate its business in accordance with the criteria of sound and prudent management; and (b) those in control of the insurer must be fit and proper persons to hold their offices. Art 8(1)(f) was inserted by Directive 2000/26, art 8(a). The addendum to art 8(1) was inserted by Directive 95/26, art 2. Art 8(1a) was inserted by Directive 95/26, art 3. Art 8(3) is aimed at those member states who exercised ‘‘material control’’ over policy terms and premium rates. The UK has never operated a regime of this nature (although in the case of compulsory motor and employer’s liability insurance the insurer is not permitted to rely upon particular policy terms and other defences where the claim is one relating to the assured’s liability: see paras 7.20 and 6.23). Art 4 of the Second Non-Life Directive modified art 8(3) of the First Non-Life Directive by excluding from the definition of ‘‘special policy conditions’’ specific conditions intended to meet, in an individual case, the particular circumstances of the risk to be covered. See also art 39 of the Third Non-Life Directive, Directive 92/49, in para 1.66, which abolished any material controls imposed by a host state on an insurer authorised elsewhere in the EC and carrying on insurance business or providing insurance in the host’s territory. Art 8(4) merely requires member states to consider applications on their merits rather than in accordance with wider considerations. There is nothing in the UK legislation which expressly deals with this point.

Article 9 The scheme of operations referred to in Article 8(1)(c) shall include particulars or proof concerning: (a) the nature of the risks which the undertaking proposes to cover; (b) the guiding principles as to reinsurance; (c) the items constituting the minimum guarantee fund; (d) estimates of the costs of setting up the administrative services and the organisation for securing business; the financial resources intended to meet those costs and, if the risks to be covered are classified in class 18 in point A of the Annex, the resources at the undertaking’s disposal for the provision of the assistance promised; and, in addition, for the first three financial years; (e) estimates of management expenses other than installation costs, in particular current general expenses and commissions; (f) estimates of premiums or contributions and claims; (g) a forecast balance sheet; (h) estimates of the financial resources intended to cover underwriting liabilities and the solvency margin. Notes This article was amended by the Tourist Assistance Directive, Directive 84/641, art 7, and was substituted by the Third Non-Life Directive, Directive 92/49, art 7.

Article 10 1. An insurance undertaking that proposes to establish a branch within the territory of another Member State shall notify the competent authorities of its home Member State. 2. The Member States shall require every insurance undertaking that proposes to establish a branch within the territory of another Member State to provide the following information when effecting the notification provided for in paragraph 1: (a) the Member State within the territory of which it proposes to establish a branch; (b) a scheme of operations setting out, inter alia, the types of business envisaged and the structural organisation of the branch; (c) the address in the Member State of the branch from which documents may be obtained and to which they may be delivered, it being understood that that address shall be the one to which all communications to the authorised agent are sent; (d) the name of the branch’s authorised agent, who must possess sufficient powers to bind the undertaking in relation to third parties and to represent it in relations with the authorities and courts of the Member State of the branch. With regard to Lloyd’s, in

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the event of any litigation in the Member State of the branch arising out of underwritten commitments, the insured persons must not be treated less favourably than if the litigation had been brought against businesses of a conventional type. The authorised agent must, therefore, possess sufficient powers for proceedings to be taken against him and must in that capacity be able to bind the Lloyd’s underwriters concerned. Where the undertaking intends its branch to cover risks in class 10 of point A of the Annex, not including carrier’s liability, it must produce a declaration that it has become a member of the national bureau and the national guarantee fund of the Member State of the branch. 3. Unless the competent authorities of the home Member State have reason to doubt the adequacy of the administrative structure or the financial situation of the insurance undertaking or the good repute and professional qualifications or experience of the directors or managers or the authorised agent, taking into account the business planned, they shall within three months of receiving all the information referred to in paragraph 2 communicate that information to the competent authorities of the Member State of the branch and shall inform the undertaking concerned accordingly. The competent authorities of the home Member State shall also attest that the insurance undertaking has the premium solvency margin calculated in accordance with Articles 16 and 17. Where the competent authorities of the home Member State refuse to communicate the information referred to in paragraph 2 to the competent authorities of the Member State of the branch they shall give the reasons for their refusal to the undertaking concerned within three months of receiving all the information in question. That refusal or failure to act may be subject to a right to apply to the courts in the home Member State. 4. Before the branch of an insurance undertaking starts business, the competent authorities of the Member State of the branch shall, within two months of receiving the information referred to in paragraph 3, inform the competent authority of the home Member State, if appropriate, of the conditions under which, in the interest of the general good, that business must be carried on in the Member State of the branch. 5. On receiving a communication from the competent authorities of the Member State of the branch or, if no communication is received from them, on expiry of the period provided for in paragraph 4, the branch may be established and start business. 6. In the event of a change of any of the particulars communicated under paragraph 2(b), (c) or (d), an insurance undertaking shall give written notice of the change to the competent authorities of the home Member State and of the Member State of the branch at least one month before making the change so that the competent authorities of the home Member State and the competent authorities of the Member State of the branch may fulfil their respective roles under paragraphs 3 and 4. Notes This article was amended by the Tourist Assistance Directive, Directive 84/641, art 6, and was substituted by the Third Non-Life Directive, Directive 92/49, art 32. Art 10(1)–(2) In accordance with the Single Market, an insurer authorised by the authorities of its home state may establish a branch in any other member state without host state authorisation. Instead, the insurer must notify its home authorities of its intention, and provide the information set out in this Article. Art 10(4)–(5) An EC company wishing to operate a branch elsewhere in the EC must wait until the certification here specified is provided to the host state by the home state. Art 10(4) provides an exception to the freedom to establish, based upon the host’s right to preserve the ‘‘general good’’. For UK implementation, see the FSMA 2000, Scheds 3 and 4, and the Financial Services and Markets Act 2000 (EEA Passport Rights) Regulations 2001, SI 2001 No 2511.

Article 11 [Repealed under art 33 of the Third Non-Life Directive.] Notes This article was amended by the Tourist Assistance Directive, Directive 84/641, art 7, and was deleted by the Third Non-Life Directive, Directive 92/49, art 33.

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Article 12 Any decision to refuse an authorisation shall be accompanied by the precise grounds for doing so and notified to the undertaking in question. Each Member State shall make provision for a right to apply to the courts should there be any refusal. Such provision shall also be made with regard to cases where the competent authorities have not dealt with an application for an authorisation upon the expiry of a period of six months from the date of its receipt. Article 12a 1. The competent authorities of the other Member State involved shall be consulted prior to the granting of an authorisation to a non-life insurance undertaking, which is: (a) a subsidiary of an insurance or reinsurance undertaking authorised in another Member State; or (b) a subsidiary of the parent undertaking of an insurance or reinsurance undertaking authorised in another Member State; or (c) controlled by the same person, whether natural or legal, who controls an insurance or reinsurance undertaking authorised in another Member State. 2. The competent authority of a Member State involved responsible for the supervision of credit institutions or investment firms shall be consulted prior to the granting of an authorisation to a non-life insurance undertaking which is: (a) a subsidiary of a credit institution or investment firm authorised in the Community; or (b) a subsidiary of the parent undertaking of a credit institution or investment firm authorised in the Community; or (c) controlled by the same person, whether natural or legal, who controls a credit institution or investment firm authorised in the Community. 3. The relevant competent authorities referred to in paragraphs 1 and 2 shall in particular consult each other when assessing the suitability of the shareholders and the reputation and experience of directors involved in the management of another entity of the same group. They shall inform each other of any information regarding the suitability of shareholders and the reputation and experience of directors which is of relevance to the other competent authorities involved for the granting of an authorisation as well as for the ongoing assessment of compliance with operating conditions. Notes Art 12a inserted by Directive 2002/87. Art 12a(1) and (2) substituted by Directive 2005/68, art 57.

Section B: Conditions for exercise of business Article 13 1. The financial supervision of an insurance undertaking, including that of the business it carries on either through branches or under the freedom to provide services, shall be the sole responsibility of the home Member State. 2. That financial supervision shall include verification, with respect to the insurance undertaking’s entire business, of its state of solvency, of the establishment of technical provisions and of the assets covering them in accordance with the rules laid down or practices followed in the home Member State under provisions adopted at Community level. Where the undertaking in question is authorised to cover the risks classified in clause 18 in point A of the Annex, supervision shall extend to monitoring of the technical resources which the undertaking has at its disposal for the purpose of carrying out the assistance operations it has undertaken to perform, where the law of the home Member State provides for the monitoring of such resources. The home Member State of the insurance undertaking shall not refuse a reinsurance contract concluded by the insurance undertaking with a reinsurance undertaking authorised in

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accordance with Directive 2005/68/EC of the European Parliament and of the Council of 16 November 2005 on reinsurance or an insurance undertaking authorised in accordance with this Directive or Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance, on grounds directly related to the financial soundness of the reinsurance undertaking or the insurance undertaking 3. The competent authorities of the home Member State shall require every insurance undertaking to have sound administrative and accounting procedures and adequate internal control mechanisms. Notes This article was amended by the Tourist Assistance Directive, Directive 84/641, art 8, and was substituted by the Third Non-Life Directive, Directive 92/49, art 9. Art 13(2) The concepts of solvency margin, technical provisions and matching assets are set out in art 15 et seq. Art 13(2), third sub-paragraph inserted by Directive 2005/68, art 57. Art 13(3) The UK’s accounting rules are set out in the FSA Handbook.

Article 14 The Member State of the branch shall provide that where an insurance undertaking authorised in another Member State carries on business through a branch the competent authorities of the home Member State may, after having informed the competent authorities of the Member State of the branch, carry out themselves or through the intermediary of persons they appoint for that purpose on-the-spot verification of the information necessary to ensure the financial supervision of the undertaking. The authorities of the Member State of the branch may participate in that verification. Notes This article was substituted by the Third Non-Life Directive, Directive 92/49, art 10. It permits the regulatory authorities of an insurer’s home state to obtain sufficient information from a branch outside its territory to permit the authorities to exercise the necessary EC-wide supervision of the insurer.

Article 15 1. The home Member State shall require every insurance undertaking to establish adequate technical provisions in respect of its entire business. The amount of such technical provisions shall be determined in accordance with the rules laid down in Directive 91/674/EEC. 2. The home Member State shall require every insurance undertaking to cover the technical provisions and the equalisation reserve referred to in Article 15a of this Directive by matching assets in accordance with Article 6 of Directive 88/357/EEC. In respect of risks situated within the Community, those assets must be localised within the Community. Member States shall not require insurance undertakings to localise their assets in any particular Member State. The home Member State may, however, allow the rules on the localisation of assets to be relaxed. 3. Member States shall not retain or introduce for the establishment of technical provisions a system of gross reserving which requires pledging of assets to cover unearned premiums and outstanding claims provisions by the reinsurer, when the reinsurer is a reinsurance undertaking authorised in accordance with Directive 2005/68/EC or an insurance undertaking authorised in accordance with this Directive or Directive 2002/83/EC. When the home Member State allows any technical provisions to be covered by claims against a reinsurer which is neither a reinsurance undertaking authorised in accordance with Directive 2005/68/EC nor an insurance undertaking authorised in accordance with this Directive or Directive 2002/83/EC, it shall set the conditions for accepting such claims. Notes This article was substituted by the Third Non-Life Directive, Directive 92/49, art 17. It is concerned with the EC-wide operations of an insurer. An insurer who fails to comply with the obligations in art 15 may be subjected to the sanctions provided for by art 20.

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Art 15(1) The reference here is to the Insurance Accounts Directive. For the calculation of the amount of technical reserves required by an insurer, see also arts 20–22 of the Third Non-Life Directive, in para 1.66, for details as to what assets may and may not constitute the technical reserves. Art 15(2) The matching assets rules are laid down in Annex 1 to the Second Non-Life Directive, Directive 88/357, as applied by art 6 of the Second Non-Life Directive. Art 15(2) and (3)—new text substituted by Directive 2005/68, art 57.

Article 15a 1. Member States shall require every insurance undertaking with a head office within their territories which underwrites risks included in class 14 in point A of the Annex (hereinafter referred to as ‘‘credit insurance’’) to set up an equalisation reserve for the purpose of offsetting any technical deficit or above-average claims ratio arising in that class in any financial year. 2. The equalisation reserve shall be calculated in accordance with the rules laid down by the home Member State in accordance with one of the four methods set out in point D of the Annex, which shall be regarded as equivalent. 3. Up to the amount calculated in accordance with the methods set out in point D of the Annex, the equalisation reserve shall be disregarded for the purpose of calculating the solvency margin. 4. Member States may exempt insurance undertakings with head offices within their territories from the obligation to set up equalisation reserves for credit insurance business where the premiums or contributions receivable in respect of credit insurance are less than 4% of the total premiums or contributions receivable by them and less than ECU 2 500 00. Notes This article was inserted by the Credit and Suretyship Directive, Directive 87/343, art 1(5), and was substituted by the Third Non-Life Directive, Directive 92/49, art 18. Its purpose is to ensure that the home authorities of an insurer require the insurer to set up an equalisation reserve in respect of credit insurance, using any of the four methods of calculation set out in Point D to the Annex to the First Non-Life Directive, see below.

Article 16 1. Each Member State shall require of every insurance undertaking whose head office is situated in its territory an adequate available solvency margin in respect of its entire business at all times, which is at least equal to the requirements in this Directive. 2. The available solvency margin shall consist of the assets of the insurance undertaking free of any foreseeable liabilities, less any intangible items, including: (a) the paid-up share capital or, in the case of a mutual insurance undertaking, the effective initial fund plus any members’ accounts which meet all the following criteria: (i) the memorandum and articles of association must stipulate that payments may be made from these accounts to members only in so far as this does not cause the available solvency margin to fall below the required level, or, after the dissolution of the undertaking, if all the undertaking’s other debts have been settled; (ii) the memorandum and articles of association must stipulate, with respect to any payments referred to in point (i) for reasons other than the individual termination of membership, that the competent authorities must be notified at least one month in advance and can prohibit the payment within that period; (iii) the relevant provisions of the memorandum and articles of association may be amended only after the competent authorities have declared that they have no objection to the amendment, without prejudice to the criteria stated in points (i) and (ii); (b) reserves (statutory and free reserves) which neither correspond to underwriting liabilities nor are classified as equalisation reserves; (c) the profit or loss brought forward after deduction of dividends to be paid. The available solvency margin shall be reduced by the amount of own shares directly held by the insurance undertaking. For those insurance undertakings which discount or reduce their technical provisions for claims outstanding to take account of investment income as permitted by Article 60(1)(g) of

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Council Directive 91/674/EEC of 19 December 1991 on the annual accounts and consolidated accounts of insurance undertakings, the available solvency margin shall be reduced by the difference between the undiscounted technical provisions or technical provisions before deductions as disclosed in the notes on the accounts, and the discounted or technical provisions after deductions. This adjustment shall be made for all risks listed in point A of the Annex, except for risks listed under classes 1 and 2. For classes other than 1 and 2, no adjustment need be made in respect of the discounting of annuities included in technical provisions. The available solvency margin shall also be reduced by the following items: (a) participations which the insurance undertaking holds in: — insurance undertakings within the meaning of Article 6 of this Directive, Article 4 of Directive 2002/83/EC, or Article 1(b) of Directive 98/78/EC of the European Parliament and of the Council, — reinsurance undertakings within the meaning of Article 3 of Directive 2005/68/EC or non-member country reinsurance undertakings within the meaning of Article 1(l) of Directive 98/78/EC, — insurance holding companies within the meaning of Article 1(i) of Directive 98/78/EC, — credit institutions and financial institutions within the meaning of Article 1(1) and (5) of Directive 2000/12/EC of the European Parliament and of the Council, —investment firms and financial institutions within the meaning of Article 1(2) of Council Directive 93/22/EEC and of Article 2(4) and (7) of Council Directive 93/6/EEC (b) each of the following items which the insurance undertaking holds in respect of the entities defined in (a) in which it holds a participation: — instruments referred to in paragraph 3, — instruments referred to in Article 18(3) of Directive 79/267/EEC, — subordinated claims and instruments referred to in Article 35 and Article 36(3) of Directive 2000/12/EC. Where shares in another credit institution, investment firm, financial institution, insurance or reinsurance undertaking or insurance holding company are held temporarily for the purposes of a financial assistance operation designed to reorganise and save that entity, the competent authority may waive the provisions on deduction referred to under (a) and (b) of the fourth subparagraph. As an alternative to the deduction of the items referred to in (a) and (b) of the fourth subparagraph which the insurance undertaking holds in credit institutions, investment firms and financial institutions, Member States may allow their insurance undertakings to apply mutatis mutandis methods 1, 2, or 3 of Annex I to Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate. Method 1 (Accounting consolidation) shall only be applied if the competent authority is confident about the level of integrated management and internal control regarding the entities which would be included in the scope of consolidation. The method chosen shall be applied in a consistent manner overtime. Member States may provide that, for the calculation of the solvency margin as provided for by this Directive, insurance undertakings subject to supplementary supervision in accordance with Directive 98/78/EC or to supplementary supervision in accordance with Directive 2002/87/EC, need not deduct the items referred to in (a) and (b) of the fourth subparagraph which are held in credit institutions, investment firms, financial institutions, insurance or reinsurance undertakings or insurance holding companies which are included in the supplementary supervision. For the purposes of the deduction of participations referred to in this paragraph, participation shall mean a participation within the meaning of Article 1(f) of Directive 98/78/EC. 3. The available solvency margin may also consist of: (a) cumulative preferential share capital and subordinated loan capital up to 50% of the lesser of the available solvency margin and the required solvency margin, no more than 25% of which shall consist of subordinated loans with a fixed maturity, or fixedterm cumulative preferential share capital, provided in the event of the bankruptcy or liquidation of the insurance undertaking, binding agreements exist under which the

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subordinated loan capital or preferential share capital ranks after the claims of all other creditors and is not to be repaid until all other debts outstanding at the time have been settled. Subordinated loan capital must also fulfil the following conditions: (i) only fully paid-up funds may be taken into account; (ii) for loans with a fixed maturity, the original maturity must be at least five years. No later than one year before the repayment date the insurance undertaking must submit to the competent authorities for their approval a plan showing how the available solvency margin will be kept at or brought to the required level at maturity, unless the extent to which the loan may rank as a component of the available solvency margin is gradually reduced during at least the last five years before the repayment date. The competent authorities may authorise the early repayment of such loans provided application is made by the issuing insurance undertaking and its available solvency margin will not fall below the required level; (iii) loans the maturity of which is not fixed must be repayable only subject to five years’ notice unless the loans are no longer considered as a component of the available solvency margin or unless the prior consent of the competent authorities is specifically required for early repayment. In the latter event the insurance undertaking must notify the competent authorities at least six months before the date of the proposed repayment, specifying the available solvency margin and the required solvency margin both before and after that repayment. The competent authorities shall authorise repayment only if the insurance undertaking’s available solvency margin will not fall below the required level; (iv) the loan agreement must not include any clause providing that in specified circumstances, other than the winding-up of the insurance undertaking, the debt will become repayable before the agreed repayment dates; (v) the loan agreement may be amended only after the competent authorities have declared that they have no objection to the amendment; (b) securities with no specified maturity date and other instruments, including cumulative preferential shares other than those mentioned in point (a), up to 50% of the lesser of the available solvency margin and the required solvency margin for the total of such securities and the subordinated loan capital referred to in point (a) provided they fulfil the following: (i) they may not be repaid on the initiative of the bearer or without the prior consent of the competent authority; (ii) the contract of issue must enable the insurance undertaking to defer the payment of interest on the loan; (iii) the lender’s claims on the insurance undertaking must rank entirely after those of all non-subordinated creditors; (iv) the documents governing the issue of the securities must provide for the lossabsorption capacity of the debt and unpaid interest, while enabling the insurance undertaking to continue its business; (v) only fully paid-up amounts may be taken into account. 4. Upon application, with supporting evidence, by the undertaking to the competent authority of the home Member State and with the agreement of that competent authority, the available solvency margin may also consist of: (a) one half of the unpaid share capital or initial fund, once the paid-up part amounts to 25% of that share capital or fund, up to 50% of the lesser of the available solvency margin and the required solvency margin; (b) in the case of mutual or mutual-type association with variable contributions, any claim which it has against its members by way of a call for supplementary contribution, within the financial year, up to one half of the difference between the maximum contributions and the contributions actually called in, and subject to a limit of 50% of the lesser of the available solvency margin and the required solvency margin. The competent national authorities shall establish guidelines laying down the conditions under which supplementary contributions may be accepted;

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(c) any hidden net reserves arising out of the valuation of assets, in so far as such hidden net reserves are not of an exceptional nature. 5. Amendments to paragraphs 2, 3 and 4 to take into account developments that justify a technical adjustment of the elements eligible for the available solvency margin, shall be adopted in accordance with the procedure laid down in Article 2 of Council Directive 91/675/EEC. Notes Art 16 requires any insurer to establish and maintain a solvency margin in respect of its entire business, ie, the assets of the insurer must exceed its liabilities in accordance with the calculations set out in the article. For remedies in the event of failure, see art 20 of this Directive. The article had previously been amended by the Third Non-Life Directive, Directive 92/49, art 24; the Credit and Suretyship Directive, Directive 87/343, art 1(4) and the Tourist Assistance Directive, Directive 84/641, art 9. An entirely new wording for the whole article was introduced by Directive 2002/13, art 1(2). Para 16(1) point (b) was substituted by Directive 2005/68, art 57. The introductory wording and point (a) of the fourth subparagraph substituted by Directive 2005/68, art 57. Para 16(2) the sub-paragraphs from ‘‘The available solvency margin shall also be reduced by the following items’’ and onwards were added by Directive 2002/87, art 22(2).

Article 16a 1. The required solvency margin shall be determined on the basis either of the annual amount of premiums or contributions, or of the average burden of claims for the past three financial years. In the case, however, of insurance undertakings which essentially underwrite only one or more of the risks of credit, storm, hail or frost, the last seven financial years shall be taken as the reference period for the average burden of claims. 2. Subject to Article 17, the amount of the required solvency margin shall be equal to the higher of the two results as set out in paragraphs 3 and 4. 3. The premium basis shall be calculated using the higher of gross written premiums or contributions as calculated below, and gross earned premiums or contributions. Premiums or contributions in respect of the classes 11, 12 and 13 listed in point A of the Annex shall be increased by 50%. The premiums or contributions (inclusive of charges ancillary to premiums or contributions) due in respect of direct business in the last financial year shall be aggregated. To this sum there shall be added the amount of premiums accepted for all reinsurance in the last financial year. From this sum there shall then be deducted the total amount of premiums or contributions cancelled in the last financial year, as well as the total amount of taxes and levies pertaining to the premiums or contributions entering into the aggregate. The amount so obtained shall be divided into two portions, the first portion extending up to EUR50 million, the second comprising the excess; 18% and 16% of these portions respectively shall be calculated and added together. The sum so obtained shall be multiplied by the ratio existing in respect of the sum of the last three financial years between the amount of claims remaining to be borne by the undertaking after deduction of amounts recoverable under reinsurance and the gross amount of claims; that ratio may in no case be less than 50%. Upon application, with supporting evidence, by the insurance undertaking to the competent authority of the home Member State and with the agreement of that authority, amounts recoverable from special purpose vehicles referred to in Article 46 of Directive 2005/68/EC may be deducted as reinsurance. With the approval of the competent authorities, statistical methods may be used to allocate the premiums or contributions in respect of the classes 11, 12 and 13. 4. The claims basis shall be calculated, as follows, using in respect of the classes 11, 12 and 13 listed in point A of the Annex, claims, provisions and recoveries increased by 50%. The amounts of claims paid in respect of direct business (without any deduction of claims borne by reinsurers and retrocessionaires) in the periods specified in paragraph 1 shall be aggregated. To this sum there shall be added the amount of claims paid in respect of reinsurances or retrocessions accepted during the same periods and the amount of provisions for claims

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outstanding established at the end of the last financial year both for direct business and for reinsurance acceptances. From this sum there shall be deducted the amount of recoveries effected during the periods specified in paragraph 1. From the sum then remaining, there shall be deducted the amount of provisions for claims outstanding established at the commencement of the second financial year preceding the last financial year for which there are accounts, both for direct business and for reinsurance acceptances. If the period of reference established in paragraph 1 equals seven years, the amount of provisions for claims outstanding established at the commencement of the sixth financial year preceding the last financial year for which there are accounts shall be deducted. One-third, or one-seventh, of the amount so obtained, according to the period of reference established in paragraph 1, shall be divided into two portions, the first extending up to EUR35 million and the second comprising the excess; 26% and 23% of these portions respectively shall be calculated and added together. The sum so obtained shall be multiplied by the ratio existing in respect of the sum of the last three financial years between the amount of claims remaining to be borne by the undertaking after deduction of amounts recoverable under reinsurance and the gross amount of claims; that ratio may in no case be less than 50%. Upon application, with supporting evidence, by the insurance undertaking to the competent authority of the home Member State and with the agreement of that authority, amounts recoverable from special purpose vehiclees referred to in Article 46 of Directive 2005/68/EC may be deducted as reinsurance. With the approval of the competent authorities, statistical methods may be used to allocate the claims, provisions and recoveries in respect of the classes 11, 12 and 13. In the case of the risks listed under class 18 in point A of the Annex, the amount of claims paid used to calculate the claims basis shall be the costs borne by the insurance undertaking in respect of assistance given. Such costs shall be calculated in accordance with the national provisions of the home Member State. 5. If the required solvency margin as calculated in paragraphs 2, 3 and 4 is lower than the required solvency margin of the year before, the required solvency margin shall be at least equal to the required solvency margin of the year before multiplied by the ratio of the amount of the technical provisions for claims outstanding at the end of the last financial year and the amount of the technical provisions for claims outstanding at the beginning of the last financial year. In these calculations technical provisions shall be calculated net of reinsurance but the ratio may in no case be higher than 1. 6. The fractions applicable to the portions referred to in the sixth subparagraph of paragraph 3 and the sixth subparagraph of paragraph 4 shall each be reduced to a third in the case of health insurance practised on a similar technical basis to that of life assurance, if (a) the premiums paid are calculated on the basis of sickness tables according to the mathematical method applied in insurance; (b) a provision is set up for increasing age; (c) an additional premium is collected in order to set up a safety margin of an appropriate amount; (d) the insurance undertaking may cancel the contract before the end of the third year of insurance at the latest; (e) the contract provides for the possibility of increasing premiums or reducing payments even for current contracts Notes Art 16a inserted by Directive 2002/13, art 1. Art 16a(3), seventh sub-paragraph substituted by Directive 2005/68, art 57. Art 16a(4), seventh sub-paragraph substituted by Directive 2005/68, art 57.

Article 17 1. One third of the required solvency margin as specified in Article 16a shall constitute the guarantee fund. This fund shall consist of the items listed in Article 16(2), (3) and, with the agreement of the competent authority of the home Member State, (4)(c).

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2. The guarantee fund may not be less than EUR2 million. Where, however, all or some of the risks included in one of the classes 10 to 15 listed in point A of the Annex are covered, it shall be EUR3 million. Any Member State may provide for a one-fourth reduction of the minimum guarantee fund in the case of mutual associations and mutual-type associations Notes Art 17(1) requires member states to provide for a minimum amount, one-third of the solvency margin, as constituting a ‘‘guarantee fund’’. Art 17(2) was amended by the Tourist Assistance Directive, Directive 84/641, art 10, and by the Credit and Suretyship Directive, Directive 87/343, arts 1(5) and 1(6). Art 17 was substituted in its entirety by Directive 2002/13, art 1(4).

Article 17a 1. The amounts in euro as laid down in Article 16a (3) and (4) and Article 17(2) shall be reviewed annually starting 20 September 2003 in order to take account of changes in the European index of consumer prices comprising all Member States as published by Eurostat. The amounts shall be adapted automatically by increasing the base amount in euro by the percentage change in that index over the period between the entry into force of this Directive and the review date and rounded up to a multiple of EUR100 000. If the percentage change since the last adaptation is less than 5%, no adaptation shall take place. 2. The Commission shall inform annually the European Parliament and the Council of the review and the adapted amounts referred to in paragraph 1 Notes Art 17a was inserted by Directive 2002/13, art 1(5).

Article 17b 1. Each Member State shall require that an insurance undertaking whose head office is situated within its territory and which conducts reinsurance activities establishes, in respect of its entire business, a minimum guarantee fund in accordance with Article 40 of Directive 2005/68/EC, where one of the following conditions is met: (a) the reinsurance premiums collected exceed 10% of its total premium; (b) the reinsurance premiums collected exceed EUR 50 000 000; (c) the technical provisions resulting from its reinsurance acceptances exceed 10% of its total technical provisions. 2. Each Member State may choose to apply to such insurance undertakings as are referred to in paragraph 1 of this Article and whose head office is situated within its territory the provisions of Article 34 of Directive 2005/68/EC in respect of their reinsurance acceptance activities, where one of the conditions laid down in the said paragraph 1 is met. In that case, the relevant Member State shall require that all assets employed by the insurance undertaking to cover the technical provisions corresponding to its reinsurance acceptances shall be ring-fenced, managed and organised separately from the direct insurance activities of the insurance undertaking, without any possibility of transfer. In such a case, and only as far as their reinsurance acceptance activities are concerned, insurance undertakings shall not be subject to Articles 20, 21 and 22 of Directive 92/49/EEC and Annex I to Directive 88/357/EEC. Each Member State shall ensure that their competent authorities verify the separation provided for in the second subparagraph. 3. If the Commission decides, pursuant to Article 56(c) of Directive 2005/68/EC to increase the amounts used for the calculation of the required solvency margin provided for in Article 37(3) and (4) of that Directive, each Member State shall apply to such insurance undertakings as are referred to in paragraph 1 of this Article the provisions of Articles 35 to 39 of that Directive in respect of their reinsurance acceptance activities.

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Notes Art 17b was inserted by Directive 2005/68, art 57.

Article 18 1. Member States shall not prescribe any rules as to the choice of the assets that need not be used as cover for the technical provisions referred to in Article 15. 2. Subject to Article 15(2), Article 20(1), (2), (3) and (5) and the last subparagraph of Article 22(1), Member States shall not restrain the free disposal of those assets, whether movable or immovable, that form part of the assets of authorised insurance undertakings. 3. Paragraphs 1 and 2 shall not preclude any measures which Member States, while safeguarding the interests of the insured persons, are entitled to take as owners or members of or partners to the undertakings in question. Notes This article was substituted by the Third Non-Life Directive, Directive 92/49, art 26. Its effect is to prohibit an insurer’s home regulatory authorities from imposing restrictions on the insurer’s choice of assets for technical reserves or free disposal of its assets. This is, however, subject to: (a) the insurer’s obligation to retain matching assets within the EC (First Non-Life Directive, art 15(2); (b) the power of the home state regulatory authorities to impose restrictions where the insurer has failed to maintain its technical reserves, solvency margin or guarantee fund (First Non-Life Directive, art 20); (c) cases in which the insurer’s authorisation is lost (First Non-Life Directive, art 22(1)). The principle that member states may not prescribe any rules on the insurer’s choice of assets means that a domestic rule, whereby an insurer which holds an interest in some other company is restricted to a maximum of 5% of non-voting shares, is not justified by art 18: Case C-241/97 Re Forsakringsaktiebolaget Skandia [1999] ECR I-1879. For UK implementation of the assets rules, see the FSA Handbook.

Article 19 1. Each Member State shall require every undertaking whose head office is situated in its territory to produce an annual account, covering all types of operation, of its financial situation, solvency and, as regards cover for risks listed under No 18 in point A of the Annex, other resources available to them for meeting their liabilities, where its laws provide for supervision of such resources. 1a. In respect of credit insurance, the undertaking shall make available to the supervisory authority accounts showing both the technical results and the technical reserves relating to that business. 2. Member States shall require insurance undertakings with head offices within their territories to render periodically the returns, together with statistical documents, which are necessary for the purposes of supervision. The competent authorities shall provide each other with any documents and information that are useful for the purposes of supervision. 3. Every Member State shall take all steps necessary to ensure that the competent authorities have the powers and means necessary for the supervision of the business of insurance undertakings with head offices within their territories, including business carried on outwith those territories, in accordance with the Council Directives governing such business and for the purpose of seeing that they are implemented. These powers and means must, in particular, enable the competent authorities to: (a) make detailed enquiries regarding an undertaking’s situation and the whole of its business, inter alia, by: — gathering information or requiring the submission of documents concerning its insurance business, — carrying out on-the-spot investigations at the undertaking’s premises; (b) take any measures with regard to an undertaking, its directors or managers or the persons who control it, that are appropriate and necessary to ensure that that undertaking’s business continues to comply with the laws, regulations and administrative provisions with which the undertaking must comply in each Member State and

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in particular with the scheme of operations insofar as it remains mandatory, and to prevent or remedy any irregularities prejudicial to the interests of insured persons; (c) ensure that those measures are carried out, if need be by enforcement and where appropriate through judicial channels. Member States may also make provision for the competent authorities to obtain any information regarding contracts which are held by intermediaries. Notes Art 19(1) was substituted by the Tourist Assistance Directive, Directive 84/641, art 11. Art 19(1a) was inserted by the Credit and Suretyship Directive, Directive 87/343, art 1(7). Art 19(2) was amended by the Tourist Assistance Directive, Directive 84/641, art 11, and was substituted by the Third Non-Life Directive, Directive 92/49, art 11. Art 19(3) was amended by the Second Non-Life Directive, Directive 88/357, art 10, and was substituted by the Third Non-Life Directive, Directive 92/49, art 11. Art 19(3)(a) It is necessary for the home authorities of an insurer to have power to investigate the insurer’s entire EC operations, in the light of the single European licence principle.

Article 20 1. If an undertaking does not comply with Article 15, the competent authority of its home Member State may prohibit the free disposal of its assets after having communicated its intention to the competent authorities of the Member States in which the risks are situated. 2. For the purposes of restoring the financial situation of an undertaking the solvency margin of which has fallen below the minimum required under Article 16a, the competent authority of the home Member State shall require that a plan for the restoration of a sound financial situation be submitted for its approval. In exceptional circumstances, if the competent authority is of the opinion that the financial situation of the undertaking will deteriorate further, it may also restrict or prohibit the free disposal of the undertaking’s assets. It shall inform the authorities of other Member States within the territories of which the undertaking carries on business of any measures it has taken and the latter shall, at the request of the former, take the same measures. 3. If the solvency margin falls below the guarantee fund as defined in Article 17, the competent authority of the home Member State shall require the undertaking to submit a shortterm finance scheme for its approval. It may also restrict or prohibit the free disposal of the undertaking’s assets. It shall inform the authorities of other Member States within the territories of which the undertaking carries on business accordingly and the latter shall, at the request of the former, take the same measures. 4. The competent authorities may further take all measures necessary to safeguard the interests of insured persons in the cases provided for in paragraphs 1, 2, and 3. 5. Each Member State shall take the measures necessary to be able, in accordance with its national law, to prohibit the free disposal of assets located within its territory at the request, in the cases provided for in paragraphs 1, 2 and 3, of the undertaking’s home Member State, which shall designate the assets to be covered by such measures. Notes This article was substituted by the Third Non-Life Directive, Directive 92/49, art 13. Art 20(1)–(4) provides sanctions for various infringements by insurers. These are as follows: (a) failure to establish adequate technical provisions and to cover them by matching assets—the regulatory authorities of the insurer’s home state may prohibit the free disposal of assets, may inform other member states accordingly and may take all further measures necessary to protect assureds (art 20(1), (4)); (b) failure to maintain the solvency margin—the regulatory authorities of the insurer’s home state may require the preparation of a plan to restore the position, may in exceptional circumstances prohibit the free disposal of assets and inform other member states accordingly and in general terms may take all further measures necessary to protect assureds (art 20(2), (4)); (c) failure to maintain the guarantee fund—the regulatory authorities of the insurer’s home state may require the preparation of a plan to restore the position in the short-term, may prohibit the free disposal of assets and inform other member states accordingly and in general terms may take all further measures necessary to protect assureds (art 20(3), (4)).

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Art 20(2) change in the reference from 16(3) to 16a inserted by Directive 2002/13, art 1(6). Art 20(5) This power is a corollary to the powers in art 20(1)–(4).

Article 20a 1. Member States shall ensure that the competent authorities have the power to require a financial recovery plan for those insurance undertakings where competent authorities consider that policyholders’ rights are threatened. The financial recovery plan shall as a minimum include particulars or proof concerning for the next three financial years: (a) estimates of management expenses, in particular current general expenses and commissions; (b) a plan setting out detailed estimates of income and expenditure in respect of direct business, reinsurance acceptances and reinsurance cessions; (c) a forecast balance sheet; (d) estimates of the financial resources intended to cover underwriting liabilities and the required solvency margin; (e) the overall reinsurance policy. 2. Where policyholders’ rights are threatened because the financial position of the undertaking is deteriorating, Member States shall ensure that the competent authorities have the power to oblige insurance undertakings to have a higher required solvency margin, in order to ensure that the insurance undertaking is able to fulfil the solvency requirements in the near future. The level of this higher required solvency margin shall be based on the financial recovery plan referred to in paragraph 1. 3. Member States shall ensure that the competent authorities have the power to revalue downwards all elements eligible for the available solvency margin, in particular, where there has been a significant change in the market value of these elements since the end of the last financial year. 4. Member States shall ensure that the competent authorities have the power to decrease the reduction, based on reinsurance, to the solvency margin as determined in accordance with Article 16a where: (a) the nature or quality of reinsurance contracts has changed significantly since the last financial year; (b) there is no, or a limited, risk transfer under the reinsurance contracts. 5. If the competent authorities have required a financial recovery plan for the insurance undertaking in accordance with paragraph 1, they shall refrain from issuing a certificate in accordance with Article 10(3), second subparagraph of this Directive, Article 16(1)(a) of Council Directive 88/357/EEC (second non-life insurance Directive) and Article 12(2) of Council Directive 92/ 49/EEC (third non-life insurance Directive) as long as they consider that policyholders rights are threatened within the meaning of paragraph 1. Notes Art 20a inserted by Directive 2002/13, art 1. Art 20a(4) substituted by Directive 2005/68, art 57.

Article 21 [This article was deleted by the Third Non-Life Directive, Directive 92/49, art 11.] Article 22 1. Authorisation granted to an insurance undertaking by the competent authority of its home Member State may be withdrawn by that authority if that undertaking: (a) does not make use of that authorisation within 12 months, expressly renounces it or ceases to carry on business for more than six months, unless the Member State concerned has made provision for authorisation to lapse in such cases; (b) no longer fulfils the conditions for admission; (c) has been unable, within the time allowed, to take the measures specified in the restoration plan or finance scheme referred to in Article 20;

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(d) fails seriously in its obligation under the regulations to which it is subject. In the event of the withdrawal or lapse of authorisation, the competent authority of the home Member State shall notify the competent authorities of the other Member States accordingly, and they shall take appropriate measures to prevent the undertaking from commencing new operations within their territories, under either the right of establishment or the freedom to provide services. The home Member State’s competent authority shall, in conjunction with those authorities, take all measures necessary to safeguard the interests of insured persons and, in particular, shall restrict the free disposal of the undertaking’s assets in accordance with Article 20(1), (2), second subparagraph, or (3), second subparagraph. 2. Any decision to withdraw authorisation shall be supported by precise reasons and communicated to the undertaking in question. Notes This article was substituted by the Third Non-Life Directive, Directive 92/49, art 14. Art 22(1) The grounds provided for withdrawal of authorisation are implemented in the UK by the FSMA 2000, s 33 and 13, although UK law is framed in much more general terms. The power of the UK authorities to withdraw recognition, to protect assureds and to prevent the free disposal of assets following withdrawal of authorisation by the insurer’s home regulators is found in FSMA 2000, s 34.

TITLE IIIA RULES APPLICABLE TO AGENCIES OR BRANCHES E S TA B L I S H E D W I T H I N T H E C O M M U N I T Y A N D B E L O N G I N G T O U N D E RTA K I N G S W H O S E H E A D O F F I C E S A R E O U T S I D E T H E C O M M U N I T Y Article 23 1. Each Member State shall make access to the business referred to in Article 1 by any undertaking whose head office is outside the Community subject to an official authorisation. 2. A Member State may grant an authorisation if the undertaking fulfils at least the following conditions: (a) It is entitled to undertake insurance business under its national law; (b) It establishes an agency or branch in the territory of such Member State; (c) It undertakes to establish at the place of management of the agency or branch accounts specific to the business which it undertakes there, and to keep there all the records relating to the business transacted; (d) It designates an authorised agent, to be approved by the competent authorities; (e) It possesses in the country where it carries on its business assets of an amount equal to at least one-half of the minimum amount prescribed in Article 17(2), in respect of the guarantee fund, and deposits one-fourth of the minimum amount as security. (f) It undertakes to keep a margin of solvency in accordance with the requirements referred to in Article 25; (g) It submits a scheme of operation in accordance with the provisions of Article 11(1) and (2). (h) communicate the name and address of the claims representative appointed in each Member State other than the Member State in which the authorisation is sought if the risks to be covered are classified in class 10 of point A of the Annex, other than carrier’s liability. Notes Art 23(2)(h) was inserted by Directive 2000/26, art 8(b).

Article 24 Member States shall require undertakings to establish adequate technical reserves to cover the underwriting liabilities assumed in their territories. Member States shall see that the agency or branch covers such technical reserves by means of assets which are equivalent to such reserves and are, to the extent fixed by the State in question, matching assets.

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The law of the Member State shall be applicable to the calculation of technical reserves, the determination of categories of investments, and the valuation of assets. The Member State in question shall require that the assets representing the technical reserves shall be localised in its territory. Article 15(3) shall, however, be applicable. Notes The matching rules are set out in Annex 1 to the Second Non-Life Directive, Directive 88/357.

Article 25 1. Each Member State shall require for agencies or branches established in its territory a solvency margin consisting of assets free of all foreseeable liabilities, less any intangible items. The solvency margin shall be calculated in accordance with the provisions of Article 16(3). However, for the purpose of calculating this margin, account shall be taken only of the premiums or contributions and claims pertaining to the business effected by the agency or branch concerned. 2. One-third of the solvency margin shall constitute the guarantee fund. The guarantee fund may not be less than one-half of the minimum required under Article 17(2). The initial deposit lodged in accordance with Article 23(2)(e) shall be counted towards such guarantee fund. 3. The assets representing the solvency margin must be kept within the country where the business is carried on up to the amount of the guarantee fund and the excess, within the Community. Notes This article applies to the branches of non-EC companies the same solvency margin and guarantee fund requirements as exist for EC companies, but as regards each member state rather than the EC as a whole.

Article 26 1. Any undertaking which has requested or obtained authorisation from more than one Member State may apply for the following advantages which may be granted only jointly: (a) the solvency margin referred to in Article 25 shall be calculated in relation to the entire business which it carries on within the Community; in such case, account shall be taken only of the operations effected by all the agencies or branches established within the Community for the purposes of this calculation; (b) the deposit required under Article 23(2)(c) shall be lodged in only one of those Member States; (c) the assets representing the guarantee fund shall be localised in any one of the Member States in which it carries on its activities. 2. Application to benefit from the advantages provided for in paragraph 1 shall be made to the competent authorities of the Member States concerned. The application must state the authority of the Member State which in future is to supervise the solvency of the entire business of the agencies or branches established within the Community. Reasons must be given for the choice of authority made by the undertaking. The deposit shall be lodged with that Member State. 3. The advantages provided for in paragraph 1 may only be granted if the competent authorities of all Member States in which an application has been made agree to them. They shall take effect from the time when the selected supervisory authority informs the other supervisory authorities that it will supervise the state of solvency of the entire business of the agencies or branches within the Community. The supervisory authority selected shall obtain from the other Member States the information necessary for the supervision of the overall solvency of the agencies and branches established in their territory. 4. At the request of one or more of the Member States concerned, the advantages granted under this Article shall be withdrawn simultaneously by all Member States concerned.

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Notes This article was substituted by the Tourist Assistance Directive, Directive 84/641, art 12, and permits a nonEC insurer which has obtained authorisation in at least two EC member states to apply for an EC-wide solvency margin, thereby permitting the insurer to meet EC-wide requirements rather than the requirements of each member state in which it is authorised.

Article 27 The provisions of Articles 19 and 20 shall also apply in relation to agencies and branches of undertakings to which this Title applies. As regards the application of Article 20, where an undertaking qualifies for the advantages provided for in Article 26(1), the authority responsible for verifying the solvency of agencies or branches established within the Community with respect to their entire business shall be treated in the same way as the authority of the State in the territory of which the head office of a Community undertaking is situated. Notes This article was amended by the Tourist Assistance Directive, Directive 84/641, art 13.

Article 28 In the case of a withdrawal of authorisation by the authority referred to in Article 26(2), this authority shall notify the authorities of the other Member States where the undertaking operates and the latter supervisory authorities shall take the appropriate measures. If the reason for the withdrawal of the authorisation is the inadequacy of the overall state of solvency as fixed by the Member States which agreed to the request referred to in Article 26, the Member States which gave their approval shall also withdraw their authorisations. Article 28a 1. Under the conditions laid down by national law, each Member State shall authorise agencies and branches set up within its territory and covered by this Title to transfer all or part of their portfolios of contracts to an accepting office established in the same Member State if the competent authorities of that Member State or, if appropriate, of the Member State referred to in Article 26 certify that after taking the transfer into account the accepting office possesses the necessary solvency margin. 2. Under the conditions laid down by national law, each Member State shall authorise agencies and branches set up within its territory and covered by this Title to transfer all or part of their portfolios of contracts to an insurance undertaking with a head office in another Member State if the competent authorities of that Member State certify that after taking the transfer into account the accepting office possesses the necessary solvency margin. 3. If under the conditions laid down by national law a Member State authorises agencies and branches set up within its territory and covered by this Title to transfer all or part of their portfolios of contracts to an agency or branch covered by this Title and set up within the territory of another Member State it shall ensure that the competent authorities of the Member State of the accepting office or, if appropriate, of the Member State referred to in Article 26 certify that after taking the transfer into account the accepting office possesses the necessary solvency margin, that the law of the Member State of the accepting office permits such a transfer and that that State has agreed to the transfer. 4. In the circumstances referred to in paragraphs 1, 2 and 3 the Member State in which the transferring agency or branch is situated shall authorise the transfer after obtaining the agreement of the competent authorities of the Member State in which the risks are situated, where different from the Member State in which the transferring agency or branch is situated. 5. The competent authorities of the Member States consulted shall give their opinion or consent to the competent authorities of the home Member State of the transferring insurance undertaking within three months of receiving a request; the absence of any response from the authorities consulted within that period shall be considered equivalent to a favourable opinion or tacit consent.

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6. A transfer authorised in accordance with this Article shall be published as laid down by national law in the Member State in which the risk is situated. Such transfers shall automatically be valid against policyholders, insured persons and any other persons having rights or obligations arising out of the contracts transferred. This provision shall not affect the Member States’ right to give policyholders the option of cancelling contracts within a fixed period after a transfer. Notes This article was inserted by the Third Non-Life Directive, Directive 92/49, art 53. It deals with transfers of insurance contracts by a branch or agency established in a member state but with its head office outside the EC. Three situations are distinguished. (a) A branch or agency has the right to transfer all or part of its portfolio to another insurer with an establishment in the same member state (art 28a(1)). The transfer may proceed providing that: (i) the accepting establishment has the necessary solvency margin; and (ii) the authorities of the member states in which the risks are located have consented, or have failed to object within three months of notification (art 28a(4)–(5)). (b) A branch or agency has the right to transfer all or part of its portfolio to an establishment in any other member state (art 28a(1)). The transfer may go ahead provided that: (i) the establishment is of an insurer with its head office in the EC and is authorised by the regulatory authorities of its home state; (ii) the transferee has the necessary solvency margin; and (iii) the authorities of the member states in which the risks are located have consented, or have failed to object within three months of notification (art 28a(4)–(5)). (c) Member states may confer upon a branch or agency the power to transfer all or a part of its portfolio of contracts to a branch or agency in another member state, but not an insurer which does not have its head office in the EC (art 28a(3)). The transfer may go ahead if: (i) the transferee has the necessary solvency margin; (ii) the law of the member state in which the transferee branch or agency is located permits such transfers; (iii) the authorities of the member state in which the branch or agency is located agree to the transfer or fail to object to it within three months of notification; and (iv) the authorities of the member states in which the risks are located have consented, or have failed to object within three months of the transfer (art 28a (4)–(5)). Art 28a(6) Any transfer effected in accordance with the above provisions overrides the wishes of assureds, although member states are free to provide for a right of cancellation within a fixed period.

Article 29 The Community may, by means of agreements concluded pursuant to the Treaty with one or more third countries, agree to the application of provisions different to those provided for in this Title, for the purpose of ensuring under conditions of reciprocity, adequate protection for insured persons in the Member States. Notes This article does not apply where the EEA Agreement is concerned, and the following provision is substituted: Each Contracting Party may, by means of agreements concluded with one or more third countries, agree on the application of provisions different from those provided for in Articles 23 to 28 of the Directive on the condition that its insured persons are given adequate and equivalent protection. The Contracting Parties shall inform and consult each other prior to concluding such agreements. The Contracting Parties shall not apply to branches of insurance undertakings having their head office outside the territory of the Contracting Parties provisions which result in more favourable treatment than that accorded to branches of insurance undertakings having their head office within the territory of the Contracting Parties.

T I T L E I I I B R U L E S A P P L I C A B L E T O S U B S I D I A R I E S O F PA R E N T U N D E RTA K I N G S G O V E R N E D B Y T H E L AW S O F A T H I R D C O U N T RY A N D T O A C Q U I S I T I O N S O F H O L D I N G S B Y S U C H PA R E N T U N D E RTA K I N G S Article 29a 1. The competent authorities of the Member States shall inform the Commission and the competent authorities of the other Member States:

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(a) of any authorisation of a direct or indirect subsidiary, one or more of whose parent undertakings are governed by the law of a third country; (b) whenever such a parent undertaking acquires a holding in a Community insurance undertaking which would turn the latter into its subsidiary. 2. When the authorisation referred to in paragraph 1(a) is granted to the direct or indirect subsidiary of one or more parent undertakings governed by the law of a third country, the structure of the group shall be specified in the notification which the competent authorities shall address to the Commission. Notes This article was originally inserted by the Motor Services Directive, Directive 90/618, art 4. The current text was substituted by Directive 2005/1, art 4.

Article 29b 1. Member States shall inform the Commission of any general difficulties encountered by their insurance undertakings in establishing themselves or carrying on their activities in a third country. 2. Initially not later than six months before the application of this Directive, and thereafter periodically, the Commission shall draw up a report examining the treatment accorded to Community insurance undertakings in third countries, in the terms referred to in paragraph 3 and 4, as regards establishment and the carrying on of insurance activities, and the acquisition of holdings in third-country insurance undertakings. The Commission shall submit those reports to the Council, together with any appropriate proposals. 3. Whenever it appears to the Commission, either on the basis of the reports referred to in paragraph 2 or on the basis of other information, that a third country is not granting Community insurance undertakings effective market access comparable to that granted by the Community to insurance undertakings from that third country, the Commission may submit proposals to the Council for the appropriate mandate for negotiation with a view to obtaining comparable competitive opportunities for Community insurance undertakings. The Council shall decide by a qualified majority. 4. Whenever it appears to the Commission, either on the basis of the reports referred to in paragraph 2 or on the basis of other information, that Community insurance undertakings in a third country are not receiving national treatment offering the same competitive opportunities as are available to domestic insurance undertakings and that the conditions of effective market access are not being fulfilled, the Commission may initiate negotiations in order to remedy the situation. In the circumstances described in the first subparagraph, it may also be decided at any time, and in addition to initiating negotiations, in accordance with the procedure referred to in Article 5 of Decision 1999/468/EC and in compliance with Article 7(3) and Article 8 thereof that the competent authorities of the Member States must limit or suspend their decisions regarding the following: (a) requests for authorisation, whether pending at the moment of the decision or submitted thereafter; (b) the acquisition of holdings by direct or indirect parent undertakings governed by the law of the third country in question. The duration of the measures referred to may not exceed three months. Before the end of that three-month period, and in the light of the results of the negotiations, the Council may, acting on a proposal from the Commission, decide by a qualified majority that the measures shall be continued. Such limitations or suspension may not apply to the setting up of subsidiaries by insurance undertakings or their subsidiaries duly authorised in the Community, or to the acquisition of holdings in Community insurance undertakings by such undertakings or subsidiaries. 5. Whenever it appears to the Commission that one of the situations described in paragraphs 3 and 4 has arisen, the Member States shall inform it as its request: (a) of any request for the authorisation of a direct or indirect subsidiary, one or more parent undertakings of which are governed by the laws of the third country in question;

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(b) of any plans for such an undertaking to acquire a holding in a Community insurance undertaking such that the latter would become the subsidiary of the former. This obligation to provide information shall lapse once an agreement is concluded with the third country referred to in paragraph 3 or 4 or when the measures referred to in the second and third subparagraphs of paragraph 4 cease to apply. 6. Measures taken under this Article shall comply with the Community’s obligations under any international agreements, bilateral or multilateral, governing the taking-up and pursuit of the business or insurance undertakings. Notes This article was inserted by the Motor Services Directive, Directive 90/618, art 4. Its purpose is to delay the authorisation of a subsidiary of a parent company located outside the EC where the parent’s home country makes life difficult for EC insurers, so that reciprocity can be achieved by one or other means. Art 29b is modified in its application under the EEA Agreement. Information is to be exchanged between the Contracting Parties in the event that the situations set out in art 29b(1) or 29b(5) exist, and consultations shall be held within the EEA Joint Committee in the event that any of the situations in art 29b(2), 29b(3) or 29b(4) prevail. In accordance with the Directive, authorisation granted by any Contracting Party to a subsidiary of an undertaking governed by the law of a third country applies throughout the EEA, with the following provisos: (a) when the third country imposes on EFTA undertakings restrictions which do not apply to EC undertakings, any authorisation granted in the EC applies only in the EC and not to EFTA states (subject to a state taking a contrary approach); (b) if the EC decides to suspend the authorisation of a subsidiary of an undertaking governed by the law of a third country, an authorisation granted in an EFTA state applies only in its own jurisdiction (subject to a state taking a contrary approach); although in either case existing authorisations are not to be prejudiced. In paragraph 4, he second sub-paragraph was substituted by Directive 2005/1, art 4.

TITLE IV

TRANSITIONAL AND OTHER PROVISIONS

Article 30 1. Member States shall allow undertakings referred to in Title II which at the entry into force of the implementing measures to this Directive provide insurance in their territories in one or more of the classes referred to in Article 1 a period of five years, commencing with the date of notification of this Directive, in order to comply with the requirements of Articles 16 and 17. 2. Furthermore, Member States may: (a) allow any undertakings referred to in (1), which upon the expiry of the five-year period have not fully established the margin of solvency, a further period not exceeding two years in which to do so provided that such undertakings have, in accordance with Article 20, submitted for the approval of the supervisory authority the measures which they propose to take for such purpose; (b) exempt undertakings referred to in (1) whose annual premium or contribution income upon the expiry of the period of five years falls short of six times the amount of the minimum guarantee fund required under Article 17(2) from the requirement to establish such minimum guarantee fund before the end of the financial year in respect of which the premium or contribution income is as much as six times such minimum guarantee fund. After considering the results of the examination provided for under Article 33, the Council shall unanimously decide, on a proposal from the Commission, when this exemption is to be abolished by Member States. 3. Undertakings desiring to extend their operations within the meaning of Article 8(2) or Article 10 may not do so unless they comply immediately with the rules of this Directive. However, the undertakings referred to in paragraph (2)(b) which within the national territory extend their business to other classes of insurance or to other parts of such territory may be exempted for a period of ten years from the date of notification of the Directive from the requirement to constitute the minimum guarantee fund referred to in Article 17(2). 4. An undertaking having a structure different from any of those listed in Article 8 may continue, for a period of three years from the notification of the Directive, to carry on their present business in the legal form in which they are constituted at the time of such notification.

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Undertakings set up in the United Kingdom ‘‘by Royal Charter’’ or ‘‘by private Act’’ or ‘‘by special public Act’’ may continue to carry on their business in their present form for an unlimited period. Undertakings in Belgium which, in accordance with their objects, carry on the business of intervention mortgage loans or savings operations in accordance with No 4 of Article 15 of the provisions relating to the supervision of private savings banks, coordinated by the ‘‘arrˆete royal’’ of 23 June 1967, may continue to undertake such business for a period of three years from the date of notification of this Directive. The Member States in question shall draw up a list of such undertakings and communicate it to the other Member States and the Commission. 5. At the request of undertakings which comply with the requirements of Articles 15, 16 and 17, Member States shall cease to apply restrictive measures such as those relating to mortgages, deposits and securities established under present regulations. Notes This article is purely historical. Art 30 (and arts 31, 32 and 34), does not apply to the EEA Agreement. Alternative transitional provisions apply to the margin of solvency and the guarantee fund, as follows: The non-life insurance undertakings to be identified separately by Finland, Iceland and Norway shall be exempt from Articles 16 [margin of solvency] and 17 [guarantee fund]. The competent supervisory authority shall require such undertakings to meet the requirements of these Articles by 1 January 1995. Prior to that date the EEA Joint Committee shall examine the financial situation of the undertakings still not meeting the requirements and make appropriate recommendations. As long as an insurance undertaking fails to meet the requirements of Articles 16 and 17 it shall not establish a branch or provide services in the territory of another Contracting Party. Undertakings desiring to extend their operations within the meaning of Article 8(2) [authorisation for other classes of business] or Article 10 [establishment of a branch] may not do so unless they comply immediately with the rules of the Directive.

Article 31 Member States shall allow agencies or branches referred to in Title III which, at the entry into force of the implementing measures to this Directive, are undertaking one or more classes referred to in Article 1 and do not extend their business within the meaning of Article 10(2), a maximum period of five years, from the date of notification of this Directive, in order to comply with the conditions of Article 25. Notes This article does not apply to the EEA Agreement: see the note to art 30 above.

Article 32 During a period which terminates at the time of the entry into force of an agreement concluded with a third country pursuant to Article 29 and at the latest upon the expiry of a period of four years after the notification of this Directive, each Member State may retain in favour of undertakings of that country established in its territory the rules applied to them on 1 January 1973 in respect of matching assets and the localisation of technical reserves, provided that notification is given to the other Member States and the Commission and that the limits of relaxations granted pursuant to Article 15(2) in favour or the undertakings of Member States established in its territory are not exceeded. Notes This article does not apply to the EEA Agreement: see the note to art 30 above.

TITLE V

FINAL PROVISIONS

Article 33 The Commission and the competent authorities of the Member States shall collaborate closely for the purpose of facilitating the supervision of direct insurance within the Community and of examining any difficulties which may arise in the application of this Directive.

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Article 34 1. The Commission shall submit to the Council, within six years from the date of notification of this Directive, a report on the effects of the financial requirements imposed by this Directive on the situation on the insurance markets of the Member States. 2. The Commission shall, as and when necessary, submit interim reports to the Council before the end of the transitional period provided for in Article 30(1). Notes This article does not apply to the EEA Agreement: see the note to art 30 above.

Article 35 Member States shall amend their national provisions to comply with this Directive within 18 months of its notification and shall forthwith inform the Commission thereof. The provisions thus amended shall, subject to Articles 30, 31 and 32, be applied within 30 months from the date of notification. Article 36 Upon notification of this Directive, Member States shall ensure that the texts of the main provisions of a legislative, regulatory or administrative nature which they adopt in the field covered by this Directive are communicated to the Commission. Article 37 The Annex shall form an integral part of this Directive. Article 38 This Directive is addressed to the Member States. ANNEX Notes The Annex was amended by: the Tourist Assistance Directive, Directive 84/641, art 14; the Credit and Suretyship Directive, Directive 87/343, art 1(8); and the Legal Expenses Insurance Directive, Directive 87/344, art 9. Point A lists the 18 classes of general insurance business for which authorisation is required. The grouping of classes at Point B of the Annex refer back to art 7(2)(a) and are reflected in the Insurance Companies Act 1982, Sched 2, Part II. Point C refers back to art 7(2)(b), and permits insurance of ancillary risks (other than credit, suretyship and legal expenses insurance). Point D sets out the various methods for calculating the equalisation reserve required for credit insurance by art 15a of the First Non-Life Directive.

A. Classification of risks according to classes of insurance 1. Accident (including industrial injury and occupational diseases) — fixed pecuniary benefits — benefits in the nature of indemnity — combinations of the two — injury to passengers 2. Sickness — fixed pecuniary benefits — benefits in the nature of indemnity — combination of the two 3. Land vehicles (other than railway rolling stock) All damage to or loss of

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— land motor vehicles — land vehicles other than motor vehicles 4. Railway rolling stock All damage to or loss of railway rolling stock 5. Aircraft All damage to or loss of aircraft 6. Ships (sea, lake and river and canal vessels) All damage to or loss of — river and canal vessels — lake vessels — sea vessels 7. Goods in transit (including merchandise, baggage, and all other goods) All damage to or loss of goods in transit or baggage, irrespective of the form of transport 8. Fire and natural forces All damage to or loss of property (other than property included in classes 3, 4, 5, 6 and 7) due to — fire — explosion — storm — natural forces other than storm — nuclear energy — land subsidence 9. Other damage to property All damage to or loss of property (other than property included in classes 3, 4, 5, 6 and 7) due to hail or frost, and any event such as theft, other than those mentioned under 8 10. Motor vehicle liability All liability arising out of the use of motor vehicles operating on the land (including carrier’s liability) 11. Aircraft liability All liability arising out of the use of aircraft (including carrier’s liability) 12. Liability for ships (sea, lake and river and canal vessels) All liability arising out of the use of ships, vessels or boats on the sea, lakes, rivers or canals (including carrier’s liability) 13. General liability All liability other than those forms mentioned under Nos 10, 11 and 12 14. Credit — insolvency (general) — export credit — instalment credit — mortgages — agricultural credit 15. Suretyship — suretyship (direct) — suretyship (indirect) 16. Miscellaneous financial loss — employment risks — insufficiency of income (general) — bad weather — loss of benefits — continuing general expenses — unforeseen trading expenses — loss of market value — loss of rent or revenue — indirect trading losses other than those mentioned above — other financial loss (non-trading) — other forms of financial loss 17. Legal expenses Legal expenses and costs of litigation

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The risks included in a class may not be included in any other class except in the cases referred to in point C. 18. Assistance Assistance for persons who get into difficulties while travelling, while away from home or while away from their permanent residence. B. Description of authorisations granted for more than one class of insurance Where the authorisation simultaneously covers: (a) Classes Nos 1 and 2, it shall be named ‘‘Accident and Health Insurance’’; (b) Classes Nos 1 (fourth indent), 3, 7 and 10, it shall be named ‘‘Motor Insurance’’; (c) Classes Nos 1 (fourth indent), 4, 6, 7 and 12, it shall be named ‘‘Marine and Transport Insurance’’; (d) Classes Nos 1 (fourth indent), 5, 7 and 11, it shall be named ‘‘Aviation Insurance’’; (e) Classes Nos 8 and 9, it shall be named ‘‘Insurance against Fire and other Damage to Property’’; (f) Classes Nos 10, 11, 12 and 13, it shall be named ‘‘Liability Insurance’’; (g) Classes Nos 14 and 15, it shall be named ‘‘Credit and Suretyship Insurance’’; (h) All classes, it shall be named at the choice of the Member State in question, which shall notify the other Member States and the Commission of its choice. C. Ancillary risks An undertaking obtaining an authorisation for a principal risk belonging to one class or a group of classes may also insure risks included in another class without an authorisation being necessary for them if they: — are connected with the principal risk, — concern the object which is covered against the principal risk. However, the risks included in classes 14, 15 and 17 in point A may not be regarded as risks ancillary to other classes. Nonetheless, the risk included in class 17 (legal expenses insurance) may be regarded as an ancillary risk of class 18 where the conditions laid down in the first subparagraph are fulfilled, where the main risk relates solely to the assistance provided for persons who fall into difficulties while travelling, while away from home or while away from their permanent residence. Legal expenses insurance may also be regarded as an ancillary risk under the conditions set out in first subparagraph where it concerns disputes or risks arising out of, or in connection with, the use of seagoing vessels. D. Methods of calculating the equalisation for the credit insurance class Method No 1 1. In respect of the risks included in the class of insurance in point A No 14 (hereinafter referred to as ‘‘credit insurance’’), the undertaking shall set up an equalisation reserve to which shall be charged any technical deficit arising in that class for a financial year. 2. Such reserve shall in each financial year receive 75% of any technical surplus arising on credit insurance business, subject to a limit of 12% of the net premiums or contributions until the reserve has reached 150% of the highest annual amount of net premiums or contributions received during the previous five financial years. Method No 2 1. In respect of the risks included in the class of insurance listed in point A No 14 (hereinafter referred to as ‘‘credit insurance’’) the undertaking shall set up an equalisation reserve to which shall be charged any technical deficit arising in that class for a financial year. 2. The minimum amount of the equalisation reserve shall be 134% of the average of the premiums or contributions received annually during the previous five financial years after subtraction of the cessions and addition of the reinsurance acceptances. 3. Such reserve shall in each of the successive financial years receive 75% of any technical surplus arising in that class until the reserve is at least equal to the minimum calculated in accordance with paragraph 2.

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4. Member States may lay down special rules for the calculation of the amount of the reserve and/or the amount of the annual levy in excess of the minimum amounts laid down in this Directive. Method No 3 1. An equalisation reserve shall be formed for class 14 in point A (hereinafter referred to as ‘‘credit insurance’’) for the purpose of offsetting any above-average claims ratio for a financial year in that class of insurance. 2. The equalisation reserve shall be calculated on the basis of the method set out below. All calculations shall relate to income and expenditure for the insurer’s own account. An amount in respect of any claims shortfall for each financial year shall be placed to the equalisation reserve until it has reached, or is restored to, the required amount. There shall be deemed to be a claims shortfall if the claims ratio for a financial year is lower than the average claims ratio for the reference period. The amount in respect of the claims shortfall shall be arrived at by multiplying the difference between the two ratios by the earned premiums for the financial year. The required amount shall be equal to six times the standard deviation of the claims ratios in the reference period from the average claims ratio, multiplied by the earned premiums for the financial year. Where claims for any financial year are in excess, an amount in respect thereof shall be taken from the equalisation reserve. Claims shall be deemed to be in excess if the claims ratio for the financial year is higher than the average claims ratio. The amount in respect of the excess claims shall be arrived at by multiplying the difference between the two ratios by the earned premiums for the financial year. Irrespective of claims experience, 3.5% of the required amount of the equalisation reserve shall be first placed to that reserve each financial year until its required amount has been reached or restored. The length of the reference period shall be not less than 15 years and not more than 30 years. No equalisation reserve need be formed if no underwriting loss has been noted during the reference period. The required amount of the equalisation reserve and the amount to be taken from it may be reduced if the average claims ratio for the reference period in conjunction with the expenses ratio show that the premiums include a safety margin. Method No 4 1. An equalisation reserve shall be formed for class 14 in point A (hereinafter referred to as ‘‘credit insurance’’) for the purpose of offsetting any above-average claims ratio for a financial year in that class of insurance. 2. The equalisation reserve shall be calculated on the basis of the method set out below. All calculations shall relate to income and expenditure for the insurer’s own account. An amount in respect of any claims shortfall for each financial year shall be placed to the equalisation reserve until it has reached the maximum required amount. There shall be deemed to be a claims shortfall if the claims ratio for a financial year is lower than the average claims ratio for the reference period. The amount in respect of the claims shortfall shall be arrived at by multiplying the difference between the two ratios by the earned premiums for the financial year. The maximum required amount shall be equal to six times the standard deviation of the claims ratio in the reference period from the average claims ratio, multiplied by the earned premiums for the financial year. Where claims for any financial year are in excess, an amount in respect thereof shall be taken from the equalisation reserve until it has reached the minimum required amount. Claims shall be deemed to be in excess if the claims ratio for the financial year is higher than the average claims ratio. The amount in respect of the excess claims shall be arrived at by multiplying the difference between the two ratios by the earned premiums for the financial year.

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The minimum required amount shall be equal to three times the standard deviation of the claims ratio in the reference from the average claims ratio multiplied by the earned premiums for the financial year. The length of the reference period shall be not less than 15 years and not more than 30 years. No equalisation reserve need be formed if no underwriting loss has been noted during the reference period. Both required amounts of the equalisation reserve and the amount to be placed to it or the amount to be taken from it may be reduced if the average claims ratio for the reference period in conjunction with the expenses ratio show that the premiums include a safety margin and that safety margin is more than one-and-a-half times the standard deviation of the claims ratio in the reference period. In such a case the amounts in question shall be multiplied by the quotient or one-and-a-half times the standard deviation and the safety margin.

1.60 COUNCIL DIRECTIVE OF 24 JULY 1973 ABOLISHING RESTRICTIONS ON FREEDOM OF ESTABLISHMENT IN THE BUSINESS OF DIRECT INSURANCE OTHER THAN LIFE ASSURANCE (73/240/EEC) General Note The First Non-Life Directive, Directive 73/239, conferred upon EC insurers the right to establish in any other EC member state. This Directive supplements the First Non-Life Directive by providing that it is not permissible for a member state to discriminate on grounds of nationality between applicants from its own territory and other EC territories. In so providing, the Directive fleshes out the general anti-discrimination rule in art 6 of the Treaty of Rome itself. The UK has never adopted discriminatory laws of this type, and implementation in the UK has not been necessary. The Directive is applicable to the European Economic Area Agreement between EC member states and EFTA states, with the modifications noted in the annotations.

THE COUNCIL OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Economic Community, and in particular Article 54(2) and (3) thereof; Having regard to the General Programme for the abolition of restrictions on freedom of establishment, and in particular Title IVC thereof; Having regard to the proposal from the Commission; Having regard to the Opinion of the European Parliament; Having regard to the Opinion of the Economic and Social Committee; Whereas the General Programme referred to above provides for the abolition of all discriminatory treatment of the nationals of the other Member States as regards establishment in the business of direct insurance other than life assurance; Whereas, in accordance with this General Programme, the lifting of restrictions on the setting-up of agencies and branches is, as regards direct insurance undertakings, dependent upon the coordination of conditions of taking up and pursuit of the business. Whereas this coordination has been achieved for direct insurance other than life assurance, by the first Council Directive of 24 July 1973; Whereas the scope of this Directive is in all respects the same as that defined in item A of the Annex to the first Directive on coordination; whereas it appeared reasonable in the circumstances to exclude, for purposes of coordination, credit-insurance for exports; Whereas, in accordance with the General Programme referred to above, the restrictions on the right to join professional organisations must be abolished where the professional activities of the persons concerned involve the exercise of this right;

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HAS ADOPTED THIS DIRECTIVE: Article 1 Member States shall abolish, in respect of the natural persons and undertakings covered by Title I of the General Programme for the abolition of restrictions on freedom of establishment, hereafter called ‘‘beneficiaries’’, the restrictions referred to in Title III of this programme affecting the right to take up and pursue self-employed activities in the classes of insurance specified in Article I of the first Coordination Directive. By ‘‘First Coordination Directive’’ is meant the first Council Directive of 24 July 1973 on coordination of the laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance. However, as regards credit-insurance for exports, these restrictions shall be maintained until the coordination programme laid down in Article 2(2)(d), of the first Coordination Directive has been carried out. Notes This article does not apply to the EEA Agreement.

Article 2 1. Member States shall in particular abolish the following restrictions: (a) those which prevent beneficiaries from establishing themselves in the host country under the same conditions and with the same rights as nationals of that country; (b) those existing by reason of administrative practices which result in treatment being applied to beneficiaries that is discriminatory by comparison with that applied to nationals. 2. The restrictions to be abolished shall include in particular those arising out of measures which prevent or limit the establishment of beneficiaries by the following means: (a) In Germany : the provisions granting the Federal Ministry of Economic Affairs the discretionary right to impose its own conditions of access to this business on foreign nationals and to prevent them from pursuing this business within the Federal Republic (Law of 6 June 1931 (VAG), Article 106(2), No 1, in conjunction with Article 8(1), No 3, Article 106(2), last sentence, and Article 111(2)); (b) In Belgium: the obligation to hold a ‘‘carte professionelle’’ (Article 1 of the Law of 19 February 1965); (c) In France : — the need to obtain special consent (Law of 15 February 1917, as amended and supplemented by the ‘‘d´ecret-loi’’ of 30 October 1935, Article 2(2)—‘‘d´ecret’’ of 19 August 1941, as amended, Articles 1 and 2—‘‘d´ecret’’ of 13 August 1947, as amended, Articles 2 and 10); — the obligation to provide a surety-bond or special guarantees as a reciprocal requirement (Law of 15 February 1917, amended and supplemented by the ‘‘d´ecret-loi’’ of 30 October 1935, Article 2 (2)—‘‘d´ecret-loi’’ of 14 June 1938, Article 42—‘‘d´ecret’’ of 30 December 1938, as amended, Article 143—‘‘d´ecret’’ of 14 December 1966, Articles 9, 10 and 11); — the obligation to deposit technical reserves (‘‘d´ecret’’ of 30 December 1938, amended Article 179—‘‘d´ecret’’ of 13 August 1947, as amended, Articles 8 and 13—‘‘d´ecret’’ of 14 December 1966. Title I). (d) In Ireland: the provision that, to be eligible for an insurance licence, a company must be registered under the Irish Companies Acts, two-thirds of its shares must be owned by Irish citizens and the majority of the directors (other than a full-time managing director) must be Irish citizens (Insurance Act, 1936, Section 12; Insurance Act, 1964, Section 7). 3. The laws, regulations or administrative provisions that involve beneficiaries in the obligation to provide a deposit or special surety-bond shall not be abolished, as long as the undertakings do not fulfil the financial conditions under Articles 16 and 17 of the first

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Coordination Directive in accordance with the provisions of Article 30(1) and (2) of the same Directive. Notes This article does not apply to the EEA Agreement.

Article 3 1. Where a host Member State requires of its own nationals wishing to take up any activity referred to in Article 1 proof of good repute and proof of no previous bankruptcy, or proof of either of these, that State shall accept as sufficient evidence, in respect of nationals of other Member States, the production of an extract from the ‘‘judicial record’’ or, failing this, of an equivalent document issued by a competent judicial or administrative authority in the country of origin or the country whence the foreign national comes, showing that these requirements have been met. 2. Where the country of origin or the country whence the foreign national comes does not issue such documentary proof of good repute or documentary proof of no previous bankruptcy, such proof may be replaced by a declaration on oath—or in States where there is no provision for declaration on oath, by a solemn declaration—made by the person concerned before a competent judicial or administrative authority, or where appropriate a notary, in the country of origin or in the country whence that person comes; such authority or notary will issue a certificate attesting the authenticity of the declaration on oath or solemn declaration. A declaration in respect of no previous bankruptcy may also be made before a competent professional or trade body in the said country. 3. Documents issued in accordance with paragraph 1 or with paragraph 2 may not be produced more than three months after their date of issue. 4. Member States shall, within the time limit laid down in Article 6, designate the authorities and bodies competent to issue these documents and shall forthwith inform the other Member States and the Commission thereof. Article 4 1. Member States shall ensure that beneficiaries have the right to join professional or trade organisations under the same rights and obligations as their own nationals. 2. The right to join professional or trade organisations shall, in the case of establishment, entail eligibility for election or appointment to high office in such organisations. However, such posts may be reserved for nationals where, in pursuance of any provision laid down by law or regulation, the organisation concerned is involved in the exercise of official authority. 3. In the Grand Duchy of Luxembourg, membership of the ‘‘Chambre de commerce’’ shall not give beneficiaries the right to take part in the election of the administrative organs of that Chamber. Article 5 No Member State shall grant to any of its nationals who go to another Member State for the purposes of pursuing any activity referred to in Article 1 any aid liable to distort the conditions of establishment. Notes This article does not apply to the EEA Agreement.

Article 6 Member States shall amend their national regulations in accordance with this Directive and within 18 months of the notification of the first Coordination Directive and shall forthwith inform the Commission thereof. The regulations thus amended shall be implemented at the same time as the laws, regulations and administrative provisions set up in pursuance of the first Directive.

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Article 7 This Directive is addressed to the Member States.

1.61 COUNCIL DIRECTIVE OF 29 JUNE 1976 AMENDING DIRECTIVE 73/239/EEC ON THE CO-ORDINATION OF LAWS, REGULATIONS AND ADMINISTRATIVE PROVISIONS RELATING TO THE TAKING UP AND PURSUIT OF THE BUSINESS OF DIRECT INSURANCE OTHER THAN LIFE ASSURANCE (76/580/EEC) General Note Under art 17 of the First Non-Life Directive, Directive 73/239, every EC insurer must maintain a guarantee fund, constituting one-third of its solvency margin and not being less than the amounts expressed in ECU in that article. This provision was first implemented in the UK by the Insurance Companies Regulations 1994, SI 1994 No 1516, now superceded by the FSA Handbook. The purpose of the Directive was to fix a common date for valuing the ECU in national currencies. The Directive is obsolete following the introduction of the Euro and the first revision of the solvency margin amounts by Directive 2002/13/EC.

1.62 COUNCIL DIRECTIVE OF 30 MAY 1978 ON THE COORDINATION OF LAWS, REGULATIONS AND ADMINISTRATIVE PROVISIONS RELATING TO COMMUNITY CO-INSURANCE (78/473/EEC) General Note For the case law under this Directive see para 1.10 above. See also art 26 of the Second Non-Life Directive, in para 1.65, which extended the single market rules to co-insurance.

THE COUNCIL OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Economic Community, and in particular Articles 57(2) and 66 thereof, Having regard to the proposal from the Commission, Having regard to the opinion of the European Parliament, Having regard to the opinion of the Economic and Social Committee, Whereas the effective pursuit of Community co-insurance business should be facilitated by a minimum of coordination in order to prevent distortion of competition and inequality of treatment, without affecting the freedom existing in several Member States, Whereas such coordination covers only those co-insurance operations which are economically the most important, i.e. those which by reason of their nature or their size are liable to be covered by international co-insurance, Whereas this Directive thus constitutes a first step towards the coordination of all operations which may be carried out by virtue of the freedom to provide services; whereas this coordination, in fact, is the object of the proposal for a second Council Directive on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and laying down provisions to facilitate the effective exercise of freedom to provide services, which the Commission forwarded to the Council on 30 December 1975. Whereas the leading insurer is better placed than the other co-insurers to assess claims and to fix the minimum of reserves for outstanding claims; Whereas work is in progress on the winding-up of insurance undertakings; whereas provision must be made at this stage to ensure that, in the event of winding-up, beneficiaries under Community co-insurance contracts enjoy equality of treatment with beneficiaries in respect of the other insurance business, irrespective of the nationality of such persons; Whereas special cooperation should be provided for in the Community co-insurance field both between the competent supervisory authorities of the Member States and between those

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authorities and the Commission; whereas any practices which might indicate a misuse of the purpose of the Directive are to be examined in the course of such cooperation. HAS ADOPTED THIS DIRECTIVE: TITLE I

GENERAL PROVISIONS

Article 1 1. This Directive shall apply to Community co-insurance operations referred to in Article 2 which relate to risks classified under point A, 4, 5, 6, 7, 8, 9, 11, 12, 13 and 16 of the Annex to the First Council Directive of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance, hereinafter called the ‘‘first Coordination Directive’’. It shall not apply, however, to Community co-insurance operations covering risks classified under point A.13 which concern damage arising from nuclear sources or from medicinal products. The exclusion of insurance against damage arising from medicinal products shall be examined by the Council within five years of the notification of this Directive. 2. This Directive shall apply to risks referred to in the first subparagraph of paragraph 1 which by reason of their nature or size call for the participation of several insured for their coverage. Any difficulties which may arise in implementing this principle shall be examined pursuant to Article 8. Article 2 1. This Directive shall apply only to those Community co-insurance operations which satisfy the following conditions: (a) The risk, within the meaning of Article 1(1), is covered by a single contract at an overall premium and for the same period by two or more insurance undertakings, hereinafter referred to as ‘‘co-insurers’’, each for its own part; one of these undertakings shall be the leading insurer; (b) the risk is situated within the community; (c) for the purpose of covering this risk, the leading insurer is authorised in accordance with the conditions laid down in the First Coordination Directive, i.e. he is treated as if he were the insurer covering the whole risk; (d) at least one of the co-insurers participates in the contract by means of a head office, agency or branch established in a Member State other than that of the leading insurer; (e) the leading insurer fully assumes the leader’s role in co-insurance practice and in particular determines the terms and conditions of insurance and rating. 2. Those co-insurance operations which do not satisfy the conditions set out in paragraph 1 or which cover risks other than specified in Article 1 shall remain subject to the national laws operative at the time when this Directive comes into force. Article 3 The right of undertakings which have their head office in a Member State and which are subject to and satisfy the requirements of the First Coordination Directive to participate in Community co-insurance may not be made subject to any provisions other than those of this Directive. TITLE II

CONDITIONS AND PROCEDURES FOR COMMUNITY CO-INSURANCE

Article 4 1. The amount of the technical reserves shall be determined by the different co-insurers according to the rules fixed by the Member State where they are established or, in the absence

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of such rules, according to customary practice in that State. However, the reserve for outstanding claims shall be at least equal to that determined by the leading insurer according to the rules or practice of the State where such insurer is established. 2. The technical reserves established by the different co-insurers shall be represented by matching assets. However, relaxation of the matching assets rule may be granted by the Member States in which the co-insurers are established in order to take account of the requirements of sound management of insurance undertakings. Such assets shall be localised either in the Member States in which the co-insurers are established or in the Member State in which the leading insurer is established, whichever the insurer chooses. Article 5 The Member States shall ensure that co-insurers established in their territory keep statistical data showing the extent of Community co-insurance operations and the countries concerned. Article 6 The supervisory authorities of the Member States shall cooperate closely in the implementation of this Directive and shall provide each other with all the information necessary to this end. Article 7 In the event of an insurance undertaking being wound up, liabilities arising from participation in Community co-insurance contracts shall be met in the same way as those arising under that undertaking’s other insurance contracts without distinction as to the nationality of the insured and of the beneficiaries.

TITLE III

FINAL PROVISIONS

Article 8 The Commission and the competent authorities of the Member States shall cooperate closely for the purposes of examining any difficulties which might arise in implementing this Directive. In the course of this cooperation they shall examine in particular any practices which might indicate that the purposes of the provisions of this Directive and in particular of Article 1(2) and Article 2 are being misused either in that the leading insurer does not assume the leader’s role in co-insurance practice or that the risks clearly do not require the participation of two or more for their coverage. Article 9 The Commission shall submit to the Council within six years of the notification of this Directive a report on the development of Community co-insurance. Article 10 Member States shall amend their national provisions so as to comply with this Directive within 18 months of its notification and shall immediately inform the Commission thereof. The provisions thereby amended shall be applied within 24 months of such notification. Article 11 Upon ratification of this Directive Member States shall ensure that the texts of the main provisions of laws, regulations or administrative measures which they adopt in the field covered by this Directive are communicated to the Commission.

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Article 12 This Directive is addressed to the Member States.

1.63 COUNCIL DIRECTIVE OF 10 DECEMBER 1984 AMENDING, PARTICULARLY AS REGARDS TOURIST ASSISTANCE, THE FIRST DIRECTIVE (73/239/EEC) ON THE COORDINATION OF LAWS, REGULATIONS AND ADMINISTRATIVE PROVISIONS RELATING TO THE TAKING-UP AND PURSUIT OF THE BUSINESS OF DIRECT INSURANCE OTHER THAN LIFE ASSURANCE (84/641/EEC) General Note The First Non-Life Directive, Directive 73/239, which provided for freedom of establishment, apparently excluded insurance agreements under which benefits in kind were provided by the insurer. The Tourist Assistance Directive brought such insurance contracts, notably roadside assistance contracts, into the regime established by the First Non-Life Directive, although only where the person providing such benefits is an insurer (as opposed to the provider of some other form of service). This Directive applies to the European Economic Area Agreement between EC member states and EFTA states.

THE COUNCIL OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Economic Community, and in particular Article 57(2) thereof, Having regard to the proposal from the Commission, Having regard to the opinion of the European Parliament, Having regard to the opinion of the Economic and Social Committee, Whereas the First Council Directive (73/239/EEC) of 4 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance, hereinafter referred to as the ‘‘First Directive’’, as amended by Directive 76/580/EEC, eliminated certain differences between the laws of Member States in order to facilitate the taking-up and pursuit of the above business; Whereas considerable progress has been achieved in that area of business involving the provision of benefits in kind, whereas such benefits are governed by provisions which differ from one Member State to another; whereas those differences constitute a barrier to the exercise of the right of establishment; Whereas, in order to eliminate that barrier to the right of establishment, it should be specified that an activity is not excluded from the application of the First Directive for the simple reason that it constitutes a benefit solely in kind or one for which the person providing it uses his own staff or equipment only; whereas, therefore, such provision of assistance consisting in the promise of aid on the occurrence of a chance event should be covered by the above Directive, taking into account the special characteristics of such assistance; Whereas the purpose of the inclusion, for reasons of supervision, of assistance operations in the scope of the First Directive, which does not involve the definition of these operations, is not to affect the fiscal rules applicable to them; Whereas the sole fact of providing certain forms of assistance on the occasion of an accident or breakdown involving a road vehicle normally occurring in the territory of the Member State of the undertaking providing cover is not a reason for any person or undertaking that is not an insurance undertaking to be subject to the arrangements of the First Directive; Whereas provision should be made for certain relaxations to the condition that the accident or breakdown must occur in the territory of the Member State of the undertaking providing cover in order to take into account either the existence of reciprocal agreements or of certain specific circumstances relating to the geographical situation or to the structure of the organisations concerned, or to the very limited economic importance of the operations referred to; Whereas an organisation of a Member State whose main activity is to provide services on behalf of the public authorities should be excluded from the scope of the First Directive; Whereas an undertaking offering assistance contracts must possess the means necessary for it to provide the benefits in kind which it offers within an appropriate period of time; whereas

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special provision should be laid down for calculating the solvency margin and the minimum amount of the guarantee fund which such undertaking must possess; Whereas certain transitional provisions are necessary in order to permit undertakings providing only assistance to adapt themselves to the application of the First Directive; Whereas, having regard to special structural and geographical difficulties, it is necessary to allow a transitional period to the automobile club of a Member State for bringing itself into line with the said Directive concerning repatriation of the vehicle, possibly accompanied by the driver and passengers; Whereas it is necessary to keep up-to-date the provisions of the First Directive concerning the legal forms which insurance undertakings may assume; whereas certain provisions of the said Directive concerning the rules applicable to agencies or branches established within the Community and belonging to undertakings whose head offices are situated outside the Community should be amended in order to make them consistent with the provisions of Directive 79/267/EEC, HAS ADOPTED THIS DIRECTIVE: Article 1 [Substitutes art 1 of Directive 73/239] Article 2 [Amends art 2(3) of Directive 73/239] Article 3 [Amends art 3(1) of Directive 73/239] Article 4 [Amends art 4 of Directive 73/239] Article 5 [Amended art 8(1)(a) of Directive 73/239, subsequently replaced by art 6 of Directive 92/49] Article 6 [Amended arts 8(3) and 10(3) of Directive 73/239, subsequently replaced by arts 6 and 32 of Directive 92/49] Article 7 [Amended arts 9 and 11(1) of Directive 73/239, subsequently replaced by arts 7 and 33 of Directive 92/49] Article 8 [Replaced art 13 of Directive 73/239, subsequently replaced by art 9 of Directive 92/49] Article 9 [Amends art 16(3) of Directive 73/239] Article 10 [Amends art 17(2) of Directive 73/239] Article 11 [Replaces art 19 of Directive 73/239]

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Article 12 [Replaces art 26 of Directive 73/239] Article 13 [Amends art 27 of Directive 73/239] Article 14 [Amends the Annex to Directive 73/239] Article 15 Any Member State may, in its territory, make the provision of assistance to persons who get into difficulties in circumstances other than those referred to in Article 1 subject to the arrangements introduced by the First Directive. If a Member State makes use of this possibility it shall, for the purposes of applying these arrangements, treat such activity as if were listed in class 18 in point A of the Annex to the First Directive without prejudice to point C thereof. The preceding paragraph shall in no way affect the possibilities for classification laid down in the Annex to the First Directive for activities which obviously come under other classes. It shall not be possible to refuse authorisation to an agency or branch solely on the grounds that the activity covered by this Article is classified differently in the Member State in the territory of which the head office of the undertaking is situated. Notes The Directive allows excluded assistance activities—including assistance to a person travelling within his home territory—to be regulated by member states as independent class 18 insurance business. However, if that business is merely ancillary to some other form of insurance, Point C of the Annex to the First Non-Life Directive states that no separate authorisation is needed.

TRANSITIONAL PROVISIONS Article 16 1. Member States may allow undertakings which, on the date of notification of this Directive, provide only assistance in their territories, a period of five years from that date in order to comply with the requirements set out in Articles 16 and 17 of the First Directive. 2. Member States may allow any undertakings referred to in paragraph 1 which, upon expiry of the five-year period, have not fully established the solvency margin, a further period not exceeding two years in which to do so provided that such undertakings have in accordance with Article 20 of the First Directive, submitted for the approval of the supervisory authority the measures which they propose to take for that purpose. 3. Any undertaking referred to in paragraph 1 which wishes to extend its business within the meaning of Article 8(2) or Article 10 of the First Directive may do so only on condition that it complies forthwith with that Directive. 4. Any undertaking referred to in paragraph 1 which has a form different to those referred to in Article 8 of the First Directive may continue for a period of three years from the date of notification of this Directive to carry on its existing business in the form in which it exists on that date. 5. This Article shall apply mutatis mutandis to undertakings formed after the date of notification of this Directive which take over business already conducted on that date by a legally distinct body. Article 17 Member States may allow agencies and branches referred to in Title III of the First Directive which provide only assistance in the territories of those Member States a maximum period of five years commencing on the date of notification of this Directive in order to comply with

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Article 25 of the First Directive, provided such agencies or branches do not extend their business within the meaning of Article 10(2) of the First Directive. Article 18 During a period of eight years from the date of notification of this Directive, the condition that the accident or breakdown must have happened in the territory of the Member State of the undertaking providing cover shall not apply to the operations referred to in the third indent of the first subparagraph of Article 2(3) of the First Directive where these operations are carried out by the ELPA (Automobile and Touring Club of Greece). FINAL PROVISIONS Article 19 1. Member States shall amend their national provisions in order to comply with this Directive not later than 30 June 1987. They shall forthwith inform the Commission thereof. The provisions thus amended shall, subject to Articles 16, 17 and 18 of this Directive, apply at the latest beginning on 1 January 1988. 2. Member States shall communicate to the Commission the texts of the main provisions laid down by law, regulation or administrative action which they adopt in the field governed by this Directive. Article 20 The Commission shall report to the Council, within six years of notification of this Directive, on the difficulties arising from the application thereof, and in particular Article 15 thereof. It shall, if appropriate, submit proposals to put an end to them. Article 21 This Directive is addressed to the Member States.

1.64 COUNCIL DIRECTIVE OF 22 JUNE 1987 ON THE COORDINATION OF LAWS, REGULATIONS AND ADMINISTRATIVE PROVISIONS RELATING TO LEGAL EXPENSES INSURANCE (87/344/EEC) General Note Legal expenses insurance covers an assured against costs incurred by him in bringing or defending legal proceedings. Legal expenses insurance is within the regulatory framework, as class 17 general business. The purpose of this Directive was to minimise any conflict of interest faced by an insurer offering both property or liability insurance and legal expenses insurance, as it was perfectly feasible that such an insurer might find himself on both sides in a dispute between two assureds. This is achieved by requiring that an insurer may not offer both forms of insurance or, if he does, that mechanisms are in place to ensure that the assured has a right to an independent decision as to his right to assistance. The Legal Expenses Insurance Directive was implemented in the UK by the Insurance Companies (Legal Expenses) Regulations 1990, SI 1990 No 1159 (in this chapter referred to as the Legal Expenses Insurance Regulations 1990), and the Insurance Companies (Legal Expenses Insurance) (Application for Authorisation) Regulations 1990, SI 1990 No 1160. The former implements the substantive policy matters provided for in the Directive, and the latter implemented the requirement that an insurer (subject to exceptions) cannot offer both forms of cover in a single policy. SI 1990 No 1160 was repealed and replaced by the Insurance Companies Regulations 1994, SI 1994 No 1516, Sched 2, in turn revoked by the Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001 (SI 2001 No 3649), which also amended SI 2001 No 1159, reg 2. The Legal Expenses Insurance Directive does not specify the consequences of any breach of its provisions. This Directive is applicable to the European Economic Area Agreement between EC member states and EFTA states.

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THE COUNCIL OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Economic Community, and in particular Article 57(2) thereof, Having regard to the proposal from the Commission, Having regard to the opinion of the European Parliament, Having regard to the opinion of the Economic and Social Committee, Whereas Council Directive 73/239/EEC of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance, as last amended by Directive 87/343/EEC, eliminated, in order to facilitate the taking-up and pursuit of such activities, certain differences existing between national laws; Whereas, however, Article 7(2)(c) of Directive 73/239/EEC provides that ‘‘pending further coordination, which must be implemented within four years of notification of this Directive, the Federal Republic of Germany may maintain the provision prohibiting the simultaneous undertaking in its territory of health insurance, credit and suretyship insurance or insurance in respect of recourse against third parties and legal defence, either with one another or with other classes’’; Whereas the present Directive provides for the coordination of legal expenses insurance as envisaged in Article 7(2)(c) of Directive 73/239/EEC; Whereas, in order to protect insured persons, steps should be taken to preclude, as far as possible, any conflict of interests between a person with legal expenses cover and his insurer arising out of the fact that the latter is covering him in respect of any other class of insurance referred to in the Annex to Directive 73/239/EEC or is covering another person and, should such a conflict arise, to enable it to be resolved; Whereas legal expenses insurance in respect of disputes or risks arising out of, or in connection with, the use of sea-going vessels should, in view of its specific nature, be excluded from the scope of this Directive; Whereas the activity of an insurer who provides services or bears the cost of defending the insured person in connection with a civil liability contract should also be excluded from the scope of this Directive if that activity is at the same time pursued in the insurer’s own interest under such cover; Whereas Member States should be given the option of excluding from the scope of this Directive the activity of legal expenses insurance undertaken by an assistance insurer where this activity is carried out in a Member State other than the one in which the insured person normally resides and where it forms part of a contract covering solely the assistance provided for persons who fall into difficulties while travelling, while away from home or while away from their permanent residence; Whereas the system of compulsory specialisation at present applied by one Member State, namely the Federal Republic of Germany, precludes the majority of conflicts; whereas, however, it does not appear necessary, in order to obtain this result, to extend that system to the entire Community, which would require the splitting-up of composite undertakings; Whereas the desired result can also be achieved by requiring undertakings to provide for a separate contract or a separate section of a single policy for legal expenses insurance and by obliging them either to have separate management for legal expenses insurance, or to entrust the management of claims in respect of legal expenses insurance to an undertaking having separate legal personality, or to afford the person having legal expenses cover the right to choose his lawyer from the moment that he has the right to claim from his insurer; Whereas, whichever solution is adopted, the interest of persons having legal expenses cover shall be protected by equivalent safeguards; Whereas the interest of persons having legal expenses cover means that the insured person must be able to choose a lawyer or other person appropriately qualified according to national law in any inquiry or proceedings and whenever a conflict of interest arises; Whereas Member States should be given the option of exempting undertakings from the obligation to give the insured person this free choice of lawyer if the legal expenses insurance is limited to cases arising from the use of road vehicles on their territory and if other restrictive conditions are met; Whereas, if a conflict arises between insurer and insured, it is important that it be settled in the fairest and speediest manner possible; whereas it is therefore appropriate that provision be

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made in legal expenses insurance policies for an arbitration procedure or a procedure offering comparable guarantees; Whereas the second paragraph of point C of the Annex to Directive 73/239/EEC provides that the risks included in classes 14 and 15 in point A may not be regarded as risks ancillary to other classes; whereas in insurance undertaking should not be able to cover legal expenses as a risk ancillary to another risk without having obtained an authorisation in respect of the legal expenses risk; whereas, however, Member States should be given the option of regarding class 17 as a risk ancillary to class 18 in specific cases; whereas, therefore, point C of the said Annex should be amended accordingly. HAS ADOPTED THIS DIRECTIVE: Article 1 The purpose of this Directive is to coordinate the provisions laid down by law, regulation or administrative action concerning legal expenses insurance as referred to in paragraph 17 of point A of the Annex to Council Directive 73/239/EEC in order to facilitate the effective exercise of freedom of establishment and preclude as far as possible any conflict of interest arising in particular out of the fact that the insurer is covering another person or is covering a person in respect of both legal expenses and any other class in that Annex and, should such a conflict arise, to enable it to be resolved. Article 2 1. This Directive shall apply to legal expenses insurance. Such consists in undertaking, against the payment of a premium, to bear the costs of legal proceedings and to provide other services directly linked to insurance cover, in particular with a view to: — securing compensation for the loss, damage or injury suffered by the insured person, by settlement out of court or through civil or criminal proceedings, — defending or representing the insured person in civil, criminal, administrative or other proceedings or in respect of any claim made against him. 2. This Directive shall not, however, apply to: — legal expenses insurance where such insurance concerns disputes or risks arising out of, or in connection with, the use of sea-going vessels, — the activity pursued by the insurer providing civil liability cover for the purposes of defending or representing the insured person in any inquiry or proceedings if that activity is at the same time pursued in the insurer’s own interest under such cover, — where a Member State so chooses, the activity of legal expenses insurance undertaken by an assistance insurer where this activity is carried out in a Member State other than the one in which the insured person normally resides, where it forms part of a contract covering solely the assistance provided for persons who fall into difficulties while travelling, while away from home or while away from their permanent residence. In this event the contract must clearly state that the cover in question is limited to the circumstances referred to in the foregoing sentence and is ancillary to the assistance. Notes Art 2(1) See the Legal Expenses Insurance Regulations 1990, reg 2 as amended by the Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001 (SI 2001 No 3649), art 407. Art 2(2) The exemptions are transposed in the UK by the Legal Expenses Insurance Regulations 1990, reg 3. The optional exemption conferred upon member states by art 2, 3rd indent, has been taken up by the UK.

Article 3 1. Legal expenses cover shall be the subject of a contract separate from that drawn up for the other classes of insurance or shall be dealt with in a separate section of a single policy in which

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the nature of the legal expenses cover and, should the Member State so request, the amount of the relevant premium are specified. 2. Each Member State shall take the necessary measures to ensure that the undertakings established within its territory adopt, in accordance with the option imposed by the Member State, or at their own choice, if the Member States so agrees, at least one of the following solutions which are alternatives: (a) the undertaking shall ensure that no member of the staff who is concerned with the management of legal expenses claims or with legal advice in respect thereof carries on at the same time a similar activity — if the undertaking is a composite one, for another class transacted by it, — irrespective of whether the undertaking is a composite or a specialised one, in another having financial, commercial or administrative links with the first undertaking and carrying on one or more of the other classes of insurance set out in Directive 73/239/EEC; (b) the undertaking shall entrust the management of claims in respect of legal expenses insurance to an undertaking having separate legal personality. That undertaking shall be mentioned in the separate contract or separate section referred to in paragraph 1. If the undertaking having separate legal personality has links with an undertaking which carries on one or more of the other classes of insurance referred to in point A of the Annex to Directive 73/239/EEC, members of the staff of the undertaking who are concerned with the processing of claims or with legal advice connected with such processing may not pursue the same or a similar activity in the other undertaking at the same time. In addition, Member States may impose the same requirements on the members of the management body; (c) the undertaking shall, in the contract, afford the insured person the right to entrust the defence of his interests, from the moment that he has the right to claim from his insurer under the policy, to a lawyer of his choice or, to the extent that national law so permits, any other appropriately qualified person. 3. Whichever solution is adopted, the interest of persons having legal expenses cover shall be regarded as safeguarded in an equivalent manner under this Directive. Notes Art 3(1) This is enacted in the UK by the Legal Expenses Insurance Regulations 1990, reg 4. Art 3(2) This provision confers upon member states a choice of various alternative methods, (a)–(c), to be enacted to avoid any conflict of interest where an insurer is on both sides of a legal dispute between two assured persons. It is open to each member state either to specify which of the three options is to be adopted, or to allow insurers themselves to choose between the options. The UK has taken the latter more liberal approach and has left it to each insurer to determine which of the three options suits it best: Legal Expenses Insurance Regulations 1990, reg 5.

Article 4 1. Any contract of legal expenses insurance shall expressly recognise that: (a) where recourse is had to a lawyer or other person appropriately qualified according to national law in order to defend, represent or serve the interests of the insured person in any inquiry or proceedings, that insured person shall be free to choose such lawyer or other person; (b) the insured person shall be free to choose a lawyer or, if he so prefers and to the extent that national law so permits, any other appropriately qualified person, to serve his interests whenever a conflict of interests arises. 2. Lawyer means any person entitled to pursue his professional activities under one of the denominations laid down in Council Directive 77/249/EEC of 22 March 1977 to facilitate the effective exercise by lawyers of freedom to provide services. Notes Art 4(1) This article is implemented in the UK by the Legal Expenses Insurance Regulations 1990, reg 6. Art 4(2) Directive 77/249 facilitates the effective exercise by lawyers of freedom to provide services, and requires each member state to recognise the qualifications of lawyers qualified elsewhere in the EC. Art 2 of Directive 77/249 defines the meaning of the word ‘‘lawyer’’ for each member state.

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Article 5 1. Each Member State may provide exemption from the application of Article 4(1) for legal expenses insurance if all the following conditions are fulfilled: (a) the insurance is limited to cases arising from the use of road vehicles in the territory of the Member State concerned; (b) the insurance is connected to a contract to provide assistance in the event of accident or breakdown involving a road vehicle; (c) neither the legal expenses insurer nor the assistance insurer carries out any class of liability insurance; (d) measures are taken so that the legal counsel and representation of each of these parties to a dispute is effected by completely independent lawyers when the parties are insured for legal expenses by the same insurer. 2. The exemption granted by a Member State to an undertaking pursuant to paragraph 1 shall not affect the application of Article 3(2). Notes Art 5(1) The option given to member states to exempt domestic accident and breakdown insurance from the right to seek independent legal advice as long as suitable arrangements are made for the provision of independent legal advice. For UK implementation, see the Legal Expenses Insurance Regulations, reg 7. Art 5(2) confirms that the exempted classes in art 5(1) are relevant only for the purposes of art 4 (lawyers) and not art 3 (avoiding conflicts of interest).

Article 6 Member States shall adopt all appropriate measures to ensure that, without prejudice to any right of appeal to a judicial body which might be provided for by national law, an arbitration or other procedure offering comparable guarantees of objectivity is provided for whereby, in the event of a difference of opinion between a legal expenses insurer and his insured, a decision can be taken on the attitude to be adopted in order to settle the dispute. The insurance contract must mention the right of the insured person to have recourse to such a procedure. Notes The right to go to arbitration is reflected in the UK implementation by the Legal Expenses Insurance Regulations 1990, reg 8.

Article 7 Whenever a conflict of interests arises or there is a disagreement over the settlement of the dispute, the legal expenses insurer or, where appropriate, the claims settlement office shall inform the person insured of — the right referred to in Article 4, — the possibility of having recourse to the procedure referred to in Article 6. Notes The obligation to inform the assured, once a dispute has arisen, of his right to obtain independent legal advice and of his right to go to arbitration, is enacted in the UK by the Legal Expenses Insurance Regulations 1990, reg 9.

Article 8 Member States shall abolish all provisions which prohibit an insurer from carrying out within their territory legal expenses insurance and other classes of insurance at the same time. Notes No such provision has ever existed in the UK. The UK does, however, in accordance with the classes of business listed in the First Non-Life Directive, insist upon separate authorisation for legal expenses insurance business unless the business relates to travel assistance or sea-going vessels (both of which are exempted from the Legal Expenses Insurance Regulations).

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Article 9 [Amends the Annex to Directive 73/239.] Article 10 Member States shall take the measures necessary to comply with this Directive by 1 January 1990. They shall forthwith inform the Commission thereof. They shall apply these measures from 1 July 1990 at the latest. Notes In accordance with this requirement, the two original implementing Regulations in the UK came into force on 1 July 1990: Legal Expenses Insurance Regulations 1990, reg 1; see the General Note above.

Article 11 Following notification of this Directive, Member States shall communicate to the Commission the texts of the main provisions of national law which they adopt in the field governed by this Directive. Article 12 This Directive is addressed to the Member States.

1.65 SECOND COUNCIL DIRECTIVE OF 22 JUNE 1988 ON THE COORDINATION OF LAWS, REGULATIONS AND ADMINISTRATIVE PROVISIONS RELATING TO DIRECT INSURANCE OTHER THAN LIFE ASSURANCE AND LAYING DOWN PROVISIONS TO FACILITATE THE EFFECTIVE EXERCISE OF FREEDOM TO PROVIDE SERVICES AND AMENDING DIRECTIVE 73/239/EEC (88/357/EEC) General Notes The First Non-Life Directive took the preliminary steps to the position ultimately reached by the Third NonLife Directive of the Single European Licence. The First Non-Life Directive in its original form was concerned only with the right of an insurer authorised in one member state to create a branch or agency in another member state, and then to seek authorisation from the authorities of that state to carry on insurance business through that branch or agency. In the period before the adoption of the Second NonLife Directive, the Commission’s intention was to move more or less directly to a single market by providing (a) that the branch or agency did not require host authorisation and (b) that an insurer established and authorised in an EC member state could sell insurance by way of services directly into any other EC member state without the need to become established in or authorised by the host. This aim was, however, thwarted by four cases coming before the European Court of Justice in 1986, arising under the Co-Insurance Directive, Directive 78/473. The ‘‘insurance cases’’, as they have come to be known, were Case 220/83 Commission v. France [1987] 2 CMLR 113, Case 252/83 Commission v. Denmark [1987] 2 CMLR 169, Case 205/84 Commission v. Germany [1987] 2 CMLR 69, Case 206/84 Commission v. Ireland [1987] 2 CMLR 150. These cases required the Court to pronounce upon the validity of a series of domestic laws which, inter alia: restricted the role of leading insurer in a co-insurance arrangement to an insurer established in and authorised by the state in which the risk was located; restricted broking activities for co-insurance to brokers operating in the same country as the location of the risk; prohibited co-insurance below certain financial thresholds; and required an insurer to obtain national authorisation from its home authorities to participate in co-insurance arrangements elsewhere in the EC. The issues fell to be resolved under the Co-Insurance Directive, Directive 78/473, the text of which is set out in para 1.62. The general principles emerging from the judgments were of direct import to the Commission’s programme. The cases held:

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(a) Where an insurer authorised and established in one member state seeks to operate an establishment in another member state, it must abide by the authorisation and regulatory requirements of that state. (b) Where an insurer authorised and established in one member state wishes to sell insurance in another member state by way of services (ie, other than through an establishment in that state), it should be free to do so without the need to be established. However, the host state could if it so wished insist upon its own authorisation of the insurer where the interests of consumers so demanded. This decision required the Commission to hold back on the concept of cross-border trading without authorisation. The Second Non-Life Directive reached a compromise position: an insurer wishing to sell insurance by way of services could do so without authorisation if the risks insured were commercial (‘‘large’’), but in the case of domestic (‘‘mass’’) risks the host state could continue to insist upon authorisation. The original version of the Second Non-Life Directive incorporated this principle. It was, however, deleted by the Third Non-Life Directive in favour of the Single European Licence principle. The Second Non-Life Directive is applicable to the European Economic Area Agreement between EC member states and EFTA states, with the modifications noted in the annotations. The amendments to this Directive introduced by the Third Non-Life Directive are also applicable under the EEA Agreement.

THE COUNCIL OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Economic Community, and in particular Articles 57(2) and 66 thereof, Having regard to the proposal from the Commission, In cooperation with the European Parliament, Having regard to the opinion of the Economic and Social Committee, Whereas it is necessary to develop the internal insurance market and, to achieve this objective, it is desirable to make it easier for insurance undertakings having their head office in the Community to provide services in the Member States, thus making it possible for policyholders to have recourse not only to insurers established in their own country, but also to insurers which have their head office in the Community and are established in other Member States; Whereas, pursuant to the Treaty, any discrimination with regard to freedom to provide services based on the fact that an undertaking is not established in the Member State in which the services are provided has been prohibited since the end of the transitional period; whereas this prohibition applies to services provided from any establishment in the Community, whether it is the head office of an undertaking or an agency or branch; Whereas, for practical reasons, it is desirable to define the provision of services taking into account both the insurer’s establishment and the place where the risk is situated; whereas therefore a definition of the situation of the risk should also be adopted; whereas, moreover, it is desirable to distinguish between the activity pursued by way of establishment and the activity pursued by way of freedom to provide services; Whereas it is desirable to supplement the First Council Directive 73/239/EEC of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance, hereinafter referred to as the ‘first Directive’, as last amended by Directive 87/343/EEC, in order particularly to clarify the powers and means of supervision vested in the supervisory authorities; whereas it is also desirable to lay down specific provisions regarding the taking-up, pursuit and supervision of activity by way of freedom to provide services; Whereas policyholders who, by virtue of their status, their size or the nature of the risk to be insured, do not require special protection in the State in which the risk is situated should be granted complete freedom to avail themselves of the widest possible insurance market; whereas, moreover, it is desirable to guarantee other policyholders adequate protection; Whereas the concern to protect policyholders and to avoid any disturbance of competition justifies coordinating the relaxation of the matching assets rules, provided for by the first Directive; Whereas the provisions in force in the Member States regarding insurance contract law continue to differ; whereas the freedom to choose, as the law applicable to the contract, a law other than that of the State in which the risk is situated may be granted in certain cases, in accordance with rules taking into account specific circumstances;

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Whereas the scope of this Directive should include compulsory insurance but should require the contract covering such insurance to be in conformity with the specific provisions relating to such insurance, as provided by the Member State imposing the insurance obligation; Whereas the provisions of the first Directive on the transfer of portfolio should be reinforced and supplemented by provisions specifically covering the transfer of the portfolio of contracts concluded for the provision of services to another undertaking; Whereas the scope of the provisions specifically concerning freedom to provide services should exclude certain risks, the application to which of the said provisions is rendered inappropriate at this stage by the specific rules adopted by the Member States’ authorities, owing to the nature and social implications of such provisions; whereas, therefore, these exclusions should be re-examined after this Directive has been in force for a certain period. Whereas, in the interests of protecting policyholders, Member States should, at the present stage in coordination, be allowed the option of limiting the simultaneous pursuit of activity by way of freedom to provide services and activity by way of establishment; whereas no such limitation can be provided for where policyholders do not require this protection; Whereas the taking-up and pursuit of freedom to provide services should be subject to procedures guaranteeing the insurance undertaking’s compliance with the provisions regarding both financial guarantees and conditions of insurance; whereas these procedures may be relaxed in cases where the activity by way of provision of services covers policyholders who, by virtue of their status, their size or the nature of the risk to be insured, do not require special protection in the State in which the risk is situated; Whereas it is necessary to initiate special cooperation with regard to freedom to provide services between the competent supervisory authorities of the Member States and between these authorities and the Commission; whereas provision should also be made for a system of penalties to apply where the undertaking providing the service fails to comply with the provisions of the Member State of provision of service; Whereas, pending future coordination, the technical reserves should be subject to the rules and supervision of the Member State of provision of services where such provision of services involves risks in respect of which the State receiving the service wishes to provide special protection for policyholders; whereas, however, if such concern to protect the policyholders is unjustified, the technical reserves continue to be subject to the rules and supervision of the Member State in which the insurer is established; Whereas some Member States do not subject insurance transactions to any form of indirect taxation, while the majority apply special taxes and other forms of contribution, including surcharges intended for compensation bodies; whereas the structure and rate of these taxes and contributions vary considerably between the Member States in which they are applied; whereas it is desirable to avoid a situation where existing differences lead to disturbances of competition in insurance services between Member States; whereas, pending future harmonisation, the application of the tax system and of other forms of contributions provided for by the Member State in which the risk is situated is likely to remedy such mischief and whereas it is for the Member States to establish a method of ensuring that such taxes and contributions are collected; Whereas it is desirable to prevent the uncoordinated application of this Directive and of Council Directive 78/473/EEC of 30 May 1978 on the coordination of laws, regulations and administrative provisions relating to Community co-insurance from leading to the existence of three different systems in every Member State; whereas, therefore, the criteria defining ‘‘large risks’’ in this Directive should also define risks likely to be covered under Community co-insurance arrangements; Whereas it is desirable to take into account, within the meaning of Article 8C of the Treaty, the extent of the effort which needs to be made by certain economies showing differences in development; whereas, therefore, it is desirable to grant certain Member States transitional arrangements for the gradual application of the specific provisions of this Directive relating to freedom to provide services,

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HAS ADOPTED THIS DIRECTIVE: TITLE 1

GENERAL PROVISIONS

Article 1 The object of this Directive is: (a) to supplement the first Directive 73/239/EEC; (b) to lay down special provisions relating to freedom to provide services for the undertakings and in respect of the classes of insurance covered by that first Directive. Article 2 For the purposes of this Directive: (a) ‘‘first Directive’’ means: Directive 73/239/EEC; (b) ‘‘undertaking’’: — for the purposes of applying Titles I and II, means: any undertaking which has received official authorisation under Article 6 or 23 of the first Directive — for the purposes of applying Title III and Title V, means: any undertaking which has received official authorisation under Article 6 of the first Directive; (c) ‘‘establishment’’, means the head office, agency or branch of an undertaking, account being taken of Article 3: (d) ‘‘Member State where the risk is situated’’ means: — the Member State in which the property is situated, where the insurance relates either to buildings or to buildings and their contents, in so far as the contents are covered by the same insurance policy. — the Member State of registration, where the insurance relates to vehicles of any type. — the Member State where the policyholder took out the policy in the case of policies of a duration of four months or less covering travel or holiday risks, whatever the class concerned, — the Member State where the policyholder has his habitual residence or, if the policyholder is a legal person, the Member State where the latter’s establishment, to which the contract relates, is situated, in all cases not explicitly covered by the foregoing indents; (e) ‘‘Member State of establishment’’ means: the Member State in which the establishment covering the risk is situated; (f) ‘‘Member State of provision of services’’ means: the Member State in which the risk is situated when it is covered by an establishment situated in another Member State. Notes ‘‘Establishment’’. See the note to art 3 below. ‘‘Member State where the risk is situated’’. This definition is primarily of importance for the interpretation of the choice of law rules contained in art 7 and for defining the right of an insurer to sell insurance outside its home territory by way of services (art 12(1)). ‘‘Member State of establishment’’. This definition is relevant where insurance is provided from an establishment within a member state. ‘‘Member State of provision of services’’. This definition is relevant where a risk located in one member state is insured by an establishment located in another member state.

Article 3 For the purposes of the first Directive and of this Directive, any permanent presence of an undertaking in the territory of a Member State shall be treated in the same way as an agency

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or branch, even if that presence does not take the form of a branch or agency, but consists merely of an office managed by the undertaking’s own staff or by a person who is independent but has permanent authority to act for the undertaking as an agency would. Notes This article is based upon a suggestion of the European Court of Justice in the Insurance Cases, to the effect that an establishment could be something less than a branch or agency and could amount to any permanent presence. The suggestion was intended to make it somewhat easier for an insurer to become established outside its home state, and was taken up by the Commission in its drafting of the Second Non-Life Directive. For the effect on the First Non-Life Directive, see art 1(1) of that Directive, para 1.59.

Article 4 For the purposes of this Directive and the first Directive, general and special policy conditions shall not include specific conditions intended to meet, in an individual case, the particular circumstances of the risk to be covered. Notes Prior to the single market programme, a number of EC member states exercised ‘‘material control’’ over insurance contracts. Under this system, the terms and conditions of policies, and possibly the premiums themselves, were subject to prior scrutiny and authorisation by national regulatory authorities. Prior notification and authorisation were required to be discontinued by art 8(3) of the First Non-Life Directive, but this is modified by art 4 of the Second Non-Life Directive to the extent that the conditions in question are intended to meet particular individual circumstances.

TITLE II

P R O V I S I O N S S U P P L E M E N TA RY T O T H E F I R S T D I R E C T I V E

Article 5 [Amended art 5 of the First Non-Life Directive, Directive 73/239, subsequently amended by art 2 of the Motor Services Directive, Directive 90/618.] Article 6 For the purpose of applying the first subparagraph of Article 15(2) and Article 24 of the first Directive, the Member States shall comply with Annex 1 to this Directive as regards the matching rules. Notes The matching rules required by arts 15(2) and 24 of the First Non-Life Directive relate to the currency in which the insurer is required to meet its obligations to assureds, and the obligation to hold sufficient reserves of the necessary currencies to meet those obligations. See the note to the Annex below.

Article 7 1. The law applicable to contracts of insurance referred to by this Directive and covering risks situated within the Member States is determined in accordance with the following provisions: (a) Where a policyholder has his habitual residence or central administration within the territory of the Member State in which the risk is situated, the law applicable to the insurance contract shall be the law of that Member State. However, where the law of that Member State so allows, the parties may choose the law of another country. (b) Where a policyholder does not have his habitual residence or central administration in the Member State in which the risk is situated, the parties to the contract of insurance may choose to apply either the law of the Member State in which the risk is situated or the law of the country in which the policyholder has his habitual residence or central administration. (c) Where a policyholder pursues a commercial or industrial activity or a liberal profession and where the contract covers two or more risks relating to these activities and situated

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in different Member States, the freedom of choice of the law applicable to the contract shall extend to the laws of those Member States and of the country in which the policyholder has his habitual residence or central administration. (d) Notwithstanding subparagraphs (b) and (c), where the Member States referred to in those subparagraphs grant greater freedom of choice of the law applicable to the contract, the parties may take advantage of this freedom. (e) Notwithstanding subparagraphs (a), (b) and (c), when the risks covered by the contract are limited to events occurring in one Member State other than the Member State where the risk is situated, as defined in article 2(d), the parties may always choose the law of the former State. (f) in the case of the risks referred to in Article 5(d) of Directive 73/239/EEC, the parties to the contract may choose any law. (g) The fact that, in the cases referred to in subparagraph (a) or (f), the parties have chosen a law shall not, where all the other elements relevant to the situation at the time of the choice are connected with one Member State only, prejudice the application of the mandatory rules of the law of that Member State, which means the rules from which the law of that Member State allows no derogation by means of a contract. (h) The choice referred to in the preceding subparagraphs must be expressed or demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case. If this is not so, or if no choice has been made, the contract shall be governed by the law of the country, from amongst those considered in the relevant sub-paragraphs above, with which it is most closely connected. Nevertheless, a severable part of the contract which has a closer connection with another country, from amongst those considered in the relevant subparagraphs, may by way of exception be governed by the law of that other country. The contract shall be rebuttably presumed to be most closely connected with the Member State in which the risk is situated. (i) Where a State includes several territorial units, each of which has its own rules of law concerning contractual obligations, each unit shall be considered as a country for the purposes of identifying the law applicable under this Directive. A Member State in which various territorial units have their own rules of law concerning contractual obligations shall not be found to apply the provisions of this Directive to conflicts which arise between the laws of those units. 2. Nothing in this Article shall restrict the application of the rules of the law of the forum in a situation where they are mandatory, irrespective of the law otherwise applicable to the contract. If the law of a Member State so stipulates, the mandatory rules of the law of the Member State in which the risk is situated or of the Member State imposing the obligation to take out insurance may be applied if and in so far as, under the law of those States, those rules must be applied whatever the law applicable to the contract. Where the contract covers risks situated in more than one Member State, the contract is considered for the purposes of applying this paragraph as constituting several contracts each relating to one Member State. 3. Subject to the preceding paragraphs, the Member States shall apply to the insurance contracts referred to by this Directive their general rules of private international law concerning contractual obligations. Notes Art 7(1) The original conception of the European Commission in its single market programme was to create a situation in which insurance contracts sold anywhere in the EC would be subject to harmonised substantive rules, thereby removing all possible contractual disincentives to an assured in dealing with an insurer located outside the state of his own domicile. Two draft directives on contract law harmonisation were submitted by the Commission in 1979 and 1980 but were ultimately formally abandoned in 1994 as agreement on them could not be reached. In their place, art 7 of the Second Non-Life Directive introduced a set of choice of law rules aimed at ensuring, so far as possible, that the assured had the benefit of his home law either in its entirety or as regards those mandatory rules of his home law aimed at protecting consumers. The rules are enacted in the UK almost verbatim by the Financial Services and Markets Act 2000 (Law Applicable to Insurance Contracts) Regulations 2001, SI 2001 No 2635. The choice of law rules apply where a risk is situated in a member state, as to which see art 2(d) of the Second Non-Life Directive. If the risk is

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situated outside the EC, choice of law in the UK is governed by the Rome Convention, set out in para 9.28. Art 7(1)(f) was substituted by the Third Non-Life Directive, Directive 92/49, art 27. Art 7(2) establishes the primacy of national mandatory rules, and deals with the divisibility of the policy where risks in more than one member state are covered. Art 7(3) Ordinary conflict of laws rules are now harmonised throughout the EC under the Rome Convention 1980: see in para 9.28.

Article 8 1. Under the conditions set out in this Article, insurance undertakings may offer and conclude compulsory insurance contracts in accordance with the rules of this Directive and of the first Directive. 2. When a Member State imposes an obligation to take out insurance, the contract shall not satisfy that obligation unless it is in accordance with the specific provisions relating to that insurance laid down by that Member State. 3. When, in the case of compulsory insurance, the law of the Member State in which the risk is situated and the law of the Member State imposing the obligation to take out insurance contradict each other, the latter shall prevail. 4 (a) Subject to subparagraph (c), the third subparagraph of Article 7(2) shall apply where the insurance contract provides cover in two or more Member States, at least one of which makes insurance compulsory. (b) [deleted.] (c) A Member State may, by way of derogation from Article 7, lay down that the law applicable to a compulsory insurance contract is the law of the State which imposes the obligation to take out insurance. (d) Where a Member State imposes compulsory insurance and the insurer must notify the competent authorities of any cessation of cover, such cessation may be invoked against injured third parties only in the circumstances laid down in the legislation of that State. 5 (a) Each Member State shall communicate to the Commission the risks against which insurance is compulsory under its legislation, stating: — the specific legal provisions relating to that insurance, — the particulars which must be given in the certificate which an insurer must issue to an insured person where that State requires proof that the obligation to take out insurance has been complied with. A Member State may require that those particulars include a declaration by the insurer to the effect that the contract complies with the specific provisions relating to that insurance. (b) The Commission shall publish the particulars referred to in sub-paragraph (a) in the Official Journal of the European Communities. (c) A Member State shall accept, as proof that the insurance obligation has been fulfilled, a certificate, the content of which is in conformity with the second indent of subparagraph (a). Notes Art 8(1)–(2) The general effect of art 8 is to free the market for domestic compulsory insurance risks, by allowing compulsory insurance to be provided by insurers established and authorised in other EC member states, provided that the obligations imposed by the home state are met. There is accordingly no restriction in the UK in this regard for insurances on employers liability and riding establishments. Where compulsory third party motor vehicle insurance is concerned, an insurer from elsewhere in the EC wishing to insure UK risks must comply with the relevant provisions of the Road Traffic Act 1988 (see para 7.20). Where an insurer wishes to sell motor vehicle insurance by way of services, that is, without an establishment in the host state, it must comply with the provisions of art 12a of this Directive. Art 8(3) This provision gives primacy to the compulsory insurance requirements of the place in which the risk is situated, as defined by art 2(d) of this Directive. Art 8(4)(a) was substituted by the Third Non-Life Directive, Directive 92/49, art 30. Its effect is to make it clear that the divisibility of a policy authorised by art 7(2) applies even where the insurance obtained covers a risk which must be covered by insurance under domestic law. Art 8(4)(b) was deleted by the Third Non-Life Directive, Directive 92/49, art 30.

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Art 8(4)(c) allows member states to provide that, in the case of compulsory insurance, the law of the state which makes the insurance compulsory is to apply to the policy. The UK has not taken up this option. Art 8(4)(d) does not apply to the UK.

Article 9 [1. Amended arts 9 and 11 of the First Non-Life Directive, Directive 73/239. Those articles were subsequently replaced by arts 7 and 33 of the Third Non-Life Directive, Directive 92/49. 2. Amended arts 8(3) and 10(3) of the First Non-Life Directive, Directive 73/239. Those articles were subsequently replaced by arts 6 and 32 of the Third Non-Life Directive, Directive 92/49.]

Article 10 [Inserted art 19(3) into the First Non-Life Directive, Directive 73/239. That article was itself later substituted by art 11 of the Third Non-Life Directive, Directive 92/49.]

Article 11 [1. Deletes art 21 of the First Non-Life Directive, Directive 73/239. 2. Was deleted by the Third Non-Life Directive, Directive 92/49, art 12.]

TITLE III

PROVISIONS PECULIAR TO THE FREEDOM TO PROVIDE S ER VI CE S

Article 12 1. This Title shall apply where an undertaking, through an establishment situated in a Member State, covers a risk situated, within the meaning of Article 2(d), in another Member State; the latter shall be the Member State of provision of services for the purposes of this Title. 2. This Title shall not apply to the transactions, undertakings and institutions to which the first Directive does not apply, nor to the risks to be covered by the institutions under public law referred to in Article 4 of that Directive. This Title shall not apply to insurance contracts covering risks classified under the following numbers of point A of the Annex to the first Directive: — No 1: as regards accidents at work, ... — No 13: as regards nuclear civil liability and pharmaceutical products liability, — Nos 9 and 13: as regards compulsory insurance of building works. These exclusions will be examined by the Council not later than 1 July 1998. ... Notes Art 12(1) Title III of the Directive is concerned with extending the freedom of insurers to sell insurance by way of services, ie from an establishment in one member state directly to policyholders elsewhere in the EC. As amended by the Third Non-Life Directive (which removes the right for host states to insist upon authorisation in the case of ‘‘mass’’ risks), Title III states that insurance may be provided by way of services with minimal intervention by the host. Art 12(2) in its original form contained a rather lengthier list of exclusions. Those exclusions were restricted by amendments made by the Motor Services Directive, Directive 90/618, art 5, and by the Third Non-Life Directive, Directive 92/49, art 37. Art 12(3) was deleted by the Third Non-Life Directive, Directive 92/49, art 37.

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Article 12a 1. This Article shall apply where an undertaking, through an establishment situated in a Member State, covers a risk, other than carrier’s liability, classified under class 10 of point A of the Annex to Directive 73/239/EEC which is situated in another Member State. 2. The Member State of provision of services shall require the undertaking to become a member of and participate in the financing of its national bureau and its national guarantee fund. The undertaking shall not, however, be required to make any payment or contribution to the bureau and fund of the Member State of provision of services in respect of risks covered by way of provision of services other than one calculated on the same basis as for undertakings covering risks, other than carrier’s liability, in class 10 through an establishment situated in that Member State, by reference to its premium income from that class in that Member State or the number of risks in that class covered there. 3. This Directive shall not prevent an insurance undertaking providing services from being required to comply with the rules in the Member State of provision of services concerning the cover of aggravated risks, insofar as they apply to established undertakings. 4. The Member State of provision of services shall require the undertaking to ensure that persons pursuing claims arising out of events occurring in its territory are not placed in a less favourable situation as a result of the fact that the undertaking is covering a risk, other than carrier’s liability, in class 10 by way of provision of services rather than through an establishment situated in that State. For this purpose, the Member State of provision of services shall require the undertaking to appoint a representative resident or established in its territory who shall collect all necessary information in relation to claims, and shall possess sufficient powers to represent the undertaking in relation to persons suffering damage who could pursue claims, including the payment of such claims, and to represent it or, where necessary, to have it represented before the courts and authorities of that Member State in relation to these claims. The representative may also be required to represent the undertaking before the competent authorities of the State of provision of services with regard to checking the existence and validity of motor vehicle liability insurance policies. The Member State of provision of services may not require that appointee to undertake activities on behalf of the undertaking which appointed him other than those set out in the second and third subparagraphs. The appointment of the representative shall not in itself constitute the opening of a branch or agency for the purpose of Article 6(2)(b) of Directive 73/239/EEC and the representative shall not be an establishment within the meaning of Article 2(c) of this Directive. If the insurance undertaking has failed to appoint a representative, Member States may give their approval to the claims representative appointed in accordance with Article 4 of Directive 2000/ 26/EC assuming the function of the representative appointed according to this paragraph. Notes Art 12a(1) This article was added by the Motor Services Directive, Directive 90/618, art 6, and provides for freedom of insurers to sell motor vehicle insurance by way of services. This form of cover was originally excluded from Title III of the Second Non-Life Directive due to the existence of differing national provisions for compulsory insurance. Art 12a(3) As far as the UK is concerned, all motor policies, whether written by an insurer established in the UK or by an insurer selling into the UK by way of services, must comply with the provisions of the Road Traffic Act 1988. For those requirements, see para 7.20. Art 12a(4) The second sentence of the fourth sub-paragraph was deleted by Directive 2005/14, art 3. The new final sub-paragraph was inserted by Directive 2000/26, art 9, implemented in UK by SI 2002/2707.

Article 13 [This article was repealed by the Third Non-Life Directive, Directive 92/49, art 37.]

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Article 14 Any undertaking that intends to carry on business for the first time in one or more Member States under the freedom to provide services shall first inform the competent authorities of the home Member State, indicating the nature of the risks it proposes to cover. Notes This article was substituted by the Third Non-Life Directive, Directive 92/49, art 34.

Article 15 [This article was amended by the Motor Services Directive, Directive 90/618, art 7, and was deleted by the Third Non-Life Directive, Directive 92/49, art 37.] Article 16 1. Within one month of the notification provided for in Article 14, the competent authorities of the home Member State shall communicate to the Member State or Member States within the territories of which an undertaking intends to carry on business under the freedom to provide services: (a) a certificate attesting that the undertaking has the minimum solvency margin calculated in accordance with Articles 16 and 17 of Directive 73/239/EEC; (b) the classes of insurance which the undertaking has been authorised to offer; (c) the nature of the risks which the undertaking proposes to cover in the Member State of the provision of services. At the same time, they shall inform the undertaking concerned accordingly. Each Member State within the territory of which an undertaking intends, under the freedom to provide services, to cover risks in class 10 of point A of the Annex to Directive 73/239/EEC other than carrier’s liability may require that the undertaking: — communicate the name and address of the representative referred to in Article 12a(4) of this Directive, — produce a declaration that the undertaking has become a member of the national bureau and national guarantee fund of the Member State of the provision of services. 2. Where the competent authorities of the home Member State do not communicate the information referred to in paragraph 1 within the period laid down, they shall give the reasons for their refusal to the undertaking within that same period. That refusal shall be subject to a right to apply to the courts in the home Member State. 3. The undertaking may start business on the certified date on which it is informed of the communication provided for in the first subparagraph of paragraph 1. Notes This article was amended by the Motor Services Directive, Directive 90/618, art 7, and was substituted by the Third Non-Life Directive, Directive 92/49, art 35. Art 16(1)(a) In line with the principle of home country supervision, the solvency margin established by an insurer must relate to the entirety of its EC operations and not (as previously) just those in the member state in which it is authorised: see art 16 of the First Non-Life Directive, Directive 73/239.

Article 17 Any change which an undertaking intends to make to the information referred to in Article 14 shall be subject to the procedure provided for in Articles 14 and 16. Notes This article was substituted by the Third Non-Life Directive, Directive 92/49, art 36.

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Article 18 [This article was deleted by the Third Non-Life Directive, Directive 92/49, art 39(1).] Article 19 [This article was deleted by the Third Non-Life Directive, Directive 92/49, art 40(1).] Article 20 [This article was deleted by the Third Non-Life Directive, Directive 92/49, art 42.] Article 21 [This article was amended by the Motor Services Directive, Directive 90/618, art 8, and was deleted by the Third Non-Life Directive, Directive 92/49, art 43.] Article 22 [This article was amended by the Motor Services Directive, Directive 90/618, art 9, and was deleted by the Third Non-Life Directive, Directive 92/49, art 44.] Article 23 [This article was deleted by the Third Non-Life Directive, Directive 92/49, art 19.] Article 24 [This article was deleted by the Third Non-Life Directive, Directive 92/49, art 45(1).] Article 25 [This article was deleted by the Third Non-Life Directive, Directive 92/49, art 46(1).] Article 26 1. The risks which may be covered by way of Community co-insurance within the meaning of Directive 78/473/EEC shall be those defined in Article 5(d) of the first Directive. 2. The provisions of this Directive regarding the risks defined in Article 5(d) of the first Directive shall apply to the leading insurer. Notes This article extends the scope of the Co-Insurance Directive, Directive 78/473. For the text of the Directive, see 1.62.

TITLE IV

TRANSITIONAL ARRANGEMENTS

Article 27 1. Greece, Ireland, Spain and Portugal may apply the following transitional arrangements: (i) until 31 December 1992, they may apply, to all risks, the regime other than that for risks referred to in Article 5(d) of the first Directive, (ii) from 1 January 1993 to 31 December 1994, the regime for large risks shall apply to risks referred to under (i) and (ii) of Article 5(d) of the first Directive; for risks referred to under (iii) of the abovementioned article 5(d), these Member States shall fix the thresholds to apply therefor; (iii) Spain — from 1 January 1995 to 31 December 1996, the thresholds of the first stage described in Article 5(d)(iii) of the first Directive shall apply,

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— from 1 January 1997, the thresholds of the second stage shall apply. Portugal, Ireland and Greece — from 1 January 1995 to 31 December 1998 the thresholds of the first stage described in Article 5(d)(iii) of the first Directive shall apply, — from 1 January 1999 the thresholds of the second stage shall apply. The derogation allowed from 1 January 1995 shall only apply to contracts covering risks classified under classes 3, 8, 9, 10, 13 and 16 situated exclusively in one of the four Member States benefiting from the transitional arrangements. 2. Until 31 December 1994, Article 26(1) of this Directive shall not apply to risks situated in the four Member States listed in this Article. For the transitional period from 1 January 1995, the risks defined under Article 5(d)(iii) of the first Directive situated in these Member States and capable of being covered by Community co-insurance within the meaning of Directive 78/473/EEC shall be those which exceed the thresholds referred to in paragraph 1(iii) of this Article. Notes This article is not applicable to the UK. Art 27(1) was amended by the Motor Services Directive, Directive 90/618, art 10. (See 7.41).

TITLE V

FINAL PROVISIONS

Article 28 The Commission and the competent authorities of the Member States shall collaborate closely for the purpose of facilitating the supervision of direct insurance within the Community. Every Member State shall inform the Commission of any major difficulties to which application of this Directive gives rise, inter alia any arising if a Member State becomes aware of an abnormal transfer of insurance business to the detriment of undertakings established in its territory and to the advantage of branches and agencies located just beyond its borders. The Commission and the competent authorities of the Member States concerned shall examine these difficulties as quickly as possible in order to find an appropriate solution. Where necessary, the Commission shall submit appropriate proposals to the Council. Article 29 The Commission shall forward to the Council regular reports, the first on 1 July 1993, on the development of the market in insurance transacted under conditions of freedom to provide services. Article 30 Where this Directive makes reference to the ECU, the exchange value in national currencies to be used with effect from 31 December of each year shall be the value which applies on the last day of the preceding October for which exchange values for the ECU are available in all Community currencies. Article 2 of Directive 76/580/EEC shall apply only to Articles 3, 16 and 17 of the first Directive. Article 31 Every five years, the Council, acting on a proposal from the Commission, shall review and if necessary amend any amounts expressed in ECU in this Directive, taking into account changes in the economic and monetary situation of the Community. Article 32 Member States shall amend their national provisions to comply with this Directive within 18 months of the date of its notification and shall forthwith inform the Commission thereof.

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The provisions amended in accordance with this Article shall be applied within 24 months of the date of the notification of the Directive. Article 33 Upon notification of this Directive, Member States shall ensure that the texts of the main laws, regulations or administrative provisions which they adopt in the field covered by this Directive are communicated to the Commission. Article 34 The Annexes shall form an integral part of this Directive. Article 35 This Directive is addressed to the Member States.

ANNEX 1

M AT C H I N G R U L E S

General Note The purpose of matching rules is to ensure that an insurer is able to meet its obligations in the currency of those obligations. The Annex was amended by the Third Non-Life Directive, Directive 92/49, art 23. The Annex is applied by art 6 of the Second Non-Life Directive to the EC-wide operations of an insurer (under art 15(2) of the First Non-Life Directive, Directive 73/239) and the operations of an insurer which does not have its head office within the EC (under art 23 of the First Non-Life Directive).

The currency in which the insurer’s commitments are payable shall be determined in accordance with the following rules. 1. Where the cover provided by a contract is expressed in terms of a particular currency, the insurer’s commitments are considered to be payable in that currency. 2. Where the cover provided by a contract is not expressed in terms of any currency, the insurer’s commitments are considered to be payable in the currency of the country in which the risk is situated. However, the insurer may choose the currency in which the premium is expressed if there are justifiable grounds for exercising such a choice. This could be the case if, from the time the contract is entered into, it appears likely that a claim will be paid in the currency of the premium and not in the currency of the country in which the risk is situated. 3. The Member States may authorise the insurer to consider that the currency in which he must provide cover will be either that which he will use in accordance with experience acquired or, in the absence of such experience, the currency of the country in which he is established: — for contracts covering risks classified under classes 4, 5, 6, 7, 11, 12 and 13 (producers’ liability only), and — for contracts covering the risks classified under other classes where, in accordance with the nature of the risks, the cover is to be provided in a currency other than that which would result from the application of the above procedures. 4. Where a claim has been reported to an insurer and is payable in a specified currency other than the currency resulting from application of the above procedures, the insurer’s commitments shall be considered to be payable in that currency, and in particular the currency in which the compensation to be paid by the insurer has been determined by a court judgment or by agreement between the insurer and the insured. 5. Where a claim is assessed in a currency which is known to the insurer in advance but which is different from the currency resulting from application of the above procedures, the insurers may consider their commitments to be payable in that currency.

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6. The Member States may authorise undertakings not to cover their technical reserves by matching assets if application of the above procedures would result in the undertaking —whether head office or branch—being obliged, in order to comply with the matching principle, to hold assets in a currency amounting to not more than 7% of the assets existing in other currencies. However: (a) in the case of technical reserve assets to be matched in Greek drachmas, Irish pounds and Portuguese escudos, this amount shall not exceed: — 1 million ECU during a transitional period ending 31 December 1992, — 2 million ECU from 1 January 1993 to 31 December 1988; (b) in the case of technical reserve assets to be matched in Belgian francs, Luxembourg francs and Spanish pesetas, this amount shall not exceed 2 million ECU during a transitional period ending 31 December 1996. From the end of the transitional periods defined under (a) and (b), the general regime shall apply for these currencies, unless the Council decides otherwise. 7. The Member States may choose not to require undertakings—whether head offices or branches—to apply the matching principle where commitments are payable in a currency other than the currency of one of the Community Member States, if investments in that currency are regulated, if the currency is subject to transfer restrictions or if, for similar reasons, it is not suitable for covering technical reserves. 8. Insurance undertakings may hold non-matching assets to cover an amount not exceeding 20% of their commitments in a particular currency. 9. A Member State may provide that when under the preceding procedures a commitment must be covered by assets expressed in a Member State’s currency that requirement shall also be considered as satisfied when the assets are expressed in ecus.

ANNEX 2A 1. 2. 3. 4.

U N D E RW R I T I N G A C C O U N T

Total gross premiums earned Total cost of claims Commission costs Gross underwriting result

ANNEX 2B

U N D E RW R I T I N G A C C O U N T

1. Gross premiums for the last underwriting year 2. Gross claims in the last underwriting year (including reserve at the end of underwriting year) 3. Commission costs 4. Gross underwriting result

1.66 THIRD COUNCIL DIRECTIVE OF 18 JUNE 1992 ON THE COORDINATION OF LAWS, REGULATIONS AND ADMINISTRATIVE PROVISIONS RELATING TO DIRECT INSURANCE OTHER THAN LIFE ASSURANCE AND AMENDING DIRECTIVES 73/239/EEC AND 88/357/EEC (THIRD NON-LIFE INSURANCE DIRECTIVE) (92/49/EEC) General Note The Third Non-Life Directive completes the structure for the single market for insurance. It implements the principle of home country control (otherwise known as the Single European Licence) under which an insurer established and authorised in its home state may establish elsewhere in the EC and may sell insurance elsewhere in the EC from any establishment without authorisation by any host and with minimal regulation by any host state. Much of the Third Non-Life Directive takes effect as amendments to the First and Second Non-Life Directives.

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This Directive extends to the European Economic Area Agreement, but its principles are not reflected in the Swiss Insurance Agreement.

THE COUNCIL OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Economic Community, and in particular Articles 57(2) and 66 thereof, Having regard to the proposal from the Commission, In cooperation with the European Parliament, Having regard to the opinion of the Economic and Social Committee, (1) Whereas it is necessary to complete the internal market in direct insurance other than life assurance from the point of view both of the right of establishment and of the freedom to provide services, to make it easier for insurance undertakings with head offices in the Community to cover risks situated within the Community; (2) Whereas the Second Council Directive of 22 June 1988 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and laying down provisions to facilitate the effective exercise of freedom to provide services and amending Directive 73/239/EEC (88/357/EEC) has already contributed substantially to the achievement of the internal market in direct insurance other than life assurance by granting policyholders who, by virtue of their status, their size or the nature of the risks to be insured, do not require special protection in the Member State in which a risk is situated, complete freedom to avail themselves of the widest possible insurance market. (3) Whereas Directive 88/357/EEC therefore represents an important stage in the merging of national markets into an integrated market and that stage must be supplemented by other Community instruments with a view to enabling all policyholders, irrespective of their status, their size or the nature of the risks to be insured, to have recourse to any insurer with a head office in the Community who carries on business there, under the right of establishment or the freedom to provide services, while guaranteeing them adequate protection; (4) Whereas this Directive forms part of the body of Community legislation already enacted which includes the First Council Directive of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct insurance other than life assurance (73/239/EEC) and the Council Directive of 19 December 1991 on the annual accounts and consolidated accounts of insurance undertakings (91/674/EEC); (5) Whereas the approach adopted consists in bringing about such harmonisation as is essential, necessary and sufficient to achieve the mutual recognition of authorisations and prudential control systems, thereby making it possible to grant a single authorisation valid throughout the Community and apply the principle of supervision by the home Member State; (6) Whereas, as a result, the taking up and the pursuit of the business of insurance are henceforth to be subject to the grant of a single official authorisation issued by the competent authorities of the Member State in which an insurance undertaking has its head office; whereas such authorisation enables an undertaking to carry on business throughout the Community, under the right of establishment or the freedom to provide services; whereas the Member State of the branch or of the provision of services may no longer require insurance undertakings which wish to carry on insurance business there and which have already been authorised in their home Member State to seek fresh authorisation; whereas Directives 73/239/EEC and 88/357/EEC should therefore be amended along those lines; (7) Whereas the competent authorities of home Member States will henceforth be responsible for monitoring the financial health of insurance undertakings, including their state of solvency, the establishment of adequate technical provisions and the covering of those provisions by matching assets; (8) Whereas certain provisions of this Directive define minimum standards; whereas a home Member State may lay down stricter rules for insurance undertakings authorised by its own competent authorities; (9) Whereas the competent authorities of the Member States must have at their disposal such means of supervision as are necessary to ensure the orderly pursuit of business by

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(10)

(11) (12)

(13)

(14)

(15)

(16)

(17)

(18)

(19)

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insurance undertakings throughout the Community whether carried on under the right of establishment or the freedom to provide services; whereas, in particular, they must be able to introduce appropriate safeguards or impose sanctions aimed at preventing irregularities and infringements of the provisions on insurance supervision; Whereas the internal market comprises an area without internal frontiers and involves access to all insurance business other than life assurance throughout the Community and, hence, the possibility for any duly authorised insurer to cover any of the risks referred to in the Annex to Directive 73/239/EEC; whereas, to that end, the monopoly enjoyed by certain bodies in certain Member States in respect of the coverage of certain risks must be abolished; Whereas the provisions on transfers of portfolios must be adapted to bring them into line with the single authorisation system introduced by this Directive; Whereas Directive 91/674/EEC has already effected the necessary harmonisation of the Member States’ rules on the technical provisions which insurers are required to establish to cover their commitments, and that harmonisation makes it possible to grant mutual recognition of those provisions; Whereas the rules governing the spread, localisation and matching of the assets used to cover technical provisions must be coordinated in order to facilitate the mutual recognition of Member States’ rules; whereas that coordination must take account of the measures on the liberalisation of capital movements provided for in the Council Directive of 24 June 1988 for the implementation of Article 67 of the Treaty (88/361/EEC) and the progress made by the Community towards economic and monetary union; Whereas, however, the home Member State may not require insurance undertakings to invest the assets covering their technical provisions in particular categories of assets, as such a requirement would be incompatible with the measures on the liberalisation of capital movements provided for in Directive 88/361/EEC; Whereas, pending the adoption of a Directive on investment services harmonising inter alia the definition of the concept of regulated market, for the purposes of this Directive and without prejudice to such future harmonisation that concept must be defined provisionally; whereas that definition will be replaced by that harmonised at Community level which will give the home Member State of the market the responsibilities for these matters which this Directive transitionally gives to the insurance undertaking’s home Member State; Whereas the list of items of which the solvency margin required by Directive 73/239/EEC may be made up must be supplemented to take account of new financial instruments and of the facilities granted to other financial institutions for the constitution of their own funds; Whereas within the framework of an integrated insurance market policyholders who, by virtue of their status, their size or the nature of the risks to be insured, do not require special protection in the Member State in which a risk is situated should be granted complete freedom to choose the law applicable to their insurance contracts; Whereas the harmonisation of insurance contract law is not a prior condition for the achievement of the internal market in insurance; whereas, therefore, the opportunity afforded to the Member States of imposing the application of their law to insurance contracts covering risks situated within their territories is likely to provide adequate safeguards for policyholders who require special protection; Whereas within the framework of an internal market it is in the policyholder’s interest that he should have access to the widest possible range of insurance products available in the Community so that he can choose that which is best suited to his needs; whereas it is for the Member State in which the risk is situated to ensure that there is nothing to prevent the marketing within its territory of all the insurance products offered for sale in the Community as long as they do not conflict with the legal provisions protecting the general good in force in the Member State in which the risk is situated, and insofar as the general good is not safeguarded by the rules of the home Member State, provided that such provisions must be applied without discrimination to all

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(20)

(21) (22) (23)

(24)

(25)

(26)

(27)

Regulation of Insurers undertakings operating in that Member State and be objectively necessary and in proportion to the objective pursued; Whereas the Member States must be able to ensure that the insurance products and contract documents used, under the right of establishment or the freedom to provide services, to cover risks situated within their territories comply with such specific legal provisions protecting the general good as are applicable; whereas the systems of supervision to be employed must meet the requirements of an integrated market but their employment may not constitute a prior condition for carrying on insurance business; whereas from this standpoint systems for the prior approval of policy conditions do not appear to be justified; whereas it is therefore necessary to provide for other systems better suited to the requirements of an internal market which enable every Member State to guarantee policyholders adequate protection; Whereas if a policyholder is a natural person, he should be informed by the insurance undertaking of the law which will apply to the contract and of the arrangements for handling policyholders’ complaints concerning contracts; Whereas in some Member States private or voluntary health insurance serves as a partial or complete alternative to health cover provided for by the social security systems; Whereas the nature and social consequences of health insurance contracts justify the competent authorities of the Member State in which a risk is situated in requiring systematic notification of the general and special policy conditions in order to verify that such contracts are a partial or complete alternative to the health cover provided by the social security system; whereas such verification must not be a prior condition for the marketing of the products; whereas the particular nature of health insurance, serving as a partial or complete alternative to the health cover provided by the social security system, distinguishes it from other classes of indemnity insurance and life assurance insofar as it is necessary to ensure that policyholders have effective access to private health cover or health cover taken out on a voluntary basis regardless of their age or risk profile; Whereas to this end some Member States have adopted specific legal provisions; whereas, to protect the general good, it is possible to adopt or maintain such legal provisions insofar as they do not unduly restrict the right of establishment or the freedom to provide services, it being understood that such provisions must apply in an identical manner whatever the home Member State of the undertaking may be; whereas these legal provisions may differ in nature according to the conditions in each Member State; whereas these measures may provide for open enrolment, rating on a uniform basis according to the type of policy and lifetime cover; whereas that object may also be achieved by requiring undertakings offering private health cover or health cover taken out on a voluntary basis to offer standard policies in line with the cover provided by statutory social security schemes at a premium rate at or below a prescribed maximum and to participate in loss compensation schemes; whereas, as a further possibility, it may be required that the technical basis of private health cover or health cover taken out on a voluntary basis be similar to that of life assurance; Whereas, because of the coordination effected by Directive 73/239/EEC as amended by this Directive, the possibility, afforded to the Federal Republic of Germany under Article 7(2)(c) of the same Directive, of prohibiting the simultaneous transaction of health insurance and other classes is no longer justified and must therefore be abolished; Whereas Member States may require any insurance undertakings offering compulsory insurance against accidents at work at their own risk within their territories to comply with the specific provisions laid down in their national law on such insurance; whereas, however, this requirement may not apply to the provisions concerning financial supervision, which are the exclusive responsibility of the home Member State; Whereas exercise of the right of establishment requires an undertaking to maintain a permanent presence in the Member State of the branch; whereas responsibility for the specific interests of insured persons and victims in the case of third-party liability motor insurance requires adequate structures in the Member State of the branch for the collection of all the necessary information on compensation claims relating to that risk, with sufficient powers to represent the undertaking vis-`a-vis injured parties who could

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(29) (30)

(31)

(32)

(33)

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claim compensation, including powers to pay such compensation, and to represent the undertaking or, if necessary, to arrange for it to be represented in the courts and before the competent authorities of that Member State in connection with claims for compensation; Whereas within the framework of the internal market no Member State may continue to prohibit the simultaneous carrying on of insurance business within its territory under the right of establishment and the freedom to provide services; whereas the option granted to Member States in this connection by Directive 88/357/EEC should therefore be abolished; Whereas provision should be made for a system of penalties to be imposed when, in the Member State in which a risk is situated, an insurance undertaking does not comply with those provisions protecting the general good that are applicable to it; Whereas some Member States do not subject insurance transactions to any form of indirect taxation, while the majority apply special taxes and other forms of contribution, including surcharges intended for compensation bodies; whereas the structures and rates of such taxes and contributions vary considerably between the Member States in which they are applied; whereas it is desirable to prevent existing differences leading to distortions of competition in insurance services between Member States; whereas, pending subsequent harmonisation, application of the tax systems and other forms of contribution provided for by the Member States in which risks are situated is likely to remedy that problem and it is for the Member States to make arrangements to ensure that such taxes and contributions are collected; Whereas technical adjustments to the detailed rules laid down in this Directive may be necessary from time to time to take account of the future development of the insurance industry; whereas the Commission will make such adjustments as and when necessary, after consulting the Insurance Committee set up by Directive 91/675/EEC, in the exercise of the implementing powers conferred on it by the Treaty; Whereas it is necessary to adopt specific provisions intended to ensure smooth transition from the legal regime in existence when this Directive becomes applicable to the regime that it introduces, taking care not to place an additional workload on Member States’ competent authorities; Whereas under Article 8c of the Treaty account should be taken of the extent of the effort which must be made by certain economies at different stages of development; whereas, therefore, transitional arrangements should be adopted for the gradual application of this Directive by certain Member States,

HAS ADOPTED THIS DIRECTIVE: TITLE 1

DEFINITIONS AND SCOPE

Article 1 For the purposes of this Directive: (a) ‘‘insurance undertaking’’ shall mean an undertaking which has received official authorisation in accordance with Article 6 of Directive 73/239/EEC; (b) ‘‘branch’’ shall mean an agency or branch of an insurance undertaking, having regard to Article 3 of Directive 88/357/EEC; (c) ‘‘home Member State’’ shall mean the Member State in which the head office of the insurance undertaking covering a risk is situated; (d) ‘‘Member State of the branch’’ shall mean the Member State in which the branch covering a risk is situated; (e) ‘‘Member State of the provision of services’’ shall mean the Member State in which a risk is situated, as defined in Article 2(d) of Directive 88/357/EEC, if it is covered by an insurance undertaking or a branch situated in another Member State; (f) ‘‘control’’ shall mean the relationship between a parent undertaking and a subsidiary, as defined in Article 1 of Directive 83/349/EEC, or a similar relationship between any natural or legal person and an undertaking; (g) ‘‘qualifying holding’’ shall mean a direct or indirect holding in an undertaking which represents 10% or more of the capital or of the voting rights or which makes it possible

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(h) (i)

(j)

(k) (l)

to exercise a significant influence over the management of the undertaking in which a holding subsists. For the purposes of this definition, in the context of Articles 8 and 15 and of the other levels of holding referred to in Article 15, the voting rights referred to in Article 7 of Directive 88/627/EEC shall be taken into account; ‘‘parent undertaking’’ shall mean a parent undertaking as defined in Articles 1 and 2 of Directive 83/349/EEC; ‘‘subsidiary’’ shall mean a subsidiary undertaking as defined in Articles 1 and 2 of Directive 83/349/EEC; any subsidiary of a subsidiary undertaking shall also be regarded as a subsidiary of the undertaking which is those undertakings’ ultimate parent undertaking; ‘‘regulated market’’ shall mean a financial market regarded by an undertaking’s home Member State as a regulated market pending the adoption of a definition in a directive on investment services and characterised by: — regular operation, and — the fact that regulations issued or approved by the appropriate authorities define the conditions for the operation of the market, the conditions for access to the market and, where the Council Directive of 5 March 1979 coordinating the conditions for the admission of securities to official stock-exchange listing (79/279/EEC) applies, the conditions for admission to listing imposed in that Directive or, where that Directive does not apply, the conditions to be satisfied by a financial instrument in order to be effectively dealt in on the market. For the purposes of this Directive, a regulated market may be situated in a Member State or in a third country. In the latter event, the market must be recognised by the home Member State and meet comparable requirements. Any financial instruments dealt in on that market must be of a quality comparable to that of the instruments dealt in on the regulated market or markets of the Member State in question; ‘‘competent authorities’’ shall mean the national authorities which are empowered by law or regulation to supervise insurance undertakings. ‘‘close links’’ shall mean a situation in which two or more natural or legal persons are linked by: (a) ‘‘participation’’, which shall mean the ownership, direct or by way of control, of 20% or more of the voting rights or capital of an undertaking or (b) ‘‘control’’, which shall mean the relationship between a parent undertaking and a subsidiary, in all the cases referred to in Article 1(1) and (2) of Directive 83/349/EEC, or a similar relationship between any natural or legal person and an undertaking; any subsidiary undertaking of a subsidiary undertaking shall also be considerd a subsidiary of the parent undertaking which is at the head of those undertakings. A situation in which two or more natural or legal persons are permanently linked to one and the same person by a control relationship shall also be regarded as constituting a close link between such persons.

Notes Art 1(g) The definition of qualifying holding is relevant for arts 8 (authorisation of insurer) and 15 (notification of acquisition of qualifying holding). See also the note to art 8 below. Art 1(l) was inserted by Directive 95/26, art 1.

Article 2 1. This directive shall apply to the types of insurance and undertakings referred to in Article 1 of Directive 73/239/EEC. 2. This Directive shall apply neither to the types of insurance or operations, nor to undertakings or institutions to which Directive 73/239/EEC does not apply, nor to the bodies referred to in Article 4 of that Directive.

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Article 3 Notwithstanding Article 2(2), Member States shall take every step to ensure that monopolies in respect of the taking up of the business of certain classes of insurance, granted to bodies established within their territories and referred to in Article 4 of Directive 73/239/EEC, are abolished by 1 July 1994. TITLE II

T H E TA K I N G U P O F T H E B U S I N E S S O F I N S U R A N C E

Article 4 [This article substitutes art 6 of the First Non-Life Directive, Directive 73/239.] Article 5 [This article substitutes art 7 of the First Non-Life Directive, Directive 73/239.] Article 6 [This article substitutes art 8 of the First Non-Life Directive, Directive 73/239.] Article 7 [This article substitutes art 9 of the First Non-Life Directive, Directive 73/239.] Article 8 The competent authorities of the home Member State shall not grant an undertaking authorisation to take up the business of insurance before they have been informed of the identities of the shareholders or members, direct or indirect, whether natural or legal persons, who have qualifying holdings in that undertaking and of the amounts of those holdings. The same authorities shall refuse authorisation if, taking into account the need to ensure the sound and prudent management of an insurance undertaking, they are not satisfied as to the qualifications of the shareholders or members. Notes The concept of ‘‘qualifying holding’’ is defined in art 1(g). That definition was amended by Directive 2007/44/EC of the European Parliament and of the Council of 5 September 2007 amending Council Directive 92/49/EEC and Directives 2002/83/EC, 2004/39/EC, 2005/68/EC and 2006/48/EC as regards procedural rules and evaluation criteria for the prudential assessment of acquisitions and increase of holdings in the financial sector. The Directive entered into force on 21 September 2007 and must be implemented by member states by 20 March 2009. The ‘‘sound and prudent management criteria’’ restriction was originally enacted in the UK in the Insurance Companies Act 1982, s 5(1A) and Sched 2A and supplemented the ‘‘fit and proper person’’ rules contained in s 7(3) of the 1982 Act (based on art 8(1)(e) of the First Non-Life Directive, Directive 73/239). Those provisions now form a part of the authorisation and supervision rules and principles of the FSA Handbook.

TITLE III

H A R M O N I S AT I O N O F T H E C O N D I T I O N S G O V E R N I N G T H E BUSINESS OF INSURANCE CHAPTER 1

Article 9 [This article substitutes art 13 of the First Non-Life Directive, Directive 73/239.] Article 10 [This article substitutes art 14 of the First Non-Life Directive, Directive 73/239.]

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Article 11 [This article substitutes art 19(2)–(3) of the First Non-Life Directive, Directive 73/239.] Article 12 1. [Repeals art 11(2) to (7) of Directive 88/357.] 2. Under the conditions laid down by national law, each Member State shall authorise insurance undertakings with head offices within its territory to transfer all or part of their portfolios of contracts, concluded either under the right of establishment or the freedom to provide services, to an accepting office established within the Community, if the competent authorities of the home Member State of the accepting office certify that after taking the transfer into account the latter possesses the necessary solvency margin. 3. Where a branch proposes to transfer all or part of its portfolio of contracts, concluded either under the right of establishment or the freedom to provide services, the Member State of the branch shall be consulted. 4. In the circumstances referred to in paragraphs 2 and 3, the competent authorities of the home Member State of the transferring undertaking shall authorise the transfer after obtaining the agreement of the competent authorities of the Member States in which the risks are situated. 5. The competent authorities of the Member States consulted shall give their opinion or consent to the competent authorities of the home Member State of the transferring insurance undertaking within three months of receiving a request; the absence of any response within that period from the authorities consulted shall be considered equivalent to a favourable opinion or tacit consent. 6. A transfer authorised in accordance with this Article shall be published as laid down by national law in the Member State in which the risk is situated. Such transfers shall automatically be valid against policy-holders, insured persons and any other persons having rights or obligations arising out of the contracts transferred. This provision shall not affect the Member States’ rights to give policy-holders the option of cancelling contracts within a fixed period after a transfer. Notes Art 12(1) repeals art 11(2)–(7) of the Second Non-Life Directive, Directive 88/357. Art 12(2) For UK implementation, see the Financial Services and Markets Act 2000, Sched 3, which provides for certification by the Secretary of State where the transferee is UK-authorised. Art 12(3) In accordance with this provision, UK law does not require a UK branch of an insurer established elsewhere in the EC to seek UK authorisation for the transfer of its portfolio, although the UK authorities must be consulted. If the UK is the supervisory authority of an insurer an EC branch of which is transferring its portfolio, the UK is the relevant authorising state. For the rules on transfers, see the Financial Services and Markets Act 2000, ss 104–117. Art 12(4) For UK implementation, see the Financial Services and Markets Act 2000, s 116, under which the UK’s consent is deemed to have been given as long as the execution of the transfer is published, as to which see art 12(6). Art 12(6) The publication rule is set out in the UK in the Financial Services and Markets Act 2000 (Control of Business Transfers) (Requirements on Applicants) Regulations 2001 (SI 2001 No 3625), reg 3. The UK has not taken up the option to allow UK policyholders to cancel a transferred policy, and the transfer is binding unless the insurer has failed to publish details of the execution of the transfer.

Article 13 [This article substitutes art 20 of the First Non-Life Directive, Directive 73/239.] Article 14 [This article substitutes art 22 of the First Non-Life Directive, Directive 73/239.] Article 15 1. Member States shall require any natural or legal person who proposes to [hold], directly or indirectly, a qualifying holding in an insurance undertaking first to inform the competent

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authorities of the home Member State, indicating the size of his intended holding. Such a person must likewise inform the competent authorities of the home Member State if he proposes to increase his qualifying holding so that the proportion of the voting rights or of the capital he holds would reach or exceed 20, 33 or 50% or so that the insurance undertaking would become his subsidiary. The competent authorities of the home Member State shall have up to three months from the date of the notification provided for in the first subparagraph to oppose such a plan if, in view of the need to ensure sound and prudent management of the insurance undertaking in question, they are not satisfied as to the qualification of the person referred to in the first subparagraph. If they do not oppose the plan in question, they may fix a maximum period for its implementation. 1a. If the acquirer of the holdings referred to in paragraph 1 of this Article is an insurance undertaking, a reinsurance undertaking, a credit institution or an investment firm authorised in another Member State, or the parent undertaking of such an entity, or a natural or legal person controlling such an entity, and if, as a result of that acquisition, the undertaking in which the acquirer proposes to hold a holding would become a subsidiary or subject to the control of the acquirer, the assessment of the acquisition shall be subject to the prior consultation referred to in Article 12a of Directive 73/ 239/EEC. 2. Member States shall require any natural or legal person who proposes to dispose, directly or indirectly, of a qualifying holding in an insurance undertaking first to inform the competent authorities of the home Member State, indicating the size of his intended holding. Such a person must likewise inform the competent authorities if he proposes to reduce his qualifying holding so that the proportion of the voting rights or of the capital he holds would fall below 20, 33 or 50% or so that the insurance undertaking would cease to be his subsidiary. 3. On becoming aware of them, insurance undertakings shall inform the competent authorities of their home Member States of any acquisitions or disposals of holdings in their capital that cause holdings to exceed or fall below any of the thresholds referred to in paragraphs 1 and 2. They shall also, at least once a year, inform them of the names of shareholders and members possessing qualifying holdings and the sizes of such holdings as shown, for example, by the information received at annual general meetings of shareholders or members or as a result of compliance with the regulations relating to companies listed on stock exchanges. 4. Member States shall require that, where the influence exercised by the persons referred to in paragraph 1 is likely to operate against the prudent and sound management of an insurance undertaking, the competent authorities of the home Member State shall take appropriate measures to put an end to that situation. Such measures may consist, for example, in injunctions, sanctions against directors and managers, or suspension of the exercise of the voting rights attaching to the shares held by the shareholders or members in question. Similar measures shall apply to natural or legal persons failing to comply with the obligation to provide prior information imposed in paragraph 1. If a holding is acquired despite the opposition of the competent authorities, the Member States shall, regardless of any other sanctions to be adopted, provide either for exercise of the corresponding voting rights to be suspended, or for the nullity of votes cast or for the possibility of their annulment. Notes Art 15(1) This was amended by a corrigendum published in OJ 1997 L311/34. The UK introduced for this purpose the concept of the ‘‘shareholder controller’’. For UK implementation of the rules on controllers, see the Financial Services and Markets Act 2000, ss 178–192. Art 15(1a) inserted by Directive 2002/87, art 24, new text substituted by Directive 2005/68.

Article 16 1. The Member States shall provide that all persons working or who have worked for the competent authorities, as well as auditors and experts acting on behalf of the competent authorities, shall be bound by the obligation of professional secrecy. This means that no confidential information which they may receive while performing their duties may be divulged to any person or authority whatsoever, except in summary or aggregate form, such that individual insurance undertakings cannot be identified, without prejudice to cases covered by criminal law.

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Nevertheless, where an insurance undertaking has been declared bankrupt or is being compulsorily wound up, confidential information which does not concern third parties involved in attempts to rescue that undertaking may be divulged in civil or commercial proceedings. 2. Paragraph 1 shall not prevent the competent authorities of different Member States from exchanging information in accordance with the Directives applicable to insurance undertakings. Such information shall be subject to the conditions of professional secrecy laid down in paragraph 1. 3. Member States may conclude cooperation agreements providing for exchange of information with the competent authorities of third countries or with authorities or bodies of third countries as defined in paragraphs 5 and 5a only if the information disclosed is subject to guarantees of professional secrecy at least equivalent to those referred to in this Article. Such exchange of information must be intended for the performance of the supervisory task of the authorities or bodies mentioned. Where the information originates in another Member State, it may not be disclosed without the express agreement of the competent authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities gave their agreement. 4. Competent authorities receiving confidential information under paragraph 1 or 2 may use it only in the course of their duties: — to check that the conditions governing the taking up of the business of insurance are met and to facilitate monitoring of the conduct of such business, especially with regard to the monitoring of technical provisions, solvency margins, administrative and accounting procedures and internal control mechanisms, — to impose penalties, — in administrative appeals against decisions of the competent authorities, or — in court proceedings initiated under Article 53 or under special provisions provided for in this Directive and other Directives adopted in the field of insurance undertakings and reinsurance undertakings. 5. Paragraphs 1 and 4 shall not preclude the exchange of information within a Member State, where there are two or more competent authorities in the same Member State, or, between Member States, between competent authorities and: — authorities responsible for the official supervision of credit institutions and other financial organisations and the authorities responsible for the supervision of financial markets, — bodies involved in the liquidation and bankruptcy of insurance undertakings, reinsurance undertakings and in other similar procedures, and — persons responsible for carrying out statutory audits of the accounts of insurance undertakings, reinsurance undertakings and other financial institutions, in the discharge of their supervisory functions, and the disclosure, to bodies which administer compulsory winding-up proceedings or guarantee funds, of information necessary to the performance of their duties. The information received by those authorities, bodies and persons shall be subject to the obligation of professional secrecy laid down in paragraph 1. 5a. Notwithstanding paragraphs 1 to 4, Member States may authorize exchanges of information between the competent authorities and: — the authorities responsible for overseeing the bodies involved in the liquidation and bankruptcy of financial undertakings and other similar procedures, or — the authorities responsible for overseeing the persons charged with carrying out statutory audits of the accounts of insurance undertakings, credit institutions, investment firms and other financial institutions, or — independent actuaries of insurance undertakings carrying out legal supervision of those undertakings and the bodies responsible for overseeing such actuaries. Member States which have recourse to the option provided for in the first subparagraph shall require at least that the following conditions are met: — this information shall be for the purpose of carrying out the overseeing or legal supervision referred to in the first subparagraph,

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— information received in this context will be subject to the conditions of professional secrecy imposed in paragraph 1, — where the information originates in another Member State, it may not be disclosed without the express agreement of the competent authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities gave their agreement. Member States shall communicate to the Commission and to the other Member States the names of the authorities, person and bodies which may receive information pursuant to this paragraph. 5b. Notwithstanding paragraphs 1 to 4, Member States may, with the aim of strengthening the stability, including integrity, of the financial system, authorize the exchange of information between the competent authorities and the authorities or bodies responsible under the law for the detection and investigation of breaches of company law. Member States which have recourse to the option provided for in the first subparagraph shall require at least that the following conditions are met: — the information shall be for the purpose of performing the task referred to in the first subparagraph, — information received in this context shall be subject to the conditions of professional secrecy imposed in paragraph 1, — where the information originates in another Member State, it may not be disclosed without the express agreement of the competent authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities gave their agreement. Where, in a Member State, the authorities or bodies referred to in the first subparagraph perform their task of detection or investigation with the aid, in view of their specific competence, of persons appointed for that purpose and not employed in the public sector, the possibility of exchanging information provided for in the first subparagraph may be extended to such persons under the conditions stipulated in the second subparagraph. In order to implement the final indent of the second subparagraph, the authorities or bodies referred to in the first subparagraph shall communicate to the competent authorities which have disclosed the information, the names and precise responsibilities of the persons to whom it is to be sent. Member States shall communicate to the Commission and to the other Member States the names of the authorities or bodies which may receive information pursuant to this paragraph. Before 31 December 2000, the Commission shall draw up a report on the application of the provisions of this paragraph. 5c. This Article shall not prevent a competent authority from transmitting — to central banks and other bodies with a similar function in their capacity as monetary authorities, — where appropriate, to other public authorities responsible for overseeing payment systems, information intended for the performance of their task, nor shall it prevent such authorities or bodies from communicating to the competent authorities such information as they may need for the purposes of paragraph 4. Information received in this context shall be subject to the conditions of professional secrecy imposed in this Article. 6. Notwithstanding paragraphs 1 to 4, Member States may authorise exchanges of information between the competent authorities and: — the authorities responsible for overseeing the bodies involved in the liquidation and bankruptcy of assurance undertakings, reinsurance undertakings and other similar procedures, or — the authorities responsible for overseeing the persons charged with carrying out statutory audits of the accounts of insurance undertakings, reinsurance undertakings, credit institutions, investment firms and other financial institutions, or — independent actuaries of insurance undertakings or reinsurance undertakings carrying out legal supervision of those undertakings and the bodies responsible for overseeing such actuaries.

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Member States which have recourse to the option provided for in the first subparagraph shall require at least that the following conditions are met: — this information shall be for the purpose of carrying out the overseeing or legal supervision referred to in the first subparagraph, — information received in this context shall be subject to the conditions of professional secrecy imposed in paragraph 1, — where the information originates in another Member State, it may not be disclosed without the express agreement of the competent authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities gave their agreement. Member States shall communicate to the Commission and to the other Member States the names of the authorities, persons and bodies which may receive information pursuant to this paragraph. Notes This article is implemented in the UK by the Financial Services and Markets Act 2000, ss 348 to 354. Art 16(3) was amended by Directive 2000/64, art 2. Art 16(4) new text substituted by Directive 2005/68 art 58. Art 16(5) new text substituted by Directive 2005/68 art 58. Art 16(5a)–(5c) were inserted by Directive 95/26, art 4. Art 16(5c) substituted by Directive 2002/87, art 24. Art 16(6) new text substituted by Directive 2005/68 art 58.

Article 16a 1. Member States shall provide at least that: (a) any person authorized within the meaning of Directive 84/253/EEC, performing in a financial undertaking the task described in Article 51 of Directive 78/660/EEC, Article 37 of Directive 83/345/EEC or Article 31 of Directive 85/611/EEC or any other statutory task, shall have a duty to report promptly to the competent authorities any fact or decision concerning that undertaking of which he has become aware while carrying out that task which is liable to: — constitute a material breach of the laws, regulations or administrative provisions which lay down the conditions governing authorization or which specifically govern pursuit of the activities of financial undertakings, or — affect the continuous functioning of the financial undertaking, or — lead to refusal to certify the accounts or to the expression of reservations; (b) that person shall likewise have a duty to report any facts and decisions of which he becomes aware in the course of carrying out a task as described in (a) in an undertaking having close links resulting from a control relationship with the financial undertaking within which he is carrying out the abovementioned task. 2. The disclosure in good faith to the competent authorities, by persons authorized within the meaning of Directive 84/253/EEC, of any fact or decision referred to in paragraph 1 shall not constitute a breach of any restriction on disclosure of information imposed by contract of by any legislative, regulatory or administrative provision and shall not involve such persons in liability of any kind. Notes This article was inserted by Directive 95/26, art 5.

Article 17 [This article substitutes art 15 of the First Non-Life Directive, Directive 73/239.] Article 18 [This article substitutes art 15a of the First Non-Life Directive, Directive 73/239.]

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Article 19 [This article repeals art 23 of the Second Non-Life Directive, Directive 88/357.] Article 20 The assets covering the technical provisions shall take account of the type of business carried on by an undertaking in such a way as to secure the safety, yield and marketability of its investments, which the undertaking shall ensure are diversified and adequately spread. Notes For the general rules on technical provisions, see art 15 of the First Non-Life Directive, in para 1.59.

Article 21 1. The home Member State may not authorise insurance undertakings to cover their technical provisions and equalisation reserves with any assets other than those in the following categories: A. Investments (a) (b) (c) (d)

debt securities, bonds and other money and capital market instruments; loans; shares and other variable yield participations; units in undertakings for collective investment in transferable securities and other investment funds; (e) land, buildings and immovable property rights; B. Debts and claims

(f) debts owed by reinsurers, including reinsurers shares of technical provisions, and by the special purpose vehicles referred to in Article 46 of Directive 2005/68/EC of the European Parliament and of the Council of 16 November 2005 on reinsurance. (g) deposits with and debts owed by ceding undertakings; (h) debts owed by policyholders and intermediaries arising out of direct and reinsurance operations; (i) claims arising out of salvage and subrogation; (j) tax recoveries; (k) claims against guarantee funds; C. Others (l) tangible fixed assets, other than land and buildings, valued on the basis of prudent amortisation; (m) cash at bank and in hand, deposits with credit institutions and any other bodies authorised to receive deposits; (n) deferred acquisition costs; (o) accrued interest and rent, other accrued income and prepayments; In the case of the association of underwriters known as Lloyd’s, asset categories shall also include guarantees and letters of credit issued by credit institutions within the meaning of Directive 77/780/EEC or by assurance undertakings, together with verifiable sums arising out of life assurance policies, to the extent that they represent funds belonging to members. The inclusion of any asset or category of assets listed in the first subparagraph shall not mean that all those assets should automatically be accepted as cover for technical provisions. The

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home Member State shall lay down more detailed rules setting the conditions for the use of acceptable assets. In the determination and the application of the rules which it lays down, the home Member State shall, in particular, ensure that the following principles are complied with: (i) assets covering technical provisions shall be valued net of any debts arising out of their acquisition; (ii) all assets must be valued on a prudent basis, allowing for the risk of any amounts not being realisable. In particular, tangible fixed assets other than land and buildings may be accepted as cover for technical provisions only if they are valued on the basis of prudent amortisation; (iii) loans, whether to undertakings, to State authorities or international organisations, to local or regional authorities or to natural persons, may be accepted as cover for technical provisions only if there are sufficient guarantees as to their security, whether these are based on the status of the borrower, mortgages, bank guarantees or guarantees granted by insurance undertakings or other forms of security; (iv) derivative instruments such as options, futures and swaps in connection with assets covering technical provisions may be used in so far as they contribute to a reduction of investment risks or facilitate efficient portfolio management. They must be valued on a prudent basis and may be taken into account in the valuation of the underlying assets; (v) transferrable securities which are not dealt in on a regulated market may be accepted as cover for technical provisions only if they can be realised in the short term; (vi) debts owed by and claims against a third party may be accepted as cover for technical provisions only after deduction of all amounts owed to the same third party; (vii) the value of any debts and claims accepted as cover for technical provisions must be calculated on a prudent basis, with due allowance for the risk of any amounts not being realisable. In particular, debts owed by policyholders and intermediaries arising out of insurance and reinsurance operations may be accepted only in so far as they have been outstanding for not more than three months; (viii) where the assets held include an investment in a subsidiary undertaking which manages all or part of the insurance undertaking’s investments on its behalf, the home Member State must, when applying the rules and principles laid down in this Article, take into account the underlying assets held by the subsidiary undertaking; the home Member State may treat the assets of other subsidiaries in the same way; (ix) deferred acquisition costs may be accepted as cover for technical provisions only to the extent that that is consistent with the calculation of the technical provision for unearned premiums. 2. Notwithstanding paragraph 1, in exceptional circumstances and at an insurance undertaking’s request, the home Member State may, temporarily and under a properly reasoned decision, accept other categories of assets as cover for technical provisions, subject to Article 20. Notes For the general rules on technical provisions, see art 15 of the First Non-Life Directive, in para 1.59. Art 21(1)—introductory wording, point (f) of point (B) and the third sub-para of point (C) substituted by Directive 2005/68, art 58.

Article 22 1. As regards the assets covering technical provisions and equalisation reserves, the home Member State shall require every insurance undertaking to invest no more than: (a) 10% of its total gross technical provisions in any one piece of land or building, or a number of pieces of land or buildings close enough to each other to be considered effectively as one investment; (b) 5% of its total gross technical provisions in shares and other negotiable securities treated as shares, bonds, debt securities and other money and capital market instruments from the same undertaking, or in loans granted to the same borrower, taken together, the loans being loans other than those granted to a State, regional or

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local authority or to an international organisation of which one or more Member States are members. This limit may be raised to 10% if an undertaking does not invest more than 40% of its gross technical provisions in the loans or securities of issuing bodies and borrowers in each of which it invests more than 5% of its assets; (c) 5% of its total gross technical provisions in unsecured loans, including 1% for any single unsecured loan, other than loans granted to credit institutions, assurance undertaking—in so far as Article 8 of Directive 73/239/EEC allows it—and investment undertakings established in a Member State; (d) 3% of its total gross technical provisions in the form of cash in hand; (e) 10% of its total gross technical provisions in shares, other securities treated as shares and debt securities, which are not dealt in on a regulated market. 2. The absence of a limit in paragraph 1 on investment in any particular category does not imply that assets in that category should be accepted as cover for technical provisions without limit. The home Member State shall lay down more detailed rules fixing the conditions for the use of acceptable assets. In particular it shall ensure, in the determination and the application of those rules, that the following principles are complied with: (i) assets covering technical provisions must be diversified and spread in such a way as to ensure that there is no excessive reliance on any particular category of asset, investment market or investment; (ii) investment in particular types of asset which show high levels of risk, whether because of the nature of the asset or the quality of the issuer, must be restricted to prudent levels; (iii) limitations on particular categories of asset must take account of the treatment of reinsurance in the calculation of technical provisions; (iv) where the assets held include an investment in a subsidiary undertaking which manages all or part of the insurance undertaking’s investments on its behalf, the home Member State must, when applying the rules and principles laid down in this Article, take into account the underlying assets held by the subsidiary undertaking; the home Member State may treat the assets of other subsidiaries in the same way; (v) the percentage of assets covering technical provisions which are the subject of nonliquid investments must be kept to a prudent level; (vi) where the assets held include loans to or debt securities issued by certain credit institutions, the home Member State may, when applying the rules and principles laid down in this Article, take into account the underlying assets held by such credit institutions. This treatment may be applied only where the credit institution has its head office in a Member State, is entirely owned by that Member State and/or that State’s local authorities and its business, according to its memorandum and articles of association, consists of extending, through its intermediary, loans to or guaranteed by the State or local authorities or loans to bodies closely linked to the State or to local authorities. 3. In the context of the detailed rules laying down the conditions for the use of acceptable assets, the Member State shall give more limitative treatment to: — any loan unaccompanied by a bank guarantee, a guarantee issued by an insurance undertaking, a mortgage or any other form of security, as compared with loans accompanied by such collateral, — Ucits not coordinated within the meaning of Directive 85/611/EEC and other investment funds, as compared with Ucits coordinated within the meaning of that Directive, — securities which are not dealt in on a regulated market, as compared with those which are, — bonds, debt securities and other money and capital market instruments not issued by States, local or regional authorities or undertakings belonging to Zone A as defined in Directive 89/647/EEC, or the issuers of which are international organisations not numbering at least one Community Member State among their members, as compared with the same financial instruments issued by such bodies. 4. Member States may raise the limit laid down in paragraph 1(b) to 40% in the case of certain debt securities when these are issued by a credit institution which has its head office in a Member State and is subject by law to special official supervision designed to protect the

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holders of those debt securities. In particular, sums deriving from the issue of such debt securities must be invested in accordance with the law in assets which, during the whole period of validity of the debt securities, are capable of covering claims attaching to the debt securities and which, in the event of failure of the issues, would be used on a priority basis for the reimbursement of the principal and payment of the accrued interest. 5. Member States shall not require insurance undertakings to invest in particular categories of assets. 6. Notwithstanding paragraph 1, in exceptional circumstances and at an insurance undertaking’s request, the home Member State may, temporarily and under a properly reasoned decision, allow exceptions to the rules laid down in paragraph 1(a) to (e), subject to Article 20. Notes For the general rules on technical provisions, see art 15 of the First Non-Life Directive, in para 1.59. Art 22(1) introductory wording substituted by Directive 2005/68, art 58.

Article 23 [This article substitutes points 8 and 9 of Annex 1 to the Second Non-Life Directive, Directive 73/239.] Article 24 [This article substitutes art 16(1) of the First Non-Life Directive, Directive 73/239.] Article 25 No more than three years after the date of application of this Directive the Commission shall submit a report to the Insurance Committee on the need for further harmonisation of the solvency margin. Notes The Insurance Committee was established by Decision 91/675.

Article 26 [This article substitutes art 18 of the First Non-Life Directive, Directive 73/239.] Article 27 [This article amends art 7(1) of the First Non-Life Directive, Directive 73/239.] Article 28 The Member State in which a risk is situated shall not prevent a policyholder from concluding a contract with an insurance undertaking authorised under the conditions of Article 6 of Directive 73/239/EEC, as long as that does not conflict with legal provisions protecting the general good in the Member State in which the risk is situated. Notes The term ‘‘general good’’ is not used in the Financial Services and Markets Act 2000, and there is seemingly no power in the 2000 Act for the UK authorities to forbid on general public policy grounds an insurance contract relating to a risk located in the UK. There are instead specific measures which may be taken, against incoming firms, contained in s 47 and ss 193 to 202 of the Financial Services and Markets Act 2000, either on the request of the insurers’ home state regulator or on the UK authorities’ own initiative.

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Article 29 Member States shall not adopt provisions requiring the prior approval or systematic notification of general and special policy conditions, scales of premiums, or forms and other printed documents which an insurance undertaking intends to use in its dealings with policy-holders. They may only require non-systematic notification of those policy conditions and other documents for the purpose of verifying compliance with national provisions concerning insurance contracts, and that requirement may not constitute a prior condition for an undertaking’s carrying on its business. Member States may not retain or introduce prior notification or approval of proposed increases in premium rates except as part of general price-control systems. Notes The prohibition on the exercise of material control, in the form of prior approval or notification of policy conditions and premium rates reflects art 8(3) of the First Non-Life Directive, Directive 73/239, as modified by art 4 of the Second Non-Life Directive, Directive 88/357. Art 29 of the Third Non-Life Directive permits premium controls as part of a wider price control policy. Similar principles apply where an insurer is operating a branch or is selling insurance by way of services into another member state: the host may not, under art 40(2)–(3) insist upon material control other than as a part of general price control.

Article 30 1. [Amends art 8(4) of Directive 88/357.] 2. Notwithstanding any provision to the contrary, a Member State which makes insurance compulsory may require that the general and special conditions of the compulsory insurance be communicated to its competent authority before being circulated. Notes Art 30(1) amends art 8(4) of the Second Non-Life Directive, Directive 88/357. Art 30(2) The UK does not insist upon this right in the case of any class of compulsory insurance.

Article 31 1. Before an insurance contract is concluded the insurance undertaking shall inform the policyholder of: — The law applicable to the contract where the parties do not have a free choice, or the fact that the parties are free to choose the law applicable and, in the latter case, the law the insurer proposes to choose. — the arrangements for handling policyholders’ complaints concerning contracts including, where appropriate, the existence of a complaints body, without prejudice to the policyholders’ right to take legal proceedings. 2. The obligation referred to in paragraph 1 shall apply only where the policyholder is a natural person. 3. The rules for implementing this Article shall be determined in accordance with the law of the Member State in which the risk is situated.

TITLE IV

P R O V I S I O N S R E L AT I N G T O R I G H T O F E S TA B L I S H M E N T A N D THE FREEDOM TO PROVIDE SERVICES

Article 32 [This article substitutes art 10 of the First Non-Life Directive, Directive 73/239.] Article 33 [This article substitutes art 10 of the First Non-Life Directive, Directive 73/239.]

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Article 34 [This article substitutes art 14 of the Second Non-Life Directive, Directive 88/357.] Article 35 [This article substitutes art 16 of the Second Non-Life Directive, Directive 88/357.] Article 36 [This article substitutes art 17 of the Second Non-Life Directive, Directive 88/357.] Article 37 [This article amends art 12(2), and repeals arts 12(3), 13 and 15, of the Second Non-Life Directive, Directive 88/357.] Article 38 The competent authorities of the Member State of the branch or the Member State of the provision of services may require that the information which they are authorised under this Directive to request with regard to the business of insurance undertakings operating in the territory of that State shall be supplied to them in the official language or languages of that State. Article 39 1. Article 18 of Directive 88/357/EEC is hereby repealed. 2. The Member State of the branch or of the provision of services shall not adopt provisions requiring the prior approval or systematic notification of general and special policy conditions, scales of premiums, or forms and other printed documents which an undertaking intends to use in its dealings with policyholders. It may only require an undertaking that proposes to carry on insurance business within its territory, under the right of establishment or the freedom to provide services, to effect non-systematic notification to those policy conditions and other documents for the purpose of verifying compliance with its national provisions concerning insurance contracts, and that requirement may not constitute a prior condition for an undertaking’s carrying on its business. 3. The Member State of the branch or of the provision of services may not retain or introduce prior notification or approval of proposed increases in premium rates except as part of general price-control systems. Notes Art 39(2) The prohibition on material control by the insurer’s home authorities, contained in art 8 of the First Non-Life Directive, Directive 73/239, and art 29 of the Third Non-Life Directive, is extended to the host member state where an insurer authorised and established elsewhere in the EC seeks to carry on insurance business or sell insurance in the host state. The insurer is free to carry on business or sell in the host state merely by complying with the minimal formalities noted earlier.

Article 40 1. Article 19 of Directive 88/357/EEC is hereby repealed. 2. Any undertaking carrying on business under the right of establishment or the freedom to provide services shall submit to the competent authorities of the Member State of the branch and/or of the Member State of the provision of services all documents requested of it for the purposes of this Article in so far as undertakings with head offices in those Member States are also obliged to do so. 3. If the competent authorities of a Member State establish that an undertaking with a branch or carrying on business under the freedom to provide services within its territory is not complying with the legal provisions applicable to it in that State, they shall require the undertaking concerned to remedy that irregular situation.

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4. If the undertaking in question fails to take the necessary action, the competent authorities of the Member State concerned shall inform the competent authorities of the home Member State accordingly. The latter authorities shall, at the earliest opportunity, take all appropriate measures to ensure that the undertaking concerned remedies that irregular situation. The nature of those measures shall be communicated to the competent authorities of the Member State concerned. 5. If, despite the measures taken by the home Member State or because those measures prove inadequate or are lacking in that State, the undertaking persists in infringing the legal provisions in force in the Member State concerned, the latter may, after informing the competent authorities of the home Member State, take appropriate measures to prevent or penalise further infringements, including, in so far as is strictly necessary, preventing that undertaking from continuing to conclude new insurance contracts within its territory. Member States shall ensure that within their territories it is possible to serve the legal documents necessary for such measures on insurance undertakings. 6. Paragraphs 3, 4 and 5 shall not affect the emergency power of the Member States concerned to take appropriate measures to prevent irregularities within their territories. This shall include the possibility of preventing insurance undertakings from continuing to conclude new insurance contracts within their territories. 7. Paragraphs 3, 4 and 5 shall not affect the powers of the Member States to penalise infringements within their territories. 8. If an undertaking which has committed an infringement has an establishment or possesses property in the Member State concerned, the competent authorities of the latter may, in accordance with national law, apply the administrative penalties prescribed for that infringement by way of enforcement against that establishment or property. 9. Any measure adopted under paragraphs 4 to 8 involving penalties or restrictions on the conduct of insurance business must be properly reasoned and communicated to the undertaking concerned. 10. Every two years, the Commission shall inform the European Insurance and Occupational Pensions Committee of the number and types of cases in which, in each Member State, authorisation has been refused under Article 10 of Directive 73/239/EEC or Article 16 of Directive 88/357/EEC as amended by this Directive or measures have been taken under paragraph 5. Member States shall cooperate with the Commission by providing it with the information required for that report. Notes The provisions of this article are implemented in the UK by the Financial Services and Markets Act 2000, ss 34 and 37, and Sched 3. Art 40(1) repeals art 19 of the Second Non-Life Directive, Directive 88/357. Art 40(2) empowers a host member state to demand information from an insurer to determine whether the insurer is adhering to the host’s internal law. Art 40(7)–(9) this option has in general not been taken up by the UK. Art 40(10) was amended by Directive 2005/1, art 6.

Article 41 Nothing in this Directive shall prevent insurance undertakings with head offices in Member States from advertising their services, through all available means of communication, in the Member State of the branch or the Member State of the provision of services, subject to any rules governing the form and content of such advertising adopted in the interest of the general good. Article 42 1. [Repeals art 20 of Directive 88/357.] 2. In the event of an insurance undertaking’s being wound up, commitments arising out of contracts underwritten through a branch or under the freedom to provide services shall be met in the same way as those arising out of that undertaking’s other insurance contracts, without distinction as to nationality as far as the persons insured and the beneficiaries are concerned.

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Notes Art 42(1) repeals art 20 of the Second Non-Life Directive, Directive 88/357. Art 42(2) requires all policyholders of a company in liquidation to be treated equally irrespective of nationality. This reflects the fundamental EC principle of equality of treatment, in art 6 of the Treaty of Rome.

Article 43 1. [Repeals art 21 of Directive 88/357.] 2. Where insurance is offered under the right of establishment or the freedom to provide services, the policyholder shall, before any commitment is entered into, be informed of the Member State in which the head office or, where appropriate, the branch with which the contract is to be concluded is situated. Any documents issued to the policyholder must convey the information referred to in the first subparagraph. The obligations imposed in the first two subparagraphs shall not apply to the risks referred to in Article 5(d) of Directive 73/239/EEC. 3. The contract or any other document granting cover, together with the insurance proposal where it is binding upon the policyholder, must state the address of the head office, or, where appropriate, of the branch of the insurance undertaking which grants the cover. Each Member State may require that the name and address of the representative of the insurance undertaking referred to in Article 12a(4) of Directive 88/357/EEC also appear in the documents referred to in the first subparagraph. Notes Art 43(1) repeals art 21 of the Second Non-Life Directive, Directive 88/357. Art 43(2) confers on the policyholder the right to receive information as to the insurer. The exception in art 43(2) is for ‘‘large risks’’.

Article 44 1. [Repeals art 22 of Directive 88/357.] 2. Every insurance undertaking shall inform the competent authority of its home Member State, separately in respect of transactions carried out under the right of establishment and those carried out under the freedom to provide services, of the amount of the premiums, claims and commissions, without deduction of reinsurance, by Member State and by group of classes, and also as regards class 10 of point A of the Annex to Directive 73/239/EEC, not including carrier’s liability, the frequency and average cost of claims. The groups of classes are hereby defined as follows: — accident and sickness (classes 1 and 2). — motor (classes 3, 7 and 10, the figures for class 10, excluding carriers’ liability, being given separately), — fire and other damage to property (classes 8 and 9), — aviation, marine and transport (classes 4, 5, 6, 7, 11 and 12), — general liability (class 13), — credit and suretyship (classes 14 and 15), — other classes (classes 16, 17 and 18). The competent authority of the home Member State shall forward that information within a reasonable time and in aggregate form to the competent authorities of each of the Member States concerned which so request. Notes Art 44(1) repeals art 22 of the Second Non-Life Directive, Directive 88/357.

Article 45 1. [Repeals art 24 of Directive 88/357.]

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2. Nothing in this Directive shall affect the Member States’ right to require undertakings carrying on business within their territories under the right of establishment or the freedom to provide services to join and participate, on the same terms as undertakings authorised there, in any scheme designed to guarantee the payment of insurance claims to insured persons and injured third parties. Notes Art 45(1) repeals art 24 of the Second Non-Life Directive, Directive 88/357. Art 45(2) the relevant scheme in the UK is the Financial Services Compensation Scheme.

Article 46 1. [Repeals art 25 of Directive 88/357.] 2. Without prejudice to any subsequent harmonisation, every insurance contract shall be subject exclusively to the indirect taxes and parafiscal charges on insurance premiums in the Member State in which the risk is situated as defined in Article 2(d) of Directive 88/357/EEC, and also, in the case of Spain, to the surcharges legally established in favour of the Spanish ‘‘Consorcio de Compensacio´ n de Seguros’’ for the performance of its functions relating to the compensation of losses arising from extraordinary events occurring in that Member State. In derogation from the first indent of Article 2(d) of Directive 88/357/EEC, and for the purposes of this paragraph, movable property contained in a building situated within the territory of a Member State, except for goods in commercial transit, shall be a risk situated in that Member State, even if the building and its contents are not covered by the same insurance policy. The law applicable to the contract under Article 7 of Directive 88/357/EEC shall not affect the fiscal arrangements applicable. Pending future harmonisation, each Member State shall apply to those undertakings which cover risks situated within its territory its own national provisions to ensure the collection of indirect taxes and parafiscal charges due under the first subparagraph. Notes Art 46(1) repeals art 25 of the Second Non-Life Directive, Directive 88/357.

TITLE V

TRANSITIONAL PROVISIONS

Article 47 The Federal Republic of Germany may postpone until 1 January 1996 the application of the first sentence of the second subparagraph of Article 54(2). During that period, the provisions of the following subparagraph shall apply in the situation referred to in Article 54(2). When the technical basis for the calculation of premiums has been communicated to the competent authorities of the home Member State in accordance with the third sentence of the second subparagraph of Article 54(2), those authorities shall without delay forward that information to the competent authorities of the Member State in which the risk is situated so that they may comment. If the competent authorities of the home Member State take no account of those comments, they shall inform the competent authorities of the Member State in which the risk is situated accordingly in detail and state their reasons. Article 48 Member States may allow insurance undertakings with head offices in their territories, the buildings and land of which that cover their technical provisions exceed, at the time of the notification of this Directive, the percentage laid down in Article 22(1)(a), a period expiring no later than 31 December 1998 within which to comply with that provision.

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Article 49 The Kingdom of Denmark may postpone until 1 January 1999 the application of this Directive to compulsory insurance against accidents at work. During that period the exclusion provided for in Article 12(2) of directive 88/357/EEC for accidents at work shall continue to apply in the Kingdom of Denmark. Article 50 Spain, until 31 December 1996, and Greece and Portugal, until 31 December 1998, may operate the following transitional arrangements for contracts covering risks situated exclusively in one of those Member States other than those defined in Article 5(d) of Directive 73/239/EEC: (a) in derogation from Article 8(3) of Directive 73/239/EEC and from Articles 29 and 39 of this Directive, the competent authorities of the Member States in question may require the communication, before use, of general and special insurance policy conditions; (b) the amount of the technical provisions relating to the contracts referred to in this Article shall be determined under the supervision of the Member State concerned in accordance with its own rules or, failing that, in accordance with the procedures established within its territory in accordance with this directive. Cover of those technical provisions by equivalent and matching assets and the localisation of those assets shall be effected under the supervision of that Member State in accordance with its rules and practices adopted in accordance with this Directive.

TITLE VI

FINAL PROVISIONS

Article 51 The following technical adjustments to be made to Directives 73/239/EEC and 88/357/EEC and to this Directive shall be adopted in accordance with the procedure laid down in Directive 91/675/EEC: — extension of the legal forms provided for in Article 8(1)(a) of directive 73/239/EEC, — amendments to the list set out in the Annex to Directive 73/239/EEC, or adaptation of the terminology used in that list to take account of the development of insurance markets. — clarification of the items constituting the solvency margin listed in Article 16(1) of Directive 73/239/EEC to take account of the creation of new financial instruments, — alteration of the minimum guarantee fund provided for in Article 17(2) of Directive 73/239/EEC to take account of economic and financial developments, — amendments, to take account of the creation of new financial instruments, to the list of assets acceptable as cover for technical provisions set out in Article 21 of this Directive and to the rules on the spreading of investments laid down in Article 22, — changes in the relaxations in the matching rules laid down in Annex 1 to Directive 88/357/EEC, to take account of the development of new currency-hedging instruments or progress made towards economic and monetary union, — clarification of the definitions in order to ensure uniform application of Directives 73/239/EEC and 88/357/EEC and of this Directive throughout the Community. Article 52 1. Branches which have started business, in accordance with the provisions in force in their Member State of establishment, before the entry into force of the provisions adopted in implementation of this Directive shall be presumed to have been subject to the procedure laid down in Article 10(1) to (5) Directive 73/239/EEC. They shall be governed, from the date of that entry into force, by Articles 15, 19, 20 and 22 of Directive 73/239/EEC and by Article 40 of this Directive.

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2. Articles 34 and 35 shall not affect rights acquired by insurance undertakings carrying on business under the freedom to provide services before the entry into force of the provisions adopted in implementation of this Directive. Article 53 [This article inserts art 28a into the First Non-Life Directive, Directive 73/239.] Article 54 1. Notwithstanding any provision to the contrary, a Member State in which contracts covering the risks in class 2 of point A of the Annex to Directive 73/239/EEC may serve as a partial or complete alternative to health cover provided by the statutory social security system may require that those contracts comply with the specific legal provisions adopted by that Member State to protect the general good in that class of insurance, and that the general and special conditions of that insurance be communicated to the competent authorities of that Member State before use. 2. Member States may require that the health insurance system referred to in paragraph 1 be operated on a technical basis similar to that of life assurance where: — the premiums paid are calculated on the basis of sickness tables and other statistical data relevant to the Member State in which the risk is situated in accordance with the mathematical methods used in insurance, — a reserve is set up for increasing age, — the insurer may cancel the contract only within a fixed period determined by the Member State in which the risk is situated, — the contract provides that premiums may be increased or payments reduced, even for current contracts, — the contract provides that the policyholder may change his existing contract into a new contract complying with paragraph 1, offered by the same insurance undertaking or the same branch and taking account of his acquired rights. In particular, account must be taken of the reserve for increasing age and a new medical examination may be required only for increased cover. In that event, the competent authorities of the Member State concerned shall publish the sickness tables and other relevant statistical data referred to in the first subparagraph and transmit them to the competent authorities of the home Member State. The premiums must be sufficient, on reasonable actuarial assumptions, for undertakings to be able to meet all their commitments having regard to all aspects of their financial situation. The home Member State shall require that the technical basis for the calculation of premiums be communicated to its competent authorities before the product is circulated. This paragraph shall also apply where existing contracts are modified. Article 55 Member States may require that any insurance undertaking offering, at its own risk, compulsory insurance against accidents at work within their territories comply with the specific provisions of their national law concerning such insurance, except for the provisions concerning financial supervision, which shall be the exclusive responsibility of the home Member State. Notes For the UK’s rules on compulsory insurance of workplace accidents, see the Employers’ Liability (Compulsory Insurance) Act 1969, at para 6.23

Article 56 Member States shall ensure that decisions taken in respect of an insurance undertaking under laws, regulations and administrative provisions adopted in accordance with this Directive may be subject to the right to apply to the courts.

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Article 57 1. The Member States shall adopt the laws, regulations and administrative provisions necessary for their compliance with this Directive not later than 31 December 1993 and bring them into force no later than 1 July 1994. They shall forthwith inform the Commission thereof. When they adopt such measures the Member States shall include references to this Directive or shall make such references when they effect official publication. The manner in which such references are to be made shall be laid down by the Member States. 2. The Member States shall communicate to the Commission the texts of the main provisions of national law which they adopt in the field covered by this Directive.

Article 58 This Directive is addressed to the Member States.

1.67 DIRECTIVE 98/78/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL OF 27 OCTOBER 1998 ON THE SUPPLEMENTARY SUPERVISION OF INSURANCE AND REINSURANCE UNDERTAKINGS IN AN INSURANCE OR REINSURANCE GROUP

General Note Title substituted by Directive 2005/68, Article 59.

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, and in particular Article 57(2) thereof, Having regard to the proposal from the Commission, Having regard to the opinion of the Economic and Social Committee, Acting in accordance with the procedure laid down in Article 189b of the Treaty, (1) Whereas the first Council Directive 73/239/EEC of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance and the first Council Directive 79/267/EEC of 5 March 1979 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct life assurance require insurance undertakings to have solvency margins; (2) Whereas, under Council Directive 92/49/EEC of 18 June 1992 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and amending Directives 73/239/EEC and 88/357/EEC and Council Directive 92/96/EEC of 10 November 1992 on the coordination of laws, regulations and administrative provisions relating to direct life assurance and amending Directives 79/267/EEC and 90/619/EEC the taking-up and the pursuit of the business of insurance are subject to the granting of a single official authorization issued by the authorities of the Member State in which an insurance undertaking has its head office; (home Member State); whereas such authorization allows an undertaking to carry on business throughout the Community, under either the right of establishment or the freedom to provide services; whereas the competent authorities of home Member States are responsible for monitoring the financial health of insurance undertakings, including their state of solvency;

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(3) Whereas measures concerning the supplementary supervision of insurance undertakings in an insurance group should enable the authorities supervising an insurance undertaking to form a more soundly based judgment of its financial situation; whereas such supplementary supervision should take into account certain undertakings which are not at present subject to supervision under Community Directives; whereas this Directive does not in any way imply that Member States are required to undertake supervision of those undertakings considered individually; (4) Whereas insurance undertakings in a common insurance market engage in direct competition with each other and the rules concerning capital requirements must therefore be equivalent; whereas, to that end, the criteria applied to determine supplementary supervision must not be left solely to Member States; whereas the adoption of common basic rules will be in the best interests of the Community in that it will prevent distortions of competition; whereas it is necessary to eliminate certain divergences between the laws of the Member States as regards the prudential rules to which insurance undertakings that are part of an insurance group are subject; (5) Whereas the approach adopted consists in bringing about such harmonisation as is essential, necessary and sufficient to achieve the mutual recognition of prudential control systems in this field; whereas the aim of this Directive is in particular to protect the interests of insured persons; (6) Whereas certain provisions of this Directive define minimum standards; whereas a home Member State may lay down stricter rules for insurance undertakings authorised by its own competent authorities; (7) Whereas this Directive provides for the supplementary supervision of any insurance company which is a participating undertaking in at least one insurance undertaking, reinsurance undertaking or non-member-country insurance undertaking and, under different rules, for the supplementary supervision of any insurance company whose parent undertaking is an insurance holding company, a reinsurance undertaking, a non-member-country insurance undertaking or a mixed-activity insurance holding company; whereas the supervision of individual insurance undertakings by the competent authorities remains the essential principle of insurance supervision; (8) Whereas it is necessary to calculate an adjusted solvency situation for insurance undertakings forming part of an insurance group; whereas different methods are applied by the competent authorities in the Community to take into account the effects on the financial situation of an insurance undertaking attributable to the fact that it belongs to an insurance group; whereas this Directive lays down three methods to effect that calculation; whereas the principle is accepted that these methods are prudentially equivalent; (9) Whereas the solvency of a related subsidiary insurance undertaking of an insurance holding company, reinsurance undertaking or non-member-country insurance undertaking may be affected by the financial resources of the group of which it is a part and by the distribution of financial resources within that group; whereas the competent authorities should be provided with the means of exercising supplementary supervision and of taking appropriate measures at the level of the insurance undertaking where its solvency is or may be jeopardised; (10) Whereas the competent authorities should have access to all the information relevant to the exercise of supplementary supervision; whereas cooperation between the authorities responsible for the supervision of insurance undertakings as well as between those authorities and the authorities responsible for the supervision of other financial sectors should be established; (11) Whereas intra-group transactions can affect the financial position of an insurance undertaking; whereas the competent authorities should be in a position to exercise general supervision over certain types of such intra-group operations and take appropriate measures at the level of the undertaking where its solvency is or may be jeopardised,

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HAVE ADOPTED THIS DIRECTIVE: Article 1

Definitions

For the purposes of this Directive: (a) ‘‘insurance undertaking’’ means an undertaking which has received official authorisation in accordance with Article 6 of Directive 73/239/EEC or Article 6 of Directive 79/267/EEC; (b) ‘‘non-member country insurance undertaking’’ means an undertaking which would require authorization in accordance with Article 6 of Directive 73/239/EEC or Article 6 of Directive 79/267/EEC if it had its registered office in the Community; (c) ‘‘reinsurance undertaking’’ means an undertaking, which has received official authorisation in accordance with Article 3 of Directive 2005/68/EC of the European Parliament and of the Council of 16 November 2005 on reinsurance; (d) ‘‘parent undertaking’’ means a parent undertaking within the meaning of Article 1 of Directive 83/349/EEC and any undertaking which, in the opinion of the competent authorities, effectively exercises a dominant influence over another undertaking; (e) ‘‘subsidiary undertaking’’ means a subsidiary undertaking within the meaning of Article 1 of Directive 83/349/EEC and any undertaking over which, in the opinion of the competent authorities, a parent undertaking effectively exercises a dominant influence. All subsidiaries of subsidiary undertakings shall also be considered subsidiaries of the parent undertaking which is at the head of those undertakings; (f) ‘‘participation’’ means participation within the meaning of Article 17, first sentence, of Directive 78/660/EEC or the holding, directly or indirectly, of 20% or more of the voting rights or capital of an undertaking; (g) ‘‘participating undertaking’’ shall mean an undertaking which is either a parent undertaking or other undertaking which holds a participation, or an undertaking linked with another undertaking by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC; (h) ‘‘related undertaking’’ shall mean either a subsidiary or other undertaking in which a participation is held, or an undertaking linked with another undertaking by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC; (i) ‘‘insurance holding company’’ means a parent undertaking, the main business of which is to acquire and hold participations in subsidiary undertakings, where those subsidiary undertakings are exclusively or mainly insurance undertakings, reinsurance undertakings or non-member country insurance undertakings or non-member country reinsurance undertakings, at least one of such subsidiary undertakings being an insurance undertaking, or a reinsurance undertaking and which is not a mixed financial holding company within the meaning of Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate; (j) ‘‘mixed-activity insurance holding company’’ means a parent undertaking, other than an insurance undertaking, a non-member country insurance undertaking, a reinsurance undertaking, a non-member country reinsurance undertaking, an insurance holding company or a mixed financial holding company within the meaning of Directive 2002/87/EC, which includes at least one insurance undertaking or a reinsurance undertaking among its subsidiary undertakings; (k) ‘‘competent authorities’’ means the national authorities which are empowered by law or regulation to supervise insurance undertakings or reinsurance undertakings (l) ‘‘non-member country reinsurance undertaking’’ means an undertaking which would require authorisation in accordance with Article 3 of Directive 2005/68/EC if it had its head office in the Community . . . Notes Art 1(1)(g)–(j) new wording inserted by Directive 2002/87, art 28. Art 1(1)(c), (i), (j) and (k) new wording inserted by Directive 2005/68, art 59. Art 1(1)(l) inserted by Directive 2005/68, art 59.

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Article 2 Cases of application of supplementary supervision of insurance undertakings and reinsurance undertakings 1. In addition to the provisions of Directive 73/239/ EEC, Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance and Directive 2005/68/EC, which lay down the rules for the supervision of insurance undertakings and reinsurance undertakings, Member States shall provide supervision of any insurance undertaking or any reinsurance undertaking, which is a participating undertaking in at least one insurance undertaking, reinsurance undertaking, non-member-country insurance undertaking or non-member country reinsurance undertaking, shall be supplemented in the manner prescribed in Articles 5, 6, 8 and 9 of this Directive. 2. Every insurance undertaking or reinsurance undertaking the parent undertaking of which is an insurance holding company, a non-member country insurance or a non-member country reinsurance undertaking shall be subject to supplementary supervision in the manner prescribed in Articles 5(2), 6, 8 and 10. 3. Every insurance undertaking or reinsurance undertaking the parent undertaking of which is a mixed activity insurance holding company shall be subject to supplementary supervision in the manner prescribed in Articles 5(2), 6 and 8. Notes Art 2 new text substituted by Directive 2005/68, art 59.

Article 3

Scope of supplementary supervision

1. The exercise of supplementary supervision in accordance with Article 2 shall in no way imply that the competent authorities are required to play a supervisory role in relation to the non-member country insurance undertaking, the non-member country reinsurance undertaking, insurance holding company or mixed-activity insurance holding company taken individually. 2. The supplementary supervision shall take into account the following undertakings referred to in Articles 5, 6, 8, 9 and 10: — related undertakings of the insurance undertaking or of the reinsurance undertaking, — participating undertakings in the insurance undertaking or in the reinsurance undertaking, — related undertakings of a participating undertaking in the insurance undertaking or in the reinsurance undertaking. 3. Member States may decide not to take into account in the supplementary supervision referred to in Article 2 undertakings having their registered office in a non-member country where there are legal impediments to the transfer of the necessary information, without prejudice to the provisions of Annex I, point 2.5, and of Annex II, point 4. Furthermore, the competent authorities responsible for exercising supplementary supervision may in the cases listed below decide on a case-by-case basis not to take an undertaking into account in the supplementary supervision referred to in Article 2: — if the undertaking which should be included is of negligible interest with respect to the objectives of the supplementary supervision of insurance undertakings or reinsurance undertakings; — if the inclusion of the financial situation of the undertaking would be inappropriate or misleading with respect to the objectives of the supplementary supervision of insurance undertakings or reinsurance undertakings. Notes Art 3 new text substituted by Directive 2005/68, art 59.

Article 4

Competent authorities for exercising supplementary supervision

1. Supplementary supervision shall be exercised by the competent authorities of the Member State in which the insurance undertaking or the reinsurance undertaking has received official

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authorisation under Article 6 of Directive 73/239/EEC or Article 4 of Directive 2002/83/EC or Article 3 of Directive 2005/68/EC. 2. Where insurance undertakings or reinsurance undertakings authorised in two or more Member States have as their parent undertaking the same insurance holding company, nonmember country insurance undertaking, non-member country reinsurance undertaking or mixedactivity insurance holding company, the competent authorities of the Member States concerned may reach agreement as to which of them will be responsible for exercising supplementary supervision. 3. Where a Member State has more than one competent authority for the prudential supervision of insurance undertakings and reinsurance undertakings, such Member State shall take the requisite measures to organise coordination between those authorities. Notes Art 4 new text substituted by Directive 2005/68, art 59.

Article 5

Availability and quality of information

1. Member States shall prescribe that the competent authorities are to require that every insurance undertaking or reinsurance undertaking subject to supplementary supervision shall have adequate internal control mechanisms in place for the production of any data and information relevant for the purposes of such supplementary supervision. 2. Member States shall take the appropriate steps to ensure that there are no legal impediments within their jurisdiction preventing the undertakings that are subject to the supplementary supervision and their related undertakings and participating undertakings from exchanging amongst themselves any information relevant for the purposes of such supplementary supervision. Notes Art 5(1) new text substituted by Directive 2005/68, art 59.

Article 6

Access to information

1. Member States shall provide that their competent authorities responsible for exercising supplementary supervision are to have access to any information which would be relevant for the purpose of supervision of an insurance undertaking or a reinsurance undertaking subject to such supplementary supervision. The competent authorities may address themselves directly to the relevant undertakings referred to in Article 3(2) to obtain the necessary information only if such information has been requested from the insurance undertaking or the reinsurance undertaking and has not been supplied by it. 2. Member States shall provide that their competent authorities may carry out within their territory, themselves or through the intermediary of persons whom they appoint for that purpose, on-the-spot verification of the information referred to in paragraph 1 at: — the insurance undertaking subject to supplementary supervision, — the reinsurance undertaking subject to supplementary supervision, — subsidiary undertakings of that insurance undertaking, — subsidiary undertakings of that reinsurance undertaking, — parent undertakings of that insurance undertaking, — parent undertakings of that reinsurance undertaking, — subsidiary undertakings of a parent undertaking of that insurance undertaking. — subsidiary undertakings of a parent undertaking of that reinsurance undertaking. 3. Where, in applying this Article, the competent authorities of one Member State wish in specific cases to verify important information concerning an undertaking situated in another Member State which is a related insurance undertaking, a related reinsurance undertaking, a subsidiary undertaking, a parent undertaking or a subsidiary of a parent undertaking of the insurance undertaking or of the reinsurance undertaking subject to supplementary supervision, they must ask the competent authorities of that other Member State to have that verification carried out. The authorities which receive such a request must act on it within the limits of their jurisdiction by carrying out the verification themselves, by

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allowing the authorities making the request to carry it out or by allowing an auditor or expert to carry it out. The competent authority which made the request may, if it so wishes, participate in the verification when it does not carry out the verification itself. Notes Art 6 new text substituted by Directive 2005/68, art 59. Art 6(3) the final sentence was originally added by Directive 2002/87, art 28.

Article 7

Cooperation between competent authorities

1. Where insurance undertakings or reinsurance undertakings established in different Member States are directly or indirectly related or have a common participating undertaking, the competent authorities of each Member State shall communicate to one another on request all relevant information which may allow or facilitate the exercise of supervision pursuant to this Directive and shall communicate on their own initiative any information which appears to them to be essential for the other competent authorities. 2. Where an insurance undertaking or a reinsurance undertaking and either a credit institution as defined in Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions or an investment firm as defined in Council Directive 93/22/EEC of 10 May 1993 on investment services in the securities field (**), or both, are directly or indirectly related or have a common participating undertaking, the competent authorities and the authorities with public responsibility for the supervision of those other undertakings shall cooperate closely. Without prejudice to their respective responsibilities, those authorities shall provide one another with any information likely to simplify their task, in particular within the framework of this Directive. 3. Information received pursuant to this Directive and, in particular, any exchange of information between competent authorities which is provided for in this Directive shall be subject to the obligation of professional secrecy defined in Article 16 of Council Directive 92/49/EEC of 18 June 1992 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance (third non-life insurance Directive) and Article 16 of Directive 2002/83/EC and Articles 24 to 30 of Directive 2005/68/EC. Notes Art 7 new text substituted by Directive 2005/68, art 59.

Article 8

Intra-group transactions

1. Member States shall provide that the competent authorities exercise general supervision over transactions between: (a) an insurance undertaking or a reinsurance undertaking and: (i) a related undertaking of the insurance undertaking or of the reinsurance undertaking; (ii) a participating undertaking in the insurance undertaking or in the reinsurance undertaking; (iii) a related undertaking of a participating undertaking in the insurance undertaking or in the reinsurance undertaking; (b) an insurance undertaking or a reinsurance undertaking and a natural person who holds a participation in: (i) the insurance undertaking, the reinsurance undertaking or any of its related undertakings; (ii) a participating undertaking in the insurance undertaking or in the reinsurance undertaking;

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(iii) a related undertaking of a participating undertaking in the insurance undertaking or in the reinsurance undertaking. These transactions concern in particular: — loans, — guarantees and off-balance-sheet transactions, — elements eligible for the solvency margin, — investments, — reinsurance and retrocession operations, — agreements to share costs. 2. Member States shall require insurance undertakings and reinsurance undertakings to have in place adequate risk management processes and internal control mechanisms, including sound reporting and accounting procedures, in order to identify, measure, monitor and control transactions as provided for in paragraph 1 appropriately. Member States shall also require at least annual reporting by insurance undertakings and reinsurance undertakings to the competent authorities of significant transactions. These processes and mechanisms shall be subject to overview by the competent authorities. If, on the basis of this information, it appears that the solvency of the insurance undertaking or the reinsurance undertaking is, or may be, jeopardised, the competent authority shall take appropriate measures at the level of the insurance undertaking or of the reinsurance undertaking. Notes Art 8 substituted by Directive 2005/68, art 59. Art 8(2) first sub-paragraph was modified by Directive 2002/87, art 28.

Article 9

Adjusted solvency requirement

1. In the case referred to in Article 2(1), Member States shall require that an adjusted solvency calculation be carried out in accordance with Annex I. 2. Any related undertaking, participating undertaking or related undertaking of a participating undertaking shall be included in the calculation referred to in paragraph 1. 3. If the calculation referred to in paragraph 1 demonstrates that the adjusted solvency is negative, the competent authorities shall take appropriate measures at the level of the insurance undertaking or the reinsurance undertaking in question Notes Art 9(3) substituted by Directive 2005/68, art 59.

Article 10 Insurance holding companies, non-member country insurance undertakings and non-member country reinsurance undertakings 1. In the case referred to in Article 2(2), Member States shall require the method of supplementary supervision to be applied in accordance with Annex II. 2. In the case referred to in Article 2(2), the calculation shall include all related undertakings of the insurance holding company, the non-member country insurance undertaking or the nonmember country reinsurance undertaking, in the manner provided for in Annex II. 3. If, on the basis of that calculation, the competent authorities conclude that the solvency of a subsidiary insurance undertaking or a reinsurance undertaking of the insurance holding company, the non-member country insurance undertaking or the non-member country reinsurance undertaking is, or may be, jeopardised, they shall take appropriate measures at the level of that insurance undertaking or reinsurance undertaking Notes Art 10 title substituted by Directive 2005/68, art 59. Art 10(2) and (3) substituted by Directive 2005/68, art 59.

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Cooperation with third countries’ competent authorities

1. The Commission may submit proposals to the Council, either at the request of a Member State or on its own initiative, for the negotiation of agreements with one or more third countries regarding the means of exercising supplementary supervision over: (a) insurance undertakings which have, as participating undertakings, undertakings within the meaning of Article 2 which have their head office situated in a third country; and (b) reinsurance undertakings which have, as participating undertakings, undertakings within the meaning of Article 2 which have their head office situated in a third country; (c) non-member country insurance undertakings or non-member country reinsurance undertakings which have, as participating undertakings, undertakings within the meaning of Article 2 which have their head office in the Community. 2. The agreements referred to in paragraph 1 shall in particular seek to ensure both: (a) that the competent authorities of the Member States are able to obtain the information necessary for the supplementary supervision of insurance undertakings and reinsurance undertakings which have their head office in the Community and which have subsidiaries or hold participations in undertakings outside the Community; and (b) that the competent authorities of third countries are able to obtain the information necessary for the supplementary supervision of insurance undertakings and reinsurance undertakings which have their head office in their territories and which have subsidiaries or hold participations in undertakings in one or more Member States. 3. Without prejudice to Article 300(1) and (2) of the Treaty, the Commission shall, with the assistance of the European Insurance and Occupational Pensions Committee, examine the outcome of the negotiations referred to in paragraph 1 and the resulting situation. Notes Art 10a inserted by Directive 2002/87, art 28. Art 10a(1)(b) and (c) replace point (b) as per Directive 2005/68, art 59. Art 10a(2) substituted by Directive 2005/68, art 59. Art 10a(3) substituted by Directive 2005/1, art 7.

Article 10b

Management body of insurance holding companies

The Member States shall require that persons who effectively direct the business of an insurance holding company are of sufficiently good repute and have sufficient experience to perform these duties. Notes Art 10b inserted by Directive 2002/87, art 28.

Article 11

Implementation

1. Member States shall adopt not later than 5 June 2000 the laws, regulations and administrative provisions necessary to comply with this Directive. They shall immediately inform the Commission thereof. 2. Member States shall provide that the provisions referred to in paragraph 1 shall first apply to the supervision of accounts for financial years beginning on 1 January 2001 or during that calendar year. 3. When Member States adopt the measures referred to in paragraph 1, they shall contain a reference to this Directive or shall be accompanied by such reference on the occasion of their official publication. The methods of making such reference shall be laid down by Member States. 4. Member States shall communicate to the Commission the main provisions of national law which they adopt in the field covered by this Directive.

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5. Not later than 1 January 2006 the Commission shall issue a report on the application of this Directive and, if necessary, on the need for further harmonisation. Notes Art 11(5) substituted by Directive 2005/1, art 7

Article 12

Entry into force

This Directive shall enter into force on the day of its publication in the Official Journal of the European Communities.

Article 13

Addressees

This Directive is addressed to the Member States. Done at Luxembourg, 27 October 1998. Annex I (Calculation of the adjusted solvency of insurance undertakings) and Annex II (Supplementary supervision for insurance undertakings that are subsidiaries of an insurance holding company, a reinsurance undertaking or a non-member-country insurance undertaking) replaced by Annex II to Directive 2005/86/EC of the European Parliament and of the Council of 16 November 2005 on reinsurance and amending Council Directives 73/239/EEC, 92/49/EEC as well as Directives 98/78/EC and 2002/83/EC, pursuant to Article 59(9) of that Directive.

1.68 DIRECTIVE 2001/17/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL OF 19 MARCH 2001 ON THE REORGANISATION AND WINDING-UP OF INSURANCE UNDERTAKINGS General note This Directive has two main objectives in respect of the winding up and other reorganisation of insurance companies: to lay down jurisdictional rules for winding up proceedings; and to confer upon policyholders priority over the other unsecured assets of an insolvent insurer. The Directive is implemented in the UK by the Insurers (Reorganisation and Winding Up) Regulations 2004, SI 2004 No 353, and by the Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005, SI 2005 No 1998.

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, and in particular Articles 47(2) and 55 thereof, Having regard to the proposal from the Commission, Having regard to the opinion of the Economic and Social Committee, Acting in accordance with the procedure laid down in Article 251 of the Treaty, Whereas: (1) First Council Directive 73/239/EEC of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct insurance other than life assurance, as supplemented by Directive 92/49/EEC, and the First Council Directive 79/267/EEC of 5 March 1979 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct life assurance, as supplemented by Directive 92/96/EEC, provide for a single authorisation of the insurance undertakings granted by the home Member State supervisory authority. This single authorisation allows the insurance undertaking to carry out its activities in the Community by means of establishment or free provision of services without any further authorisation by the host

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(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

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Member State and under the sole prudential supervision of the home Member State supervisory authorities. The insurance directives providing a single authorisation with a Community scope for the insurance undertakings do not contain coordination rules in the event of windingup proceedings. Insurance undertakings as well as other financial institutions are expressly excluded from the scope of Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings. It is in the interest of the proper functioning of the internal market and of the protection of creditors that coordinated rules are established at Community level for winding-up proceedings in respect of insurance undertakings. Coordination rules should also be established to ensure that the reorganisation measures, adopted by the competent authority of a Member State in order to preserve or restore the financial soundness of an insurance undertaking and to prevent as much as possible a winding-up situation, produce full effects throughout the Community. The reorganisation measures covered by this Directive are those affecting pre-existing rights of parties other than the insurance undertaking itself. The measures provided for in Article 20 of Directive 73/239/EEC and Article 24 of Directive 79/267/EEC should be included within the scope of this Directive provided that they comply with the conditions contained in the definition of reorganisation measures. This Directive has a Community scope which affects insurance undertakings as defined in Directives 73/239/EEC and 79/267/EEC which have their head office in the Community, Community branches of insurance undertakings which have their head office in third countries and creditors resident in the Community. This Directive should not regulate the effects of the reorganisation measures and winding-up proceedings visa` -vis third countries. This Directive should concern winding-up proceedings whether or not they are founded on insolvency and whether they are voluntary or compulsory. It should apply to collective proceedings as defined by the home Member State’s legislation in accordance with Article 9 involving the realisation of the assets of an insurance undertaking and the distribution of their proceeds. Winding-up proceedings which, without being founded on insolvency, involve for the payment of insurance claims a priority order in accordance with Article 10 should also be included in the scope of this Directive. Claims by the employees of an insurance undertaking arising from employment contracts and employment relationships should be capable of being subrogated to a national wage guarantee scheme; such subrogated claims should benefit from the treatment determined by the home Member State’s law (lex concursus) according to the principles of this Directive. The provisions of this Directive should apply to the different cases of winding-up proceedings as appropriate. The adoption of reorganisation measures does not preclude the opening of winding-up proceedings. Winding-up proceedings may be opened in the absence of, or following, the adoption of reorganisation measures and they may terminate with composition or other analogous measures, including reorganisation measures. The definition of branch, in accordance with existing insolvency principles, should take account of the single legal personality of the insurance undertaking. The home Member State’s legislation should determine the way in which the assets and liabilities held by independent persons who have a permanent authority to act as agent for an insurance undertaking should be treated in the winding-up of an insurance undertaking. A distinction should be made between the competent authorities for the purposes of reorganisation measures and winding-up proceedings and the supervisory authorities of the insurance undertakings. The competent authorities may be administrative or judicial authorities depending on the Member State’s legislation. This Directive does not purport to harmonise national legislation concerning the allocation of competences between such authorities. This Directive does not seek to harmonise national legislation concerning reorganisation measures and winding-up proceedings but aims at ensuring mutual recognition of

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(10)

(11)

(12) (13)

(14)

(15)

(16)

(17)

Regulation of Insurers Member States’ reorganisation measures and winding-up legislation concerning insurance undertakings as well as the necessary cooperation. Such mutual recognition is implemented in this Directive through the principles of unity, universality, coordination, publicity, equivalent treatment and protection of insurance creditors. Only the competent authorities of the home Member State should be empowered to take decisions on winding-up proceedings concerning insurance undertakings (principle of unity). These proceedings should produce their effects throughout the Community and should be recognised by all Member States. All the assets and liabilities of the insurance undertaking should, as a general rule, be taken into consideration in the winding-up proceedings (principle of universality). The home Member State’s law should govern the winding-up decision concerning an insurance undertaking, the winding-up proceedings themselves and their effects, both substantive and procedural, on the persons and legal relations concerned, except where this Directive provides otherwise. Therefore all the conditions for the opening, conduct and closure of winding-up proceedings should in general be governed by the home Member State’s law. In order to facilitate its application this Directive should include a non-exhaustive list of aspects which, in particular, are subject to the general rule of the home Member State’s legislation. The supervisory authorities of the home Member State and those of all the other Member States should be informed as a matter of urgency of the opening of winding-up proceedings (principle of coordination). It is of utmost importance that insured persons, policy-holders, beneficiaries and any injured party having a direct right of action against the insurance undertaking on a claim arising from insurance operations be protected in winding-up proceedings. Such protection should not include claims which arise not from obligations under insurance contracts or insurance perations but from civil liability caused by an agent in negotiations for which, according to the law applicable to the insurance contract or operation, the agent himself is not responsible under such insurance contract or operation. In order to achieve this objective Member States should ensure special treatment for insurance creditors according to one of two optional methods provided for in this Directive. Member States may choose between granting insurance claims absolute precedence over any other claim with respect to assets representing the technical provisions or granting insurance claims a special rank which may only be preceded by claims on salaries, social security, taxes and rights ‘in rem’ over the whole assets of the insurance undertaking. Neither of the two methods provided for in this Directive impedes a Member State from establishing a ranking between different categories of insurance claims. This Directive should ensure an appropriate balance between the protection of insurance creditors and other privileged creditors protected by the Member State’s legislation and not harmonise the different systems of privileged creditors existing in the Member States. The two optional methods for treatment of insurance claims are considered substantially equivalent. The first method ensures the affectation of assets representing the technical provisions to insurance claims, the second method ensures insurance claims a position in the ranking of creditors which not only affects the assets representing the technical provisions but all the assets of the insurance undertaking. Member States which, in order to protect insurance creditors, opt for the method of granting insurance claims absolute precedence with respect to the assets representing the technical provisions should require their insurance undertakings to establish and keep up to date a special register of such assets. Such a register is a useful instrument for identifying the assets affected to such claims. In order to strengthen equivalence between both methods of treatment of insurance claims, this Directive should oblige the Member States which apply the method set out in Article 10(1)(b) to require every insurance undertaking to represent, at any moment and independently of a possible winding-up, claims, which according to that method may have precedence over insurance claims and which are registered in the insurance undertaking’s accounts, by assets allowed by the insurance directives in force to represent the technical provisions.

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(18) The home Member State should be able to provide that, where the rights of insurance creditors have been subrogated to a guarantee scheme established in such home Member State, claims by that scheme should not benefit from the treatment of insurance claims under this Directive. (19) The opening of winding-up proceedings should involve the withdrawal of the authorisation to conduct business granted to the insurance undertaking unless such authorisation has previously been withdrawn. (20) The decision to open winding-up proceedings, which may produce effects throughout the Community according to the principle of universality, should have appropriate publicity within the Community. In order to protect interested parties, the decision should be published in accordance with the home Member State’s procedures and in the Official Journal of the European Communities and, further, by any other means decided by the other Member States’ supervisory authorities within their respective territories. In addition to publication of the decision, known creditors who are resident in the Community should be individually informed of the decision and this information should contain at least the elements specified in this Directive. Liquidators should also keep creditors regularly informed of the progress of the winding-up proceedings. (21) Creditors should have the right to lodge claims or to submit written observations in winding-up proceedings. Claims by creditors resident in a Member State other than the home Member State should be treated in the same way as equivalent claims in the home Member State without any discrimination on the grounds of nationality or residence (principle of equivalent treatment). (22) This Directive should apply to reorganisation measures adopted by a competent authority of a Member State principles which are similar ‘mutatis mutandis’ to those provided for in winding-up proceedings. The publication of such reorganisation measures should be limited to the case in which an appeal in the home Member State is possible by parties other than the insurance undertaking itself. When reorganisation measures affect exclusively the rights of shareholders, members or employees of the insurance undertaking considered in those capacities, the competent authorities should determine the manner in which the parties affected should be informed in accordance with relevant legislation. (23) This Directive provides for coordinated rules to determine the law applicable to reorganisation measures and winding-up proceedings of insurance undertakings. This Directive does not seek to establish rules of private international law determining the law applicable to contracts and other legal relations. In particular, this Directive does not seek to govern the applicable rules on the existence of a contract, the rights and obligations of parties and the evaluation of debts. (24) The general rule of this Directive, according to which reorganisation measures and the winding-up proceedings are governed by the law of the home Member State, should have a series of exceptions in order to protect legitimate expectations and the certainty of certain transactions in Member States other than the home Member State. Such exceptions should concern the effects of such reorganisation measures or winding-up proceedings on certain contracts and rights, third parties’ rights in rem, reservations of title, set-off, regulated markets, detrimental acts, third party purchasers and lawsuits pending. (25) The exception concerning the effects of reorganisation measures and winding-up proceedings on certain contracts and rights provided for in Article 19 should be limited to the effects specified therein and should not include any other issues related to reorganisation measures and winding-up proceedings such as the lodging, verification, admission and ranking of claims regarding such contracts and rights, which should be governed by the home Member State’s legislation. (26) The effects of reorganisation measures or winding-up proceedings on a lawsuit pending should be governed by the law of the Member States in which the lawsuit is pending concerning an asset or a right of which the insurance undertaking has been divested as an exception to the application of the law of the home Member State. The effects of such measures and proceedings on individual enforcement actions arising from these

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lawsuits should be governed by the home Member State’s legislation, according to the general rule of this Directive. (27) All persons required to receive or divulge information connected with the procedures of communication provided for in this Directive should be bound by professional secrecy in the same manner as that established in Article 16 of Directive 92/49/EEC and Article 15 of Directive 92/96/EEC, with the exception of any judicial authority to which specific national legislation applies. (28) For the sole purpose of applying the provisions of this Directive to reorganisation measures and winding-up proceedings concerning branches situated in the Community of an insurance undertaking whose head office is located in a third country the home Member State should be defined as the Member State in which the branch is located and the supervisory authorities and competent authorities as the authorities of that Member State. (29) Where there are branches in more than one Member State of an insurance undertaking whose head office is located outside the Community, each branch should be treated independently with regard to the application of this Directive. In that case the competent authorities, supervisory authorities, administrators and liquidators should endeavour to coordinate their actions, HAVE ADOPTED THIS DIRECTIVE:

TITLE I

SCOPE AND DEFINITIONS

Article 1 Scope 1. This Directive applies to reorganisation measures and winding-up proceedings concerning insurance undertakings. 2. This Directive also applies, to the extent provided for in Article 30, to reorganisation measures and winding-up proceedings concerning branches in the territory of the Community of insurance undertakings having their head office outside the Community. Article 2 Definitions For the purpose of this Directive: (a) ‘‘insurance undertaking’’ means an undertaking which has received official authorisation in accordance with Article 6 of Directive 73/239/EEC or Article 6 of Directive 79/267/EEC; (b) ‘‘branch’’ means any permanent presence of an insurance undertaking in the territory of a Member State other than the home Member State which carries out insurance business; (c) ‘‘reorganisation measures’’ means measures involving any intervention by administrative bodies or judicial authorities which are intended to preserve or restore the financial situation of an insurance undertaking and which affect pre-existing rights of parties other than the insurance undertaking itself, including but not limited to measures involving the possibility of a suspension of payments, suspension of enforcement measures or reduction of claims; (d) ‘‘winding-up proceedings’’ means collective proceedings involving realising the assets of an insurance undertaking and distributing the proceeds among the creditors, shareholders or members as appropriate, which necessarily involve any intervention by the administrative or the judicial authorities of a Member State, including where the collective proceedings are terminated by a composition or other analogous measure, whether or not they are founded on insolvency or are voluntary or compulsory; (e) ‘‘home Member State’’ means the Member State in which an insurance undertaking has been authorised in accordance with Article 6 of Directive 73/239/EEC or Article 6 of Directive 79/267/EEC;

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(f) ‘‘host Member State’’ means the Member State other than the home Member State in which an insurance undertaking has a branch; (g) ‘‘competent authorities’’ means the administrative or judicial authorities of the Member States which are competent for the purposes of the reorganisation measures or the winding-up proceedings; (h) ‘‘supervisory authorities’’ means the competent authorities within the meaning of Article 1(k) of Directive 92/49/EEC and of Article 1(l) of Directive 92/96/EEC; (i) ‘‘administrator’’ means any person or body appointed by the competent authorities for the purpose of administering reorganisation measures; (j) ‘‘liquidator’’ means any person or body appointed by the competent authorities or by the governing bodies of an insurance undertaking, as appropriate, for the purpose of administering winding-up proceedings; (k) ‘‘insurance claims’’ means any amount which is owed by an insurance undertaking to insured persons, policy holders, beneficiaries or to any injured party having direct right of action against the insurance undertaking and which arises from an insurance contract or from any operation provided for in Article 1(2) and (3), of Directive 79/267/EEC in direct insurance business, including amounts set aside for the aforementioned persons, when some elements of the debt are not yet known. The premiums owed by an insurance undertaking as a result of the non-conclusion or cancellation of these insurance contracts and operations in accordance with the law applicable to such contracts or operations before the opening of the winding-up proceedings shall also be considered insurance claims. TITLE II Article 3

R E O R G A N I S AT I O N M E A S U R E S

Scope

This Title applies to the reorganisation measures defined in Article 2(c). Article 4

Adoption of reorganisation measures—Applicable law

1. Only the competent authorities of the home Member State shall be entitled to decide on the reorganisation measures with respect to an insurance undertaking, including its branches in other Member States. The reorganisation measures shall not preclude the opening of winding-up proceedings by the home Member State. 2. The reorganisation measures shall be governed by the laws, regulations and procedures applicable in the home Member State, unless otherwise provided in Articles 19 to 26. 3. The reorganisation measures shall be fully effective throughout the Community in accordance with the legislation of the home Member State without any further formalities, including against third parties in other Member States, even if the legislation of those other Member States does not provide for such reorganisation measures or alternatively makes their implementation subject to conditions which are not fulfilled. 4. The reorganisation measures shall be effective throughout the Community once they become effective in the Member State where they have been taken. Article 5

Information to the supervisory authorities

The competent authorities of the home Member State shall inform as a matter or urgency the home Member State’s supervisory authorities of their decision on any reorganisation measure, where possible before the adoption of such a measure and failing that immediately thereafter. The supervisory authorities of the home Member State shall inform as a matter of urgency the supervisory authorities of all other Member States of the decision to adopt reorganisation measures including the possible practical effects of such measures. Article 6

Publication

1. Where an appeal is possible in the home Member State against a reorganisation measure, the competent authorities of the home Member State, the administrator or any person entitled

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to do so in the home Member State shall make public its decision on a reorganisation measure in accordance with the publication procedures provided for in the home Member State and, furthermore, publish in the Official Journal of the European Communities at the earliest opportunity an extract from the document establishing the reorganisation measure. The supervisory authorities of all the other Member States which have been informed of the decision on a reorganisation measure pursuant to Article 5 may ensure the publication of such decision within their territory in the manner they consider appropriate. 2. The publications provided for in paragraph 1 shall also specify the competent authority of the home Member State, the applicable law as provided in Article 4(2) and the administrator appointed, if any. They shall be carried out in the official language or in one of the official languages of the Member State in which the information is published. 3. The reorganisation measures shall apply regardless of the provisions concerning publication set out in paragraphs 1 and 2 and shall be fully effective as against creditors, unless the competent authorities of the home Member State or the law of that State provide otherwise. 4. When reorganisation measures affect exclusively the rights of shareholders, members or employees of an insurance undertaking, considered in those capacities, this Article shall not apply unless the law applicable to these reorganisation measures provides otherwise. The competent authorities shall determine the manner in which the interested parties affected by such reorganisation measures shall be informed in accordance with the relevant legislation.

Article 7

Information to known creditors—Right to lodge claims

1. Where the legislation of the home Member State requires lodgement of a claim with a view to its recognition or provides for compulsory notification of a reorganisation measure to creditors who have their normal place of residence, domicile or head office in that State, the competent authorities of the home Member State or the administrator shall also inform known creditors who have their normal place of residence, domicile or head office in another Member State, in accordance with the procedures laid down in Articles 15 and 17(1). 2. Where the legislation of the home Member State provides for the right of creditors who have their normal place of residence, domicile or head office in that State to lodge claims or to submit observations concerning their claims, creditors who have their normal place of residence, domicile or head office in another Member State shall have the same right to lodge claims or submit observations in accordance with the procedures laid down in Articles 16 and 17(2).

TITLE III Article 8

WINDING-UP PROCEEDINGS

Opening of winding-up proceedings—Information to the supervisory authorities

1. Only the competent authorities of the home Member State shall be entitled to take a decision concerning the opening of winding-up proceedings with regard to an insurance undertaking, including its branches in other Member States. This decision may be taken in the absence, or following the adoption, of reorganisation measures. 2. A decision adopted according to the home Member State’s legislation concerning the opening of winding-up proceedings of an insurance undertaking, including its branches in other Member States, shall be recognised without further formality within the territory of all other Member States and shall be effective there as soon as the decision is effective in the Member State in which the proceedings are opened. 3. The supervisory authorities of the home Member State shall be informed as a matter of urgency of the decision to open winding-up proceedings, if possible before the proceedings are opened and failing that immediately thereafter. The supervisory authorities of the home Member State shall inform as a matter of urgency the supervisory authorities of all other Member States of the decision to open winding-up proceedings including the possible practical effects of such proceedings.

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Applicable law

1. The decision to open winding-up proceedings with regard to an insurance undertaking, the winding-up proceedings and their effects shall be governed by the laws, regulations and administrative provisions applicable in its home Member State unless otherwise provided in Articles 19 to 26. 2. The law of the home Member State shall determine in particular: (a) the assets which form part of the estate and the treatment of assets acquired by, or devolving on, the insurance undertaking after the opening of the winding-up proceedings; (b) the respective powers of the insurance undertaking and the liquidator; (c) the conditions under which set-off may be invoked; (d) the effects of the winding-up proceedings on current contracts to which the insurance undertaking is party; (e) the effects of the winding-up proceedings on proceedings brought by individual creditors, with the exception of lawsuits pending as provided for in Article 26; (f) the claims which are to be lodged against the insurance undertaking’s estate and the treatment of claims arising after the opening of winding-up proceedings; (g) the rules governing the lodging, verification and admission of claims; (h) the rules governing the distribution of proceeds from the realisation of assets, the ranking of claims, and the rights of creditors who have obtained partial satisfaction after the opening of winding-up proceedings by virtue of a right in rem or through a set-off; (i) the conditions for and the effects of closure of winding-up proceedings, in particular by composition; (j) creditors’ rights after the closure of winding-up proceedings; (k) who is to bear the cost and expenses incurred in the winding-up proceedings; (l) the rules relating to the voidness, voidability or unenforceability of legal acts detrimental to all the creditors. Article 10

Treatment of insurance claims

1. Member States shall ensure that insurance claims take precedence over other claims on the insurance undertaking according to one or both of the following methods: (a) insurance claims shall, with respect to assets representing the technical provisions, take absolute precedence over any other claim on the insurance undertaking; (b) insurance claims shall, with respect to the whole of the insurance undertaking’s assets, take precedence over any other claim on the insurance undertaking with the only possible exception of: (i) claims by employees arising from employment contracts and employment relationships, (ii) claims by public bodies on taxes, (iii) claims by social security systems, (iv) claims on assets subject to rights in rem. 2. Without prejudice to paragraph 1, Member States may provide that the whole or a part of the expenses arising from the winding-up procedure, as defined by their national legislation, shall take precedence over insurance claims. 3. Member States which have opted for the method provided for in paragraph 1(a) shall require that insurance undertakings establish and keep up to date a special register in line with the provisions set out in the Annex. Article 11 Subrogation to a guarantee scheme The home Member State may provide that, where the rights of insurance creditors have been subrogated to a guarantee scheme established in that Member State, claims by that scheme shall not benefit from the provisions of Article 10(1).

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1.68 Article 12

Regulation of Insurers Representation of preferential claims by assets

By way of derogation from Article 18 of Directive 73/239/EEC and Article 21 of Directive 79/267/EEC, Member States which apply the method set out in Article 10(1)(b) of this Directive shall require every insurance undertaking to represent, at any moment and independently from a possible winding-up, the claims which may take precedence over insurance claims pursuant to Article 10(1)(b) and which are registered in the insurance undertaking’s accounts, by assets mentioned in Article 21 of Directive 92/49/EEC and Article 21 of Directive 92/96/EEC. Article 13

Withdrawal of the authorisation

1. Where the opening of winding-up proceedings is decided in respect of an insurance undertaking, the authorisation of the insurance undertaking shall be withdrawn, except to the extent necessary for the purposes of paragraph 2, in accordance with the procedure laid down in Article 22 of Directive 73/239/EEC and Article 26 of Directive 79/267/EEC, if the authorisation has not been previously withdrawn. 2. The withdrawal of authorisation pursuant to paragraph 1 shall not prevent the liquidator or any other person entrusted by the competent authorities from carrying on some of the insurance undertakings’ activities in so far as that is necessary or appropriate for the purposes of winding-up. The home Member State may provide that such activities shall be carried on with the consent and under the supervision of the supervisory authorities of the home Member State. Article 14

Publication

1. The competent authority, the liquidator or any person appointed for that purpose by the competent authority shall publish the decision to open winding-up proceedings in accordance with the publication procedures provided for in the home Member State and also publish an extract from the winding-up decision in the Official Journal of the European Communities. The supervisory authorities of all the other Member States which have been informed of the decision to open winding-up proceedings in accordance with Article 8(3) may ensure the publication of such decision within their territories in the manner they consider appropriate. 2. The publication of the decision to open winding-up proceedings provided for in paragraph 1 shall also specify the competent authority of the home Member State, the applicable law and the liquidator appointed. It shall be in the official language or in one of the official languages of the Member State in which the information is published. Article 15

Information to known creditors

1. When winding-up proceedings are opened, the competent authorities of the home Member State, the liquidator or any person appointed for that purpose by the competent authorities shall without delay individually inform by written notice each known creditor who has his normal place of residence, domicile or head office in another Member State thereof. 2. The notice referred to in paragraph 1 shall in particular deal with time limits, the penalties laid down with regard to those time limits, the body or authority empowered to accept the lodgement of claims or observations relating to claims and the other measures laid down. The notice shall also indicate whether creditors whose claims are preferential or secured in rem need to lodge their claims. In the case of insurance claims, the notice shall further indicate the general effects of the winding-up proceedings on the insurance contracts, in particular, the date on which the insurance contracts or the operations will cease to produce effects and the rights and duties of insured persons with regard to the contract or operation. Article 16

Right to lodge claims

1. Any creditor who has his normal place of residence, domicile or head office in a Member State other than the home Member State, including Member States’ public authorities, shall have the right to lodge claims or to submit written observations relating to claims.

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2. The claims of all creditors who have their normal place of residence, domicile or head office in a Member State other than the home Member State, including the aforementioned authorities, shall be treated in the same way and accorded the same ranking as claims of an equivalent nature lodgeable by creditors who have their normal place of residence, domicile or head office in the home Member State. 3. Except in cases where the law of the home Member State allows otherwise, a creditor shall send copies of supporting documents, if any, and shall indicate the nature of the claim, the date on which it arose and the amount, whether he alleges preference, security in rem or reservation of title in respect of the claim and what assets are covered by his security. The precedence granted to insurance claims by Article 10 need not be indicated. Article 17

Languages and form

1. The information in the notice referred to in Article 15 shall be provided in the official language or one of the official languages of the home Member State. For that purpose a form shall be used bearing the heading ‘Invitation to lodge a claim; time limits to be observed’ or, where the law of the home Member State provides for the submission of observations relating to claims, ‘Invitation to submit observations relating to a claim; time limits to be observed’, in all the official languages of the European Union. However, where a known creditor is a holder of an insurance claim, the information in the notice referred to in Article 15 shall be provided in the official language or one of the official languages of the Member State in which the creditor has his normal place of residence, domicile or head office. 2. Any creditor who has his normal place of residence, domicile or head office in a Member State other than the home Member State may lodge his claim or submit observations relating to his claim in the official language or one of the official languages of that other Member State. However, in that event the lodgement of his claim or the submission of observations on his claim, as appropriate, shall bear the heading ‘Lodgement of claim’ or ‘Submission of observations relating to claims’, as appropriate, in the official language or one of the official languages of the home Member State. Article 18

Regular information to the creditors

1. Liquidators shall keep creditors regularly informed, in an appropriate manner, in particular regarding the progress of the winding-up. 2. The supervisory authorities of the Member States may request information on developments in the winding-up procedure from the supervisory authorities of the home Member State.

TITLE IV Article 19

P R O V I S I O N S C O M M O N T O R E O R G A N I S AT I O N M E A S U R E S A N D WINDING-UP PROCEEDINGS Effects on certain contracts and rights

By way of derogation from Articles 4 and 9, the effects of the opening of reorganisation measures or of winding-up proceedings on the contracts and rights specified below shall be governed by the following rules: (a) employment contracts and employment relationships shall be governed solely by the law of the Member State applicable to the employment contract or employment relationship; (b) a contract conferring the right to make use of or acquire immovable property shall be governed solely by the law of the Member State in whose territory the immovable property is situated; (c) rights of the insurance undertaking with respect to immovable property, a ship or an aircraft subject to registration in a public register shall be governed by the law of the Member State under whose authority the register is kept.

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1.68 Article 20

Regulation of Insurers Third parties’ rights in rem

1. The opening of reorganisation measures or winding-up proceedings shall not affect the rights in rem of creditors or third parties in respect of tangible or intangible, movable or immovable assets—both specific assets and collections of indefinite assets as a whole which change from time to time—belonging to the insurance undertaking which are situated within the territory of another Member State at the time of the opening of such measures or proceedings. 2. The rights referred to in paragraph 1 shall in particular mean: (a) the right to dispose of assets or have them disposed of and to obtain satisfaction from the proceeds of or income from those assets, in particular by virtue of a lien or a mortgage; (b) the exclusive right to have a claim met, in particular a right guaranteed by a lien in respect of the claim or by assignment of the claim by way of a guarantee; (c) the right to demand the assets from, and/or to require restitution by, anyone having possession or use of them contrary to the wishes of the party so entitled; (d) a right in rem to the beneficial use of assets. 3. The right, recorded in a public register and enforceable against third parties, under which a right in rem within the meaning of paragraph 1 may be obtained, shall be considered a right in rem. 4. Paragraph 1 shall not preclude actions for voidness, voidability or unenforceability referred to in Article 9(2)(l).

Article 21

Reservation of title

1. The opening of reorganisation measures or winding-up proceedings against an insurance undertaking purchasing an asset shall not affect the seller’s rights based on a reservation of title where at the time of the opening of such measures or proceedings the asset is situated within the territory of a Member State other than the State in which such measures or proceedings were opened. 2. The opening of reorganisation measures or winding-up proceedings against an insurance undertaking selling an asset, after delivery of the asset, shall not constitute grounds for rescinding or terminating the sale and shall not prevent the purchaser from acquiring title where at the time of the opening of such measures or proceedings the asset sold is situated within the territory of a Member State other than the State in which such measures or proceedings were opened. 3. Paragraphs 1 and 2 shall not preclude actions for voidness, voidability or unenforceability referred to in Article 9(2)(l).

Article 22

Set-off

1. The opening of reorganisation measures or winding-up proceedings shall not affect the right of creditors to demand the set-off of their claims against the claims of the insurance undertaking, where such a set-off is permitted by the law applicable to the insurance undertaking’s claim. 2. Paragraph 1 shall not preclude actions for voidness, voidability or unenforceability referred to in Article 9(2)(l).

Article 23

Regulated markets

1. Without prejudice to Article 20 the effects of a reorganisation measure or the opening of winding-up proceedings on the rights and obligations of the parties to a regulated market shall be governed solely by the law applicable to that market. 2. Paragraph 1 shall not preclude any action for voidness, voidability, or unenforceability referred to in Article 9(2)(l) which may be taken to set aside payments or transactions under the law applicable to that market.

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Directive 2001/17/EC of the European Parliament and of the Council Article 24

1.68

Detrimental acts

Article 9(2)(l) shall not apply, where a person who has benefited from a legal act detrimental to all the creditors provides proof that: (a) the said act is subject to the law of a Member State other than the home Member State, and (b) that law does not allow any means of challenging that act in the relevant case. Article 25

Protection of third-party purchasers

Where, by an act concluded after the adoption of a reorganisation measure or the opening of winding-up proceedings, an insurance undertaking disposes, for a consideration, of: (a) an immovable asset, (b) a ship or an aircraft subject to registration in a public register, or (c) transferable or other securities whose existence or transfer presupposes entry in a register or account laid down by law or which are placed in a central deposit system governed by the law of a Member State, the validity of that act shall be governed by the law of the Member State within whose territory the immovable asset is situated or under whose authority the register, account or system is kept. Article 26

Lawsuits pending

The effects of reorganisation measures or winding-up proceedings on a pending lawsuit concerning an asset or a right of which the insurance undertaking has been divested shall be governed solely by the law of the Member State in which the lawsuit is pending. Article 27

Administrators and liquidators

1. The administrator’s or liquidator’s appointment shall be evidenced by a certified copy of the original decision appointing him or by any other certificate issued by the competent authorities of the home Member State. A translation into the official language or one of the official languages of the Member State within the territory of which the administrator or liquidator wishes to act may be required. No legalisation or other similar formality shall be required. 2. Administrators and liquidators shall be entitled to exercise within the territory of all the Member States all the powers which they are entitled to exercise within the territory of the home Member State. Persons to assist or, where appropriate, represent administrators and liquidators may be appointed, according to the home Member State’s legislation, in the course of the reorganisation measure or winding-up proceedings, in particular in host Member States and, specifically, in order to help overcome any difficulties encountered by creditors in the host Member State. 3. In exercising his powers according to the home Member State’s legislation, an administrator or liquidator shall comply with the law of the Member States within whose territory he wishes to take action, in particular with regard to procedures for the realisation of assets and the informing of employees. Those powers may not include the use of force or the right to rule on legal proceedings or disputes. Article 28

Registration in a public register

1. The administrator, liquidator or any other authority or person duly empowered in the home Member State may request that a reorganisation measure or the decision to open winding-up proceedings be registered in the land register, the trade register and any other public register kept in the other Member States. However, if a Member State prescribes mandatory registration, the authority or person referred to in subparagraph 1 shall take all the measures necessary to ensure such registration. 2. The costs of registration shall be regarded as costs and expenses incurred in the proceedings.

587

1.68 Article 29

Regulation of Insurers Professional secrecy

All persons required to receive or divulge information in connection with the procedures of communication laid down in Articles 5, 8 and 30 shall be bound by professional secrecy, in the same manner as laid down in Article 16 of Directive 92/49/EEC and Article 15 of Directive 92/96/EEC, with the exception of any judicial authorities to which existing national provisions apply. Article 30

Branches of third country insurance undertakings

1. Notwithstanding the definitions laid down in Article 2(e), (f) and (g) and for the purpose of applying the provisions of this Directive to the reorganisation measures and winding-up proceedings concerning a branch situated in a Member State of an insurance undertaking whose head office is located outside the Community: (a) ‘‘home Member State’’ means the Member State in which the branch has been granted authorisation according to Article 23 of Directive 73/239/EEC and Article 27 of Directive 79/267/EEC, and (b) ‘‘supervisory authorities’’ and ‘‘competent authorities’’ mean such authorities of the Member State in which the branch was authorised. 2. When an insurance undertaking whose head office is outside the Community has branches established in more than one Member State, each branch shall be treated independently with regard to the application of this Directive. The competent authorities and the supervisory authorities of these Member States shall endeavour to coordinate their actions. Any administrators or liquidators shall likewise endeavour to coordinate their actions. Article 31

Implementation of this Directive

1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive before 20 April 2003. They shall forthwith inform the Commission thereof. When Member States adopt these measures, they shall contain a reference to this Directive or shall be accompanied by such reference on the occasion of their official publication. The methods of making such reference shall be laid down by Member States. 2. National provisions adopted in application of this Directive shall apply only to reorganisation measures or winding-up proceedings adopted or opened after the date referred to in paragraph 1. Reorganisation measures adopted or winding up proceedings opened before that date shall continue to be governed by the law that was applicable to them at the time of adoption or opening. 3. Member States shall communicate to the Commission the text of the main provisions of domestic law which they adopt in the field governed by this Directive. Article 32

Entry into force

This Directive shall enter into force on the day of its publication in the Official Journal of the European Communities. Article 33

Addressees

This Directive is addressed to the Member States.

ANNEX SPECIAL REGISTER REFERRED TO IN ARTICLE 10(3) 1. Every insurance undertaking must keep at its head office a special register of the assets used to cover the technical provisions calculated and invested in accordance with the home Member State’s rules.

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2. Where an insurance undertaking transacts both non-life and life business, it must keep at its head office separate registers for each type of business. However, where a Member State authorises insurance undertakings to cover life and the risks listed in points 1 and 2 of Annex A to Directive 73/239/EEC, it may provide that those insurance undertakings must keep a single register for the whole of their activities. 3. The total value of the assets entered, valued in accordance with the rules applicable in the home Member State, must at no time be less than the value of the technical provisions. 4. Where an asset entered in the register is subject to a right in rem in favour of a creditor or a third party, with the result that part of the value of the asset is not available for the purpose of covering commitments, that fact is recorded in the register and the amount not available is not included in the total value referred to in point 3. 5. Where an asset employed to cover technical provisions is subject to a right in rem in favour of a creditor or a third party, without meeting the conditions of point 4, or where such an asset is subject to a reservation of title in favour of a creditor or of a third party or where a creditor has a right to demand the set-off of his claim against the claim of the insurance undertaking, the treatment of such asset in case of the winding-up of the insurance undertaking with respect to the method provided for in Article 10(1)(a) shall be determined by the legislation of the home Member State except where Articles 20, 21 or 22 apply to that asset. 6. The composition of the assets entered in the register in accordance with points 1 to 5, at the time when winding-up proceedings are opened, must not thereafter be changed and no alteration other than the correction of purely clerical errors must be made in the registers, except with the authorisation of the competent authority. 7. Notwithstanding point 6, the liquidators must add to the said assets the yield therefrom and the value of the pure premiums received in respect of the class of business concerned between the opening of the winding-up proceedings and the time of payment of the insurance claims or until any transfer of portfolio is effected. 8. If the product of the realisation of assets is less than their estimated value in the registers, the liquidators must be required to justify this to the home Member States’ competent authorities. 9. The supervisory authorities of the Member States must take appropriate measures to ensure full application by the insurance undertakings of the provisions of this Annex.

1.69 DIRECTIVE 2002/13/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL OF 5 MARCH 2002 AMENDING COUNCIL DIRECTIVE 73/239/EEC AS REGARDS THE SOLVENCY MARGIN REQUIREMENTS FOR NON-LIFE INSURANCE UNDERTAKINGS General Note This Directive amends Council Directive 73/239/EEC as regards the solvency margin requirements for nonlife insurance undertakings, to provide for minimum standards and to simplify and increase the existing minimum guarantee funds. The amendment is incorporated into the text of Council Directive 73/239/EEC (see para 1.59) and is not reproduced here.

1.70 DIRECTIVE 2007/44/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL OF 5 SEPTEMBER 2007 AMENDING COUNCIL DIRECTIVE 92/49/EEC AND DIRECTIVES 2002/83/EC, 2004/39/EC, 2005/68/EC AND 2006/48/EC AS REGARDS PROCEDURAL RULES AND EVALUATION CRITERIA FOR THE PRUDENTIAL ASSESSMENT OF ACQUISITIONS AND INCREASE OF HOLDINGS IN THE FINANCIAL SECTOR General Note This Directive entered into force on 21 September 2007 and must be implemented in the national context by 20 March 2009. It consists entirely of amendments to the various Directives referred to in the title. Its purpose is to introduce harmonised criteria for the assessment of acquisitions of qualifying holdings in insurance undertakings.

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1.70

Regulation of Insurers

The acquisition of a qualifying holding is subject to scrutiny in a number of member states, including the UK. The Directive is intended to prevent that initial conditions for authorisation are circumvented by the acquisition of a qualifying holding in the target entity. The aim is to achieve harmonisation among the member states (including the EEA states) of the supervision procedure and the prudential assessments, to prevent individual states from laying down stricter rules. To that end, the Directive harmonises the thresholds for notifying a proposed acquisition or a disposal of a qualifying holding, the assessment procedure and the list of assessment criteria.

590

CHAPTER 2

REINSURANCE

OVERVIEW 2.1 Reinsurance is regulated by the UK financial services legislation in much the same way as direct insurance, although there are modifications relating to solvency margins and accounting, and also the Insurance Conduct of Business Rules—which are largely concerned with protecting policyholders—are irrelevant in the reinsurance context and thus do not extend to reinsurance. European Community law, while regulating direct insurance since 1973 (including the reinsurance business carried out by direct insurers), did not until comparatively recently seek to extend single market principles to, or regulate the activities of, pure reinsurers. The only measure in place was Council Directive 64/225/EEC, which was an early attempt to remove national barriers to the creation of branches and to the provision of reinsurance by way of cross-border services. Matters remained in this state until the adoption in November 2005 of the European Parliament and Council Directive 2005/68/EC, the Reinsurance Directive. This measure brings the regulation of pure reinsurers, including captive insurers, into line with the regulation of direct insurers, by imposing a harmonised regulatory regime for reinsurance across the EU based on the usual principles of authorisation, control of transfer of business, solvency requirements and home state control for all EU activities. The Directive also lays down minimum requirements of home state control for two particular forms of alternative risk transfer used as an alternative to traditional reinsurance, namely finite reinsurance and the use of special purpose vehicles: as yet there is no harmonised regulatory system for ART, but this may be expected to develop along with the European Commission’s expertise of the entire ART concept. The Reinsurance Directive 2005 had to be implemented by member states by 10 December 2007. The UK has implemented the Directive by modifications to the Financial Services Authority’s Handbook. 2.20 COUNCIL DIRECTIVE 64/225/EEC OF 25 FEBRUARY 1964 ON THE ABOLITION OF RESTRICTIONS ON FREEDOM OF ESTABLISHMENT AND FREEDOM TO PROVIDE SERVICES IN RESPECT OF REINSURANCE AND RETROCESSION THE COUNCIL OF THE EUROPEAN ECONOMIC COMMUNITY, Having regard to the Treaty establishing the European Economic Community, and in particular Articles 54(2) and (3) and 63(2) thereof; Having regard to the General Programme for the abolition of restrictions on freedom of establishment, and in particular Title IV A thereof; Having regard to the General Programme for the abolition of restrictions on freedom to provide services, and in particular Title V C thereof; Having regard to the proposal from the Commission; Having regard to the Opinion of the European Parliament; Having regard to the Opinion of the Economic and Social Committee;

591

2.20

Reinsurance

Whereas the General Programmes provide that all branches of reinsurance must, without distinction, be liberalised before the end of 1963 as regards both right of establishment and provision of services; Whereas reinsurance is effected not only by undertakings specialising in reinsurance but also by so-called ‘‘mixed’’ undertakings, which deal both in direct insurance and in reinsurance and which should therefore be covered by measures taken in implementation of this Directive in respect of that part of their business which is concerned with reinsurance and retrocession; Whereas, for the purposes of applying measures concerning right of establishment and freedom to provide services, companies and firms are to be treated in the same way as natural persons who are nationals of Member States, subject only to the conditions laid down in Article 58 and, where necessary, to the condition that there should exist a real and continuous link with the economy of a Member State; whereas therefore no company or firm may be required, in order to obtain the benefit of such measures, to fulfil any additional condition, and in particular no company or firm may be required to obtain any special authorisation not required of a domestic company or firm wishing to pursue a particular economic activity ; whereas, however, such uniformity of treatment should not prevent Member States from requiring that a company having a share capital should operate in their countries under the description by which it is known in the law of the Member State under which it is constituted, and that it should indicate the amount of its subscribed capital on the business papers which it uses in the host Member State; HAS ADOPTED THIS DIRECTIVE: Article 1 Member States shall abolish, in respect of the natural persons and companies or firms covered by Title I of the General Programmes for the abolition of restrictions on freedom of establishment and freedom to provide services the restrictions referred to in Title III of those General Programmes affecting the right to take up and pursue the activities specified in Article 2 of this Directive. Article 2 The provisions of this Directive shall apply: 1. to activities of self-employed persons in reinsurance and retrocession falling within Group ex 630 1 OJ No 2, 15.1.1962, p. 36/62. 2 OJ No 2, 15.1.1962, p. 32/62. 3 OJ No 33, 4.3.1963, p. 482/63. 4 OJ No 56, 4.4.1963, p. 882/64. in Annex I to the General Programme for the abolition of restrictions on freedom of establishment; 2. in the special case of natural persons, companies or firms referred to in Article 1 which deal both in direct insurance and in reinsurance and retrocession, to that part of their activities which is concerned with reinsurance and retrocession. Article 3 Article 1 shall apply in particular to restrictions arising out of the following provisions: (a) with regard to freedom of establishment: — in the Federal Republic of Germany (1) Versicherungsaufsichtsgesetz of 6 June 1931, last sentence of Article 106 (2), and Article 111 (2), whereby the Federal Minister of Economic Affairs is given discretionary powers to impose on foreign nationals conditions for taking up activities in insurance and to prohibit such nationals from pursuing such activities in the territory of the Federal Republic; (2) Gewerbeordnung, paragraph 12, and Law of 30 January 1937, Article 292, whereby foreign companies and firms are required to obtain prior authorisation; — in the Kingdom of Belgium, Arrˆet´e royal No 62 of 16 November 1939 and Arrˆet´e minist´eriel of 17 December 1945, which require the possession of a carte professionelle; — in the French Republic

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2.21

(1) D´ecret-loi of 12 November 1938 and D´ecret of 2 February 1939, both as amended by the Law of 8 October 1940, which require the possession of a carte d’identit´e de commer¸cant; (2) Second paragraph of Article 2 of the Law of 15 February 1917, as amended and supplemented by D´ecret-loi of 30 October 1935, which requires that special authorisation be obtained; — in the Grand Duchy of Luxembourg, Law of 2 June 1962, Articles 19 and 21 (M´emorial A No 31 of 19 June 1962). (b) with regard to freedom to provide services: — in the French Republic, Law of 15 February 1917, as amended by D´ecret-loi of 30 October 1935, namely: (1) The second paragraph of Article 1, which empowers the Minister of Finance to draw up a list of specified undertakings, or of undertakings of a specified country, with which no contract for reinsurance or retrocession of any risk in respect of any person, property or liability in France may be concluded; (2) the last paragraph of Article 1, which prohibits the acceptance of reinsurance or of retrocession risks insured by the undertakings referred to in (b) (1) above; (3) the first paragraph of Article 2, which requires that the name of the person referred to in that Article must be submitted to the Minister of Finance for approval; — in the Republic of Italy, The second paragraph of Article 73 of the consolidated text approved by Decreto No 449 of 13 February 1959, which empowers the Minister of Industry and Commerce to prohibit the transfer of reinsurance or retrocession risks to specified foreign undertakings which have not established legal representation in Italian territory. Article 4 Member States shall adopt the measures necessary to comply with this Directive within six months of its notification and shall forthwith inform the Commission thereof. Article 5 This Directive is addressed to the Member States.

2.21 DIRECTIVE 2005/68/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL OF 16 NOVEMBER 2005 ON REINSURANCE AND AMENDING COUNCIL DIRECTIVES 73/239/EEC, 92/49/EEC AS WELL AS DIRECTIVES 98/78/EC AND 2002/83/EC THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, and in particular Articles 47(2) and 55 thereof, Having regard to the proposal from the Commission, Having regard to the opinion of the European Economic and Social Committee, After consulting the Committee of the Regions, Acting in accordance with the procedure laid down in Article 251 of the Treaty, Whereas: (1) Council Directive 73/239/EEC of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance, Council Directive 92/49/EEC of 18 June 1992 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance have laid down the provisions relating to the taking-up and pursuit of direct insurance in the Community.

593

2.21

Reinsurance

(2) Those Directives provide for the legal framework for insurance undertakings to conduct insurance business in the internal market, from the point of view both of the right of establishment and of the freedom to provide services, in order to make it easier for insurance undertakings with head offices in the Community to cover commitments situated within the Community and to make it possible for policy holders to have recourse not only to insurers established in their own country, but also to insurers which have their head office in the Community and are established in other Member States. (3) The regime laid down by those Directives applies to direct insurance undertakings in respect of their entire business carried on, both direct insurance activities as well as reinsurance activities by way of acceptances; however reinsurance activities conducted by specialised reinsurance undertakings are neither subject to that regime nor any other regime provided for by Community law. (4) Reinsurance is a major financial activity as it allows direct insurance undertakings, by facilitating a wider distribution of risks at worldwide level, to have a higher underwriting capacity to engage in insurance business and provide insurance cover and also to reduce their capital costs; furthermore, reinsurance plays a fundamental role in financial stability, since it is an essential element in ensuring the financial soundness and the stability of direct insurance markets as well as the financial system as a whole, because it involves major financial intermediaries and institutional investors. (5) Council Directive 64/225/EEC of 25 February 1964 on the abolition of restrictions on freedom of establishment and freedom to provide services in respect of reinsurance and retrocession has removed the restrictions on the right of establishment and the freedom to provide services related to the nationality or residence of the provider of reinsurance. It has not however removed restrictions caused by divergences between national provisions as regards prudential regulation of reinsurance. This situation has resulted in significant differences in the level of supervision of reinsurance undertakings in the Community, which create barriers to the pursuit of reinsurance business, such as the obligation for the reinsurance undertaking to pledge assets in order to cover its part of the technical provisions of the direct insurance undertaking, as well as the compliance by reinsurance undertakings with different supervisory rules in the various Member States in which they conduct business or an indirect supervision of the various aspects of a reinsurance undertaking by the competent authorities of direct insurance undertakings. (6) The Action Plan for Financial Services has identified reinsurance as a sector which requires action at Community level in order to complete the internal market for financial services. Moreover, major financial fora, such as the International Monetary Fund and the International Association of Insurance Supervisors (IAIS) have highlighted the lack of harmonised reinsurance supervision rules at Community level as an important gap in the financial services regulatory framework that should be filled. (7) This Directive aims at establishing a prudential regulatory framework for reinsurance activities in the Community. It forms part of the body of Community legislation in the field of insurance aimed at establishing the Internal Market in the insurance sector. (8) This Directive is consistent with major international work carried out on reinsurance prudential rules, in particular the IAIS. (9) This Directive follows the approach of Community legislation adopted in respect of direct insurance by carrying out the harmonisation which is essential, necessary and sufficient to ensure the mutual recognition of authorisations and prudential control systems, thereby making it possible to grant a single authorisation valid throughout the Community and apply the principle of supervision by the home Member State. (10) As a result, the taking up and the pursuit of the business of reinsurance are subject to the grant of a single official authorisation issued by the competent authorities of the Member State in which a reinsurance undertaking has its head office. Such authorisation enables an undertaking to carry on business throughout the Community, under the right of establishment or the freedom to provide services. The Member State of the branch or of the provision of services may not require a reinsurance undertaking which wishes to carry on reinsurance business in its territory and which has already been authorised in its home Member State to seek fresh authorisation. Furthermore a reinsurance undertaking which has already been authorised in its home Member State should not be subject to additional supervision or checks related to its financial soundness performed by the competent authorities of an insurance undertaking

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2.21

which is reinsured by that reinsurance undertaking. In addition, Member States should not be allowed to require a reinsurance undertaking authorised in the Community to pledge assets in order to cover its part of the cedant’s technical provisions. The conditions for the granting or withdrawal of such authorisation should be defined. The competent authorities should not authorise or continue the authorisation of a reinsurance undertaking which does not fulfil the conditions laid down in this Directive. (11) This Directive should apply to reinsurance undertakings which conduct exclusively reinsurance business and do not engage in direct insurance business; it should also apply to the so-called ‘‘captive’’ reinsurance undertakings created or owned by either a financial undertaking other than an insurance or reinsurance undertaking or a group of insurance or reinsurance undertakings to which Directive 98/78/EC of the European Parliament and of the Council of 27 October 1998 on the supplementary supervision of insurance undertakings in an insurance group applies, or by one or several non-financial undertakings, the purpose of which is to provide reinsurance cover exclusively for the risks of the undertakings to which they belong. When in this Directive reference is made to reinsurance undertakings, it should include captive reinsurance undertakings, except where special provision is made for captive reinsurance undertakings. Captive reinsurance undertakings do not cover risks deriving from the external direct insurance or reinsurance business of an insurance or reinsurance undertaking belonging to the group. Furthermore, insurance or reinsurance undertakings belonging to a financial conglomerate may not own a captive undertaking. (12) This Directive should however not apply to insurance undertakings which are already subject to Directives 73/239/EEC or 2002/83/EC; however, in order to ensure the financial soundness of insurance undertakings which also carry on reinsurance business and that the specific characteristics of those activities is duly taken into account by the capital requirements of those insurance undertakings, the provisions relating to the solvency margin of reinsurance undertakings contained in this Directive should apply to reinsurance business of those insurance undertakings, if the volume of their reinsurance activities represents a significant part of their entire business. (13) This Directive should not apply to the provision of reinsurance cover carried out or fully guaranteed by a Member State for reasons of substantial public interest, in the capacity of reinsurer of last resort, in particular where because of a specific situation in a market, it is not feasible to obtain adequate commercial cover; in this regard, a lack of ‘‘adequate commercial cover’’ should mainly mean a market failure which is characterised by an evident lack of a sufficient range of insurance offers, although excessive premiums should not per se imply inadequacy of that commercial cover. Article 1(2)(d) of this Directive also applies to arrangements between insurance undertakings to which Directives 73/239/EEC or 2002/83/EC apply and which aim to pool financial claims ensuing from major risks such as terrorism. (14) Reinsurance undertakings are to limit their objects to the business of reinsurance and related operations. This requirement may allow a reinsurance undertaking to carry on, for instance, activities, such as provision of statistical or actuarial advice, risk analysis or research for its clients. It may also include a holding company function and activities with respect to financial sector activities within the meaning of Article 2, point 8, of Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate. In any case, this requirement does not allow the carrying on of unrelated banking and financial activities. (15) This Directive should clarify the powers and means of supervision vested in the competent authorities. The competent authorities of the reinsurance undertaking’s home Member State should be responsible for monitoring the financial health of reinsurance undertakings, including their state of solvency, the establishment of adequate technical provisions and equalisation reserves and the covering of those provisions and reserves by quality assets. (16) The competent authorities of the Member States should have at their disposal such means of supervision as are necessary to ensure the orderly pursuit of business by reinsurance undertakings throughout the Community whether carried on under the right of establishment or the freedom to provide services. In particular, they should be able to introduce appropriate

595

2.21

Reinsurance

safeguards or impose penalties aimed at preventing irregularities and infringements of the provisions on reinsurance supervision. (17) The provisions governing transfers of portfolios should be in line with the single authorisation provided for in this Directive. They should apply to the various kinds of transfers of portfolios between reinsurance undertakings, such as transfers of portfolios resulting from mergers between reinsurance undertakings or other instruments of company law or transfers of portfolios of outstanding losses in run-off to another reinsurance undertaking. Moreover, the provisions governing transfers of portfolios should include provisions specifically concerning the transfer to another reinsurance undertaking of the portfolio of contracts concluded under the right of establishment or the freedom to provide services. (18) Provision should be made for the exchange of information between the competent authorities and authorities or bodies which, by virtue of their function, help to strengthen the stability of the financial system. In order to preserve the confidential nature of the information forwarded, the list of addressees should remain within strict limits. It is therefore necessary to specify the conditions under which the abovementioned exchanges of information are authorised; moreover, where it is laid down that information may be disclosed only with the express agreement of the competent authorities, these may, where appropriate, make their agreement subject to compliance with strict conditions. In this regard, and with a view to ensuring the proper supervision of reinsurance undertakings by the competent authorities, this Directive should provide for rules enabling Member States to conclude agreements on exchange of information with third countries provided that the information disclosed is subject to appropriate guarantees of professional secrecy. (19) For the purposes of strengthening the prudential supervision of reinsurance undertakings, it should be laid down that an auditor has a duty to report promptly to the competent authorities, wherever, as provided for by this Directive, he/she becomes aware, while carrying out his/her tasks, of certain facts which are liable to have a serious effect on the financial situation or the administrative and accounting organisation of a reinsurance undertaking. Having regard to the aim in view, it is desirable for Member States to provide that such a duty should apply in all circumstances where such facts are discovered by an auditor during the performance of his/her tasks in an undertaking which has close links with a reinsurance undertaking. The duty of auditors to communicate, where appropriate, to the competent authorities certain facts and decisions concerning a reinsurance undertaking which they discover during the performance of their tasks in a non-reinsurance undertaking does not in itself change the nature of their tasks in that undertaking nor the manner in which they must perform those tasks in that undertaking. (20) Provision should be made to define the application of this Directive to existing reinsurance undertakings which were already authorised or entitled to conduct reinsurance business in accordance with the provisions of the Member States before the application of this Directive. (21) In order to allow a reinsurance undertaking to meet its commitments, the home Member State should require a reinsurance undertaking to establish adequate technical provisions. The amount of such technical provisions should be determined in accordance with Council Directive 91/674/EEC of 19 December 1991 on the annual accounts and consolidated accounts of insurance undertakings and, in respect of life reinsurance activities, the home Member State should also be allowed to lay down more specific rules in accordance with Directive 2002/83/EC. (22) A reinsurance undertaking conducting reinsurance business in respect of credit insurance, whose credit reinsurance business amounts to more than a small proportion of its total business, should be required to set up an equalisation reserve which does not form part of the solvency margin; that reserve should be calculated according to one of the methods laid down in Directive 73/239/EEC and which are recognised as equivalent; furthermore, this Directive should allow the home Member State also to require reinsurance undertakings whose head office is situated within its territory to set up equalisation reserves for classes of risks other than credit reinsurance, following the rules laid down by that home Member State. Following the introduction of the International Financial Reporting Standards (IFRS 4), this Directive should clarify the prudential treatment of equalisation reserves established in accordance with this Directive. However, since supervision of reinsurance needs to be reassessed under the

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Solvency II project, this Directive does not pre-empt any future reinsurance supervision under Solvency II. (23) A reinsurance undertaking should have assets to cover technical provisions and equalisation reserves which should take account of the type of business that it carries out in particular the nature, amount and duration of the expected claims payments, in such a way as to secure the sufficiency, liquidity, security, quality, profitability and matching of its investments, which the undertaking should ensure are diversified and adequately spread and which gives the undertaking the possibility of responding adequately to changing economic circumstances, in particular developments in the financial markets and real estate markets or major catastrophic events. (24) It is necessary that, over and above technical provisions, reinsurance undertakings should possess a supplementary reserve, known as the solvency margin, represented by free assets and, with the agreement of the competent authority, by other implicit assets, which is to act as a buffer against adverse business fluctuations. This requirement is an important element of prudential supervision. Pending the revision of the existing solvency margin regime, which the Commission is carrying on under the so-called ‘‘Solvency II project’’, in order to determine the required solvency margin of reinsurance undertakings, the rules provided for in existing legislation in the field of direct insurance should be applicable. (25) In the light of the similarities between life reassurance covering mortality risk and nonlife reinsurance, in particular the cover of insurance risks and the duration of the life reassurance contracts, the required solvency margin for life reassurance should be determined in accordance with the provisions laid down in this Directive for the calculation of the required solvency margin for non-life reinsurance; the home Member State should however be allowed to apply the rules provided for in Directive 2002/83/EC for the establishment of the required solvency margin in respect of life reassurance activities which are linked to investment funds or participating contracts. (26) In order to take account of the particular nature of some types of reinsurance contracts or specific lines of business, provision should be made to make adjustments to the calculation of the required solvency margin; these adjustments should be made by the Commission, after consulting the European Insurance and Occupational Pensions Committee, set up by Commission Decision 2004/9/EC in the exercise of its implementing powers conferred by the Treaty. (27) These measures should be adopted by the use of the regulatory procedure provided for in Article 5 of Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission. (28) The list of items eligible to represent the available solvency margin laid down by this Directive should be that provided for in Directives 73/239/EEC and 2002/83/EC. (29) Reinsurance undertakings should also possess a guarantee fund in order to ensure that they possess adequate resources when they are set up and that in the subsequent course of business the solvency margin in no event falls below a minimum of security; however, in order to take account of the specificities of captive reinsurance undertakings, provision should be made to allow the home Member State to set the minimum guarantee fund required for captive reinsurance undertakings at a lower amount. (30) Certain provisions of this Directive define minimum standards. A home Member State should be able to lay down stricter rules for reinsurance undertakings authorised by its own competent authorities, in particular with respect to solvency margin requirements. (31) This Directive should be applicable to finite reinsurance activities; therefore, a definition of finite reinsurance for the purposes of this Directive is necessary; owing to the special nature of this line of reinsurance activity, the home Member State should be given the option of laying down specific provisions for the pursuit of finite reinsurance activities. These provisions could differ from the general regime laid down in this Directive on a number of specific points. (32) This Directive should provide for rules concerning those special purpose vehicles that assume risks from insurance and reinsurance undertakings. The special nature of such special purpose vehicles, which are not insurance or reinsurance undertakings, calls for the establishment of specific provisions in Member States. Furthermore, this Directive should provide that the home Member State should lay down more detailed rules in order to set the conditions under which outstanding amounts from a special purpose vehicle can be used as assets covering technical provisions by an insurance or a reinsurance undertaking. This Directive should also

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provide that recoverable amounts from a special purpose vehicle may be considered as amounts deductible under reinsurance or retrocession contracts within the limits set out in this Directive, subject to an application by the insurance undertaking or reinsurance undertaking to the competent authority and after agreement by that authority. (33) It is necessary to provide for measures in cases where the financial position of the reinsurance undertaking becomes such that it is difficult for it to meet its underwriting liabilities. In specific situations, there is also a need for the competent authorities to be empowered to intervene at a sufficiently early stage, but in the exercise of those powers, competent authorities should inform the reinsurance undertakings of the reasons motivating such supervisory action, in accordance with the principles of sound administration and due process. As long as such a situation exists, the competent authorities should be prevented from certifying that the reinsurance undertaking has a sufficient solvency margin. (34) It is necessary to make provision for cooperation between the competent authorities of the Member States in order to ensure that a reinsurance undertaking carrying on its activities under the right of establishment and the freedom to provide services complies with the provisions applicable to it in the host Member State. (35) Provision should be made for the right to apply to the courts should an authorisation be refused or withdrawn. (36) It is important to provide that reinsurance undertakings whose head office is situated outside the Community and which conduct reinsurance business in the Community should not be subject to provisions which result in treatment more favourable than that provided to reinsurance undertakings having their head office in a Member State. (37) In order to take account of the international aspects of reinsurance, provision should be made to enable the conclusion of international agreements with a third country aimed at defining the means of supervision over reinsurance entities which conduct business in the territory of each contracting party. (38) Provision should be made for a flexible procedure to make it possible to assess prudential equivalence with third countries on a Community basis, so as to improve liberalisation of reinsurance services in third countries, be it through establishment or cross-border provision of services. To that end, this Directive should provide for procedures for negotiating with third countries. (39) The Commission should be empowered to adopt implementing measures provided that these do not modify the essential elements of this Directive. These implementing measures should enable the Community to take account of the future development of reinsurance. The measures necessary for implementation of this Directive should be adopted in accordance with Decision 1999/468/EC. (40) The existing Community legal framework for insurance should be adapted in order to take account of the new supervisory regime for reinsurance undertakings laid down by this Directive and in order to ensure a consistent regulatory framework for the whole insurance sector. In particular, the existing provisions which permit ‘‘indirect supervision’’ of reinsurance undertakings by the authorities competent for the supervision of direct insurance undertakings should be adapted. Furthermore, it is necessary to abolish the current provisions enabling Member States to require pledging of assets covering the technical provisions of an insurance undertaking, whatever form this requirement might take, when the insurer is reinsured by a reinsurance undertaking authorised pursuant to this Directive or by an insurance undertaking. Finally, provision should be made for the solvency margin required for insurance undertakings conducting reinsurance activities, when such activities represent a significant part of their business, to be subject to the solvency rules provided for reinsurance undertakings in this Directive. Directives 73/239/EEC, 92/49/EEC and 2002/83/EC should therefore be amended accordingly. (41) Directive 98/78/EC should be amended in order to guarantee that reinsurance undertakings in an insurance or a reinsurance group are subject to supplementary supervision in the same manner as insurance undertakings which are currently part of an insurance group. (42) The Council, in accordance with paragraph 34 of the Interinstitutional agreement on better law-making, should encourage Member States to draw up, for themselves and in the interest of the Community, their own tables, illustrating, as far as possible, the correlation between this Directive and the transposition measures, and to make them public.

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(43) Since the objective of this Directive, namely the establishment of a legal framework for the taking up and pursuit of reinsurance activities, cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale and effects of the action, be better achieved at Community level, the Community may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve this objective. (44) Since this Directive defines minimum standards, Member States may lay down stricter rules, HAVE ADOPTED THIS DIRECTIVE: TITLE I SCOPE AND DEFINITIONS Article 1

Scope

1. This Directive lays down rules for the taking up and pursuit of the self-employed activity of reinsurance carried on by reinsurance undertakings, which conduct only reinsurance activities, and which are established in a Member State or wish to become established therein. 2. This Directive shall not apply to the following: (a) insurance undertakings to which Directives 73/239/EEC or 2002/83/EC apply; (b) activities and bodies referred to in Articles 2 and 3 of Directive 73/239/EEC; (c) activities and bodies referred to in Article 3 of Directive 2002/83/EC; (d) the activity of reinsurance conducted or fully guaranteed by the government of a Member State when this is acting, for reasons of substantial public interest, in the capacity of reinsurer of last resort, including in circumstances where such a role is required by a situation in the market in which it is not feasible to obtain adequate commercial cover. General note The Reinsurance Directive applies only to pure reinsurers: those insurers who carry on reinsurance business are regulated under the Insurance Directives. State reinsurance schemes, typically those affecting terrorism risks, are excluded. Captives are brought within the regime by Art 2.

Article 2

Definitions

1. For the purposes of this Directive, the following definitions shall apply: (a) ‘‘reinsurance’’ means the activity consisting in accepting risks ceded by an insurance undertaking or by another reinsurance undertaking. In the case of the association of underwriters known as Lloyd’s, reinsurance also means the activity consisting in accepting risks, ceded by any member of Lloyd’s, by an insurance or reinsurance undertaking other than the association of underwriters known as Lloyd’s; (b) ‘‘captive reinsurance undertaking’’ means a reinsurance undertaking owned either by a financial undertaking other than an insurance or a reinsurance undertaking or a group of insurance or reinsurance undertakings to which Directive 98/78/EC applies, or by a non-financial undertaking, the purpose of which is to provide reinsurance cover exclusively for the risks of the undertaking or undertakings to which it belongs or of an undertaking or undertakings of the group of which the captive reinsurance undertaking is a member; (c) ‘‘reinsurance undertaking’’ means an undertaking which has received official authorisation in accordance with Article 3; (d) ‘‘branch’’ means an agency or a branch of a reinsurance undertaking; (e) ‘‘establishment’’ means the head office or a branch of a reinsurance undertaking, account being taken of point (d); (f) ‘‘home Member State’’ means the Member State in which the head office of the reinsurance undertaking is situated;

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(g) ‘‘Member State of the branch’’ means the Member State in which the branch of a reinsurance undertaking is situated; (h) ‘‘host Member State’’ means the Member State in which a reinsurance undertaking has a branch or provides services; (i) ‘‘control’’ means the relationship between a parent undertaking and a subsidiary, as defined in Article 1 of Directive 83/349/EEC, or a similar relationship between any natural or legal person and an undertaking; (j) ‘‘qualifying holding’’ means a direct or indirect holding in an undertaking which represents 10% or more of the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of the undertaking in which a holding subsists; (k) ‘‘parent undertaking’’ means a parent undertaking as defined in Articles 1 and 2 of Directive 83/349/EEC; (l) ‘‘subsidiary’’ means a subsidiary undertaking as defined in Articles 1 and 2 of Directive 83/349/EEC; (m) ‘‘competent authorities’’ means the national authorities which are empowered by law or regulation to supervise reinsurance undertakings; (n) ‘‘close links’’ means a situation in which two or more natural or legal persons are linked by: (i) participation, which shall mean the ownership, direct or by way of control, of 20% or more of the voting rights or capital of an undertaking, or (ii) control, in all the cases referred to in Article 1(1) and (2) of Directive 83/349/EEC or a similar relationship between any natural or legal person and an undertaking; (o) ‘‘financial undertaking’’ means one of the following entities: (i) a credit institution, a financial institution or an ancillary banking services undertaking within the meaning of Article 1(5) and (23) of Directive 2000/12/EC, (ii) an insurance undertaking, a reinsurance undertaking or an insurance holding company within the meaning of Article 1(i) of Directive 98/78/EC, (iii) an investment firm or a financial institution within the meaning of point 1 of Article 4(1) of Directive 2004/39/EC, (iv) a mixed financial holding company within the meaning of Article 2(15) of Directive 2002/87/EC; (p) ‘‘special purpose vehicle’’ means any undertaking, whether incorporated or not, other than an existing insurance or reinsurance undertaking, which assumes risks from insurance or reinsurance undertakings and which fully funds its exposure to such risks through the proceeds of a debt issuance or some other financing mechanism where the repayment rights of the providers of such debt or other financing mechanism are subordinated to the reinsurance obligations of such a vehicle; (q) ‘‘finite reinsurance’’ means reinsurance under which the explicit maximum loss potential, expressed as the maximum economic risk transferred, arising both from a significant underwriting risk and timing risk transfer, exceeds the premium over the lifetime of the contract by a limited but significant amount, together with at least one of the following two features: (i) explicit and material consideration of the time value of money, (ii) contractual provisions to moderate the balance of economic experience between the parties over time to achieve the target risk transfer. 2. For the purposes of paragraph 1(a) of this Article, the provision of cover by a reinsurance undertaking to an institution for occupational retirement provision falling under the scope of Directive 2003/41/EC where the law of the institution’s home Member State permits such provision, shall also be considered as an activity falling under the scope of this Directive. For the purposes of paragraph 1(d), any permanent presence of a reinsurance undertaking in the territory of a Member State shall be treated in the same way as an agency or branch, even if that presence does not take the form of a branch or agency, but consists merely of an office managed by the undertaking’s own staff or by a person who is independent but has permanent authority to act for the undertaking as an agency would.

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For the purposes of paragraph 1(j) of this Article, and in the context of Articles 12 and 19 to 23 and of the other levels of holding referred to in Article 19 to 23, the voting rights referred to in Article 92 of Directive 2001/34/EC shall be taken into account. For the purposes of paragraph 1(l), any subsidiary of a subsidiary undertaking shall also be regarded as a subsidiary of the undertaking which is those undertakings’ ultimate parent undertaking. For the purposes of paragraph 1(n): — any subsidiary undertaking of a subsidiary undertaking shall be considered a subsidiary of the parent undertaking which is at the head of those undertakings; — a situation in which two or more natural or legal persons are permanently linked to one and the same person by a control relationship shall also be regarded as constituting a close link between such persons. 3. Wherever this Directive refers to the euro, the conversion value in national currency to be adopted shall, as from 31 December of each year, be that of the last day of the preceding month of October for which euro conversion values are available in all the Community currencies. TITLE II T H E TA K I N G - U P O F T H E B U S I N E S S O F R E I N S U R A N C E A N D A U T H O R I S AT I O N O F T H E R E I N S U R A N C E U N D E RTA K I N G Article 3

Principle of authorisation

The taking up of the business of reinsurance shall be subject to prior official authorisation. Such authorisation shall be sought from the competent authorities of the home Member State by: (a) any undertaking which establishes its head office in the territory of that State; (b) any reinsurance undertaking which, having received the authorisation, extends its business to reinsurance activities other than those already authorised. General note Arts 4 to 14 lay down the authorisation requirement in much the same terms as it applies to direct insurers. Authorisation is valid for the entire EU (art 5). Conditions for authorisation relate to: (a) the legal form of the undertaking (art 5) and situation of head office (art 8); (b) a restriction on business to reinsurance (art 6, and see also art 7 on the prohibition on close links which may hinder supervision and art 12 on the identification of shareholders); (c) the submission of an appropriate scheme of operations (arts 6 and 11); (d) possession of a minimum guarantee fund (arts 6 and 40); and (e) operations run by persons of good repute and appropriately qualified (art 6). Authorisation decisions cannot be based on material control of premiums or policy terms (art 9) or upon general economic conditions (art 10).

Article 4

Scope of authorisation

1. An authorisation pursuant to Article 3 shall be valid for the entire Community. It shall permit a reinsurance undertaking to carry on business there, under either the right of establishment or the freedom to provide services. 2. Authorisation shall be granted for non-life reinsurance activities, life reassurance activities or all kinds of reinsurance activities, according to the request made by the applicant. It shall be considered in the light of the scheme of operations to be submitted pursuant to Articles 6(b) and 11 and the fulfilment of the conditions laid down for authorisation by the Member State from which the authorisation is sought. Article 5

Form of the reinsurance undertaking

1. The home Member State shall require every reinsurance undertaking for which authorisation is sought to adopt one of the forms set out in Annex I. A reinsurance undertaking may also adopt the form of a European Company (SE), as defined in Regulation (EC) No 2157/2001. 2. Member States may, where appropriate, set up undertakings in any public-law form provided that such bodies have as their objects reinsurance operations under conditions equivalent to those under which private-law undertakings operate.

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Reinsurance Conditions

The home Member State shall require every reinsurance undertaking for which authorisation is sought to: (a) limit its objects to the business of reinsurance and related operations; this requirement may include a holding company function and activities with respect to financial sector activities within the meaning of Article 2, point (8), of Directive 2002/87/EC; (b) submit a scheme of operations in accordance with Article 11; (c) possess the minimum guarantee fund provided for in Article 40(2); (d) be effectively run by persons of good repute with appropriate professional qualifications or experience. Article 7

Close links

1. Where close links exist between the reinsurance undertaking and other natural or legal persons, the competent authorities shall grant authorisation only if those links do not prevent the effective exercise of their supervisory functions. 2. The competent authorities shall refuse authorisation if the laws, regulations or administrative provisions of a non-member country governing one or more natural or legal persons with which the reinsurance undertaking has close links, or difficulties involved in their enforcement, prevent the effective exercise of their supervisory functions. 3. The competent authorities shall require reinsurance undertakings to provide them with the information they require to monitor compliance with the conditions referred to in paragraph 1 on a continuous basis. Article 8

Head office of the reinsurance undertaking

Member States shall require that the head offices of reinsurance undertakings be situated in the same Member State as their registered offices. Article 9

Policy conditions and scales of premiums

1. This Directive shall not prevent Member States from maintaining in force or introducing laws, regulations or administrative provisions requiring approval of the memorandum and articles of association and communication of any other documents necessary for the normal exercise of supervision. 2. However, Member States may not adopt provisions requiring the prior approval or systematic notification of general and special policy conditions, scales of premiums and forms and other printed documents which a reinsurance undertaking intends to use in its dealings with ceding or retroceding undertakings. Article 10

Economic requirements of the market

Member States may not require that any application for authorisation be considered in the light of the economic requirements of the market. Article 11

Scheme of operations

1. The scheme of operations referred to in Article 6(b) shall include particulars or evidence of: (a) the nature of the risks which the reinsurance undertaking proposes to cover; (b) the kinds of reinsurance arrangements which the reinsurance undertaking proposes to make with ceding undertakings; (c) the guiding principles as to retrocession; (d) the items constituting the minimum guarantee fund; (e) estimates of the costs of setting up the administrative services and the organisation for securing business and the financial resources intended to meet those costs. 2. In addition to the requirements in paragraph 1, the scheme of operations shall for the first three financial years contain:

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(a) estimates of management expenses other than installation costs, in particular current general expenses and commissions; (b) estimates of premiums or contributions and claims; (c) a forecast balance sheet; (d) estimates of the financial resources intended to cover underwriting liabilities and the solvency margin.

Article 12

Shareholders and members with qualifying holdings

The competent authorities of the home Member State shall not grant to an undertaking an authorisation to take up the business of reinsurance before they have been informed of the identities of the shareholders or members, direct or indirect, whether natural or legal persons, who have qualifying holdings in that undertaking and of the amounts of those holdings. The same authorities shall refuse authorisation if, taking into account the need to ensure the sound and prudent management of a reinsurance undertaking, they are not satisfied as to the qualifications of the shareholders or members.

Article 13

Refusal of authorisation

Any decision to refuse an authorisation shall be accompanied by the precise grounds for doing so and notified to the undertaking in question. Each Member State shall make provision for a right to apply to the courts, pursuant to Article 53, should there be any refusal. Such provision shall also be made with regard to cases where the competent authorities have not dealt with an application for an authorisation upon the expiry of a period of six months from the date of its receipt.

Article 14

Prior consultation with the competent authorities of other Member States

1. The competent authorities of the other Member State involved shall be consulted prior to the granting of an authorisation to a reinsurance undertaking, which is: (a) a subsidiary of an insurance or reinsurance undertaking authorised in another Member State; or (b) a subsidiary of the parent undertaking of an insurance or reinsurance undertaking authorised in another Member State; or (c) controlled by the same person, whether natural or legal, who controls an insurance or reinsurance undertaking authorised in another Member State. 2. The competent authority of a Member State involved, which is responsible for the supervision of credit institutions or investment firms, shall be consulted prior to the granting of an authorisation to a reinsurance undertaking which is: (a) a subsidiary of a credit institution or investment firm authorised in the Community; or (b) a subsidiary of the parent undertaking of a credit institution or investment firm authorised in the Community; or (c) controlled by the same person, whether natural or legal, who controls a credit institution or investment firm authorised in the Community. 3. The relevant competent authorities referred to in paragraphs 1 and 2 shall in particular consult each other when assessing the suitability of the shareholders and the reputation and experience of directors involved in the management of another entity of the same group. They shall inform each other of any information regarding the suitability of shareholders and the reputation and experience of directors which is of relevance to the other competent authorities involved for the granting of an authorisation as well as for the ongoing assessment of compliance with operating conditions.

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Reinsurance TITLE III CONDITIONS GOVERNING THE BUSINESS OF REINSURANCE CHAPTER 1 Principles and methods of financial supervision Section 1 Competent authorities and general rules

General note Art 15 lays down the principle of home state supervision, and requires the home state supervisors to monitor the entire EU operations of a reinsurer to ensure solvency. Branches in other EU states remain regulated by the home state supervisor (art 16), and the solvency margin must be maintained for the EU as a whole (art 17). Transfers may be approved only if the solvency margin is maintained (art 18).

Article 15

Competent authorities and object of supervision

1. The financial supervision of a reinsurance undertaking, including that of the business it carries on either through branches or under the freedom to provide services, shall be the sole responsibility of the home Member State. If the competent authorities of the host Member State have reason to consider that the activities of a reinsurance undertaking might affect its financial soundness, they shall inform the competent authorities of the reinsurance undertaking’s home Member State. The latter authorities shall determine whether the reinsurance undertaking is complying with the prudential rules laid down in this Directive. 2. The financial supervision pursuant to paragraph 1 shall include verification, with respect to the reinsurance undertaking’s entire business, of its state of solvency, of the establishment of technical provisions and of the assets covering them in accordance with the rules laid down or practices followed in the home Member State under provisions adopted at Community level. 3. The home Member State of the reinsurance undertaking shall not refuse a retrocession contract concluded by the reinsurance undertaking with a reinsurance undertaking authorised in accordance with this Directive or an insurance undertaking authorised in accordance with Directives 73/239/EEC or 2002/83/EC on grounds directly related to the financial soundness of that reinsurance undertaking or that insurance undertaking. 4. The competent authorities of the home Member State shall require every reinsurance undertaking to have sound administrative and accounting procedures and adequate internal control mechanisms. Article 16

Supervision of branches established in another Member State

The Member State of the branch shall provide that, where a reinsurance undertaking authorised in another Member State carries on business through a branch, the competent authorities of the home Member State may, after having first informed the competent authorities of the Member State of the branch, carry out themselves or through the intermediary of persons they appoint for that purpose, on-the-spot verification of the information necessary to ensure the financial supervision of the undertaking. The authorities of the Member State of the branch may participate in that verification. Article 17

Accounting, prudential and statistical information: supervisory powers

1. Each Member State shall require every reinsurance undertaking whose head office is situated in its territory to produce an annual account, covering all types of operation, of its financial situation and of its solvency. 2. Member States shall require reinsurance undertakings with head offices within their territories to render periodically the returns, together with statistical documents, which are

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necessary for the purposes of supervision. The competent authorities shall provide each other with any documents and information that are useful for the purposes of supervision. 3. Every Member State shall take all steps necessary to ensure that the competent authorities have the powers and means necessary for the supervision of the business of reinsurance undertakings with head offices within their territories, including business carried on outside those territories. 4. In particular, the competent authorities shall be enabled to: (a) make detailed enquiries regarding a reinsurance undertaking’s situation and the whole of its business, inter alia, by gathering information or requiring the submission of documents concerning its reinsurance and retrocession business, and by carrying out on-the-spot investigations at the reinsurance undertaking’s premises; (b) take any measures with regard to a reinsurance undertaking, its directors or managers or the persons who control it, that are appropriate and necessary to ensure that that reinsurance undertaking’s business continues to comply with the laws, regulations and administrative provisions with which the reinsurance undertaking must comply in each Member State; (c) ensure that those measures are carried out, if need be, by enforcement and where appropriate through judicial channels. Member States may also make provision for the competent authorities to obtain any information regarding contracts which are held by intermediaries. Article 18

Transfer of portfolio

Under the conditions laid down by national law, each Member State shall authorise reinsurance undertakings with head offices within its territory to transfer all or part of their portfolios of contracts, including those concluded either under the right of establishment or the freedom to provide services, to an accepting office established within the Community, if the competent authorities of the home Member State of the accepting office certify that, after taking the transfer into account, the latter possesses the necessary solvency margin referred to in Chapter 3. Section 2 Qualifying holdings General note Arts 19 to 23 seek to ensure that the controllers of a reinsurance undertaking are fit and proper persons. Art 19 requires notification to the home state regulator of significant changes in shareholding and art 23 empowers the home state regulator to take steps to intervene if an acquisition might interfere with the reinsurer’s sound and prudent management.

Article 19

Acquisitions

Member States shall require any natural or legal person who proposes to hold, directly or indirectly, a qualifying holding in a reinsurance undertaking first to inform the competent authorities of the home Member State, indicating the size of his intended holding. That person must likewise inform the competent authorities of the home Member State if he proposes to increase his qualifying holding so that the proportion of the voting rights or of the capital he holds would reach or exceed 20%, 33% or 50% or so that the reinsurance undertaking would become his subsidiary. The competent authorities of the home Member State shall have up to three months from the date of the notification provided for in the first paragraph to oppose such a plan if, in view of the need to ensure sound and prudent management of the reinsurance undertaking in question, they are not satisfied as to the qualifications of the person referred to in the first paragraph. If they do not oppose the plan in question, they may fix a maximum period for its implementation.

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Reinsurance Acquisitions by financial undertakings

If the acquirer of the holdings referred to in Article 19 is an insurance undertaking, a reinsurance undertaking, a credit institution or an investment firm authorised in another Member State, or the parent undertaking of such an entity, or a natural or legal person controlling such an entity, and if, as a result of that acquisition, the undertaking in which the acquirer proposes to acquire such a holding would become a subsidiary or subject to the control of the acquirer, the assessment of the acquisition must be subject to the prior consultation referred to in Article 14. Article 21

Disposals

Member States shall require any natural or legal person who proposes to dispose, directly or indirectly, of a qualifying holding in a reinsurance undertaking first to inform the competent authorities of the home Member State, indicating the size of his intended holding. Such a person shall likewise inform the competent authorities if he proposes to reduce his qualifying holding so that the proportion of the voting rights or of the capital he holds would fall below 20%, 33% or 50% or so that the reinsurance undertaking would cease to be his subsidiary. Article 22

Information to the competent authority by the reinsurance undertaking

On becoming aware of them, reinsurance undertakings shall inform the competent authorities of their home Member States of any acquisitions or disposals of holdings in their capital that cause holdings to exceed or fall below any of the thresholds referred to in Articles 19 and 21. They shall also, at least once a year, inform them of the names of shareholders and members possessing qualifying holdings and the sizes of such holdings as shown, for example, by the information received at annual general meetings of shareholders or members or as a result of compliance with the regulations relating to companies listed on stock exchanges. Article 23

Qualifying holdings: powers of the competent authority

Member States shall require that, where the influence exercised by the persons referred to in Article 19 is likely to operate against the prudent and sound management of a reinsurance undertaking, the competent authorities of the home Member State shall take appropriate measures to put an end to that situation. Such measures may consist, for example, in injunctions, penalties against directors and managers, or suspension of the exercise of the voting rights attaching to the shares held by the shareholders or members in question. Similar measures shall apply to natural or legal persons failing to comply with the obligation to provide prior information imposed pursuant to Article 19. If a holding is acquired despite the opposition of the competent authorities, the Member States shall, regardless of any other penalties to be adopted, provide either for exercise of the corresponding voting rights to be suspended, or for the nullity of votes cast or for the possibility of their annulment. Section 3 Professional secrecy and exchanges of information General note Arts 24 to 30 control the use and disclosure of information obtained by regulators exercising their supervisory functions. Exchanges of information are permitted as between insurance regulators, and also with regulators of non-EU countries and regulators of related sectors.

Article 24

Obligation

1. Member States shall provide that all persons working or who have worked for the competent authorities, as well as auditors and experts acting on behalf of the competent authorities, are bound by an obligation of professional secrecy.

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Pursuant to that obligation, and without prejudice to cases covered by criminal law, no confidential information which they may receive while performing their duties may be divulged to any person or authority whatsoever, except in summary or aggregate form, such that individual reinsurance undertakings cannot be identified. 2. However, where a reinsurance undertaking has been declared bankrupt or is being compulsorily wound up, confidential information which does not concern third parties involved in attempts to rescue that undertaking may be divulged in civil or commercial proceedings. Article 25

Exchange of information between competent authorities of Member States

Article 24 shall not prevent the competent authorities of different Member States from exchanging information in accordance with the Directives applicable to reinsurance undertakings. Such information shall be subject to the conditions of professional secrecy laid down in Article 24. Article 26

Cooperation agreements with third countries

Member States may conclude cooperation agreements providing for exchange of information with the competent authorities of third countries or with authorities or bodies of third countries as defined in Article 28(1) and (2) only if the information disclosed is subject to guarantees of professional secrecy at least equivalent to those referred to in this Section. Such exchange of information shall be intended for the performance of the supervisory task of the authorities or bodies mentioned. Where the information originates in another Member State, it may not be disclosed without the express agreement of the competent authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities gave their agreement. Article 27

Use of confidential information

Competent authorities receiving confidential information under Articles 24 and 25 may use it only in the course of their duties: (a) to check that the conditions governing the taking up of the business of reinsurance are met and to facilitate monitoring of the conduct of such business, especially with regard to the monitoring of technical provisions, solvency margins, administrative and accounting procedures and internal control mechanisms, (b) to impose penalties, (c) in administrative appeals against decisions of the competent authorities, or (d) in court proceedings initiated under Article 53 or under special provisions provided for in this Directive and other Directives adopted in the field of insurance and reinsurance undertakings. Article 28

Exchange of information with other authorities

1. Articles 24 and 27 shall not preclude the exchange of information within a Member State, where there are two or more competent authorities in the same Member State, or, between Member States, between competent authorities and: (a) authorities responsible for the official supervision of credit institutions and other financial organisations and the authorities responsible for the supervision of financial markets, (b) bodies involved in the liquidation and bankruptcy of insurance and reinsurance undertakings and in other similar procedures, and (c) persons responsible for carrying out statutory audits of the accounts of insurance undertakings, reinsurance undertakings and other financial institutions, in the discharge of their supervisory functions, or the disclosure to bodies which administer compulsory winding-up proceedings or guarantee schemes of information necessary to the performance of their duties. The information received by those authorities, bodies and persons shall be subject to the conditions of professional secrecy laid down in Article 24. 2. Notwithstanding Articles 24 to 27, Member States may authorise exchanges of information between the competent authorities and:

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(a) the authorities responsible for overseeing the bodies involved in the liquidation and bankruptcy of insurance or reinsurance undertakings and other similar procedures, or (b) the authorities responsible for overseeing the persons charged with carrying out statutory audits of the accounts of insurance or reinsurance undertakings, credit institutions, investment firms and other financial institutions, or (c) independent actuaries of insurance or reinsurance undertakings carrying out legal supervision of those undertakings and the bodies responsible for overseeing such actuaries. Member States which have recourse to the option provided for in the first subparagraph shall require at least that the following conditions are met: (a) this exchange of information shall be for the purpose of carrying out the overseeing or legal supervision referred to in the first subparagraph; (b) information received in this context shall be subject to the conditions of professional secrecy imposed in Article 24; (c) where the information originates in another Member State, it may not be disclosed without the express agreement of the competent authorities which have disclosed it and, where appropriate, may only be disclosed for the purposes for which those authorities gave their agreement. Member States shall communicate to the Commission and to the other Member States the names of the authorities, persons and bodies which may receive information pursuant to this paragraph. 3. Notwithstanding Articles 24 to 27, Member States may, with the aim of strengthening the stability, including the integrity, of the financial system, authorise the exchange of information between the competent authorities and the authorities or bodies responsible under the law for the detection and investigation of breaches of company law. Member States which have recourse to the option provided for in the first subparagraph shall require at least that the following conditions are met: (a) the information shall be for the purpose of performing the task referred to in the first subparagraph; (b) information received in this context shall be subject to the conditions of professional secrecy imposed in Article 24; (c) where the information originates in another Member State, it may not be disclosed without the express agreement of the competent authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities gave their agreement. Where, in a Member State, the authorities or bodies referred to in the first subparagraph perform their task of detection or investigation with the aid, in view of their specific competence, of persons appointed for that purpose and not employed in the public sector, the possibility of exchanging information provided for in the first subparagraph may be extended to such persons under the conditions laid down in the second subparagraph. In order to implement point (c) of the second subparagraph, the authorities or bodies referred to in the first subparagraph shall communicate to the competent authorities which have disclosed the information the names and precise responsibilities of the persons to whom it is to be sent. Member States shall communicate to the Commission and to the other Member States the names of the authorities or bodies which may receive information pursuant to this paragraph. Article 29 Transmission of information to central banks and monetary authorities This Section shall not prevent a competent authority from transmitting to central banks and other bodies with a similar function in their capacity as monetary authorities, and where appropriate, to other public authorities responsible for overseeing payment systems, information intended for the performance of their task. Nor shall it prevent such authorities or bodies from communicating to the competent authorities such information as they may need for the purposes of Article 27. Information received in this context shall be subject to the conditions of professional secrecy imposed in this Section.

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Article 30 Disclosure of information to government administrations responsible for financial legislation Notwithstanding Articles 24 and 27, Member States may, under provisions laid down by law, authorise the disclosure of certain information to other departments of their central government administrations responsible for legislation on the supervision of credit institutions, financial institutions, investment services and insurance or reinsurance undertakings and to inspectors acting on behalf of those departments. However, such disclosures may be made only where necessary for reasons of prudential control. Member States shall, however, provide that information received under Articles 25 and 28(1) and that obtained by means of the on-the-spot verification referred to in Article 16 may never be disclosed in the cases referred to in this Article except with the express consent of the competent authorities which disclosed the information or of the competent authorities of the Member State in which on-the-spot verification was carried out. Section 4 Duties of auditors Article 31

Duties of auditors

1. Member States shall provide at least that any person authorised in accordance with Directive 84/253/EEC, performing in a reinsurance undertaking the task described in Article 51 of Directive 78/660/EEC, Article 37 of Directive 83/349/EEC or Article 31 of Directive 85/611/EEC or any other statutory task, shall have a duty to report promptly to the competent authorities any fact or decision concerning that undertaking of which he/she has become aware while carrying out that task which is liable to: (a) constitute a material breach of the laws, regulations or administrative provisions which lay down the conditions governing authorisation or which specifically govern pursuit of the activities of insurance or reinsurance undertakings, or (b) affect the continuous functioning of the reinsurance undertaking, or (c) lead to refusal to certify the accounts or to the expression of reservations. That person shall also have a duty to report any facts and decisions of which he/she becomes aware in the course of carrying out a task as described in the first subparagraph in an undertaking having close links resulting from a control relationship with the reinsurance undertaking within which he/she is carrying out the abovementioned task. 2. The disclosure to the competent authorities, by persons authorised in accordance with Directive 84/253/EEC, of any relevant fact or decision referred to in paragraph 1 of this Article shall not constitute a breach of any restriction on disclosure of information imposed by contract or by any legislative, regulatory or administrative provision and shall not involve such persons in liability of any kind. CHAPTER 2 Rules relating to technical provisions General note Reinsurers must, in the same way as insurers, establish adequate technical provisions for their entire business (art 32), including the establishment of equalisation reserves (art 33) and compliance with investment rules in respect of assets which constitute the technical provisions and equalisation reserve (art 34).

Article 32

Establishment of technical provisions

1. The home Member State shall require every reinsurance undertaking to establish adequate technical provisions in respect of its entire business.

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Reinsurance

The amount of such technical provisions shall be determined in accordance with the rules laid down in Directive 91/674/EEC. Where applicable, the home Member State may lay down more specific rules in accordance with Article 20 of Directive 2002/83/EC. 2. Member States shall not retain or introduce a system with gross reserving which requires pledging of assets to cover unearned premiums and outstanding claims provisions if the reinsurer is a reinsurance undertaking authorised in accordance with this Directive or an insurance undertaking authorised in accordance with Directives 73/239/EEC or 2002/83/EC. 3. When the home Member State allows any technical provisions to be covered by claims against reinsurers who are not authorised in accordance with this Directive or insurance undertakings which are not authorised in accordance with Directives 73/239/EEC or 2002/83/EC, it shall set the conditions for accepting such claims. Article 33

Equalisation reserves

1. The home Member State shall require every reinsurance undertaking which reinsures risks included in class 14 listed in point A of the Annex to Directive 73/239/EEC to set up an equalisation reserve for the purpose of offsetting any technical deficit or above-average claims ratio arising in that class in any financial year. 2. The equalisation reserve for credit reinsurance shall be calculated in accordance with the rules laid down by the home Member State in accordance with one of the four methods set out in point D of the Annex to Directive 73/239/EEC, which shall be regarded as equivalent. 3. The home Member State may exempt reinsurance undertakings from the obligation to set up equalisation reserves for reinsurance of credit insurance business where the premiums or contributions receivable in respect of reinsurance of credit insurance are less than 4% of the total premiums or contributions receivable by them and less than EUR 2500000. 4. The home Member State may require every reinsurance undertaking to set up equalisation reserves for classes of risks other than credit reinsurance. The equalisation reserves shall be calculated according to the rules laid down by the home Member State. Article 34

Assets covering technical provisions

1. The home Member State shall require every reinsurance undertaking to invest the assets covering the technical provisions and the equalisation reserve referred to in Article 33 in accordance with the following rules: (a) the assets shall take account of the type of business carried out by a reinsurance undertaking, in particular the nature, amount and duration of the expected claims payments, in such a way as to secure the sufficiency, liquidity, security, quality, profitability and matching of its investments; (b) the reinsurance undertaking shall ensure that the assets are diversified and adequately spread and allow the undertaking to respond adequately to changing economic circumstances, in particular developments in the financial markets and real estate markets or major catastrophic events. The undertaking shall assess the impact of irregular market circumstances on its assets and shall diversify the assets in such a way as to reduce such impact; (c) investment in assets which are not admitted to trading on a regulated financial market shall in any event be kept to prudent levels; (d) investment in derivative instruments shall be possible insofar as they contribute to a reduction of investment risks or facilitate efficient portfolio management. They shall be valued on a prudent basis, taking into account the underlying assets, and included in the valuation of the institution’s assets. The institution shall also avoid excessive risk exposure to a single counterparty and to other derivative operations; (e) the assets shall be properly diversified in such a way as to avoid excessive reliance on any one particular asset, issuer or group of undertakings and accumulations of risk in the portfolio as a whole. Investments in assets issued by the same issuer or by issuers belonging to the same group shall not expose the undertaking to excessive risk concentration. Member States may decide not to apply the requirements referred to in point (e) to investment in government bonds.

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2. Member States shall not require reinsurance undertakings situated in their territory to invest in particular categories of assets. 3. Member States shall not subject the investment decisions of a reinsurance undertaking situated in their territory or its investment manager to any kind of prior approval or systematic notification requirements. 4. Notwithstanding paragraphs 1 to 3, the home Member State may, for every reinsurance undertaking whose head office is situated in its territory, lay down the following quantitative rules, provided that they are prudentially justified: (a) investments of gross technical provisions in currencies other than those in which technical provisions are set should be limited to 30%; (b) investments of gross technical provisions in shares and other negotiable securities treated as shares, bonds and debt securities which are not admitted to trading on a regulated market should be limited to 30%; (c) the home Member State may require every reinsurance undertaking to invest no more than 5% of its gross technical provisions in shares and other negotiable securities treated as shares, bonds, debt securities and other money and capital market instruments from the same undertaking, and no more than 10% of its total gross technical provisions in shares and other negotiable securities treated as shares, bonds, debt securities and other money and capital market instruments from undertakings which are members of the same group. 5. Furthermore, the home Member State shall lay down more detailed rules setting the conditions for the use of amounts outstanding from a special purpose vehicle as assets covering technical provisions pursuant to this Article. CHAPTER 3 Rules relating to the solvency margin and to the guarantee fund Section 1 Available solvency margin General note The obligation of a reinsurer to maintain a solvency margin in respect of its entire business is at the heart of the Reinsurance Directive. Arts 35 to 39 set out the calculation of the solvency margin for life reinsurance, non-life reinsurance and mixed business, and set out the assets which are eligible to be included in the solvency margin. Arts 40–41 require one-third of the solvency margin to constitute the guarantee fund, which must consist of the assets specified in art 36(1)– (3).

Article 35

General rule

Each Member State shall require of every reinsurance undertaking whose head office is situated in its territory an adequate available solvency margin in respect of its entire business at all times, which is at least equal to the requirements of this Directive. Article 36

Eligible items

1. The available solvency margin shall consist of the assets of the reinsurance undertaking free of any foreseeable liabilities, less any intangible items, including: (a) the paid-up share capital or, in the case of a mutual reinsurance undertaking, the effective initial fund plus any members’ accounts which meet all the following criteria: (i) the memorandum and articles of association shall stipulate that payments may be made from those accounts to members only in so far as this does not cause the available solvency margin to fall below the required level, or, after the dissolution of the undertaking, if all the undertaking’s other debts have been settled;

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Reinsurance

(ii) the memorandum and articles of association shall stipulate, with respect to any payments referred to in point (i) for reasons other than the individual termination of membership, that the competent authorities must be notified at least one month in advance and can prohibit the payment within that period; (iii) the relevant provisions of the memorandum and articles of association may be amended only after the competent authorities have declared that they have no objection to the amendment, without prejudice to the criteria stated in points (i) and (ii); (b) statutory and free reserves which neither correspond to underwriting liabilities nor are classified as equalisation reserves; (c) the profit or loss brought forward after deduction of dividends to be paid. 2. The available solvency margin shall be reduced by the amount of own shares directly held by the reinsurance undertaking. For those reinsurance undertakings which discount or reduce their non-life technical provisions for claims outstanding to take account of investment income as permitted by Article 60(1)(g) of Directive 91/674/EEC, the available solvency margin shall be reduced by the difference between the undiscounted technical provisions or technical provisions before deductions as disclosed in the notes on the accounts, and the discounted or technical provisions after deductions. This adjustment shall be made for all risks listed in point A of the Annex to Directive 73/239/EEC, except for risks listed under classes 1 and 2 of point A of that Annex. For classes other than 1 and 2 listed in point A of that Annex, no adjustment need be made in respect of the discounting of annuities included in technical provisions. In addition to the deductions in the first and second subparagraphs, the available solvency margin shall be reduced by the following items: (a) participations which the reinsurance undertaking holds in the following entities: (i) insurance undertakings within the meaning of Article 6 of Directive 73/239/EEC, Article 4 of Directive 2002/83/EC, or Article 1(b) of Directive 98/78/EC, (ii) reinsurance undertakings within the meaning of Article 3 of this Directive or nonmember country reinsurance undertakings within the meaning of Article 1(l) of Directive 98/78/EC, (iii) insurance holding companies within the meaning of Article 1(i) of Directive 98/78/EC, (iv) credit institutions and financial institutions within the meaning of Article 1(1) and (5) of Directive 2000/12/EC, (v) investment firms and financial institutions within the meaning of Article 1(2) of Directive 93/22/EEC and of Article 2(4) and (7) of Directive 93/6/EEC; (b) each of the following items which the reinsurance undertaking holds in respect of the entities defined in (a) in which it holds a participation: (i) instruments referred to in paragraph 4, (ii) instruments referred to in Article 27(3) of Directive 2002/83/EC, (iii) subordinated claims and instruments referred to in Article 35 and Article 36(3) of Directive 2000/12/EC. Where shares in another credit institution, investment firm, financial institution, insurance or reinsurance undertaking or insurance holding company are held temporarily for the purposes of a financial assistance operation designed to reorganise and save that entity, the competent authority may waive the provisions on deduction referred to under (a) and (b) of the third subparagraph. As an alternative to the deduction of the items referred to in (a) and (b) of the third subparagraph which the reinsurance undertaking holds in credit institutions, investment firms and financial institutions, Member States may allow their reinsurance undertakings to apply mutatis mutandis methods 1, 2, or 3 of Annex I to Directive 2002/87/EC. Method 1 (Accounting consolidation) shall only be applied if the competent authority is confident about the level of integrated management and internal control regarding the entities which would be included in the scope of consolidation. The method chosen shall be applied in a consistent manner over time. Member States may provide that, for the calculation of the solvency margin as provided for by this Directive, reinsurance undertakings subject to supplementary supervision in accordance with Directive 98/78/EC or to supplementary supervision in accordance with Directive

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2002/87/EC need not deduct the items referred to in (a) and (b) of the third subparagraph which are held in credit institutions, investment firms, financial institutions, insurance or reinsurance undertakings or insurance holding companies which are included in the supplementary supervision. For the purposes of the deduction of participations referred to in this paragraph, participation shall mean a participation within the meaning of Article 1(f) of Directive 98/78/EC. 3. The available solvency margin may also consist of: (a) cumulative preferential share capital and subordinated loan capital up to 50% of the available solvency margin or the required solvency margin, whichever is the smaller, no more than 25% of which shall consist of subordinated loans with a fixed maturity, or fixed-term cumulative preferential share capital, provided that, in the event of the bankruptcy or liquidation of the reinsurance undertaking, binding agreements exist under which the subordinated loan capital or preferential share capital ranks after the claims of all other creditors and is not to be repaid until all other debts outstanding at the time have been settled. Subordinated loan capital shall also fulfil the following conditions: (i) only fully paid-up funds may be taken into account; (ii) for loans with a fixed maturity, the original maturity shall be at least five years. No later than one year before the repayment date the reinsurance undertaking shall submit to the competent authorities for their approval a plan showing how the available solvency margin will be kept at or brought to the required level at maturity, unless the extent to which the loan may rank as a component of the available solvency margin is gradually reduced during at least the last five years before the repayment date. The competent authorities may authorise the early repayment of such loans provided that application is made by the issuing reinsurance undertaking and that its available solvency margin will not fall below the required level; (iii) loans the maturity of which is not fixed shall be repayable only subject to five years’ notice unless the loans are no longer considered as a component of the available solvency margin or unless the prior consent of the competent authorities is specifically required for early repayment. In the latter event the reinsurance undertaking shall notify the competent authorities at least six months before the date of the proposed repayment, specifying the available solvency margin and the required solvency margin both before and after that repayment. The competent authorities shall authorise repayment only if the reinsurance undertaking’s available solvency margin will not fall below the required level; (iv) the loan agreement shall not include any clause providing that in specified circumstances, other than the winding-up of the reinsurance undertaking, the debt will become repayable before the agreed repayment dates; (v) the loan agreement may be amended only after the competent authorities have declared that they have no objection to the amendment; (b) securities with no specified maturity date and other instruments, including cumulative preferential shares other than those referred to in point (a), up to 50% of the available solvency margin or the required solvency margin, whichever is the smaller, for the total of such securities and the subordinated loan capital referred to in point (a) provided that they fulfil the following: (i) they may not be repaid on the initiative of the bearer or without the prior consent of the competent authority; (ii) the contract of issue shall enable the reinsurance undertaking to defer the payment of interest on the loan; (iii) the lender’s claims on the reinsurance undertaking shall rank entirely after those of all non- subordinated creditors; (iv) the documents governing the issue of the securities shall provide for the lossabsorption capacity of the debt and unpaid interest, while enabling the reinsurance undertaking to continue its business; (v) only fully paid-up amounts may be taken into account.

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4. Upon application, with supporting evidence, by the reinsurance undertaking to the competent authority of the home Member State and with the agreement of that competent authority, the available solvency margin may also consist of: (a) one half of the unpaid share capital or initial fund, once the paid-up part amounts to 25% of that share capital or fund, up to 50% of the available solvency margin or the required solvency margin, whichever is the smaller; (b) in the case of a non-life mutual or mutual-type association with variable contributions, any claim which it has against its members by way of a call for supplementary contribution, within the financial year, up to one half of the difference between the maximum contributions and the contributions actually called in, and subject to a limit of 50% of the available solvency margin or the required solvency margin, whichever is the smaller. The competent national authorities shall establish guidelines laying down the conditions under which supplementary contributions may be accepted; (c) any hidden net reserves arising out of the valuation of assets, in so far as such hidden net reserves are not of an exceptional nature. 5. In addition, with respect to life reassurance activities, the available solvency margin may, upon application, with supporting evidence, by the reinsurance undertaking to the competent authority of the home Member State and with the agreement of that competent authority, consist of: (a) until 31 December 2009, an amount equal to 50% of the undertaking’s future profits, but not exceeding 25% of the available solvency margin or the required solvency margin, whichever is the smaller; the amount of the future profits shall be obtained by multiplying the estimated annual profit by a factor which represents the average period left to run on policies; the factor used may not exceed six; the estimated annual profit shall not exceed the arithmetical average of the profits made over the last five financial years in the activities listed in Article 2(1) of Directive 2002/83/EC. Competent authorities may only agree to include such an amount for the available solvency margin: (i) when an actuarial report is submitted to the competent authorities substantiating the likelihood of emergence of these profits in the future; and (ii) insofar as that part of future profits emerging from hidden net reserves referred to in paragraph 4(c) has not already been taken into account; (b) where Zillmerising is not practised or where, if practised, it is less than the loading for acquisition costs included in the premium, the difference between a non-Zillmerised or partially Zillmerised mathematical provision and a mathematical provision Zillmerised at a rate equal to the loading for acquisition costs included in the premium; this figure may not, however, exceed 3,5% of the sum of the differences between the relevant capital sums of life reassurance activities and the mathematical provisions for all policies for which Zillmerising is possible; the difference shall be reduced by the amount of any undepreciated acquisition costs entered as an asset. 6. Amendments to paragraphs 1 to 5 of this Article to take into account developments that justify a technical adjustment of the elements eligible for the available solvency margin shall be adopted in accordance with the procedure laid down in Article 55(2). Section 2 Required solvency margin Article 37

Required solvency margin for non-life reinsurance activities

1. The required solvency margin shall be determined on the basis either of the annual amount of premiums or contributions, or of the average burden of claims for the past three financial years. However, in the case of reinsurance undertakings which essentially underwrite only one or more of the risks of credit, storm, hail or frost, the last seven financial years shall be taken as the reference period for the average burden of claims. 2. Subject to Article 40, the amount of the required solvency margin shall be equal to the higher of the two results as set out in paragraphs 3 and 4 of this Article.

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3. The premium basis shall be calculated using the higher of gross written premiums or contributions as calculated below, and gross earned premiums or contributions. Premiums or contributions in respect of the classes 11, 12 and 13 listed in point A of the Annex to Directive 73/239/EEC shall be increased by 50%. Premiums or contributions in respect of classes other than classes 11, 12 and 13 listed in point A of the Annex to Directive 73/239/EEC may be increased by up to 50%, for specific reinsurance activities or contract types, in order to take account of the specificities of these activities or contracts, in accordance with the procedure referred to in Article 55(2) of this Directive. The premiums or contributions, inclusive of charges ancillary to premiums or contributions, due in respect of reinsurance business in the last financial year shall be aggregated. From that sum there shall then be deducted the total amount of premiums or contributions cancelled in the last financial year, as well as the total amount of taxes and levies pertaining to the premiums or contributions entering into the aggregate. The amount so obtained shall be divided into two portions, the first portion extending up to EUR 50000000, the second comprising the excess; 18% and 16% of these portions respectively shall be calculated and added together. The sum so obtained shall be multiplied by the ratio existing in respect of the sum of the last three financial years between the amount of claims remaining to be borne by the reinsurance undertaking after deduction of amounts recoverable under retrocession and the gross amount of claims; that ratio may in no case be less than 50%. Upon application, with supporting evidence, by the reinsurance undertaking to the competent authority of the home Member State and with the agreement of that authority, amounts recoverable from special purpose vehicles as referred to in Article 46 may also be deducted as retrocession. With the approval of the competent authorities, statistical methods may be used to allocate the premiums or contributions. 4. The claims basis shall be calculated, as follows, using in respect of the classes 11, 12 and 13 listed in point A of the Annex to Directive 73/239/EEC, claims, provisions and recoveries increased by 50%. Claims, provisions and recoveries in respect of classes other than classes 11, 12 and 13 listed in point A of the Annex to Directive 73/239/EEC, may be increased by up to 50%, for specific reinsurance activities or contract types, in order to take account of the specificities of those activities or contracts, in accordance with the procedure referred to in Article 55(2) of this Directive. The amounts of claims paid, without any deduction of claims borne by retrocessionaires, in the periods specified in paragraph 1 shall be aggregated. To that sum there shall be added the amount of provisions for claims outstanding established at the end of the last financial year. From that sum there shall be deducted the amount of recoveries effected during the periods specified in paragraph 1. From the sum then remaining, there shall be deducted the amount of provisions for claims outstanding established at the commencement of the second financial year preceding the last financial year for which there are accounts. If the reference period established in paragraph 1 equals seven years, the amount of provisions for claims outstanding established at the commencement of the sixth financial year preceding the last financial year for which there are accounts shall be deducted. One third, or one seventh, of the amount so obtained, according to the reference period established in paragraph 1, shall be divided into two portions, the first extending up to EUR 35000000 and the second comprising the excess; 26% and 23% of these portions respectively shall be calculated and added together. The sum so obtained shall be multiplied by the ratio existing in respect of the sum of the last three financial years between the amount of claims remaining to be borne by the undertaking after deduction of amounts recoverable under retrocession and the gross amount of claims; that ratio may in no case be less than 50%. Upon application, with supporting evidence, by the reinsurance undertaking to the competent authority of the home Member State and with the agreement of that authority, amounts recoverable from special purpose vehicles as referred to in Article 46 may also be deducted as retrocession.

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With the approval of the competent authorities, statistical methods may be used to allocate claims, provisions and recoveries. 5. If the required solvency margin as calculated in paragraphs 2, 3 and 4 is lower than the required solvency margin of the year before, the required solvency margin shall be at least equal to the required solvency margin of the year before multiplied by the ratio between the amount of the technical provisions for claims outstanding at the end of the last financial year and the amount of the technical provisions for claims outstanding at the beginning of the last financial year. In these calculations technical provisions shall be calculated net of retrocession but the ratio may in no case be higher than 1. 6. The fractions applicable to the portions referred to in the fifth subparagraph of paragraph 3 and the seventh subparagraph of paragraph 4 shall each be reduced to a third in the case of reinsurance of health insurance practised on a similar technical basis to that of life assurance, if: (a) the premiums paid are calculated on the basis of sickness tables according to the mathematical method applied in insurance; (b) a provision is set up for increasing age; (c) an additional premium is collected in order to set up a safety margin of an appropriate amount; (d) the insurance undertaking may cancel the contract before the end of the third year of insurance at the latest; (e) the contract provides for the possibility of increasing premiums or reducing payments even for current contracts. Article 38

Required solvency margin for life reassurance activities

1. The required solvency margin for life reassurance activities shall be determined in accordance with Article 37. 2. Notwithstanding paragraph 1 of this Article, the home Member State may provide that for reinsurance classes of assurance business covered by Article 2(1)(a) of Directive 2002/83/EC linked to investment funds or participating contracts and for the operations referred to in Article 2(1)(b), 2(2)(b), (c), (d) and (e) of Directive 2002/83/EC, the required solvency margin is to be determined in accordance with Article 28 of Directive 2002/83/EC. Article 39 Required solvency margin for a reinsurance undertaking simultaneously conducting non-life and life reinsurance 1. The home Member State shall require every reinsurance undertaking conducting both non-life and life reinsurance business to have an available solvency margin to cover the total sum of required solvency margins in respect of both non-life and life reinsurance activities which shall be determined in accordance with Articles 37 and 38 respectively. 2. If the available solvency margin does not reach the level required in paragraph 1 of this Article, the competent authorities shall apply the measures provided for in Articles 42 and 43. Section 3 Guarantee fund Article 40

Amount of the guarantee fund

1. One third of the required solvency margin as specified in Articles 37, 38 and 39 shall constitute the guarantee fund. This fund shall consist of the items listed in Article 36(1), (2) and (3) and, with the agreement of the competent authority of the home Member State, in Article 36(4)(c). 2. The guarantee fund shall not be less than a minimum of EUR 3000000. Any Member State may provide that as regards captive reinsurance undertakings, the minimum guarantee fund shall not be not less than EUR 1000000.

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Review of the amount of the guarantee fund

1. The amounts in euro as laid down in Article 40(2) shall be reviewed annually as from 10 December 2007 in order to take account of changes in the European index of consumer prices comprising all Member States as published by Eurostat. The amounts shall be adapted automatically by increasing the base amount in euro by the percentage change in that index over the period between the entry into force of this Directive and the review date and rounded up to a multiple of EUR 100000. If the percentage change since the last adaptation is less than 5%, no adaptation shall take place. 2. The Commission shall inform the European Parliament and the Council annually of the review and the adapted amounts referred to in paragraph 1. CHAPTER 4 Reinsurance undertakings in difficulty or in an irregular situation and withdrawal of authorisation General note Arts 42 to 44 confer upon the home state regulator the power to intervene where a reinsurer fails to comply with the financial rules in the Directive is otherwise in financial difficulty. Where a reinsurer fails to establish technical reserves, its home state regulator may freeze its assets (art 42), and in the case of a threat to solvency the reinsurer must prepare a recovery plan (art 43). As a last resort authorisation may be withdrawn (art 44).

Article 42

Reinsurance undertakings in difficulty

1. If a reinsurance undertaking does not comply with Article 32, the competent authority of its home Member State may prohibit the free disposal of its assets after having communicated its intention to the competent authorities of the host Member States. 2. For the purposes of restoring the financial situation of a reinsurance undertaking the solvency margin of which has fallen below the minimum required under Articles 37, 38 and 39, the competent authority of the home Member State shall require that a plan for the restoration of a sound financial situation be submitted for its approval. In exceptional circumstances, if the competent authority is of the opinion that the financial situation of the reinsurance undertaking will deteriorate further, it may also restrict or prohibit the free disposal of the reinsurance undertaking’s assets. It shall inform the authorities of other Member States within the territories of which the reinsurance undertaking carries on business of any measures it has taken and the latter shall, at the request of the former, take the same measures. 3. If the solvency margin falls below the guarantee fund as defined in Article 40, the competent authority of the home Member State shall require the reinsurance undertaking to submit a short-term finance scheme for its approval. It may also restrict or prohibit the free disposal of the reinsurance undertaking’s assets. It shall inform the authorities of all other Member States and the latter shall, at the request of the former, take the same measures. 4. Each Member State shall take the measures necessary to be able, in accordance with its national law, to prohibit the free disposal of assets located within its territory at the request, in the cases provided for in paragraphs 1, 2 and 3, of the reinsurance undertaking’s home Member State, which shall designate the assets to be covered by such measures. Article 43

Financial recovery plan

1. Member States shall ensure that the competent authorities have the power to require a financial recovery plan for those reinsurance undertakings where competent authorities consider that their obligations arising out of reinsurance contracts are threatened. 2. The financial recovery plan shall, as a minimum, include particulars or proof for the next three financial years concerning:

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Reinsurance

(a) estimates of management expenses, in particular current general expenses and commissions; (b) a plan setting out detailed estimates of income and expenditure in respect of reinsurance acceptances and reinsurance cessions; (c) a forecast balance sheet; (d) estimates of the financial resources intended to cover underwriting liabilities and the required solvency margin; (e) the overall retrocession policy. 3. Where the financial position of the reinsurance undertaking is deteriorating and the contractual obligations of the reinsurance undertaking are threatened, Member States shall ensure that the competent authorities have the power to oblige reinsurance undertakings to have a higher required solvency margin, in order to ensure that the reinsurance undertaking is able to fulfil the solvency requirements in the near future. The level of this higher required solvency margin shall be based on a financial recovery plan referred to in paragraph 1. 4. Member States shall ensure that the competent authorities have the power to revalue downwards all elements eligible for the available solvency margin, in particular, where there has been a significant change in the market value of those elements since the end of the last financial year. 5. Member States shall ensure that the competent authorities have the power to decrease the reduction, based on retrocession, to the solvency margin as determined in accordance with Articles 37, 38 and 39 where: (a) the nature or quality of retrocession contracts has changed significantly since the last financial year; (b) there is no or a limited risk transfer under the retrocession contracts. 6. If the competent authorities have required a financial recovery plan for the reinsurance undertaking in accordance with paragraph 1 of this Article, they shall refrain from issuing a certificate in accordance with Article 18, as long as they consider that its obligations arising out of reinsurance contracts are threatened within the meaning of the said paragraph 1. Article 44

Withdrawal of authorisation

1. Authorisation granted to a reinsurance undertaking by the competent authority of its home Member State may be withdrawn by that authority if that undertaking: (a) does not make use of that authorisation within 12 months, expressly renounces it or ceases to carry on business for more than 6 months, unless the Member State concerned has made provision for authorisation to lapse in such cases; (b) no longer fulfils the conditions for admission; (c) has been unable, within the time allowed, to take the measures specified in the restoration plan or finance scheme referred to in Article 42; (d) fails seriously in its obligations under the regulations to which it is subject. In the event of the withdrawal or lapse of authorisation, the competent authority of the home Member State shall notify the competent authorities of the other Member States accordingly, and they shall take appropriate measures to prevent the reinsurance undertaking from commencing new operations within their territories, under either the right of establishment or the freedom to provide services. 2. Any decision to withdraw an authorisation shall be supported by precise reasons and communicated to the reinsurance undertaking in question. TITLE IV P R O V I S I O N S R E L AT I N G T O F I N I T E R E I N S U R A N C E A N D S P E C I A L PURPOSE VEHICLES General note Arts 45 and 46 impose limited regulation on two specific forms of alternative risk transfer arrangements. Finite reinsurance (art 45) is a mechanism for spreading loss over a period of time, often without any transfer of underwriting risk, and member states are given the power (but not the obligation) to regulate contracts of this type. Special purpose vehicles (art 46) may be used to fund underwriting losses other than

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by conventional reinsurance, and any SPV must be authorised in the same way as an insurance or reinsurance undertaking.

Article 45

Finite reinsurance

1. The home Member State may lay down specific provisions concerning the pursuit of finite reinsurance activities regarding: — mandatory conditions for inclusion in all contracts issued; — sound administrative and accounting procedures, adequate internal control mechanisms and risk management requirements; — accounting, prudential and statistical information requirements; — the establishment of technical provisions to ensure that they are adequate, reliable and objective; — investment of assets covering technical provisions in order to ensure that they take account of the type of business carried on by the reinsurance undertaking, in particular the nature, amount and duration of the expected claims payments, in such a way as to secure the sufficiency, liquidity, security, profitability and matching of its assets; — rules relating to the available solvency margin, required solvency margin and the minimum guarantee fund that the reinsurance undertaking shall maintain in respect of finite reinsurance activities. 2. In the interests of transparency, Member States shall communicate the text of any measures laid down by their national law for the purposes of paragraph 1 to the Commission without delay. Article 46

Special purpose vehicles

1. Where a Member State decides to allow the establishment within its territory of special purpose vehicles within the meaning of this Directive, it shall require prior official authorisation thereof. 2. The Member State where the special purpose vehicle is established shall lay down the conditions under which the activities of such an undertaking shall be carried on. In particular, that Member State shall lay down rules regarding: — scope of authorisation; — mandatory conditions for inclusion in all contracts issued; — the good repute and appropriate professional qualifications of persons running the special purpose vehicle; — fit and proper requirements for shareholders or members having a qualifying holding in the special purpose vehicle; — sound administrative and accounting procedures, adequate internal control mechanisms and risk management requirements; — accounting, prudential and statistical information requirements; — the solvency requirements of special purpose vehicles. 3. In the interests of transparency, Member States shall communicate the text of any measures laid down by their national law for the purposes of paragraph 2, to the Commission without delay.

TITLE V P R O V I S I O N S R E L AT I N G T O R I G H T O F E S TA B L I S H M E N T A N D F R E E D O M TO PROVIDE SERVICES General note The scheme of the Reinsurance Directive, in common with that of the direct insurance directives, is to confer regulatory functions on the reinsurer’s home state regulators, with the regulators in host states where branches are established or into which services are offered having only fallback powers. Those powers are set out in art 47.

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2.21 Article 47

Reinsurance Reinsurance undertakings not complying with the legal provisions

1. If the competent authorities of the host Member State establish that a reinsurance undertaking with a branch or carrying on business under the freedom to provide services within its territory is not complying with the legal provisions applicable to it in that State, they shall require the reinsurance undertaking concerned to remedy that irregular situation. At the same time, they shall refer those findings to the competent authority of the home Member State. If, despite the measures taken by the competent authority of the home Member State or because such measures prove inadequate, the reinsurance undertaking persists in infringing the legal provisions applicable to it in the host Member State, the latter may, after informing the competent authority of the home Member State, take appropriate measures to prevent or penalise further infringements, including, insofar as is strictly necessary, preventing that reinsurance undertaking from continuing to conclude new reinsurance contracts within its territory. Member States shall ensure that within their territories it is possible to serve the legal documents necessary for such measures on reinsurance undertakings. 2. Any measure adopted under paragraph 1 involving penalties or restrictions on the conduct of reinsurance business shall be properly reasoned and communicated to the reinsurance undertaking concerned. Article 48

Winding-up

In the event of a reinsurance undertaking’s being wound up, commitments arising out of contracts underwritten through a branch or under the freedom to provide services shall be met in the same way as those arising out of that undertaking’s other reinsurance contracts. TITLE VI R E I N S U R A N C E U N D E RTA K I N G S W H O S E H E A D O F F I C E S A R E O U T S I D E THE COMMUNITY AND CONDUCTING REINSURANCE ACTIVITIES IN THE COMMUNITY Article 49

Principle and conditions for conducting reinsurance business

A Member State shall not apply to reinsurance undertakings having their head offices outside the Community and commencing or carrying out reinsurance activities in its territory provisions which result in a treatment more favourable than that accorded to reinsurance undertakings having their head office in that Member State. Article 50

Agreements with third countries

1. The Commission may submit proposals to the Council for the negotiation of agreements with one or more third countries regarding the means of exercising supervision over: (a) reinsurance undertakings which have their head offices situated in a third country, and conduct reinsurance business in the Community, (b) reinsurance undertakings which have their head offices in the Community and conduct reinsurance business in the territory of a third country. 2. The agreements referred to in paragraph 1 shall in particular seek to ensure under conditions of equivalence of prudential regulation, effective market access for reinsurance undertakings in the territory of each contracting party and provide for mutual recognition of supervisory rules and practices on reinsurance. They shall also seek to ensure that: (a) the competent authorities of the Member States are able to obtain the information necessary for the supervision of reinsurance undertakings which have their head offices situated in the Community and conduct business in the territory of third countries concerned, (b) the competent authorities of third countries are able to obtain the information necessary for the supervision of reinsurance undertakings which have their head offices situated within their territories and conduct business in the Community. 3. Without prejudice to Articles 300(1) and (2) of the Treaty, the Commission shall with the assistance of the European Insurance and Occupational Pensions Committee examine the

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outcome of the negotiations referred to in paragraph 1 of this Article and the resulting situation. TITLE VII S U B S I D I A R I E S O F PA R E N T U N D E RTA K I N G S G O V E R N E D B Y T H E L AW S O F A T H I R D C O U N T RY A N D A C Q U I S I T I O N S O F H O L D I N G S B Y S U C H PA R E N T U N D E RTA K I N G S Article 51

Information from Member States to the Commission

The competent authorities of the Member States shall inform the Commission and the competent authorities of the other Member States: (a) of any authorisation of a direct or indirect subsidiary, one or more parent undertakings of which are governed by the laws of a third country; (b) whenever such a parent undertaking acquires a holding in a Community reinsurance undertaking which would turn the latter into its subsidiary. When an authorisation as referred to in point (a) is granted to the direct or indirect subsidiary of one or more parent undertakings governed by the laws of a third country, the structure of the group shall be specified in the notification which the competent authorities shall address to the Commission. Article 52

Third country treatment of Community reinsurance undertakings

1. Member States shall inform the Commission of any general difficulties encountered by their reinsurance undertakings in establishing themselves and operating in a third country or carrying on activities in a third country. 2. The Commission shall, periodically, draw up a report examining the treatment accorded to Community reinsurance undertakings in third countries, in the terms referred to in paragraph 3, as regards the establishment of Community reinsurance undertakings in third countries, the acquisition of holdings in third-country reinsurance undertakings, the carrying on of reinsurance activities by such established undertakings and the cross-border provision of reinsurance activities from the Community to third countries. The Commission shall submit those reports to the Council, together with any appropriate proposals or recommendations. 3. Whenever it appears to the Commission, either on the basis of the reports referred to in paragraph 2 or on the basis of other information, that a third country is not granting Community reinsurance undertakings effective market access, the Commission may submit recommendations to the Council for the appropriate mandate for negotiation with a view to obtaining improved market access for Community reinsurance undertakings. 4. Measures taken under this Article shall comply with the Community’s obligations under any international agreements, in particular in the World Trade Organisation. TITLE VIII OTHER PROVISIONS Article 53

Right to apply to the courts

Member States shall ensure that decisions taken in respect of a reinsurance undertaking under laws, regulations and administrative provisions implementing this Directive are subject to the right to apply to the courts. Article 54

Cooperation between the Member States and the Commission

1. Member States shall cooperate with each other for the purpose of facilitating the supervision of reinsurance within the Community and the application of this Directive. 2. The Commission and the competent authorities of the Member States shall collaborate closely for the purpose of facilitating the supervision of reinsurance within the Community and of examining any difficulties which may arise in the application of this Directive.

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2.21 Article 55

Reinsurance Committee procedure

1. The Commission shall be assisted by the European Insurance and Occupational Pensions Committee. 2. Where reference is made to this paragraph, Articles 5 and 7 of Decision 1999/468/EC shall apply, having regard to the provisions of Article 8 thereof. The period laid down in Article 5(6) of Decision 1999/468/EC shall be set at three months. 3. The Committee shall adopt its Rules of Procedure. Article 56

Implementing measures

The following implementing measures to this Directive shall be adopted in accordance with the procedure referred to in Article 55(2): (a) extension of the legal forms provided for in Annex I, (b) clarification of the items constituting the solvency margin listed in Article 36 to take account of the creation of new financial instruments, (c) increase by up to 50% of the premiums or claims amounts used for the calculation of the required solvency margin provided for in Article 37(3) and (4), in classes other than classes 11, 12 and 13 listed in point A of the Annex to Directive 73/239/EEC, for specific reinsurance activities or contract types, to take account of the specificities of those activities or contracts, (d) alteration of the minimum guarantee fund provided for in Article 40(2) to take account of economic and financial developments, (e) clarification of the definitions in Article 2 in order to ensure uniform application of this Directive throughout the Community. TITLE IX AMENDMENTS TO EXISTING DIRECTIVES General note The Articles under this Title amend other Directives and are not reproduced separately. Article 57 amends Directive 73/239/EEC (see para 1.59), Article 58 amends Directive 92/49/EEC (see para 1.66), Article 59 amends Directive 98/78/EC (see para 1.67) and Article 60 amends Directive 2002/83/EC (see para 3.29).

TITLE X TRANSITIONAL AND FINAL PROVISIONS Article 61

Right acquired by existing reinsurance undertakings

1. Reinsurance undertakings subject to this Directive which were authorised or entitled to conduct reinsurance business in accordance with the provisions of the Member States in which they have their head offices before 10 December 2005 shall be deemed to be authorised in accordance with Article 3. However, they shall be obliged to comply with the provisions of this Directive concerning the carrying on of the business of reinsurance and with the requirements set out in Article 6(a), (c), (d), Articles 7, 8 and 12 and Articles 32 to 41 as from 10 December 2007. 2. Member States may allow reinsurance undertakings referred to in paragraph 1 which at 10 December 2005 do not comply with Articles 6(a), 7, 8 and Articles 32 to 40 a period until 10 December 2008 in order to comply with such requirements. Article 62

Reinsurance undertakings closing their activity

1. Reinsurance undertakings which by 10 December 2007 have ceased to conduct new reinsurance contracts and exclusively administer their existing portfolio in order to terminate their activity shall not be subject to this Directive.

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2. Member States shall draw up the list of the reinsurance undertakings concerned and they shall communicate that list to all the other Member States. Article 63

Transitional period for Articles 57(3) and 60(6)

A Member State may postpone the application of the provisions of Article 57(3) of this Directive amending Article 15(3) of Directive 73/239/EEC and of the provision of Article 60(6) of this Directive until 10 December 2008. Article 64

Transposition

1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 10 December 2007. They shall forthwith communicate to the Commission the texts of those measures. When Member States adopt those measures, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made. 2. Member States shall communicate to the Commission the text of the main provisions of national law which they adopt in the field covered by this Directive. Article 65

Entry into force

This Directive shall enter into force on the day following its publication in the Official Journal of the European Union. Article 66

Addressees

This Directive is addressed to the Member States. ANNEX I Forms of reinsurance undertakings: — in the case of the Kingdom of Belgium: ‘‘soci´et´e anonyme/naamloze vennootschap’’, ‘‘soci´et´e en commandite par actions/commanditaire vennootschap op aandelen’’, ‘‘association d’assurance mutuelle/onderlinge verzekeringsvereniging’’, ‘‘soci´et´e coope´ rative/co¨operatieve vennootschap’’; — in the case of the Czech Republic: ‘‘akciov´a spoleˇcnost’’; — in the case of the Kingdom of Denmark: ‘‘aktieselskaber’’, ‘‘gensidige selskaber’’; — in the case of the Federal Republic of Germany: ‘‘Aktiengesellschaft’’, ‘‘Versicherungsverein auf Gegenseitigkeit’’, ‘‘Offentlich-rechtliches ¨ Wettbewerbsversicherungsunternehmen’’; — in the case of the Republic of Estonia: ‘‘aktsiaselts’’; — in the case of the Hellenic Republic: ‘‘anwnumh ´ etair´ıa’’, ‘‘allhlasjalistikoz ´ sunetairismoz’’; ´ — in the case of the Kingdom of Spain: ‘‘sociedad anonima’’; ´ — in the case of the French Republic: ‘‘soci´et´e anonyme’’, ‘‘soci´et´e d’assurance mutuelle’’, ‘‘institution de pr´evoyance r´egie par le code de la s´ecurit´e sociale’’, ‘‘institution de pr´evoyance r´egie par le code rural’’ and ‘‘mutuelles r´egies par le code de la mutualit´e’’; — in the case of Ireland: incorporated companies limited by shares or by guarantee or unlimited; — in the case of the Italian Republic: ‘‘societ`a per azioni’’; — in the case of the Republic of Cyprus: ‘‘Etaire´ıa Periorism´enhz Euqunhz ´ me metoc´ez’’ h´ ‘‘Etaire´ıa Periorism´enhz Euqunhz ´ me egguhsh’’; ´ — in the case of the Republic of Latvia: ‘‘akciju sabiedr¯ıba’’, ‘‘sabiedr¯ıba ar ierobeˇzotu atbild¯ıbu’’; — in the case of the Republic of Lithuania: ‘‘akcine˙ bendrove’’, ˙ ‘‘uˇzdaroji akcine˙ bendrove’’; ˙

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Reinsurance

— in the case of the Grand Duchy of Luxembourg: ‘‘soci´et´e anonyme’’, ‘‘soci´et´e en commandite par’’ actions’’, ‘‘association d’assurances mutuelles’’, ‘‘soci´et´e coop´erative’’; — in the case of the Republic of Hungary: ‘‘biztos´ıto´ r´eszv´enyt´arsas´ag’’, ‘‘biztos´ıto´ sz¨ovetkezet’’, ‘‘harmadik orsz´agbeli biztos´ıto´ magyarorsz´agi fioktelepe’’; ´ — in the case of the Republic of Malta: ‘‘limited liability company/kumpannija t`a responsabbilt`a limitata’’; — in the case of the Kingdom of the Netherlands: ‘‘naamloze vennootschap’’, ‘‘onderlinge waarborgmaatschappij’’; — in the case of the Republic of Austria: ‘‘Aktiengesellschaft’’, ‘‘Versicherungsverein auf Gegenseitigkeit’’; — in the case of the Republic of Poland: ‘‘spo¯ ´ lka akcyjna’’, ‘‘towarzystwo ubezpieczen´ wzajemnych’’; — in the case of the Portuguese Republic: ‘‘sociedade ano´ nima’’, ‘‘mutua ´ de seguros’’; — in the case of the Republic of Slovenia: ‘‘delniˇska druˇzba’’; — in the case of the Slovak Republic: ‘‘akciov´a spoloˇcnost’’; — in the case of the Republic of Finland: ‘‘keskin¨ainen vakuutusyhti¨o/¨omsesidigt f¨ors¨akringsbolag’’, ‘‘vakuutusosakeyhti¨o/f¨ors¨akringsaktiebolag’’, ‘‘vakuutusyhdistys/ f¨ors¨akringsf¨orening’’; — in the case of the Kingdom of Sweden: ‘‘f¨ors¨akringsaktiebolag’’, ‘‘¨omsesidigt f¨ors¨akringsbolag’’; — in the case of the United Kingdom: incorporated companies limited by shares or by guarantee or unlimited, societies registered under the Industrial and Provident Societies Acts, societies registered or incorporated under the Friendly Societies Acts, ‘‘the association of underwriters known as Lloyd’s’’.

ANNEX II General note Annex II amends Directive 98/78/EC (see para 1.67).

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CHAPTER 3

LIFE INSURANCE

OVERVIEW 3.1 English statute law as it affects life insurance is concerned primarily with the regulation of the providers of life insurance. Insurers must be authorised to carry on insurance business under the Financial Services and Markets Act 2000, or must be established and authorised within the EU in order to take advantage of the Single European Licence permitting the selling of insurance throughout the EU (see chapter 1). The scheme of the 2000 Act, following the EU’s Directives, is to achieve a strict separation of life and non-life business for regulation purposes. The 2000 Act also lays down various formalities for the creation of life policies, including a coolingoff period during which the policyholder has a right to cancel the policy. 3.2 The only area of substantive law regulated by statute, the Life Assurance Act 1774 as modified by later legislation, is that of insurable interest. The remaining legislation is largely procedural, and governs the assignment of life policies (Policies of Assurance Act 1867) and the payment of the proceeds of policies (Married Women’s Property Act 1882 and Life Assurance Companies (Payment into Court) Act 1896). INSURABLE INTEREST 3.3 The Life Assurance Act 1774, s 1, requires the policyholder to have insurable interest in the life assured. The section, as construed in Dalby v. India and London Life Assurance Co (1854) 15 CB 365, means that insurable interest in the life assured is required only when the policy is taken out, and not when the loss occurs, so that it is permissible for the policyholder to assign the policy to a person not possessing interest at any time after it has been taken out, provided that the policyholder’s intention was not from the outset to act as agent for a person without interest (M’Farlane v. Royal London Friendly Society (1886) 2 TLR 755). The Dalby decision opened the way to the use of life policies as vehicles for investment. The Act does not seek to define insurable interest, a matter which has been left to the courts. Under s 3 of the 1774 Act, the policyholder may not recover any amount beyond the value of his interest, measured as at the date the policy was taken out. 3.4 Section 2 of the 1774 Act seeks to prevent evasion of the insurable interest requirement by providing that the names of all interested parties must appear in the policy, failing which the policy is illegal. This caused some difficulty as regards life policies which cover a group of persons some of whom are not identifiable when the policy is taken out, or a group whose membership alters from time to time (eg, a policy on the lives of employees), a problem which was overcome by s 50 of the Insurance Companies (Amendment) Act 1973, which allows insurance to be taken out without naming individual persons insured as long as they belong to a readily identifiable class. 625

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Life Insurance

3.5 The 1774 Act, by s 4, does not apply to ‘‘ships, goods and merchandises’’. It has subsequently been decided that the Act has no application to indemnity policies of any type, and in particular does not extend to liability insurance (Siu v. Eastern Insurance Co [1994] 1 All ER 213) and buildings insurance (Mark Rowlands Ltd v. Berni Inns Ltd [1986] 1 QB 211). Moreover, it applies only to life insurance proper: a policy which provides the same benefits on death or on voluntary surrender is nevertheless to be regarded as one which relies on an uncertain event and thus is life insurance (Fuji Finance Inc. v. Aetna Life Insurance Ltd [1997] Ch 173). Indemnity insurances (other than marine policies) are not governed by rules of insurable interest as such, although the law in effect requires insurable interest in two respects: (a) if the assured does not possess an insurable interest when the policy is taken out, and has no reasonable expectation of acquiring such an interest at some time during the currency of the policy, the policy is a wager and void under s 18 of the Gaming Act 1845: (b) if the assured does not possess an insurable interest when the loss occurs, the common law indemnity principle means that he is unable to make any recovery under the policy because he has suffered no loss. Insurable interest in marine insurance is governed by special rules contained in the Marine Insurance Act 1906, ss 5 to 15 (see chapter 5). 3.20 LIFE ASSURANCE ACT 1774 (14 Geo c 48) An Act for regulating Insurances upon Lives, and for prohibiting all such Insurances except in cases where the Persons insuring shall have an Interest in the Life or Death of the Persons insured General Note The Life Assurance Act 1774, also known as the Gambling Act 1774, was passed to outlaw wagering on lives. The Act contains the basic prohibition (s 1), goes on to outlaw attempts at evasion (s 2), prevents an assured with interest from recovering more than his interest (s 3), and sets out various exclusions (s 4).

Whereas it hath been found by experience that the making insurances on lives or other events wherein the assured shall have no interest hath introduced a mischievous kind of gaming: Notes The mischievous kind of gaming here referred to consisted of the eighteenth century practice of wagering on the lives of famous people, based upon newspaper reports of their health. The Act was also prompted by a legislative distaste for private gaming, which was generally lawful at this time, as such gaming had proved capable of damaging ‘‘leading’’ families and was perceived as giving rise to criminality of various types.

No insurance to be made on lives, etc, by persons having no interest etc [1]. From and after the passing of this Act no insurance shall be made by any person or persons, bodies politick or corporate, on the life or lives of any person or persons, or on any other event or events whatsoever, wherein the person or persons for whose use, benefit, or on whose account such policy or policies shall be made, shall have no interest, or by way of gaming or wagering; and that every assurance made contrary to the true intent and meaning hereof shall be null and void to all intents and purposes whatsoever. Notes The 1774 Act applies only to a contract made in the form of a policy of insurance (Carlill v. Carbolic Smokeball Co Ltd [1893] 1 QB 256). ‘‘No insurance shall be made’’: A policy made without the requisite insurable interest is not just void, but also illegal (Gedge v. Royal Exchange Insurance Corporation [1900] 2 QB 214). Prima facie, therefore, the

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3.20

policyholder will not be able either to claim on the policy or to recover any premiums paid (Howard v. Refuge Friendly Society (1886) 54 LT 644; Harse v. Pearl Assurance Co [1904] 1 KB 558; Re London County Commercial Reinsurance Office [1922] 2 Ch 67). The premium will be recoverable if the policyholder was not in pari delicto with the insurer, eg, where the insurer or his agent has been guilty of fraud or misrepresentation (British Workman’s & General Assurance Co Ltd v. Cunliffe (1902) 18 TLR 502; Hughes v. Liverpool Victoria Friendly Society [1916] 2 KB 482). ‘‘Any other event or events whatsoever’’: It was at one time thought that these words extended the 1774 Act beyond life policies, to encompass all policies other than those excluded by s 4, most importantly liability and buildings policies. It is, nevertheless, now clear that the 1774 Act is confined to life insurance: Mark Rowlands Ltd v. Berni Inns Ltd [1986] QB 211 (buildings insurance); Siu v. Eastern Insurance Co [1994] 1 All ER 213 (liability insurance). Earlier authority had applied the Act to other forms of wagering contract (Mollison v. Staples (1778) Park 640; Roebuck v. Hammerton (1778) 2 Cowp 737; Paterson v. Powell (1832) 9 Bing 320; Re London County Commercial Reinsurance Office Ltd [1922] 2 Ch 67)). A policy is one of life insurance under the 1774 Act only if the circumstances of payment are beyond the assured’s control, but the Act does apply to a policy under which the same benefits are payable on death or early surrender as the death of the life assured remains the determining criterion upon which the insurer’s liability is based: Fuji Finance Inc. v. Aetna Life Insurance Ltd [1996] 4 All ER 608. ‘‘Shall have no insurable interest’’: Insurable interest is required at the date of the policy, but not at the date of the loss. A policyholder who loses his insurable interest may maintain the policy in force. This point was established in Dalby v. India & London Life Assurance Co (1854) 15 CB 365 and confirmed in Law v. London Indisputable Life Policy Co (1855) 1 K & J 2233, overruling the earlier decisions in Godsall v. Boldero (1807) 9 East 72 and Henson v. Blackwell (1845) 4 Hare 434. Prior to Dalby, insurers were in the practice of paying despite loss of interest, and Dalby simply confirmed the position in practice—an illustration of the earlier position is Barber v. Morris (1831) 1 M & Rob 62. A further consequence of Dalby is that a policyholder may assign the policy to a third party who has no interest (Ashley v. Ashley (1829) 3 Sim 149), although if the entire arrangement was, from the outset, one under which the policyholder obtained the policy with the intention of assigning it to a person without interest, the policy is illegal (Wainwright v. Bland (1835) 1 Moo & R 481; Shilling v. Accidental Death (1858) 1 F & F 116; M’Farlane v. Royal London Friendly Society (1886) 2 TLR 755; Brewster v. National Life (1892) 8 TLR 648). ‘‘Insurable interest’’: The meaning of this concept has been developed by the courts. An insurable interest is, in general terms, a financial interest. The cases establish the following propositions. (a) It is conclusively presumed that a person has an unlimited interest in his or her own life (Wainwright v. Bland (1835) 1 Moo & R 481). (b) It is presumed that a husband has an unlimited insurable interest in his wife’s life (Griffiths v. Fleming [1909] 1 KB 805 and that a wife has an unlimited interest in her husband’s life (Reed v. Royal Exchange Assurance Co (1795) Peake Ad Cas 70). (c) There is no presumption of insurable interest in other family relationships, and in all cases financial interest must be shown. Thus, in the absence of such proof: a parent cannot insure his child (Halford v. Kymer (1830) 10 B & C 724; Worthington v. Curtis (1875) 1 Ch D 419; Attorney-General v. Murray [1904] 1 KB 165); a child cannot insure his parent (Shilling v. Accidental Death (1858) 1 F & F 116; Howard v. Refuge Friendly Society (1886) 54 LT 644; Harse v. Pearl Assurance Co [1904] 1 KB 558), although the position is different if the parent has accepted a duty to maintain the child (Greenslade v. London & Manchester Industrial Insurance Co Ltd (1913) 48 Sol JO 330); and those in remoter relationships, including siblings and nephews and nieces may not insure each other’s lives (British Workman’s & General Assurance Co Ltd v. Cunliffe (1902) 18 TLR 502; Elson v. Crookes (1911) 106 LT 462; Evanson v. Crooks (1911) 106 LT 264. Policies taken out by married couples may be subject to a statutory trust under s 11 of the Married Women’s Property Act 1882: see para 3.22. (d) Commercial relationships may give rise to insurable interest: such relationships include partners (Griffiths v. Fleming [1909] 1 KB 805); creditor and debtor (Anderson v. Edie (1795) 2 Park 914; Von Lindenau v. Desborough (1828) 3 C & P 353; Lea v. Hinton (1854) 5 De G M & G 823; Hebdon v. West (1863) 3 B & S 579; Branford v. Saunders (1877) 25 WR 650); and employer and employee (Turnbull & Co v. Scottish Provident Institution (1896) 34 SLR 146; Simcock v. Scottish Imperial Insurance Co 1902 10 SLT 286). (e) A trustee may insure the life of the beneficiary’s debtor (Tidswell v. Ankerstein (1792) Peake 151). In the landmark decision of the Court of Appeal in Feasey v. Sun Life Assurance Co of Canada [2003] Lloyd’s Rep IR 637 a wider approach to insurable interest was adopted, and it was held that a reinsurance treaty which provided for payment to the reinsured in the event that personal injury was suffered by a person to whom the original assured might face liability was a life policy which was supported by the requisite insurable interest: although the reinsured did not have a direct insurable interest in the lives of the assured’s employees, it was sufficient that the reinsured faced potential liability in the event that those employees suffered injury. Given the existence of a valid interest, the only question was whether the treaty covered that interest, a question which the Court of Appeal answered in the affirmative.

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3.20

Life Insurance

No policies on lives without inserting the names of persons interested etc 2. And . . . it shall not be lawful to make any policy or policies on the life or lives of any person or persons, or other event or events, without inserting in such policy or policies the person or persons name or names interested therein, or for whose use, benefit, or on whose account such policy is so made or underwrote. Notes The object of s 2 is to prevent evasion of s 1, in the form of a person with interest taking out a policy on behalf of a person without interest. In such a case, however, the policy is probably illegal under s 1 itself, and the leading authorities assume illegality under both sections (Wainwright v. Bland (1835) 1 Moo & R 481; Shilling v. Accidental Death (1858) 1 F & F 116; Downes v. Green (1844) 12 M & W 481; Worthington v. Curtis (1875) 1 Ch D 419). The prime effect of s 2 is thus to render illegal a policy which does not comply with this formality but which is made on good insurable interest (Hodson v. Observer Life Assurance Society (1857) 8 E & B 40; Evans v. Bignold (1859) LR 4 QB 622; Forgan v. Pearl Life Assurance Co (1907) 51 Sol Jo 230). If the insurer chooses to make payment despite a breach of s 2, the insurance moneys will be recoverable by the person entitled to receive them under the policy (Worthington v. Curtis (1875) 1 Ch D 419; AttorneyGeneral v. Murray [1904] 1 KB 165). The requirement imposed by s 2 is waived where the persons interested cannot be identified at the outset but belong to a class capable of definition: Insurance Companies Amendment Act 1973, s 50: see para 3.24.

How much may be recovered where the insured hath interest in lives 3. And . . . in all cases where the insured hath interest in such life or lives, event or events, no greater sum shall be recovered or received from the insurer or insurers than the amount of value of the interest of the insured in such life or lives, or other event or events. Notes The measure of interest is that at the date the policy was taken out, not the measure when the death of the life assured occurs (Dalby v. India & London Life Assurance Co (1854) 15 CB 365).

Not to extend to insurance on ships, goods etc 4. Provided, always, that nothing herein contained shall extend or be construed to extend to insurances bona fide made by any person or persons on ships, goods, or merchandises, but every such insurance shall be as valid and effectual in the law as if this Act had not been made. Notes The exclusions here provided for are not exhaustive, and the Act has been held to apply only to life and non-indemnity policies: see the note to s 1, above. Before this had become clear, it had been possible to avoid the harshness of the 1774 Act by holding that a mixed policy on goods and liability for goods was a goods policy and thus outside the 1774 Act (Williams v. Baltic Insurance Association of London Ltd [1924] 2 KB 282—motor insurance). Money has been held to be ‘goods’ for the purposes of the Act (Prudential Staff Union v. Hall [1947] 1 KB 685).

3.21 POLICIES OF ASSURANCE ACT 1867 (30 & 31 Vict c 144) General Notes Life policies, as choses in action, were not capable of assignment at common law, although marine policies were recognised as an exception to this general rule (an exception codified in ss 50–51 of the Marine Insurance Act 1906). It was not possible, therefore, for the policyholder under a life policy to transfer the policy to the assignee. Equity would, however, recognise the assignment of a life policy or any other chose in action as long as the policyholder had delivered the policy to the assignee or had otherwise evidenced an equivocal intention to assign either at the present time or with effect from some future date (Crossley v. City of Glasgow Life

628

Policies of Assurance Act 1867

3.21

Assurance Co (1876) 4 Ch D 421; Re King (1879) 14 Ch D 179; Thomas v. Harris [1947] 1 All ER 444). Writing was not essential, and consideration was not essential unless the assignment was by way of gift and the policyholder had no further action to take to perfect the assignment (Re Williams [1917] 1 Ch 1). It was not necessary for B to inform the insurer of the assignment, although, in practice, notice was given in the light of the equitable rule in Dearle v. Hall (1828) 3 Russ 1, that, where there had been a number of successive assignments, the first assignee to give notice to the insurer took priority over earlier assignments of which he did not have notice when he took his own assignment (Re Lake [1903] 1 KB 151; Mutual Life v. Langley (1886) 32 Ch D 460), although he remained subject to earlier assignments of which he was aware (Newman v. Newman (1885) 28 Ch D 674) or ought to have been aware (normally, because the policyholder does not have possession of the policy: Spencer v. Clarke (1878) 9 Ch D 137; Re Weniger’s Policy [1910] 2 Ch 291) when he took his own assignment. An equitable assignee was not permitted to sue the insurer on the policy using the assignee’s own name, and the original policyholder had to be joined as a party to the action, if necessary, against his wishes. Choses in action became assignable at law by virtue of the Judicature Act 1873, s 25(6), a provision re-enacted by s 136 of the Law of Property Act 1925. This section allows the assignee to sue the insurer in his own name, provided that the assignment is absolute (in the sense that the entire chose in action is assigned) and is in writing, and notice has been given to the debtor (the insurer, in the case of a life policy). The provision of consideration by the assignee is unnecessary, so that gifts can operate under s 136 (Re Westerton [1919] 2 Ch 104). Life policies may, therefore, be assigned either by means of a legal assignment or, if the assignment fails to meet the criteria set out in s 136 of the Law of Property Act 1925, the assignment may nevertheless be effective in equity. The ability of a person to acquire an existing life policy without possessing an insurable interest in the life assured, sanctioned by Dalby v. India and London Life Assurance Co (1854) 15 CB 365 (see para 3.3) led to the need for some mechanism to facilitate assignments. The necessary mechanism was introduced by the Policies of Assurance Act 1867, which was until 1873 the only means by which a policy could be assigned at common law, and anticipated the general relaxation of the prohibition of assignments of choses in action at common law. It will rarely be necessary to rely upon the 1867 Act in the light of subsequent statutory developments, but the 1867 Act remains in force and constitutes an alternative form of assignment to s 136 of the Law of Property Act 1925 and equitable principles of assignment.

Assignees of life policies, empowered to sue 1. Any person or corporation now being or hereafter becoming entitled, by assignment or other derivative title, to a policy of life assurance, and possessing at the time of action brought the right in equity to receive and the right to give an effectual discharge to the assurance company liable under such policy for monies thereby assured or secured, shall be at liberty to sue at law in the name of such person or corporation to recover such monies. Notes Section 1 creates no new rights, and merely provides that if the assignee has the right in equity to receive the policy moneys—ie, if there has been a valid equitable assignment—the assignee has the power to bring an action in his own name at law against the insurer. As to what constitutes a valid equitable assignment, see the above general note. The Act applies to mortgages of life policies as well as to outright assignments (Re Haycock’s Policy (1876) 1 Ch D 611).

Defence or reply on equitable grounds 2. In any action on a policy of life assurance, a defence on equitable grounds, or a reply to such defence on similar grounds, may be respectively pleaded and relied upon in the same manner and to the same extent as in any other personal action. Notes The rule that an assignee takes subject to equities has two implications: (a) any defence which the insurer may have had against the policyholder prior to assignment may be pleaded against the assured (British Equitable Insurance Co v. Great Western Railway Co (1869) 38 LJ Ch 314); (b) the assignee takes subject to prior equitable interests of which he had notice when he took the assignment (see the above general note).

Notice of assignment 3. No assignment made after the passing of this Act of a policy of life assurance shall confer on the assignee therein named, his executors, administrators, or assigns, any right to sue for the

629

3.21

Life Insurance

amount of such policy, or the monies assured or secured thereby, until a written notice of the date and purport of such assignment shall have been given to the assurance company liable under such policy at their principal place of business for the time being, or in case they have two or more principal places of business, then at some one of such principal places of business, either in England or Scotland or Ireland; and the date on which such notice shall be received shall regulate the priority of all claims under any assignment; and a payment bona fide made in respect of any policy by any assurance company before the date on which such notice shall have been received shall be as valid against the assignee giving such notice as if this Act had not been passed. Notes Notice of assignment must be given to the insurer at its principal place of business in order to bring the Act into operation. The section states that the date at which notice is given determines priority, but it was held in Newman v. Newman (1885) 28 Ch D 674 that the giving of notice merely entitles the assignee to sue the insurer at law. If there is an earlier assignment which take priority, in that the assignee was or ought to have been aware of it, s 3 does not operate to reverse the ordinary equitable principle that the earlier assignment takes priority.

Principal place of business to be specified on policies 4. Every assurance company shall, on every policy issued by them after the thirtieth day of September one thousand eight hundred and sixty-seven, specify their principal place or principal places of business at which notices of assignment may be given in pursuance of this Act. Notes This requirement merely gives effect to the obligation in s 3 that notice must be given to the insurer’s principal place of business.

Mode of assignment 5. Any such assignment may be made either by endorsement on the policy or by a separate instrument in the words or to the effect set forth in the schedule hereto, such endorsement or separate instrument being duly stamped. Notes The form of the assignment may be by endorsement or by use of the wording contained in the Schedule. The reference to stamping is otiose, as the requirement for life policies to be stamped (originating in the Stamp Act 1891) was abolished by the Finance Act 1989.

Receipt of notice of assignment 6. Every assurance company to whom notice shall have been duly given of the assignment of any policy under which they are liable shall, upon the request in writing of any person by whom any such notice was given or signed, or of his executors or administrators, and upon payment in each case of a fee not exceeding [25p] deliver an acknowledgment in writing, under the hand of the manager, secretary, treasurer, or other principal officer of the assurance company, of their receipt of such notice; and every such written acknowledgment, if signed by a person being de jure or de facto the manager, secretary, treasurer, or other principal officer of the assurance company whose acknowledgment the same purports to be, shall be conclusive evidence as against such assurance company of their having duly received the notice to which such acknowledgment relates. Notes This section was amended by s 10(1) of the Decimal Currency Act 1969.

Interpretation 7. In the construction and for the purposes of this Act the expression ‘‘policy of life assurance’’ or ‘‘policy’’ shall mean any instrument by which the payment of monies by or out

630

Married Women’s Property Act 1882

3.22

of the funds of an assurance company, on the happening of any contingency depending on the duration of human life, is assured or secured; and the expression ‘‘assurance company’’ shall mean and include every corporation, association, society, or company now or hereafter carrying on the business of assuring lives, or survivorships, either alone or in conjunction with any other object or objects. Saving of contracts under 16 & 17 Vict c 45 or 27 & 28 Vict c 43, and of engagements by friendly societies 8. Provided always, that this Act shall not apply to any policy of assurance granted or to be granted or to any contract for a payment on death entered into or to be entered into in pursuance of the provisions of the Government Annuities Act 1853 and the Government Annuities Act 1864, or either of those Acts, or to any engagement for payment on death by any friendly society. Notes The 1853 and 1864 Acts here referred to were repealed by the Government Annuities Act 1929, s 66.

Short title 9. For all purposes this Act may be cited as ‘‘The Policies of Assurance Act 1867.’’ SCHEDULE SECTION 5 I A.B., of, &c., in consideration of, &c., do hereby assign unto C.D., of, &c., his executors, administrators, and assigns, the [within] policy of assurance granted, &c., [here describe the policy]. In witness, &c.

3.22 MARRIED WOMEN’S PROPERTY ACT 1882 (45 & 46 Vict c 75) General Note This Act has largely been repealed, its most important provisions having been replaced by the Law Reform (Married Women and Tortfeasors) Act 1935. The Act was of some historical significance by allowing married women to make contracts in respect of their own property. The only provision relevant to insurance remaining in force is s 11, reproduced below.

Moneys payable under policy of assurance not to form part of estate of assured 11. A married woman may effect a policy upon her own life or the life of her husband for her [own benefit]; and the same and all benefit thereof shall enure accordingly. A policy of assurance effected by any man on his own life, and expressed to be for the benefit of his wife, or of his children, or of his wife and children, or any of them, or by any woman on her own life, and expressed to be for the benefit of her husband, or of her children, or of her husband and children, or any of them, shall create a trust in favour of the objects therein named, and the moneys payable under any such policy shall not, so long as any object of the trust remains unperformed, form part of the estate of the insured, or be subject to his or her debts: Provided, that if it shall be proved that the policy was effected and the premiums paid with intent to defraud the creditors of the insured, they shall be entitled to receive, out of the moneys payable under the policy, a sum equal to the premiums so paid. The insured may by the policy, or by any memorandum under his or her hand, appoint a trustee or trustees of the moneys payable under the policy, and from time to time appoint a new trustee or new trustees thereof, and may make provision for the appointment of a new trustee or new trustees thereof, and for the investment of the moneys payable under any such policy. In default of any such appointment of a trustee, such policy, immediately on its being effected, shall vest in the insured and his or her legal personal representatives, in trust for the purposes aforesaid. The receipt of a trustee or trustees duly appointed, or in default of any such appointment, or in default of notice to the insurance office, the receipt of the legal personal representative of

631

3.22

Life Insurance

the insured shall be a discharge to the office for the sum secured by the policy, or for the value thereof, in whole or in part. Notes The section has been amended by the Law Reform (Married Women and Tortfeasors) Act 1935, s 5 and by the Statute Law (Repeals) Act 1969. The first paragraph of s 11 was rendered necessary by the common law rule that a married woman could not make a contract in her own right: Cahill v. Cahill (1883) 8 App Cas 420. That rule has been abrogated by statute, rendering this paragraph otiose. The remainder of the section provides that the expression in a policy by one spouse that the policy be for the benefit of the other spouse or their children creates a statutory trust of the proceeds in favour of the beneficiaries. A policy on the joint lives of the spouses appears to be outside the statute (Griffiths v. Fleming [1909] 1 KB 805), although a policy for the benefit of a spouse and children is within the section to that extent even though other persons are beneficiaries under the policy (Re Clay [1937] 2 All ER 548, but contrast Re Parker [1906] 1 Ch 526). A contingent benefit is within the Act: a policy which provides for payment to a spouse in certain circumstances only, eg if the spouse is living at the death of life assured, creates a trust if the spouse is still living (Equitable Life Assurance of the United States v. Mitchell (1911) 27 TLR 213; Re Fleetwood [1926] Ch 48; Re Ioakimidis [1925] 1 Ch 403). The policy need not be a life policy: an accident policy providing death benefits is within the section (Re Gladitz [1937] Ch 588). The proceeds of such a policy do not form part of the deceased spouse’s general assets, and pass in full to the beneficiaries, free of claims which creditors may have against the deceased spouse. This is subject to the proviso that the policy was not effected to defraud creditors. Where the trust fails, the proceeds are held on resulting trust for the deceased. One clear illustration of this is where the beneficiary has murdered the life assured under the policy, as the common law does not permit a person to benefit from a deliberate criminal act (Cleaver v. Mutual Reserve Fund Life Association [1892] 1 QB 147, a principle given statutory effect, with some modification other than in the case of murder, by the Forfeiture Act 1982). See Re S, Deceased [1996] 1 WLR 235. The section does not require any particular form of wording, and merely requires that the policy is ‘‘expressed to be’’ for the benefit of spouse and children. No declaration of trust is required, and it is enough that the policy is stated to be ‘‘for the benefit of’’ the statutory beneficiaries. If a spouse is stated to be the beneficiary, the trust operates in favour of the assured’s existing spouse and not any ex-spouse (Re Browne [1903] 1 Ch 188), although the statutory trust can apply to children of previous and the present marriage (Re Davies [1892] 1 Ch 90; Re Griffiths [1903] 1 Ch 739). If a trust of policy proceeds is to be made in circumstances falling outside the Act, an express declaration of trust is required (Re Engelbach [1924] 2 Ch 348; Re Clay [1937] 3 All ER 548; Re Foster [1938] 3 All ER 357; Re Sinclair [1938] 1 Ch 799; Re Webb [1941] 1 Ch 225). Where the section operates, it is presumed that the beneficiaries acquire an immediate vested interest in the proceeds. Thus, if a beneficiary predeceases the life assured, the proceeds will pass to the beneficiary’s estate (Cousins v. Sun Life Assurance Co [1933] Ch 126).

3.23 LIFE ASSURANCE COMPANIES (PAYMENT INTO COURT) ACT 1896 (59 & 60 Vict c 8) An Act to enable Life Assurance Companies to pay Money into Court in certain Cases [21 May 1896] General Notes This short Act deals with the situation in which moneys have become payable under a life policy but either it is not clear who is entitled to give the insurer good discharge for payment or there are competing claimants for the proceeds. Payment into court may also be permitted by the court where the policy has been lost and sufficient discharge cannot be obtained (Harrison v. Alliance Assurance Co [1903] 1 KB 184). The Act allows the insurer to pay the proceeds into court, and it is thereafter open to competing claimants to apply to the court in order to establish the right to payment.

Short title 1. This Act may be cited as the Life Assurance Companies (Payment into Court) Act 1896.

632

Insurance Companies Amendment Act 1973

3.24

Interpretation 2. In this Act— The expression ‘‘life assurance company’’ means any corporation, company, or society carrying on the business of life assurance, not being a society registered under the Acts relating to friendly societies; The expression ‘‘life policy’’ includes any policy not foreign to the business of life assurance. Power to pay money into court 3. Subject to rules of court any life assurance company may pay into [the Supreme Court] . . . any moneys payable by them under a life policy in respect of which, in the opinion of the board of directors, no sufficient discharge can otherwise be obtained. Notes This section was amended by the Administration of Justice Act 1965, s 17(1) and by the Courts Act 1971, s 56. The rules of court referred to are CPR Part 37 Practice Direction.

Receipt of officer sufficient discharge 4. The receipt or certificate of the proper officer shall be a sufficient discharge to the company for the moneys so paid into court, and such moneys shall, subject to rules of court, be dealt with according to the orders of [the Supreme Court] . . . Notes This section was amended by the Administration of Justice Act 1965, s 17(1) and by the Courts Act 1971, s 56.

Extent of Act 5. This Act does not extend to Scotland.

3.24 INSURANCE COMPANIES AMENDMENT ACT 1973 (1973 c 58) General Note This Act has now, for the most part, been repealed, and its regulatory provisions now appear, in modified form, in the Insurance Companies Act 1982.

Validation of certain group policies 50.—(1) Section 2 of the Life Assurance Act 1774 (policy on life or lives or other event or events not valid unless name or names of assured etc inserted when policy is made) shall not invalidate a policy for the benefit of unnamed persons from time to time falling within a specified class or description if the class or description is stated in the policy with sufficient particularity to make it possible to establish the identity of all persons who at any given time are entitled to benefit under the policy. (2) This section applies to policies effected before the passing of this Act as well as to policies effected thereafter. Notes This section was inserted to remove doubts raised by the operation of s 2 of the Life Assurance Act 1774 (see para 3.20). Under s 2 it is necessary to insert into a file policy the names of all persons interested in the policy. This requirement proved impossible to satisfy where a policy was procured on behalf of a group whose membership altered from time to time, the clearest example being a group life policy. Section 50

633

3.24

Life Insurance

provides that, as long as the class can be identified with reasonable certainty, the need to insert into the policy the names of those covered by the policy is dispensed with.

3.25 INCOME AND CORPORATION TAXES ACT 1988 (1988 c 1) Information: duty of insurers 552.— (1) Where a chargeable event has happened in relation to any policy or contract, the body by or with whom the policy or contract was issued, entered into or effected shall— (a) unless satisfied that no gain is to be treated as arising by reason of the event, deliver to the appropriate policy holder before the end of the relevant three month period a certificate specifying the information described in subsection (5) below; and (b) if the condition in paragraph (a) or (b) of subsection (2) below is satisfied, deliver to the inspector before the end of the relevant three month period a certificate specifying the information described in subsection (5) below together with the name and address of the appropriate policy holder. (2) For the purposes of this section— (a) the condition in this paragraph is that the event is an assignment for money or money’s worth of the whole of the rights conferred by the policy or contract; or (b) the condition in this paragraph is that the amount of the gain, or the aggregate amount of the gain and any gains connected with it, exceeds one half of the basic rate limit for the relevant year of assessment. (3) If, in the case of every certificate which a body delivers under subsection (1)(a) above which relates to a gain attributable to a year of assessment (or, where the appropriate policy holder is a company, the corresponding financial year), the body also delivers to the inspector— (a) before the end of the relevant three month period for the purposes of subsection (1)(b) above, (b) by a means prescribed by the Board for the purposes of this subsection under section 552ZA(5), and (c) in a form so prescribed in the case of that means, a certificate specifying the same information as the certificate under subsection (1)(a) together with the name and address of the appropriate policy holder, the body shall be taken to have complied with the requirements of subsection (1)(b) above in relation to that year of assessment, and the corresponding financial year, so far as relating to the chargeable events to which the certificates relate. (4) Where a certificate is not required to be delivered under subsection (1)(b) above in the case of any chargeable event— (a) the inspector may by notice require the body to deliver to him a copy of any certificate that the body was required to deliver under subsection (1)(a) above which relates to the chargeable event; and (b) it shall be the duty of the body to deliver such a copy within 30 days of receipt of the notice. (5) The information to be given to the appropriate policy holder pursuant to subsection (1)(a) above or the inspector pursuant to subsection (1)(b) above is— (a) any unique identifying designation given to the policy or contract; (b) the nature of the chargeable event and— (i) the date on which it happened; and (ii) if it is a chargeable event by virtue of section 546C(7)(a) of this Act and section 514(1) of ITTOIA 2005 (chargeable events where transaction-related calculations show gains), the date on which the year and the insurance year end; (c) if the event is the assignment of all the rights conferred by the policy or contract, such of the following as may be required for computing the amount of the gain to be treated as arising by virtue of this Chapter and Chapter 9 of Part 4 of ITTOIA 2005— (i) the amount or value of any relevant capital payments and the amount or value of any capital sums of a kind referred to in section 492(1)(b) to (e) of ITTOIA 2005;

634

Income and Corporation Taxes Act 1988

3.25

(ii) the amounts previously paid under the policy or contract by way of premiums or otherwise by way of consideration for an annuity; (iii) the capital element in any payment previously made on account of an annuity determined in accordance with section 656 and the amount of so much of any payment previously made on account of an annuity as is exempt under section 717 of ITTOIA 2005; (iv) the value of any previously assigned parts of or shares in the rights conferred by the policy or contract; (v) the total of the amounts of gains treated as arising on previous chargeable events by reason, or in consequence, of the occurrence of a section 546 excess at the end of a year and the total of the amounts of gains treated as arising on previous chargeable events within section 509(1) or 514(1) of ITTOIA 2005; (d) except where paragraph (c) above applies, the amount of the gain treated as arising by reason of the event; (e) the number of years relevant for computing the annual equivalent of the amount of the gain for the purposes of subsection (1) of section 536 of ITTOIA 2005 (top slicing relieved liability: one chargeable event), apart from subsections (6) and (8) of that section; (f) on the assumption that section 465 of ITTOIA 2005 (person liable: individuals) has effect in relation to the gain— (i) whether an individual would fall to be treated as having paid income tax at the lower rate on the amount of the gain in accordance with section 530 of that Act; and (ii) if so, except in a case where paragraph (c) above applies, the amount of such tax that would fall to be so treated as paid. (6) For the purposes of subsection (1)(a) above, the relevant three month period is whichever of the following periods ends the latest— (a) the period of three months following the happening of the chargeable event; (b) if the event is a surrender or assignment which is a chargeable event by virtue of section 546C(7)(a) of this Act (and section 514(1) of ITTOIA 2005), the period of three months following the end of the year (and the insurance year) in which the event happens; (c) if the event is a death or an assignment of the whole of the rights or a surrender or assignment which is a chargeable event by virtue of section 546C(7)(a) of this Act (and section 514(1) of ITTOIA 2005), the period of three months beginning with receipt of written notification of the event. (7) For the purposes of subsection (1)(b) above, the relevant three month period is whichever of the following periods ends the latest— (a) the period of three months following the end of the year of assessment, or, where the policy holder is a company, the financial year, in which the event happened; (b) if the event is a surrender or assignment which is a chargeable event by virtue of section 546C(7)(a) of this Act (and section 514(1) of ITTOIA 2005), the period of three months following the end of the year (and the insurance year) in which the event happens; (c) if the event is a death or an assignment, the period of three months beginning with receipt of written notification of the event; (d) if a certificate under subsection (1)(b) above would not be required in respect of the event apart from the happening of another event, and that other event is one of those mentioned in paragraph (c) above, the period of three months beginning with receipt of written notification of that other event. (8) For the purposes of this section the cases where a gain is connected with another gain are those cases where— (a) both gains arise in connection with policies or contracts containing obligations which, immediately before the chargeable event, were obligations of the same body; (b) the policy holder of those policies or contracts is the same; (c) both gains are attributable to the same year of assessment or, where the policy holder is a company, to the same financial year;

635

3.25

Life Insurance

(d) the terms of the policies or contracts are the same, apart from any difference in their maturity dates; and (e) the policies or contracts were issued in respect of insurances made, or were entered into or effected, on the same date. (9) For the purposes of this section, the year of assessment or financial year to which a gain is attributable is— (a) in the case of a gain treated as arising by virtue of section 546C(7)(b) [ of this Act (and section 514(1) of ITTOIA 2005)], the year of assessment or financial year which includes the end of the year as at which the section 546 excess in question occurs (and the end of the insurance year mentioned in section 514(3) and (4) of ITTOIA 2005); or (b) in any other case, the year of assessment or financial year in which happens the chargeable event by reason of which the gain is treated as arising. (10) In this section— ‘‘amount’’, in relation to any gain, means the amount of the gain apart from section 553(3) of this Act and section 528 of ITTOIA 2005; ‘‘appropriate policy holder’’ means— (a) in relation to an assignment of part of or a share in the rights conferred by a policy or contract, any person who is both— (i) the policy holder, or one of the policy holders, immediately before the assignment; and (ii) the assignor or one of the assignors; and (b) in relation to any other chargeable event, the person who is the policy holder immediately before the happening of the event; ‘‘chargeable event’’ means an event which is a chargeable event within the meaning of this Chapter and Chapter 9 of Part 4 of ITTOIA 2005; ‘‘financial year’’ means a period of 12 months beginning with 1st April; ‘‘the relevant year of assessment’’, in the case of any gain, means— (a) the year of assessment to which the gain is attributable, or (b) if the gain arises to a company, the year of assessment which corresponds to the financial year to which the gain is attributable; ‘‘section 546 excess’’ has the meaning given in section 546B(4); ‘‘year’’, in relation to any policy or contract, has the meaning given by section 546(4). (11) For the purposes of this section a year of assessment and a financial year correspond to each other if the financial year ends with 31st March in the year of assessment. (12) This section is supplemented by section 552ZA. Notes Subsection (9) was amended by the Income Tax (Trading and Other Income) Act 2005, sched 1, para 222.

Information: supplementary provisions 552ZA.—(1) This section supplements section 552 and shall be construed as one with it. (2) Where the obligations under any policy or contract of the body that issued, entered into or effected it (‘‘the original insurer’’) are at any time the obligations of another body (‘‘the transferee’’) to whom there has been a transfer of the whole or any part of a business previously carried on by the original insurer, section 552 shall have effect in relation to that time, except where the chargeable event— (a) happened before the transfer, and (b) in the case of a death or an assignment, is an event of which the notification mentioned in subsection (6) or (7) of that section was given before the transfer, as if the policy or contract had been issued, entered into or effected by the transferee. (3) Where, in consequence of [section 546C(7)(a) of this Act and section 514(1) of ITTOIA 2005, paragraph (a) or (b) of section 552(1)] requires certificates to be delivered in respect of two or more surrenders, happening in the same year, of part of or a share in the rights conferred by the policy or contract, a single certificate may be delivered under the paragraph in question in respect of all those surrenders (and may treat them as if they together constituted

636

Civil Procedure Rules, Practice Direction 37

3.26

a single surrender) unless between the happening of the first and the happening of the last of them there has been— (a) an assignment of part of or a share in the rights conferred by the policy or contract; or (b) an assignment, otherwise than for money or money’s worth, of the whole of the rights conferred by the policy or contract. (4) Where the appropriate policy holder is two or more persons— (a) section 552(1)(a) requires a certificate to be delivered to each of them; but (b) nothing in section 552 or this section requires a body to deliver a certificate under subsection (1)(a) of that section to any person whose address has not been provided to the body (or to another body, at a time when the obligations under the policy or contract were obligations of that other body). (5) A certificate under section 552(1)(b) or (3)— (a) shall be in a form prescribed for the purpose by the Board; and (b) shall be delivered by any means prescribed for the purpose by the Board; and different forms, or different means of delivery, may be prescribed for different cases or different purposes. (6) The Board may by regulations make such provision as they think fit for securing that they are able— (a) to ascertain whether there has been or is likely to be any contravention of the requirements of section 552 or this section; and (b) to verify any certificate under that section. (7) Regulations under subsection (6) above may include, in particular, provisions requiring persons to whom premiums under any policy are or have at any time been payable— (a) to supply information to the Board; and (b) to make available books, documents and other records for inspection on behalf of the Board. (8) Regulations under subsection (6) above may— (a) make different provision for different cases; and (b) contain such supplementary, incidental, consequential or transitional provision as appears to the Board to be appropriate. Notes Subsection (3) was amended by the Income Tax (Trading and Other Income) Act 2005, sched 1, para 223.

3.26 CIVIL PROCEDURE RULES, PRACTICE DIRECTION 37 General note CPR Practice Direction 37 replacing Order 92 of the Rules of the Supreme Court, sets out the procedural mechanism for the operation of the Life Assurance Companies (Payments into Court) Act 1896. For the text of the Act, see para 3.23.

Payment into court by life assurance company 7.1 A company wishing to make a payment into court under the Life Assurance Companies (Payment into Court) Act 1896 (‘the 1896 Act’) must file a witness statement or an affidavit setting out— (1) a short description of the policy under which money is payable; (2) a statement of the persons entitled under the policy, including their names and addresses so far as known to the company; (3) a short statement of— (a) the notices received by the company making any claim to the money assured, or withdrawing any such claim; (b) the dates of receipt of such notices; and (c) the names and addresses of the persons by whom they were given;

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(4) a statement that, in the opinion of the board of directors of the company, no sufficient discharge can be obtained for the money which is payable, other than by paying it into court under the 1896 Act; (5) a statement that the company agrees to comply with any order or direction the court may make— (a) to pay any further sum into court; or(b) to pay any costs; (6) an undertaking by the company immediately to send to the Accountant General at the Court Funds Office any notice of claim received by the company after the witness statement or affidavit has been filed, together with a letter referring to the Court Funds Office reference number; and (7) the company’s address for service. 7.2 The witness statement or affidavit must be filed at— (1) Chancery Chambers at the Royal Courts of Justice, or (2) a Chancery district registry of the High Court. 7.3 The company must not deduct from the money payable by it under the policy any costs of the payment into court, except for any court fee. 7.4 If the company is a party to any proceedings issued in relation to the policy or the money assured by it, it may not make a payment into court under the 1896 Act without the permission of the court in those proceedings. 7.5 If a company pays money into court under the 1896 Act, unless the court orders otherwise it must immediately serve notice of the payment on every person who is entitled under the policy or has made a claim to the money assured. Application for payment out of money paid into court by life assurance company 8.1 Any application for the payment out of money which has been paid into court under the 1896 Act must be made in accordance with paragraph 4.2 of this practice direction. 8.2 The application must be served on— (1) every person stated in the written evidence of the company which made the payment to be entitled to or to have an interest in the money; (2) any other person who has given notice of a claim to the money; and (3) the company which made the payment, if an application is being made for costs against it, but not otherwise.

3.27 THE LIFE ASSURANCE AND OTHER POLICIES (KEEPING OF INFORMATION AND DUTIES OF INSURERS) REGULATIONS 1997 (SI 1997 No 265) General note Section 552 of the Income and Corporation Taxes Act 1988 requires a life insurer to deliver to the inspector of taxes a certificate where a chargeable event as defined by that Act has occurred (see above). The 1997 Regulations allow the Commissioners of Inland Revenue to ascertain whether there has been any breach of s 552 by imposing record-keeping and disclosure requirements on life insurers.

Citation and commencement 1. These Regulations may be cited as the Life Assurance and Other Policies (Keeping of Information and Duties of Insurers) Regulations 1997 and shall come into force on 1st April 1997. Interpretation 2.—(1) In these Regulations unless the context otherwise requires— ‘‘the Board’’ means the Commissioners of Inland Revenue; ‘‘relevant records’’, in respect of a policy or contract, means the books, documents and records specified in regulation 3; ‘‘Schedule 15’’ means Schedule 15 to the Taxes Act;

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‘‘section 552’’ means section 552 of the Taxes Act; ‘‘the Taxes Act’’ means the Income and Corporation Taxes Act 1988. (2) For the purposes of these Regulations, an ‘‘insurer’’— (a) in a case where the obligations under any policy or contract of the body that issued, entered into or effected it (‘‘the original insurer’’) are at any time the obligations of another body (‘‘the transferee’’) to whom there has been a transfer of the whole or any part of a business previously carried on by the original insurer, means the transferee, and (b) in any other case, means the body or with whom the policy or contract was issued, entered into or effected. (3) For the purposes of these Regulations and in relation to an insurer, a policy or contract is a relevant policy or contract if, on the happening of a chargeable event within the meaning of Chapter II of Part XIII of the Taxes Act in relation to the policy or contract, the insurer is under the duty to deliver a certificate pursuant to section 552; and, for the purposes of this paragraph, [the words ‘‘unless satisfied that no gain is to be treated as arising by reason of the event’’ in subsection (1)(a) shall be disregarded] (4) For the purposes of these Regulations and in respect of any policy or contract, any reference to books, documents and records includes books, documents and records (including material prepared for the purposes of advertising or publicity) which contain information— (a) relating to the terms of the policy or contract, or (b) required for the purposes of a certificate to be delivered under section 552. Notes Subsection (3) was amended by reg 3(3) of the Life Assurance and Other Policies (Keeping of Information and Duties of Insurers) (Amendment) Regulations 2002, SI 2002 No 444.

Keeping of records—general 3. An insurer shall, in respect of each relevant policy or contract, keep sufficient books, documents and records to enable the Board— (a) to ascertain the terms of the policy or contract, (b) to ascertain whether there has been or is likely to be any contravention of the requirements of section 552, and (c) to verify any certificate delivered under that section. Period for which records to be kept 4.—(1) Subject to paragraph (2), an insurer shall, in respect of each relevant policy or contract, keep the relevant records for a period of three years after the termination of the policy or contract. (2) In any case where— (a) a relevant policy is connected with another policy for the purposes of paragraph 13 or 14 of Schedule 15, or (b) in relation to a relevant policy under which a single premium only is payable, liability for that payment is discharged in accordance with paragraph 15(2) of Schedule 15, or (c) a relevant policy is issued in substitution for, or on the maturity of and in consequence of an option conferred by, another policy, an insurer shall, in respect of each policy, keep the relevant records for a period of three years after the termination of the final policy which is in force. Transfers of records 5.—(1) This regulation applies in any case where the obligations under any policy or contract of the body that issued, entered into or effected it (‘‘the original insurer’’) are at any time the obligations of another body (‘‘the transferee’’) to whom there has been a transfer of the whole or any part of a business previously carried on by the original insurer.

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(2) The original insurer shall, in respect of that policy or contract, deliver the relevant records to the transferee within the period of three months after the transfer. (3) This regulation has effect in relation to transfers on or after 1st April 1997. 6.—(1) This regulation applies in any case where each of the three conditions specified in paragraphs (2) to (4) is fulfilled. (2) The first condition is that one policy (the ‘‘new policy’’) is issued in substitution for another policy (the ‘‘old policy’’). (3) The second condition is that the new policy is issued in substitution for an old policy issued by an insurance company (the ‘‘old insurer’’) which was resident outside the United Kingdom at the time the old policy was issued. (4) The third condition is that the new policy is issued by an insurance company (the ‘‘new insurer’’) pursuant to arrangements made between the old insurer and the new insurer for the issue of policies in substitution for ones held by persons becoming resident in the United Kingdom. (5) The new insurer shall, in respect of the old policy, obtain the relevant records from the old insurer within the period of three months after the issue of the new policy. (6) This regulation has effect in relation to any new policy where the insurance for that new policy is made, and that new policy is issued, on or after 1st April 1997. 7.—(1) This regulation applies in any case where each of the conditions specified in paragraphs (2) and (3) is fulfilled. (2) The first condition is that one policy (‘‘the new policy’’) is issued in substitution for, or on the maturity of and in consequence of an option conferred by, another policy (‘‘the old policy’’). (3) The second condition is that, at the time the new policy is issued, the insurance company issuing the new policy (‘‘the new insurer’’) and the insurance company which issued the old policy (‘‘the old insurer’’) are both members of a group of companies. (4) For the purposes of paragraph (3) two companies are members of a group of companies if one is the 51 per cent subsidiary of the other or both are 51 per cent subsidiaries of a third company. (5) The original insurer shall, in respect of the old policy, deliver the relevant records to the new insurer within the period of three months beginning with the date on which the new policy was substituted for the old policy or, as the case may be, the date of the exercise of the option on the maturity of the old policy. (6) This regulation has effect in relation to any new policy where the insurance for that new policy is made, and that new policy is issued, on or after 1st April 1997.

Information to be provided to the Board 8.—(1) The Board may by notice require any person to whom premiums under any policy are or have at any time been payable, within such period as may be specified in the notice, to furnish them with such information as they may reasonably require to enable them— (a) to ascertain whether there has been or is likely to be any contravention of the requirements of section 552, and (b) to verify any certificate delivered under that section. (2) The period specified in a notice given under paragraph (1) shall be a period of not less than 14 days beginning with the date on which the notice is given.

Inspection of records by officer of the Board 9.—(1) The Board may by notice require any person to whom premiums under any policy are or have at any time been payable, to make available for inspection by an officer of the Board authorised for that purpose, at such time as that officer may reasonably require, all such books,

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documents and records as are in that person’s possession or under that person’s control and are such as may be required by the Board under regulation 8. (2) The time specified in a notice given under paragraph (1) shall not fall within the period of 14 days beginning with the date on which the notice is given.

3.28 THE LIFE ASSURANCE CONSOLIDATION DIRECTIVE (CONSEQUENTIAL AMENDMENTS) REGULATIONS 2004 SI 2004 No 3379 General Note These Regulations make amendments to other instruments to reflect the consolidation of the life assurance directives through Directive 2002/83/EC of the European Parliament and of the Council of 5th November 2002 concerning life assurance and consequently are not reproduced separately.

3.29 DIRECTIVE 2002/83/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL OF 5 NOVEMBER 2002 CONCERNING LIFE ASSURANCE ([2002] OJ L345)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, and in particular Articles 47(2) and Article 55 thereof, Having regard to the proposal from the Commission, Having regard to the opinion of the Economic and Social Committee, Acting in accordance with the procedure laid down in Article 251 of the Treaty, Whereas: (1) First Council Directive 79/267/EEC of 5 March 1979 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct life assurance, the second Council Directive 90/619/EEC of 8 November 1990 on the coordination of laws, regulations and administrative provisions relating to direct life assurance, laying down provisions to facilitate the effective exercise of freedom to provide services and amending Directive 79/267/EEC and Council Directive 92/96/EEC of 10 November 1992 on the coordination of laws, regulations and administrative provisions relating to direct life assurance and amending Directives 79/267/EEC and 90/619/EEC (third life assurance Directive) have been substantially amended several times. Since further amendments are to be made, the Directives should be recast in the interests of clarity. (2) In order to facilitate the taking-up and pursuit of the business of life assurance, it is essential to eliminate certain divergences which exist between national supervisory legislation. In order to achieve this objective and at the same time ensure adequate protection for policy holders and beneficiaries in all Member States, the provisions relating to the financial guarantees required of life assurance undertakings should be coordinated. (3) It is necessary to complete the internal market in direct life assurance, from the point of view both of the right of establishment and of the freedom to provide services in the Member States, to make it easier for assurance undertakings with head offices in the Community to cover commitments situated within the Community and to make it

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(4)

(5)

(6) (7)

(8)

(9)

(10) (11)

(12)

(13)

Life Insurance possible for policy holders to have recourse not only to assurers established in their own country, but also to assurers which have their head office in the Community and are established in other Member States. Under the Treaty, any discrimination with regard to freedom to provide services based on the fact that an undertaking is not established in the Member State in which the services are provided is prohibited. That prohibition applies to services provided from any establishment in the Community, whether it be the head office of an undertaking or an agency or branch. This Directive therefore represents an important step in the merging of national markets into an integrated market and that stage must be supplemented by other Community instruments with a view to enabling all policy holders to have recourse to any assurer with a head office in the Community who carries on business there, under the right of establishment or the freedom to provide services, while guaranteeing them adequate protection. This Directive forms part of the body of Community legislation in the field of life assurance which also includes Council Directive 91/674/EEC of 19 December 1991 on the annual accounts and consolidated accounts of insurance undertakings. The approach adopted consists in bringing about such harmonisation as is essential, necessary and sufficient to achieve the mutual recognition of authorisations and prudential control systems, thereby making it possible to grant a single authorisation valid throughout the Community and apply the principle of supervision by the home Member State. As a result, the taking up and the pursuit of the business of assurance are subject to the grant of a single official authorisation issued by the competent authorities of the Member State in which an assurance undertaking has its head office. Such authorisation enables an undertaking to carry on business throughout the Community, under the right of establishment or the freedom to provide services. The Member State of the branch or of the provision of services may not require assurance undertakings which wish to carry on assurance business there and which have already been authorised in their home Member State to seek fresh authorisation. The competent authorities should not authorise or continue the authorisation of an assurance undertaking where they are liable to be prevented from effectively exercising their supervisory functions by the close links between that undertaking and other natural or legal persons. Assurance undertakings already authorised must also satisfy the competent authorities in that respect. The definition of ‘close links’ in this Directive lays down minimum criteria and that does not prevent Member States from applying it to situations other than those envisaged by the definition. The sole fact of having acquired a significant proportion of a company’s capital does not constitute participation, within the meaning of ‘close links’, if that holding has been acquired solely as a temporary investment which does not make it possible to exercise influence over the structure or financial policy of the undertaking. The principles of mutual recognition and of home Member State supervision require that Member States’ competent authorities should not grant or should withdraw authorisation where factors such as the content of programmes of operations or the geographical distribution of the activities actually carried on indicate clearly that an assurance undertaking has opted for the legal system of one Member State for the purpose of evading the stricter standards in force in another Member State within whose territory it carries on or intends to carry on the greater part of its activities. An assurance undertaking must be authorised in the Member State in which it has its registered office. In addition, Member States must require that an assurance undertaking’s head office always be situated in its home Member State and that it actually carries on its business there. For practical reasons, it is desirable to define provision of services taking into account both the assurer’s establishment and the place where the commitment is to be covered. Therefore, commitment should also be defined. Moreover, it is desirable to distinguish between activities pursued by way of establishment and activities pursued by way of freedom to provide services.

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(14) A classification by class of assurance is necessary in order to determine, in particular, the activities subject to compulsory authorisation. (15) Certain mutual associations which, by virtue of their legal status, fulfil requirements as to security and other specific financial guarantees should be excluded from the scope of this Directive. Certain organisations whose activity covers only a very restricted sector and is limited by their articles of association should also be excluded. (16) Life assurance is subject to official authorisation and supervision in each Member State. The conditions for the granting or withdrawal of such authorisation should be defined. Provision must be made for the right to apply to the courts should an authorisation be refused or withdrawn. (17) It is desirable to clarify the powers and means of supervision vested in the competent authorities. It is also desirable to lay down specific provisions regarding the taking up, pursuit and supervision of activity by way of freedom to provide services. (18) The competent authorities of home Member States should be responsible for monitoring the financial health of assurance undertakings, including their state of solvency, the establishment of adequate technical provisions and the covering of those provisions by matching assets. (19) It is appropriate to provide for the possibility of exchanges of information between the competent authorities and authorities or bodies which, by virtue of their function, help to strengthen the stability of the financial system. In order to preserve the confidential nature of the information forwarded, the list of addressees must remain within strict limits. (20) Certain behaviour, such as fraud and insider offences, is liable to affect the stability, including integrity, of the financial system, even when involving undertakings other than assurance undertakings. (21) It is necessary to specify the conditions under which the abovementioned exchanges of information are authorised. (22) Where it is stipulated that information may be disclosed only with the express agreement of the competent authorities, these may, where appropriate, make their agreement subject to compliance with strict conditions. (23) Member States may conclude agreements on exchange of information with third countries provided that the information disclosed is subject to appropriate guarantees of professional secrecy. (24) For the purposes of strengthening the prudential supervision of assurance undertakings and protection of clients of assurance undertakings, it should be stipulated that an auditor must have a duty to report promptly to the competent authorities, wherever, as provided for by this Directive, he/she becomes aware, while carrying out his/her tasks, of certain facts which are liable to have a serious effect on the financial situation or the administrative and accounting organisation of an assurance undertaking. (25) Having regard to the aim in view, it is desirable for Member States to provide that such a duty should apply in all circumstances where such facts are discovered by an auditor during the performance of his/her tasks in an undertaking which has close links with an assurance undertaking. (26) The duty of auditors to communicate, where appropriate, to the competent authorities certain facts and decisions concerning an assurance undertaking which they discover during the performance of their tasks in a non-assurance undertaking does not in itself change the nature of their tasks in that undertaking nor the manner in which they must perform those tasks in that undertaking. (27) The performance of the operations of management of group pension funds cannot under any circumstances affect the powers conferred on the respective authorities with regard to the entities holding the assets with which that management is concerned. (28) Certain provisions of this Directive define minimum standards. A home Member State may lay down stricter rules for assurance undertakings authorised by its own competent authorities. (29) The competent authorities of the Member States must have at their disposal such means of supervision as are necessary to ensure the orderly pursuit of business by assurance undertakings throughout the Community whether carried on under the right of establishment or the freedom to provide services. In particular, they must be able to

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(30) (31) (32)

(33)

(34)

(35)

(36)

(37)

(38)

(39)

Life Insurance introduce appropriate safeguards or impose sanctions aimed at preventing irregularities and infringements of the provisions on assurance supervision. The provisions on transfers of portfolios should include provisions specifically concerning the transfer to another undertaking of the portfolio of contracts concluded by way of freedom to provide services. The provisions on transfers of portfolios must be in line with the single legal authorisation system provided for in this Directive. Undertakings formed after the dates referred to in Article 18(3) should not be authorised to carry on life assurance and non-life insurance activities simultaneously. Member States should be allowed to permit undertakings which, on the relevant dates referred to in Article 18(3), carried on these activities simultaneously to continue to do so provided that separate management is adopted for each of their activities, in order that the respective interests of life policy holders and non-life policy holders are safeguarded and the minimum financial obligations in respect of one of the activities are not borne by the other activity. Member States should be given the option of requiring those existing undertakings established in their territory which carry on life assurance and non-life insurance simultaneously to put an end to this practice. Moreover, specialised undertakings should be subject to special supervision where a non-life undertaking belongs to the same financial group as a life undertaking. Nothing in this Directive prevents a composite undertaking from dividing itself into two undertakings, one active in the field of life assurance, the other in non-life insurance. In order to allow such division to take place under the best possible conditions, it is desirable to permit Member States, in accordance with Community rules of competition law, to provide for appropriate tax arrangements, in particular with regard to the capital gains such division could entail. Those Member States which so wish should be able to grant the same undertaking authorisations for the classes referred to in Annex I and the insurance business coming under classes 1 and 2 in the Annex to Council Directive 73/239/EEC of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct insurance other than life assurance. That possibility may, however, be subject to certain conditions as regards compliance with accounting rules and rules on winding-up. It is necessary from the point of view of the protection of lives assured that every assurance undertaking should establish adequate technical provisions. The calculation of such provisions is based for the most part on actuarial principles. Those principles should be coordinated in order to facilitate mutual recognition of the prudential rules applicable in the various Member States. It is desirable, in the interests of prudence, to establish a minimum of coordination of rules limiting the rate of interest used in calculating the technical provisions. For the purposes of such limitation, since existing methods are all equally correct, prudential and equivalent, it seems appropriate to leave Member States a free choice as to the method to be used. The rules governing the calculation of technical provisions and the rules governing the spread, localisation and matching of the assets used to cover technical provisions must be coordinated in order to facilitate the mutual recognition of Member States’ rules. That coordination must take account of the liberalisation of capital movements provided for in Article 56 of the Treaty and the progress made by the Community towards economic and monetary union. The home Member State may not require assurance undertakings to invest the assets covering their technical provisions in particular categories of assets, as such a requirement would be incompatible with the liberalisation of capital movements provided for in Article 56 of the Treaty. It is necessary that, over and above technical provisions, including mathematical provisions, of sufficient amount to meet their underwriting liabilities, assurance undertakings should possess a supplementary reserve, known as the solvency margin, represented by free assets and, with the agreement of the competent authority, by other implicit assets, which shall act as a buffer against adverse business fluctuations. This requirement is an important element of prudential supervision for the protection of

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(41)

(42)

(43)

(44)

(45) (46)

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insured persons and policy holders. In order to ensure that the requirements imposed for such purposes are determined according to objective criteria whereby undertakings of the same size will be placed on an equal footing as regards competition, it is desirable to provide that this margin shall be related to all the commitments of the undertaking and to the nature and gravity of the risks presented by the various activities falling within the scope of this Directive. This margin should therefore vary according to whether the risks are of investment, death or management only. It should accordingly be determined in terms of mathematical provisions and capital at risk underwritten by an undertaking, of premiums or contributions received, of provisions only or of the assets of tontines. Directive 92/96/EEC provided for a provisional definition of a regulated market, pending the adoption of a directive on investment services in the securities field, which would harmonise that concept at Community level. Council Directive 93/22/EEC of 10 May 1993 on investment services in the securities field provides for a definition of regulated market, although it excludes from its scope life assurance activities. It is appropriate to apply the concept of regulated market also to life assurance activities. The list of items of which the solvency margin required by this Directive may be made up takes account of new financial instruments and of the facilities granted to other financial institutions for the constitution of their own funds. In the light of market developments in the nature of reinsurance cover purchased by primary insurers, there is a need for the competent authorities to be empowered to decrease the reduction to the solvency margin requirement in certain circumstances. In order to improve the quality of the solvency margin, the possibility of including future profits in the available solvency margin should be limited and subject to conditions and should in any case cease after 2009. It is necessary to require a guarantee fund, the amount and composition of which are such as to provide an assurance that the undertakings possess adequate resources when they are set up and that in the subsequent course of business the solvency margin in no event falls below a minimum of security. The whole or a specified part of this guarantee fund must consist of explicit asset items. To avoid major and sharp increases in the amount of the minimum guarantee fund in the future, a mechanism should be established providing for its increase in line with the European index of consumer prices. This Directive should lay down minimum standards for the solvency margin requirements and home Member States should be able to lay down stricter rules for insurance undertakings authorised by their own competent authorities. The provisions in force in the Member States regarding contract law applicable to the activities referred to in this Directive differ. The harmonisation of assurance contract law is not a prior condition for the achievement of the internal market in assurance. Therefore, the opportunity afforded to the Member States of imposing the application of their law to assurance contracts covering commitments within their territories is likely to provide adequate safeguards for policy holders. The freedom to choose, as the law applicable to the contract, a law other than that of the State of the commitment may be granted in certain cases, in accordance with rules which take into account specific circumstances. For life assurance contracts the policy holder should be given the opportunity of cancelling the contract within a period of between 14 and 30 days. Within the framework of an internal market it is in the policy holder’s interest that they should have access to the widest possible range of assurance products available in the Community so that they can choose that which is best suited to their needs. It is for the Member State of the commitment to ensure that there is nothing to prevent the marketing within its territory of all the assurance products offered for sale in the Community as long as they do not conflict with the legal provisions protecting the general good in force in the Member State of the commitment and in so far as the general good is not safeguarded by the rules of the home Member State, provided that such provisions must be applied without discrimination to all undertakings operating in

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(47)

(48) (49) (50)

(51)

(52)

(53)

(54) (55)

Life Insurance that Member State and be objectively necessary and in proportion to the objective pursued. The Member States must be able to ensure that the assurance products and contract documents used, under the right of establishment or the freedom to provide services, to cover commitments within their territories comply with such specific legal provisions protecting the general good as are applicable. The systems of supervision to be employed must meet the requirements of an internal market but their employment may not constitute a prior condition for carrying on assurance business. From this standpoint, systems for the prior approval of policy conditions do not appear to be justified. It is therefore necessary to provide for other systems better suited to the requirements of an internal market which enable every Member State to guarantee policy holders adequate protection. It is necessary to make provision for cooperation between the competent authorities of the Member States and between those authorities and the Commission. Provision should be made for a system of penalties to be imposed when, in the Member State in which the commitment is entered into, an assurance undertaking does not comply with those provisions protecting the general good that are applicable to it. It is necessary to provide for measures in cases where the financial position of the undertaking becomes such that it is difficult for it to meet its underwriting liabilities. In specific situations where policy holders’ rights are threatened, there is a need for the competent authorities to be empowered to intervene at a sufficiently early stage, but in the exercise of those powers, competent authorities should inform the insurance undertakings of the reasons motivating such supervisory action, in accordance with the principles of sound administration and due process. As long as such a situation exists, the competent authorities should be prevented from certifying that the insurance undertaking has a sufficient solvency margin. For the purposes of implementing actuarial principles in conformity with this Directive, the home Member State may require systematic notification of the technical bases used for calculating scales of premiums and technical provisions, with such notification of technical bases excluding notification of the general and special policy conditions and the undertaking’s commercial rates. In an internal market for assurance the consumer will have a wider and more varied choice of contracts. If he/she is to profit fully from this diversity and from increased competition, he/she must be provided with whatever information is necessary to enable him/her to choose the contract best suited to his/her needs. This information requirement is all the more important as the duration of commitments can be very long. The minimum provisions must therefore be coordinated in order for the consumer to receive clear and accurate information on the essential characteristics of the products proposed to him/her as well as the particulars of the bodies to which any complaints of policy holders, assured persons or beneficiaries of contracts may be addressed. Publicity for assurance products is an essential means of enabling assurance business to be carried on effectively within the Community. It is necessary to leave open to assurance undertakings the use of all normal means of advertising in the Member State of the branch or of provision of services. Member States may nevertheless require compliance with their national rules on the form and content of advertising, whether laid down pursuant to Community legislation on advertising or adopted by Member States for reasons of the general good. Within the framework of the internal market, no Member State may continue to prohibit the simultaneous carrying on of assurance business within its territory under the right of establishment and the freedom to provide services. Some Member States do not subject assurance transactions to any form of indirect taxation, while the majority apply special taxes and other forms of contribution. The structures and rates of such taxes and contributions vary considerably between the Member States in which they are applied. It is desirable to prevent existing differences leading to distortions of competition in assurance services between Member States. Pending subsequent harmonisation, application of the tax systems and other forms of contribution provided for by the Member States in which commitments entered into

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(56)

(57)

(58)

(59)

(60) (61)

(62)

(63)

(64)

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are likely to remedy that problem and it is for the Member States to make arrangements to ensure that such taxes and contributions are collected. It is important to introduce Community coordination on the winding-up of assurance undertakings. It is henceforth essential to provide, in the event of the winding-up of an assurance undertaking, that the system of protection in place in each Member State must guarantee equality of treatment for all assurance creditors, irrespective of nationality and of the method of entering into the commitment. The coordinated rules concerning the pursuit of the business of direct insurance within the Community should, in principle, apply to all undertakings operating on the market and, consequently, also to agencies and branches where the head office of the undertaking is situated outside the Community. As regards the methods of supervision this Directive lays down special provisions for such agencies or branches, in view of the fact that the assets of the undertakings to which they belong are situated outside the Community. It is desirable to provide for the conclusion of reciprocal agreements with one or more third countries in order to permit the relaxation of such special conditions, while observing the principle that such agencies and branches should not obtain more favourable treatment than Community undertakings. A provision should be made for a flexible procedure to make it possible to assess reciprocity with third countries on a Community basis. The aim of this procedure is not to close the Community’s financial markets but rather, as the Community intends to keep its financial markets open to the rest of the world, to improve the liberalisation of the global financial markets in other third countries. To that end, this Directive provides for procedures for negotiating with third countries. As a last resort, the possibility of taking measures involving the suspension of new applications for authorisation or the restriction of new authorisations should be provided for using the regulatory procedure under Article 5 of Council Decision 1999/468/EC. This Directive should establish provisions concerning proof of good repute and no previous bankruptcy. In order to clarify the legal regime applicable to life assurance activities covered by this Directive, some provisions of Directives 79/267/EEC, 90/619/EEC and 92/96/EEC should be adapted. For that purpose some provisions concerning the establishment of the solvency margin and the rights acquired by branches of assurance undertakings established before 1 July 1994 should be amended. The content of the scheme of operation of branches of third-country undertakings to be established in the Community should also be defined. Technical adjustments to the detailed rules laid down in this Directive may be necessary from time to time to take account of the future development of the assurance industry. The Commission will make such adjustments as and when necessary, after consulting the Insurance Committee set up by Council Directive 91/675/EEC, in the exercise of the implementing powers conferred on it by the Treaty. These measures being measures of general scope within the meaning of Article 2 of Decision 1999/468/EC, they should be adopted by the use of the regulatory procedure provided for in Article 5 of that Decision. Pursuant to Article 15 of the Treaty, account should be taken of the extent of the effort which must be made by certain economies at different stages of development. Therefore, transitional arrangements should be adopted for the gradual application of this Directive by certain Member States. Directives 79/267/EEC and 90/619/EEC granted special derogation with regard to some undertakings existing at the time of the adoption of these Directives. Such undertakings have thereafter modified their structure. Therefore they do not need any longer such special derogation. This Directive should not affect the obligations of Member States concerning the deadlines for transposition and for application of the Directives set out in Annex V(B),

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HAVE ADOPTED THIS DIRECTIVE:

TITLE I Article 1

DEFINITIONS AND SCOPE

Definitions

1. For the purposes of this Directive: (a) ‘‘assurance undertaking’’ shall mean an undertaking which has received official authorisation in accordance with Article 4; (b) ‘‘branch’’ shall mean an agency or branch of an assurance undertaking; Any permanent presence of an undertaking in the territory of a Member State shall be treated in the same way as an agency or branch, even if that presence does not take the form of a branch or agency, but consists merely of an office managed by the undertaking’s own staff or by a person who is independent but has permanent authority to act for the undertaking as an agency would; (c) ‘‘establishment’’ shall mean the head office, an agency or a branch of an undertaking; (d) ‘‘commitment’’ shall mean a commitment represented by one of the kinds of insurance or operations referred to in Article 2; (e) ‘‘home Member State’’ shall mean the Member State in which the head office of the assurance undertaking covering the commitment is situated; (f) ‘‘Member State of the branch’’ shall mean the Member State in which the branch covering the commitment is situated; (g) ‘‘Member State of the commitment’’ shall mean the Member State where the policy holder has his/her habitual residence or, if the policy holder is a legal person, the Member State where the latter’s establishment, to which the contract relates, is situated; (h) ‘‘Member State of the provision of services’’ shall mean the Member State of the commitment, if the commitment is covered by an assurance undertaking or a branch situated in another Member State; (i) ‘‘control’’ shall mean the relationship between a parent undertaking and a subsidiary, as defined in Article 1 of Council Directive 83/349/EEC, or a similar relationship between any natural or legal person and an undertaking; (j) ‘‘qualifying holding’’ shall mean a direct or indirect holding in an undertaking which represents 10% or more of the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of the undertaking in which a holding subsists; For the purposes of this definition, in the context of Articles 8 and 15 and of the other levels of holding referred to in Article 15, the voting rights referred to in Article 92 of Directive 2001/34/EC of the European Parliament and of the Council of 28 May 2001 on the admission of securities to official stock exchange listing and on information to be published on those securities shall be taken into consideration; (k) ‘‘parent undertaking’’ shall mean a parent undertaking as defined in Articles 1 and 2 of Directive 83/349/EEC; (l) ‘‘subsidiary’’ shall mean a subsidiary undertaking as defined in Articles 1 and 2 of Directive 83/349/EEC; any subsidiary of a subsidiary undertaking shall also be regarded as a subsidiary of the undertaking which is those undertakings’ ultimate parent undertaking; (m) ‘‘regulated market’’ shall mean: — in the case of a market situated in a Member State, a regulated market as defined in Article 1(13) of Directive 93/22/EEC, and — in the case of a market situated in a third country, a financial market recognised by the home Member State of the assurance undertaking which meets comparable

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requirements. Any financial instruments dealt in on that market must be of a quality comparable to that of the instruments dealt in on the regulated market or markets of the Member State in question; (n) ‘‘competent authorities’’ shall mean the national authorities which are empowered by law or regulation to supervise assurance undertakings; (o) ‘‘matching assets’’ shall mean the representation of underwriting liabilities which can be required to be met in a particular currency by assets expressed or realisable in the same currency; (p) ‘‘localisation of assets’’ shall mean the existence of assets, whether movable or immovable, within a Member State but shall not be construed as involving a requirement that movable assets be deposited or that immovable assets be subjected to restrictive measures such as the registration of mortgages; assets represented by claims against debtors shall be regarded as situated in the Member State where they are realisable; (q) capital at risk shall mean the amount payable on death less the mathematical provision for the main risk; (r) ‘‘close’’ links shall mean a situation in which two or more natural or legal persons are linked by: (i) participation, which shall mean the ownership, direct or by way of control, of 20% or more of the voting rights or capital of an undertaking; or (ii) control, which shall mean the relationship between a parent undertaking and a subsidiary, in all the cases referred to in Article 1(1) and (2) of Directive 83/349/EEC, or a similar relationship between any natural or legal person and an undertaking; any subsidiary undertaking of a subsidiary undertaking shall also be considered a subsidiary of the parent undertaking which is at the head of those undertakings. A situation in which two or more natural or legal persons are permanently linked to one and the same person by a control relationship shall also be regarded as constituting a close link between such persons. 2. Wherever this Directive refers to the euro, the conversion value in national currency to be adopted shall as from 31 December of each year be that of the last day of the preceding month of October for which euro conversion values are available in all the relevant Community currencies. Article 2

Scope

This Directive concerns the taking-up and pursuit of the self-employed activity of direct insurance carried on by undertakings which are established in a Member State or wish to become established there in the form of the activities defined below: 1. the following kinds of assurance where they are on a contractual basis: (a) life assurance, that is to say, the class of assurance which comprises, in particular, assurance on survival to a stipulated age only, assurance on death only, assurance on survival to a stipulated age or on earlier death, life assurance with return of premiums, marriage assurance, birth assurance; (b) annuities; (c) supplementary insurance carried on by life assurance undertakings, that is to say, in particular, insurance against personal injury including incapacity for employment, insurance against death resulting from an accident and insurance against disability resulting from an accident or sickness, where these various kinds of insurance are underwritten in addition to life assurance; (d) the type of insurance existing in Ireland and the United Kingdom known as permanent health insurance not subject to cancellation; 2. the following operations, where they are on a contractual basis, in so far as they are subject to supervision by the administrative authorities responsible for the supervision of private insurance:

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(a) tontines whereby associations of subscribers are set up with a view to jointly capitalising their contributions and subsequently distributing the assets thus accumulated among the survivors or among the beneficiaries of the deceased; (b) capital redemption operations based on actuarial calculation whereby, in return for single or periodic payments agreed in advance, commitments of specified duration and amount are undertaken; (c) management of group pension funds, i.e. operations consisting, for the undertaking concerned, in managing the investments, and in particular the assets representing the reserves of bodies that effect payments on death or survival or in the event of discontinuance or curtailment of activity; (d) the operations referred to in (c) where they are accompanied by insurance covering either conservation of capital or payment of a minimum interest; (e) the operations carried out by assurance undertakings such as those referred to in Chapter 1, Title 4 of Book IV of the French ‘‘Code des assurances’’. 3. Operations relating to the length of human life which are prescribed by or provided for in social insurance legislation, when they are effected or managed at their own risk by assurance undertakings in accordance with the laws of a Member State.

Article 3

Activities and bodies excluded

This Directive shall not concern: 1. subject to the application of Article 2(1)(c), the classes designated in the Annex to Directive 73/239/EEC; 2. operations of provident and mutual-benefit institutions whose benefits vary according to the resources available and which require each of their members to contribute at the appropriate flat rate; 3. operations carried out by organisations other than undertakings referred to in Article 2, whose object is to provide benefits for employed or self-employed persons belonging to an undertaking or group of undertakings, or a trade or group of trades, in the event of death or survival or of discontinuance or curtailment of activity, whether or not the commitments arising from such operations are fully covered at all times by mathematical provisions; 4. subject to the application of Article 2(3), insurance forming part of a statutory system of social security; 5. organisations which undertake to provide benefits solely in the event of death, where the amount of such benefits does not exceed the average funeral costs for a single death or where the benefits are provided in kind; 6. mutual associations, where: — the articles of association contain provisions for calling up additional contributions or reducing their benefits or claiming assistance from other persons who have undertaken to provide it, and — the annual contribution income for the activities covered by this Directive does not exceed EUR 5 million for three consecutive years. If this amount is exceeded for three consecutive years this Directive shall apply with effect from the fourth year. Nevertheless, the provisions of this paragraph shall not prevent a mutual assurance undertaking from applying, or continuing, to be licensed under this Directive; 7. the ‘‘Versorgungsverband deutscher Wirtschaftsorganisationen’’ in Germany unless its statutes are amended as regards the scope of its activities; 8. the pension activities of pension insurance undertakings prescribed in the Employees. Pension Act (TEL) and other related Finnish legislation provided that: (a) pension insurance companies which already under Finnish law are obliged to have separate accounting and management systems for their pension activities will furthermore, as from the date of accession, set up separate legal entities for carrying out these activities;

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(b) the Finnish authorities shall allow in a non-discriminatory manner all nationals and companies of Member States to perform according to Finnish legislation the activities specified in Article 2 related to this exemption whether by means of: — ownership or participation in an existing insurance company or group, — creation or participation of new insurance companies or groups, including pension insurance companies; (c) the Finnish authorities will submit to the Commission for approval a report within three months from the date of accession, stating which measures have been taken to separate TEL activities from normal insurance activities carried out by Finnish insurance companies in order to conform to all the requirements of this Directive.

TITLE II T H E TA K I N G U P O F T H E B U S I N E S S O F L I F E A S S U R A N C E Article 4

Principle of authorisation

The taking up of the activities covered by this Directive shall be subject to prior official authorisation. Such authorisation shall be sought from the authorities of the home Member State by: (a) any undertaking which establishes its head office in the territory of that State; (b) any undertaking which, having received the authorisation required in the first subparagraph, extends its business to an entire class or to other classes.

Article 5

Scope of authorisation

1. Authorisation shall be valid for the entire Community. It shall permit an assurance undertaking to carry on business there, under either the right of establishment or freedom to provide services. 2. Authorisation shall be granted for a particular class of assurance as listed in Annex I. It shall cover the entire class, unless the applicant wishes to cover only some of the risks pertaining to that class. The competent authorities may restrict authorisation requested for one of the classes to the operations set out in the scheme of operations referred to in Article 7. Each Member State may grant authorisation for two or more of the classes, where its national laws permit such classes to be carried on simultaneously.

Article 6

Conditions for obtaining authorisation

1. The home Member State shall require every assurance undertaking for which authorisation is sought to: (a) adopt one of the following forms: — in the case of the Kingdom of Belgium: ‘‘soci´et´e anonyme/naamloze vennootschap’’, ‘‘soci´et´e en commandite par actions/commanditaire vennootschap op aandelen’’, ‘‘association d’assurance mutuelle/onderlinge verzekeringsvereniging’’, ‘‘soci´et´e coop´erative/co¨operatieve vennootschap’’, — in the case of the Kingdom of Denmark: ‘‘aktieselskaber’’, ‘‘gensidige selskaber’’, ‘‘pensionskasser omfattet af lov om forsikringsvirksomhed (tvæg˚aende pensionskasser)’’, — in the case of the Federal Republic of Germany: ‘‘Aktiengesellschaft’’, ‘‘Versicherungsverein auf Gegenseitigkeit’’, ‘‘¨offentlich-rechtliches Wettbewerbsversicherungsunternehmen’’, — in the case of the French Republic: ‘‘soci´et´e anonyme’’, ‘‘soci´et´e d’assurance mutuelle’’, ‘‘institution de pr´evoyance r´egie par le code de la s´ecurit´e sociale’’,

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‘‘institution de pr´evoyance r´egie par le code rural’ and ‘mutuelles r´egies par le code de la mutualit´e’’, — in the case of Ireland: ‘‘incorporated companies limited by shares or by guarantee or unlimited’’, ‘‘societies registered under the Industrial and Provident Societies Acts’’ and ‘‘societies registered under the Friendly Societies Acts,’’ — in the case of the Italian Republic: ‘‘societ´a per azioni’’, ‘‘societ´a cooperativa’’, ‘‘mutua di assicurazione’’, — in the case of the Grand Duchy of Luxembourg: ‘‘soci´et´e anonyme’’, ‘‘soci´et´e en commandite par actions’’, ‘‘association d’assurances mutuelles’’, ‘‘soci´et´e coop´erative’’, — in the case of the Kingdom of the Netherlands: ‘‘naamloze vennootschap’’, ‘‘onderlinge waarborgmaatschappij’’, — in the case of the United Kingdom: ‘‘incorporated companies limited by shares or by guarantee or unlimited’’, ‘‘societies registered under the Industrial and Provident Societies Acts’’, ‘‘societies registered or incorporated under the Friendly Societies Acts’’, ‘‘the association of underwriters known as Lloyd’s’’, — in the case of the Hellenic Republic: ‘‘anwnumh ´ etair´ıa’’, — in the case of the Kingdom of Spain: ‘‘sociedad anonima’’, ´ ‘‘sociedad mutua’’, ‘‘sociedad cooperativa’’, — in the case of the Portuguese Republic: ‘‘sociedade anonima’’, ´ ‘‘mutua ´ de seguros’’, — in the case of the Republic of Austria: ‘‘Aktiengesellschaft’’, ‘‘Versicherungsverein auf Gegenseitigkeit’’, — in the case of the Republic of Finland: ‘‘keskin¨ainen vakuutusyhti¨o/¨omsesidigt f¨ors¨akringsbolag’’, ‘‘vakuutusosakeyhti¨o/f¨ors¨akringsaktiebolag’’, ‘‘vakuutusyhdistys/f¨ors¨akringsf¨orening’’, — in the case of Kingdom of Sweden: ‘‘f¨ors¨akringsaktiebolag’’, ‘‘¨omsesidiga f¨ors¨akringsbolag’’, ‘‘underst¨odsf¨oreningar’’. An assurance undertaking may also adopt the form of a European company when that has been established. Furthermore, Member States may, where appropriate, set up undertakings in any public-law form provided that such bodies have as their object insurance operations under conditions equivalent to those under which private-law undertakings operate; (b) limit its objects to the business provided for in this Directive and operations directly arising therefrom, to the exclusion of all other commercial business; (c) submit a scheme of operations in accordance with Article 7; (d) possess the minimum guarantee fund provided for in Article 29(2); (e) be effectively run by persons of good repute with appropriate professional qualifications or experience. 2. Where close links exist between the assurance undertaking and other natural or legal persons, the competent authorities shall grant authorisation only if those links do not prevent the effective exercise of their supervisory functions. The competent authorities shall also refuse authorisation if the laws, regulations or administrative provisions of a non-member country governing one or more natural or legal persons with which the assurance undertaking has close links, or difficulties involved in their enforcement, prevent the effective exercise of their supervisory functions. The competent authorities shall require assurance undertakings to provide them with the information they require to monitor compliance with the conditions referred to in this paragraph on a continuous basis. 3. Member States shall require that the head offices of insurance undertakings be situated in the same Member State as their registered offices. 4. An assurance undertaking seeking authorisation to extend its business to other classes or to extend an authorisation covering only some of the risks pertaining to one class shall be required to submit a scheme of operations in accordance with Article 7. It shall, furthermore, be required to show proof that it possesses the solvency margin provided for in Article 28 and the guarantee fund referred to in Article 29(1) and (2). 5. Member States shall not adopt provisions requiring the prior approval or systematic notification of general and special policy conditions, of scales of premiums, of the technical

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bases, used in particular for calculating scales of premiums and technical provisions or of forms and other printed documents which an assurance undertaking intends to use in its dealings with policy holders. Notwithstanding the first subparagraph, for the sole purpose of verifying compliance with national provisions concerning actuarial principles, the home Member State may require systematic notification of the technical bases used for calculating scales of premiums and technical provisions, without that requirement constituting a prior condition for an assurance undertaking to carry on its business. Nothing in this Directive shall prevent Member States from maintaining in force or introducing laws, regulations or administrative provisions requiring approval of the memorandum and articles of association and the communication of any other documents necessary for the normal exercise of supervision. Not later than 1 July 1999, the Commission shall submit a report to the Council on the implementation of this paragraph. 6. The provisions referred to in paragraphs 1 to 5 may not require that any application for authorisation be considered in the light of the economic requirements of the market.

Article 7

Scheme of operations

The scheme of operations referred to in Article 6(1)(c) and (4) shall include particulars or evidence of: (a) the nature of the commitments which the assurance undertaking proposes to cover; (b) the guiding principles as to reassurance; (c) the items constituting the minimum guarantee fund; (d) estimates relating to the costs of setting up the administrative services and the organisation for securing business and the financial resources intended to meet those costs; in addition, for the first three financial years: (e) a plan setting out detailed estimates of income and expenditure in respect of direct business, reassurance acceptances and reassurance cessions; (f) a forecast balance sheet; (g) estimates relating to the financial resources intended to cover underwriting liabilities and the solvency margin.

Article 8

Shareholders and members with qualifying holdings

The competent authorities of the home Member State shall not grant an undertaking authorisation to take up the business of assurance before they have been informed of the identities of the shareholders or members, direct or indirect, whether natural or legal persons, who have qualifying holdings in that undertaking and of the amounts of those holdings. The same authorities shall refuse authorisation if, taking into account the need to ensure the sound and prudent management of an assurance undertaking, they are not satisfied as to the qualifications of the shareholders or members.

Article 9

Refusal of authorisation

Any decision to refuse an authorisation shall be accompanied by the precise grounds for doing so and notified to the undertaking in question. Each Member State shall make provision for a right to apply to the courts should there be any refusal. Such provision shall also be made with regard to cases where the competent authorities have not dealt with an application for an authorisation upon the expiry of a period of six months from the date of its receipt.

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Life Insurance TITLE III CONDITIONS GOVERNING THE BUSINESS OF ASSURANCE CHAPTER 1 PRINCIPLES AND METHODS OF FINANCIAL SUPERVISION

Article 10

Competent authorities and object of supervision

1. The financial supervision of an assurance undertaking, including that of the business it carries on either through branches or under the freedom to provide services, shall be the sole responsibility of the home Member State. If the competent authorities of the Member State of the commitment have reason to consider that the activities of an assurance undertaking might affect its financial soundness, they shall inform the competent authorities of the undertaking’s home Member State. The latter authorities shall determine whether the undertaking is complying with the prudential principles laid down in this Directive. 2. That financial supervision shall include verification, with respect to the assurance undertaking’s entire business, of its state of solvency, the establishment of technical provisions, including mathematical provisions, and of the assets covering them, in accordance with the rules laid down or practices followed in the home Member State pursuant to the provisions adopted at Community level. 3. The competent authorities of the home Member State shall require every assurance undertaking to have sound administrative and accounting procedures and adequate internal control mechanisms. Article 11

Supervision of branches established in another Member State

The Member State of the branch shall provide that, where an assurance undertaking authorised in another Member State carries on business through a branch, the competent authorities of the home Member State may, after having first informed the competent authorities of the Member State of the branch, carry out themselves, or through the intermediary of persons they appoint for that purpose, on-the-spot verification of the information necessary to ensure the financial supervision of the undertaking. The authorities of the Member State of the branch may participate in that verification. Article 12

Prohibition on compulsory ceding of part of underwriting

Member States may not require assurance undertakings to cede part of their underwriting of activities listed in Article 2 to an organisation or organisations designated by national regulations. Article 13

Accounting, prudential and statistical information: supervisory powers

1. Each Member State shall require every assurance undertaking whose head office is situated in its territory to produce an annual account, covering all types of operation, of its financial situation and solvency. 2. Member States shall require assurance undertakings with head offices within their territories to render periodically the returns, together with statistical documents, which are necessary for the purposes of supervision. The competent authorities shall provide each other with any documents and information that are useful for the purposes of supervision. 3. Every Member State shall take all steps necessary to ensure that the competent authorities have the powers and means necessary for the supervision of the business of assurance undertakings with head offices within their territories, including business carried on outside those territories, in accordance with the Council directives governing those activities and for the purpose of seeing that they are implemented. These powers and means must, in particular, enable the competent authorities to: (a) make detailed enquiries regarding the assurance undertaking’s situation and the whole of its business, inter alia, by:

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— gathering information or requiring the submission of documents concerning its assurance business, — carrying out on-the-spot investigations at the assurance undertaking’s premises; (b) take any measures, with regard to the assurance undertaking, its directors or managers or the persons who control it, that are appropriate and necessary to ensure that the undertaking’s business continues to comply with the laws, regulations and administrative provisions with which the undertaking must comply in each Member State and in particular with the scheme of operations in so far as it remains mandatory, and to prevent or remedy any irregularities prejudicial to the interests of the assured persons; (c) ensure that those measures are carried out, if need be by enforcement, where appropriate through judicial channels. Member States may also make provision for the competent authorities to obtain any information regarding contracts which are held by intermediaries. Article 14

Transfer of portfolio

1. Under the conditions laid down by national law, each Member State shall authorise assurance undertakings with head offices within its territory to transfer all or part of their portfolios of contracts, concluded under either the right of establishment or the freedom to provide services, to an accepting office established within the Community, if the competent authorities of the home Member State of the accepting office certify that after taking the transfer into account, the latter possesses the necessary solvency margin. 2. Where a branch proposes to transfer all or part of its portfolio of contracts, concluded under either the right of establishment or the freedom to provide services, the Member State of the branch shall be consulted. 3. In the circumstances referred to in paragraphs 1 and 2, the authorities of the home Member State of the transferring assurance undertaking shall authorise the transfer after obtaining the agreement of the competent authorities of the Member States of the commitment. 4. The competent authorities of the Member States consulted shall give their opinion or consent to the competent authorities of the home Member State of the transferring assurance undertaking within three months of receiving a request; the absence of any response within that period from the authorities consulted shall be considered equivalent to a favourable opinion or tacit consent. 5. A transfer authorised in accordance with this Article shall be published as laid down by national law in the Member State of the commitment. Such transfers shall automatically be valid against policy holders, the assured persons and any other person having rights or obligations arising out of the contracts transferred. This provision shall not affect the Member States’ rights to give policy holders the option of cancelling contracts within a fixed period after a transfer. Article 15

Qualifying holdings

1. Member States shall require any natural or legal person who proposes to hold, directly or indirectly, a qualifying holding in an assurance undertaking first to inform the competent authorities of the home Member State, indicating the size of the intended holding. Such a person must likewise inform the competent authorities of the home Member State if he/she proposes to increase his/her qualifying holding so that the proportion of the voting rights or of the capital held by him/her would reach or exceed 20%, 33% or 50% or so that the assurance undertaking would become his/her subsidiary. The competent authorities of the home Member State shall have a maximum of three months from the date of the notification provided for in the first subparagraph to oppose such a plan if, in view of the need to ensure sound and prudent management of the assurance undertaking, they are not satisfied as to the qualifications of the person referred to in the first subparagraph. If they do not oppose the plan in question they may fix a maximum period for its implementation.

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2. Member States shall require any natural or legal person who proposes to dispose, directly or indirectly, of a qualifying holding in an assurance undertaking first to inform the competent authorities of the home Member State, indicating the size of his/her intended holding. Such a person must likewise inform the competent authorities if he/she proposes to reduce his/her qualifying holding so that the proportion of the voting rights or of the capital held by him/her would fall below 20%, 33% or 50% or so that the assurance undertaking would cease to be his/ her subsidiary. 3. On becoming aware of them, assurance undertakings shall inform the competent authorities of their home Member States of any acquisitions or disposals of holdings in their capital that cause holdings to exceed or fall below one of the thresholds referred to in paragraphs 1 and 2. They shall also, at least once a year, inform them of the names of shareholders and members possessing qualifying holdings and the sizes of such holdings as shown, for example, by the information received at the annual general meetings of shareholders and members or as a result of compliance with the regulations relating to companies listed on stock exchanges. 4. Member States shall require that, if the influence exercised by the persons referred to in paragraph 1 is likely to operate to the detriment of the prudent and sound management of the assurance undertaking, the competent authorities of the home Member State shall take appropriate measures to put an end to that situation. Such measures may consist, for example, in injunctions, sanctions against directors and managers, or the suspension of the exercise of the voting rights attaching to the shares held by the shareholders or members in question. Similar measures shall apply to natural or legal persons failing to comply with the obligation to provide prior information, as laid down in paragraph 1. If a holding is acquired despite the opposition of the competent authorities, the Member States shall, regardless of any other sanctions to be adopted, provide either for exercise of the corresponding voting rights to be suspended, or for the nullity of votes cast or for the possibility of their annulment. Article 16

Professional secrecy

1. Member States shall provide that all persons working or who have worked for the competent authorities, as well as auditors or experts acting on behalf of the competent authorities, shall be bound by the obligation of professional secrecy. This means that no confidential information which they may receive in the course of their duties may be divulged to any person or authority whatsoever, except in summary or aggregate form, such that individual assurance undertakings cannot be identified, without prejudice to cases covered by criminal law. Nevertheless, where an assurance undertaking has been declared bankrupt or is being compulsorily wound up, confidential information which does not concern third parties involved in attempts to rescue that undertaking may be divulged in civil or commercial proceedings. 2. Paragraph 1 shall not prevent the competent authorities of the different Member States from exchanging information in accordance with the directives applicable to assurance undertakings. That information shall be subject to the conditions of professional secrecy indicated in paragraph 1. 3. Member States may conclude cooperation agreements providing for exchange of information with the competent authorities of third countries or with authorities or bodies of third countries as defined in paragraphs 5 and 6 only if the information disclosed is subject to guarantees of professional secrecy at least equivalent to those referred to in this Article. Such exchange of information must be intended for the performance of the supervisory task of the authorities or bodies mentioned. Where the information originates in another Member State, it may not be disclosed without the express agreement of the competent authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities gave their agreement. 4. Competent authorities receiving confidential information under paragraphs 1 or 2 may use it only in the course of their duties: — to check that the conditions governing the taking-up of the business of assurance are met and to facilitate monitoring of the conduct of such business, especially with regard

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to the monitoring of technical provisions, solvency margins, administrative and accounting procedures and internal control mechanisms, or — to impose sanctions, or — in administrative appeals against decisions of the competent authority, or — in court proceedings initiated pursuant to Article 67 or under special provisions provided for in this Directive and other directives adopted in the field of assurance undertakings. 5. Paragraphs 1 and 4 shall not preclude the exchange of information within a Member State, where there are two or more competent authorities in the same Member State, or, between Member States, between competent authorities and: — authorities responsible for the official supervision of credit institutions and other financial organisations and the authorities responsible for the supervision of financial markets, — bodies involved in the liquidation and bankruptcy of assurance undertakings and in other similar procedures, and — persons responsible for carrying out statutory audits of the accounts of assurance undertakings and other financial institutions, in the discharge of their supervisory functions, and the disclosure, to bodies which administer (compulsory) winding-up proceedings or guarantee funds, of information necessary to the performance of their duties. The information received by these authorities, bodies and persons shall be subject to the obligation of professional secrecy laid down in paragraph 1. 6. Notwithstanding paragraphs 1 to 4, Member States may authorise exchanges of information between the competent authorities and: — the authorities responsible for overseeing the bodies involved in the liquidation and bankruptcy of assurance undertakings and other similar procedures, or — the authorities responsible for overseeing the persons charged with carrying out statutory audits of the accounts of insurance undertakings, credit institutions, investment firms and other financial institutions, or — independent actuaries of insurance undertakings carrying out legal supervision of those undertakings and the bodies responsible for overseeing such actuaries. Member States which have recourse to the option provided for in the first subparagraph shall require at least that the following conditions are met: — this information shall be for the purpose of carrying out the overseeing or legal supervision referred to in the first subparagraph, — information received in this context shall be subject to the conditions of professional secrecy imposed in paragraph 1, — where the information originates in another Member State, it may not be disclosed without the express agreement of the competent authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities gave their agreement. Member States shall communicate to the Commission and to the other Member States the names of the authorities, persons and bodies which may receive information pursuant to this paragraph. 7. Notwithstanding paragraphs 1 to 4, Member States may, with the aim of strengthening the stability, including integrity, of the financial system, authorise the exchange of information between the competent authorities and the authorities or bodies responsible under the law for the detection and investigation of breaches of company law. Member States which have recourse to the option provided for in the first subparagraph shall require at least that the following conditions are met: — the information shall be for the purpose of performing the task referred to in the first subparagraph,

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— information received in this context shall be subject to the conditions of professional secrecy imposed in paragraph 1, — where the information originates in another Member State, it may not be disclosed without the express agreement of the competent authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities gave their agreement. Where, in a Member State, the authorities or bodies referred to in the first subparagraph perform their task of detection or investigation with the aid, in view of their specific competence, of persons appointed for that purpose and not employed in the public sector, the possibility of exchanging information provided for in the first subparagraph may be extended to such persons under the conditions stipulated in the second subparagraph. In order to implement the third indent of the second subparagraph, the authorities or bodies referred to in the first subparagraph shall communicate to the competent authorities which have disclosed the information, the names and precise responsibilities of the persons to whom it is to be sent. Member States shall communicate to the Commission and to the other Member States the names of the authorities or bodies which may receive information pursuant to this paragraph. Before 31 December 2000, the Commission shall draw up a report on the application of this paragraph. 8. Member States may authorise the competent authorities to transmit: — to central banks and other bodies with a similar function in their capacity as monetary authorities, — where appropriate, to other public authorities responsible for overseeing payment systems, information intended for the performance of their task and may authorise such authorities or bodies to communicate to the competent authorities such information as they may need for the purposes of paragraph 4. Information received in this context shall be subject to the conditions of professional secrecy imposed in this Article. 9. In addition, notwithstanding paragraphs 1 and 4, Member States may, under provisions laid down by law, authorise the disclosure of certain information to other departments of their central government administrations responsible for legislation on the supervision of credit institutions, financial institutions, investment services and assurance undertakings and to inspectors acting on behalf of those departments. However, such disclosures may be made only where necessary for reasons of prudential control. However, Member States shall provide that information received under paragraphs 2 and 5 and that obtained by means of the on-the-spot verification referred to in Article 11 may never be disclosed in the cases referred to in this paragraph except with the express consent of the competent authorities which disclosed the information or of the competent authorities of the Member State in which on-the-spot verification was carried out. Article 17

Duties of auditors

1. Member States shall provide at least that: (a) any person authorised within the meaning of Council Directive 84/253/EEC, performing in an assurance undertaking the task described in Article 51 of Council Directive 78/660/EEC, Article 37 of Directive 83/349/EEC or Article 31 of Council Directive 85/611/EEC or any other statutory task, shall have a duty to report promptly to the competent authorities any fact or decision concerning that undertaking of which he/she has become aware while carrying out that task which is liable to: — constitute a material breach of the laws, regulations or administrative provisions which lay down the conditions governing authorisation or which specifically govern pursuit of the activities of assurance undertakings, or — affect the continuous functioning of the assurance undertaking or — lead to refusal to certify the accounts or to the expression of reservations;

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(b) that person shall likewise have a duty to report any facts and decisions of which he/she becomes aware in the course of carrying out a task as described in (a) in an undertaking having close links resulting from a control relationship with the assurance undertaking within which he/she is carrying out the abovementioned task. 2. The disclosure in good faith to the competent authorities, by persons authorised within the meaning of Directive 84/253/EEC, of any fact or decision referred to in paragraph 1 shall not constitute a breach of any restriction on disclosure of information imposed by contract or by any legislative, regulatory or administrative provision and shall not involve such persons in liability of any kind. Article 18

Pursuit of life assurance and non-life insurance activities

1. Without prejudice to paragraphs 3 and 7, no undertaking may be authorised both pursuant to this Directive and pursuant to Directive 73/239/EEC. 2. By way of derogation from paragraph 1, Member States may provide that: — undertakings authorised pursuant to this Directive may also obtain authorisation, in accordance with Article 6 of Directive 73/239/EEC for the risks listed in classes 1 and 2 in the Annex to that Directive, — undertakings authorised pursuant to Article 6 of Directive 73/239/EEC solely for the risks listed in classes 1 and 2 in the Annex to that Directive may obtain authorisation pursuant to this Directive. 3. Subject to paragraph 6, undertakings referred to in paragraph 2 and those which on: — 1 January 1981 for undertakings authorised in Greece, — 1 January 1986 for undertakings authorised in Spain and Portugal, — 1 January 1995 for undertakings authorised in Austria, Finland and Sweden, and — 15 March 1979 for all other undertakings, carried on simultaneously both the activities covered by this Directive and those covered by Directive 73/239/EEC may continue to carry on those activities simultaneously, provided that each activity is separately managed in accordance with Article 19 of this Directive. 4. Member States may provide that the undertakings referred to in paragraph 2 shall comply with the accounting rules governing assurance undertakings authorised pursuant to this Directive for all of their activities. Pending coordination in this respect, Member States may also provide that, with regard to rules on winding-up, activities relating to the risks listed in classes 1 and 2 in the Annex to Directive 73/239/EEC carried on by the undertakings referred to in paragraph 2 shall be governed by the rules applicable to life assurance activities. 5. Where an undertaking carrying on the activities referred to in the Annex to Directive 73/239/EEC has financial, commercial or administrative links with an assurance undertaking carrying on the activities covered by this Directive, the competent authorities of the Member States within whose territories the head offices of those undertakings are situated shall ensure that the accounts of the undertakings in question are not distorted by agreements between these undertakings or by any arrangement which could affect the apportionment of expenses and income. 6. Any Member State may require assurance undertakings whose head offices are situated in its territory to cease, within a period to be determined by the Member State concerned, the simultaneous pursuit of activities in which they were engaged on the dates referred to in paragraph 3. 7. The provisions of this Article shall be reviewed on the basis of a report from the Commission to the Council in the light of future harmonisation of the rules on winding-up, and in any case before 31 December 1999. Article 19 1.

Separation of life assurance and non-life insurance management

The separate management referred to in Article 18(3) must be organised in such a way that the activities covered by this Directive are distinct from the activities covered by Directive 73/239/EEC in order that: — the respective interests of life policy holders and non-life policy holders are not prejudiced and, in particular, that profits from life assurance benefit life policy

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holders as if the assurance undertaking only carried on the activity of life assurance, — the minimum financial obligations, in particular solvency margins, in respect of one or other of the two activities, namely an activity under this Directive and an activity under Directive 73/239/EEC, are not borne by the other activity. However, as long as the minimum financial obligations are fulfilled under the conditions laid down in the second indent of the first subparagraph and, provided the competent authority is informed, the undertaking may use those explicit items of the solvency margin which are still available for one or other activity. The competent authorities shall analyse the results in both activities so as to ensure that the provisions of this paragraph are complied with. 2. (a) Accounts shall be drawn up in such a manner as to show the sources of the results for each of the two activities, life assurance and non-life insurance. To this end all income (in particular premiums, payments by reinsurers and investment income) and expenditure (in particular insurance settlements, additions to technical provisions, reinsurance premiums, operating expenses in respect of insurance business) shall be broken down according to origin. Items common to both activities shall be entered in accordance with methods of apportionment to be accepted by the competent authority. (b) Assurance undertakings must, on the basis of the accounts, prepare a statement clearly identifying the items making up each solvency margin, in accordance with Article 27 of this Directive and Article 16(1) of Directive 73/239/EEC. 3. If one of the solvency margins is insufficient, the competent authorities shall apply to the deficient activity the measures provided for in the relevant Directive, whatever the results in the other activity. By way of derogation from the second indent of the first subparagraph of paragraph 1, these measures may involve the authorisation of a transfer from one activity to the other.

CHAPTER 2

R U L E S R E L AT I N G T O T E C H N I C A L P R O V I S I O N S A N D T H E I R R E P R E S E N TAT I O N

Article 20

Establishment of technical provisions

1. The home Member State shall require every assurance undertaking to establish sufficient technical provisions, including mathematical provisions, in respect of its entire business. The amount of such technical provisions shall be determined according to the following principles. A. (i) the amount of the technical life-assurance provisions shall be calculated by a sufficiently prudent prospective actuarial valuation, taking account of all future liabilities as determined by the policy conditions for each existing contract, including: — all guaranteed benefits, including guaranteed surrender values, — bonuses to which policy holders are already either collectively or individually entitled, however those bonuses are described—vested, declared or allotted, — all options available to the policy holder under the terms of the contract, — expenses, including commissions, taking credit for future premiums due; (ii) the use of a retrospective method is allowed, if it can be shown that the resulting technical provisions are not lower than would be required under a sufficiently prudent prospective calculation or if a prospective method cannot be used for the type of contract involved; (iii) a prudent valuation is not a ‘best estimate’ valuation, but shall include an appropriate margin for adverse deviation of the relevant factors; (iv) the method of valuation for the technical provisions must not only be prudent in itself, but must also be so having regard to the method of valuation for the assets covering those provisions;

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(v) technical provisions shall be calculated separately for each contract. The use of appropriate approximations or generalisations is allowed, however, where they are likely to give approximately the same result as individual calculations. The principle of separate calculation shall in no way prevent the establishment of additional provisions for general risks which are not individualised; (vi) where the surrender value of a contract is guaranteed, the amount of the mathematical provisions for the contract at any time shall be at least as great as the value guaranteed at that time; B. the rate of interest used shall be chosen prudently. It shall be determined in accordance with the rules of the competent authority in the home Member State, applying the following principles: (a) for all contracts, the competent authority of the assurance undertaking’s home Member State shall fix one or more maximum rates of interest, in particular in accordance with the following rules: (i) when contracts contain an interest rate guarantee, the competent authority in the home Member State shall set a single maximum rate of interest. It may differ according to the currency in which the contract is denominated, provided that it is not more than 60% of the rate on bond issues by the State in whose currency the contract is denominated. If a Member State decides, pursuant to the second sentence of the first subparagraph, to set a maximum rate of interest for contracts denominated in another Member State’s currency, it shall first consult the competent authority of the Member State in whose currency the contract is denominated; (ii) however, when the assets of the assurance undertaking are not valued at their purchase price, a Member State may stipulate that one or more maximum rates may be calculated taking into account the yield on the corresponding assets currently held, minus a prudential margin and, in particular for contracts with periodic premiums, furthermore taking into account the anticipated yield on future assets. The prudential margin and the maximum rate or rates of interest applied to the anticipated yield on future assets shall be fixed by the competent authority of the home Member State; (b) the establishment of a maximum rate of interest shall not imply that the assurance undertaking is bound to use a rate as high as that; (c) the home Member State may decide not to apply paragraph (a) to the following categories of contracts: — unit-linked contracts, — single-premium contracts for a period of up to eight years, — without-profits contracts, and annuity contracts with no surrender value. In the cases referred to in the second and third indents of the first subparagraph, in choosing a prudent rate of interest, account may be taken of the currency in which the contract is denominated and corresponding assets currently held and where the undertaking’s assets are valued at their current value, the anticipated yield on future assets. Under no circumstances may the rate of interest used be higher than the yield on assets as calculated in accordance with the accounting rules in the home Member State, less an appropriate deduction; (d) the Member State shall require an assurance undertaking to set aside in its accounts a provision to meet interest-rate commitments vis-`a-vis policy holders if the present or foreseeable yield on the undertaking’s assets is insufficient to cover those commitments; (e) the Commission and the competent authorities of the Member States which so request shall be notified of the maximum rates of interest set under (a); C. the statistical elements of the valuation and the allowance for expenses used shall be chosen prudently, having regard to the State of the commitment, the type of policy and the administrative costs and commissions expected to be incurred; D. in the case of participating contracts, the method of calculation for technical provisions may take into account, either implicitly or explicitly, future bonuses of all kinds, in a

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manner consistent with the other assumptions on future experience and with the current method of distribution of bonuses; E. allowance for future expenses may be made implicitly, for instance by the use of future premiums net of management charges. However, the overall allowance, implicit or explicit, shall be not less than a prudent estimate of the relevant future expenses; F. the method of calculation of technical provisions shall not be subject to discontinuities from year to year arising from arbitrary changes to the method or the bases of calculation and shall be such as to recognise the distribution of profits in an appropriate way over the duration of each policy. 2. Assurance undertakings shall make available to the public the bases and methods used in the calculation of the technical provisions, including provisions for bonuses. 3. The home Member State shall require every assurance undertaking to cover the technical provisions in respect of its entire business by matching assets, in accordance with Article 26. In respect of business written in the Community, these assets must be localised within the Community. Member States shall not require assurance undertakings to localise their assets in a particular Member State. The home Member State may, however, permit relaxations in the rules on the localisation of assets. 4. If the home Member State allows any technical provisions to be covered by claims against reassurers, it shall fix the percentage so allowed. In such case, it may not require the localisation of the assets representing such claims.

Article 21

Premiums for new business

Premiums for new business shall be sufficient, on reasonable actuarial assumptions, to enable assurance undertakings to meet all their commitments and, in particular, to establish adequate technical provisions. For this purpose, all aspects of the financial situation of an assurance undertaking may be taken into account, without the input from resources other than premiums and income earned thereon being systematic and permanent in such a way that it may jeopardise the undertaking’s solvency in the long term.

Article 22

Assets covering technical provisions

The assets covering the technical provisions shall take account of the type of business carried on by an assurance undertaking in such a way as to secure the safety, yield and marketability of its investments, which the undertaking shall ensure are diversified and adequately spread.

Article 23

Categories of authorised assets

1. The home Member State may not authorise assurance undertakings to cover their technical provisions with any but the following categories of assets: A. investments (a) debt securities, bonds and other money- and capital-market instruments; (b) loans; (c) shares and other variable-yield participations; (d) units in undertakings for collective investment in transferable securities (UCITS) and other investment funds; (e) land, buildings and immovable-property rights; B. debts and claims (f) debts owed by reassurers, including reassurers’ shares of technical provisions; (g) deposits with and debts owed by ceding undertakings; (h) debts owed by policy holders and intermediaries arising out of direct and reassurance operations; (i) advances against policies; (j) tax recoveries; (k) claims against guarantee funds;

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C. others (l) tangible fixed assets, other than land and buildings, valued on the basis of prudent amortisation; (m) cash at bank and in hand, deposits with credit institutions and any other body authorised to receive deposits; (n) deferred acquisition costs; (o) accrued interest and rent, other accrued income and prepayments; (p) reversionary interests. 2. In the case of the association of underwriters known as ‘Lloyd’s’, asset categories shall also include guarantees and letters of credit issued by credit institutions within the meaning of Directive 2000/12/EC of the European Parliament and of the Council or by assurance undertakings, together with verifiable sums arising out of life assurance policies, to the extent that they represent funds belonging to members. 3. The inclusion of any asset or category of assets listed in paragraph 1 shall not mean that all these assets should automatically be accepted as cover for technical provisions. The home Member State shall lay down more detailed rules fixing the conditions for the use of acceptable assets; in this connection, it may require valuable security or guarantees, particularly in the case of debts owed by reassurers. In determining and applying the rules which it lays down, the home Member State shall, in particular, ensure that the following principles are complied with: (i) assets covering technical provisions shall be valued net of any debts arising out of their acquisition; (ii) all assets must be valued on a prudent basis, allowing for the risk of any amounts not being realisable. In particular, tangible fixed assets other than land and buildings may be accepted as cover for technical provisions only if they are valued on the basis of prudent amortisation; (iii) loans, whether to undertakings, to a State or international organisation, to local or regional authorities or to natural persons, may be accepted as cover for technical provisions only if there are sufficient guarantees as to their security, whether these are based on the status of the borrower, mortgages, bank guarantees or guarantees granted by assurance undertakings or other forms of security; (iv) derivative instruments such as options, futures and swaps in connection with assets covering technical provisions may be used in so far as they contribute to a reduction of investment risks or facilitate efficient portfolio management. They must be valued on a prudent basis and may be taken into account in the valuation of the underlying assets; (v) transferable securities which are not dealt in on a regulated market may be accepted as cover for technical provisions only if they can be realised in the short term or if they are holdings in credit institutions, in assurance undertakings, within the limits permitted by Article 6, or in investment undertakings established in a Member State; (vi) debts owed by and claims against a third party may be accepted as cover for the technical provisions only after deduction of all amounts owed to the same third party; (vii) the value of any debts and claims accepted as cover for technical provisions must be calculated on a prudent basis, with due allowance for the risk of any amounts not being realisable. In particular, debts owed by policy holders and intermediaries arising out of assurance and reassurance operations may be accepted only in so far as they have been outstanding for not more than three months; (viii) where the assets held include an investment in a subsidiary undertaking which manages all or part of the assurance undertaking’s investments on its behalf, the home Member State must, when applying the rules and principles laid down in this Article, take into account the underlying assets held by the subsidiary undertaking; the home Member State may treat the assets of other subsidiaries in the same way; (ix) deferred acquisition costs may be accepted as cover for technical provisions only to the extent that this is consistent with the calculation of the mathematical provisions. 4. Notwithstanding paragraphs 1, 2 and 3, in exceptional circumstances and at an assurance undertaking’s request, the home Member State may, temporarily and under a properly reasoned decision, accept other categories of assets as cover for technical provisions, subject to Article 22.

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3.29 Article 24

Life Insurance Rules for investment diversification

1. As regards the assets covering technical provisions, the home Member State shall require every assurance undertaking to invest no more than: (a) 10% of its total gross technical provisions in any one piece of land or building, or a number of pieces of land or buildings close enough to each other to be considered effectively as one investment; (b) 5% of its total gross technical provisions in shares and other negotiable securities treated as shares, bonds, debt securities and other money- and capital-market instruments from the same undertaking, or in loans granted to the same borrower, taken together, the loans being loans other than those granted to a State, regional or local authority or to an international organisation of which one or more Member States are members. This limit may be raised to 10% if an undertaking invests not more than 40% of its gross technical provisions in the loans or securities of issuing bodies and borrowers in each of which it invests more than 5% of its assets; (c) 5% of its total gross technical provisions in unsecured loans, including 1% for any single unsecured loan, other than loans granted to credit institutions, assurance undertakings—in so far as Article 6 allows it—and investment undertakings established in a Member State. The limits may be raised to 8% and 2% respectively by a decision taken on a case-by-case basis by the competent authority of the home Member State; (d) 3% of its total gross technical provisions in the form of cash in hand; (e) 10% of its total gross technical provisions in shares, other securities treated as shares and debt securities which are not dealt in on a regulated market. 2. The absence of a limit in paragraph 1 on investment in any particular category does not imply that assets in that category should be accepted as cover for technical provisions without limit. The home Member State shall lay down more detailed rules fixing the conditions for the use of acceptable assets. In particular it shall ensure, in the determination and the application of those rules, that the following principles are complied with: (i) assets covering technical provisions must be diversified and spread in such a way as to ensure that there is no excessive reliance on any particular category of asset, investment market or investment; (ii) investment in particular types of asset which show high levels of risk, whether because of the nature of the asset or the quality of the issuer, must be restricted to prudent levels; (iii) limitations on particular categories of asset must take account of the treatment of reassurance in the calculation of technical provisions; (iv) where the assets held include an investment in a subsidiary undertaking which manages all or part of the assurance undertaking’s investments on its behalf, the home Member State must, when applying the rules and principles laid down in this Article, take into account the underlying assets held by the subsidiary undertaking; the home Member State may treat the assets of other subsidiaries in the same way; (v) the percentage of assets covering technical provisions which are the subject of nonliquid investments must be kept to a prudent level; (vi) where the assets held include loans to or debt securities issued by certain credit institutions, the home Member State may, when applying the rules and principles contained in this Article, take into account the underlying assets held by such credit institutions. This treatment may be applied only where the credit institution has its head office in a Member State, is entirely owned by that Member State and/or that State’s local authorities and its business, according to its memorandum and articles of association, consists of extending, through its intermediaries, loans to, or guaranteed by, States or local authorities or of loans to bodies closely linked to the State or to local authorities. 3. In the context of the detailed rules laying down the conditions for the use of acceptable assets, the Member State shall give more limitative treatment to: — any loan unaccompanied by a bank guarantee, a guarantee issued by an assurance undertaking, a mortgage or any other form of security, as compared with loans accompanied by such collateral,

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— UCITS not coordinated within the meaning of Directive 85/611/EEC and other investment funds, as compared with UCITS coordinated within the meaning of that Directive, — securities which are not dealt in on a regulated market, as compared with those which are, — bonds, debt securities and other money- and capital-market instruments not issued by States, local or regional authorities or undertakings belonging to zone A as defined in Directive 2000/12/EC or the issuers of which are international organisations not numbering at least one Community Member State among their members, as compared with the same financial instruments issued by such bodies. 4. Member States may raise the limit laid down in paragraph 1 (b) to 40% in the case of certain debt securities when these are issued by a credit institution which has its head office in a Member State and is subject by law to special official supervision designed to protect the holders of those debt securities. In particular, sums deriving from the issue of such debt securities must be invested in accordance with the law in assets which, during the whole period of validity of the debt securities, are capable of covering claims attaching to debt securities and which, in the event of failure of the issuer, would be used on a priority basis for the reimbursement of the principal and payment of the accrued interest. 5. Member States shall not require assurance undertakings to invest in particular categories of assets. 6. Notwithstanding paragraph 1, in exceptional circumstances and at the assurance undertaking’s request, the home Member State may, temporarily and under a properly reasoned decision, allow exceptions to the rules laid down in paragraph 1(a) to (e), subject to Article 22. Article 25

Contracts linked to UCITS or share index

1. Where the benefits provided by a contract are directly linked to the value of units in an UCITS or to the value of assets contained in an internal fund held by the insurance undertaking, usually divided into units, the technical provisions in respect of those benefits must be represented as closely as possible by those units or, in the case where units are not established, by those assets. 2. Where the benefits provided by a contract are directly linked to a share index or some other reference value other than those referred to in paragraph 1, the technical provisions in respect of those benefits must be represented as closely as possible either by the units deemed to represent the reference value or, in the case where units are not established, by assets of appropriate security and marketability which correspond as closely as possible with those on which the particular reference value is based. 3. Articles 22 and 24 shall not apply to assets held to match liabilities which are directly linked to the benefits referred to in paragraphs 1 and 2. References to the technical provisions in Article 24 shall be to the technical provisions excluding those in respect of such liabilities. 4. Where the benefits referred to in paragraphs 1 and 2 include a guarantee of investment performance or some other guaranteed benefit, the corresponding additional technical provisions shall be subject to Articles 22, 23, and 24. Article 26

Matching rules

1. For the purposes of Articles 20(3) and 54, Member States shall comply with Annex II as regards the matching rules. 2. This Article shall not apply to the commitments referred to in Article 25. CHAPTER 3 R U L E S R E L AT I N G T O T H E S O LV E N C Y M A R G I N A N D T O T H E G U A R A N T E E F U N D

Article 27

Available solvency margin

1. Each Member State shall require of every assurance undertaking whose head office is situated in its territory an adequate available solvency margin in respect of its entire business at all times which is at least equal to the requirements in this Directive.

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2. The available solvency margin shall consist of the assets of the assurance undertaking free of any foreseeable liabilities, less any intangible items, including: (a) the paid-up share capital or, in the case of a mutual assurance undertaking, the effective initial fund plus any members’ accounts which meet all the following criteria: (i) the memorandum and articles of association must stipulate that payments may be made from these accounts to members only in so far as this does not cause the available solvency margin to fall below the required level, or, after the dissolution of the undertaking, if all the undertaking’s other debts have been settled; (ii) the memorandum and articles of association must stipulate, with respect to any payments referred to in point (i) for reasons other than the individual termination of membership, that the competent authorities must be notified at least one month in advance and can prohibit the payment within that period; (iii) the relevant provisions of the memorandum and articles of association may be amended only after the competent authorities have declared that they have no objection to the amendment, without prejudice to the criteria stated in points (i) and (ii); (b) reserves (statutory and free) not corresponding to underwriting liabilities; (c) the profit or loss brought forward after deduction of dividends to be paid; (d) in so far as authorised under national law, profit reserves appearing in the balance sheet where they may be used to cover any losses which may arise and where they have not been made available for distribution to policy holders. The available solvency margin shall be reduced by the amount of own shares directly held by the assurance undertaking. 3. The available solvency margin may also consist of: (a) cumulative preferential share capital and subordinated loan capital up to 50% of the lesser of the available solvency margin and the required solvency margin, no more than 25% of which shall consist of subordinated loans with a fixed maturity, or fixedterm cumulative preferential share capital, provided that binding agreements exist under which, in the event of the bankruptcy or liquidation of the assurance undertaking, the subordinated loan capital or preferential share capital ranks after the claims of all other creditors and is not to be repaid until all other debts outstanding at the time have been settled. Subordinated loan capital must also fulfil the following conditions: (i) only fully paid-up funds may be taken into account; (ii) for loans with a fixed maturity, the original maturity must be at least five years. No later than one year before the repayment date, the assurance undertaking must submit to the competent authorities for their approval a plan showing how the available solvency margin will be kept at or brought to the required level at maturity, unless the extent to which the loan may rank as a component of the available solvency margin is gradually reduced during at least the last five years before the repayment date. The competent authorities may authorise the early repayment of such loans provided application is made by the issuing assurance undertaking and its available solvency margin will not fall below the required level; (iii) loans the maturity of which is not fixed must be repayable only subject to five years’ notice unless the loans are no longer considered as a component of the available solvency margin or unless the prior consent of the competent authorities is specifically required for early repayment. In the latter event the assurance undertaking must notify the competent authorities at least six months before the date of the proposed repayment, specifying the available solvency margin and the required solvency margin both before and after that repayment. The competent authorities shall authorise repayment only if the assurance undertaking’s available solvency margin will not fall below the required level; (iv) the loan agreement must not include any clause providing that in specified circumstances, other than the winding-up of the assurance undertaking, the debt will become repayable before the agreed repayment dates;

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(v) the loan agreement may be amended only after the competent authorities have declared that they have no objection to the amendment; (b) securities with no specified maturity date and other instruments, including cumulative preferential shares other than those mentioned in point (a), up to 50% of the lesser of the available solvency margin and the required solvency margin for the total of such securities and the subordinated loan capital referred to in point (a) provided they fulfil the following: (i) they may not be repaid on the initiative of the bearer or without the prior consent of the competent authority; (ii) the contract of issue must enable the assurance undertaking to defer the payment of interest on the loan; (iii) the lender’s claims on the assurance undertaking must rank entirely after those of all non-subordinated creditors; (iv) the documents governing the issue of the securities must provide for the lossabsorption capacity of the debt and unpaid interest, while enabling the assurance undertaking to continue its business; (v) only fully paid-up amounts may be taken into account. 4. Upon application, with supporting evidence, by the undertaking to the competent authority of the home Member State and with the agreement of that competent authority, the available solvency margin may also consist of: (a) until 31 December 2009 an amount equal to 50% of the undertaking’s future profits, but not exceeding 25% of the lesser of the available solvency margin and the required solvency margin. The amount of the future profits shall be obtained by multiplying the estimated annual profit by a factor which represents the average period left to run on policies. The factor used may not exceed six. The estimated annual profit shall not exceed the arithmetical average of the profits made over the last five financial years in the activities listed in Article 2(1). Competent authorities may only agree to include such an amount for the available solvency margin: (i) when an actuarial report is submitted to the competent authorities substantiating the likelihood of emergence of these profits in the future; and (ii) in so far as that part of future profits emerging from hidden net reserves referred to in point (c) has not already been taken into account; (b) where Zillmerising is not practised or where, if practised, it is less than the loading for acquisition costs included in the premium, the difference between a non-Zillmerised or partially Zillmerised mathematical provision and a mathematical provision Zillmerised at a rate equal to the loading for acquisition costs included in the premium. This figure may not, however, exceed 3,5% of the sum of the differences between the relevant capital sums of life assurance activities and the mathematical provisions for all policies for which Zillmerising is possible. The difference shall be reduced by the amount of any undepreciated acquisition costs entered as an asset; (c) any hidden net reserves arising out of the valuation of assets, in so far as such hidden net reserves are not of an exceptional nature; (d) one half of the unpaid share capital or initial fund, once the paid-up part amounts to 25% of that share capital or fund, up to 50% of the lesser of the available and required solvency margin. 5. Amendments to paragraphs 2, 3 and 4 to take into account developments that justify a technical adjustment of the elements eligible for the available solvency margin shall be adopted in accordance with the procedure laid down in Article 65(2). Article 28

Required solvency margin

1. Subject to Article 29, the required solvency margin shall be determined as laid down in paragraphs 2 to 7 according to the classes of assurance underwritten. 2. For the kinds of assurance referred to in Article 2(1)(a) and (b) other than assurances linked to investment funds and for the operations referred to in Article 2(3), the required solvency margin shall be equal to the sum of the following two results:

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(a) first result: a 4% fraction of the mathematical provisions relating to direct business and reinsurance acceptances gross of reinsurance cessions shall be multiplied by the ratio, for the last financial year, of the total mathematical provisions net of reinsurance cessions to the gross total mathematical provisions. That ratio may in no case be less than 85%; (b) second result: for policies on which the capital at risk is not a negative figure, a 0,3% fraction of such capital underwritten by the assurance undertaking shall be multiplied by the ratio, for the last financial year, of the total capital at risk retained as the undertaking’s liability after reinsurance cessions and retrocessions to the total capital at risk gross of reinsurance; that ratio may in no case be less than 50%. For temporary assurance on death of a maximum term of three years the fraction shall be 0,1%. For such assurance of a term of more than three years but not more than five years the above fraction shall be 0,15%. 3. For the supplementary insurance referred to in Article 2(1)(c) the required solvency margin shall be equal to the required solvency margin for insurance undertakings as laid down in Article 16a of Directive 73/239/EEC, excluding the provisions of Article 17 of that Directive. 4. For permanent health insurance not subject to cancellation referred to in Article 2(1)(d), the required solvency margin shall be equal to: (a) a 4% fraction of the mathematical provisions, calculated in compliance with paragraph 2(a) of this Article; plus (b) the required solvency margin for insurance undertakings as laid down in Article 16a of Directive 73/239/EEC, excluding the provisions of Article 17 of that Directive. However, the condition contained in Article 16a(6)(b) of that Directive that a provision be set up for increasing age may be replaced by a requirement that the business be conducted on a group basis. 5. For capital redemption operations referred to in Article 2(2)(b), the required solvency margin shall be equal to a 4% fraction of the mathematical provisions calculated in compliance with paragraph 2(a) of this Article. 6. For tontines, referred to in Article 2(2)(a), the required solvency margin shall be equal to 1% of their assets. 7. For assurances covered by Article 2(1)(a) and (b) linked to investment funds and for the operations referred to in Article 2(2)(c), (d) and (e), the required solvency margin shall be equal to the sum of the following: (a) in so far as the assurance undertaking bears an investment risk, a 4% fraction of the technical provisions, calculated in compliance with paragraph 2(a) of this Article; (b) in so far as the undertaking bears no investment risk but the allocation to cover management expenses is fixed for a period exceeding five years, a 1% fraction of the technical provisions, calculated in compliance with paragraph 2(a) of this Article; (c) in so far as the undertaking bears no investment risk and the allocation to cover management expenses is not fixed for a period exceeding five years, an amount equivalent to 25% of the last financial year’s net administrative expenses pertaining to such business; (d) in so far as the assurance undertaking covers a death risk, a 0,3% fraction of the capital at risk calculated in compliance with paragraph 2(b) of this Article. Article 29

Guarantee fund

1. One third of the required solvency margin as specified in Article 28 shall constitute the guarantee fund. This fund shall consist of the items listed in Article 27(2), (3) and, with the agreement of the competent authority of the home Member State, (4)(c). 2. The guarantee fund may not be less than a minimum of EUR 3 million. Any Member State may provide for a one-fourth reduction of the minimum guarantee fund in the case of mutual associations and mutual-type associations and tontines.

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Review of the amount of the guarantee fund

1. The amount in euro as laid down in Article 29(2) shall be reviewed annually starting on 20 September 2003, in order to take account of changes in the European index of consumer prices comprising all Member States as published by Eurostat. The amount shall be adapted automatically, by increasing the base amount in euro by the percentage change in that index over the period between 20 March 2002 and the review date and rounded up to a multiple of EUR 100 000. If the percentage change since the last adaptation is less than 5%, no adaptation shall take place. 2. The Commission shall inform annually the European Parliament and the Council of the review and the adapted amount referred to in paragraph 1. Article 31

Assets not used to cover technical provisions

1. Member States shall not prescribe any rules as to the choice of the assets that need not be used as cover for the technical provisions referred to in Article 20. 2. Subject to Article 20(3), Article 37(1), (2), (3) and (5), and the second subparagraph of Article 39(1), Member States shall not restrain the free disposal of those assets, whether movable or immovable, that form part of the assets of authorised assurance undertakings. 3. Paragraphs 1 and 2 shall not preclude any measures which Member States, while safeguarding the interests of the lives assured, are entitled to take as owners or members of or partners in the assurance undertakings in question. CHAPTER 4 C O N T R A C T L AW A N D C O N D I T I O N S O F A S S U R A N C E

Article 32

Law applicable

1. The law applicable to contracts relating to the activities referred to in this Directive shall be the law of the Member State of the commitment. However, where the law of that State so allows, the parties may choose the law of another country. 2. Where the policy holder is a natural person and has his/her habitual residence in a Member State other than that of which he/she is a national, the parties may choose the law of the Member State of which he/she is a national. 3. Where a State includes several territorial units, each of which has its own rules of law concerning contractual obligations, each unit shall be considered a country for the purposes of identifying the law applicable under this Directive. A Member State in which various territorial units have their own rules of law concerning contractual obligations shall not be bound to apply the provisions of this Directive to conflicts which arise between the laws of those units. 4. Nothing in this Article shall restrict the application of the rules of the law of the forum in a situation where they are mandatory, irrespective of the law otherwise applicable to the contract. If the law of a Member State so stipulates, the mandatory rules of the law of the Member State of the commitment may be applied if and in so far as, under the law of that Member State, those rules must be applied whatever the law applicable to the contract. 5. Subject to paragraphs 1 to 4, the Member States shall apply to the assurance contracts referred to in this Directive their general rules of private international law concerning contractual obligations. Article 33

General good

The Member State of the commitment shall not prevent a policy holder from concluding a contract with an assurance undertaking authorised under the conditions of Article 4 as long as that does not conflict with legal provisions protecting the general good in the Member State of the commitment.

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Article 34

Rules relating to conditions of assurance and scales of premiums

Member States shall not adopt provisions requiring the prior approval or systematic notification of general and special policy conditions, scales of premiums, technical bases used in particular for calculating scales of premiums and technical provisions or forms and other printed documents which an assurance undertaking intends to use in its dealings with policy holders. Notwithstanding the first subparagraph, for the sole purpose of verifying compliance with national provisions concerning actuarial principles, the home Member State may require systematic communication of the technical bases used in particular for calculating scales of premiums and technical provisions, without that requirement constituting a prior condition for an assurance undertaking to carry on its business. Not later than 1 July 1999 the Commission shall submit a report to the Council on the implementation of those provisions. Article 35

Cancellation period

1. Each Member State shall prescribe that a policy holder who concludes an individual lifeassurance contract shall have a period of between 14 and 30 days from the time when he/she was informed that the contract had been concluded within which to cancel the contract. The giving of notice of cancellation by the policy holder shall have the effect of releasing him/her from any future obligation arising from the contract. The other legal effects and the conditions of cancellation shall be determined by the law applicable to the contract as defined in Article 32, notably as regards the arrangements for informing the policy holder that the contract has been concluded. 2. The Member States need not apply paragraph 1 to contracts of six months’ duration or less, nor where, because of the status of the policy holder or the circumstances in which the contract is concluded, the policy holder does not need this special protection. Member States shall specify in their rules where paragraph 1 is not applied. Article 36

Information for policy holders

1. Before the assurance contract is concluded, at least the information listed in Annex III(A) shall be communicated to the policy holder. 2. The policy-holder shall be kept informed throughout the term of the contract of any change concerning the information listed in Annex III(B). 3. The Member State of the commitment may require assurance undertakings to furnish information in addition to that listed in Annex III only if it is necessary for a proper understanding by the policy holder of the essential elements of the commitment. 4. The detailed rules for implementing this Article and Annex III shall be laid down by the Member State of the commitment. CHAPTER 5 A S S U R A N C E U N D E RTA K I N G S I N D I F F I C U LT Y O R I N A N I R R E G U L A R S I T U AT I O N

Article 37

Assurance undertakings in difficulty

1. If an assurance undertaking does not comply with Article 20, the competent authority of its home Member State may prohibit the free disposal of its assets after having communicated its intention to the competent authorities of the Member States of commitment. 2. For the purposes of restoring the financial situation of an assurance undertaking, the solvency margin of which has fallen below the minimum required under Article 28, the competent authority of the home Member State shall require that a plan for the restoration of a sound financial position be submitted for its approval. In exceptional circumstances, if the competent authority is of the opinion that the financial situation of the assurance undertaking will further deteriorate, it may also restrict or prohibit the free disposal of the assurance undertaking’s assets. It shall inform the authorities of other Member States within the territories of which the assurance undertaking carries on business of

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any measures it has taken and the latter shall, at the request of the former, take the same measures. 3. If the solvency margin falls below the guarantee fund as defined in Article 29, the competent authority of the home Member State shall require the assurance undertaking to submit a short-term finance scheme for its approval. It may also restrict or prohibit the free disposal of the assurance undertaking’s assets. It shall inform the authorities of other Member States within the territories of which the assurance undertaking carries on business accordingly and the latter shall, at the request of the former, take the same measures. 4. The competent authorities may further take all measures necessary to safeguard the interests of the assured persons in the cases provided for in paragraphs 1, 2 and 3. 5. Each Member State shall take the measures necessary to be able in accordance with its national law to prohibit the free disposal of assets located within its territory at the request, in the cases provided for in paragraphs 1, 2 and 3, of the assurance undertaking’s home Member State, which shall designate the assets to be covered by such measures. Article 38

Financial recovery plan

1. Member States shall ensure that the competent authorities have the power to require a financial recovery plan for those insurance undertakings where competent authorities consider that policy holders’ rights are threatened. The financial recovery plan must as a minimum include particulars or proof concerning for the next three financial years: (a) estimates of management expenses, in particular current general expenses and commissions; (b) a plan setting out detailed estimates of income and expenditure in respect of direct business, reinsurance acceptances and reinsurance cessions; (c) a forecast balance sheet; (d) estimates of the financial resources intended to cover underwriting liabilities and the required solvency margin; (e) the overall reinsurance policy. 2. Where policy holders’ rights are threatened because the financial position of the undertaking is deteriorating, Member States shall ensure that the competent authorities have the power to oblige insurance undertakings to have a higher required solvency margin, in order to ensure that the insurance undertaking is able to fulfil the solvency requirements in the near future. The level of this higher required solvency margin shall be based on a financial recovery plan referred to in paragraph 1. 3. Member States shall ensure that the competent authorities have the power to revalue downwards all elements eligible for the available solvency margin, in particular, where there has been a significant change in the market value of these elements since the end of the last financial year. 4. Member States shall ensure that the competent authorities have the powers to decrease the reduction, based on reinsurance, to the solvency margin as determined in accordance with Article 28 where: (a) the nature or quality of reinsurance contracts has changed significantly since the last financial year; (b) there is no or an insignificant risk transfer under the reinsurance contracts. 5. If the competent authorities have required a financial recovery plan for the insurance undertaking in accordance with paragraph 1, they shall refrain from issuing a certificate in accordance with Article 14(1), Article 40(3), second subparagraph, and Article 42(1)(a), as long as they consider that policy holders’ rights are threatened within the meaning of paragraph 1. Article 39

Withdrawal of authorisation

1. Authorisation granted to an assurance undertaking by the competent authority of its home Member State may be withdrawn by that authority if that undertaking: (a) does not make use of the authorisation within 12 months, expressly renounces it or ceases to carry on business for more than six months, unless the Member State concerned has made provision for authorisation to lapse in such cases;

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(b) no longer fulfils the conditions for admission; (c) has been unable, within the time allowed, to take the measures specified in the restoration plan or finance scheme referred to in Article 37; (d) fails seriously in its obligations under the regulations to which it is subject. In the event of the withdrawal or lapse of the authorisation, the competent authority of the home Member State shall notify the competent authorities of the other Member States accordingly and they shall take appropriate measures to prevent the assurance undertaking from commencing new operations within their territories, under either the freedom of establishment or the freedom to provide services. The home Member State’s competent authority shall, in conjunction with those authorities, take all necessary measures to safeguard the interests of the assured persons and shall restrict, in particular, the free disposal of the assets of the assurance undertaking in accordance with Article 37(1), (2), second subparagraph, and (3), second subparagraph. 2. Any decision to withdraw an authorisation shall be supported by precise reasons and notified to the assurance undertaking in question. TITLE IV P R O V I S I O N S R E L AT I N G T O R I G H T O F E S TA B L I S H M E N T A N D F R E E D O M TO PROVIDE SERVICES Article 40

Conditions for branch establishment

1. An assurance undertaking that proposes to establish a branch within the territory of another Member State shall notify the competent authorities of its home Member State. 2. The Member States shall require every assurance undertaking that proposes to establish a branch within the territory of another Member State to provide the following information when effecting the notification provided for in paragraph 1: (a) the Member State within the territory of which it proposes to establish a branch; (b) a scheme of operations setting out, inter alia, the types of business envisaged and the structural organisation of the branch; (c) the address in the Member State of the branch from which documents may be obtained and to which they may be delivered, it being understood that that address shall be the one to which all communications to the authorised agent are sent; (d) the name of the branch’s authorised agent, who must possess sufficient powers to bind the assurance undertaking in relation to third parties and to represent it in relations with the authorities and courts of the Member State of the branch. With regard to Lloyd’s, in the event of any litigation in the Member State of the branch arising out of underwritten commitments, the assured persons must not be treated less favourably than if the litigation had been brought against businesses of a conventional type. The authorised agent must, therefore, possess sufficient powers for proceedings to be taken against him and must in that capacity be able to bind the Lloyd’s underwriters concerned. 3. Unless the competent authorities of the home Member State have reason to doubt the adequacy of the administrative structure or the financial situation of the assurance undertaking or the good repute and professional qualification or experience of the directors or managers or the authorised agent, taking into account the business planned, they shall, within three months of receiving all the information referred to in paragraph 2, communicate that information to the competent authorities of the Member State of the branch and shall inform the undertaking concerned accordingly. The competent authorities of the home Member State shall also attest that the assurance undertaking has the minimum solvency margin calculated in accordance with Articles 28 and 29. Where the competent authorities of the home Member State refuse to communicate the information referred to in paragraph 2 to the competent authorities of the Member State of the branch, they shall give the reasons for their refusal to the assurance undertaking concerned within three months of receiving all the information in question. That refusal or failure to act shall be subject to a right to apply to the courts in the home Member State.

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4. Before the branch of an assurance undertaking starts business, the competent authorities of the Member State of the branch shall, within two months of receiving the information referred to in paragraph 3, inform the competent authority of the home Member State, if appropriate, of the conditions under which, in the interest of the general good, that business must be carried on in the Member State of the branch. 5. On receiving a communication from the competent authorities of the Member State of the branch or, if no communication is received from them, on expiry of the period provided for in paragraph 4, the branch may be established and start business. 6. In the event of a change in any of the particulars communicated under paragraph 2(b), (c) or (d), an assurance undertaking shall give written notice of the change to the competent authorities of the home Member State and of the Member State of the branch at least one month before making the change so that the competent authorities of the home Member State and the competent authorities of the Member State of the branch may fulfil their respective roles under paragraphs 3 and 4. Article 41

Freedom to provide services: prior notification to the home Member State

Any assurance undertaking that intends to carry on business for the first time in one or more Member States under the freedom to provide services shall first inform the competent authorities of the home Member State, indicating the nature of the commitments it proposes to cover. Article 42

Freedom to provide services: notification by the home Member State

1. Within one month of the notification provided for in Article 41, the competent authorities of the home Member State shall communicate to the Member State or Member States within the territory of which the assurance undertaking intends to carry on business by way of the freedom to provide services: (a) a certificate attesting that the assurance undertaking has the minimum solvency margin calculated in accordance with Articles 28 and 29; (b) the classes which the assurance undertaking has been authorised to offer; (c) the nature of the commitments which the assurance undertaking proposes to cover in the Member State of the provision of services. At the same time, they shall inform the assurance undertaking concerned accordingly. 2. Where the competent authorities of the home Member State do not communicate the information referred to in paragraph 1 within the period laid down, they shall give the reasons for their refusal to the assurance undertaking within that same period. The refusal shall be subject to a right to apply to the courts in the home Member State. 3. The assurance undertaking may start business on the certified date on which it is informed of the communication provided for in the first subparagraph of paragraph 1. Article 43

Freedom to provide services: changes in the nature of commitments

Any change which an assurance undertaking intends to make to the information referred to in Article 41 shall be subject to the procedure provided for in Articles 41 and 42. Article 44

Language

The competent authorities of the Member State of the branch or the Member State of the provision of services may require that the information which they are authorised under this Directive to request with regard to the business of assurance undertakings operating in the territory of that State shall be supplied to them in the official language or languages of that State. Article 45

Rules relating to conditions of assurance and scales of premiums

The Member State of the branch or of the provision of services shall not lay down provisions requiring the prior approval or systematic notification of general and special policy conditions, scales of premiums, technical bases used in particular for calculating scales of premiums and

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technical provisions, forms and other printed documents which an assurance undertaking intends to use in its dealings with policy holders. For the purpose of verifying compliance with national provisions concerning assurance contracts, it may require an assurance undertaking that proposes to carry on assurance business within its territory, under the right of establishment or the freedom to provide services, to effect only non-systematic notification of those policy conditions and other printed documents without that requirement constituting a prior condition for an assurance undertaking to carry on its business. Article 46

Assurance undertakings not complying with the legal provisions

1. Any assurance undertaking carrying on business under the right of establishment or the freedom to provide services shall submit to the competent authorities of the Member State of the branch and/or of the Member State of the provision of services all documents requested of it for the purposes of this Article in so far as assurance undertakings the head office of which is in those Member States are also obliged to do so. 2. If the competent authorities of a Member State establish that an assurance undertaking with a branch or carrying on business under the freedom to provide services in its territory is not complying with the legal provisions applicable to it in that State, they shall require the assurance undertaking concerned to remedy that irregular situation. 3. If the assurance undertaking in question fails to take the necessary action, the competent authorities of the Member State concerned shall inform the competent authorities of the home Member State accordingly. The latter authorities shall, at the earliest opportunity, take all appropriate measures to ensure that the assurance undertaking concerned remedies that irregular situation. The nature of those measures shall be communicated to the competent authorities of the Member State concerned. 4. If, despite the measures taken by the home Member State or because those measures prove inadequate or are lacking in that State, the assurance undertaking persists in violating the legal provisions in force in the Member State concerned, the latter may, after informing the competent authorities of the home Member State, take appropriate measures to prevent or penalise further irregularities, including, in so far as is strictly necessary, preventing that undertaking from continuing to conclude new assurance contracts within its territory. Member States shall ensure that in their territories it is possible to serve the legal documents necessary for such measures on assurance undertakings. 5. Paragraphs 2, 3 and 4 shall not affect the emergency power of the Member States concerned to take appropriate measures to prevent or penalise irregularities committed within their territories. This shall include the possibility of preventing assurance undertakings from continuing to conclude new assurance contracts within their territories. 6. Paragraphs 2, 3 and 4 shall not affect the power of the Member States to penalise infringements within their territories. 7. If an assurance undertaking which has committed an infringement has an establishment or possesses property in the Member State concerned, the competent authorities of the latter may, in accordance with national law, apply the administrative penalties prescribed for that infringement by way of enforcement against that establishment or property. 8. Any measure adopted under paragraphs 3 to 7 involving penalties or restrictions on the conduct of assurance business must be properly reasoned and communicated to the assurance undertaking concerned. 9. Every two years, the Commission shall submit to the Insurance Committee a report summarising the number and type of cases in which, in each Member State, authorisation has been refused pursuant to Articles 40 or 42 or measures have been taken under paragraph 4 of this Article. Member States shall cooperate with the Commission by providing it with the information required for that report. Article 47

Advertising

Nothing in this Directive shall prevent assurance undertakings with head offices in other Member States from advertising their services through all available means of communication in the Member State of the branch or Member State of the provision of services, subject to any

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rules governing the form and content of such advertising adopted in the interest of the general good. Article 48

Winding-up

Should an assurance undertaking be wound up, commitments arising out of contracts underwritten through a branch or under the freedom to provide services shall be met in the same way as those arising out of that undertaking’s other assurance contracts, without distinction as to nationality as far as the lives assured and the beneficiaries are concerned. Article 49

Statistical information on cross-border activities

Every assurance undertaking shall inform the competent authority of its home Member State, separately in respect of transactions carried out under the right of establishment and those carried out under the freedom to provide services, of the amount of the premiums, without deduction of reassurance, by Member State and by each of classes I to IX, as defined in Annex I. The competent authority of the home Member State shall, within a reasonable time and on an aggregate basis forward this information to the competent authorities of each of the Member States concerned which so requests. Article 50

Taxes on premiums

1. Without prejudice to any subsequent harmonisation, every assurance contract shall be subject exclusively to the indirect taxes and parafiscal charges on assurance premiums in the Member State of the commitment, and also, with regard to Spain, to the surcharges legally established in favour of the Spanish ‘Consorcio de Compensacion ´ de Seguros’ for the performance of its functions relating to the compensation of losses arising from extraordinary events occurring in that Member State. 2. The law applicable to the contract pursuant to Article 32 shall not affect the fiscal arrangements applicable. 3. Pending future harmonisation, each Member State shall apply to those assurance undertakings which cover commitments situated within its territory its own national provisions for measures to ensure the collection of indirect taxes and parafiscal charges due under paragraph 1. TITLE V R U L E S A P P L I C A B L E T O A G E N C I E S O R B R A N C H E S E S TA B L I S H E D W I T H I N T H E C O M M U N I T Y A N D B E L O N G I N G T O U N D E RTA K I N G S W H O S E H E A D OFFICES ARE OUTSIDE THE COMMUNITY Article 51

Principles and conditions of authorisation

1. Each Member State shall make access to the activities referred to in Article 2 by any undertaking whose head office is outside the Community subject to an official authorisation. 2. A Member State may grant an authorisation if the undertaking fulfils at least the following conditions: (a) it is entitled to undertake insurance activities covered by Article 2 under its national law; (b) it establishes an agency or branch in the territory of such Member State; (c) it undertakes to establish at the place of management of the agency or branch accounts specific to the activity which it carries on there and to keep there all the records relating to the business transacted; (d) it designates a general representative, to be approved by the competent authorities; (e) it possesses in the Member State where it carries on an activity assets of an amount equal in value to at least one half of the minimum amount prescribed in Article 29(2), first subparagraph, in respect of the guarantee fund and deposits one quarter of the minimum amount as security;

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(f) it undertakes to keep a solvency margin complying with Article 55; (g) it submits a scheme of operations in accordance with the provisions of paragraph 3. 3. The scheme of operations of the agency or branch referred to in paragraph 2(g) shall contain the following particulars or evidence of: (a) the nature of the commitments which the undertaking proposes to cover; (b) the guiding principles as to reinsurance; (c) the state of the undertaking’s solvency margin and guarantee fund referred to in Article 55; (d) estimates relating to the cost of setting up the administrative services and the organisation for securing business and the financial resources intended to meet those costs; and, in addition shall include, for the first three financial years: (e) a plan setting out detailed estimates of income and expenditure in respect of direct business, reinsurance acceptances and reinsurance cessions; (f) a forecast balance sheet; (g) estimates relating to the financial resources intended to cover underwriting liabilities and the solvency margin. 4. A Member State may require systematic notification of the technical bases used for calculating scales of premiums and technical provisions, without that requirement constituting a prior condition for an assurance undertaking to carry on its business. Article 52

Rules applicable to branches of third-country undertakings

1. (a) Subject to point (b), agencies and branches referred to in this Title may not simultaneously carry on in a Member State the activities referred to in the Annex to Directive 73/239/EEC and those covered by this Directive. (b) Subject to point (c), Member States may provide that agencies and branches referred to in this Title which on the relevant date referred to in Article 18(3) carried on both activities simultaneously in a Member State may continue to do so there provided that each activity is separately managed in accordance with Article 19. (c) Any Member State which under Article 18(6) requires undertakings established in its territory to cease the simultaneous pursuit of the activities in which they were engaged on the relevant date referred to in Article 18(3) must also impose this requirement on agencies and branches referred to in this Title which are established in its territory and simultaneously carry on both activities there. (d) Member States may provide that agencies and branches referred to in this Title whose head office simultaneously carries on both activities and which on the dates referred to in Article 18(3) carried on in the territory of a Member State solely the activity covered by this Directive may continue their activity there. If the undertaking wishes to carry on the activity referred to in Directive 73/239/EEC in that territory it may only carry on the activity covered by this Directive through a subsidiary. 2. Articles 13 and 37 shall apply mutatis mutandis to agencies and branches referred to in this title. For the purposes of applying Article 37, the competent authority which supervises the overall solvency of agencies or branches shall be treated in the same way as the competent authority of the head-office Member State. 3. In the case of a withdrawal of authorisation by the authority referred to in Article 56(2), this authority shall notify the competent authorities of the other Member States where the undertaking operates and the latter authorities shall take the appropriate measures. If the reason for the withdrawal of authorisation is the inadequacy of the solvency margin calculated in accordance with Article 56(1)(a), the competent authorities of the other Member States concerned shall also withdraw their authorisations. Article 53

Transfer of portfolio

1. Under the conditions laid down by national law, each Member State shall authorise agencies and branches set up within its territory and covered by this Title to transfer all or part of their portfolios of contracts to an accepting office established in the same Member State if

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the competent authorities of that Member State or, if appropriate, those of the Member State referred to in Article 56 certify that after taking the transfer into account the accepting office possesses the necessary solvency margin. 2. Under the conditions laid down by national law, each Member State shall authorise agencies and branches set up within its territory and covered by this Title to transfer all or part of their portfolios of contracts to an assurance undertaking with a head office in another Member State, if the competent authorities of that Member State certify that after taking the transfer into account the accepting office possesses the necessary solvency margin. 3. If under the conditions laid down by national law, a Member State authorises agencies and branches set up within its territory and covered by this Title to transfer all or part of their portfolios of contracts to an agency or branch covered by this Title and set up within the territory of another Member State, it shall ensure that the competent authorities of the Member State of the accepting office or, if appropriate, of the Member State referred to in Article 56 certify that after taking the transfer into account the accepting office possesses the necessary solvency margin, that the law of the Member State of the accepting office permits such a transfer and that the State has agreed to the transfer. 4. In the circumstances referred to in paragraphs 1, 2 and 3 the Member State in which the transferring agency or branch is situated shall authorise the transfer after obtaining the agreement of the competent authorities of the Member State of the commitment, where different from the Member State in which the transferring agency or branch is situated. 5. The competent authorities of the Member States consulted shall give their opinion or consent to the competent authorities of the home Member State of the transferring assurance undertaking within three months of receiving a request; the absence of any response from the authorities consulted within that period shall be considered equivalent to a favourable opinion or tacit consent. 6. A transfer authorised in accordance with this Article shall be published as laid down by national law in the Member State of the commitment. Such transfers shall automatically be valid against policy holders, assured persons and any other persons having rights or obligations arising out of the contracts transferred. This provision shall not affect the Member States’ right to give policy holders the option of cancelling contracts within a fixed period after a transfer. Article 54

Technical provisions

Member States shall require undertakings to establish provisions, referred to in Article 20, adequate to cover the underwriting liabilities assumed in their territories. Member States shall see that the agency or branch covers such provisions by means of assets which are equivalent to such provisions and matching assets in accordance with Annex II. The law of the Member States shall be applicable to the calculation of such provisions, the determination of categories of investment and the valuation of assets, and, where appropriate, the determination of the extent to which these assets may be used for the purpose of covering such provisions. The Member State in question shall require that the assets covering these provisions, shall be localised in its territory. Article 20(4) shall, however, apply. Article 55

Solvency margin and guarantee fund

1. Each Member State shall require of agencies or branches set up in its territory a solvency margin consisting of the items listed in Article 27. The minimum solvency margin shall be calculated in accordance with Article 28. However, for the purpose of calculating this margin, account shall be taken only of the operations effected by the agency or branch concerned. 2. One third of the minimum solvency margin shall constitute the guarantee fund. However, the amount of this fund may not be less than one half of the minimum required under Article 29(2) first subparagraph. The initial deposit lodged in accordance with Article 51(2)(e) shall be counted towards such guarantee fund. The guarantee fund and the minimum of such fund shall be constituted in accordance with Article 29.

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3. The assets representing the minimum solvency margin must be kept within the Member State where activities are carried on up to the amount of the guarantee fund and the excess within the Community. Article 56

Advantages to undertakings authorised in more than one Member State

1. Any undertaking which has requested or obtained authorisation from more than one Member State may apply for the following advantages which may be granted only jointly: (a) the solvency margin referred to in Article 55 shall be calculated in relation to the entire business which it carries on within the Community; in such case, account shall be taken only of the operations effected by all the agencies or branches established within the Community for the purposes of this calculation; (b) the deposit required under Article 51(2)(e) shall be lodged in only one of those Member States; (c) the assets representing the guarantee fund shall be localised in any one of the Member States in which it carries on its activities. 2. Application to benefit from the advantages provided for in paragraph 1 shall be made to the competent authorities of the Member States concerned. The application must state the authority of the Member State which in future is to supervise the solvency of the entire business of the agencies or branches established within the Community. Reasons must be given for the choice of authority made by the undertaking. The deposit shall be lodged with that Member State. 3. The advantages provided for in paragraph 1 may only be granted if the competent authorities of all Member States in which an application has been made agree to them. They shall take effect from the time when the selected competent authority informs the other competent authorities that it will supervise the state of solvency of the entire business of the agencies or branches within the Community. The competent authority selected shall obtain from the other Member States the information necessary for the supervision of the overall solvency of the agencies and branches established in their territory. 4. At the request of one or more of the Member States concerned, the advantages granted under this Article shall be withdrawn simultaneously by all Member States concerned. Article 57

Agreements with third countries

The Community may, by means of agreements concluded pursuant to the Treaty with one or more third countries, agree to the application of provisions different from those provided for in this Title, for the purpose of ensuring, under conditions of reciprocity, adequate protection for policy holders in the Member States.

TITLE VI R U L E S A P P L I C A B L E T O S U B S I D I A R I E S O F PA R E N T U N D E RTA K I N G S G O V E R N E D B Y T H E L AW S O F A T H I R D C O U N T RY A N D T O T H E A C Q U I S I T I O N S O F H O L D I N G S B Y S U C H PA R E N T U N D E RTA K I N G S Article 58

Information from Member States to the Commission

The competent authorities of the Member States shall inform the Commission: (a) of any authorisation of a direct or indirect subsidiary one or more parent undertakings of which are governed by the laws of a third country. The Commission shall inform the Committee referred to in Article 65(1) accordingly; (b) whenever such a parent undertaking acquires a holding in a Community assurance undertaking which would turn the latter into its subsidiary. The Commission shall inform the Committee referred to in Article 65(1) accordingly.

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When authorisation is granted to the direct or indirect subsidiary of one or more parent undertakings governed by the law of third countries, the structure of the group shall be specified in the notification which the competent authorities shall address to the Commission. Article 59

Third-country treatment of Community assurance undertakings

1. The Member States shall inform the Commission of any general difficulties encountered by their assurance undertakings in establishing themselves or carrying on their activities in a third country. 2. Periodically, the Commission shall draw up a report examining the treatment accorded to Community assurance undertakings in third countries, in the terms referred to in paragraphs 3 and 4, as regards establishment and the carrying-on of insurance activities, and the acquisition of holdings in third-country insurance undertakings. The Commission shall submit those reports to the Council, together with any appropriate proposals. 3. Whenever it appears to the Commission, either on the basis of the reports referred to in paragraph 2 or on the basis of other information, that a third country is not granting Community assurance undertakings effective market access comparable to that granted by the Community to insurance undertakings from that third country, the Commission may submit proposals to the Council for the appropriate mandate for negotiation with a view to obtaining comparable competitive opportunities for Community assurance undertakings. The Council shall decide by a qualified majority. 4. Whenever it appears to the Commission, either on the basis of the reports referred to in paragraph 2 or on the basis of other information, that Community assurance undertakings in a third country are not receiving national treatment offering the same competitive opportunities as are available to domestic insurance undertakings and that the conditions of effective market access are not being fulfilled, the Commission may initiate negotiations in order to remedy the situation. In the circumstances described in the first subparagraph, it may also be decided at any time, and in addition to initiating negotiations, in accordance with the procedure laid down in Article 65(2), that the competent authorities of the Member States must limit or suspend their decisions: — regarding requests pending at the moment of the decision or future requests for authorisations, and — regarding the acquisition of holdings by direct or indirect parent undertakings governed by the laws of the third country in question. The duration of the measures referred to may not exceed three months. Before the end of that three-month period, and in the light of the results of the negotiations, the Council may, acting on a proposal from the Commission, decide by a qualified majority whether the measures shall be continued. Such limitations or suspension may not apply to the setting up of subsidiaries by assurance undertakings or their subsidiaries duly authorised in the Community, or to the acquisition of holdings in Community assurance undertakings by such undertakings or subsidiaries. 5. Whenever it appears to the Commission that one of the situations described in paragraphs 3 and 4 has arisen, the Member States shall inform it at its request: (a) of any request for the authorisation of a direct or indirect subsidiary one or more parent undertakings of which are governed by the laws of the third country in question; (b) of any plans for such an undertaking to acquire a holding in a Community assurance undertaking such that the latter would become the subsidiary of the former. This obligation to provide information shall lapse whenever an agreement is reached with the third country referred to in paragraph 3 or 4 when the measures referred to in the second and third subparagraphs of paragraph 4 cease to apply. 6. Measures taken under this Article shall comply with the Community’s obligations under any international agreements, bilateral or multilateral, governing the taking up and pursuit of the business of insurance undertakings.

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Article 60

Derogations and abolition of restrictive measures

1. Undertakings set up in the United Kingdom by Royal Charter or by private Act or by special Public Act may carry on their activity in the legal form in which they were constituted on 15 March 1979 for an unlimited period. The United Kingdom shall draw up a list of such undertakings and communicate it to the other Member States and the Commission. 2. The societies registered in the United Kingdom under the Friendly Societies Acts may continue the activities of life assurance and savings operations which, in accordance with their objects, they were carrying on on 15 March 1979. Article 61

Proof of good repute

1. Where a Member State requires of its own nationals proof of good repute and proof of no previous bankruptcy, or proof of either of these, that State shall accept as sufficient evidence in respect of nationals of other Member States the production of an extract from the ‘judicial record’ or, failing this, of an equivalent document issued by a competent judicial or administrative authority in the home Member State or the Member State from which the foreign national comes showing that these requirements have been met. 2. Where the home Member State or the Member State from which the foreign national concerned comes does not issue the document referred to in paragraph 1, it may be replaced by a declaration on oath—or in States where there is no provision for declaration on oath by a solemn declaration—made by the person concerned before a competent judicial or administrative authority or, where appropriate, a notary in the home Member State or the Member State from which that person comes; such authority or notary shall issue a certificate attesting the authenticity of the declaration on oath or solemn declaration. The declaration in respect of no previous bankruptcy may also be made before a competent professional or trade body in the said country. 3. Documents issued in accordance with paragraphs 1 and 2 must not be produced more than three months after their date of issue. 4. Member States shall designate the authorities and bodies competent to issue the documents referred to in paragraphs 1 and 2 and shall forthwith inform the other Member States and the Commission thereof. Each Member State shall also inform the other Member States and the Commission of the authorities or bodies to which the documents referred to in this Article are to be submitted in support of an application to carry on in the territory of this Member State the activities referred to in Article 2. TITLE VIII FINAL PROVISIONS Article 62

Cooperation between the Member States and the Commission

The Commission and the competent authorities of the Member States shall collaborate closely with a view to facilitating the supervision of the kinds of insurance and the operations referred to in this Directive within the Community. Each Member State shall inform the Commission of any major difficulties to which application of this Directive gives rise, inter alia, any arising if a Member State becomes aware of an abnormal transfer of business referred to in this Directive to the detriment of undertakings established in its territory and to the advantage of agencies and branches located just beyond its borders. The Commission and the competent authorities of the Member States concerned shall examine such difficulties as quickly as possible in order to find an appropriate solution. Where necessary, the Commission shall submit appropriate proposals to the Council.

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Reports on the development of the market under the freedom to provide

The Commission shall forward to the European Parliament and to the Council regular reports, the first on 20 November 1995, on the development of the market in assurance and operations transacted under conditions of freedom to provide services. Article 64

Technical adjustment

The following technical adjustments to be made to this Directive shall be adopted in accordance with the procedure laid down in Article 65(2): — extension of the legal forms provided for in Article 6(1)(a), — amendments to the list set out in Annex I, or adaptation of the terminology used in that list to take account of the development of assurance markets, — clarification of the items constituting the solvency margin listed in Article 27 to take account of the creation of new financial instruments, — alteration of the minimum guarantee fund provided for in Article 29(2) to take account of economic and financial developments, — amendments, to take account of the creation of new financial instruments, to the list of assets acceptable as cover for technical provisions set out in Article 23 and to the rules on the spreading of investments laid down in Article 24, — changes in the relaxations in the matching rules laid down in Annex II, to take account of the development of new currency-hedging instruments or progress made in economic and monetary union, — clarification of the definitions in order to ensure uniform application of this Directive throughout the Community, — the technical adjustments necessary to the rules for setting the maxima applicable to interest rates, pursuant to Article 20, in particular to take account of progress made in economic and monetary union. Article 65

Committee procedure

1. The Commission shall be assisted by the Insurance Committee instituted by Directive 91/675/EEC. 2. Where reference is made to this paragraph, Articles 5 and 7 of Decision 1999/468/EC shall apply, having regard to the provisions of Article 8 thereof. The period laid down in Article 5(6) of Decision 1999/468/EC shall be set at three months. 3. The Committee shall adopt its Rules of Procedure. Article 66

Rights acquired by existing branches and assurance undertakings

1. Branches which started business, in accordance with the provisions in force in the Member State of the branch, before 1 July 1994 shall be presumed to have been subject to the procedure laid down in Article 40(1) to (5). They shall be governed, from that date by Articles 13, 20, 37, 39 and 46. 2. Articles 41 and 42 shall not affect rights acquired by assurance undertakings carrying on business under the freedom to provide services before 1 July 1994. Article 67

Right to apply to the courts

Member States shall ensure that decisions taken in respect of an assurance undertaking under laws, regulations and administrative provisions adopted in accordance with this Directive may be subject to the right to apply to the courts. Article 68

Review of amounts expressed in euro

1. The Commission shall submit to the Council before 15 March 1985 a report dealing with the effects of the financial requirements imposed by this Directive on the situation in the insurance markets of the Member States.

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2. The Council, acting on a proposal from the Commission, shall every two years examine and, where appropriate, revise the amounts expressed in euro in this Directive, in the light of how the Community’s economic and monetary situation has evolved. Article 69

Implementation of new provisions

1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with Article 1(1)(m), Article 18(3), Article 51(2)(g), (3) and (4), Article 60(2) and Article 66(1) not later than 19 June 2004. They shall immediately inform the Commission thereof. 2. Member States shall bring into force the laws, regulations and administrative provisions necessary for them to comply with Article 16(3) not later than 17 November 2002. They shall forthwith inform the Commission thereof. Before this date, Member States shall apply the provision referred to in Annex IV(1). 3. Member States shall adopt by 20 September 2003 the laws, regulations and administrative provisions necessary to comply with Articles 3(6), 27, 28, 29, 30 and 38. They shall forthwith inform the Commission thereof. Member States shall provide that the provisions referred to in the first subparagraph shall first apply to the supervision of accounts for financial years beginning on 1 January 2004 or during that calendar year. Before this date, Member States shall apply the provisions referred to in Annex IV(2) and (3). 4. When Member States adopt the measures mentioned in paragraphs (1), (2) and (3), they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made. 5. Not later than 1 January 2007 the Commission shall submit to the European Parliament and to the Council a report on the application of Articles 3(6), 27, 28, 29, 30 and 38 and, if necessary, on the need for further harmonisation. The report shall indicate how Member States have made use of the possibilities under those articles and, in particular, whether the discretionary powers afforded to the national supervisory authorities have resulted in major supervisory differences in the single market. Article 70

Information to the Commission

The Member States shall communicate to the Commission the texts of the main provisions of national law which they adopt in the field covered by this Directive. Article 71

Transitional period for Articles 3(6), 27, 28, 29, 30 and 38

1. Member States may allow assurance undertakings which at 20 March 2002 provided assurance in their territories in one or more of classes referred to in Annex I, a period of five years, commencing on that same date, in order to comply with the requirements set out in Articles 3(6), 27, 28, 29, 30 and 38. 2. Member States may allow any undertakings referred to in paragraph 1, which upon the expiry of the five-year period have not fully established the required solvency margin, a further period not exceeding two years in which to do so provided that such undertakings have, in accordance with Article 37, submitted for the approval of the competent authorities, the measures which they propose to take for such purpose. Article 72

Repealed directives and their correlation with this Directive

1. The Directives listed in Annex V, part A, are hereby repealed, without prejudice to the obligations of the Member States concerning the time limits for transposition and for application of the said Directives listed in Annex V, part B. 2. References to the repealed Directives shall be construed as references to this Directive and shall be read in accordance with the correlation table in Annex VI.

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Entry into force

This Directive shall enter into force on the day of its publication in the Official Journal of the European Communities.

Article 74

Addressees

This Directive is addressed to the Member States.

ANNEX I Classes of assurance I. The assurance referred to in Article 2(1)(a), (b) and (c) excluding those referred to in II and III II. Marriage assurance, birth assurance III. The assurance referred to in Article 2(1)(a) and (b), which are linked to investment funds IV. Permanent health insurance, referred to in Article 2(1)(d) V. Tontines, referred to in Article 2(2)(a) VI. Capital redemption operations, referred to in Article 2(2)(b) VII. Management of group pension funds, referred to in Article 2(2)(c) and (d) VIII. The operations referred to in Article 2(2)(e) IX. The operations referred to in Article 2(3)

ANNEX II Matching rules The currency in which the assurer’s commitments are payable shall be determined in accordance with the following rules. 1. Where the cover provided by a contract is expressed in terms of a particular currency, the assurer’s commitments are considered to be payable in that currency. 2. Member States may authorise assurance undertakings not to cover their technical provisions, including their mathematical provisions, by matching assets if application of the above procedures would result in the undertaking being obliged, in order to comply with the matching principle, to hold assets in a currency amounting to not more than 7% of the assets existing in other currencies. 3. Member States may choose not to require assurance undertakings to apply the matching principle where commitments are payable in a currency other than the currency of one of the Member States, if investments in that currency are regulated, if the currency is subject to transfer restrictions or if, for similar reasons, it is not suitable for covering technical provisions. 4. Assurance undertakings are authorised not to hold matching assets to cover an amount not exceeding 20% of their commitments in a particular currency. However, total assets in all currencies combined must be at least equal to total commitments in all currencies combined. 5. Each Member State may provide that, whenever under the preceding procedures a commitment has to be covered by assets expressed in the currency of a Member State, this requirement shall also be considered to be satisfied when the assets are expressed in euro.

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Life Insurance ANNEX III Information for policy holders

The following information, which is to be communicated to the policy holder before the contract is concluded (A) or during the term of the contract (B), must be provided in a clear and accurate manner, in writing, in an official language of the Member State of the commitment. However, such information may be in another language if the policy holder so requests and the law of the Member State so permits or the policy holder is free to choose the law applicable. A. Before concluding the contract Information about the assurance undertaking

Information about the commitment

(a)1

The name of the undertaking and its legal form

(a)4

Definition of each benefit and each option

(a)2

The name of the Member State in which the head office and, where appropriate, the agency or branch concluding the contract is situated

(a)5

Term of the contract

(a)3

The address of the head office and, where appropriate, of the agency or branch concluding the contract

(a)6

Means of terminating the contract

(a)7

Means of payment of premiums and duration of payments

(a)8

Means of calculation and distribution of bonuses

(a)9

Indication of surrender and paid-up values and the extent to which they are guaranteed

(a)10

Information on the premiums for each benefit, both main benefits and supplementary benefits, where appropriate

(a)11

For unit-linked policies, definition of the units to which the benefits are linked

(a)12

Indication of the nature of the underlying assets for unit-linked policies

(a)13

Arrangements for application of the cooling-off period

(a)14

General information on the tax arrangements applicable to the type of policy

(a)15

The arrangements for handling complaints concerning contracts by policy holders, lives assured or beneficiaries under contracts including, where appropriate, the existence of a complaints body, without prejudice to the right to take legal proceedings

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A. Before concluding the contract Information about the assurance undertaking

Information about the commitment (a)16

Law applicable to the contract where the parties do not have a free choice or, where the parties are free to choose the law applicable, the law the assurer proposes to choose

B. During the term of the contract In addition to the policy conditions, both general and special, the policy-holder must receive the following information throughout the term of the contract. Information about the assurance undertaking (b)1

Information about the commitment

Any change in the name of the under- (b)2 taking, its legal form or the address of its head office and, where appropriate, of the agency or branch which concluded the contract (b)3

All the information listed in points (a)(4) to (a)(12) of A in the event of a change in the policy conditions or amendment of the law applicable to the contract Every year, information on the state of bonuses

ANNEX IV 1. Professional secrecy Until 17 November 2002, Member States may conclude cooperation agreements, providing for exchanges of information, with the competent authorities of third countries only if the information disclosed is subject to guarantees of professional secrecy at least equivalent to those referred to in Article 16 of this Directive. 2. Activities and bodies excluded from this Directive Until 1 January 2004, this Directive shall not concern mutual associations, where: — the articles of association contain provisions for calling up additional contributions or reducing their benefits or claiming assistance from other persons who have undertaken to provide it, and — the annual contribution income for the activities covered by this Directive does not exceed EUR 500 000 for three consecutive years. If this amount is exceeded for three consecutive years this Directive shall apply with effect from the fourth year. 3. Until 1 January 2004, Member States shall apply the following provisions: A. Solvency margin Each Member State shall require of every assurance undertaking whose head office is situated in its territory an adequate solvency margin in respect of its entire business. The solvency margin shall consist of: 1. the assets of the assurance undertaking free of any foreseeable liabilities, less any intangible items. In particular the following shall be included: — the paid-up share capital or, in the case of a mutual assurance undertaking, the effective initial fund plus any members’ accounts which meet all the following criteria: (a) the memorandum and articles of association must stipulate that payments may be made from these accounts to members only in so far as this does not cause the solvency margin to fall below the required level, or, after the

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— — — —

—

dissolution of the undertaking, if all the undertaking’s other debts have been settled; (b) the memorandum and articles of association must stipulate, with respect to any such payments for reasons other than the individual termination of membership, that the competent authorities must be notified at least one month in advance and can prohibit the payment within that period; (c) the relevant provisions of the memorandum and articles of association may be amended only after the competent authorities have declared that they have no objection to the amendment, without prejudice to the criteria stated in (a) and (b), one half of the unpaid share capital or initial fund, once the paid-up part amounts to 25% of that share capital or fund, reserves (statutory reserves and free reserves) not corresponding to underwriting liabilities, any profits brought forward, cumulative preferential share capital and subordinated loan capital may be included but, if so, only up to 50% of the margin, no more than 25% of which shall consist of subordinated loans with a fixed maturity, or fixed-term cumulative preferential share capital, if the following minimum criteria are met: (a) in the event of the bankruptcy or liquidation of the assurance undertaking, binding agreements must exist under which the subordinated loan capital or preferential share capital ranks after the claims of all other creditors and is not to be repaid until all other debts outstanding at the time have been settled. Subordinated loan capital must also fulfil the following conditions: (b) only fully paid-up funds may be taken into account; (c) for loans with a fixed maturity, the original maturity must be at least five years. No later than one year before the repayment date, the assurance undertaking must submit to the competent authorities for their approval a plan showing how the solvency margin will be kept at or brought to the required level at maturity, unless the extent to which the loan may rank as a component of the solvency margin is gradually reduced during at least the last five years before the repayment date. The competent authorities may authorise the early repayment of such loans provided application is made by the issuing assurance undertaking and its solvency margin will not fall below the required level; (d) loans the maturity of which is not fixed must be repayable only subject to five years’ notice unless the loans are no longer considered as a component of the solvency margin or unless the prior consent of the competent authorities is specifically required for early repayment. In the latter event the assurance undertaking must notify the competent authorities at least six months before the date of the proposed repayment, specifying the actual and required solvency margin both before and after that repayment. The competent authorities shall authorise repayment only if the assurance undertaking’s solvency margin will not fall below the required level; (e) the loan agreement must not include any clause providing that in specified circumstances, other than the winding-up of the assurance undertaking, the debt will become repayable before the agreed repayment dates; (f) the loan agreement may be amended only after the competent authorities have declared that they have no objection to the amendment, securities with no specified maturity date and other instruments that fulfil the following conditions, including cumulative preferential shares other than those mentioned in the fifth indent, up to 50% of the margin for the total of such securities and the subordinated loan capital referred to in the fifth indent: (a) they may not be repaid on the initiative of the bearer or without the prior consent of the competent authority; (b) the contract of issue must enable the assurance undertaking to defer the payment of interest on the loan;

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(c) the lender’s claims on the assurance undertaking must rank entirely after those of all non-subordinated creditors; (d) the documents governing the issue of the securities must provide for the lossabsorption capacity of the debt and unpaid interest, while enabling the assurance undertaking to continue its business; (e) only fully paid-up amounts may be taken into account. 2. in so far as authorised under national law, profit reserves appearing in the balance sheet where they may be used to cover any losses which may arise and where they have not been made available for distribution to policy holders; 3. upon application, with supporting evidence, by the undertaking to the competent authority of the Member State in the territory of which its head office is situated and with the agreement of that authority: (a) an amount equal to 50% of the undertaking’s future profits; the amount of the future profits shall be obtained by multiplying the estimated annual profit by a factor which represents the average period left to run on policies; the factor used may not exceed 10; the estimated annual profit shall be the arithmetical average of the profits made over the last five years in the activities listed in Article 2 of this Directive. The bases for calculating the factor by which the estimated annual profit is to be multiplied and the items comprising the profits made shall be defined by common agreement by the competent authorities of the Member States in collaboration with the Commission. Pending such agreement, those items shall be determined in accordance with the laws of the home Member State. When the competent authorities have defined the concept of profits made, the Commission shall submit proposals for the harmonisation of this concept by means of a Directive on the harmonisation of the annual accounts of insurance undertakings and providing for the coordination set out in Article 1(2) of Directive 78/660/EEC; (b) where Zillmerising is not practised or where, if practised, it is less than the loading for acquisition costs included in the premium, the difference between a non-Zillmerised or partially Zillmerised mathematical provision and a mathematical provision Zillmerised at a rate equal to the loading for acquisition costs included in the premium; this figure may not, however, exceed 3,5% of the sum of the differences between the relevant capital sums of life assurance activities and the mathematical provisions for all policies for which Zillmerising is possible; the difference shall be reduced by the amount of any undepreciated acquisition costs entered as an asset; (c) where approval is given by the competent authorities of the Member States concerned in which the assurance undertaking is carrying on its activities any hidden reserves resulting from the underestimation of assets and overestimation of liabilities other than mathematical provisions in so far as such hidden reserves are not of an exceptional nature. B. Minimum solvency margin Subject to section C, the minimum solvency margin shall be determined as shown below according to the classes of assurance underwritten. (a) For the kinds of assurance referred to in Article 2(1)(a) and (b) of this Directive other than assurance linked to investment funds and for the operations referred to in Article 2(3) of this Directive, it must be equal to the sum of the following two results: — first result: a 4% fraction of the mathematical provisions relating to direct business gross of reinsurance cessions and to reinsurance acceptances shall be multiplied by the ratio, for the last financial year, of the total mathematical provisions net of reinsurance cessions to the gross total mathematical provisions as specified above; that ratio may in no case be less than 85%, — second result: for policies on which the capital at risk is not a negative figure, a 0,3% fraction of such capital underwritten by the assurance undertaking shall be multiplied

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3.29

Life Insurance by the ratio, for the last financial year, of the total capital at risk retained as the undertaking’s liability after reinsurance cessions and retrocessions to the total capital at risk gross of reinsurance; that ratio may in no case be less than 50%. For temporary assurance on death of a maximum term of three years the above fraction shall be 0,1%; for such assurance of a term of more than three years but not more than five years the above fraction shall be 0,15%. (b) For the supplementary insurance referred to in Article 2(1)(c) of this Directive, it shall be equal to the result of the following calculation: — the premiums or contributions (inclusive of charges ancillary to premiums or contributions) due in respect of direct business in the last financial year in respect of all financial years shall be aggregated, — to this aggregate there shall be added the amount of premiums accepted for all reinsurance in the last financial year, — from this sum shall then be deducted the total amount of premiums or contributions cancelled in the last financial year as well as the total amount of taxes and levies pertaining to the premiums or contributions entering into the aggregate. The amount so obtained shall be divided into two portions, the first extending up to EUR 10 million and the second comprising the excess; 18% and 16% of these portions respectively shall be calculated and added together. The result shall be obtained by multiplying the sum so calculated by the ratio existing in respect of the last financial year between the amount of claims remaining to be borne by the assurance undertaking after deduction of transfers for reinsurance and the gross amount of claims; this ratio may in no case be less than 50%. In the case of the association of underwriters known as Lloyd’s, the calculation of the solvency margin shall be made on the basis of net premiums, which shall be multiplied by flat-rate percentage fixed annually by the competent authority of the head office Member State. This flat-rate percentage must be calculated on the basis of the most recent statistical data on commissions paid. The details together with the relevant calculations shall be sent to the competent authorities of the countries in whose territory Lloyd’s is established. (c) For permanent health insurance not subject to cancellation referred to in Article 2(1)(d) of this Directive, and for capital redemption operations referred to in Article 2(2)(b) thereof, it shall be equal to a 4% fraction of the mathematical provisions calculated in compliance with the conditions set out in the first result in (a) of this section. (d) For tontines, referred to in Article 2(2)(a) of this Directive, it shall be equal to 1% of their assets. (e) For assurance covered by Article 2(1)(a) and (b) of this Directive linked to investment funds and for the operations referred to in Article 2(2)(c), (d) and (e) of this Directive it shall be equal to: — a 4% fraction of the mathematical provisions, calculated in compliance with the conditions set out in the first result in (a) of this section in so far as the assurance undertaking bears an investment risk, and a 1% fraction of the provisions calculated in the same way, in so far as the undertaking bears no investment risk provided that the term of the contract exceeds five years and the allocation to cover management expenses set out in the contract is fixed for a period exceeding five years, plus — a 0,3% fraction of the capital at risk calculated in compliance with the conditions set out in the first subparagraph of the second result of (a) of this section in so far as the assurance undertaking covers a death risk. C. Guarantee fund 1. One third of the required solvency margin as specified in section B shall constitute the guarantee fund. Subject to paragraph 2 of this section, at least 50% of this fund shall consist of the items listed in section A(1) and (2). 2. (a) The guarantee fund may not, however, be less than a minimum of EUR 800 000.

688

3.29

Consolidated Life Insurance Directive

(b) Any Member State may provide for the minimum of the guarantee fund to be reduced to EUR 600 000 in the case of mutual associations and mutual-type associations and tontines. (c) For mutual associations referred to in the second sentence of the second indent of Article 3(6) of this Directive, as soon as they come within the scope of this Directive, and for tontines, any Member State may permit the establishment of a minimum of the guarantee fund of EUR 100 000 to be increased progressively to the amount fixed in (b) of this section by successive tranches of EUR 100 000 whenever the contributions increase by EUR 500 000. (d) The minimum of the guarantee fund referred to in (a), (b) and (c) of this section must consist of the items listed in section A(1) and (2). 3. Mutual associations wishing to extend their business within the meaning of Article 6(4) or Article 40 of this Directive may not do so unless they comply immediately with the requirements of paragraph 2(a) and (b) of this section. ANNEX V PART A Repealed Directives together with their successive amendments (referred to in Article 72) Council Directive 79/267/EEC Council Directive 90/619/EEC Council Directive 92/96/EEC Directive 95/26/EEC of the European Parliament and of the Council (only Article 1, second indent, Article 2(2), fourth indent, and Article 3(1) as regards the references made to Directive 79/267/EEC) Directive 2002/12/EC of the European Parliament and of the Council Second Council Directive 90/619/EEC Third Council Directive 92/96/EEC Third Council Directive 92/96/EEC Directive 95/26/EEC of the European Parliament and of the Council (only Article 1, second indent, Article 2(1), third indent, Article 4(1), (3), (5) and Article 5, third indent, as regards the references made to Directive 92/96/EEC). Directive 2000/64/EC of the European Parliament and of the Council (Article 2, as regards the references made to Directive 92/96/EEC) Directive 2002/12/EC of the European Parliament and of the Council (Article 2) PART B Deadlines for implementation (Referred to in Article 72) Directive

Time limits for transposition

Time limits for application

79/267/EEC (OJ L 63, 13.3.1979, p. 1)

15 September 1980

15 September 1981

90/619/EEC (OJ L 330, 29.11.1990, p. 50)

20 November 1992

20 May 1993

92/96/EEC (OJ L 360, 9.12.1992, p. 1)

31 December 1993

1 July 1994

95/26/EC (OJ L 168, 18.7.1995, p. 7)

18 July 1996

18 July 1996

2000/64/EC (OJ L 290, 17.11.2000, p. 27)

17 November 2002

17 November 2002

2002/12/EC (OJ L 77, 20.3.2002, p. 11)

20 September 2003

1 January 2004

689

3.29

Life Insurance ANNEX VI Correlation table

This Directive

Directive 79/267/EEC

Directive 90/619/EEC

Article 1(1)(a)

Directive 92/96/EEC

Directive 95/26/EC

Other Acts

Article 1(a)

Article 1(1)(b)

Article 3

Article 1(1)(c)

Article 2(c)

Article 1(b)

Article 1(1)(d)

Article 1(c)

Article 1(1)(e)

Article 1(d)

Article 1(1)(f)

Article 1(e)

Article 1(1)(g)

Article 2(e)

Article 1(1)(h) to (1)

Article 1(f) to (j)

Article 1(1)(m)

New

Article 1(1)(n)

Article 1(1)

Article 1(1)(o), Article 5(b), (p), (q) (c) and (d) Article 1(1)(r)

Article 2(1)

Article 1(2)

Article 5(a), second sentence

Article 2

Article 1

Article 3(1) to (4)

Article 2

Article 3(5) and (6)

Article 3

Article 3(7)

Article 4

Article 3(8)

Act of Accession of Austria, Finland and Sweden, adapted by Decision 95/1/EC, Euratom, ECSC

Article 4

Article 6

Article 5

Article 7

Article 6(1)

Article 8(1)

Article 6(2)

Article 8(1) last three subparagraphs

Article 6(3)

Article 8(1)a

690

3.29

Consolidated Life Insurance Directive This Directive

Directive 79/267/EEC

Article 6(4)

Article 8(2)

Article 6(5)

Article 8(3)

Article 6(6)

Article 8(4)

Article 7

Article 9

Article 8

Directive 90/619/EEC

Directive 92/96/EEC

Other Acts

Article 7

Article 9

Article 12

Article 10

Article 15

Article 11

Article 16

Article 12

Article 22(1)

Article 13

Article 23

Article 14(1) to (5)

Article 11(2) to (6)

Article 15

Article 14

Article 16(1) to (5)

Article 15(1) to (5)

Article 16(6)

Article 15(5)(a)

Article 16(7)

Article 15(5)(b)

Article 16(8)

Article 15(5)(c)

Article 16(9)

Article 15(6)

Article 17

Article 15(a)

Article 18(1) and (2)

Directive 95/26/EC

Article 13(1) and (2)

Article 18(3)

New

Article 18(4) to Article 13(3) to (7) (7) Article 19

Article 14

Article 20

Article 17

Article 21

Article 19

Article 22

Article 20

Article 23(1)

Article 21(1) first subparagraph

Article 23(2)

Article 21(1) second subparagraph

Article 23(3) first subparagraph

Article 21(1) third subparagraph

691

3.29 This Directive

Life Insurance Directive 79/267/EEC

Directive 90/619/EEC

Directive 92/96/EEC

Article 23(3) second subparagraph

Article 21(1) fourth subparagraph

Article 23(4)

Article 21(2)

Article 24

Article 22

Article 25

Article 23

Article 26

Article 24

Article 27

Article 18

Article 28

Article 19

Article 29

Article 20

Article 30

Article 20a

Article 31

Article 21

Article 32

Article 4

Article 33

Article 28

Article 34

Article 29

Article 35

Article 15

Article 36

Article 31

Article 37

Article 24

Article 38

Article 24a

Article 39

Article 26

Article 40

Article 10

Article 41

Article 11

Article 42

Article 14

Article 43

Article 17

Article 44

Article 38

Article 45

Article 39(2)

Article 46(1) to (9)

Article 40(2) to (10)

Article 47

Article 41

Article 48

Article 42(2)

Article 49

Article 43(2)

Article 50(1)

Article 44(2) first subparagraph

Article 50(2)

Article 44(2) second subparagraph

692

Directive 95/26/EC

Other Acts

3.29

Consolidated Life Insurance Directive This Directive

Directive 79/267/EEC

Directive 90/619/EEC

Article 50(3)

Directive 92/96/EEC

Directive 95/26/EC

Other Acts

Article 44(2) third subparagraph

Article 51(1) to Article 27(1) to (2)(f) (2)(f) Article 51(2)(g)

New

Article 51(3) and (4)

New

Article 52

Article 31

Article 53

Article 31a

Article 54

Article 28

Article 55

Article 29

Article 56

Article 30

Article 57

Article 32

Article 58

Article 32a

Article 59(1)

Article 32b(1)

Article 59(2)

Article 32b(2)

Article 59(3)

Article 32b(3)

Article 59(4)

Article 32b(4)

Article 59(5)

Article 32b(5)

Article 59(6)

Article 32b(7)

Article 60(1)

Article 33(4)

Article 60(2) Article 61

New Article 37

Article 62, first Article 38 subparagraph

Article 28, first subparagraph

Article 62, second to fourth subparagraphs

Article 28, second to fourth subparagraphs

Article 63

Article 29

Article 64

Article 47

Article 65

Article 47

Article 66(1), first subparagraph Article 66(1), second subparagraph

New

Article 48(1)

693

3.29 This Directive

Life Insurance Directive 79/267/EEC

Directive 90/619/EEC

Article 66(2)

Directive 92/96/EEC

Directive 95/26/EC

Other Acts

Article 48(2)

Article 67

Article 50

Article 68(1)

Article 39(1)

Article 68(2)

Article 39(3)

Article 69(1)

New

Article 69(2)

Directive 2000/64/EC, Article 3(1), first subparagraph

Article 69(3)

Directive 2000/12/EC, Article 3(1), first subparagraph, and Directive 2000/64/EC, Article 3(2)

Article 69(4)

Directive 2000/64/EC, Article 3(1), second subparagraph and Directive 2002/12/EC, Article 3(1), second subparagraph

Article 69(5)

Directive 2002/12/EC, Article 3(4)

Article 70

Article 41

Article 31

Article 51(2)

Article 71

Directive 2002/12/EC, Article 2

Article 72 Article 73 Article 74 Annex I

Article 6(2) Directive 2000/64/EC, Article 3(2), and Directive 2002/12/EC, Article 3(3)

Annex

Annex II

Annex I

Annex III

Annex II

Annex IV Annex V Annex VI

694

CHAPTER 4

PROPERTY

4.1 Property insurance is primarily a matter for the contract between the parties, with statute playing a minor role. Those statutes which do exist, in part remedy defects in the common law, and facilitate insurance which otherwise would not have been available from the market. The existing legislation may be categorised under four headings. INSURABLE INTEREST

4.2 The insurable interest requirement for property insurance has historically been a combination of two principles: a prohibition on gambling; and the rule that property insurance is a contract of indemnity. The prohibition on gambling was contained in s 18 of the Gaming Act 1845 and meant, when translated to the insurance context, that a policy was void for wagering unless on the date of its making the assured either possessed or had a reasonable prospect of obtaining insurable interest. The section was repealed with effect from 1 September 2007 by the Gambling Act 2005 and replaced by a new provision, s 335 of the Gambling Act 2005 which validates gambling contracts. As a result, the requirement for insurable interest on inception disappeared. The indemnity principle means that if, at the date of the loss, the assured no longer has, or has failed to acquire, an insurable interest, he cannot recover anything at all; equally, he is confined to recovering for his actual loss, which means that even where the assured has an insurable interest he will not necessarily be able to recover up to the full limits of the policy if his interest is in fact for a lesser amount. The Marine Insurance Act 1788, which in its original form applied to all goods policies, supplemented the insurable interest requirement by insisting that the names of all interested parties were inserted in the policy, thereby preventing a third party without interest from claiming to be the beneficiary of the insurance. The Act ceased to apply to marine policies by virtue of the Marine Insurance Act 1906, but continues to apply to goods policies. Its requirements are, however, minimal, and in particular it is satisfied if the name of the broker or other agent is inserted in the policy. R I G H T S O F T H I R D PA RT I E S

4.3 At common law a third party cannot claim under a contract to which he is not a party, in the absence of voluntary assignment or agency. The privity rule was abolished by the Contracts (Rights of Third Parties) Act 1999, and although this extends to insurance contracts the practice of the market is to exclude its operation. There are various statutory exceptions to the common law privity principle in the field of insurance, (eg, under the Road Traffic Act 1988 or the Third Parties (Rights against Insurers) Act 1930, reproduced in this work at paras 7.20 and 6.20 respectively). Modified rights under policies on buildings are given to third parties by two statutes, 695

Property the Fires Prevention (Metropolis) Act 1774, s 83, and the Landlord and Tenant Act 1985. The 1774 Act allows a person interested in a building, but who is not a party to the insurance, to give notice to the insurer following damage to the building by fire but before the insurance money has been paid to the assured. The notice may require the insurer not to pay the assured but to use the insurance moneys to reinstate the building. By this means, for example, a tenant may require his landlord’s insurers to reinstate the building rather than to pay the landlord. The 1774 Act is, however, only effective if there has been a claim against the insurer, as the third party is given no right to make a claim of his own. This rule is modified in the particular case of leases, by the Landlord and Tenant Act 1985 (as amended). Under the Act, once there has been a loss, the tenant may give notice to the insurer, the effect of which is to suspend for six months the insurer’s right to deny liability on the basis that the landlord has not made a claim within the specified contract period. Within the six-month period given to the tenant, proceedings can be brought against the landlord to ensure that a claim is made. The 1985 Act confers a variety of other rights on the tenant, eg, to view the policy and to ensure that premiums have been paid by the landlord. 4.4 Miscellaneous other rights are conferred upon third parties by the Law of Property Act 1925. Section 47 is an attempt to mitigate the equitable principle that the purchaser of land is on risk as soon as contracts have been exchanged, so that he has to insure the property as from that date. The purpose of s 47 is to allow the purchaser to obtain the benefit of the vendor’s own insurance. It would seem, however, that s 47 is ineffective as it fails to take into account the subrogation rights of the insurer to claim the purchase price from the third party in the event that the insurer has to make payment under the policy. Section 101 authorises the mortgagee to insure the mortgaged property and to charge the premiums to the loan, and s 108 is concerned with the application of the policy moneys where the mortgagee has insured in his own name. R E C O V E RY F O R R I O T D A M A G E

4.5 The Riot (Damages) Act 1886, as amended by the Public Order Act 1986, imposes liability for damage caused by riot on the local police authority on the basis that that is where responsibility for preventing riots lies. The owners of damaged buildings may, therefore, recover their losses against that authority. Where the householder or other victim is insured against riot damage, the real effect of the 1886 Act is to confer upon the insurer a statutory right of subrogation against the police authority. I N S U R A N C E I N T I M E O F WA R

4.6 In time of war it may not be possible for property owners to obtain insurance either at all or on acceptable terms. This problem is overcome in the case of vessels, aircraft and cargo by the Marine and Aviation (War Risks) Act 1952 (see para 5.22) under which the state acts as insurer of last resort. This principle was extended to cover terrorist damage to commercial buildings by the Reinsurance (Acts of Terrorism) Act 1993, which was passed to overcome the withdrawal of reinsurers from commercial buildings insurance following a major bomb explosion in the City of London in 1992. Under the 1993 Act, an insurer willing to offer primary cover has guaranteed reinsurance available to it by Pool Re, established under the 1993 Act as insurer of last resort. The Restriction of Advertisement (War Risks Insurance) Act 1939 prevents the advertisement of war risks insurance without government authority. 696

Fires Prevention (Metropolis) Act 1774

4.20

4.20 FIRES PREVENTION (METROPOLIS) ACT 1774 (14 Geo 3 c 78) An Act . . . for the more effectually preventing Mischiefs by Fire within the Cities of London and Westminster and the Liberties thereof, and other the Parishes, Precincts, and Places within the Weekly Bills of Mortality, the Parishes of Saint Mary-le-bon, Paddington, Saint Pancras and Saint Luke at Chelsea, in the County of Middlesex . . . General Note The whole Act, other than ss 83 and 86, was repealed by the Metropolitan Fire Brigade Act 1865, s 34. Section 83, reproduced below, is concerned with the reinstatement of buildings destroyed or damaged by fire. Section 86, not reproduced in this work, confers immunity from legal suit (other than under contract) upon a person on whose premises a fire accidentally begins.

Money insured on houses burnt how to be applied 83. And in order to deter and hinder ill-minded persons from wilfully setting their house or houses or other buildings on fire with a view of gaining to themselves the insurance money, whereby the lives and fortunes of many families may be lost or endangered: Be it further enacted by the authority aforesaid, that it shall and may be lawful to and for the respective governors or directors of the several insurance offices for insuring houses or other buildings against loss by fire, and they are hereby authorised and required, upon the request of any person or persons interested in or entitled unto any house or houses or other buildings which may hereafter be burnt down, demolished or damaged by fire, or upon any grounds of suspicion that the owner or owners, occupier or occupiers, or other person or persons who shall have insured such house or houses or other buildings have been guilty of fraud, or of wilfully setting their house or houses or other buildings on fire, to cause the insurance money to be laid out and expended, as far as the same will go, towards rebuilding, reinstating or repairing such house or houses or other buildings so burnt down, demolished or damaged by fire, unless the party or parties claiming such insurance money shall, within sixty days next after his, her or their claim is adjusted, give a sufficient security to the governors or directors of the insurance office where such house or houses or other buildings are insured, that the same insurance money shall be laid out and expended as aforesaid, or unless the said insurance money shall be in that time settled and disposed of to and amongst all the contending parties, to the satisfaction and approbation of such governors or directors of such insurance office respectively. Notes The purpose of s 83, as is noted in the preamble to s 83, was to prevent the deliberate setting of fires for the insurance money. The particular abuse against which it was aimed was insurance of premises for their full value by a weekly or short-term tenant, as in such a case the tenant had no particular interest in the continuing existence of the premises. By providing that the premises could be reinstated as opposed to payment of the insurance moneys to the assured, incentives to arson were minimised. ‘‘Reinstatement at the insurer’s option’’: Section 83 allows the insurer, on suspicion of fraudulent arson by the assured, to cause the insurance moneys to be laid out by way of reinstatement. If fraud is proved, no moneys are payable in any event: the section is concerned merely with suspicion of fraud, and in the absence of authority it must be assumed that the suspicion must be based on reasonable grounds. ‘‘Reinstatement at the request of a third party’’: Section 83 allows any person who is ‘‘interested in or entitled unto’’ any house or building to require the insurer not to pay the proceeds to the assured, but to use the insurance moneys to reinstate the premises. On receiving notice, the insurer may either reinstate itself, or pay the proceeds to the assured subject to securities as to reinstatement by the assured. Notice may be given only before the insurance moneys have been paid over to the assured: following payment, it is too late for s 83 to be used. Equally, if no claim has been made by the assured, an interested third party cannot require reinstatement by notice, as the section presupposes the making of a valid claim (although see on this point the Landlord and Tenant Act 1985, para 4.26). Persons interested and entitled to give notice include: mortgagor and mortgagee (Sinnott v. Bowden [1912] 2 Ch 414); landlord and tenant (Vernon v. Smith (1821) 5 B & Ald 1; Wimbledon Park Golf Club v. Imperial Insurance Co (1902) 18 TLR 815; Sun Insurance Office v. Galinsky [1914] 2 KB 545); and remaindermen (Poltimore v. Quicke [1908] 1 Ch 887). The assured himself may not give notice in a case

697

4.20

Property

where the insurer has refused to make payment under the policy, so that the Act cannot be used to force an insurer to expend money when it has otherwise refused to pay (Reynolds v. Phoenix Assurance Co [1978] 2 Lloyd’s Rep 44), although this restriction does not operate where separate interests have been insured under a single composite policy and the insurer is refusing to pay one of the composite assureds. A person who has entered into a binding agreement to purchase the property may give notice, but the insurer will subsequently have a subrogation action against the purchaser when the purchase price becomes payable, so that such notice probably serves little purpose. Scope of section 83. The following points on the scope of s 83 may be noted. (a) The insurer’s obligation is to reinstate to the extent of the policy moneys. This should be contrasted with a contractual obligation on the insurer to reinstate, as in such a case it is the insurer’s obligation to reinstate to an equivalent state, irrespective of whether the costs of so doing exceed the actual amount payable under the policy. (b) Despite being confined by its short title to the metropolis, it is settled that the Act extends to England and Wales (Sinnott v. Bowden [1912] 2 Ch 414) but not to Scotland (Westminster Fire Office v. Glasgow Provident Investment Society (1888) 13 App Cas 699) or Ireland (Andrews v. Patriotic Assurance Co (1868) 18 LR Ir 355). (c) The Act applies to buildings, but not to their contents, including fixtures (Ex parte Gorely (1864) 4 De G J & Sm 477; Re Quicke’s Trusts [1908] 1 Ch 887). (d) Lloyd’s underwriters are outside the Act, as it applies only to insurance companies (Portavon Cinema Co Ltd v. Price [1939] 4 All ER 601). (e) If the insurer refuses to reinstate, it is unclear whether a mandatory injunction is available against the insurer, requiring reinstatement (Simpson v. Scottish Union Insurance Co (1863) 1 H & M 618) or whether the sole remedy is an injunction preventing the insurer from making payment to the assured (Wimbledon Park Golf Club Ltd v. Imperial Insurance Co Ltd (1902) 18 TLR 815).

4.21 MARINE INSURANCE ACT 1788 (28 Geo 3 c 56)

General Note The Life Assurance Act 1774, para 3.20, requires the names of all persons interested in an insurance, other than one on ships, goods and merchandises, to be inserted into the policy. The purpose of that provision was to prevent a person with insurable interest procuring a life policy with the intention of benefitting a third party without insurable interest, in contravention of the rules requiring insurable interest. The Marine Insurance Act 1788, despite the short title conferred upon it by the Short Titles Act 1896, applied the same rule to ships, goods and merchandises policies excluded from the 1774 Act whether or not they were marine. The Marine Insurance Act 1906, s 92 and Sched 2, repealed the 1788 Act insofar as it applied to marine insurances (for the insurable interest rules under the 1906 Act, see s 5 in para 5.20), but left it in place as regards non-marine policies on goods and merchandises. The curious result is that the Marine Insurance Act 1788 applies only to non-marine policies on goods. The wording of the 1788 Act makes it inapplicable to real property and liability policies.

1. By this Act : ‘‘it shall not be lawful for any person or persons to make or effect, or cause to be made or effected, any policy or policies of assurance upon any ship or ships, vessel or vessels, or upon any goods, merchandizes effects, or other property whatsoever, without first inserting, or causing to be inserted, in such policy or policies of assurance, the name or names, or the usual stile and firm of dealing of one or more of the persons interested in such assurance; or without, instead thereof, first inserting, or causing to be inserted in such policy or policies of assurance, the name or names or the usual stile and firm of dealing of the consignor or consignors, consignee or consignees of the goods, merchandizes, effects, or property so to be insured; or the name or names, or the usual stile and firm of dealing of the person or persons residing in Great Britain, who shall receive the order for and effect such policy or policies of assurance, or of the person or persons who shall give the order or direction to the agent or agents immediately employed to negotiate or effect such policy or policies of assurance. Notes The requirements of the 1788 Act are satisfied by the insertion in the policy of the name of the broker responsible for negotiating the policy. Consequently it became, and in the marine market remains, the

698

Riot (Damages) Act 1886

4.22

practice for the broker to be identified on the policy, thereby rendering the 1788 Act devoid of any practical effect.

2. And be it further enacted by the authority aforesaid, that every policy and policies of assurance, made or underwrote contrary to the true intent and meaning of this Act, shall be null and void to all intents and purposes whatsoever.’’ Notes The 1774 Act, unlike the 1788 Act, provides that a policy made in breach of the formal requirements of s 1 of the 1788 Act is illegal and not merely void. However, by analogy with decisions under s 1 of the 1774 Act (see para 3.20), it is arguable that the combined effect of the opening words of s 1 and s 2 of the 1788 Act is to render infringing policies illegal.

4.22 RIOT (DAMAGES) ACT 1886 (49 & 50 Vict c 38) General Note The Riot (Damages) Act 1886, which has a pedigree of some antiquity, casts upon local police or local authority funds liability for property damage caused by riot, on the basis that control of riots is a local matter. The significance of this for insurance law is that a property insurer who has paid for property damage resulting from riot is subrogated to the rights of the assured as against the police fund. The insurer’s right of subrogation in this situation is statutory in England, under s 2(2) of the 1886 Act. In some jurisdictions of the US, by contrast, subrogation has been refused, on the principle that, as the compensation fund is raised by means of local taxation, allowing the insurer to be subrogated against the fund simply raises local taxation to the ultimate detriment of the assured himself. It has also been argued successfully in the US that, as the compensation fund’s liability is strict (indeed, absolute) rather than based on any form of fault, it would be improper to allow subrogation against an innocent third party who happens to be liable by virtue of legislation. The terms ‘‘riotous’’ and ‘‘riotously’’ as used in this Act are by virtue of s 10(c) of the Public Order Act 1986, to be construed in accordance with the definition of riot in s 1 of the Public Order Act 1986. For the text of s 1, see para 5.23.

Short title 1. This Act may be cited for all purposes as the Riot (Damages) Act 1886. Compensation to persons for damage by riot 2.—(1) Where a house, shop, or building in any police district has been injured or destroyed, or the property therein has been injured, stolen, or destroyed, by any persons riotously and tumultuously assembled together, such compensation as herein-after mentioned shall be paid out of the police fund of [the area] to any person who has sustained loss by such injury, stealing, or destruction; but in fixing the amount of such compensation regard shall be had to the conduct of the said person, whether as respects the precautions taken by him or as respects his being a party or accessory to such riotous or tumultuous assembly, or as regards any provocation offered to the persons assembled or otherwise. (2) Where any person having sustained such loss as aforesaid has received, by way of insurance or otherwise, any sum to recoup him, in whole or in part, for such loss, the compensation otherwise payable to him under this Act shall, if exceeding such sum, be reduced by the amount thereof, and in any other case shall not be paid to him, and the payer of such sum shall be entitled to compensation under this Act in respect of the sum so paid in like manner as if he had sustained the said loss, and any policy of insurance given by such payer shall continue in force as if he had made no such payment, and where such person was recouped as aforesaid otherwise than by payment of a sum, this enactment shall apply as if the value of such recoupment were a sum paid.

699

4.22

Property

Notes Subs (1) was amended by the Police Act 1964, s 63 and Sched 9 and by the Police Act 1996, sched 7, para 9. The key phrase is ‘‘riotously and tumultuously assembled’’. The term ‘‘riot’’ has been considered in numerous cases, the principles of which were reduced to five propositions by Field v. Metropolitan Police Receiver [1907] 2 KB 853. The common law crime of riot was abolished and replaced by s 9 the Public Order Act 1986 (see para 5.23), which altered the common law definition in one significant respect. The elements of riot at common law as substituted by the 1986 Act are as follows: (1) there must be at least 12 persons involved (the common law required only three, with the curious result that an armed robbery could be a riot and thus excluded from theft and burglary policy by a war risks exclusion clause referring to riot—London and Lancashire Fire Insurance Co v. Bolands [1924] AC 836); (2) the participants must have a common purpose (earlier held in London and Manchester Plate Glass Co v. Heath [1913] 1 KB 411 to mean that the conduct of the participants must be co-ordinated and executed at the same place and at the same time); (3) the common purpose must have been incepted or executed; (4) the participants must intend to help one another, by force if necessary, against any person who might oppose them (although it is not enough if force or violence is used only to allow the participants to make good their escape—Athens Maritime Enterprises Corporation v. Hellenic Mutual War Risks Association (Bermuda) Ltd, ‘‘The Andreas Lemos’’ [1983] 1 All ER 591); (5) there must be used a degree of force or violence sufficient to alarm at least one person of reasonable fitness and courage. The right to indemnification may be lost or reduced where the claimant himself is culpable: such a case was Gunter v. Metropolitan Police District Receiver (1888) 5 TLR 88, where the claimant precipitated a riot amongst a large crowd by failing to offer any explanation for the cancellation of a race meeting. Subs (2) By providing that the sum recoverable from the police fund is without prejudice to insurance recoveries, a right of subrogation is conferred upon the insurer of riot-damaged property, providing that the other requirements of subrogation are met. See generally the note to s 79 of the Marine Insurance Act 1906.

Mode of awarding compensation 3.—(1) Claims for compensation under this Act shall be made to the [compensation authority] of the district in which the injury, stealing, or destruction took place, and such [compensation authority] shall inquire into the truth thereof, and shall, if satisfied, fix such compensation as appears to them just. (2) A Secretary of State may from time to time make, and when made, revoke and vary regulations respecting the time, manner, and conditions within, in, and under which claims for compensation under this Act are to be made, and all claims not made in accordance with such regulations may be excluded. Such regulations may also provide for the particulars to be stated in any claim, and for the verification of any claim, and of any facts incidental thereto, by statutory declarations, production of books, vouchers, and documents, entry of premises, and otherwise, and may also provide for any matter which under this Act can be prescribed, and for the compensation authority obtaining information and assistance for determining the said claims. (3) The said regulations shall be published in the London Gazette, and every compensation authority shall cause the same to be published in their [police area], and copies thereof to be at all times sold to any applicant at a price not exceeding 2p for each copy. Notes Subs (1) was amended by the Police Act 1964, s 63 and Sched 9. Subs (2) was amended by the Police Act 1964, s 63 and Sched 9. The regulations here referred to are the Riot Damages Regulations 1921, SR & O 1921 No 1536, as amended by the Riot Damages (Amendment) Regulations 1986, SI 1986 No 76 (not reproduced in this work). Subs (3) was amended by the Police Act 1964, s 63 and Sched 9, the Decimal Currency Act 1969, s 10(1) and the Police Act 1996, sched 7, para 10.

Right of action to person aggrieved 4.—(1) Where a claim to compensation has been made in accordance with the regulations, and the claimant is aggrieved by the refusal or failure of the [compensation authority] to fix compensation upon such claim, or by the amount of compensation fixed, he may bring an

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Riot (Damages) Act 1886

4.22

action against the [compensation authority] to recover compensation in respect of all or any of the matters mentioned in such claim and to an amount not exceeding that mentioned therein, but if in such action he fails to recover any compensation or an amount exceeding that fixed by the compensation authority, he shall pay the costs of the compensation authority as between solicitor and client. (2) . . . Notes Subs (1) was amended by the Police Act 1964, s 63 and Sched 9. There is a refusal to pay compensation by the compensation authority where consideration of the claim is deferred, pending the furnishing of proofs of loss (Ford v. Metropolitan Police District Receiver [1921] 2 KB 344). The rule here follows the principles of payment into court and sealed offers in arbitrations. Subs (2) was repealed by the Statute Law (Reform) Act 1993.

Payment of compensation and expenses, and raising of money 5.—(1) Where any compensation under this Act has been fixed by or recovered in an action against the compensation authority, that authority shall, on the prescribed conditions having been complied with, pay in the prescribed manner the amount of such compensation out of [the police fund, and shall also pay out of the said fund] all costs and expenses payable by them in or incidental to the execution of this Act; . . . (2)–(4) . . . Notes Subs (1) was amended by the Police Act 1964, s 63 and Sched 9. Subs (2)–(4) were repealed by the Police Act 1964, s 64 and Sched 10.

Application of Act to wreck and machinery 6. This Act shall apply— (a) . . . (b) in the case of the injury or destruction, by persons riotously and tumultuously assembled together, of any machinery, whether fixed or movable, prepared for or employed in any manufacture, or agriculture, or any branch thereof, or of any erection or fixture about or belonging to such machinery, or of any steam engine or other engine for sinking, draining, or working any mine or quarry, or of any staith or erection used in conducting the business of any mine or quarry, or of any bridge, waggon-way, or trunk for conveying minerals or other products from any mine or quarry; in like manner as if such . . . injury or destruction were an injury, stealing, or destruction in respect of which compensation is payable under the foregoing provisions of this Act . . . . Notes Subs (1) was amended by the Merchant Shipping Act 1894, s 745 and Sched 22, removing references to vessels.

As to claimants in the case of churches, public institutions, etc 7. For the purposes of this Act— (a) where a church or chapel has been injured or destroyed, or any property therein has been injured, stolen, or destroyed, the churchwardens or chapelwardens, if any, or, if there are none, the persons having the management of such church or chapel, or the persons in whom the legal estate in the same is vested; and (b) where a school, hospital, public institution, or public building, has been injured or destroyed, or any property therein has been injured, stolen, or destroyed, the persons having the control of such school, hospital, institution, or building, or the persons in whom the legal estate in the same is vested; shall be deemed to be the persons who have sustained loss from such injury, stealing, or destruction, and claims may be made by any one or more of such persons in relation both to

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Property

the building and to the property therein, and payment to any such claimant shall discharge the liability of the compensation authority to pay compensation, but shall be without prejudice to the right of any person to recover the compensation from such payee. Notes This section was amended by the Police Act 1964, s 63 and Sched 9.

Section 8 [Repealed by the Police Act 1964, s 64 and Sched 10.] Definitions 9. In this Act, unless the context otherwise requires— The expression ‘‘person’’ includes a body of persons, corporate or unincorporate: The expression ‘‘police area’’ and the expression ‘‘police fund’’ have the same meaning as in the Police Act 1996 and the expression ‘‘compensation authority’’ means— ... (c) in relation to any police area, the police authority: The expression ‘‘house, shop, or building’’ includes any premises appurtenant to the same: Notes This section was amended by the Statute Law Reform Act 1898, the Police Act 1964, s 63 and Sched 9, the Local Government Act 1972, s 272 and Sched 30, the Statute Law (Reform) Act 1993 and the Greater London Authority Act 1999, sched 34, para 1.

Section 10 [Repealed by the Statute Law Reform Act 1898 and the Statute Law (Reform) Act 1993.] Extent 11. This Act shall not extend to Scotland or Ireland. Schedule 1 [Repealed by the Police Act 1964, s 64 and Sched 10.] Schedule 2 [Repealed by the Statute Law Reform Act 1898.]

4.23 LAW OF PROPERTY ACT 1925 (15 Geo 5 c 20) General Note Only a small number of sections of the Law of Property Act 1925 relate directly to insurance. These are reproduced below.

Application of insurance money on completion of a sale or exchange 47.—(1) Where after the date of any contract for sale or exchange of property, money becomes payable under any policy of insurance maintained by the vendor in respect of any damage to or destruction of property included in the contract, the money shall, on completion of the contract, be held or receivable by the vendor on behalf of the purchaser and paid by the vendor to the purchaser on completion of the sale or exchange, or so soon thereafter as the same shall be received by the vendor.

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Law of Property Act 1925

4.23

(2) This section applies only to contracts made after the commencement of this Act, and has effect subject to— (a) any stipulation to the contrary contained in the contract, (b) any requisite consents of the insurers, (c) the payment by the purchaser of the proportionate part of the premium from the date of the contract. (3) This section applies to a sale or exchange by an order of the court, as if— (a) for references to the ‘‘vendor’’ there were substituted references to the ‘‘person bound by the order’’; (b) for the reference to the completion of the contract there were substituted a reference to the payment of the purchase or equality money (if any) into court; (c) for the reference to the date of the contract there were substituted a reference to the time when the contract becomes binding. Notes Subs (1) Where there is a binding contract for the sale of property which has yet to be executed, the vendor retains legal ownership but the purchaser retains equitable ownership. Each party is entitled to insure for the full value of the property in that intervening period, but it is particularly important for the purchaser to be insured, as if the property is destroyed or damaged prior to completion the purchaser will not (subject to contract) be discharged from the obligation to make full payment on the appointed day. If the vendor remains insured for the intervening period, and the vendor’s insurers indemnify the vendor for the loss, they have subrogated rights against the purchaser for the loss (Castellain v. Preston (1883) 11 QBD 380). As a result of the operation of these principles, it became necessary for both the vendor and the purchaser to insure the property for the period between contract and conveyance. The purpose of s 47 was to obviate the need for the purchaser to obtain duplicate insurance. Section 47(1) thus provides that, where the insurance moneys are paid to the vendor, those moneys are held by the vendor to the account of the purchaser and must be paid to him on completion. The section reverses the rule in Rayner v. Preston (1881) 18 Ch D 1 to the effect that the moneys belong to the vendor alone. The section has not, however, achieved its purpose, for it overlooks the fact that, when the due date for completion arises, the purchaser remains liable for the purchase price and the insurer has subrogation rights against the purchaser for price. While, therefore, the purchaser receives the insurance moneys from the vendor, the vendor’s insurers remain entitled to sue the purchaser for them, by way of subrogation. Section 47 can operate only if it can be construed as implying that the purchaser is discharged from liability, which is a plausible construction but too dangerous to be left to chance. In practice, the problem raised but not resolved by s 47 is dealt with, since 1990 in the field of domestic conveyancing, by standard contract conditions which impose on the vendor the obligation, on completion, to provide property in substantially the same state as at the date of contract. The risk of loss is, therefore, restored to the vendor. Subs (2) Even where s 47 is potentially available, it is subject to the three requirements set out in this subsection. In line with the principle that indemnity policies (other than marine policies) are not freely assignable, the insurer must consent to any transfer.

Powers incident to estate or interest of mortgagee 101.—(1) A mortgagee, where the mortgage is made by deed, shall by virtue of this Act, have the following powers, to the like extent as if they had been in terms conferred by the mortgage deed, but not further (namely):— (i) A power, when the mortgage money has become due, to sell, or to concur with any other person in selling, the mortgaged property, or any part thereof, either subject to prior charges or not, and either together or in lots, by public auction or by private contract, subject to such conditions respecting title, or evidence of title, or other matter, as the mortgagee thinks fit, with power to vary any contract for sale, and to buy in at an auction, or to rescind any contract for sale, and to re-sell, without being answerable for any loss occasioned thereby; and (ii) A power, at any time after the date of the mortgage deed, to insure and keep insured against loss or damage by fire any building, or any effects or property of an insurable nature, whether affixed to the freehold or not, being or forming part of the property which or an estate or interest wherein is mortgaged, and the premiums paid for any such insurance shall be a charge on the mortgaged property or estate or interest, in addition to the mortgage money, and with the same priority, and with interest at the same rate, as the mortgage money; and

703

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Property

(iii) A power, when the mortgage money has become due, to appoint a receiver of the income of the mortgaged property, or any part thereof; or, if the mortgaged property consists of an interest in income, or of a rentcharge or an annual or other periodical sum, a receiver of that property or any part thereof; and (iv) A power, while the mortgagee is in possession, to cut and sell timber and other trees ripe for cutting, and not planted or left standing for shelter or ornament, or to contract for any such cutting and sale, to be completed within any time not exceeding twelve months from the making of the contract. [(1A) Subsection (1)(i) is subject to section 21 of the Commonhold and Leasehold Reform Act 2002 (no disposition of part-units).] (2) Where the mortgage deed is executed after the thirty-first day of December, nineteen hundred and eleven, the power of sale aforesaid includes the following powers as incident thereto (namely):— (i) A power to impose or reserve or make binding, as far as the law permits, by covenant, condition, or otherwise, on the unsold part of the mortgaged property or any part thereof, or on the purchaser and any property sold, any restriction or reservation with respect to building on or other user of land, or with respect to mines and minerals, or for the purpose of the more beneficial working thereof, or with respect to any other thing: (ii) A power to sell the mortgaged property, or any part thereof, or all or any mines and minerals apart from the surface:— (a) With or without a grant or reservation of rights of way, rights of water, easements, rights, and privileges for or connected with building or other purposes in relation to the property remaining in mortgage or any part thereof, or to any property sold: and (b) With or without an exception or reservation of all or any of the mines and minerals in or under the mortgaged property, and with or without a grant or reservation of powers of working, wayleaves, or rights of way, rights of water and drainage and other powers, easements, rights, and privileges for or connected with mining purposes in relation to the property remaining unsold or any part thereof, or to any property sold: and (c) With or without covenants by the purchaser to expend money on the land sold. (3) The provisions of this Act relating to the foregoing powers, comprised either in this section, or in any other section regulating the exercise of those powers, may be varied or extended by the mortgage deed, and, as so varied or extended, shall, as far as may be, operate in the like manner and with all the like incidents, effects, and consequences, as if such variations or extensions were contained in this Act. (4) This section applies only if and as far as a contrary intention is not expressed in the mortgage deed, and has effect subject to the terms of the mortgage deed and to the provisions therein contained. (5) Save as otherwise provided, this section applies where the mortgage deed is executed after the thirty-first day of December, eighteen hundred and eighty-one. (6) The power of sale conferred by this section includes such power of selling the estate in fee simple or any leasehold reversion as is conferred by the provisions of this Act relating to the realisation of mortgages. Notes Subsection (1A) was inserted by the Commonhold and Leasehold Reform Act 2002, sched 5, para 2. This section sets out the implied rights of the mortgagee, including the power to insure and to charge the premiums to the mortgagor’s debt secured by the mortgage. This right may be excluded by contract: see 108(2) of the 1925 Act below. For the permissible amount of insurance by the mortgagee for fire risks, see s 108(1) of the 1925 Act below.

Amount and application of insurance money 108.—(1) The amount of an insurance effected by a mortgagee against loss or damage by fire under the power in that behalf conferred by this Act shall not exceed the amount specified in the mortgage deed, or, if no amount is therein specified two third parts of the amount that would be required, in case of total destruction, to restore the property insured.

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Restriction of Advertisement (War Risks Insurance) Act 1939

4.24

(2) An insurance shall not, under the power conferred by this Act, be effected by a mortgagee in any of the following cases (namely):— (i) Where there is a declaration in the mortgage deed that no insurance is required: (ii) Where an insurance is kept up by or on behalf of the mortgagor in accordance with the mortgage deed: (iii) Where the mortgage deed contains no stipulation respecting insurance, and an insurance is kept up by or on behalf of the mortgagor with the consent of the mortgagee to the amount to which the mortgagee is by this Act authorised to insure. (3) All money received on an insurance or mortgaged property against loss or damage by fire or otherwise effected under this Act, or any enactment replaced by this Act, or on an insurance for the maintenance of which the mortgagor is liable under the mortgage deed, shall, if the mortgagee so requires, be applied by the mortgagor in making good the loss or damage in respect of which the money is received. (4) Without prejudice to any obligation to the contrary imposed by law, or by special contract, a mortgagee may require that all money received on an insurance of mortgaged property against loss or damage by fire or otherwise effected under this Act, or any enactment replaced by this Act, or on an insurance for the maintenance of which the mortgagor is liable under the mortgage deed, be applied in or towards the discharge of the mortgage money. Notes Subs (2) see the note to s 101 of this Act. Subs (3)–(4) authorises the mortgagee to require the mortgagor to apply the mortgagor’s insurance moneys to the reinstatement of the mortgaged property or to the discharge of the mortgage debt. In practice, the insurance will be taken out in the mortgagor’s name and the policy to be assigned to the mortgagee. An agreement to assign which is not executed may nevertheless operate as a valid equitable assignment, and the mortgagee can secure priority over other assignees by giving notice of its interest to the insurer, eg, by requesting its interest to be noted: Colonial Mutual General Insurance Co. Ltd v. ANZ Banking Group (New Zealand) Ltd [1995] 2 Lloyd’s Rep 433.

4.24 RESTRICTION OF ADVERTISEMENT (WAR RISKS INSURANCE) ACT 1939 (2 & 3 Geo 6 c 120) An Act to restrict the distribution of circulars, and the publication of advertisements, relating to the insurance of property against war risks, to provide for the imposition of certain conditions and requirements in cases where permission for such distribution or publication is granted, and for purposes connected with the matters aforesaid [23 November 1939] General Note The Restriction of Advertisements (War Risks Insurance) Act 1939 was passed to prevent the exploitation of consumers fearful of suffering damage due to war risks. Under the Act, it is forbidden to advertise war risks insurance without the permission of the Treasury: the Act was administered by the Board of Trade until the Transfer of Functions (Insurance) Order 1997, SI 1997 No 2781.

Restriction of circulars and advertisements relating to insurance against war risks 1.—(1) Subject to the provisions of this section, any person who on or after such day as may be fixed by order of the [Treasury]— (a) distributes or causes to be distributed any circulars containing— (i) any invitation to persons to insure any property in the United Kingdom in which they are interested against any war risks, or (ii) any information calculated to lead to the recipient of the information insuring any property in the United Kingdom in which he is interested against any war risks; or

705

4.24

Property

(b) has in his possession for the purpose of distribution any circulars of such a nature as to show that the object or principal object of distributing them would be to communicate such an invitation or such information as aforesaid; or (c) causes or permits any advertisement to appear which contains such an invitation or such information as aforesaid, shall, unless permission for the distribution of the circular or the appearance of the advertisement has been granted by the [Treasury] and any conditions imposed by the [Treasury] in relation thereto have been complied with, be guilty of an offence under this Act. (2) Nothing in this section shall render unlawful— (a) . . . [(b) anything done with a view to inducing persons to enter into any contract of insurance, if the [Board of Trade] could, under section one of the Marine and Aviation Insurance (War Risks) Act 1952, lawfully re-insure the person liable under that contract; or] (c) anything done with a view to inducing persons to enter into any contract of insurance— (i) of goods consigned for carriage by sea or by air from a place outside the United Kingdom to a place in the United Kingdom, while the goods are in transit between the ship or aircraft and their destination; or (ii) of goods consigned for carriage by sea or by air from a place in the United Kingdom to a place outside the United Kingdom, while the goods are in transit between the premises from which they are consigned and the ship or aircraft. Notes Subs (1) was amended by the Transfer of Functions (Insurance) Order 1997, SI 1997 No 2781, Sched, para 95 and creates the basic offence of advertising war risks insurance without authorisation. For the scope of the prohibition, see s 6(1)(b), which excludes various forms of general publicity. The Act does not indicate whether a contract concluded in breach of the Act is valid. Subs (2) was amended by the Marine and Aviation Insurance (War Risks) Act 1952, s 8, by the Transfer of Functions (Sea Transport) Order 1968, SI 1968 No 2038, art 4, and the Statute Law (Reform) Act 1981. It contains exemptions from the prohibition in s 1(1), namely, transport risks and risks affecting ships, aircraft and cargoes capable of state reinsurance under the Marine and Aviation (War Risks) Act 1952. For the text of the Act, see para 5.22.

Requirements as to carrying on business where permission granted under section 1 2.—(1) Where the [Treasury] grant any such permission as is mentioned in subsection (1) of the preceding section, they may, in addition to imposing conditions in relation to the distribution or appearance of the circular or advertisement in question, at the same time by order specify requirements which, if the persons to whom the permission is granted avail themselves thereof, are to be complied with in the carrying on of the business in connection with which the circulars are to be distributed or the advertisements are to appear, being requirements designed to secure that any representations made in the circulars or advertisements are complied with, including, if the [Treasury] think fit— (a) requirements as to the total or partial separation of the funds respectively available for the payment of claims and the payment of expenses; (b) requirements as to the proportion of the premiums or other similar payments which is to be allocated to the payment of claims; (c) requirements as to the manner in which any fund available for the payment of claims is to be maintained and dealt with; (d) requirements as to the keeping, drawing-up, auditing and publication of accounts. (2) If the persons to whom permission is granted as aforesaid avail themselves thereof, every person thereafter concerned in carrying on the business shall comply with any requirements specified as aforesaid except so far as the [Treasury] may dispense with compliance therewith, and any person who contravenes the provisions of this subsection shall be guilty of an offence under this Act.

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Restriction of Advertisement (War Risks Insurance) Act 1939

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Notes Subs (1) was amended by the Transfer of Functions (Insurance) Order 1997, SI 1997 No 2781, Sched, para 95. Subs (2) was amended by the Transfer of Functions (Insurance) Order 1997, SI 1997 No 2781, Sched, para 95.

Advisory committee 3.—(1) For the purpose of advising them as to the exercise of their functions under this Act, the [Treasury] shall appoint an advisory committee consisting of such persons as the Board think fit. (2) Every application for any such permission as is mentioned in subsection (1) of section one of this Act shall be referred by the [Treasury] to the said advisory committee, and the [Treasury] shall not— (a) grant the permission except on the recommendation of the committee; (b) if the committee recommend that the permission be granted subject to conditions or that if it is granted requirements should be imposed in relation to the carrying on of the business in question, grant that permission without imposing those conditions or those requirements, but nothing in this subsection shall be taken to limit the discretion of the [Treasury] to refuse altogether to grant the permission or, if they grant the permission, to impose further conditions or requirements. (3) The Committee shall not recommend the granting of any such permission as aforesaid unless, having regard to all relevant circumstances, and, in particular, to the nature and situation of the property which is proposed to be eligible for insurance, and to the classes of persons whom it is proposed to invite to insure, the committee are satisfied that the granting of the permission, subject to the imposition of such conditions or requirements, if any, as they may include in their recommendation, would not be contrary to the public interest. Notes Subs (1) was amended by the Transfer of Functions (Insurance) Order 1997, SI 1997 No 2781, Sched, para 95. Subs (2) was amended by the Transfer of Functions (Insurance) Order 1997, SI 1997 No 2781, Sched, para 95.

Offences 4.—(1) Any person who commits an offence under this Act shall be liable— (a) on summary conviction, to a fine not exceeding [the prescribed sum] or to imprisonment for a period not exceeding three months, or both to such fine and such imprisonment; (b) on conviction on indictment, to a fine, or to imprisonment for a period not exceeding two years, or both to a fine and such imprisonment. (2) Where any offence under this Act committed by a body corporate is proved to have been committed with the consent or connivance of any director, manager, secretary or other officer of the body corporate, he, as well as the body corporate, shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. (3) No prosecution in respect of an offence under this Act shall, in England or Northern Ireland, be instituted otherwise than with the consent of the [Treasury]. (4) . . . Notes Subs (1) was amended by the Magistrates’ Courts Act 1980, s 32(2). Subs (3) was amended by the Transfer of Functions (Insurance) Order 1997, SI 1997 No 2781, Sched, para 95. Subs (4) was repealed by the Northern Ireland Act 1962, s 30 and Sched 4.

Section 5 [Repealed by the Statute Law (Reform) Act 1974.]

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Property

Interpretation 6.—(1) In this Act— (a) the expression ‘‘war risks’’ means risks arising from action taken by an enemy or from action taken in combating an enemy or in repelling an imagined attack by an enemy; (b) any reference to the insuring of any property by any person includes a reference to the making by him of any contract or arrangement (not being a contract for the sale or bailment of that property) under which he is, in the event of damage to that property, entitled or eligible, either absolutely or conditionally, to or for any form of indemnification, whether total or partial, and whether by way of a money payment or not, in respect of that damage. (2) Documents shall not for the purposes of this Act be deemed not to be circulars by reason only that they are in the form of a newspaper, journal, magazine or other periodical publication; but a person shall not be taken to contravene this Act by reason only that he distributes, or causes to be distributed, to purchasers thereof, or has in his possession for the purpose of distribution to purchasers thereof, copies of any newspaper, journal, magazine or other periodical publication of which he is not the publisher. (3) (Applies to Scotland only .) Short title and extent 7.—(1) This Act may be cited as the Restriction of Advertisement (War Risks Insurance) Act 1939. (2) It is hereby declared that this Act extends to Northern Ireland.

4.25 LIABILITY FOR WAR DAMAGE (MISCELLANEOUS PROVISIONS) ACT 1939 (2 & 3 Geo 6 c 102) An Act to modify certain rights and liabilities with respect to goods lost or damaged by war [7 September 1939] General Note This Act allocates, as between a bailor and a bailee, liability for damage to the goods caused by war risks. Only s 1 is reproduced below. The remainder of the Act is concerned with the liabilities of purchasers on sale or return and innkeepers, and liability for customs and excise duties.

Liability in respect of bailments 1.—(1) Where, in the case of the bailment of any goods, whether before or after the commencement of this Act, an obligation is imposed on the bailor or bailee by the provisions (whether express or implied) of any contract or by any enactment, rule or law or custom— (a) to insure against loss of or damage to the goods; (b) to repair damage to the goods; (c) to replace the goods in the event of loss; (d) to restore the goods or deliver them up in good repair, notwithstanding such loss or damage; (e) to continue to pay for the hire of the goods, notwithstanding such loss or damage; or (f) to pay damages or compensation for any loss of or damage to the goods; the obligation shall, subject to the following provisions of this section, be deemed not to extend to loss or damage by war. (2) Nothing in this section shall relieve a bailee of any liability for loss of or damage to any goods occurring while the goods are being kept or transported in a manner or at a place which is contrary to the terms of any contract relating to the custody or transport thereof, unless the

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Landlord and Tenanct Act 1985

4.26

bailee satisfied the court, in any proceedings brought to enforce any such liability, that he had reasonable grounds for believing that the goods were less likely to be lost or damaged while being kept or transported in that manner or at that place than while being kept or transported in accordance with the terms of the contract. (3) Nothing in this section shall relieve a bailor or bailee of any liability imposed by any contract if the liability is expressly related to war by the terms of the contract: Provided that this subsection shall not apply to any liability imposed on a bailee by— (a) a hire-purchase agreement or a conditional sale agreement within the meaning of the Consumer Credit Act 1974 being (in either case) a consumer credit agreement as defined by that Act; or (b) a consumer hire agreement as defined by that Act Notes The effect of this section is to relieve the bailor or bailee (as the case may be) who is under an obligation to insure the goods, of liability to insure for loss or damage caused by war (subs (1)). This is only a presumption, which is ousted in two circumstances: (a) where the bailee has kept or transported the goods in a manner contrary to the contract (subs (2)); or (b) where the contract specifically imposes an obligation to insure against war risks (subs (3)).

4.26 LANDLORD AND TENANT ACT 1985 (1985 c 70)

General Note The Landlord and Tenant Act 1985 was amended by the Landlord and Tenant Act 1987, by the insertion of s 30A and the Schedule. The purpose of the amendments was to deal with the situation in which a landlord covenants to insure leasehold premises on behalf of the tenant, and then fails to make a claim under the policy. If the tenant is a party to the contract of insurance, the tenant is himself able to make a claim. However, if the tenant is not intended to be a full party but merely a person whose interests are protected, the tenant has no claim under the policy and the availability of any insurance moneys is dependent upon the landlord submitting a claim. If, under the lease, the tenant is liable for rent, whether or not the property has been damaged, and the lease is for the lengthy period, the landlord may have little pressing need to claim from the insurers. The effect of the 1987 amendments to the 1985 Act is to freeze the operation of the policy for six months, preventing the insurer from relying upon notice of loss or related provisions, in which time the tenant can take steps against the insurer for a claim to be made under the policy. Under the 1987 amendments, the tenant is entitled to information concerning the existence and scope of the policy where the landlord has covenanted to insure. The 1987 amendments to the 1985 Act are aimed at blocks of flats used as domestic dwellings. See the definitions in Sched, para 1.

Insurance Rights of tenants with respect to insurance 30A. The Schedule to this Act (which confers on tenants certain rights with respect to the insurance of their dwellings) shall have effect. Notes This section and the following schedule were inserted by the Landlord and Tenant Act 1987, s 43(1).

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4.26

Property SCHEDULE RIGHTS OF TENANTS WITH RESPECT TO INSURANCE Construction

1. In this Schedule— ‘‘landlord’’, in relation to a tenant by whom a service charge is payable which includes an amount payable directly or indirectly for insurance, includes any person who has a right to enforce payment of that service charge; ‘‘relevant policy’’, in relation to a dwelling, means any policy of insurance under which the dwelling is insured (being, in the case of a flat, a policy covering the building containing it); and ‘‘tenant’’ includes a statutory tenant. Request for summary of insurance cover 2.—(1) Where a service charge is payable by the tenant of a dwelling which consists of or includes an amount payable directly or indirectly for insurance, the tenant may [by notice in writing require the landlord] to supply him with a written summary of the insurance for the time being effected in relation to the dwelling. (2) If the tenant is represented by a recognised tenants’ association and he consents, the [notice may be served] by the secretary of the association instead of by the tenant and may then be for the supply of the summary to the secretary. (3) A [notice under this paragraph is duly] served on the landlord if it is served on— (a) an agent of the landlord named as such in the rent book or similar document, or (b) the person who receives the rent on behalf of the landlord; and a person on [whom such a notice] is so served shall forward it as soon as may be to the landlord. (4) The landlord shall, within one month of the request, comply with it by supplying to the tenant or the secretary of the recognised tenants’ association (as the case may require) such a summary as is mentioned in sub-paragraph (1), which shall include— (a) the insured amount or amounts under any relevant policy, and (b) the name of the insurer under any such policy, and (c) the risks in respect of which the dwelling or (as the case may be) the building containing it is insured under any such policy. (5) In sub-paragraph (4)(a) ‘‘the insured amount or amounts’’, in relation to a relevant policy, means— (a) in the case of a dwelling other than a flat, the amount for which the dwelling is insured under the policy; and (b) in the case of a flat, the amount for which the building containing it is insured under the policy and, if specified in the policy, the amount for which the flat is insured under it. (6) The landlord shall be taken to have complied with the [notice] if, within the period mentioned in sub-paragraph (4), he instead supplies to the tenant or the secretary (as the case may require) a copy of every relevant policy. (7) In a case where two or more buildings are insured under any relevant policy, the summary or copy supplied under sub-paragraph (4) or (6) so far as relating to that policy need only be of such parts of the policy as relate— (a) to the dwelling, and (b) if the dwelling is a flat, to the building containing it. Notes This paragraph was amended by the Commonhold and Leasehold Reform Act 2002, sched 10, para 8.

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[Inspection of insurance policy etc 3.—(1) Where a service charge is payable by the tenant of a dwelling which consists of or includes an amount payable directly or indirectly for insurance, the tenant may by notice in writing require the landlord— (a) to afford him reasonable facilities for inspecting any relevant policy or associated documents and for taking copies of or extracts from them, or (b) to take copies of or extracts from any such policy or documents and either send them to him or afford him reasonable facilities for collecting them (as he specifies). (2) If the tenant is represented by a recognised tenants’ association and he consents, the notice may be served by the secretary of the association instead of by the tenant (and in that case any requirement imposed by it is to afford reasonable facilities, or to send copies or extracts, to the secretary). (3) A notice under this paragraph is duly served on the landlord if it is served on— (a) an agent of the landlord named as such in the rent book or similar document, or (b) the person who receives the rent on behalf of the landlord; and a person on whom such a notice is so served shall forward it as soon as may be to the landlord. (4) The landlord shall comply with a requirement imposed by a notice under this paragraph within the period of twenty-one days beginning with the day on which he receives the notice. (5) To the extent that a notice under this paragraph requires the landlord to afford facilities for inspecting documents— (a) he shall do so free of charge, but (b) he may treat as part of his costs of management any costs incurred by him in doing so. (6) The landlord may make a reasonable charge for doing anything else in compliance with a requirement imposed by a notice under this paragraph. (7) In this paragraph— ‘‘relevant policy’’ includes a policy of insurance under which the dwelling was insured for the period of insurance immediately preceding that current when the notice is served (being, in the case of a flat, a policy covering the building containing it), and ‘‘associated documents’’ means accounts, receipts or other documents which provide evidence of payment of any premiums due under a relevant policy in respect of the period of insurance which is current when the notice is served or the period of insurance immediately preceding that period.] Notes This paragraph was substituted by the Commonhold and Leasehold Reform Act 2002, sched 10, para 9.

Request relating to insurance effected by superior landlord 4.—(1) If a [notice is served] under paragraph 2 in a case where a superior landlord has effected, in whole or in part, the insurance of the dwelling in question and the landlord [on whom the notice is served] is not in possession of the relevant information— (a) he shall in turn [by notice in writing require the person who is his landlord to give him the relevant information] (and so on, if that person is not himself the superior landlord), (b) the superior landlord shall comply with [that notice] within a reasonable time, and (c) the immediate landlord shall then comply with the tenant’s or [secretary’s notice] in the manner provided by sub-paragraphs (4) to (7) of paragraph 2 within the time allowed by that paragraph or such further time, if any, as is reasonable in the circumstances. (2) If, in a case where a superior landlord has effected, in whole or in part, the insurance of the dwelling [notice under paragraph 3 imposes a requirement relating] to any policy of insurance effected by the superior landlord— (a) the landlord [on whom the notice is served] shall forthwith inform the tenant or secretary of that fact and of the name and address of the superior landlord, and

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Property

(b) that paragraph shall then apply to the superior landlord in relation to that policy as it applies to the immediate landlord. Notes This paragraph was amended by the Commonhold and Leasehold Reform Act 2002, sched 10, para 10.

Effect of change of landlord 4A.—(1) This paragraph applies where, at a time when a duty imposed on the landlord or a superior landlord by virtue of any of paragraphs 2 to 4 remains to be discharged by him, he disposes of the whole or part of his interest as landlord or superior landlord). (2) If the landlord or superior landlord is, despite the disposal, still in a position to discharge the duty to any extent, he remains responsible for discharging it to that extent. (3) If the other person is in a position to discharge the duty to any extent, he is responsible for discharging it to that extent. (4) Where the other person is responsible for discharging the duty to any extent (whether or not the landlord or superior landlord is also responsible for discharging it to that or any other extent)— (a) references to the landlord or superior landlord in paragraphs 2 to 4 are to, or include, the other person so far as is appropriate to reflect his responsibility for discharging the duty to that extent, but (b) in connection with its discharge by that person, paragraphs 2(4) and 3(4) apply as if the reference to the day on which the landlord receives the notice were to the date of the disposal referred to in sub-paragraph (1). Notes Para 4A was added by the Commonhold and Leasehold Reform Act 2002, sched 10, para 11.

Effect of assignment on request 5. The assignment of a tenancy does not affect the validity of a request made under [paragraphs 2 to 4A] before the assignment; but a person is not obliged to provide a summary or make facilities available more than once for the same dwelling and for the same period. Notes Para 5 was amended by the Commonhold and Leasehold Reform Act 2002, sched 10, para 12.

Failure to comply with paragraph 2, 3 or 4 an offence 6.—(1) It is a summary offence for a person to fail, without reasonable excuse, to perform a duty imposed on him by or by virtue of [paragraphs 2 to 4A]. (2) A person committing such an offence is liable on conviction to a fine not exceeding level 4 on the standard scale. Notes Para 6 was amended by the Commonhold and Leasehold Reform Act 2002, sched 10, para 13.

Tenant’s right to notify insurers of possible claim 7.—(1) This paragraph applies to any dwelling in respect of which the tenant pays to the landlord a service charge consisting of or including an amount payable directly or indirectly for insurance. (2) Where— (a) it appears to the tenant of any such dwelling that damage has been caused— (i) to the dwelling, or (ii) if the dwelling is a flat, to the dwelling or to any other part of the building containing it,

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in respect of which a claim could be made under the terms of a policy of insurance, and (b) it is a term of that policy that the person insured under the policy should give notice of any claim under it to the insurer within a specified period, the tenant may, within that specified period, serve on the insurer a notice in writing stating that it appears to him that damage has been caused as mentioned in paragraph (a) and describing briefly the nature of the damage. (3) Where— (a) any such notice is served on an insurer by a tenant in relation to any such damage, and (b) the specified period referred to in sub-paragraph (2)(b) would expire earlier than the period of six months beginning with the date on which the notice is served, the policy in question shall have effect as regards any claim subsequently made in respect of that damage by the person insured under the policy as if for the specified period there were substituted that period of six months. (4) Where the tenancy of a dwelling to which this paragraph applies is held by joint tenants, a single notice under this paragraph may be given by any one or more of those tenants. (5) The Secretary of State may by regulations prescribe the form of notices under this paragraph and the particulars which such notices must contain. (6) Any such regulations— (a) may make different provision with respect to different cases or descriptions of case, including different provision for different areas, and (b) shall be made by statutory instrument. Right to challenge landlord’s choice of insurers 8.—(1) This paragraph applies to a tenancy of a dwelling which requires the tenant to insure the dwelling with an insurer nominated [or approved] by the landlord. (2) Where, on an application made by the tenant under any such tenancy, the court is satisfied— (a) that the insurance which is available from the nominated [or approved] insurer for insuring the tenant’s dwelling is unsatisfactory in any respect, or (b) that the premiums payable in respect of any such insurance are excessive, the court may make either an order requiring the landlord to nominate [or approve] such other insurer as is specified in the order or an order requiring him to nominate [or approve] another insurer who satisfies such requirements in relation to the insurance of the dwelling as are specified in the order. (3) A county court shall have jurisdiction to hear and determine any application under this paragraph. Notes Para 5 was amended by the Commonhold and Leasehold Reform Act 2002, s 165.

Exception for tenants of certain public authorities 9.—(1) Paragraphs 2 to 8 do not apply to a tenant of— a local authority, a National Park authority, or a new town corporation unless the tenancy is a long tenancy, in which case paragraphs 2 to 5 and 7 and 8 apply but paragraph 6 does not. (2) Subsections (2) and (3) of section 26 shall apply for the purposes of sub-paragraph (1) as they apply for the purposes of subsection (1) of that section. Notes Para 9 was amended by the Government of Wales Act 1998, sched 18, para 1.

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4.27

Property 4.27 REINSURANCE (ACTS OF TERRORISM) ACT 1993 (1993 c 18)

An Act to provide for the payment out of money provided by Parliament or into the Consolidated Fund of sums referable to reinsurance liabilities entered into by the Secretary of State in respect of loss or damage to property resulting from or consequential upon acts of terrorism and losses consequential on such loss or damage General Note This Act has its origins in a bomb which exploded in, and devastated much of, the City of London, in 1992. Following the explosion, reinsurers of building risks in the UK made it clear that they were no longer prepared to offer terrorist damage cover. The withdrawal of reinsurance prompted insurers to follow suit. The non-availability of cover caused two main problems: the owners of commercial buildings could not obtain terrorist risks insurance cover; and the investments of many institutional investors in commercial property were thrown into jeopardy. The Reinsurance (Terrorism) Act 1993 responded to these concerns by government being prepared to act as insurer of last resort. Under the scheme operated by the industry, all insurers offering terrorist damage cover may join a new mutual insurance company, Pool Re, established for the purpose. The government provides retrocession cover to Pool Re as regards terrorist risks, in return for premiums calculated on a commercial basis. The scheme established by the Act is not a guarantee fund for uninsured buildings damaged by terrorist conduct, and operates purely as a reinsurance and retrocession scheme where premiums have in the first instance been paid by the assured.

Financing of reinsurance obligations of the [Treasury] 1.—(1) There shall be paid out of money provided by Parliament such sums as may be necessary to enable the [Treasury] to meet [their] obligations under— (a) any agreement of reinsurance which is entered into (whether before or after the passing of this Act) pursuant to arrangements to which this Act applies, or (b) any guarantee which is entered into (whether before or after that passing) pursuant to any such agreement. (2) As soon as practicable after the passing of this Act or, if it is later, after [they enter] into the agreement or guarantee, the [Treasury] shall lay before each House of Parliament a copy of any agreement or guarantee falling within subsection (1) above. (3) There shall be paid into the Consolidated Fund any sums received by the Secretary of State pursuant to any arrangements to which this Act applies. Notes Subs (1) was amended by the Transfer of Functions (Insurance) Order 1997, SI 1997 No 2781, Sched, paras 120 to 122. Subs (2) was amended by the Transfer of Functions (Insurance) Order 1997, SI 1997 No 2781, Sched, paras 120 to 122.

Reinsurance arrangements to which this Act applies 2.—(1) This Act applies to arrangements under which the [Treasury undertake] to any extent the liability of reinsuring risks against— (a) loss of or damage to property in Great Britain resulting from or consequential upon acts or terrorism; and (b) any loss which is consequential on loss or damage falling within paragraph (a) above; and to the extent that the arrangements relate to events occurring before as well as after an agreement of reinsurance comes into being, the reference in section 1(1) above to the obligations of the [Treasury] shall be construed accordingly. (2) In this section ‘‘acts of terrorism’’ means acts of persons acting on behalf of, or in connection with, any organisation which carries out activities directed towards the overthrowing or influencing, by force or violence, of Her Majesty’s government in the United Kingdom or any other government de jure or de facto.

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(3) In subsection (2) above ‘‘organisation’’ includes any association or combination of persons. Notes Subs (1) was amended by the Transfer of Functions (Insurance) Order 1997, SI 1997 No 2781, Sched, paras 120 to 122.

Citation and extent 3.—(1) This Act may be cited as the Reinsurance (Acts of Terrorism) Act 1993. (2) This Act does not extend to Northern Ireland. Notes In December 2004 the Treasury published guidance on the meaning of ‘‘acts of terrorism’’. The Treasury’s document reads as follows: In applying the definition of ‘‘acts of terrorism’’ in section 2(2) of the 1993 Act in the context of the Pool Re scheme, HM Treasury would expect to be guided by the following general principles of interpretation. In view of the fact that the definition has not been the subject of a judicial decision, these principles cannot be taken as a definitive legal interpretation. Nor are they offered as legal advice to parties who might be affected by the scheme, or as any legally binding undertaking by HM Treasury to any person. The essence of the definition is the relationship between the act in question and an ‘‘organisation’’. ‘‘Organisation’’ The scope of the term ‘‘organisation’’ is not expressly limited, and includes ‘‘any association or combination of persons’’ (section 2(3)). Diffuse, decentralised structures would not be excluded. There is no defined upper or lower limit on the numbers of persons required to constitute an ‘‘organisation’’, and no express minimum duration for its existence as such. However, it is clear that there would need to be a significant element of continuity before an ‘‘organisation’’ could be said to exist: persons acting spontaneously in concert (without more) would be unlikely to constitute an ‘‘organisation’’, although their actions might still be carried out ‘‘on behalf of’’, or ‘‘in connection with’’ an organisation (see further below). ‘‘Overthrowing or influencing a government by force or violence’’ The activities relied on to characterise the organisation need not of themselves be forceful or violent, provided they are directed towards overthrowing or influencing a Government by such means (eg an organisation whose activities were limited to funding or otherwise supporting the forceful or violent acts of others would not be excluded). The Government in question may be anywhere in the world and may or may not be recognised. ‘‘Multi-purpose’’ organisations are not excluded. An organisation is not excluded merely because it carries on a diverse range of activities, provided that at least some of them are directed towards the overthrow or influencing of a Government by force or violence. The precise motive, or subject on which influence is sought to be brought to bear makes no difference: it could be political, ethnic, religious, cultural, or anything else. The ‘‘force or violence’’ envisaged does not have to be carried out by the organisation itself, nor does it need to be successful in its aims. The fact that the organisation’s activities are directed towards the end of exerting influence over a Government by force or violence would be sufficient. The fact that an organisation’s activities are not aimed at specific government targets would not be decisive: the organisation might seek to influence a Government by attacking private property, and would not fall outside the definition for this reason. Acts ‘‘on behalf of’’ or ‘‘in connection with’’ an organisation The act in question needs to be related to the organisation. However, the act would not need to be carried out by a member of, or person authorised by, the organisation. The fact that it was carried out by a sympathiser, or ‘‘cell’’ acting independently of the organisation’s hierarchy would not exclude it from the definition. In the case of a sympathiser acting alone, the mere fact of sharing an organisation’s objectives is unlikely to be sufficient. There would probably have to be something additional to connect the act to a specific organisation. However, there would be a variety of circumstances that could potentially establish a connection of the required kind.

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4.28

Property 4.28 GAMBLING ACT 2005 (2005 c 19)

Enforceability of gambling contracts 335.—(1) The fact that a contract relates to gambling shall not prevent its enforcement. (2) Subsection (1) is without prejudice to any rule of law preventing the enforcement of a contract on the grounds of unlawfulness (other than a rule relating specifically to gambling).

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CHAPTER 5

MARINE INSURANCE

5.20 MARINE INSURANCE ACT 1906 (6 Edw 7 c 41) General Note The Marine Insurance Act 1906 was drafted by Sir Mackenzie Chalmers, and was the last of his famous pieces of codifying legislation. The Act does not seek to change the law, but rather is a codification of some 200 years of judicial decisions. There is no equivalent non-marine codification, although at various points the 1906 Act reflects both marine and non-marine law. The Act has to be viewed with some degree of caution, for three reasons. First, much of the Act is concerned with laying down presumptions which operate only in the absence of any contrary agreement between the parties: in practice marine insurance contracts written in England are governed by the various sets of standard marine clauses published by the Institute of London Underwriters (a body which on 31 December 1998 merged with the London International Insurance and Reinsurance Market Association—LIRMA—to form the International Underwriting Association), and these frequently oust many of the Act’s presumptions. There are separate clauses for, inter alia, cargo policies (marine risks—the A clauses are all risks, whereas the B and C clauses cover specified risks), cargo policies (war risks and strike risks), hulls time policies, hulls voyage policies, freight time policies, freight voyage policies, and war and strikes clauses for each type of hull and freight time and voyage policy. The most important provisions of the cargo and hulls clauses are noted in the relevant places in the following annotations (the freight clauses are not noted separately, and for the most part follow the hulls clauses). In November 2003 the market adopted the International Hull Clauses (replacing an earlier version published in 2002): the International Hull Clauses were designed to replace the hulls clauses, although at the time of writing the 2003 clauses are not in widespread use. Accordingly, reference will be made to both the hulls clauses and the International Hull Clauses. Secondly, the 1906 Act must be viewed as a snapshot of the law relating to marine insurance practice as it existed in 1906, but there have been significant changes in practice since that date and certain of the Act’s concepts relate to superseded forms of dealing. There are also a number of important post-Act decisions refining the meaning of the Act’s wording. Thirdly, the Act is not exhaustive, although most of the important principles of marine insurance law have been enshrined in it. A number of different forms of insurance may be required to provide full cover for a marine adventure. These will include: (a) a standard marine policy on hulls and machinery; (b) cargo insurance; (c) insurance of the freight to be earned by the carrier; (d) increased value insurance, to deal with the possibility of the subject-matter’s increase in value during the currency of the policy; (e) mortgagee’s interest insurance, covering the mortgagee of the vessel in the event that the underwriters under the marine policy do not accept liability for a loss; (f) strikes and war risks insurance; (g) liability insurance, for collisions (covered by the hull and machinery policy) and for other forms of liability (generally insured on a mutual basis by P&I clubs). In the case of a large risk, insurance may be arranged on a co-insurance basis (a number of underwriters accept a proportion of the risk—this is the method of doing business at Lloyd’s) or in layers, with successive underwriters providing excess of loss cover (as to which, see Hong Kong Borneo Services Ltd v. Pilcher [1992] 2 Lloyd’s Rep 593—obligation of excess of loss underwriters to follow settlements of primary layer underwriter). The annotations cite many of the early cases upon which the 1906 Act was based, and should be regarded as illustrations of the operation of the Act.

717

5.20

Marine Insurance Marine Insurance

Marine insurance defined 1. A contract of marine insurance is a contract whereby the insurer undertakes to indemnify the assured, in manner and to the extent thereby agreed, against marine losses, that is to say, the losses incident to marine adventure. Notes The distinction between marine and non-marine insurance is significant for two general reasons: (a) separate authorisation is required under the Financial Services and Markets Act 2000; (b) there are a number of distinctions between marine and non-marine insurance law. The following is a non-exhaustive list: (1) in determining the assured’s loss, marine policies value the assured’s interest at the date of the policy rather than at the date of the loss (s 16); (2) a marine contract is enforceable only if embodied in a policy (s 22); (3) marine warranties may be express or implied by operation of law (ss 36–41) whereas non-marine warranties must be expressly created; (4) marine voyage policies terminate automatically where the voyage is changed or there is deviation from the accepted route (ss 42–49), whereas an increase of risk does not affect a non-marine policy unless the policy otherwise provides; (5) marine policies, unlike non-marine policies, are freely assignable (ss 50–51); (6) under a marine policy the broker is responsible to the underwriters for the premium (s 53); (7) non-marine law recognises only total and partial losses, whereas marine insurance recognises an intermediate form of loss, constructive total loss (s 60); (8) it is the obligation of the assured under a marine policy to take steps to avoid or mitigate the loss, and the underwriters have the concurrent duty to indemnify the assured for the costs of ‘‘suing and labouring’’ of this type (s 78); (9) marine insurance law permits return of premium to the assured in a greater number of situations than exist in non-marine law (s 84). A policy in marine form is not necessarily a marine policy, as the substance has to be maritime in nature (Re London County Commercial Reinsurance Office Ltd [1922] 2 Ch 67 (peace policy); Re Argonaut Marine Insurance Co Ltd [1932] 2 Ch 34 (fire policy).

Mixed sea and land risks 2.—(1) A contract of marine insurance may, by its express terms, or by usage of trade, be extended so as to protect the assured against losses on inland waters or on any land risk which may be incidental to any sea voyage. (2) Where a ship in course of building, or the launch of a ship, or any adventure analogous to a marine adventure, is covered by a policy in the form of a marine policy, the provisions of this Act, in so far as applicable, shall apply thereto; but, except as by this section provided, nothing in this Act shall alter or affect any rule of law applicable to any contract of insurance other than a contract of marine insurance as by this Act defined. Notes Subs (1) It has long been the practice for policies on cargo to cover risks other than pure maritime risks, and the standard cargo cover written in the London market—the Institute Cargo Clauses, cl 8—is on a ‘‘warehouse to warehouse’’ basis. This replaces earlier policy terms, which previously covered cargo until ‘‘safely landed’’ (as to which see the Marine Insurance Act 1906, Sched, r 5), ‘‘safely delivered’’ (DeutschAustralische Dampfschiffsgesellschaft v. Sturge (1913) 109 LT 905) or ‘‘discharged’’ (G H Renton & Co Ltd v. Black Sea and Baltic General Insurance Co Ltd [1941] 1 KB 206). Wider forms of cover, stated to be from specified origin to specified destination, are also marine policies as long as the marine voyage constitutes the most significant part of the cover. Of the many illustrations of the point, see: Rodocanachi v. Elliott (1874) LR 9 CP 518; Ide and Christie v. Chalmers and White (1900) 5 Com Cas 212; Allagar Rubber Estates Ltd v. National Benefit Assurance Co (1922) 10 Ll LR 564; Leon v. Casey [1932] 2 KB 576; Cousins & Co v. D & C Carriers Ltd [1971] 2 QB 230; Fuerst Day Lawson Ltd v. Orion Insurance Co Ltd [1980] 1 Lloyd’s Rep 656; Simon, Israel & Co v. Sedgwick [1893] 1 QB 303; Wunsche International v. Tai Ping Insurance Co [1998] 2 Lloyd’s Rep 8; Hibernia Foods plc v. McAuslin, The Joint Frost [1998] 1 Lloyd’s Rep 310. A non-marine policy may itself cover marine risks which are incidental to the main cover (Moore v. Evans [1918] AC 185). Equally, the fact that the policy covers ‘‘all risks’’, including some risks which may occur only on land, does not mean that it ceases to be a marine policy (Hyderabad (Deccan) Co v. Willoughby [1899] 2 QB 530;

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Schloss Brothers v. Stevens [1906] 2 KB 665; British and Foreign Marine Insurance Co v. Gaunt [1921] 2 AC 41). Subs (2) There are many illustrations in the case of marine policies on building risks, eg Jackson v. Mumford (1904) 9 Com Cas 114; Youell v. Bland Welch (No 1) [1992] Lloyd’s Rep 127; National Oilwell (UK) Ltd v. Davy Offshore Ltd [1993] 2 Lloyd’s Rep 582; Heesens Yacht Builders BV v. Cox Syndicate Management Ltd, The Red Sapphire [2006] Lloyd’s Rep IR 476.

Marine adventure and maritime perils defined 3.—(1) Subject to the provisions of this Act, every lawful marine adventure may be the subject of a contract of marine insurance. (2) In particular there is a marine adventure where— (a) Any ship goods or other moveables are exposed to maritime perils. Such property is in this Act referred to as ‘‘insurable property’’; (b) The earning or acquisition of any freight, passage money, commission, profit, or other pecuniary benefit, or the security for any advances, loan, or disbursements, is endangered by the exposure of insurable property to maritime perils; (c) Any liability to a third party may be incurred by the owner of, or other person interested in or responsible for, insurable property, by reason of maritime perils. ‘‘Maritime perils’’ means the perils consequent on, or incidental to, the navigation of the sea, that is to say, perils of the seas, fire, war perils, pirates, rovers, thieves, captures, seisures, restraints, and detainments of princes and peoples, jettisons, barratry, and any other perils, either of the like kind or which may be designated by the policy. Notes Subs (1) A marine policy is stated to insure a marine ‘‘adventure’’. This concept has no modern significance, and modern policies insure particular risks forming part of the overall adventure. There is an inclusive definition of ‘‘marine adventure’’ in subs (2). The adventure must be lawful, eg not prohibited by statute or contrary to the public interest, for the policy to be valid. If the voyage is not lawful from the outset, the assured is in breach of the warranty of legality under s 41 of the 1906 Act, and the risk will not attach. If the adventure is lawful at its inception, s 3(1) is satisfied, although the assured may be in breach of the continuing warranty in s 41 in so far as any unlawful conduct taking place during the currency of the adventure is within his control. Subs (2) This subsection lists the most important forms of cover available under a marine policy: property damage in respect of the vessel and its cargo, loss of freight, and liability incurred to third parties. Cargo policies are commonly written on an ‘‘all risks’’ basis (Institute Cargo Clauses A). The B and C clauses are against specific risks, including fire, explosion, stranding and jettison. As to fire, see: Gordon v. Rimmington (1807) 1 Camp 123 (fire to prevent vessel falling into enemy hands covered by policy); Busk v. Royal Exchange (1818) 2 B & Ald 73 (fire caused by negligence covered by policy); Symington & Co v. Union Insurance Society of Canton (1928) 31 Ll LR 179 (water damage as consequence of fire proximately caused by fire, and cf The Knight of St Michael [1898] P 30); Watson & Son Ltd v. Firemen’s Fund Insurance Co of San Francisco [1922] 2 KB 355 (steam damage not covered, and cf Thames and Mersey Marine Insurance Co Ltd v. Hamilton Fraser & Co (1887) 12 App Cas 484). The older forms of policy excluded partial loss unless the vessel was ‘‘burnt’’, as to which see The Glenlivet [1894] P 48. As to stranding, see the note to the Marine Insurance Act 1906, Sched, r 14. As to explosion, see Commonwealth Smelting Ltd v. Guardian Royal Exchange Assurance Ltd [1984] 2 Lloyd’s Rep 608 (physical or chemical reaction required, and not merely equipment failure resulting in outward pressure and propulsion). As to jettison, there is some ambiguity, for jettison of cargo is frequently encountered in the context of an attempt to preserve a vessel in distress or the remaining cargo, in which case jettison constitutes a general average sacrifice and attracts general average contributions from its beneficiaries (see s 66 and the note thereto). Some cases treat the act of throwing cargo overboard as jettison in its own right despite the fact that some other peril was the cause of the jettison (Butler v. Wildman (1820) 3 B & Ald 398; Symington & Co v. Union Insurance Society of Canton Ltd (1928) 34 Com Cas 23) whereas others have held that it is not possible to convert an uninsured peril into an insured peril by jettison (Taylor v. Dunbar (1869) LR 4 CP 206). Under an all risks policy the underwriters are liable for all risks, including accidental damage (Jacob v. Gaviller (1902) 7 Com Cas 116; Schloss Brothers v. Stevens [1906] 2 KB 665) other than excepted risks (as to which, see the Institute Cargo Clauses, cl 4), and also that the assured’s burden of proof in the event of a loss is satisfied if he proves that the loss has occurred—the burden of proof then shifts to the underwriters to show that the loss was proximately caused by an excluded peril, although the assured may be required to rebut any evidence of the operation of an excluded peril brought forward by the underwriters (Re National Benefit Assurance Co Ltd (1933) 45 Ll LR 147; Theodorou v. Chester [1951] 1 Lloyd’s Rep 204; British

719

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Marine Insurance

and Foreign Marine Insurance Co v. Gaunt [1921] 2 AC 41; Fuerst Day Lawson Ltd v. Orion Insurance Co Ltd [1980] 1 Lloyd’s Rep 656). See, however, Tektrol Ltd v. International Insurance Co of Hanover Ltd [2005] 2 Lloyd’s Rep 701, where Carnwath LJ criticised the use of extensive exclusions in an all risks policy and commented on the wording before him that: ‘‘Although it is described as an ‘all risks’ policy, one has to search long and hard, through a bewildering and apparently comprehensive list of exclusions, to discover the extent to which any risks are in fact covered’’ and that ‘‘One should start from the presumption that the parties intended an ‘all risks’ policy to cover all risks, except when they are clearly and unambiguously excluded.’’ For the scope of hulls cover, see Institute Time Clauses Hulls, cll 6–8, Institute Voyage Clauses Hulls, cll 4–8 and International Hull Clauses, cll 2–5 (sea perils including fire and explosion, mechanical breakdown, and pollution hazards—the International Hull Clauses extend cover to leased equipment and parts taken off the vessel). Subs (2)(a) The term ‘‘movables’’ is defined in s 90, the term ‘‘ship’’ is defined in the Schedule, r 15, and the term ‘‘goods’’ is defined in the Schedule, r 17. Policies on ships and goods do not cover consequential losses, including loss of profits, unless specifically covered (Lucena v. Craufurd (1806) 2 Bos & PNR 269; Royal Exchange Assurance v. M’Swiney (1850) 14 QB 646; Halhead v. Young (1856) 6 E & B 312; Mackenzie v. Whitworth (1875) 1 Ex D 36; Anderson v. Morice (1875) LR 10 CP 609; Inglis v. Stock (1885) 10 App Cas 263; Yangtse Insurance Association v. Lukmanjee [1918] AC 585). Thus if the assured has no insurable interest in the subject-matter, he cannot make any claim at all under a policy which does not cover loss of profits (see Stockdale v. Dunlop (1840) 6 M & W 224 and the note to s 6). It is a matter of construction whether a policy is on goods or against loss of profits, with the presumption being in favour of the former (Agra Trading Ltd v. McAuslin, The Frio Chile [1995] 1 Lloyd’s Rep 182, distinguished in Hibernia Foods plc v. McAuslin, The Joint Frost [1998] 1 Lloyd’s Rep 310 in which both cargo and profits were insured under the same clause). Subs (2)(b) The term ‘‘freight’’ is defined in s 90. The other terms used here are not defined by the 1906 Act. For insurance against loss of profits see: Barclay v. Cousins (1802) 2 East 544; Wilson v. Jones (1867) LR 2 Exch 139, Asfar v. Blundell [1896] 1 QB 123; for insurance on disbursements see Buchanan & Co v. Faber (1899) 4 Com Cas 223, Lawther v. Black (1901) 6 Com Cas 196; New Zealand Shipping Co Ltd v. Duke [1914] 2 KB 682; and for insurance against loss of commission on freight see Ward & Co v. Weir & Co (1899) 4 Com Cas 216. The Hulls clauses (Institute Time Clauses Hulls, cl 22; Institute Voyage Clauses Hulls, cl 20, International Hull Clauses, cl 24) contain a disbursements warranty, introduced following the decision in Thames and Mersey Marine Insurance Co v. Gunford Ship Co, ‘‘The Gunford’’ [1911] AC 529. It was there held that a disbursement policy simply duplicated the cover conferred by a freight policy, and constituted double insurance. The disbursements warranty permits additional insurance for freight, return of premium, etc, only to the extent of 25% of the stated value and requires the assured to warrant that there is no insurance in excess of that amount. Subs (2)(c) See the Institute Time Clauses Hulls, cll 8–9, the Institute Voyage Clauses Hulls, cll 6–7 and the International Hull Clauses, cll 6–7, for collision liabilities. The collision clause covers the assured in respect of three-fourths of damages payable for loss or damage caused to any other vessel or property on any other vessel by reason of collision: damage caused to sisterships is included within the cover. The International Hull Clauses do, however, contemplate that the assured may obtain 4/4ths cover by payment of additional premium (cl 38) As to another ‘‘vessel’’, see: M’Cowan v. Baine & Johnson, ‘‘The Niobe’’ [1891] AC 401; Re Margetts & Ocean Accident & Guarantee Corporation [1901] 2 KB 792 (tug is vessel); Bennett SS Co v. Hull Mutual SS Protecting Society [1914] 3 KB 57 (fishing nets not vessel); Merchants’ Marine Insurance Co Ltd v. North of England Protecting and Indemnity Association (1926) 26 Ll LR 201 (crane not a vessel); Polpen Shipping Co Ltd v. Commercial Union Assurance Co Ltd [1943] KB 161 (flying boat not a vessel). The International Hull Clauses permit the assured to obtain additional cover for collision liability incurred with regard to any fixed or floating object, and not merely a vessel: cl 37. Where a submerged vessel is involved, there is a collision only where the owner of the submerged vessel has a reasonable hope of successfully continuing salvage operations (Pelton SS Co Ltd v. North of England Protecting and Indemnity Association, The Zelo (1925) 22 Ll LR 510, disapproving the navigability test laid down in Chandler v. Blogg [1898] 1 QB 32). It is possible to extend the definition to encompass fixed objects such as piers (Union Marine Insurance Co v. Borwick [1895] 2 QB 279). Liability for a collision between the insured vessel and vessel A, which causes vessel A to collide with vessel B, is within the collision clause (France, Fenwick & Co Ltd v. Merchants’ Marine Insurance Co Ltd [1915] 3 KB 290). If both vessels are to blame, the indemnity is determined by means of cross-liabilities. At common law the principle of single liability was recognised (Stoomvaart Maatschappij Nederland v. P&O Steam Navigation Co (1882) 7 App Cas 795; London Steamship Owners Insurance Co v. Grampian Steamship Co (1890) 24 QB 663). Under the single liability basis of calculation, the liability of each vessel is determined and a set off of the liabilities is applied, so that the vessel which is liable for the greater sum simply pays the balance to the other. That principle is ousted by the Institute Time Clauses Hulls, cl 8, the Institute Voyage Clauses Hulls, cl 6 and the International Hull Clauses, cl 6, in favour of cross-liabilities. Under the cross-liabilities approach, the respective liability of each vessel to the other is assessed and 3/4ths of the liability of one vessel to the other is paid by the underwriters, with the other 1/4 being borne by the assured. The collision clause appears to apply only to tort liabilities, and not to those which arise in contract (Furness Withy & Co Ltd v. Duder [1936] 2 KB 461) or under statute (Hall Brothers SS Co Ltd v. Young, ‘‘The Trident’’ [1939] 1 KB 748). The collision

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clause does not extend to liability for personal injury or for consequential losses (Taylor v. Dewar (1864) 5 B & S 58; Xenos v. Fox (1869) LR 4 CP 665) or the removal of obstructions (‘‘The North Britain’’ [1894] P 77; Tatham, Bromage & Co v. Burr, ‘‘The Engineer’’ [1898] AC 382). There is a distinction between insuring property against liability, in which case the measure of the assured’s interest is potential liability, and insuring property on a first party basis, in which case the measure of the assured’s interest is the value of the property (Hill v. Scott [1895] 2 QB 713). For the property insurable interest of a person in possession of goods, see s 5. ‘‘Maritime perils’’: Various of the terms used in this provision are partly defined in the Schedule to the Marine Insurance Act 1906: perils of the sea (Sched, r 7); pirates (Sched, r 8); thieves (Sched, r 9); arrests, etc (Sched, r 10); barratry (Sched, r 11). The definition of ‘‘maritime perils’’ is not exhaustive (as evidenced by the words ‘‘that is to say’’), and may include ancillary forms of loss, such as mortgagee’s interest insurance or mechanical failure (Continental Illinois National Bank & Trust Co of Chicago v. Bathurst, ‘‘The Captain Panagos DP ’’ [1985] 1 Lloyd’s Rep 625). It is not possible, despite the concluding words of the definition, to convert a non-marine risk into a marine risk merely by designation (‘‘The Captain Panagos DP ’’ [1985] 1 Lloyd’s Rep 625).

Insurable Interest Avoidance of wagering or gaming contracts 4.—(1) Every contract of marine insurance by way of gaming or wagering is void. (2) A contract of marine insurance is deemed to be a gaming or wagering contract— (a) Where the assured has not an insurable interest as defined by this Act, and the contract is entered into with no expectation of acquiring such an interest; or (b) Where the policy is made ‘‘interest or no interest,’’ or ‘‘without further proof of interest than the policy itself,’’ or ‘‘without benefit of salvage to the insurer,’’ or subject to any other like term: Provided that, where there is no possibility of salvage, a policy may be effected without benefit of salvage to the insurer. Notes Wagers were lawful contracts at common law but a wager on a marine risk ran the risk of being rendered unenforceable where the court construed the contract as one requiring proof of loss by the assured (Whittingham v. Thornburgh (1690) 2 Vern 206; Martin v. Sitwell (1691) 1 Show 156; Goddard v. Garrett (1692) 2 Vern 269; Le Pypre v. Farr (1716) 2 Vern 516; Fitzgerald v. Pole (1754) 4 Bro Parl Cas 439). For this reason, the practice developed of specifically stating in the policy that no proof of interest was required: such policies became known as ‘‘ppi’’ (policy proof of interest) contracts, although the term ‘‘ppi’’ encompasses other forms of wording to the same effect. Wagering policies and ppi policies were outlawed by the Marine Insurance Act 1745, and wagers in general were rendered void by s 18 of the Gaming Act 1845, the latter having been repealed by the Gambling Act 2005. Section 4 of the 1906 Act replicates the effect of these two earlier provisions. Assuming that the assured possesses an insurable interest, the nature of that interest is not a material fact for the purposes of disclosure under s 18 of the 1906 Act (Carruthers v. Sheddon (1815) 6 Taunt 14; Irving v. Richardson (1831) 2 B & Ad 193; Crowley v. Cohen (1832) 3 B & Ad 478; Mackenzie v. Whitworth (1875) LR 1 Ex D 36; O’Kane v. Jones, ‘‘The Martin P ’’ [2005] Lloyd’s Rep IR 174). Subs (1) For a contract to contravene this provision, there must be some intention on the part of the assured to wager rather than to insure a possible future interest (Kent v. Bird (1777) 2 Cowp 583; Gedge v. Royal Exchange Assurance Corporation [1900] 2 QB 214; Coker v. Bolton [1912] 3 KB 315, and cf Newbury International Ltd v. Reliance National Insurance Co (UK) Ltd [1994] 1 Lloyd’s Rep 83). Subs (2) sets out two specific situations in which a policy is deemed to be by way of gaming or wagering, but it would seem that subs (1) is not confined to these situations. Subs (2) The two limbs of subs (2) are alternative grounds on which a contract may fall within s 4. Subs (2)(a) The contract is valid if the assured either possesses an insurable interest at the outset, or has an expectation of acquiring an interest during the currency of the policy. The test for expectation is both subjective and objective, in that the assured must believe that an interest will be acquired and there must be a reasonable basis for this belief (Hodgson v. Glover (1805) 6 East 316; Knox v. Wood (1808) 1 Camp 543; Eyre v. Glover (1812) 16 East 218; Anderson v. Morice (1876) 1 App Cas 713; Buchanan & Co v. Faber (1899) 4 Com Cas 223; Moran, Galloway & Co v. Uzielli [1905] 2 KB 555). Where the assured possesses some insurable interest, overinsurance is not wagering within s 4(2)(a) (Glafki Shipping Co SA v. Pinios Shipping Co, ‘‘The Maria’’ [1984] 1 Lloyd’s Rep 660), although the assured may be required to disclose substantial overinsurance under s 18. Subs (2)(b) Where a policy is made in this or equivalent form, the policy is void even though it is made on good interest (Cheshire & Co v. Vaughan Bros & Co [1920] 3 KB 240; Edwards & Co v. Motor Union Insurance

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Co [1922] 2 KB 249; Re Overseas Marine Insurance Co Ltd (1930) 36 Ll LR 183), although the premium may be recoverable in such a case (Re London County Commercial Reinsurance Office Ltd [1922] 2 Ch 67, putting a gloss on s 84(3)(c) of the Marine Insurance Act 1906). It is immaterial that the ppi clause is detachable (Re London County Commercial Reinsurance Office Ltd [1922] 2 Ch 67). The Gambling Act 2005, which has repealed and replaced virtually all of the UK’s gambling legislation, has an uncertain effect on s 4 of the Marine Insurance Act 1906. Section 335 of the Gambling Act 2005 states: ‘‘(1) The fact that a contract relates to gambling shall not prevent its enforcement. (2) Subsection (1) is without prejudice to any rule of law preventing the enforcement of a contract on the grounds of unlawfulness (other than a rule relating specifically to gambling).’’ As a result, gambling contracts are valid and enforceable under s 335(1), although any rule of law which does not relate specifically to gambling and which renders a contract unlawful remains operative under s 335(2). The starting point is that a marine insurance contract made by way of gaming or wagering is enforceable under s 335(1), and the prohibition is maintained only if s 4 of the Marine Insurance Act 1906 is preserved by s 335(2). That preservation is possible only in respect of a rule of law preventing the enforcement of a contract on the grounds of unlawfulness which is not one relating specifically to gambling. It is arguable that s 4 of the 1906 has been deprived of effect by s 335(1) of the 2005 Act: s 4 of the 1906 does not render contracts unlawful but merely void; and even if that is wrong s 4 is clearly one which relates specifically to gambling.

Insurable interest defined 5.—(1) Subject to the provisions of this Act, every person has an insurable interest who is interested in a marine adventure. (2) In particular a person is interested in a marine adventure where he stands in any legal or equitable relation to the adventure or to any insurable property at risk therein, in consequence of which he may benefit by the safety or due arrival of insurable property, or may be prejudiced by its loss, or damage thereto, or by the detention thereof, or may incur liability in respect thereof. Notes Subs (1) For the definition of ‘‘marine adventure’’, see s 3(2). It has been said the concept of insurable interest in a marine adventure is a broad one: Feasey v. Sun Life Assurance Corporation of Canada [2003] Lloyd’s Rep IR 640. The assured may thus invest in a marine adventure and insure the subject matter of that marine adventure even though he does not own or possess the subject matter in question: see Wilson v. Jones (1867) LR 2 Exch 139—shareholder has right to insure adventure undertaken by company. Subs (2) The definition of insurable interest is derived from the judgment of Lawrence J in Lucena v. Craufurd (1806) 2 Bos & PNR 269, a wide definition approved generally in Feasey v. Sun Life Assurance Corporation of Canada [2003] Lloyd’s Rep IR 640. The definition is not exhaustive, and was extended by Colman J in National Oilwell (UK) Ltd v. Davy Offshore Ltd [1993] 2 Lloyd’s Rep 582 to cover cases in which the assured is not the owner or possessor of property but his relation to it is such that he may suffer loss or incur liability in respect of it should it be damaged. See also State of Netherlands v. Youell [1997] 2 Lloyd’s Rep 440, confirming the concept of the ‘‘pervasive insurable interest’’, Deepak Fertilisers & Petrochemical Corporation v. Davy McKee [1999] 1 Lloyd’s Rep 387 in which the Court of Appeal held that a sub-contractor may have an insurable interest in the entirety of the insured subject-matter on the basis that its loss or destruction will deprive the sub-contractor of the opportunity to carry out its contract (the insurable interest by definition coming to an end when the sub-contractor’s tasks have been performed in full), and O’Kane v. Jones, ‘‘The Martin P ’’ [2005] Lloyd’s Rep IR 174 in which it was held that the manager of a vessel had an insurable interest in the vessel by reason of loss which the manager would suffer and the liability which it would face in the event of any loss. The principle that an insurable interest may go beyond a pure pecuniary interest, and may extend to these types of interest, was confirmed in Feasey v. Sun Life Assurance Corporation of Canada [2003] Lloyd’s Rep IR 640. There are specific illustrations of insurable interest given in ss 7 to 14, but there are also many decided cases dealing with other forms of interest. What follows is a list of authorities on the insurable interest required to obtain a valid policy. Insurance on ship or cargo: A person may insure a ship or its cargo: (a) which he owns (Herbert v. Carter (1787) 1 TR 745), even if it is mortgaged (insurance being possible under s 14(1) of the Marine Insurance Act 1906 up to the full value of the property) or chartered (Hobbs v. Hannam (1811) 3 Camp 93); (b) which is in his custody, in which case he may insure for the full insurable value and not merely in respect of his own liability (North British Insurance Co v. Moffatt (1871) LR 7 CP 25, and see the note to s 14(2));

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(c) which he has agreed to buy (whether or not property has passed to him) or which is at his risk (Stephens v. Australasian Insurance Co (1872) LR 8 CP 18; Allison v. Bristol Marine Insurance Co (1876) 1 App Cas 209; Wunsche International v. Tai Ping Insurance Co [1998] 2 Lloyd’s Rep 8); (d) which he has chartered or hired (Linelevel Ltd v. Powszechny Zaklad Ubezpieczen SA, The Nore Challenger [2005] 2 Lloyd’s Rep 534); (e) which he has agreed to sell (Re National Benefit Assurance Co Ltd (1933) 45 Ll LR 147); or (f) over which he has a security (Wolff v. Horncastle (1798) 1 Bos & P 316—right to lien; Briggs v. Merchant Traders Association (1849) 13 QB 167—lien; Sutherland v. Pratt (1843) 11 M & W 296—pledge). For mortgages, see s 14. A shareholder or other unsecured creditor of a company cannot insure its assets (Manfield v. Maitland (1821) 4 B & A582; Moran, Galloway & Co v. Uzielli [1905] 2 KB 555; Sharp v. Sphere Drake Insurance Co, ‘‘The Moonacre’’ [1992] 2 Lloyd’s Rep 501, O’Kane v. Jones, ‘‘The Martin P ’’ [2005] Lloyd’s Rep IR 174), and a person in possession of property but without any right to use or enjoy it has no insurable interest in it (Sharp v. Sphere Drake Insurance Co Ltd, ‘‘The Moonacre’’ [1992] 2 Lloyd’s Rep 501). However, as noted above, an assured who stands to suffer loss (whether in the form of a lost contract or the incurring of liability) in the event that the subject matter of an insured adventure is lost or damaged can insure that subject matter (Wilson v. Jones (1867) LR 2 Exch 139; Feasey v. Sun Life Assurance Corporation of Canada [2003] Lloyd’s Rep IR 640). A mere expectation is not, however, insurable: a person who hopes to benefit in the future from the arrival of a vessel or cargo has no right to insure it, as his interest is a mere expectation not recognised by the law (Price v. Maritime Insurance Co [1901] 2 KB 412, and see, on expectations: Devaux v. Steele (1840) 6 Bing NC 358; Buchanan & Co v. Faber (1899) 4 Com Cas 223). Freight: Freight may be insured when it is at the assured’s risk: in the usual case in which the carrier of goods earns freight only when the goods arrive safely he has insurable interest from the commencement of the voyage (Miller v. Warre (1824) 1 C & P 237; Flint v. Flemyng (1830) 1 B & Ad 45; Dakin v. Oxley (1864) 15 CBNS 646; Barber v. Fleming (1869) LR 5 QB 59). For advance freight, see s 12. Liability: A person may insure his potential liability, whether contractual or tortious, to third parties. A policy which covers lives or property may, on its proper construction, also extend to liability which may be incurred in the event that the subject matter is damaged, injured or lost: Feasey v. Sun Life Assurance Corporation of Canada [2003] Lloyd’s Rep IR 640.

When interest must attach 6.—(1) The assured must be interested in the subject-matter insured at the time of the loss though he need not be interested when the insurance is effected: Provided that where the subject-matter is insured ‘‘lost or not lost,’’ the assured may recover although he may not have acquired his interest until after the loss, unless at the time of effecting the contract of insurance the assured was aware of the loss, and the insurer was not. (2) Where the assured has no interest at the time of the loss, he cannot acquire interest by any act or election after he is aware of the loss. Notes Subs (1) This subsection reflects s 4(2)(a), requiring actual or potential interest at the date of the policy. Its effect is reproduced in cl 11.1 of the Institute Cargo Clauses. If the assured fails to acquire an insurable interest, or loses that interest, during the currency of the policy, the principle of indemnity—embodied in s 6(1)—prevents recovery by him. In the case of the sale of a vessel or cargo, it will be important to know whether the assured has either the property or risk in the subject-matter at the date of the loss, as either will support an insurable interest (Powles v. Innes (1843) 11 M & W 10, Joyce v. Swann (1864) 13 CBNS 84; Seagrave v. Union Marine Insurance Co (1866) LR 1 CP 305; North of England Oil Cake Co v. Archangel Insurance Co (1875) LR 10 QB 249; Anderson v. Morice (1876) 1 App Cas 713; Colonial Insurance Co of New Zealand v. Adelaide Marine Insurance Co (1886) 12 App Cas 128; Piper v. Royal Exchange Assurance (1932) 44 Ll LR 103; Re National Benefit Assurance Co Ltd (1933) 45 Ll LR 147). In the case of insurance against loss of earnings in respect of a vessel, there is insurable interest only when the vessel is not off-hire, so that the question of insurable interest must be looked at on a day-to-day basis: Cepheus Shipping Corporation v. Guardian Royal Exchange Assurance plc [1995] 1 Lloyd’s Rep 622. An agent of the assured has no insurable interest in the insured subject-matter, and cannot recover in the event of its loss (Wolff v. Horncastle (1798) 1 Bos & P 316; Seagrave v. Union Marine Insurance Co (1866) LR 1 CP 305), although by way of exception the assured’s broker is permitted to sue on the policy (Provincial Insurance Co of Canada v. Leduc (1874) LR 6 PC 224; Transcontinental Underwriting Agency v. Grand Union Insurance Co Ltd [1987] 2 Lloyd’s Rep 409; Pan Atlantic Insurance Co Ltd v. Pine Top Insurance Co Ltd [1994] 3 All ER 581). If the assured has a mere expectation of obtaining an insurable interest, he has no actual insurable interest in the subject-matter which can support a claim, and his only loss will be of profit which is not covered unless the policy expressly so provides (Stockdale v. Dunlop (1840) 6 M & W 224; Halhead v. Young

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(1856) 6 E & B 312, and see the authorities cited in the note to s 3(2)(a). On the same principle, if the unpaid vendor of goods exercises his right of stoppage in transit, under s 44 of the Sale of Goods Act 1979, the purchaser has no insurable interest and cannot sustain a claim under the policy (Clay v. Harrison (1829) 10 B & C 99), and if goods are insured and are not delivered, the assured’s loss would seem to be not the goods themselves but loss of profits (Anderson v. Morice (1876) 1 App Cas 713; Fuerst Day Lawson Ltd v. Orion Insurance Co Ltd [1980] 1 Lloyd’s Rep 656). Proviso: The proviso deals with the situation in which property is insured on the assumption that it is undamaged at the date of the policy, eg cargo which is thought to be in course of transit. As long as the assured is unaware of any loss, the policy is valid and the underwriters must pay even though the loss has occurred prior to the insurance becoming effective. Equally, the underwriters may bring an action for the premium (Bradford v. Symondson (1881) 7 QBD 456). The proviso is echoed by the Schedule, r 1, and is based on, inter alia; Mead v. Davison (1835) 3 Ad & El 303; Sutherland v. Pratt (1843) 11 M & W 296; Gibson v. Small (1853) 4 HL Cas 353; Gledstanes v. Royal Exchange Assurance Corporation (1864) 34 LJQB 30. The proviso is repeated in art 11.2 of the Institute Cargo Clauses. Subs (2) This is based on Anderson v. Morice (1876) 1 App Cas 713.

Defeasible or contingent interest 7.—(1) A defeasible interest is insurable, as also is a contingent interest. (2) In particular, where the buyer of goods has insured them, he has an insurable interest, notwithstanding that he might, at his election, have rejected the goods, or have treated them as at the seller’s risk, by reason of the latter’s delay in making delivery or otherwise. Notes Subs (1) A defeasible interest is one which is liable to be defeated by subsequent events. The principle is based on: Lucena v. Craufurd (1806) 2 Bos PNR 269; Stirling v. Vaughan (1809) 11 East 619; Colonial Insurance Co of New Zealand v. Adelaide Marine Insurance Co (1886) 12 App Cas 128. Subs (2) For common law illustrations, see: Sparkes v. Marshall (1836) 2 Bing NC 761; Anderson v. Morice (1876) 1 App Cas 713.

Partial interest 8. A partial interest of any nature is insurable. Notes A partial interest will include the interest of a joint owner of property (Page v. Fry (1800) 2 B & P 240; Robertson v. Hamilton (1811) 14 East 522; Griffiths v. Bramley-Moore (1878) 4 QBD 70) and the case in which the risk in an undivided bulk cargo has passed to the purchaser (Inglis v. Stock (1885) 10 App Cas 263). Under the Sale of Goods Act 1979, s 20A (inserted by the Sale of Goods (Amendment) Act 1995), property in part of an undivided bulk will pass to a buyer who has paid for that part.

Re-insurance 9.—(1) The insurer under a contract of marine insurance has an insurable interest in his risk, and may re-insure in respect of it. (2) Unless the policy otherwise provides, the original assured has no right or interest in respect of such re-insurance. Notes Subs (1) It is well established that the reinsured’s insurable interest for the purpose of a reinsurance agreement is his liability to the assured. Reinsurance is not a separate contract by the reinsured on the original subject-matter. For a general discussion of reinsurance, see Butler and Merkin, Reinsurance Law, Sweet & Maxwell, looseleaf. In Feasey v. Sun Life Assurance Corporation of Canada [2003] Lloyd’s Rep IR 637 the Court of Appeal by a majority held that the reinsurer of a Lloyd’s syndicate, which had insured P Club’s liability to indemnify shipowners against claims by injured employees, had an insurable interest in the lives of the employees: although the policy was expressed to be a life policy, the reinsurer had an insurable interest in its liability to the Syndicate, and this was covered by the policy. Subs (2) This provision merely reflects the doctrine of privity of contract: the contract of insurance and the contract of reinsurance are separate arrangements, so that the assured cannot sue on the reinsurance (see Grecoair Inc v. Tilling [2005] Lloyd’s Rep IR 151). It is doubtful, contrary to the assumption in subs (2), whether any reinsurance term permitting the assured to sue the reinsurers directly (eg a cut-through clause operating where the reinsured becomes insolvent) is enforceable by the assured. As a matter of general law,

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the abolition of the privity of contract doctrine by the Contracts (Rights of Third Parties) Act 1999 has rendered a cut-through clause potentially enforceable, although English insolvency law might well treat this type of clause as a contravention of the pari passu principle which demands equal treatment of unsecured creditors in a winding up or bankruptcy. Further, the clause may be registrable as a charge on the reinsured’s assets under s 395 of the Companies Act 1985. These objections may disappear if the reinsured is a foreign company and the domestic insolvency law of the relevant country does not impose any restrictions on enforcement of cut-through clauses.

Bottomry 10. The lender of money on bottomry or respondentia has an insurable interest in respect of the loan. Notes These forms of security are now obsolete. Under each, the master of the vessel was permitted, in time of emergency to raise money on security of the vessel and freight (bottomry bond) or cargo (respondentia) to enable the voyage to be completed. For a fuller definition, see ‘‘The James W Elwell’’ [1921] P 351. Cf also: Simonds v. Hodgson (1832) 3 B & Ad 50; Stainbank v. Fenning (1851) 11 CB 59; Stainbank v. Shepard (1853) 13 CB 418.

Master’s and seamen’s wages 11. The master or any member of the crew of a ship has an insurable interest in respect of his wages. Notes At common law the wages of seamen could not be insured, on the basis that wages were payable only if freight was earned by the vessel. The link between freight and wages was severed by the Merchant Shipping Act 1854, s 183 (now s 38 of the Merchant Shipping Act 1995), thereby removing any objection to the crew insuring their wages.

Advance freight 12. In the case of advance freight, the person advancing the freight has an insurable interest, in so far as such freight is not repayable in case of loss. Notes This section is a specific illustration of the general rule that the person who bears the risk of the loss of freight may insure it (see the note to s 5(2) of the Marine Insurance Act 1906). If advance freight is not repayable in the event of loss of cargo, the cargo owner may insure the sum at risk. Conversely, if advance freight is repayable in the event of loss of cargo, the carrier may insure the sum at risk. The principles are discussed in Allison v. Bristol Marine Insurance Co (1876) 1 App Cas 209. A distinction has to be drawn between advance freight, which is generally not repayable unless the contract provides to the contrary, and some other form of repayable advance to the carrier (Manfield v. Maitland (1821) 4 B & Ald 582; Droege v. Stuart, ‘‘The Varnak’’ (1869) LR 2 PC 505; Wilson v. Martin (1856) 11 Exch 684; Hicks v. Shield (1857) 26 LJQB 205; Allison v. Bristol Marine Insurance (1876) 1 App Cas 209).

Charges of insurance 13. The assured has an insurable interest in the charges of any insurance which he may effect. Notes This section is based on Usher v. Noble (1810) 12 East 639. Charges include the premium and the broker’s commission, assuming (contrary to the usual practice) that it is not incorporated in the gross premium (United States Shipping Co v. Empress Assurance Co [1907] 1 KB 259).

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Quantum of interest 14.—(1) Where the subject-matter insured is mortgaged, the mortgagor has an insurable interest in the full value thereof, and the mortgagee has an insurable interest in respect of any sum due or to become due under the mortgage. (2) A mortgagee, consignee, or other person having an interest in the subject-matter insured may insure on behalf and for the benefit of other persons interested as well as for his own benefit. (3) The owner of insurable property has an insurable interest in respect of the full value thereof, notwithstanding that some third person may have agreed, or be liable, to indemnify him in case of loss. Notes The interests of a mortgagor and mortgagee are distinct, even if insured under the same policy. The fact that the underwriters have a defence against one of the parties will not, therefore, mean that the other is denied a claim (Small v. United Kingdom Marine Mutual Insurance Association [1897] 2 QB 311), although if the mortgagor has been guilty of scuttling the vessel, the loss is not by perils of the sea and the mortgagee will be defeated by want of insured peril (Samuel & Co Ltd v. Dumas [1924] AC 431). Subs (1) This provision reflects the common law principle of indemnity. See, eg Alston v. Campbell (1779) 4 Bro Parl Cas 476; Irving v. Richardson (1831) 2 B & Ad 193; Hutchinson v. Wright (1858) 25 Beav 444; Ward v. Beck (1863) 13 CBNS 668. An assured with an equitable right to a mortgage (eg where the mortgage has yet to be executed) has an insurable interest under the general provisions of s 5 of the 1906 Act (Samuel & Co Ltd v. Dumas [1924] AC 431). Subs (2) This subsection does not create any statutory authority of an interested person to insure on behalf of others, but simply provides that if such authority exists then the interested person may insure: O’Kane v. Jones, ‘‘The Martin P’’ [2005] Lloyd’s Rep IR 174. It is now generally accepted that a person interested in subject-matter can insure his interest as well as those of other interested parties under a single composite policy. If other interests have not been insured, the assured can recover only the amount of his own interest (Irving v. Richardson (1831) 2 B & Ad 193; Labroke v. Lee (1850) 4 De G & Sm 106; Scott v. Globe Marine Insurance Co Ltd (1896) 1 Com Cas 370), although it is established that a warehouseman or other person in possession of property can insure and recover its full value and must account to other interests for any sums in excess of his own interest (Crowley v. Cohen (1832) 3 B & Ad 478; Waters v. Monarch Fire and Life Assurance Co (1856) 5 E & B 870; North British and Mercantile Insurance Co v. Moffatt (1871) LR 7 CP 25; Joyce v. Kennard (1871) LR 7 QB 78; Stephens v. Australasian Insurance Co (1872) LR 8 CP 18; Engel v. Lancashire General Insurance Co Ltd (1925) 21 Ll LR 327; Williams v. Atlantic Assurance Co Ltd [1933] 1 KB 81; Hepburn v. Tomlinson (Hauliers) [1966] AC 451; Petrofina (UK) Ltd v. Magnaload Ltd [1984] QB 127; Ramco (UK) Ltd v. International Insurance Co of Hannover Ltd [2004] Lloyd’s Rep IR 606; Re Dibbens [1990] BCLC 677—the last-mentioned case demonstrating that if there is a contractual duty to insure, the surplus proceeds are held on trust). Cf also: Robertson v. Hamilton (1811) 14 East 522; Irving v. Richardson (1831) 2 B & Ad 193; Ebsworth v. Alliance Marine Co (1873) LR 8 CP 596). The authorities were considered by the Court of Appeal in Ramco, and that Court concluded that: (a) a policy which covers goods for which the bailee is ‘‘responsible’’ covers only those goods for which the assured bears a legal liability; and (b) a policy which covers goods ‘‘in trust or commission’’ meant goods entrusted to the assured, and was not confined to goods which were held on trust in the strict equitable sense. Where the mortgage has been paid off, the mortgagee will in the ordinary course of events not suffer any loss in the event of the occurrence of an insured peril (Levy & Co v. Merchants’ Marine Insurance Co (1885) Cab & Ell 474, where there was recovery on other grounds; Chartered Trust & Executor Co v. London & Scottish Assurance Corporation Ltd (1923) 39 TLR 608). Subs (3) For common law authority on this point, see: Hobbs v. Hannam (1811) 3 Camp 93; Provincial Insurance Co of Canada v. Leduc (1874) LR 6 PC 224. If the third party has paid the assured, the assured has suffered no loss and cannot make any claim against his underwriters. By contrast, if the third party has yet to pay the underwriters, they will, having themselves paid, be subrogated to the assured’s rights against the third party to the extent of their payment: see the Marine Insurance Act 1906, s 79.

Assignment of interest 15. Where the assured assigns or otherwise parts with his interest in the subject-matter insured, he does not thereby transfer to the assignee his rights under the contract of insurance, unless there be an express or implied agreement with the assignee to that effect. But the provisions of this section do not affect a transmission of interest by operation of law.

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Notes The rule in this section is based on: Powles v. Innes (1843) 11 M & W 10; North of England Pure Oil Cake Co v. Archangel Maritime Insurance Co (1875) LR 10 QB 249. The effect of an assignment of the subject-matter without the policy is to bring the policy to an end (Marine Insurance Act 1906, s 51). Equally, an assignment of the policy without a contemporaneous assignment of the subject-matter terminates the policy. For the form and consequences of assignment, see Marine Insurance Act 1906, s 50.

Insurable Value Measure of insurable value 16. Subject to any express provision or valuation in the policy, the insurable value of the subject-matter insured must be ascertained as follows— (1) In insurance on ship, the insurable value is the value, at the commencement of the risk, of the ship, including her outfit, provisions and stores for the officers and crew, money advanced for seamen’s wages, and other disbursements (if any) incurred to make the ship fit for the voyage or adventure contemplated by the policy, plus the charges of insurance upon the whole: The insurable value, in the case of a steamship, includes also the machinery, boilers, and coals and engine stores if owned by the assured, and, in the case of a ship engaged in a special trade, the ordinary fittings requisite for that trade: (2) In insurance on freight, whether paid in advance or otherwise, the insurable value is the gross amount of the freight at the risk of the assured, plus the charges of insurance: (3) In insurance on goods or merchandise, the insurable value is the prime cost of the property insured, plus the expenses of and incidental to shipping and the charges of insurance upon the whole: (4) In insurance on any other subject-matter, the insurable value is the amount at the risk of the assured when the policy attaches, plus the charges of insurance. Notes The definition of insurable value is significant where the policy is unvalued. Under a valued policy the measure of the assured’s indemnity is based on the agreed value, whereas under an unvalued policy ‘‘insurable value’’ determines the amount recoverable in most cases (see ss 67–70). The insurable value takes the value of the subject-matter when the risk attaches and not—as in the case of non-marine insurance—immediately before the occurrence of the event causing the loss, although the presumption that this is the appropriate date is rebuttable where the evidence demonstrates that the assured’s loss is properly felt at the time and place of the casualty. The most recent cases hold that the standard London market wordings, which speak of the provision of an indemnity, are inconsistent with the basic rule in s 16, and that s 16 has been ousted by agreement: accordingly, in the vast majority of cases the principle will be that the assured’s loss is measured by the difference in the value of the subject matter immediately before and immediately after the loss (‘‘The Captain Panagos’’ [1985] 1 Lloyd’s Rep 625, Thor Navigation Inc v. Ingosstrakh Insurance [2005] Lloyd’s Rep IR 490). Subs (1) For the common law basis of valuation at the date of the commencement of the risk, see Herring v. Janson (1895) 1 Com Cas 177. The definition of ‘‘ship’’ in r 15 of the Schedule to the Marine Insurance Act, is somewhat narrower, a discrepancy which may be of significance where the policy itself does not define the limits of the cover, as indeed is the case with the Institute Hull Clauses which refer merely to the ‘‘vessel’’. For ‘‘stores and provisions’’ see Brough v. Whitmore (1791) 4 TR 206, Hill v. Patten (1807) 8 East 373 and Forbes v. Aspinall (1811) 13 East 323, and for ‘‘ordinary fittings’’ see Hogarth v. Walker [1900] 2 KB 283. Early cases held that fishing equipment was not covered by a hulls policy (Hoskins v. Pickersgill (1783) 3 Dougl 222; Gale v. Laurie (1826) 5 B & C 156), but the concluding words of the definition appear to reverse this position. At common law a hull and machinery policy on a steamship did not cover coal or provisions (Roddick v. Indemnity Mutual Marine Insurance Co [1895] 2 QB 380), the position under the statute being reversed. Subs (2) For the common law basis, see: Palmer v. Blackburn (1822) 1 Bing 61; United States Shipping Co v. Empress Assurance Corporation [1908] 1 KB 115. Subs (3) For the common law basis, see: Usher v. Noble (1810) 12 East 639. Prima facie evidence of the prime cost of goods is the invoice price paid by the assured, but if the value has altered before the policy incepts, the value at the latter date is the relevant value (Williams v. Atlantic Assurance Co Ltd [1933] 1 KB 81; Berger and Light Diffusers Pty Ltd v. Pollock [1973] 2 Lloyd’s Rep 442).

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Marine Insurance Disclosure and Representations

Insurance is uberrimae fidei 17. A contract of marine insurance is a contract based upon the utmost good faith, and, if the utmost good faith be not observed by either party, the contract may be avoided by the other party. Notes Section 17 states the general principle of utmost good faith which has been applicable to insurance contracts since the decision of Lord Mansfield in Carter v. Boehm (1766) 3 Burr 1905. The duty of utmost good faith is stated to be of a general nature (Container Transport International v. Oceanus Mutual [1984] 1 Lloyd’s Rep 476; Marc Rich & Co AG v. Portman [1996] 1 Lloyd’s Rep 430), but two specific illustrations of it as applied to the assured are provided by s 18 (duty to disclose material facts before the contract is made) and s 20 (duty to avoid pre-contractual misrepresentation). These are by far the most important illustrations, although there may in exceptional circumstances be a post-contractual duty owed by the assured: see below. The underwriters’ right is to avoid the contract ab initio on an all or nothing basis, although if the policy is composite in that there are two or more assureds with different interests, the position of each assured is to be considered separately: New Hampshire Insurance v. MGN Ltd [1997] LRLR 24; Arab Bank v. Zurich Insurance Ltd [1999] 1 Lloyd’s Rep 262; FNCB Ltd v. Barnet Devanney (Harrow) Ltd [1999] Lloyd’s Rep IR 459. The assured cannot require the underwriters to reinstate the contract by proffering an additional premium, as proportionality does not form part of English law (Pan Atlantic Insurance Co Ltd v. Pine Top Insurance Co Ltd [1994] 3 All ER 581). Damages are not awardable for any breach of duty (Banque Keyser Ullmann SA v. Skandia (UK) Insurance Co Ltd [1990] 1 QB 665), although if a tort is committed by the assured or the broker—in the form of a fraudulent or negligent false statement—the underwriters will have the right to claim damages for any loss they have suffered if they choose not to avoid the policy or have contracted out of their right to do so (HIH Casualty and General Insurance v. Chase Manhattan Bank [2003] Lloyd’s Rep IR 230). The right may be lost by waiver or affirmation where the underwriters, in full knowledge of the assured’s breach of duty, act in a fashion which induces the assured to believe that the right will not be exercised (Iron Trades Mutual Insurance Co Ltd v. Companhia de Seguros Imperio [1991] 1 Re LR 225; Svenska Handelsbanken v. Sun Alliance & London Insurance plc [1996] 1 Lloyd’s Rep 519; Insurance Corporation of the Channel Islands v. Royal Hotel [1998] Lloyd’s Rep IR 151; Callaghan and Hedges v. Thompson [2000] Lloyd’s Rep IR 125; Cape plc v. Iron Trades Employers Insurance Association Ltd [2004] Lloyd’s Rep IR 75; Spriggs v. Wessington Court School [2005] Lloyd’s Rep IR 474). At Lloyd’s, the issue of a policy is not regarded as waiver, as this act is merely ministerial and does no more than to allow the assured to contest the underwriters’ avoidance in civil proceedings (Universal Marine Insurance Co v. Morrison (1873) LR 8 Exch 197, although contrast the position where the underwriters accept further premiums and otherwise continue to operate the policy without indicating that there is any problem—Drake Insurance plc v. Provident Insurance plc [2004] Lloyd’s Rep IR 277). See also Nicholson v. Power (1869) 20 LT 580, where the policy was issued subject to a reservation of rights. An agreement by the parties to cancel the policy and treat it as never having existed is not waiver of the right to avoid it in the event that the cancellation is not effective for all purposes (O’Kane v. Jones, ‘‘The Martin P ’’ [2005] Lloyd’s Rep IR 174). Reliance on contractual rights under the policy may amount to a waiver (WISE Underwriting Agency v. Grupo Nacional Provincial SA [2004] Lloyd’s Rep IR 962—giving contractual notice of cancellation; Moore Large Co Ltd v. Hermes Credit Guarantee plc [2003] Lloyd’s Rep IR 315—reliance on policy provision to defend claim, with utmost good faith pleaded only by amendment to pleadings just before trial), unless there is some reservation of rights by the underwriters or unless the contractual rights relied upon are merely ancillary to the assured’s main obligations under the policy (eg claims conditions —Strive Shipping Corporation v. Hellenic Mutual War Risks Association (Bermuda) Ltd, ‘‘The Grecia Express’’ [2002] Lloyd’s Rep IR 669, distinguishing Iron Trades Mutual Insurance Co Ltd v. Companhia de Seguros Imperio [1991] 1 Re LR 225, where the policy condition relied upon by the reinsurers was a general one requiring disclosure of information and did not relate to claims). Before there can be waiver in this form, it must be shown that the underwriters were actually aware of the assured’s breach of duty, and this may mean that information disclosed to them for other reasons may be treated as not having been received for waiver purposes (Malhi v. Abbey Life Assurance Co Ltd [1996] LRLR 237). Alternatively, the underwriters may be estopped from asserting their right to avoid, where they have unequivocally represented expressly or impliedly that they intend to carry on with the policy and the assured has relied upon that representation. If the policy provides that it is not to be voidable or cancellable, the underwriters may not rely on an innocent breach of the duty of utmost good faith, although they will always have the right to avoid for fraud as the assured cannot contract out of his liability for his own fraud (HIH Casualty and General Insurance v. Chase Manhattan Bank [2003] Lloyd’s Rep IR 230). It was held in Toomey v. Eagle Star Insurance Co (No 2) [1995] 2 Lloyd’s Rep 88 that an exclusion will not cover negligence unless the wording specifically so states,

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although this reasoning is probably inconsistent with the subsequent decision of the House of Lords in HIH Casualty and General Insurance v. Chase Manhattan Bank [2003] Lloyd’s Rep IR 230 in which it was held that an exclusion clause was to be construed as covering negligent as well as purely innocent breach of duty. It was further decided in Toomey that an action for damages for non-innocent misrepresentation, under s 2(1) of the Misrepresentation Act 1967, is not precluded by a clause referring only to avoidance or cancellation. Utmost good faith may in exceptional circumstances be post-contractual, although to date the situations in which the assured owes a post-contractual duty of utmost good faith are confined to a number of clear categories, and in particular there is no general obligation on the assured to disclose facts material to the risk after the contract has been concluded (Ionides v. Pacific Fire and Marine Insurance Co Ltd (1871) LR 6 QB 674; Cory v. Patton (1872) LR 7 QB 304; Lishman v. Northern Maritime Insurance Co (1875) LR 10 CP 179; Niger Co Ltd v. Guardian Assurance Co (1922) 12 Ll LR 175; Willmott v. General Accident Fire and Life Assurance Corporation (1935) 53 Ll LR 156; 15 July; Sirius International Insurance Corporation v. Oriental Assurance Corporation [1999] Lloyd’s Rep IR 343), although if the risk completely changes in nature then the underwriters are automatically discharged from liability as a matter of law (Kausar v. Eagle Star Insurance Co Ltd [2000] Lloyd’s Rep IR 154; Swiss Reinsurance Co v. United India Insurance Co Ltd [2005] Lloyd’s Rep IR 341) and if circumstances change between the presentation of the risk and its acceptance then the change must be disclosed (Assicurazioni Generali SpA v. Arab Insurance Group [2003] Lloyd’s Rep IR 131). The absence of a continuing duty is one consequence of the rule in s 21 of the Marine Insurance Act 1906, that the contract is completed when the slip is scratched. The special situations are as follows. (a) In the case of insurance at Lloyd’s, a duty of utmost good faith is owed to each successive subscribing underwriter, on the basis that a separate contract is made with each underwriter. A false statement made to the leading underwriter is not in principle to be treated as having been made to each underwriter in the following market (Bell v. Carstairs (1810) 2 Camp 543; Forrester v. Pigou (1813) 1 M & S 9; General Accident Fire and Life Assurance Corporation v. Tanter, ‘‘The Zephyr’’ [1984] 1 Lloyd’s Rep 58; Bank Leumi Le Israel BM v. British National Insurance Co Ltd [1988] 1 Lloyd’s Rep 71). However, there is earlier authority to the contrary, allowing all of the underwriters to avoid liability (Barber v. Fletcher (1779) 1 Doug KB 305; Pawson v. Watson (1778) 2 Cowp 785; Brine v. Featherstone (1813) 4 Taunt 869; Robertson v. Marjoribanks (1819) 2 Stark 573) and the most recent cases have consistently held that a false statement to the leading underwriter which is not repeated to the following market may nevertheless give the following market the right to avoid the policy: this may be because the fact that a false statement has been made to the leading underwriter is itself material and has to be disclosed to the following market (assuming, of course, that the assured or his broker were aware of the position), or because market practice is such that the following market are known to rely upon the judgment of the leader. See, for the modern view in favour of the following market: Aneco Reinsurance Underwriting Ltd v. Johnson & Higgins [1998] 1 Lloyd’s Rep 565; International Lottery Management v. Dumas [2002] Lloyd’s Rep IR 237; Brotherton v. Aseguradora Colseguros SA (No 3) [2003] Lloyd’s Rep IR 762; International Management Group (UK) Ltd v. Simmonds [2004] Lloyd’s Rep IR 247; Toomey v. Banco Vitalicio de Espana [2005] Lloyd’s Rep IR 423. (b) When a marine policy is renewed, a fresh contract is made and further disclosure is required. In particular, if statements have been made which were true at the time of original placement, but which have become untrue in a material respect, the assured is under a duty to disclose the changes (ERC Frankona Reinsurance v. American National Insurance Co [2006] Lloyd’s Rep IR 157, where there was no duty of disclosure on renewal because the assured was unaware that the earlier false statements had been made and relied upon). Similarly, where the assured seeks to benefit from a ‘‘held covered’’ clause in a marine policy, under which cover is extended following breach of warranty or expiry of the cover, material facts must be disclosed to the underwriters (Overseas Commodities v. Style [1958] 1 Lloyd’s Rep 546; Liberian Insurance Agency v. Mosse [1977] 2 Lloyd’s Rep 560). (c) Where the assured is under a contractual duty to provide information to underwriters, he is also under a duty to disclose material facts known to him which bear upon that information. If he fails to do so, the policy can be avoided ab initio. The duty is, however, extremely limited. It rests upon the assured having acted in bad faith, which means at the very least recklessness (Alfred McAlpine plc v. BAI (Run-off) Ltd [2000] Lloyd’s Rep IR 352), and it also requires the breach to be of a nature which amounts to a repudiation of the policy. Accordingly, the underwriters will have the right to avoid the policy for breach of the continuing duty of utmost good faith only when they have, as an alternative, the right to treat the policy as at an end for having been repudiated for breach of an express obligation under which the provision of information is required. This was the analysis of Longmore LJ in K/S Merc-Skandia XXXXII v. Lloyd’s Underwriters, ‘‘The Mercandian Continent’’ [2001] Lloyd’s Rep IR 802, where it was pointed out that the continuing duty of utmost good faith could not be a stand-alone duty and was at best an alternative remedy for breach of a fundamental contract term. This reasoning all but deprives the continuing duty of any effect, given that failure to provide information under a contract term will very rarely amount to a repudiation of the policy

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itself, so that the necessary trigger for the continuing duty will not be present. See also New Hampshire Insurance Co v. MGN Ltd [1997] LRLR 24, in which the Court of Appeal held that the mere fact that a policy is cancellable by the giving of notice at the option of the underwriters is not enough to put the assured under a general duty of disclosure. The Mercandian Continent disapproved an earlier line of authority for the proposition that the assured was under a generalised post-contractual duty of utmost good faith which was particularly applicable when the assured submitted details of a loss in order to make a claim (Black King Shipping Co v. Massie, ‘‘The Litsion Pride’’ [1985] 1 Lloyd’s Rep 437; ‘‘The Captain Panagos’’ [1986] 2 Lloyd’s Rep 470; Parker & Heard Ltd v. Generali Assicurazioni SpA, 1988, unrep; Bucks Printing Press Ltd v. Prudential Assurance Co, 1991, unrep; Hussain v. Brown (No 2) unrep; Orakpo v. Barclays Insurance Services Ltd [1995] LRLR 443; Transthene Packaging v. Royal Insurance (UK) Ltd [1996] LRLR 32; Galloway v. Guardian Royal Exchange (UK) Ltd [1999] Lloyd’s Rep IR 209). The earlier cases were effectively undermined by the reasoning of the House of Lords in Manifest Shipping & Co Ltd v. Uni-Polaris Insurance Co Ltd, ‘‘The Star Sea’’ [2001] Lloyd’s Rep IR 247, which doubted the existence of any generalised postcontractual duty of good faith: the case turned, however, on the proposition that any postcontractual duty comes to an end as soon as legal proceedings have been instigated, so that the duty cannot be relied upon in respect of disclosure of documents pending a hearing. (d) ‘‘The Litsion Pride’’ [1985] 1 Lloyd’s Rep 437 has been taken as support for the proposition that the making of a fraudulent claim—by claiming for a loss which has not occurred, seeking to recover an amount greatly in excess of actual loss or submitting false or forged proofs of loss or statements as the circumstances of the loss (fraudulent means and devices)—is a breach of the continuing duty of good faith. This proposition was doubted in The Star Sea and The Mercandian Continent, and rejected by the Court of Appeal in both Agapitos v. Agnew, The Aegeon [2002] Lloyd’s Rep IR 573 and Axa Insurance Co v. Gottlieb [2005] Lloyd’s Rep IR 369. See also Interpart Comerciao e Gestao SA v. Lexington Insurance Co [2004] Lloyd’s Rep IR 690. The position is that a fraudulent claim is now to be dealt with as a matter of contract, and is probably to be regarded as conferring upon the underwriters the right to refuse a claim, by reason of the public policy principle precluding the assured from making a profit from his own wrong. A claim may be fraudulent because (as per the judgment of Mance LJ in Agapitos v. Agnew, ‘‘The Aegeon’’ [2002] Lloyd’s Rep IR 573): the assured has deliberately caused his own loss (see the authorities cited in the note to s 55); the assured has claimed for a loss which has not occurred (Galloway v. Guardian Royal Exchange (UK) Ltd [1999] Lloyd’s Rep IR 209; Direct Line v. Khan [2002] Lloyd’s Rep IR 364; Axa Insurance Co v. Gottlieb [2005] Lloyd’s Rep IR 369); the assured has submitted a grossly inflated claim (Eagle Star Insurance Co Ltd v. Games Video Co, ‘‘The Game Boy’’ [2004] Lloyd’s Rep IR 867, Danepoint Ltd v Underwriting Insurance Ltd [2006] Lloyd’s Rep IR 429); the assured has persisted in pursuing a claim after becoming aware that it was exaggerated (Piermay Shipping Co SA v. Chester, ‘‘The Michael’’ [1979] 2 Lloyd’s Rep 1; the assured has suppressed a defence known to him; or the assured has used fraudulent means and devices to promote a perfectly genuine loss (as in Eagle Star Insurance Co Ltd v. Games Video Co, ‘‘The Game Boy’’ [2004] Lloyd’s Rep IR 867 and Stemson v AMP General Insurance (NZ) Ltd [2006] Lloyd’s Rep IR 852) and it may be that this last category imposes a duty on the assured to disclose the circumstances surrounding his loss—Marc Rich Agriculture Trading SA v. Fortis Corporate Insurance NV [2005] Lloyd’s Rep IR 396. Where a claim is tainted by fraud, either at the time of the loss itself or by reason of the assured’s subsequent conduct in relation to the claim, the entire claim is lost, including any genuine parts of the claim (see: Galloway v. Guardian Royal Exchange (UK) Ltd [1999] Lloyd’s Rep IR 209; Axa Insurance Co v. Gottlieb [2005] Lloyd’s Rep IR 369). A fraudulent claim may, arguably, have the further effect of amounting to a repudiation of the policy by the assured, giving the underwriters the right to terminate the policy as of the date of the loss giving rise to the fraudulent claim, although this is necessarily without prejudice to the obligation of the underwriters to pay valid claims for genuine losses occurring before the loss giving rise to the fraudulent claim. The underwriters cannot in any event rely upon fraud committed by the assured after proceedings have commenced, as this is a matter for the rules of the court (Agapitos v. Agnew, The Aegeon [2002] Lloyd’s Rep IR 573). As far as hulls claims are concerned, cl 45.3–45.4 of the International Hull Clauses state that the underwriters have the right to reject any fraudulent claim, an attempt to codify the judgment in Agapitos v. Agnew, The Aegeon [2002] Lloyd’s Rep IR 573. (e) The assured may be ordered to produce the ships’ papers to the underwriters when a claim is made. The power to make such an order was set out in RSC, Ord 72, r 10, superseded by the Civil Procedure Rules 1998, r 58.14. As to the exercise of the discretion, see: North British Rubber Co v. Cheetham (1938) 61 L1 LR 337; Keevil and Keevil Ltd v. Boag (1940) 67 L1 LR 263; Probatina Shipping Co Ltd v. Sun Insurance Office Ltd, ‘‘The Sageorge’’ [1974] QB 635. The power was available under any marine policy, including one which involved some land transit (Leon v. Casey [1932] 2 KB 576), and could have been exercised against a mortgagee (Graham Joint Stock Shipping Co Ltd v. Motor Union Insurance Co [1922] 2 KB 563) and in reinsurance cases (China Traders Insurance Co v. Royal Exchange Assurance [1898] 2 QB 187) as well as against the assured himself. RSC, Ord 72, r 10 replaced an earlier right of the underwriters to obtain an order for the ship’s papers on demand.

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(f) Under a non-obligatory open cover, where the underwriters have the right to refuse to accept declarations made to him, a duty of disclosure attaches to each declaration (Berger v. Pollock [1973] 2 Lloyd’s Rep 442, and for floating policies see s 29 of the 1906 Act). Section 17 further provides that the duty of utmost good faith is bilateral. This is based upon dicta of Lord Mansfield in Carter v. Boehm (1766) 3 Burr 1905, confirmed in principle by the House of Lords in La Banque Financi`ere de la Cit´e v. Westgate Insurance Co [1990] 2 All ER 947. This case also decides that there is no independent duty of care in tort owed by an underwriter to the assured, a point applied in Searle v. A R Hales & Co Ltd [1996] LRLR 68. La Banque Financi`ere decided that whatever the content of the underwriters’ duty of utmost good faith might be, the only available remedy is avoidance by the assured; of necessity this is of little use where the assured has suffered a loss and seeks to recover under the policy rather than merely to recover his premiums. The principle was applied in Norwich Union Life Insurance Society v. Qureshi [1999] Lloyd’s Rep IR 263, in which Rix J ruled that an underwriter did not owe a duty to the assured to disclose that the risk to which the policy related was a serious one, but that in any event the assured’s only remedy was avoidance of the policy. This ruling was upheld in a joined appeal, Aldrich v. Norwich Union Life Insurance Co Ltd [2000] Lloyd’s Rep IR 1. More recently however, the courts have developed a bilateral duty of utmost good faith, not in respect of placement but in respect of claims handling. In Strive Shipping Corporation v. Hellenic Mutual War Risks Association (Bermuda) Ltd, ‘‘The Grecia Express’’ [2002] Lloyd’s Rep IR 669 it was held that where the underwriters had avoided a policy based on non-disclosure of facts thought to be true at the date of placement but subsequently discovered not to be true, then, based on either the equitable origins of utmost good faith and the continuing duty of utmost good faith: (a) the court could overturn the avoidance at trial; and (b) if at the time of the avoidance the underwriters knew or ought to have known that the facts had proved to be unfounded, they would be precluded from relying upon their avoidance. Ground (a) was overruled by the Court of Appeal in Brotherton v. Aseguradora Coseguros (No 2) [2003] Lloyd’s Rep IR 746, on the ground that avoidance is a self-help remedy. Ground (b) was similarly doubted in Brotherton, but in Drake Insurance plc v. Provident Insurance plc [2004] Lloyd’s Rep IR 277 the Court of Appeal dismissed its own doubts and held that an underwriter who knew or had blind eye knowledge that the material facts had proved to be immaterial would be in breach of his duty of utmost good faith in relying on those facts to deny liability. The continuing duty of good faith owed by an underwriter has also been held to require the underwriter to exercise a contractual discretion relating to claims (eg payment of defence costs or following a settlement reached by the assured with a third party) in good faith and not for any collateral purpose (Gan Insurance Co v. Tai Ping Insurance Co [2001] Lloyd’s Rep IR 667; Eagle Star Insurance Co v. Cresswell [2004] Lloyd’s Rep IR 602; Anders & Kern Ltd v. CGU Insurance plc [2007] Lloyd’s Rep IR 555), and it has even been suggested by Rix LJ in a dissenting judgment in WISE Underwriting Agency v. Grupo Nacional Provincial SA [2004] Lloyd’s Rep IR 962 that an underwriter who fails to act in good faith in asking appropriate questions on presentation is to be treated as having waived disclosure.

Disclosure by assured 18.—(1) Subject to the provisions of this section, the assured must disclose to the insurer, before the contract is concluded, every material circumstance which is known to the assured, and the assured is deemed to know every circumstance which, in the ordinary course of business, ought to be known by him. If the assured fails to make such disclosure, the insurer may avoid the contract. (2) Every circumstance is material which would influence the judgment of a prudent insurer in fixing the premium, or determining whether he will take the risk. (3) In the absence of inquiry the following circumstances need not be disclosed namely:— (a) Any circumstance which diminishes the risk; (b) Any circumstance which is known or presumed to be known to the insurer. The insurer is presumed to know matters of common notoriety or knowledge, and matters which an insurer in the ordinary course of his business, as such, ought to know; (c) Any circumstance as to which information is waived by the insurer; (d) Any circumstance which it is superfluous to disclose by reason of any express or implied warranty. (4) Whether any particular circumstance, which is not disclosed, be material or not is, in each case, a question of fact. (5) The term ‘‘circumstance’’ includes any communication made to, or information received by, the assured. Notes The drafting of s 18 is based to a large extent on the judgment of Lord Mansfield in Carter v. Boehm (1766) 3 Burr 1905.

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Marine Insurance

Subs (1) The contract is concluded when offer and acceptance coincide (cf s 21 of the Marine Insurance Act 1906): the date of the issue of the policy and the inception of the risk are irrelevant. A fact must be disclosed if the assured ought to have been aware of it in the usual course of business (London General Insurance Co v. General Marine Underwriters Association [1921] 1 KB 104). This does not mean that the assured is required to investigate matters outside his knowledge, as these are for the underwriters alone to uncover in reaching an underwriting decision (Simner v. New India Insurance Co [1995] LRLR 240; Economides v. Commercial Union [1997] 3 All ER 636). The assured is generally not required to disclose facts which are known to his agent unless the agent is one whose duty was to possess that information on behalf of the assured (an ‘‘agent to know’’) or the agent’s status was such that he operated as the alter ego of the assured: in each of these cases the information may be treated for the purposes of s 18 as that which the assured ought to have known in the ordinary course of business (Simner v. New India Assurance Co Ltd [1995] 1 Lloyd’s Rep 240; ERC Frankona Reinsurance v. American National Insurance Co [2006] Lloyd’s Rep IR 157) unless the information related to the agent’s own fraudulent conduct in respect of the assured (Re Hampshire Land [1896] 2 Ch 743). There is a further situation in which an agent’s knowledge may be relevant, namely where the agent is authorised to insure on behalf of the assured: an ‘‘agent to insure’’ must disclose material facts to the insurers under the provisions of s 19 of the Marine Insurance Act 1906. The general rule, however, is that information in the possession of a general agent or employee is not deemed to be known by the assured (Fitzherbert v. Mather (1785) 1 TR 12; Gladstone v. King (1813) 1 M & S 35; Proudfoot v. Montefiore (1867) LR 2 QB 511; Stribley v. Imperial Marine Insurance Co (1876) 1 QBD 507; Blackburn Low & Co v. Vigors (1887) 12 App Cas 531; Blackburn Low & Co v. Haslam (1888) 21 QBD 144; Wilson v. Salamandra Assurance Co of St Petersburg (1903) 88 LT 96; St Margaret’s Trust Ltd v. Navigation General Insurance Co Ltd (1949) 82 Ll LR 752; Australia and New Zealand Bank Ltd v. Colonial and Eagle Wharves Ltd [1960] 2 Lloyd’s Rep 241; Berger v. Pollock [1973] 2 Lloyd’s Rep 442; Simner v. New India Insurance Co [1995] LRLR 240; SAIL v. Farex Gie [1995] LRLR 116; PCW Syndicates v. PCW Insurers [1996] 1 Lloyd’s Rep 241; Group Josi Re v. Walbrook Insurance Ltd [1996] 1 Lloyd’s Rep 345; Kingscroft v. Nissan Fire and Marine Insurance Co Ltd [1999] Lloyd’s Rep IR 371; Arab Bank v. Zurich Insurance Co [1999] 1 Lloyd’s Rep 262; ERC Frankona Reinsurance v. American National Insurance Co [2006] Lloyd’s Rep IR 157). Subs (2) The test of materiality was considered by the Court of Appeal in Container Transport International Ltd v. Oceanus Mutual Underwriting Association (Bermuda) Ltd [1984] 1 Lloyd’s Rep 476, where it was held that the test is purely objective and does not involve consideration of the question whether the assured appreciated the materiality of the fact or whether the underwriters in question was actually influenced by it: the only relevant point is whether a prudent underwriter would have been interested in the information. The test was given detailed consideration by the House of Lords in Pan Atlantic Insurance Co Ltd v. Pine Top Insurance Co Ltd [1994] 3 All ER 581 and much of the Court of Appeal’s reasoning in CTI was overturned. In Pan Atlantic the House of Lords held that there is a two-limb test for materiality: (i) Would a prudent underwriter have been influenced by the information? In determining whether this is the case, the question is not whether the information would have had a decisive influence on a prudent underwriter, nor whether a prudent underwriter would have refused the risk or charged a higher premium, but rather whether the information would have had an effect on the underwriter’s thought processes. Cf also the St Paul Fire case (see (ii) below). It is necessary for market evidence to be adduced to prove whether or not a prudent underwriter would have been influenced by the information. The admissibility of the evidence of other underwriters was originally denied as pure hearsay (Carter v. Boehm (1766) 3 Burr 1905; Campbell v. Rickards (1833) 5 B & Ad 840), but its admissibility was established in other cases (Berthon v. Loughman (1817) 2 Stark 258; Richards v. Murdoch (1830) 10 B & C 527). (ii) Was the actual underwriter influenced by the assured’s failure to disclose the information in question? The underwriter must thus show that there was an inducement upon which he relied. Although there is no mention of this requirement in the Act itself, their Lordships held that it should be implied in order to bring insurance law into line with the general law. The view was expressed by Lord Mustill in Pan Atlantic that, where materiality has been demonstrated, the underwriter can rely on a presumption that he has been induced to enter the contract. That approach was followed by the Court of Appeal in St Paul Fire and Marine Insurance Co (UK) Ltd v. McConnell Dowell Constructors Ltd [1995] 2 Lloyd’s Rep 116. However, Lord Lloyd in Pan Atlantic rejected the notion that there was a presumption of inducement, and more recent cases have confined that presumption to the situation in which the underwriter is for good reason unable to give evidence as to his state of mind. If the underwriter is available, he must give evidence and is thus open to cross-examination on the matter: Marc Rich Co AG v. Portman [1996] 1 Lloyd’s Rep 430; Sirius International Insurance Corporation v. Oriental Assurance Corporation [1999] Lloyd’s Rep IR 343. A broker sued for breach of duty may rely upon the presumption to establish that a risk was uninsurable: Gunns v. Par Insurance Brokers [1997] 1 Lloyd’s Rep 173. The link between materiality and inducement in cases where the underwriter is available to give evidence was finally severed by the Court of Appeal in Assicurazioni Generali SpA v. Arab Insurance Group [2003] Lloyd’s Rep IR 131, where it was confirmed that the assured’s false or incomplete presentation of the risk has to be an effective cause of the underwriter’s decision to enter into the contract, and that there is no general

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presumption in favour of inducement simply because a fact is material. Evidence of the underwriter’s previous imprudence in relation to other risks is inadmissible, as what matters is how the risk itself was underwritten: see Marc Rich & Co AG v. Portman [1996] 1 Lloyd’s Rep 430. Even where evidence of actual inducement is presented, it is open to the court to take the view that the underwriter could not have been influenced by the fact in question (Kausar v. Eagle Star Insurance Co Ltd [2000] Lloyd’s Rep IR 154). In particular, when the underwriter asserts that on the hypothesis that had the true facts been presented to him he would have acted differently, it is open to the assured to adduce evidence to substantiate the further hypothesis that commercial considerations or further disclosures on the part of the assured following the underwriter’s response would have in fact negatived the underwriter’s alleged decision to refuse the risk or to offer different terms (Drake Insurance plc v. Provident Insurance plc [2004] Lloyd’s Rep IR 277; Bonner v. Cox Dedicated Corporate Member [2006] Lloyd’s Rep IR 385. The views of the assured himself or those of a prudent assured are irrelevant to the test of materiality (Pan Atlantic Insurance Co Ltd v. Pine Top Insurance Co Ltd [1994] 3 All ER 581). Materiality has to be assessed at the date of the making of the contract, and not in the light of subsequent events (Seaman v. Fonnereau (1743) 2 Str 1183; Lynch v. Hamilton (1810) 3 Taunt 37; Inversiones Manria SA v. Sphere Drake Insurance Co Ltd, ‘‘The Dora’’ [1989] 1 Lloyd’s Rep 69). These cases also demonstrate that there is no need for any connection between the information withheld and the loss, as breach of the duty of utmost good faith rests upon the underwriter having been given a false impression (Pan Atlantic Insurance Co Ltd v. Pine Top Insurance Co Ltd [1994] 3 All ER 581). Material facts: There are numerous reported cases in which the materiality of facts, for the purposes of both non-disclosure and misrepresentation (see s 20(2) of the Marine Insurance Act 1906), has been discussed by the courts. The following list is illustrative of the position. (1) Any fact which affects directly the risk insured (‘‘physical hazard’’) is material. (a) Any physical attributes of the insured subject-matter which render it a greater risk than would normally be assumed must be disclosed (Da Costa v. Scandret (1723) 2 P Wms 170; Seaman v. Fonnereau (1743) 2 Str 1183; Lynch v. Hamilton (1810) 3 Taunt 37; Lynch v. Dunsford (1811) 14 East 494; Kirby v. Smith (1818) 1 B & Ald 672; Westbury v. Aberdein (1837) 2 M & W 267; Russell v. Thornton (1860) 6 H & N 140; Bates v. Hewitt (1867) LR 2 QB 595; Ionides v. Pacific Fire and Marine Insurance Co (1872) LR 7 QB 517; Bird’s Cigarette Manufacturing Co Ltd v. Rouse (1924) 19 L1 LR 301; Neue Fischmehl Vertriebs-Gesellschaft Haselhorst mbH v. Yorkshire Insurance Co Ltd (1934) 50 L1 LR 151; Berger and Light Diffusers Pty Ltd v. Pollock [1973] 2 Lloyd’s Rep 442; Liberian Insurance Agency v. Mosse [1977] 2 Lloyd’s Rep 560; Inversiones Manria SA v. Sphere Drake Insurance Co Ltd, ‘‘The Dora’’ [1989] 1 Lloyd’s Rep 69); International Lottery Management v. Dumas [2002] Lloyd’s Rep IR 237. Similarly, in a reinsurance case, the fact that the direct policy is valued rather than one paying only an indemnity is a material fact if the agreed value is greater than the maximum potential loss calculated on an indemnity basis (Toomey v. Banco Vitalicio de Espana [2005] Lloyd’s Rep IR 423). (b) Previous losses and claims may constitute material facts. It is the circumstances of a loss rather than its amount which is the relevant fact (Sharp v. Sphere Drake Insurance Co Ltd, ‘‘The Moonacre’’ [1992] 2 Lloyd’s Rep 501). (c) Any particular hazards of the voyage constitute material facts if the underwriter could not have discovered those facts or if they have been misstated (Middlewood v. Blakes (1797) 7 TR 162; Edwards v. Footner (1808) 1 Camp 530; Feise v. Parkinson (1812) 4 Taunt 640; Sawtell v. Loudon (1814) 5 Taunt 359; Westbury v. Aberdein (1837) 2 M & W 267; Anderson v. Thornton (1853) 8 Exch 425; Harrower v. Hutchinson (1870) LR 5 QB 584; Leigh v. Adams (1871) 25 LT 566; Ionides v. Pacific Fire and Marine Insurance Co (1871) LR 6 QB 674; Laing v. Union Marine Insurance Co Ltd (1895) 1 Com Cas 11). This would include the manner in which insured cargo is being carried or has been treated prior to the voyage (Blackett v. Royal Exchange Assurance Co (1832) 2 Cr & J 244; Hood v. West End Motor Car Packing Co [1917] 2 KB 38; Alluvials Mining Machinery Co v. Stowe (1922) 10 Ll LR 96; Greenhill v. Federal Insurance Co [1927] 1 KB 65), the time at which the vessel sailed or was due to sail, provided that the time of sailing affected the risk (Fillis v. Bruton (1782) 1 Park’s Marine Insurances 414; Macdowall v. Fraser (1779) 1 Doug KB 260; M’Andrew v. Bell (1795) 1 Esp 373; Fort v. Lee (1811) 3 Taunt 381; Foley v. Moline (1814) 5 Taunt 430; Bridges v. Hunter (1813) 1 M & S 15; Stribley v. Imperial Marine Insurance (1876) 1 QBD 507; Scottish Shire Line Ltd v. London and Provincial Marine and General Insurance Co [1912] 3 KB 51; Harper & Co Ltd v. Mackechnie & Co (1925) 22 Ll LR 514); port risks (Kingston v. Knibbs (1808) 1 Camp 508n; Stewart v. Bell (1821) 5 B & Ald 238; Marc Rich & Co AG v. Portman [1996] 1 Lloyd’s Rep 430; Fraser Shipping Ltd v. Colton [1997] 1 Lloyd’s Rep 586) and war risks dangers which were not of common knowledge (Beckwaite v. Nalgrove (1810) 3 Taunt 41n). The disclosure must be made even if the policy is written on an all risks or all losses basis (Cheshire & Co v. Thompson (1919) 24 Com Cas 198). (d) The assured must disclose that he has entered into a contract with a third party, not found in the ordinary course of commerce, which potentially increases the underwriter’s liability or diminishes its right of subrogation in the event of a loss (Mercantile Steamship Co v. Tyser (1881) 7 QBD 73; Tate

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v. Hyslop (1885) 15 QBD 368; ‘‘The Bedouin’’ [1894] P 1; Scottish Shire Line v. London and Provincial Marine Insurance Co [1912] 3 KB 51; Marc Rich & Co AG v. Portman [1996] 1 Lloyd’s Rep 430). (2) Any fact which goes to the ‘‘moral hazard’’ is material. Moral hazard is relevant to both marine and war risks policies alike, even though in the latter case there is a lesser risk of the assured being able to carry out a fraud on his underwriters: North Star Shipping Ltd v. Sphere Drake Insurance plc [2005] 2 Lloyd’s Rep 76, affirmed on other grounds [2006] Lloyd’s Rep IR 519. (a) If the assured has overinsured to an excessive amount, the overinsurance must be disclosed, although this is less significant in an unvalued policy as the assured is unable to recover more than his actual loss (Ionides v. Pender (1874) LR 9 QB 531; Herring v. Janson (1895) 1 Com Cas 177; Thames & Mersey Marine Insurance Co Ltd v. Gunford Ship Co [1911] AC 529; Pickersgill v. London and Provincial Marine Insurance Co [1912] 3 KB 614; Gooding v. White (1913) 29 TLR 312; Visscherij Maatschappij Nieuw Onderneming v. Scottish Metropolitan Assurance Co Ltd (1922) 27 Com Cas 198; Piper v. Royal Exchange Assurance (1932) 44 Ll LR 103; Williams v. Atlantic Assurance Co Ltd [1933] 1 KB 81; Slattery v. Mance [1962] 1 Lloyd’s Rep 60; Berger v. Pollock [1973] 2 Lloyd’s Rep 442). The most recent cases have made it clear that some overvaluation is not material, and that the test is whether the disparity between the insured value and the market value is consistent with prudent ship management: Strive Shipping Corporation v. Hellenic Mutual War Risks Association (Bermuda) Ltd, ‘‘The Grecia Express’’ [2002] Lloyd’s Rep IR 669; Eagle Star Insurance Co Ltd v. Games Video Co, ‘‘The Game Boy’’ [2004] Lloyd’s Rep IR 867. However, in North Star Shipping Ltd v. Sphere Drake Insurance plc [2006] Lloyd’s Rep IR 519 the Court of Appeal cast doubt on the earlier authorities, and held that overvaluation was not necessarily a material fact insofar as underwriters might prefer to take a higher premium in return for the risk of having to make a payment greater than the actual value of the vessel. (b) Information as to other policies on the same risk is material if it converts the risk from genuine to speculative (Sibbald v. Hill (1814) 2 Dow 263; Thames & Mersey Marine Insurance Co Ltd v. Gunford Ship Co [1911] AC 529; Mathie v. Argonaut Insurance Ltd (1925) 21 Ll LR 145), as is information as to previous losses or claims under other policies (Container Transport International Inc v. Oceanus Mutual Underwriting Association (Bermuda) Ltd [1984] 1 Lloyd’s Rep 476; Stowers v. G A Bonus plc [2003] Lloyd’s Rep IR 402). Policies on related but separate risks need not be disclosed (Wilson, Holgate & Co Ltd v. Lancashire & Cheshire Insurance Corporation Ltd (1922) 13 Ll LR 486). (c) The master’s qualifications or previous conduct are immaterial (Anon (1699) 12 Mod Rep 325; Thames & Mersey Marine Insurance Co Ltd v. Gunford Ship Co [1911] AC 529) unless they relate directly to the hazard. The master’s past criminal conduct may be material if it increases the risk of the vessel’s seizure (‘‘The Dora’’ [1989] 1 Lloyd’s Rep 69). (d) There is authority for the proposition that the nationality of the shipowner or the vessel may be a material fact (Steel v. Lacy (1810) 3 Taunt 285; Campbell v. Innes (1821) 4 B & Ald 423; Associated Oil Carriers Ltd v. Union Insurance Society of Canton Ltd [1917] 2 KB 184; Demetriades & Co v. Northern Assurance Co, ‘‘The Spathari’’ (1926) 21 Ll LR 265). Quaere whether it is now permissible under the Race Relations Act 1976 for an underwriter to take the view that higher premiums are to be charged depending upon the assured’s nationality, at least unless the assured is an enemy alien. (e) The assured’s criminal convictions are material (Allden v. Raven, ‘‘The Kylie’’ [1983] 2 Lloyd’s Rep 444) as are those of the master (‘‘The Dora’’ [1989] 2 Lloyd’s Rep 69). Outstanding criminal charges, and civil proceedings in which dishonesty has been alleged, are material: Strive Shipping Corporation v. Hellenic Mutual War Risks Association (Bermuda) Ltd, ‘‘The Grecia Express’’ [2002] Lloyd’s Rep IR 669; North Star Shipping Ltd v. Sphere Drake Insurance plc [2005] 2 Lloyd’s Rep 76, affirmed on this point [2006] Lloyd’s Rep IR 519. It would also seem from ‘‘The Dora’’ that criminal conduct which has not been the subject of any charge is also a material fact. Criminal convictions are, however, to be disregarded if they are spent under the Rehabilitation of Offenders Act 1974. (f) General dishonesty on the assured’s part is material, eg where the assured has fraudulently prepared invoices intended to be used to defraud its bankers (Insurance Corporation of the Channel Islands v. Royal Hotel [1998] Lloyd’s Rep IR 151) or has defrauded customers or the tax authorities (James v. CGU Insurance plc [2002] Lloyd’s Rep IR 206). Specific allegations of dishonesty are also material: Strive Shipping Corporation v. Hellenic Mutual War Risks Association (Bermuda) Ltd, ‘‘The Grecia Express’’ [2002] Lloyd’s Rep IR 669; Brotherton v. Aseguradora Colseguros SA (No 2) [2003] 1 Lloyd’s Rep 746; North Star Shipping Ltd v. Sphere Drake Insurance plc [2006] Lloyd’s Rep IR 519. (3) Hard intelligence as to the existence of a material fact is of itself material, although mere loose or idle rumours are not material (Durrell v. Bederley (1816) Holt NP 283; Da Costa v. Scandret (1723) 2 P Wms 170; Seaman v. Fonnereau (1743) 2 Str 1183; Lynch v. Hamilton (1810) 3 Taunt 37; Lynch v. Dunsford (1811) 14 East 494; Durrell v. Bederley (1816) Holt NP 283; Morison v. Universal Marine Insurance Co (1873) LR 8 Ex 197; Decorum Investments Ltd v. Atkin, ‘‘The Elena G’’ [2002] Lloyd’s Rep IR 450; Brotherton v. Aseguradora Coseguros (No 2) [2003] Lloyd’s Rep IR 746; Brotherton v. Aseguradora Coseguros (No 3) [2003] Lloyd’s Rep IR 762; International Management Group (UK) Ltd v. Simmonds [2004] Lloyd’s Rep IR 247. Underwriters who have avoided the policy for non-disclosure of hard intelligence cannot be treated as having acted wrongfully in the event that the intelligence proves at some point after avoidance to have been inaccurate (Brotherton v.

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Aseguradora Coseguros (No 2) [2003] Lloyd’s Rep IR 746, overruling on this point Strive Shipping Corporation v. Hellenic Mutual War Risks Association (Bermuda) Ltd, ‘‘The Grecia Express’’ [2002] Lloyd’s Rep IR 669) although if the intelligence has been shown to be untrue before avoidance then the underwriters may be in breach of their own duty of utmost good faith in seeking to rely upon discredited information as justifying the making of a decision to avoid (Strive Shipping Corporation v. Hellenic Mutual War Risks Association (Bermuda) Ltd, ‘‘The Grecia Express’’ [2002] Lloyd’s Rep IR 669, Drake Insurance plc v. Provident Insurance plc [2004] Lloyd’s Rep IR 277, the latter decision disagreeing with the contrary view expressed on this point in Brotherton v. Aseguradora Coseguros (No 2) [2003] Lloyd’s Rep IR 746). (4) Matters held to be immaterial include the following. (a) The assured under a marine policy does not have to disclose rejections of cover by other underwriters (Lebon & Co v. Straits Insurance Co (1894) 10 TLR 517; Glasgow Assurance Corporation Ltd v. William Symondson Co (1911) 16 Com Cas 109; North British Fishing Boat Insurance Co v. Starr (1922) 13 Ll LR 206) or the fact that he has previously been guilty of non-disclosure (Container Transport International v. Oceanus Mutual Underwriting Association (Bermuda) Ltd [1982] 2 Lloyd’s Rep 178, reversed on other grounds [1984] 1 Lloyd’s Rep 476), but previous claims against other underwriters are material. (b) Assuming that there are no facts affecting the moral hazard, the identity of the assured is not a material fact, so that an agent can insure on behalf of the assured and the assured may take the benefit of the policy on the basis of the undisclosed principal doctrine (National Oilwell (UK) Ltd v. Davy Offshore Ltd [1993] 2 Lloyd’s Rep 582; Siu v. Eastern Insurance Ltd [1994] 1 Lloyd’s Rep 616; O’Kane v. Jones, ‘‘The Martin P’’ [2005] Lloyd’s Rep IR 174; Talbot Underwriting Ltd v. Nausch, Hogan & Murray Inc [2006] Lloyd’s Rep IR 531). (c) The nature of the assured’s interest is not material (see the note to s 4 of the 1906 Act). (d) Fraud by the assured’s agent perpetrated on the assured himself is a material fact only if it relates directly to the risk: it cannot form part of the moral hazard if unconnected to the risk in question (Deutsche Ruckversicherung Akt v. Walbrook Insurance Co Ltd [1996] 1 Lloyd’s Rep 345). Subs (2) by its terms treats a fact as material if it would influence the decision of a prudent underwriter in fixing the premium or accepting the risk. This wording on its face encompasses facts which may have nothing to do with the actual risk run by the underwriter but which may nevertheless influence the making of the contract. In North Star Shipping Ltd v. Sphere Drake Insurance plc [2006] Lloyd’s Rep IR 519 the Court of Appeal, reversing the decision of Colman J, [2005] Lloyd’s Rep IR 76, held that these words apply only to the risk and not to other matters such as the creditworthiness of the assured. Thus the fact that an earlier policy has been cancelled for non-payment of premiums is not a material fact, an approach adopted in the earlier decision O’Kane v. Jones, ‘‘The Martin P’’ [2005] Lloyd’s Rep IR 174 (Micro Design Group Ltd v Norwich Union Insurance Ltd [2006] Lloyd’s Rep IR 235, which turns on inducement rather than materiality, appears to proceed on the incorrect premise of materiality). It may be that the North Star ruling affects earlier authorities, namely: ‘‘The Dora’’ [1989] 1 Lloyd’s Rep 69 (the number of vessels to be declared to the underwriter is material, as this affects the premium charged for each vessel); and Sharp v. Sphere Drake Insurance Co Ltd, ‘‘The Moonacre’’ [1992] 2 Lloyd’s Rep 501 (the fact that the assured has not personally signed the proposal is material, as the proposal is a personal undertaking by the assured). Subs (3) lists the situations in which material facts need not be disclosed. The four exceptions operate only ‘‘in the absence of inquiry’’ so that if the underwriters have sought to obtain the relevant information then the assured cannot rely upon any of the statutory defences: Brotherton v. Aseguradora Colseguros SA (No 3) [2003] Lloyd’s Rep IR 762. Subs (3)(a) See: Inversiones Manria SA v. Sphere Drake Insurance Co plc, ‘‘The Dora’’ [1989] 1 Lloyd’s Rep 69 (vessel insured against marine risks not completed when risk attached); Decorum Investments Ltd v. Atkin, ‘‘The Elena G’’ [2002] Lloyd’s Rep IR 450 (yacht moored under conditions of security). Subs (3)(b) The underwriters need not be told what they actually know. There is some authority for the proposition that each branch or department of an underwriter is a distinct entity for the purpose of ascertaining its knowledge—Stone v. Reliance Mutual Insurance Association [1972] 1 Lloyd’s Rep 469; Malhi v. Abbey Life Assurance Co Ltd [1996] LRLR 237; Gunns v. Par Insurance Brokers [1997] 1 Lloyd’s Rep 173—but these cases should be treated with some caution. Two forms of information are presumed to be known to the underwriters. (1) Matters of general knowledge (Planche v. Fletcher (1779) 1 Doug KB 251; Bates v. Hewitt (1867) LR 2 QB 595; Schloss Brothers v. Stevens [1906] 2 KB 665). The mere fact that information has been published in overseas media is not enough to give the underwriters actual knowledge of that information (Brotherton v. Aseguradora Colseguros SA (No 3) [2003] Lloyd’s Rep IR 763). (2) Matters relating specifically to the class of business insured under the policy and to the nature of the subject-matter insured (Noble v. Kennaway (1780) 2 Doug 510; Moxon v. Atkins (1812) 3 Camp 200; Da Costa v. Edmonds (1815) 4 Camp 142; Stewart v. Bell (1821) 5 B & Ald 238; Gandy v. Adelaide Insurance Co (1871) LR 6 QB 746; ‘‘The Bedouin’’ [1894] P 1; Cantiere Meccanico Brindisino v. Janson [1912] 3 KB 452; British and Foreign Marine Insurance Co v. Gaunt [1921] 2 AC 41; North British Fishing Boat Insurance Co Ltd v. Starr (1922) 13 Ll LR 206; George Cohen, Sons & Co v. Standard Marine Insurance Co Ltd (1925) 21 Ll LR 30; Kingscroft v. Nissan Fire and Marine Insurance Co (No 2) [1999]

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Lloyd’s Rep IR 596; Glencore International AG v. Alpina Insurance Co Ltd [2004] 1 Lloyd’s Rep 111; Frans Maas (UK) Ltd v. Sun Alliance & London Insurance plc [2004] Lloyd’s Rep 649). There is a conflict of authority on whether the fact that information appears in Lloyd’s lists containing shipping information dispenses with the duty of disclosure. This was held to be so in some cases (Friere v. Woodhouse (1817) Holt NP 572) but not in others (Elton v. Larkins (1832) 8 Bing 198; Universal Marine Insurance Co v. Morrison (1873) LR 8 Exch 197; London General Insurance Co v. General Marine Underwriters Association [1921] 1 KB 104). The true principle would appear to be that a misrepresentation is not overridden by the availability of the information from Lloyd’s (Mackintosh v. Marshall (1843) 11 M & W 116; Strive Shipping Corporation v. Hellenic Mutual War Risks Association (Bermuda) Ltd, ‘‘The Grecia Express’’ [2002] Lloyd’s Rep IR 669). Falling within this heading are matters which are deemed to be known to the underwriters due to trade usage relating, eg to route to be taken or method of loading cargo: a series of decisions has raised the question whether a practice was sufficiently widespread and notorious to amount to a usage (Salvador v. Hopkins (1765) 3 Burr 1707; Noble v. Kennaway (1780) 2 Doug KB 510; Vallance v. Dewar (1808) 1 Camp 503; Tennant v. Henderson (1813) 1 Dow 324; Da Costa v. Edmonds (1815) 4 Camp 142; Stewart v. Bell (1821) 5 B & Ald 238). Subs (3)(c) In general, underwriters are entitled to rely upon the risk as presented to them at face value, and are not required to undertake their own investigations: WISE Underwriting Agency v. Grupo Nacional Provincial SA [2004] Lloyd’s Rep IR 962; Noblebright Ltd v Sirius International Corporation 2007, unreported. Accordingly, there can be waiver only where the underwriters have been presented with material which is capable of alerting them that there are additional material facts (New Hampshire Insurance Co v. Oil Refineries Ltd [2003] Lloyd’s Rep IR 386; Stowers v. G A Bonus plc [2003] Lloyd’s Rep IR 402). Waiver may nevertheless arise in the following ways: (1) blanket waiver of all disclosure on the part of the assured (HIH Casualty and General Insurance Co v. Chase Manhattan Bank [2003] Lloyd’s Rep IR 230); (2) disclaimer by the underwriters of the relevance of the facts at issue, particularly by policy terms (Cantiere Meccanico Brindisino v. Janson [1912] 3 KB 452; Kumar v. AGF Insurance Ltd [1999] Lloyd’s Rep IR 147; Rothschild v. Collyear [1999] Lloyd’s Rep IR 6) or by an authorised agent (Allden v. Raven, ‘‘The Kylie’’ [1983] 2 Lloyd’s Rep 444); (3) limited requests by the underwriters for information which excludes facts otherwise material, although not all limited express questions amount to waiver (Svenska Handelsbanken v. Sun Alliance & London Insurance plc [1996] 1 Lloyd’s Rep 519; Doheny v. New India Assurance Co Ltd [2005] Lloyd’s Rep IR 251); (4) failure by the underwriters to seek further information when alerted by existing disclosures (Court v. Martineau (1782) 2 Doug KB 161; Freeland v. Glover (1806) 7 East 457; Weir v. Aberdeen (1819) 2 B & Ald 320; Inman SS Co v. Bischoff (1882) 7 App Cas 670; Asfar & Co v. Blundell [1896] 1 QB 123; Cantiere Meccanico Brindisino v. Janson [1912] 3 KB 452; Mann, MacNeal and Steeves Ltd v. General Marine Underwriters Ltd [1921] 2 KB 300; J Kirkaldy & Sons v. Walker [1999] Lloyd’s Rep IR 410; Rendall v. Combined Insurance Co of America [2006] Lloyd’s Rep IR 732). There is no waiver by failure to ask a material question (Marc Rich & Co AG v. Portman [1996] 1 Lloyd’s Rep 430; WISE Underwriting Agency v. Grupo Nacional Provincial SA [2004] Lloyd’s Rep IR 962. The contrary comments in GMA v. Unistorebrand [1995] LRLR 333 probably do not represent the law). Subs (3)(d) If the matter is covered by a warranty, the underwriters are discharged from liability as from the date of the breach, and thus need not rely upon utmost good faith. The cases are largely concerned with the failure of the assured under a voyage policy to disclose the unseaworthiness of the vessel (Haywood v. Rodgers (1804) 4 East 590; Gandy v. Adelaide Insurance Co (1871) LR 6 QB 746; ‘‘The Dora’’ [1989] 1 Lloyd’s Rep 69; Cape plc v. Iron Trades Employers Insurance Association Ltd [2004] Lloyd’s Rep IR 75).

Disclosure by agent effecting insurance 19. Subject to the provisions of the preceding section as to circumstances which need not be disclosed, where an insurance is effected for the assured by an agent, the agent must disclose to the insurer— (a) Every material circumstance which is known to himself, and an agent to insure is deemed to know every circumstance which in the ordinary course of business ought to be known by, or to have been communicated to, him; and (b) Every material circumstance which the assured is bound to disclose, unless it come to his knowledge too late to communicate it to the agent. Notes The broker is the agent of the assured for most purposes, so that information disclosed to the broker by the assured (Stowers v. G A Bonus plc [2003] Lloyd’s Rep IR 402; Hazel v. Whitlam [2005] Lloyd’s Rep IR 168), or notice of loss given to the broker by the assured (Friends Provident Life and Pensions Ltd v. Sirius International

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Insurance Corporation [2006] Lloyd’s Rep IR 45; Tioxide Europe Ltd v. CGU International plc [2006] Lloyd’s Rep IR 31), is not to be treated as having been received by the underwriters. In the same way, information held in the broker’s placing and claims file belongs to the assured and cannot be provided to the underwriters without the assured’s consent, even though that information has previously been shown to the underwriters at the placing or claims stage (Goshawk Dedicated Ltd v. Tyser [2005] Lloyd’s Rep IR 379). It is nevertheless the case that the broker owes an independent duty of utmost good faith to the underwriters, as set out in s 19. That duty is to disclose facts which the broker himself knows even though not known to the assured (see s 19(a)), and facts which the assured knows which have been or which could have been notified to the broker prior to placement (s 19(b)). Waiver by the underwriters of the assured’s duty of disclosure does not, therefore, operate to waive the broker’s duty of disclosure, at least if it is clear that the risk is to be presented by the broker and not by the assured (HIH Casualty and General Insurance Co v. Chase Manhattan Bank [2003] Lloyd’s Rep IR 230). If the broker breaks his own duty and fails to disclose material facts, the underwriters will have the right to avoid the policy and—in the case of misrepresentation—the underwriters may have an action for damages against the broker where the underwriters decide not to avoid the policy. For the broker’s independent duty, see HIH Casualty and General Insurance Co v. Chase Manhattan Bank [2003] Lloyd’s Rep IR 230. Subs (a) An ‘‘agent to insure’’ is an agent authorised by the assured to obtain insurance, as opposed to a general agent of the assured: In PCW Syndicates v. PCW Insurers [1996] 1 Lloyd’s Rep 241 and Group Josi Re v. Walbrook Insurance [1996] 1 Lloyd’s Rep 345 Saville LJ held that an agent to insure is the placing broker, a principle applied in ERC Frankona Reinsurance v. American National Insurance Co [2006] Lloyd’s Rep IR 157 (but contrast Blackburn Low & Co v. Haslam (1888) 21 QBD 144 where an intermediate agent was held to be an agent of this type). A fact need be disclosed by an agent to insure only if he is in possession of it in his capacity as agent, and in particular if the agent has defrauded the assured, the agent’s knowledge of that fraud need not be disclosed to the underwriters for the policy to be valid: Re Hampshire Land [1896] 2 Ch 743; Simner v. New India Insurance [1995] LRLR 240; SAIL v. Farex Gie [1995] LRLR 116; PCW Syndicates v. PCW Insurers [1996] 1 Lloyd’s Rep 241; Group Josi Re v. Walbrook Insurance [1996] 1 Lloyd’s Rep 345; Arab Bank v. Zurich Insurance Co [1999] 1 Lloyd’s Rep 262, although see Markel International Insurance Co Ltd v. La Republica Compania Argentine de Seguros [2005] Lloyd’s Rep IR 90, where it was held to be arguable that the earlier misconduct of the producing broker was a material fact to be disclosed by placing brokers. It was further held in Markel that ‘‘premium-skimming’’ by a broker in the form of taking commission not disclosed to underwriters could be a material fact, in that the assured was willing to pay a far higher premium for the risk than had been disclosed to the underwriters. For an illustration of the situation in which information is in the possession of the agent but is not passed to the underwriters by the agent when placing the insurance, see Russell v. Thornton (1860) 6 H & N 140. Subs (b) For an illustration of the situation in which information known to the assured is not passed on to the broker, see Republic of Bolivia v. Indemnity Mutual Assurance Co [1909] 1 KB 785.

Representations pending negotiation of contract 20.—(1) Every material representation made by the assured or his agent to the insurer during the negotiations for the contract, and before the contract is concluded, must be true. If it be untrue the insurer may avoid the contract. (2) A representation is material which would influence the judgment of a prudent insurer in fixing the premium, or determining whether he will take the risk. (3) A representation may be either a representation as to a matter of fact, or as to a matter of expectation or belief. (4) A representation as to matter of fact is true, if it be substantially correct, that is to say, if the difference between what is represented and what is actually correct would not be considered material by a prudent insurer. (5) A representation as to a matter of expectation or belief is true if it be made in good faith. (6) A representation may be withdrawn or corrected before the contract is concluded. (7) Whether a particular representation be material or not is, in each case, a question of fact. Notes This section reflects ordinary principles of misrepresentation, a position confirmed by Pan Atlantic Insurance Co Ltd v. Pine Top Insurance Co Ltd [1994] 3 All ER 581, in which it was held—overruling earlier authority—that the underwriter himself must have been influenced by the misrepresentation. Any statement by the assured has to be construed reasonably. Thus if the assured insures a vessel with an English name, he is not taken to be representing that it is an English vessel (Clapham v. Cologan (1813) 3 Camp 382).

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The general principle here is that express statements made by the assured are not to be construed as implying other statements: the courts have rejected the concept of implied misrepresentation (Feasey v. Sun Life Assurance Corporation of Canada [2002] Lloyd’s Rep IR 835, affirmed on other grounds [2003] Lloyd’s Rep IR 640; ERC Frankona Reinsurance v. American National Insurance Co [2006] Lloyd’s Rep IR 157). As is the case with the general law, a misstatement may be material irrespective of the representor’s state of mind (Dennistoun v. Lillie (1821) 3 Bli 202; Hamilton & Co v. Eagle Star and British Dominions Insurance Co Ltd (1924) 19 Ll LR 242). Equally, express questions asked by underwriters are to be construed reasonably, so that an answer given by the assured following genuine misapprehension by the assured as to the information being sought from him is not to be treated as a false statement (cf Doheny v. New India Assurance Co Ltd [2005] Lloyd’s Rep IR 251). Subs (1) See also the note to s 18. If there is a misrepresentation, the underwriters’ right to avoid is not removed by the fact that the truth of the matter could have been discovered by the underwriters by consulting Lloyd’s lists (Mackintosh v. Marshall (1843) 11 M & W 116). Not every pre-contractual statement is a representation: Kingscroft v. Nissan Fire and Marine Insurance Co Ltd (No 2) [1999] Lloyd’s Rep IR 596. The misrepresentation must be by the assured or his agent, and not by an independent expert appointed by the underwriters to give advice on the risk: International Lottery Management v. Dumas [2002] Lloyd’s Rep IR 237. The underwriters’ right to avoid is tempered by s 2(2) of the Misrepresentation Act 1967, which authorises the court to refuse to avoid the contract and instead to award damages to the innocent party. The section is for the benefit of the misrepresentor, and is intended to mitigate the hardships of avoidance. It has been held that s 2(2) of the 1967 Act ought not in principle to be used in reinsurance cases (Highlands Insurance Co v. Continental Insurance Co [1987] 1 Lloyd’s Rep 109n), although its use in marine insurance remains possible. There is some difficulty in applying this provision to insurances formed at Lloyd’s, as the slip presented to successive underwriters gives rise to a fresh contract on each occasion on which an underwriter subscribes to it. The practice at Lloyd’s is that any exchange of information takes place primarily between the leading underwriter and the broker and that subsequent underwriters do not ask questions in the same amount of detail. Consequently, it is likely that any false statements will be made to the leading underwriter only. In such a case, the leading underwriter can clearly avoid liability, but it is unclear whether the subsequent underwriters are the deemed recipients of false information or whether they remain bound by the contract. The authorities were discussed in the note to s 17. Subs (2) For the general meaning of materiality, see s 18(2). A post-contractual misrepresentation is immaterial (Ionides v. Pacific Insurance Co (1871) LR 6 QB 674). There is authority for the proposition that a fraudulent misrepresentation always gives the underwriters the right to avoid, whether or not it is material (Sibbald v. Hill (1814) 2 Dow 263; ‘‘The Bedouin’’ [1894] P 1), but this principle has not been incorporated into the statute and did not form part of the actual decisions. Subs (3) The distinction between a representation of fact and one of expectation is hard to draw, but in general, an unequivocal statement is likely to be construed as one of fact (Dennistoun v. Lillie (1821) 3 Bli 202; Highlands Insurance v. Continental Insurance [1987] 1 Lloyd’s Rep 109n; Sirius International Insurance Corporation v. Oriental Assurance Corporation [1999] Lloyd’s Rep IR 343) whereas a statement as to a matter over which the assured has no control is more likely to be construed as a matter of expectation (Bowden v. Vaughan (1809) 10 East 415; Hubbard v. Glover (1812) 3 Camp 313). As far as opinions are concerned, see: Brine v. Featherstone (1813) 4 Taunt 869. Subs (4) This is based on, eg Pawson v. Watson (1778) 2 Cowp 785 and Nonnen v. Kettlewell (1812) 16 East 176. The meaning of the assured’s statement must be judged in accordance with the custom and practice of the trade in question (Chaurand v. Angerstein (1791) Peake 43). Subs (5) There is no objective element in the application of this subsection, and the question is purely whether the assured believed what he said, so that an objective mistake cannot be relied upon by the underwriters: Economides v. Commercial Union [1998] QB 587; Eagle Star Insurance Co Ltd v. Games Video Co, ‘‘The Game Boy’’ [2004] Lloyd’s Rep IR 867; Rendall v. Combined Insurance Co of America [2006] Lloyd’s Rep IR 732. For illustrations of this provision, see: Brine v. Featherstone (1813) 4 Taunt 869; Grant v. Aetna Insurance Co (1862) 15 Moo PC 516; Anderson v. Pacific Fire and Marine Insurance Co (1872) LR 7 CP 65. An assured who has not addressed his mind to the correctness or otherwise of his statement cannot be said to have acted in good faith: International Lottery Management v. Dumas [2002] Lloyd’s Rep IR 237. Subs (6) See, eg Edwards v. Footner (1808) 1 Camp 530.

When contract is deemed to be concluded 21. A contract of marine insurance is deemed to be concluded when the proposal of the assured is accepted by the insurer, whether the policy be then issued or not; and, for the purpose of showing when the proposal was accepted, reference may be made to the slip or covering note or other customary memorandum of the contract, . . .

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Notes Section 21 was amended by the Finance Act 1959, Sched 8. A marine policy placed in the London market will typically be preceded by the presentation of a slip by the broker to the potential subscribing underwriters. An underwriter who wishes to subscribe ‘‘scratches’’ the slip by appending his signature to it and adding the stamp of the Lloyd’s syndicate or company which he represents. An underwriter who merely wishes to give a quotation, or who otherwise seeks to impose conditions before the contract is concluded, may qualify his scratch in some way, although this must be done in a manner recognised by the market: the addition of the letters ‘‘TBE’’ (‘‘to be entered’’) taken alone merely signifies that the underwriter did not have his records available to mark up his entry, and not that the scratching is conditional: ERC Frankona Reinsurance v. American National Insurance Co [2006] Lloyd’s Rep IR 157. A slip can be validly scratched in pencil (Bonner v. Cox Dedicated Corporate Member [2006] Lloyd’s Rep IR 385). For the contractual effect of a slip, see the note to section 89. Although a slip is the usual method for placing marine risks in the London market, a slip is not essential providing that the parties can be shown to have reached agreement on all material terms. The presumption, however, is that the parties do not intend to be bound until a slip has been scratched: New England Reinsurance Corporation v. Messoghios Insurance Co [1992] 2 Lloyd’s Rep 251; Assicurazioni Generali SpA v. Arab Insurance Group [2003] Lloyd’s Rep IR 131; Sun Life Assurance Co v. CX Reinsurance Co Ltd [2004] Lloyd’s Rep IR 58.

The Policy Contract must be embodied in policy 22. Subject to the provisions of any statute, a contract of marine insurance is inadmissible in evidence unless it is embodied in a marine policy in accordance with this Act. The policy may be executed and issued either at the time when the contract is concluded, or afterwards. Notes Although a contract of insurance may exist independently of a policy, eg where a slip has been scratched, the contract is unenforceable until a policy has been issued, as only the policy itself may be sued upon in the court (Fisher v. Liverpool Marine Insurance Co (1874) LR 9 QB 418; Genforsikrings & Co v. Da Costa [1911] 1 KB 137; Re National Benefit Assurance Co Ltd [1931] 1 Ch 46). However, there are cases in which an action has been heard at the instance of an assured not in possession of the policy (Swan v. Maritime Insurance Co [1907] 1 KB 116) and in Eide UK Ltd v. Lowndes Lambert Group Ltd, The Sun Tender [1998] 1 Lloyd’s Rep 389 the Court of Appeal left open the question whether s 22 has the effect of rendering a marine contract unenforceable if the assured cannot produce the policy unless the policy itself so provided. The point is of the greatest significance where the broker has retained possession of the policy as security for premiums advanced by him on the assured’s behalf in accordance with s 53 of the 1906 Act). It is the practice of an underwriter who has not issued a policy at the date of the loss not to plead s 22 as a defence but to issue a policy in order to allow the assured the right to commence proceedings (Mead v. Davison (1835) 3 Ad & El 303). Section 22 does not apply to contracts of reinsurance or insurance falling within ss 1 and 2 of the Marine and Aviation (War Risks) Insurance Act 1952: see s 7 of the 1952 Act.

What policy must specify 23. A marine policy must specify— (1) The name of the assured, or of some person who effects the insurance on his behalf: (2)–(5) . . . Notes Section 23 was amended by the Finance Act 1959, Sched 8. The section recognises the practice of a broker insuring in his own name on behalf of various persons interested in the policy (Bell v. Gibson (1798) 1 Bos & P 345). Where a policy is procured by an agent, the mere fact that a person is named in the policy as an assured is not sufficient to make him such: a person in this position may claim the benefit of the insurance only by demonstrating that the agent was authorised to insure on his behalf and intended to do so (Sutherland v. Pratt (1843) 12 M & W 16; Boston Fruit Co v. British and Foreign Marine Insurance Co [1905] 1 KB 637; National Oilwell (UK) Ltd v. Davy Offshore Ltd [1993] 2 Lloyd’s Rep 582; O’Kane v. Jones, ‘‘The Martin P ’’ [2005] Lloyd’s Rep IR 174). Conversely, where the agent is authorised to act on the assured’s behalf, the assured’s name need not appear in the policy and the assured is entitled to the benefit of the policy on the basis of the undisclosed principal doctrine provided that the agent intended to effect the policy on the

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assured’s behalf (Yangtse Insurance Association v. Lukmanjee [1918] AC 585; National Oilwell (UK) Ltd v. Davy Offshore Ltd [1993] 2 Lloyd’s Rep 582) but not if the policy, by specifically limiting the classes of persons who may become assureds, excludes the possibility of the agent becoming a party (Talbot Underwriting Ltd v. Nausch, Hogan & Murray Inc [2006] Lloyd’s Rep IR 531.

Signature of insurer 24.—(1) A marine policy must be signed by or on behalf of the insurer, provided that in the case of a corporation the corporate seal may be sufficient, but nothing in this section shall be construed as requiring the subscription of a corporation to be under seal. (2) Where a policy is subscribed by or on behalf or two or more insurers, each subscription, unless the contrary be expressed, constitutes a distinct contract with the assured. Notes Subs (2) The notion that a policy constitutes a bundle of individual contracts was confirmed by the House of Lords in Touche Ross v. Baker [1992] 2 Lloyd’s Rep 207, where it was held that each subscribing underwriter was separately bound by the obligations in the policy. The point is further illustrated by the Lloyd’s rule that each separate ‘‘scratching’’ of the slip constitutes a separate contract, made when the slip is scratched: this is now expressly stated in the International Hull Clauses, cl 27 (see generally the note to s 21).

Voyage and time policies 25.—(1) Where the contract is to insure the subject-matter ‘‘at and from’’, or from one place to another or others, the policy is called a ‘‘voyage policy’’, and where the contract is to insure the subject-matter for a definite period of time the policy is called a ‘‘time policy’’. A contract for both voyage and time may be included in the same policy. (2) . . . Notes Section 25 was amended by the Finance Act 1959, Sched 8. The distinction between voyage and time policies is important for the following reasons: (a) a voyage policy is subject to the warranty of seaworthiness in s 39(1), whereas a time policy is subject to the rather lesser seaworthiness constraints of s 39(5); (b) different rules apply to the commencement and termination of the risk under the two types of policy (see s 42 of the Marine Insurance Act 1906); (c) voyage policies are avoided where the assured deviates, delays or changes the voyage (Marine Insurance Act 1906, ss 44–49, whereas no such limits are placed upon time policies). A policy may contain both time and voyage elements (Way v. Modigliani (1787) 2 TR 30), eg where a policy is for a fixed time but the assured is held covered if the voyage has not been completed by the expiry of the policy and the vessel is in distress or missing (Institute Time Clauses Hulls, cl 2; International Hull Clauses, cl 12): such a policy is to be treated as ‘‘mixed’’ and takes effect as a time policy followed by a voyage policy, so that, for example, rules as to deviation do not apply once the policy has been converted from voyage to time (Gambles v. Ocean Insurance Co (1876) 1 Ex D 141; Maritime Insurance Co v. Alianza Insurance Co of Santander (1907) 13 Com Cas 46; Royal Exchange Assurance Corporation v. Sjoforsakrings Aktiebolaget Vega [1902] 2 KB 384). A policy remains a time policy despite the fact that it is renewable and that it may be determined by notice prior to the stated date of termination (Compania Maritima San Basilio SA v. Oceanus Mutual Underwriting Association (Bermuda) Ltd, ‘‘The Eurysthenes’’ [1976] 2 Lloyd’s Rep 171). Equally, it is perfectly consistent for a time policy to contain geographical restrictions on the area of trading, so that a relaxation of those restrictions does not give rise to a voyage policy (Kin Yuen Co Pte Ltd v. Lombard Insurance Co Ltd (1995) Lloyd’s List, 26 April, [1995] 1 SLR 643).

Designation of subject-matter 26.—(1) The subject-matter insured must be designated in a marine policy with reasonable certainty. (2) The nature and extent of the interest of the assured in the subject-matter insured need not be specified in the policy. (3) Where the policy designates the subject-matter insured in general terms, it shall be construed to apply to the interest intended by the assured to be covered.

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(4) In the application of this section regard shall be had to any usage regulating the designation of the subject-matter insured. Notes Subs (1) For illustrations, see: Le Mesurier v. Vaughan (1805) 6 East 382; Ionides v. Pacific Insurance Co (1871) LR 6 QB 674; Denoon v. Home and Colonial Assurance Co (1872) LR 7 CP 341; Mackenzie v. Whitworth (1875) 1 Ex D 36; Overseas Commodities Ltd v. Style [1958] 1 Lloyd’s Rep 546 (cover applying only to subject-matter complying with policy description). Subs (2) Neither is such interest a material fact: see the note to s 4 of the 1906 Act. Subs (3) The effect of this subsection is unclear, as in some cases the intention of the assured has overriden policy wording (Janson v. Poole (1915) 20 Com Cas 232) whereas in others the assured has been allowed the benefit of the wording despite want of intention to insure that widely (Reliance Marine Insurance Co v. Duder [1913] 1 KB 265). In the case of a floating policy which designates the subject-matter in general terms, subs (3) confines the assured’s recovery to his own interest (Stephens v. Australasian Insurance Co (1872) LR 8 CP 18; Scott v. Globe Marine Insurance Co (1896) 1 Com Cas 370; Dunlop Brothers v. Townend [1919] 2 KB 127). The subsection does not have the effect of making a named person a party to the policy, in the absence of the necessary agency relationship between the agent taking out the policy and that person (National Oilwell (UK) Ltd v. Davy Offshore Ltd [1993] 2 Lloyd’s Rep 582; O’Kane v. Jones, ‘‘The Martin P ’’ [2005] Lloyd’s Rep IR 174).

Valued policy 27.—(1) A policy may be either valued or unvalued. (2) A valued policy is a policy which specifies the agreed value of the subject-matter insured. (3) Subject to the provisions of this Act, and in the absence of fraud, the value fixed by the policy is, as between the insurer and assured, conclusive of the insurable value of the subject intended to be insured, whether the loss be total or partial. (4) Unless the policy otherwise provides, the value fixed by the policy is not conclusive for the purpose of determining whether there has been a constructive total loss. Notes Subs (1) The validity of valued policies was confirmed by Lewis v. Rucker (1761) 2 Burr 1167, where it was held that an agreement by the parties as to the basis of indemnity did not render the contract void as a wager. In practice most marine policies are valued. It is now clear that a valued policy is perfectly valid even though the indemnity given to the assured is far from perfect (Irving v. Manning (1847) 1 HL Cas 287). Subs (2) Under a valued policy the value of the subject-matter is agreed and the premium is calculated on that value (Bousfield v. Barnes (1815) 4 Camp 228). A policy is not valued merely because the assured is required to state the value of the insured subject-matter (Wilson v. Nelson (1864) 33 LJQB 220). No precise form of words is required to create a valued policy, although there is a consistent line of authority for the proposition that the phrase ‘‘sum insured’’ does not operate as a valued policy but rather merely designates the maximum amount recoverable by the assured on proof of loss: Kyzuna Investments Ltd v. Ocean Marine Mutual Insurance Assoc (Europe) [2000] 1 Lloyd’s Rep 505, Quorum AS v. Schramm (No 1) [2002] Lloyd’s Rep IR 293; Thor Navigation Inc v. Ingosstrakh Insurance [2005] Lloyd’s Rep IR 490. A policy which is stated to have financial limits on the amount recoverable is not a valued policy for the purposes of this section (Continental Illinois National Bank and Trust Co of Chicago v. Bathurst [1985] 1 Lloyd’s Rep 625). Subs (3) Once the underwriters have accepted the premium based on the agreed value, it is not open to the underwriters to contest the valuation for any reason (Barker v. Janson (1868) LR 3 CP 303; Herring v. Janson (1895) 1 Com Cas 177; Muirhead v. Forth & North Sea Steamboat Mutual Insurance Association [1894] 2 AC 72; ‘‘The Main’’ [1894] P 320) unless: (a) the assured has been guilty of fraud in presenting the valuation (Lewis v. Rucker (1761) 2 Burr 1167, Haigh v. De La Cour (1812) 3 Camp 319—overvaluation is not enough, as is demonstrated by General Shipping and Forwarding Co v. British General Insurance Co Ltd (1923) 15 Ll LR 175 and Papademetriou v. Henderson (1939) 64 Ll LR 345); or (b) the assured has overvalued the subject-matter in a material fashion and has failed to disclose, or has misrepresented, the valuation (see the note to s 18(2) of the Marine Insurance Act 1906); or (c) in the case of a floating policy, the value of each declaration has not been honestly stated (Marine Insurance Act 1906, s 29(3), below). In the event of a total loss, the assured recovers the full value of the subject-matter, subject to policy limits (Steamship Balmoral Co v. Marten [1902] AC 511). If the assured is overinsured by double insurance, he recovers only a sum representing the agreed value (Marine Insurance Act 1906, s 32(2)(a)). In the event

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of a partial loss, the assured recovers the proportion of the agreed value representing the degree of loss. Thus, if subject-matter valued at £100,000 suffers a 50 per cent loss, the assured recovers £50,000, irrespective of the actual market value of the subject-matter (Thompson v. Reynolds (1857) 26 LJQB 93; ‘‘The Main’’ [1894] P 320). This measure is, however, subject to the other provisions of the 1906 Act: see in particular s 69 of the Act, which lays down market value rules for calculating indemnity for a damaged vessel. The agreed value is also disregarded in determining the underwriters’ subrogation rights: see the note to s 79. Subs (4) The definition of constructive total loss in s 60 of the 1906 Act, refers to repaired and unrepaired values. The effect of subs (4) is to require market values rather than the agreed value to be used as the basis of calculation. See: Irving v. Manning (1847) 1 HL Cas 287; Woodside v. Globe Marine Insurance Co Ltd [1896] 1 QB 105; Helmville Ltd v. Yorkshire Insurance Co Ltd, ‘‘The Medina Princess’’ [1965] 1 Lloyd’s Rep 361, and Marine Insurance Act 1906, s 60(2)(ii).

Unvalued policy 28. An unvalued policy is a policy which does not specify the value of the subject-matter insured, but, subject to the limit of the sum insured, leaves the insurable value to be subsequently ascertained, in the manner herein-before specified. Notes For the meaning of this term, see the note to s 27. The amount recoverable in the absence of a valuation for indemnity purposes is based on the insurable value, as set out in s 16 of the Marine Insurance Act 1906.

Floating policy by ship or ships 29.—(1) A floating policy is a policy which describes the insurance in general terms, and leaves the name of the ship or ships and other particulars to be defined by subsequent declaration. (2) The subsequent declaration or declarations may be made by indorsement on the policy, or in other customary manner. (3) Unless the policy otherwise provides, the declarations must be made in the order of dispatch or shipment. They must, in the case of goods, comprise all consignments within the terms of the policy, and the value of the goods or other property must be honestly stated, but an omission or erroneous declaration may be rectified even after loss or arrival, provided the omission or declaration was made in good faith. (4) Unless the policy otherwise provides, where a declaration of value is not made until after notice of loss or arrival, the policy must be treated as an unvalued policy as regards the subjectmatter of that declaration. Notes Subs (1) A floating policy is a framework agreement under which the underwriters agree to insure subjectmatter of a given description which is subsequently at the assured’s risk. A floating cover will become exhausted when the financial limits are reached, and it is common for the assured to arrange a further policy covering excess risks. The assured merely has to declare each risk as and when it incepts, and the underwriters are liable for any loss following declaration. In the absence of any declaration, the underwriters are not on risk in respect of that particular subject-matter (Union Insurance Society of Canton Ltd v. Wills & Co [1916] 1 AC 281). Floating policies are used primarily for cargo insurance, and may be procured by warehousemen and carriers. The application of the doctrine of utmost good faith depends upon the nature of the policy. If the underwriters are obliged to cover any risk declared by the assured, the assured’s duty of utmost good faith attaches to the open cover itself but not to subsequent declarations (Glasgow Assurance Corporation Ltd v. William Symondson & Co (1911) 16 Com Cas 109), but if the floating policy gives the underwriters the right to reject individual declarations the duty of utmost good faith is relevant only at declaration stage (SAIL v. Farex Gie [1995] LRLR 116). Cf the note to s 17 of the 1906 Act. In the same way, if the grant of cover for any risks accepted by the assured is obligatory from the point of view of the underwriters, then unless there is a notification clause expressed as a condition precedent they cannot rely upon any failure by the assured to notify them of the attachment of any risk and must pay even though notification is not made until after the loss has occurred (Glencore International AG v. Ryan, ‘‘The Beursgracht’’ [2002] Lloyd’s Rep IR 335). Contrast the position where the underwriters are not obliged to accept a risk, as in such a case failure by the assured to make a declaration means that they have not been given the opportunity to decide whether or not to accept the risk (Glencore International AG v. Alpina Insurance Co Ltd [2004] 1 Lloyd’s Rep 111).

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Subs (3) As to the common law basis for the rule as to the order of declaration, see: Henchman v. Offley (1782) 3 Doug KB 135; Kewley v. Ryan (1794) 2 Hy Bl 343; Gledstanes v. Royal Exchange Assurance Co (1864) 5 B & S 797; Ionides v. Pacific Fire and Marine Insurance Co Ltd (1871) LR 6 QB 674; Dunlop Bros & Co v. Townend [1919] 2 KB 127. The right to rectify a declaration, even after a loss, is based upon: Robinson v. Touray (1811) 3 Camp 158; Stephens v. Australasian Insurance Co (1872) LR 8 CP 18; Imperial Marine Insurance Co v. Fire Insurance Corporation (1879) 4 CPD 166. Subs (4) See: Harman v. Kingston (1811) 3 Camp 150; Gledstanes v. Royal Exchange Assurance Corporation (1864) 34 LJQB 30; Union Insurance Society of Canton Ltd v. George Wills & Co [1916] 1 AC 281.

Construction of terms in policy 30.—(1) A policy may be in the form in the First Schedule to this Act. (2) Subject to the provisions of this Act, and unless the context of the policy otherwise requires, the terms and expressions mentioned in the First Schedule to this Act shall be construed as having the scope and meaning in that schedule assigned to them. Notes The form of policy set out in the First Schedule was abandoned in the UK in 1983, after usage of some 200 years. The modern practice is to attach to a simple front-sheet a set of standard terms published by the Institute of London Underwriters (modified where appropriate). The construction of a marine policy is governed by a series of well developed rules, which indicate that the starting point is that the intentions of the parties must prevail. The meaning of individual words or phrases may depend upon context, the ejusdem generis rule and the principle that legal terms of art are afforded their technical meaning by way of exception to the general rule that the ordinary and natural meaning of words should prevail. Further, where a term has acquired a recognised meaning in the courts, the doctrine of precedent will apply in order to ensure consistency, and it will be permissible to introduce evidence of custom and usage for the construction of particular terminology provided it can be shown that both parties were aware of the custom or usage of the market, that the parties have not expressly agreed to the contrary and that the custom is reasonable (Brough v. Whitmore (1791) 4 TR 206; Blackett v. Royal Exchange Assurance Co (1832) 2 Cr & J 244; Gabay v. Lloyd (1825) 3 B & C 793, Carvill American Inc v. Camperdown UK Ltd [2006] Lloyd’s Rep IR 1 and Goshawk Dedicated Ltd v. Tyser Co Ltd [2005] Lloyd’s Rep IR 379, and cf s 87 of the Marine Insurance Act 1906). Within an individual policy, the courts will give priority to added words as opposed to printed words (Robertson v. French (1803) 4 East 130; Dudgeon v. Pembroke (1877) 2 App Cas 284). In the event of a genuine ambiguity the doctrine of contra proferentem will be applied (as in Lawrence v. Aberdein (1821) 5 B & Ald 107), although this is likely to be of little import in commercial cases (cf Youell v. Bland Welch (No 1) [1990] 2 Lloyd’s Rep 423), and it should also be remembered that if the ambiguity arises in wording proposed by the assured or his broker the ambiguity is to be construed in favour of the underwriters (A/S Ocean v. Black Sea & Baltic General Insurance Co Ltd (1935) 51 Ll LR 305; Abrahams v. Mediterranean Insurance and Reinsurance Co Ltd [1991] 1 Lloyd’s Rep 216). For the significance of the ‘‘factual matrix’’ as an aid to construction, see Investors Compensation Scheme v. West Bromwich Building Society [1998] 1 WLR 896, Sirius International Insurance Co (Publ) v. FAI General Insurance Ltd [2005] Lloyd’s Rep IR 294 (in which Lord Steyn, perhaps prematurely, announced the death of literalism) and Royal and Sun Alliance Insurance plc v. Dornoch Ltd [2005] Lloyd’s Rep IR 544.

Premium to be arranged 31.—(1) Where an insurance is effected at a premium to be arranged, and no arrangement is made, a reasonable premium is payable. (2) Where an insurance is effected on the terms that an additional premium is to be arranged in a given event, and that event happens but no arrangement is made, then a reasonable additional premium is payable. Notes The principle of s 31, that in the absence of agreement a reasonable premium is payable, is one familiar in the English law of sale of goods (Sale of Goods Act 1979, s 8) and the supply of services (Supply of Goods and Services Act 1982, s 15). Despite the wording of s 31, it remains open to the courts to find that the absence of any agreement on the premium renders the entire arrangement between the parties void for uncertainty, although s 31 indicates that that conclusion is likely to be exceptional. In any event, failure by the parties to agree a premium will not render a policy void for uncertainty if there is an agreed mechanism whereby the premium can be determined (RSA Pursuit Test Cases, 27 May 2005, unreported). What is reasonable is a question of fact (Marine Insurance Act 1906, s 88). If the premium due is not paid, the underwriters are not obliged to issue the policy (Marine Insurance Act 1906, s 52).

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Subs (1) This deals with the case in which the premium is not agreed at the outset. Subs (2) This deals with the case in which the underwriters agree, under a ‘‘held covered’’ clause, to accept an additional risk during the currency of the policy, eg where the policy has expired before the voyage has been completed (Institute Cargo Clauses, cl 9, Institute Time Clauses Hulls, cl 2, International Hull Clauses, cl 12), or where the assured has broken a warranty (Institute Time Clauses Hulls, cl 3) or has deviated or changed voyage (Institute Cargo Clauses, cl 10; Institute Voyage Clauses Hulls, cl 2). In the case of extension of cover, it is usual for the underwriters to agree to be held covered on payment of a pro rata premium, but in other cases the held covered clause requires the assured to meet two conditions. (a) To give prompt notice of the event bringing the clause into operation (the old contractual requirement to give notice within a reasonable time having been discontinued in 1983 in the light of decisions to the effect that notice could be given after loss: Mentz, Decker & Co v. Maritime Insurance Co (1909) 15 Com Cas 17; Hewitt v. London General Insurance Co (1925) 23 Ll LR 243)—for a discussion of the meaning of ‘‘prompt’’, see Liberian Insurance Agency v. Mosse [1977] 2 Lloyd’s Rep 560. (b) To agree on an additional premium or, in the case of the continuation of an existing policy for an additional period, a pro rata premium. If additional premium has to be agreed upon, and no agreement is reached, the court will look to the market rate for the risk as affected by the variation (Greenock SS Co v. Maritime Insurance Co Ltd [1903] 1 KB 367). If there is no market rate for the risk, the held covered clause cannot operate (Liberian Insurance Agency v. Mosse [1977] 2 Lloyd’s Rep 560).

Double Insurance Double insurance 32.—(1) Where two or more policies are effected by or on behalf of the assured on the same adventure and interest or any part thereof, and the sums insured exceed the indemnity allowed by this Act, the assured is said to be over-insured by double insurance. (2) Where the assured is over-insured by double insurance— (a) The assured, unless the policy otherwise provides, may claim payment from the insurers in such order as he may think fit, provided that he is not entitled to receive any sum in excess of the indemnity allowed by this Act; (b) Where the policy under which the assured claims is a valued policy, the assured must give credit as against the valuation for any sum received by him under any other policy without regard to the actual value of the subject-matter insured; (c) Where the policy under which the assured claims is an unvalued policy he must give credit, as against the full insurable value, for any sum received by him under any other policy; (d) Where the assured receives any sum in excess of the indemnity allowed by this Act, he is deemed to hold such sum in trust for the insurers, according to their right of contribution among themselves. Notes Subs (1) The definition of double insurance requires the same interest and the same assured, so that if persons with different interests (eg a shipowner and the ship’s managers) there is no double insurance: O’Kane v. Jones, ‘‘The Martin P ’’ [2005] Lloyd’s Rep IR 174. A distinction has also to be drawn between double insurance as here defined (based on Godin v. London Assurance Co (1758) 1 Burr 489 and North British & Mercantile Insurance Co v. London, Liverpool & Globe Insurance Co (1877) 5 Ch D 569) and the issue of one policy in substitution for another, as in Union Marine Insurance v. Martin (1866) 35 LJCP 181. Equally, an increased value policy does not overlap with the original policy (Boag v. Economic Insurance Co Ltd [1954] 2 Lloyd’s Rep 581). Double insurance requires concurrent policies and not consecutive policies: Phillips v. Syndicate 992 Gunner [2004] Lloyd’s Rep IR 426; Bolton Metropolitan Borough Council v. Municipal Mutual Insurance Ltd [2006] Lloyd’s Rep IR 15. Subs (2)(a) The purpose of this provision is to allow the assured the benefit of double insurance in the event that one of the underwriters becomes insolvent (Newby v. Reed (1763) 1 W Bl 416; Bousfield v. Barnes (1815) 4 Camp 228; Morgan v. Price (1849) 4 Exch 615; Bruce v. Jones (1863) 1 H & C 769). Where the assured has claimed a disproportionate sum from one of the underwriters, that underwriter has a right of contribution from the others, so that each will ultimately pay its proportionate part of the loss (see s 80 of the Marine Insurance Act 1906). As is anticipated by subs (2)(a), policies commonly provide that the assured is unable to recover from the underwriters in the event that some other policy covers the loss. Alternatively, a policy may contain a rateable proportion clause, under which the assured is restricted to recovering from that underwriter its own proportion of the loss, ie, the amount which it would have paid

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net of contribution recoveries (Lega l& General Assurance Society v. Drake Insurance Co Ltd [1992] 1 All ER 283). Subs (2)(b) The effect here is that if the assured is underinsured under a valued policy, and first claims part of his loss from another valued or unvalued policy, the amount recoverable under the valued policy is the difference between the agreed value and the sum previously recovered, thereby leaving a potential shortfall. This is based on: Irving v. Richardson (1831) 2 B & Ad 193; Bruce v. Jones (1863) 1 H & C 769 (contra Bousfield v. Barnes (1815) 4 Camp 228). To avoid this, the first claim must be made on any valued policy. Subs (2)(c) See the note to subs (2)(b) above. Subs (2)(d) For the right of contribution, see Marine Insurance Act 1906, s 80.

Warranties, etc Nature of warranty 33.—(1) A warranty, in the following sections relating to warranties, means a promissory warranty, that is to say, a warranty by which the assured undertakes that some particular thing shall or shall not be done, or that some condition shall be fulfilled, or whereby he affirms or negatives the existence of a particular state of facts. (2) A warranty may be express or implied. (3) A warranty, as above defined, is a condition which must be exactly complied with, whether it be material to the risk or not. If it be not so complied with, then, subject to any express provision in the policy, the insurer is discharged from liability as from the date of the breach of warranty, but without prejudice to any liability incurred by him before that date. Notes Subs (1) The word ‘‘promissory’’ encompasses both warranties as to existing facts or intentions (present warranties), and warranties as to future conduct (continuing warranties). In the absence of clear wording, a warranty will not be construed as relating to the assured’s future conduct (Hussain v. Brown [1996] 1 Lloyd’s Rep 627). However, if the warranty is designed to give continuing protection to the underwriters, it will be construed accordingly (Eagle Star Insurance Co Ltd v. Games Video Co, ‘‘The Game Boy’’ [2004] Lloyd’s Rep IR 867). A warranty by the assured that a permit or certificate has been obtained must be complied with at the time of the statement, and the assured does not have a reasonable period in which to comply with the promise (Agapitos v. Agnew (No 2) [2003] Lloyd’s Rep IR 55). If the warranty is in the nature of an opinion or statement of intention by the assured, breach of warranty depends upon whether the assured held that opinion or intention and not on the assured’s actual conduct at a later date; Gerling-Konzern General Insurance Co v. Polygram Holdings, 1998, 2 Lloyd’s Rep 544; Arab Bank v. Zurich Insurance Ltd [1999] 1 Lloyd’s Rep 262. There is no need for a warranty to relate in any way to the likelihood of loss or the nature of the risk (Woolmer v. Muilman (1763) 1 Wm Bl 427; Rich v. Parker (1798) 7 TR 705; Yorkshire Insurance Co Ltd v. Campbell [1917] AC 218). A warranty on its proper construction may be restricted to material facts (see the discussion in Unipac (Scotland) Ltd v. Aegon Insurance Co (UK) Ltd [1999] Lloyd’s Rep IR 502) or to a specific part of the policy (Printpak v. AGF Insurance [1999] Lloyd’s Rep IR 542, but contrast James v. CGU Insurance plc [2002] Lloyd’s Rep IR 206 and International Management Group (UK) Ltd v. Simmonds [2004] Lloyd’s Rep IR 247). A warranty is to be given a reasonable construction consistent with its purposes: thus a warranty by the assured that a yacht would be ‘‘fully crewed’’ required a member of crew on board at all times other than in the case of emergencies making his departure necessary or where temporary departure was necessary to enable him to fulfil his crewing duties (GE Frankona Reinsurance Ltd v. CMM Trust No 1400, The Newfoundland Explorer [2006] Lloyd’s Rep IR 704. It is also necessary to distinguish a warranty proper from the description of the insured subject-matter in the policy. If the subject-matter fails to comply with its description the underwriters are off risk for the duration of the default, whereas if a warranty is involved the underwriters’ liability is discharged and cannot be reinstated (cf s 33(3), below, and see Provincial Insurance Co v. Morgan [1933] AC 240 and Kler Knitwear Ltd v. Lombard General Insurance Co Ltd [2000] Lloyd’s Rep IR 47. The law on express warranties was developed in a series of old cases—now largely redundant in the light of the modern Institute wordings—concerning matters such as the number of crew (Bean v. Stupart (1778) 1 Doug 11; De Hahn v. Hartley (1786) 1 TR 343), the safety of the ship when the risk was to commence (Kenyon v. Berthon (1778) 1 Doug 12n; Macdowell v. Fraser (1779) 1 Doug 260; Blackhurst v. Cockell (1789) 3 TR 360; Colby v. Hunter (1827) 3 C & P 7), the time by or after which the vessel was to sail (as to which, see s 42 and the note thereto,), the course of the voyage (Colledge v. Harty (1851) 6 Exch 205, and cf the rules on deviation and change of voyage, in ss 44–49) and the requirement for the vessel to sail in convoy (Hibbert v. Pigou (1783) 3 Doug KB 224; Anderson v. Pitcher (1800) 2 Bos & P 164; Sanderson v. Busher (1814) 4 Camp 54n; Warwick v. Scott (1814) 4 Camp 62). The assured may also be required to warrant that he will retain part of the risk for his own account, thereby reducing the incentive for him to bring about his own loss: the retention remains important, particularly in reinsurance, and the assured or reinsured will be in breach of

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the warranty by obtaining cover for that part of the risk to be retained by him (Muirhead v. Forth & North Sea Steamboat Mutual Insurance Association [1894] AC 72; Roddick v. Indemnity Mutual Marine Insurance Co [1895] 2 QB 380; Samuel & Co Ltd v. Dumas [1924] AC 431, but contrast Lishman v. Northern Maritime Insurance Co (1875) LR 10 CP 179, General Insurance Co of Trieste v. Cory [1897] 1 QB 335 and General Shipping and Forwarding Co v. British General Insurance Co Ltd (1923) 15 Ll LR 175 in each of which the warranty was not broken). The old method of excluding war risks from a marine policy was by means of a ‘‘free of capture and seizure’’ (fcs) warranty, but this wording has now fallen into disuse. For illustrations of the old wording, see: Maydhew v. Scott (1811) 3 Camp 205; Dalgleish v. Brooke (1812) 15 East 295. Subs (2) Implied warranties are peculiar to marine insurance (Euro-Diam Ltd v. Bathurst [1988] 2 All ER 23), and are set out in ss 39–41 of the Marine Insurance Act 1906. Subs (3) The doctrine of exact compliance means that if there is only a minor deviation from what is required by the warranty, the underwriters are discharged from liability (Bond v. Nutt (1777) 2 Cowp 601; Hore v. Whitmore (1778) 2 Cowp 784; Earle v. Harris (1780) 1 Doug KB 357; Sanderson v. Busher (1814) 4 Camp 54n; De Hahn v. Hartley (1786) 1 TR 343; Hart v. Standard Marine Insurance Co (1889) 22 QBD 499; Union Insurance Society of Canton v. George Wills & Co [1916] AC 281; Simons v. Gale [1958] 2 All ER 504; Overseas Commodities v. Style [1958] 1 Lloyd’s Rep 546; Bennett v. Axa Insurance plc [2004] Lloyd’s Rep IR 615). The strictness of the doctrine is tempered by a willingness in the courts to construe narrowly the obligations imposed by warranties. Thus a warranty that the vessel is carrying a particular cargo does not preclude the assured from carrying additional cargo (Muller v. Thompson (1811) 2 Camp 610). See also: Hide v. Bruce (1783) 3 Doug 213; Laing v. Glover (1813) 5 Taunt 49; Hart v. Standard Marine Insurance Co Ltd (1889) 22 QBD 499. The saving for the situation in which the policy provides otherwise, reflects ‘‘held covered’’ clauses, presently found in the Institute Clauses, under which the assured is held covered despite a breach of warranty provided that the assured gives prompt notice to the underwriters and pays an additional premium. See the note to s 31. The principle that the underwriters are discharged from liability on breach, whether or not they are aware of the breach at that date, was established by the House of Lords in Bank of Nova Scotia v. Hellenic Mutual War Risks Association (Bermuda) Ltd, ‘‘The Good Luck’’ [1991] 3 All ER 1, relying on Provincial Insurance Co of Canada v. Leduc (1874) LR 6 PC 224). See also: Forsakringsaktieselskapet Vesta v. Butcher [1989] 1 Lloyd’s Rep 331; Groupama Navigation et Transports Continent SA v. Catatumbo Ca Seguros [2001] Lloyd’s Rep IR 141. Losses which have accrued prior to the date of the assured’s breach remain payable under the policy. This necessarily applies only to breaches of a continuing warranty, as in the case of a present warranty the underwriters never come on risk as in Arab Bank v. Zurich Insurance Ltd [1999] 1 Lloyd’s Rep 262 and Agapitos v. Agnew (No 2) [2003] Lloyd’s Rep IR 55. If the loss occurs prior to breach, the underwriters remain liable (Woolmer v. Muilman (1763) 2 Burr 1419; Simpson SS Co Ltd v. Premier Underwriting Association Ltd (1905) 92 LT 730). Equally, once a warranty has been broken, the underwriters are off risk and the assured cannot reinstate the risk by complying with the warranty following its breach (De Hahn v. Hartley (1786) 1 TR 343; Forshaw v. Chabert (1821) 3 Brod & Bing 158; Foley v. Tabor (1861) 2 F & F 663; Quebec Marine Insurance Co v. Commercial Bank of Canada (1870) LR 3 PC 234). The point is graphically illustrated by J A & Co Ltd v. Kadirga Denizcilik Ve Ticaret [1998] Lloyd’s Rep IR 377, in which the late payment of an instalment of premium put the assured in breach of a premium warranty clause, putting an end to the risk under the policy but leaving untouched the assured’s liability to pay the full amount of the premium. There must be actual breach of warranty before the underwriters are discharged, and not merely an anticipated or intended breach (Baines v. Holland (1855) 10 Exch 802; Simpson SS Co v. Premier Underwriting Association (1905) 10 Com Cas 198). A policy may oust the right of an insurer to rely upon breach of warranty as giving rise to automatic termination of the risk: in such a case, the underwriters retain a right to claim damages for breach of contract (Kumar v. AGF Insurance Ltd [1999] Lloyd’s Rep IR 147).

When breach of warranty excused 34.—(1) Non-compliance with a warranty is excused when, by reason of a change of circumstances, the warranty ceases to be applicable to the circumstances of the contract, or when compliance with the warranty is rendered unlawful by any subsequent law. (2) Where a warranty is broken, the assured cannot avail himself of the defence that the breach has been remedied, and the warranty complied with, before loss. (3) A breach of warranty may be waived by the insurer. Notes Subs (1) For illustrations of these situations, see: Hore v. Whitmore (1778) 2 Cowp 784; Esposito v. Bowden (1857) 7 E & B 763; Agapitos v. Agnew (No 2) [2003] Lloyd’s Rep IR 55.

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Subs (2) There are many reported instances of this: De Hahn v. Hartley (1786) 1 TR 343 (warranty as to number of crew); Quebec Marine Insurance Co v. Commercial Bank of Canada (1870) LR 3 PC 234 (seaworthiness). Subs (3) Waiver arises where the underwriters, having become aware of the assured’s breach of duty, equivocally represent by word or conduct that they do not intend to rely on the breach of warranty (Weir v. Aberdeen (1819) 2 B & Ald 320; Samuel & Co Ltd v. Dumas [1924] AC 431; Bhopal v. Sphere Drake Insurance plc [2002] Lloyd’s Rep IR 413). Contrast Sleigh v. Tyser [1900] 2 QB 333. In particular, the underwriters are taken to have waived a breach when he accepts a notice of abandonment in full knowledge of the breach (Quebec Marine Insurance Co v. Commercial Bank of Canada (1870) LR 3 PC 234; Provincial Insurance Co v. Leduc (1874) LR 6 PC 224; Samuel & Co v. Dumas [1924] AC 431). It is not possible to waive breach of the implied warranty of legality (Marine Insurance Act 1906, s 40), as the issue is one of public policy rather than private contract (Gedge v. Royal Exchange Assurance Corporation [1900] 2 QB 214). Waiver by the underwriters leaves the risk intact, but exposes the assured to an action for damages for breach of contract (Kumar v. AGF Insurance [1999] Lloyd’s Rep IR 147). As a result of the doctrine of automatic termination, ‘‘waiver’’ in the present context does not refer to affirmation in the form of a decision by underwriters to continue the risk rather than bring it to an end: instead it requires positive affirmation by the underwriters, in the form of an estoppel: J Kirkaldy & Sons v. Walker [1999] Lloyd’s Rep IR 410; HIH Casualty and General Insurance Ltd v. Axa Corporate Solutions [2002] Lloyd’s Rep IR 325, affirmed [2003] Lloyd’s Rep IR 1. Standard policy wording waives certain breaches of warranty: the warranty of seaworthiness is waived in relation to cargo policies unless the assured was privy to the unseaworthiness (Institute Cargo Clauses, cl 5.2).

Express warranties 35.—(1) An express warranty may be in any form of words from which the intention to warrant is to be inferred. (2) An express warranty must be included in, or written upon, the policy, or must be contained in some document incorporated by reference into the policy. (3) An express warranty does not exclude an implied warranty, unless it be inconsistent therewith. Notes Subs (1) The use of the word warranty is not essential for the creation of a warranty (Union Insurance Society of Canton Ltd v. George Wills Co [1916] AC 281). The questions to be asked are: whether the term goes to the root of the transaction; whether the term bears materially on the risk; and whether damages would be an adequate remedy for breach (HIH Casualty and General Insurance Ltd v. New Hampshire Insurance Co [2001] Lloyd’s Rep IR 596, applied in GE Reinsurance Corporation v. New Hampshire Insurance Co [2004] Lloyd’s Rep IR 404 and in Toomey v. Banco Vitalicio de Espana [2005] Lloyd’s Rep IR 423). Equally, the fact that a term is described as a warranty does not make it one without more (CTN Cash Carry v. General Accident Fire and Life Assurance Corporation [1989] 1 Lloyd’s Rep 299), although there are certain types of clause which are traditionally referred to as warranties and are given effect as such (eg premium warranties—Heath Lambert Ltd v. Sociedad de Corretage de Seguros [2004] Lloyd’s Rep IR 905). A statement in the policy that the vessel possesses a stated class is by its nature a warranty (Sun Alliance & London Insurance plc v PT Asuraynsri Dayin Mitra TBK, The No 1 Dae Bu [2006] Lloyd’s Rep IR 860). Subs (2) See ERC Frankona Reinsurance v. American National Insurance Co [2006] Lloyd’s Rep IR 157 (alleged statements not incorporated into policy). The most common method of creating warranties is by means of a declaration on the proposal form to the effect that the proposal form is to be the ‘‘basis of the contract’’ between the parties, a form of wording which is settled as creating a warranty (Yorkshire Insurance Co v. Campbell [1917] AC 218; Samuel & Co Ltd v. Dumas [1924] AC 431) providing that it is not limited to material facts, in which case the warranty adds nothing to s 20 of the Act (Fowkes v. Manchester & London Life Assurance Co (1863) 3 B & S 917; Hemmings v. Sceptre Life Association [1905] 1 Ch 365; Unipac (Scotland) Ltd v. Aegon Insurance Co [1999] Lloyd’s Rep IR 502). Warranties were in earlier times attached to standard policy wordings, and it was ultimately established that this form of attachment did not preclude a term from becoming a warranty (Bensuade v. Thames & Mersey Marine Insurance Co [1897] AC 609, doubting Pawson v. Watson (1778) 1 Doug KB 12n). Subs (3) This is illustrated by Sleigh v. Tyser [1900] 2 QB 333.

Warranty of neutrality 36.—(1) Where insurable property, whether ship or goods, is expressly warranted neutral, there is an implied condition that the property shall have a neutral character at the commencement of the risk, and that, so far as the assured can control the matter, its neutral character shall be preserved during the risk.

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(2) Where a ship is expressly warranted ‘‘neutral’’ there is also an implied condition that, so far as the assured can control the matter, she shall be properly documented, that is to say, that she shall carry the necessary papers to establish her neutrality, and that she shall not falsify or suppress her papers, or use simulated papers. If any loss occurs through breach of this condition, the insurer may avoid the contract. Notes Subs (1) There is no common law implied warranty of neutrality (Tyson v. Gurney (1789) 3 TR 477; Baring v. Claggett (1802) 3 B & P 201; Lothian v. Henderson (1803) 3 B & P 499). An express warranty of neutrality imposes an absolute obligation as regards the position when the risk incepts (Tabbs v. Bendelack (1801) 3 Bos & P 207n; Baring v. Christie (1804) 5 East 398), and thereafter the warranty is subject to the ability of the assured to control the matter. If a vessel loses its neutrality for reasons beyond the assured’s control, such as outbreak of war, there is no breach of warranty (Eden v. Parkinson (1781) 2 Doug 732), whereas if neutrality is lost due to the assured’s fault, eg because the vessel has disobeyed the rules of neutrality, the warranty is broken (Garrels v. Kensington (1799) 8 TR 230). Many of the cases concern the question, generally answered in the affirmative, whether the ruling of a foreign prize court as to the neutrality of a vessel can be regarded as conclusive evidence as to neutrality for the purposes of a warranty (Baring v. Claggett (1802) 3 Bos & P 201; Lothian v. Henderson (1803) 3 Bos & P 499; Bolton v. Gladstone (1809) 2 Taunt 85). Subs (2) For the common law basis, see: Barzillai v. Lewis (1782) 3 Doug KB 126; Rich v. Parker (1798) 7 TR 705; Steel v. Lacy (1810) 3 Taunt 285. The underwriters are required to show that the documents carried by the vessel were inappropriate (Le Cheminant v. Pearson (1812) 4 Taunt 367). As to seizure while carrying simulated papers, see: Oswell v. Vigne (1812) 15 East 70; Bell v. Bromfield (1812) 15 East 364. The warranty may be waived by prior permission given by the underwriters (Bell v. Bromfield (1812) 15 East 364). The warranty applies only to the vessel, so that cargo lost as a result of improper documentation may be claimed for under a cargo policy (Dawson v. Atty (1806) 7 East 367; Bell v. Carstairs (1811) 14 East 374; Carruthers v. Gray (1811) 3 Camp 142). The warranty is unique in that, by the terms of s 36(2) itself, the underwriters are able to avoid the policy only where the breach has caused the loss.

No implied warranty of nationality 37. There is no implied warranty as to the nationality of a ship, or that her nationality shall not be changed during the risk. Notes This is based on: Eden v. Parkinson (1781) 2 Doug KB 732; Tyson v. Gurney (1789) 3 TR 477; Clapham v. Cologan (1813) 3 Camp 382; Dent v. Smith (1869) LR 4 QB 414. In Seavision Investment SA v. Evennett and Clarkson Puckle, ‘‘The Tiburon’’ [1990] 2 Lloyd’s Rep 418 it was held that the warranty refers to the nationality of the legal owner of the vessel and not to the beneficial owner (eg the main shareholder in the assured company).

Warranty of good safety 38. Where the subject-matter insured is warranted ‘‘well’’ or ‘‘in good safety’’ on a particular day, it is sufficient if it be safe at any time during that day. Notes This is based on Blackhurst v. Cockell (1789) 3 TR 360.

Warranty of seaworthiness of ship 39.—(1) In a voyage policy there is an implied warranty that at the commencement of the voyage the ship shall be seaworthy for the purpose of the particular adventure insured. (2) Where the policy attaches while the ship is in port, there is also an implied warranty that she shall, at the commencement of the risk, be reasonably fit to encounter the ordinary perils of the port. (3) Where the policy relates to a voyage which is performed in different stages, during which the ship requires different kinds of or further preparation or equipment, there is an implied warranty that at the commencement of each stage the ship is seaworthy in respect of such preparation or equipment for the purposes of that stage.

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(4) A ship is deemed to be seaworthy when she is reasonably fit in all respects to encounter the ordinary perils of the seas of the adventure insured. (5) In a time policy there is no implied warranty that the ship shall be seaworthy at any stage of the adventure, but where, with the privity of the assured, the ship is sent to sea in an unseaworthy state, the insurer is not liable for any loss attributable to unseaworthiness. Notes Section 39 draws a distinction between voyage and time policies (as to which, see Biccard v. Shepherd (1861) 14 Moo PCC 471). Under a voyage policy there is a full warranty of seaworthiness of the vessel (s 39(1)–(4)). By contrast, under a time policy, there is no warranty of seaworthiness as such and the assured is precluded from recovering only where the assured was aware of the unseaworthiness and the loss was to some extent the result of that unseaworthiness. In all cases the seaworthiness must be assessed at the commencement of the voyage, so that the underwriters are not discharged when a vessel subsequently becomes unseaworthy (Dixon v. Sadler (1841) 8 M & W 895—negligent conduct by crew, and see the note to s 55 of the 1906 Act). In practice, underwriters require condition surveys of vessels prior to the inception of risk; as to what constitutes a proper survey, see Zeus Tradition (Marine) v. Bell [1999] 1 Lloyd’s Rep 703 and J Kirkaldy & Sons Ltd v. Walker [1999] Lloyd’s Rep IR 410. The burden of proving unseaworthiness rests on the underwriters (Pickup v. Thames & Mersey Marine Insurance Co Ltd (1878) 3 QBD 594; Ajum Goolam Hossen& Co v. Union Marine Insurance Co [1901] AC 362). The mere fact that a vessel goes down may in some cases be prima facie evidence of unseaworthiness (Parker v. Potts (1815) 3 Dow 23; Douglas v. Scougall (1816) 4 Dow 276), although this is a secondary question as the assured will not be able to claim unless he can demonstrate that an insured peril was operative at the time of the loss (Rhesa Shipping Co v. Edmunds, ‘‘The Popi M’’ [1985] 2 Lloyd’s Rep 1; Lamb Head Shipping Co Ltd v. Jennings, ‘‘The Marel’’ [1992] 1 Lloyd’s Rep 402; Glowrange Ltd v. CGU Insurance 2001, unreported; North Star Shipping Ltd v. Sphere Drake Insurance plc [2005] 2 Lloyd’s Rep 76). In Papera Traders Co Ltd v. Hyundai Merchant Marine Co Ltd, ‘‘The Eurasian Dream’’ [2002] 1 Lloyd’s Rep 719 Cresswell J classified the heads of seaworthiness. Seaworthiness may relate to: the condition of the vessel (Wilkie v. Geddes (1815) 3 Dow 57; Quebec Marine Insurance Co Ltd v. Commercial Bank of Canada (1870) LR 3 PC 234; Turnbull v. Janson (1877) 36 LT 635; Hoffmann & Co v. British General Insurance Co (1922) 10 Ll LR 434; Neue Fischmehl Vertriebs-Gesellschaft Haselhorst mbH v. Yorkshire Insurance Co Ltd (1934) 50 Ll LR 151; Silcock Sons Ltd v. Maritime Lighterage Co Ltd (1937) 57 Ll LR 78; Manifest Shipping & Co Ltd v. Un-Polaris Shiping Co Ltd, ‘‘The Star Sea’’ [2001] Lloyd’s Rep IR 247; Sun Alliance & London Insurance plc v. PT Asuraynsri Dayin Mitra TBK, The No 1 Dae Bu [2006] Lloyd’s Rep IR 860), the vessel’s failure to comply with the servicing requirements of its classification society (Stewart v. Wilson (1843) 2 M & W 11); the supplies carried by the vessel (Woolf v. Claggett (1800) 3 Esp 257; Wilkie v. Geddes (1815) 3 Dow 57; Wedderburn v. Bell (1807) 1 Camp 1; Quebec Marine Insurance Co v. Commercial Bank of Canada (1870) LR 3 PC 234); the number or competence of the crew (Annen v. Woodman (1810) 3 Taunt 299; Tait v. Levi (1811) 14 East 481; Busk v. Royal Exchange Assurance Co (1818) 2 B & Ald 73; Forshaw v. Chabert (1821) 3 Brod & Bing 158; Clifford v. Hunter (1827) 3 C & P 16; Holdsworth v. Wise (1828) 7 B & C 794; Phillips v. Headlam (1831) 2 B & Ad 383; Thomas v. Tyne & Wear Insurance Association [1917] 1 KB 938; Thomas & Son Shipping Co Ltd v. London & Provincial Marine & General Insurance Co Ltd (1914) 30 TLR 595; Manifest Shipping & Co Ltd v. Uni-Polaris Insurance Co Ltd, ‘‘The Star Sea’’ [2001] Lloyd’s Rep IR 247), including the use of a pilot to navigate the vessel into and out of port (Phillips v. Headlam (1831) 2 B & Ad 380); the method in which the cargo is stowed, including the overloading of the vessel (Weir v. Aberdeen (1819) 2 B & Ald 320; Foley v. Tabor (1861) 2 F & F 663; Biccard v. Shepherd (1861) 14 Moo PCC 471; Daniels v. Harris (1874) LR 10 CP 1); or the sufficiency of the vessel’s fuel supplies (Greenock SS Co v. Maritime Insurance Co [1903] 2 KB 657; ‘‘The Vortigern’’ [1899] P 140; Cohen Sons & Co v. Standard Marine Insurance Co Ltd (1925) 21 Ll LR 30; Harocopos v. Mountain (1934) 49 Ll LR 267). Anything likely to endanger the vessel or its cargo can render the vessel unseaworthy (Athenian Tankers Management SA v. Pyrena Shipping Inc, ‘‘The Arianna’’ [1987] 2 Lloyd’s Rep 376). If a defect can be cured easily and without great expense, it is unlikely to be regarded as giving rise to unseaworthiness (Ajum Goolam Hossen & Co v. Union Marine Insurance Co [1901] AC 362; Hong Kong Fir Shipping Co v. Kawasaki Kisen Kaisha [1962] 2 QB 26). In all cases, the burden is on the underwriters to prove unseaworthiness (Davidson v. Burnand (1868) LR 4 CP 117). Subs (1) This is based on Christie v. Secretan (1799) 8 TR 192. The section is concerned only with the seaworthiness of the vessel, but provides a defence in all forms of marine policies, whether on ships, cargo or freight. Seaworthiness does not involve an absolute standard, but relates merely to the particular adventure insured. Moreover, the vessel need only be reasonably fit to withstand sea perils (subs (4)). The seaworthiness warranty may be excluded by agreement, and in practice does not apply in cargo policies in the form of the Institute Cargo Clauses: cl 5 excludes liability for loss ‘‘arising from’’ unseaworthiness, but only where the assured was privy to the unseaworthiness. Older policies excluded the warranty by means of ‘‘seaworthiness admitted’’, ‘‘held covered’’ and similar clauses (Parfitt v. Thompson

749

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Marine Insurance

(1844) 13 M & W 392; Phillips v. Nairne (1847) 4 CB 343; Sleigh v. Tyser [1900] 2 QB 333; Cantiere Meccanico Brindisino v. Janson [1912] 3 KB 452). The implied warranty of seaworthiness operates at the inception of the voyage only (Bermon v. Woodbridge (1781) 2 Doug KB 781; Holdsworth v. Wise (1828) 7 B & C 794; Hollingworth v. Brodrick (1837) 7 Ad & E 40; Dixon v. Sadler (1841) 8 M & W 895; Gibson v. Small (1853) 4 HL Cas 353; Biccard v. Shepherd (1861) 14 Moo PC 471), which means that the underwriters may be put in the position of proving that a vessel lost in an unseaworthy state was unseaworthy at the earlier date at which the voyage commenced (Watson v. Clark (1813) 1 Do 336; Parker v. Potts (1815) 3 Dow 23): unseaworthiness at inception may nevertheless be presumed if the vessel is found to be unseaworthy within a short period thereafter (Pickup v. Thames & Mersey Marine Insurance Co Ltd (1878) 3 QBD 594). It also operates irrespective of the assured’s knowledge of the condition of the vessel (Douglas v. Scougall (1816) 4 Dow 269). A breach of warranty cannot be repaired, so that if the vessel is unseaworthy when the voyage commences the underwriters are off risk and the fact that repairs are effected does not reinstate the underwriters’ liability (Forshaw v. Chabert (1821) 3 Brod & Bing 458). The warranty extends to the vessel itself, but not to lighters used to transport cargo to and from the dock, even if the policy is in warehouse to warehouse form (Lane v. Nixon (1866) LR 1 CP 412). Subs (2) For port perils, see: Parmeter v. Cousins (1809) 2 Camp 235; Annen v. Woodman (1810) 3 Taunt 299; Gibson v. Small (1853) 4 HL Cas 353; Buchanan & Co v. Faber (1899) 4 Com Cas 223. Subs (3) The doctrine of stages requires a vessel to be seaworthy for each successive stage. This may require refitting (Bouillon v. Lupton (1863) 33 LJCP 37; Quebec Marine Insurance Co v. Commercial Bank of Canada (1870) LR 3 PC 234; Buchanan & Co v. Faber (1899) 4 Com Cas 223), additional crew or additional fuel (Greenock SS Co v. Maritime Insurance Co [1903] 2 KB 657; ‘‘The Vortigern’’ [1899] P 140). Where a vessel is delayed as a result of compliance with subs (3), the underwriters cannot plead delay as a defence (Marine Insurance Act 1906, s 49(1)(c)). Subs (4) Seaworthiness, as is clear from subs (1) and subs (4) taken together, is a variable standard based upon what is reasonably necessary for the voyage in question (Hibbert v. Martin (1808) Park’s Marine Insurances 473; Burges v. Wickham (1863) 3 B & S 669; Clapham v. Langton (1864) 5 B & S 729; Turnbull v. Janson (1877) 36 LT 635; Steel v. State Line SS Co (1877) 3 App Cas 72). Subs (5) In the case of a time policy, the unseaworthiness of the vessel when she commences her voyage is not an absolute defence, but rests on the ‘‘privity of the assured’’ (Gibson v. Small (1853) 4 HL Cas 353; Thompson v. Hopper (1856) 6 E & B 172; Fawcus v. Sarsfield (1856) 6 E & B 192; Dudgeon v. Pembroke (1877) 2 App Cas 284; Thomas & Son Shipping Co Ltd v. London & Provincial Marine & General Insurance Co Ltd (1914) 30 TLR 595; George Cohen, Sons & Co v. Standard Marine Insurance Co (1924) 20 Ll LR 133; Harocopos v. Mountain (1934) 49 Ll LR 267; Wilmott v. General Accident Fire and Life Assurance Corporation Ltd (1935) 53 Ll LR 156; Compania Naviera Vascongada v. British and Foreign Marine Insurance Co Ltd (1936) 54 Ll LR 35). This phrase means that the assured (or at least a person whose knowledge can be attributed to the assured) must be aware that the vessel is unseaworthy, or must have acted recklessly in that regard, and must have sent the vessel to sea in that state (Compania Maritima San Basilio SA v. Oceanus Mutual Underwriting Association (Bermuda) Ltd, ‘‘The Eurysthenes’’ [1976] 2 Lloyd’s Rep 171; Frangos v. Sun Life Insurance Office Ltd (1934) 49 Ll LR 354). The leading authority is Manifest Shipping & Co Ltd v. Uni-Polaris Shiping Co Ltd, ‘‘The Star Sea’’ [2001] Lloyd’s Rep IR 247, where it was emphasised that ‘‘privity’’ meant either actual or blind-eye knowledge (the latter dealing with the case in which the assured was aware of facts potentially leading to unseaworthiness but chose to ignore them), and that gross negligence is not enough. Moreover, s 39(5) operates to defeat the assured only when the loss is attributable to unseaworthiness of which he was aware (Thomas v. Tyne Wear Insurance Association [1917] 1 KB 938; ‘‘The Star Sea’’ [1997] 1 Lloyd’s Rep 360). This contrasts with the position under s 39(1) in relation to voyage policies, where there is no causation element. There may be express provision for the seaworthiness of a vessel. In Martin Maritime Ltd v. Provident Capital Indemnity Fund Ltd, ‘‘The Lydia Flag’’ [1998] 2 Lloyd’s Rep 652 the warranty was construed as requiring the vessel to be seaworthy at the inception of the policy unless the unseaworthiness resulted from a latent defect or crew/repairer negligence and the assured had exercised due diligence.

No implied warranty that goods are seaworthy 40.—(1) In a policy on goods or other moveables there is no implied warranty that the goods or moveables are seaworthy. (2) In a voyage policy on goods or other moveables there is an implied warranty that at the commencement of the voyage the ship is not only seaworthy as a ship, but also that she is reasonably fit to carry the goods or other moveables to the destination contemplated by the policy.

750

Marine Insurance Act 1906

5.20

Notes Subs (1) See Koebel v. Saunders (1864) 33 LJCP 310. Subs (2) See, for illustrations: Daniels v. Harris (1874) LR 10 CP 1; Sleigh v. Tyser [1900] 2 QB 333; ‘‘The Maori King’’ [1895] 2 QB 550: Blackett v. National Benefit Insurance Co (1921) 8 Ll LR 293. It is the practice to exclude this particular warranty, under the Institute Cargo Clauses, cl 5, and to restrict the exception to cases in which the assured was privy to the unseaworthiness.

Warranty of legality 41. There is an implied warranty that the adventure insured is a lawful one, and that, so far as the assured can control the matter, the adventure shall be carried out in a lawful manner. Notes This section, like s 36(1), contemplates two different situations. (a) If the adventure is illegal from the outset, the policy insuring the adventure is void, and this is so irrespective of the ignorance or otherwise of the parties (Johnston v. Sutton (1779) Doug 254; Farmer v. Legg (1797) 7 TR 186; Marryat v. Wilson (1799) 1 Bos & P 430; Parkin v. Dick (1809) 11 East 502; Gray v. Lloyd (1812) 4 Taunt 136; Camelo v. Britten (1820) 4 B & Ald 184; Redmond v. Smith (1844) 7 Man & G 457; Cunard v. Hyde (1859) 2 E & E 1; Australian Insurance Co v. Jackson (1875) 33 LT 286). (b) If the adventure is not illegal from the outset, the position is governed by the ordinary principles of law applicable to illegal contracts. If the statute specifically provides that the performance of a contract contrary to its terms is illegal, the court has no discretion in the matter and the policy will be rendered unenforceable. If, as is nearly always the case, the statute is silent as to the effects of illegality, the position is governed by the principles laid down by the Court of Appeal in Euro-Diam Ltd v. Bathurst [1988] 2 All ER 23. This case holds that not every act of illegality will render the entire contract illegal as formed (Atkinson v. Abbott (1809) 11 East 135; Waugh v. Morris (1873) LR 8 QB 202; Dudgeon v. Pembroke (1874) LR 9 QB 581). An act of illegality committed with the connivance of the assured renders the adventure illegal in its performance only if the illegality goes to the core of the adventure. Thus, the warranty is broken if the vessel is used for smuggling (Pipon v. Cope (1808) 1 Camp 434) or if regulatory legislation is disregarded (Cunard v. Hyde (1859) 29 LJQB 6; James Yachts Ltd v. Thames and Mersey Marine Insurance Co Ltd [1977] 1 Lloyd’s Rep 206) but not merely because the assured has made an illegal payment: Royal Boskalis Westminster NV v. Mountain [1997] 2 All ER 929. To be relevant, the illegality must arise under English law and must not merely be the contravention of a foreign statute, although in some cases it may be contrary to English public policy to enforce a contract to break foreign law (Planche v. Fletcher (1779) 1 Doug 251; Euro-Diam Ltd v. Bathurst [1988] 2 All ER 23). If an act of illegality is committed contrary to the assured’s instructions or wishes, and a loss occurs, the assured will be unaffected by the illegality and can recover as long as the loss was caused by an insured peril (Carstairs v. Allnutt (1813) 3 Camp 497; Wilson v. Rankin (1865) LR 1 QB 162). Moreover, if the illegality was on the part of the master or crew, the assured is entitled to recover on the basis of the insured peril of barratry. For barratry, see Marine Insurance Act 1906, Sched, r 11. It is not possible to waive breach of the warranty of illegality (Gedge v. Royal Exchange Assurance Corporation [1900] 2 QB 214). Independently of s 41, a policy will be illegal if its enforcement would be contrary to public policy, eg if trading with the enemy is involved (Gamba v. Le Mesurier (1803) 4 East 407; Brandon v. Curling (1803) 4 East 410). Contrast the position if the policy was valid in its inception, and war was declared after the loss has occurred: in such a case, an action may be maintained after war has ceased (Janson v. Driefontein Consolidated Gold Mines Ltd [1902] AC 484).

The Voyage Implied condition as to commencement of risk 42.—(1) Where the subject-matter is insured by a voyage policy ‘‘at and from’’ or ‘‘from’’ a particular place, it is not necessary that the ship should be at that place when the contract is concluded, but there is an implied condition that the adventure shall be commenced within a reasonable time, and that if the adventure be not so commenced the insurer may avoid the contract. (2) The implied condition may be negatived by showing that the delay was caused by circumstances known to the insurer before the contract was concluded, or by showing that he waived the condition.

751

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Marine Insurance

Notes Subs (1) See Moxon v. Atkins (1812) 3 Camp 200. Section 42 applies only to a voyage policy. Duration of time policies: The date at which the risk attaches and determines under a time policy is a matter for the wording of the policy itself. The risk may, for example, attach when the vessel leaves port (Sea Insurance Co v. Blogg [1898] 2 QB 398). A time policy expressed to be from a stated day to or until another stated day excludes the first day but includes the last day (Johnson & Co Ltd v. Bryant (1896) 1 Com Cas 363; Heinrich Hirdes GmbH v. Edmunds, ‘‘The Kiel’’ [1991] 2 Lloyd’s Rep 546). In all cases the loss must take place during the currency of the time policy (Bushell v. Faith (1850) 15 QB 649; Hough & Co v. Head (1885) 55 LJQB 43; Lidgett v. Secretan (1870) LR 5 CP 190; Anderson v. Martin [1908] AC 334). London market hulls policies terminate on the stated day, but there is provision for automatic early termination where the vessel changes its classification or flag (Institute Time Clauses Hulls, cl 4; International Hull Clauses, cll 13 and 14). Commencement of risk under voyage policies: the risk under a voyage policy ‘‘from’’ a particular place (port risks excluded) attaches when the vessel commences the voyage unless the policy contemplates some earlier date, eg before the goods have been allocated to a particular voyage (Wunsche International v. Tai Ping Insurance [1998] 2 Lloyd’s Rep 8). Some difficulty may here exist in determining whether the vessel has left port when the loss occurred (Hunting & Son v. Boulton (1895) 1 Com Cas 120). The risk under a voyage policy ‘‘at and from’’ a particular place (port risks included) attaches as soon as the contract is concluded (Marine Insurance Act 1906, Sched, rr 2 and 3). The main concern which this section addresses is that a delayed start to the voyage may risk adverse seasonal weather conditions. For illustrations, see: Chitty v. Selwyn & Martyn (1742) 2 Atk 359; Grant v. King (1802) 4 Esp 175; Hull v. Cooper (1811) 14 East 479; Mount v. Larkins (1831) 8 Bing 108; Palmer v. Marshall (1832) 8 Bing 317; Palmer v. Fenning (1833) 9 Bing 460; De Wolf v. Archangel Insurance Co (1874) LR 9 QB 451; Maritime Insurance Co v. Stearns [1901] 2 KB 912; Bah Lias Tobacco and Rubber Estates v. Volga Insurance Co (1920) 3 Ll LR 155. Reasonableness is a matter of fact (Marine Insurance Act 1906, s 88), and external causes for the delay may be taken into account (Smith v. Surridge (1801) 4 Esp 25). In practice, cargo policies governed by the Institute Cargo Clauses, cl 8, are written on a ‘‘warehouse to warehouse’’ basis. The risk commences when the goods leave the warehouse, (although in some cases cover may commence from a factory rather than a warehouse—Wunsche International v. Tai Ping Insurance Co [1998] 2 Lloyd’s Rep 8) and terminates on delivery to the consignee’s warehouse or place of storage, subject to a 60-day maximum period running from the completion of the discharge of the goods from the vessel. Delivery of goods to a transit shed or customs compound pending onwards transit does not amount to delivery to a ‘‘place of storage’’, so that the risk does not terminate at that point (John Martin v. Russell [1960] 1 Lloyd’s Rep 554; Mitsui Marine Fire Insurance Co v. Bayview Motors Ltd [2003] Lloyd’s Rep IR 117). There are numerous authorities on earlier versions of the transit clause. See, eg, Allagar Rubber Estates Ltd v. National Benefit Assurance Co Ltd (1922) 10 Ll LR 564 (risk terminating on safe delivery to purchaser—subject to unreasonable delay by purchaser); Safadi v. Western Assurance Co (1933) 46 Ll LR 140 (risk terminating 30 days after discharge—period to be regarded as extended if moving goods would expose them to danger but not if goods are retained for commercial reasons). For the authorities on the old standard provision whereby cover terminated when the goods were ‘‘safely landed’’ (see Marine Insurance Act 1906, Sched, r 5). Where a policy specifies the name and address of the warehouseman, it is sufficient if the goods are stored in any warehouse controlled by that person: they need not be stored at the stated address (Cecom Trade BV v. Bishop (1995) Lloyd’s List, 14 October). Termination of risk under a voyage policy: There is nothing in the 1906 Act dealing with the termination of the risk under a voyage policy (for cargo, see Sched, r 5, in practice superseded by the warehouse to warehouse clause). The policy may terminate on arrival (which refers to arrival at the part of the port where discharge takes place: Lindsay v. Janson (1859) 4 H & N 699; Samuel v. Royal Exchange Assurance (1828) 8 B & C 19; Stone v. Marine Insurance Co of Gothenburg (1876) 1 Ex D 81) at the port (which must be a friendly port—Brown v. Vigne (1810) 12 East 283) of final discharge or destination (see Marten v. Vestey Brothers Ltd [1920] AC 307, although the addition of the words ‘‘however employed’’ extend the assured’s cover to ports subsequently visited: Crocker v. Sturge [1897] 1 QB 330; Crocker v. General Insurance Co Ltd (1897) 3 Com Cas 22; Kynance SS Co v. Young (1911) 16 Com Cas 123). Nevertheless, some form of extension is usual. The cases have considered policies expressed to terminate: (a) a specified period (normally 30 days) following arrival (see the note to s 25, as to the nature of the extended policy in such a case) and it is here established that the extension runs for consecutive periods of 24 hours from the exact time of arrival, so that in the case of a 30-day extension the risk will terminate exactly 30 days from the time of arrival and not midnight on the last day—Mercantile Marine Insurance Co v. Titherington (1864) 5 B & S 765; Cornfoot v. Royal Exchange Assurance Corporation [1904] 1 KB 40); (b) after 24 hours following mooring in good safety (as to which see: Lockyer v. Offley (1786) 1 TR 252; Minett v. Anderson (1794) Peake 212; Shawe v. Felton (1801) 2 East 109; Horneyer v. Lushington (1812) 15 East 46; Samuel v. Royal Exchange Assurance Co (1828) 8 B & C 119; Whitwell v. Harrison (1848) 2 Exch 127); Lidgett v. Secretan (1870) LR 5 CP 190).

752

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Sailing warranties: Old forms of policy, whether time or voyage, commonly contained sailing warranties by which the assured was required to sail by or after a specified date. These cases gave rise to the need to define ‘‘sail’’ or ‘‘depart’’. They established that a vessel had sailed if she had left the port with an intention on the part of the master of going to sea even if she was subsequently prevented from sailing by external causes (Earle v. Harris (1780) 1 Doug KB 357; Lang v. Anderdon (1824) 3 B & C 495; Cockrane v. Fisher (1835) 1 C, M & R 809) but not if she had left port: (a) without being fully equipped to sail (Ridsdale v. Newnham (1815) 3 M & S 456; Pittegrew v. Pringle (1832) 3 B & Ad 514; Graham v. Barras (1834) 5 B & Ad 1011; Thompson v. Gillespy (1855) 5 E & B 209; Hudson v. Bilton (1856) 2 Jur NS 784; Price v. Livingstone (1882) 9 QBD 679, but contrast Bouillon v. Lupton (1863) 15 CBNS 113), or (b) without any intention on the master’s part to head for open sea (Lang v. Anderdon (1824) 3 B & C 495; Fisher v. Cochran (1835) 5 Tyr 496; Sea Insurance Co v. Blogg [1898] 2 QB 398). Failure to leave port, even if prevented from doing so by external causes, constituted a breach of warranty (Hore v. Whitmore (1778) 2 Cowp 784; Nelson v. Salvador (1829) Mood & M 309; Graham v. Barras (1834) 5 B & Ad 1011; and cf Moir v. Royal Exchange Assurance Co (1815) 3 M & S 461, where the wording was slightly different). Subs (2) If the underwriters are aware of the delay and accept the risk of it, eg by taking a supplementary premium, there is waiver (Bah Lias Tobacco and Rubber Estates v. Volga Insurance Co Ltd (1920) 3 Ll LR 155).

Alteration of port of departure 43. Where the place of departure is specified by the policy, and the ship instead of sailing from that place sails from any other place, the risk does not attach. Notes This section is based on Way v. Modigliani (1787) 2 TR 30. Compare Driscol v. Passmore (1798) 1 Bos & P 200, where the assured was held to be justified in adopting a different route to the port of commencement of risk due to fear of capture at an intermediate port.

Sailing for different destination 44. Where the destination is specified in the policy, and the ship, instead of sailing for that destination, sails for any other destination, the risk does not attach. Notes Section 44 deals with the case in which the destination is changed at the time the voyage is commenced: for the situation in which the voyage is changed after the voyage is commenced, see section 45, below. The fact that the assured has the intention to change the voyage before the risk commences does not discharge the underwriters if the voyage is in fact properly commenced (Hare v. Travis (1827) 7 B & C 14; Simon, Israel & Co v. Sedgwick [1893] 1 QB 303; Hewitt v. London General Insurance Co Ltd (1925) 23 Ll LR 243). Equally, there is no deviation on such facts (see s 46(3)). For the basis of the principle in s 44, see: Woolridge v. Boydell (1778) 1 Doug KB 16; Sellar v. McVicar (1804) 1 B PNR 23; Simon, Israel & Co v. Sedgwick [1893] 1 QB 303; Kallis Manufacturers v. Success Insurance [1985] 2 Lloyd’s Rep 8. The relationship between the s 44 principle that the risk does not attach if the wrong voyage is commenced, and the warehouse to warehouse clause in the Institute Cargo Clauses (cl 8) which provides that the risk attaches to cargo as soon as it leaves the warehouse of origin, was considered by the Court of Appeal in Nima SARL v. Deves Insurance plc [2002] Lloyd’s Rep IR 752. It was there held that the cover provided by the warehouse to warehouse clause applies until the point at which the wrongful voyage commences, so that if the cargo is lost or damaged in the course of transit from warehouse to vessel the assured can recover even though the vessel was intended to sail for a different destination and indeed subsequently did so. However, if the cargo is safely loaded, and the vessel then departs for a changed destination, section 44 takes over and the cover provided by the warehouse to warehouse clause is revoked.

Change of voyage 45.—(1) Where, after the commencement of the risk, the destination of the ship is voluntarily changed from the destination contemplated by the policy, there is said to be a change of voyage. (2) Unless the policy otherwise provides, where there is a change of voyage, the insurer is discharged from liability as from the time of change, that is to say, as from the time when the

753

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Marine Insurance

determination to change it is manifested; and it is immaterial that the ship may not in fact have left the course of voyage contemplated by the policy when the loss occurs. Notes Section 45, which applies to voyage policies, operates on the basis that the voyage has been validly commenced, and that the intention to change voyage arises after commencement (for change of port of commencement, see s 43, and for pre-commencement change of destination, see s 44, above). It should be noted that s 45 is concerned with the case in which the ultimate destination is changed: if there is merely a deviation from the agreed route to that destination, the matter is governed by ss 46–47 and 49). Subs (1) For illustrations, see: Woolridge v. Boydell (1778) 1 Doug KB 16; Bottomley v. Bovill (1826) 5 B & C 210; Tasker v. Cunningham (1819) 1 Bligh HL 87; Fraser Shipping Ltd v. Colton [1997] 1 Lloyd’s Rep 586. Resumption of the original voyage does not reinstate the policy (Way v. Modigliani (1787) 2 TR 30). There are no statutory excuses for change of voyage comparable with those for deviation (see Marine Insurance Act 1906, s 49), although the effect of some aspects of s 49 is reproduced by the requirement that the change of voyage must be voluntary and not forced on the assured by, eg governmental action (Phelps v. Auldjo (1809) 2 Camp 350; British and Foreign Marine Insurance Co v. Samuel Sanday & Co [1916] 1 AC 650; Rickards v. Forestal Land, Timber and Railway Co [1942] AC 50). Subs (2) Under this provision, which is based on Tasker v. Cunningham (1819) 1 Bligh HL 87 (and cf Bottomley v. Bovill (1826) 5 B & C 210), the underwriters are discharged as soon as there is sufficient evidence of an intention to change voyage. The evidence in that case was found in statements by the agents of the shipowner that the voyage would be changed. Contrast the position of deviation, where actual deviation is required (Marine Insurance Act 1906, s 46(3)). In practice change of voyage is not an automatic discharging event, and will be protected by a ‘‘held covered’’ clause requiring prompt notice to the underwriters and payment of additional premium if requested (Institute Cargo Clauses, cl 10; Institute Voyage Clauses Hulls, cl 2).

Deviation 46.—(1) Where a ship, without lawful excuse, deviates from the voyage contemplated by the policy, the insurer is discharged from liability as from the time of deviation, and it is immaterial that the ship may have regained her route before any loss occurs. (2) There is a deviation from the voyage contemplated by the policy— (a) Where the course of the voyage is specifically designated by the policy, and that course is departed from; or (b) Where the course of the voyage is not specifically designated by the policy, but the usual and customary course is departed from. (3) The intention to deviate is immaterial; there must be a deviation in fact to discharge the insurer from his liability under the contract. Notes Deviation, unlike change of voyage, contemplates no change in the ultimate destination but rather a change of route to that destination (Thames & Mersey Marine Insurance Co v. Van Laun & Co [1917] 1 KB 48n (decided in 1905). The rule set out in s 46 must be read subject to the list of excuses contained in s 49. Deviation is confined to voyage policies, although time policies may contain terms or warranties restricting the limits of navigation subject to the underwriters agreeing to extend cover (see Institute Time Clauses Hulls, cl 1 and International Hull Clauses, cll 10, 32 and 33, lesser restrictions also being found in Institute Voyage Clauses Hulls, cl 1). Thus the vessel may be confined to port (Pearson v. Commercial Union Assurance Co (1876) 1 App Cas 498; Mountain v. Whittle [1921] 1 AC 615) or to particular geographic regions (Birrell v. Dryer (1884) 9 App Cas 345; Simpson SS Co Ltd v. Premier Underwriting Association Ltd (1905) 10 Com Cas 198). Subs (1) Losses incurred prior to the deviation are recoverable (Green v. Young (1702) 2 Ld Raym 840; Hare v. Travis (1827) 7 B & C 14), but post-deviation losses are irrecoverable whatever the subsequent cause of the loss (Elliot v. Wilson (1766) 4 Bro PC 470; Davis v. Garrett (1830) 6 Bing 716; Thompson v. Hopper (1856) 6 E & B 172) and even though the vessel had resumed its course prior to the loss (Way v. Modigliani (1787) 2 TR 30). The fact that the risk has not increased as a result of the deviation is immaterial (Hartley v. Buggin (1781) 3 Doug KB 39). Subs (2) As to (a), see: Phyn v. Royal Exchange Assurance Co (1798) 7 TR 505; Tait v. Levi (1811) 14 East 481; Brown v. Tayleur (1835) 4 A & E 241; Wingate v. Foster (1878) 3 QBD 582; Difiori v. Adams (1884) 53 LJQB 437. The policy overrides any customary route (Elliot v. Wilson (1766) 4 Bro PC 470). As to (b), see: Salvador v. Hopkins (1765) 3 Burr 1707; Gregory v. Christie (1784) 3 Doug 419; Middlewood v. Blakes (1797) 7 TR 162; Ougier v. Jennings (1808) 1 Camp 505n; Vallance v. Dewar (1808) 1 Camp 503; Cormack v. Gladstone (1809) 11 East 347; Davis v. Garrett (1830) 6 Bing 716; Thompson v. Hopper (1858) EB & E 1038; Morrison (James) & Co

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Ltd v. Shaw, Savill and Albion Co Ltd [1916] 2 KB 783. Whether a usual and customary course is established is a matter of fact, and it may be possible for the assured to sustain a claim by establishing a customary route involving deviation: Reardon Smith Lines Ltd v. Black Sea and Baltic General Insurance Co Ltd, ‘‘The Indian City’’ [1939] AC 562; Frenkel v. MacAndrews & Co Ltd [1929] AC 545. Subs (3) This rule is based on Foster v. Wilmer (1746) 2 Str 1249; Woolridge v. Boydell (1778) 1 Doug KB 16; Thellusson v. Fergusson (1780) 1 Doug KB 360; Kewley v. Ryan (1794) 2 H Bl 343; Heselton v. Allnutt (1813) 1 M & S 46. An intention to deviate which is not put into operation is, therefore, immaterial (Kingston v. Phelps (1793) 1 Peake 299). For a post-Act illustration, see Hewitt v. London General Insurance Co Ltd (1925) 23 Ll LR 243, where the intention to deviate was formed prior to the commencement of the voyage, and cf the note to s 44. Contrast the position with change of voyage, where a manifest intention is sufficient to discharge the underwriters (Marine Insurance Act 1906, s 45(2)). If the deviation has occurred before the policy has incepted, the risk never attaches unless the underwriters can be shown to have been aware of the deviation and to have agreed to it (Redman v. Lowdon (1814) 5 Taunt 462). Deviation has traditionally been waived by underwriters, under a ‘‘liberty to touch and stay’’ clause, on which there are numerous authorities (see, eg Violett v. Allnutt (1813) 3 Taunt 419; Leathley v. Hunter (1831) 7 Bing 517, and Marine Insurance Act 1906, Sched, r 6). A rather more extensive waiver appears in the Institute Clauses, whereby deviation is permitted subject to prompt notice to the underwriters and the payment of any required additional premium (Institute Voyage Clauses Hulls, cl 2).

Several ports of discharge 47.—(1) Where several ports of discharge are specified by the policy, the ship may proceed to all or any of them, but, in the absence of any usage or sufficient cause to the contrary, she must proceed to them, or such of them as she goes to, in the order designated by the policy. If she does not there is a deviation. (2) Where the policy is to ‘‘ports of discharge’’, within a given area, which are not named, the ship must, in the absence of any usage or sufficient cause to the contrary, proceed to them, or such of them as she goes to, in their geographical order. If she does not there is a deviation. Notes Subs (1) For examples, see: Beatson v. Haworth (1796) 6 TR 531; Marsden v. Reid (1803) 3 East 572; Metcalf v. Parry (1814) 4 Camp 123; Kynance Sailing Ship Co Ltd v. Young (1911) 16 Com Cas 123. If there is only one port at a place, there is no deviation by visiting different bays (Warre v. Miller (1825) 4 B & C 538). There is equally no deviation if the vessel does not visit all of the ports specified in the policy (Marsden v. Reid (1803) 3 East 572). Subs (2) For examples, see: Clason v. Simmonds (1741) cited in 6 TR at p 533, 101 ER 687; ‘‘The Dunbeth’’ [1897] P 133; Marten v. Vestey Bros [1920] AC 307. The obligation on the assured to visit ports in geographical order is not overriden by a ‘‘liberty to touch and stay’’ clause (Gairdner v. Senhouse (1810) 3 Taunt 16).

Delay in voyage 48. In the case of a voyage policy, the adventure insured must be prosecuted throughout its course with reasonable dispatch, and, if without lawful excuse it is not so prosecuted, the insurer is discharged from liability as from the time when the delay became unreasonable. Notes At common law, delay was regarded as a form of deviation, although the two concepts were separated out by s 48. The excuses for delay and deviation remain identical under s 49. The underwriters are discharged from liability where delay becomes unreasonable, but even where delay is not unreasonable the underwriters will not be liable for a loss proximately caused by delay (see Marine Insurance Act 1906, s 55(2)(b)). The Institute Clauses provide insurance on a held covered basis where there has been delay, although this is limited to cases of delay beyond the assured’s control, so that little is added to the common law (Institute Cargo Clauses, cl 18). Whether or not delay has been undue is a question of fact, taking into account the length of the delay, the nature of the voyage and the purpose of the delay (Langhorn v. Allnutt (1812) 4 Taunt 511). For illustrations of undue delay, see: Mount v. Larkins (1831) 8 Bing 108; Doyle v. Powell (1832) 4 B & Ad 267; Hamilton v. Sheddon (1837) 3 M & W 49; Company of African Merchants v. British Insurance Co (1873) LR 8 Ex 154; Pearson v. Commercial Union Assurance Co (1876) 1 App Cas 498; Phillips v. Irving (1884) 7 Man & G 325; Hyderabad (Deccan) Co v. Willoughby [1899] 2 QB 530. Contrast cases of acceptable delay: Smith v. Surridge (1801) 4 Esp 25; Grant v. King (1802) 4 Esp 175; Schroder v. Thompson (1817) 7 Taunt 462; Samuel v. Royal Exchange Assurance (1828) 8 B & C 119; Bain v. Case (1829) 3 C & P 496; British American Tobacco v. Poland (1921) 7 Ll LR 108; Niger Co Ltd v. Guardian Assurance Co (1922) 13 Ll LR 175.

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Marine Insurance

Excuses for deviation or delay 49.—(1) Deviation or delay in prosecuting the voyage contemplated by the policy is excused— (a) Where authorised by any special term in the policy; or (b) Where caused by circumstances beyond the control of the master and his employer; or (c) Where reasonably necessary in order to comply with an express or implied warranty; or (d) Where reasonably necessary for the safety of the ship or subject-matter insured; or (e) For the purpose of saving human life, or aiding a ship in distress where human life may be in danger; or (f) Where reasonably necessary for the purpose of obtaining medical or surgical aid for any person on board the ship; or (g) Where caused by the barratrous conduct of the master or crew, if barratry be one of the perils insured against. (2) When the cause excusing the deviation or delay ceases to operate, the ship must resume her course, and prosecute her voyage, with reasonable dispatch. Notes Subs (1)(a) It is standard practice for marine policies to contain held covered provisions in the event of deviation. Such a clause does not apply where the assured’s intention to deviate was formed prior to the making of the contract (Laing v. Union Marine Insurance Co (1895) 1 Com Cas 11). The modern wording replaced the old form of policy which conferred upon the assured ‘‘liberty to touch and stay’’ at ports of his choice. See Marine Insurance Act 1906, Sched, r 6. Subs (1)(b) Relevant factors include government or belligerent action (Scott v. Thompson (1805) 1 Bos PNR 181; Blackenhagen v. London Assurance Co (1808) 1 Camp 454; Phelps v. Auldjo (1809) 2 Camp 350; Schroder v. Thompson (1817) 7 Taunt 462; Rickards v. Forestal Land, Timber and Railway Co Ltd [1942] AC 50), weather conditions (Harrington v. Halkeld (1778) 2 Park’s Marine Insurances 639; Kingston v. Phelps (1795) 7 TR 165n; Delany v. Stoddart (1785) 1 TR 22; Samuel v. Royal Exchange Assurance Co (1828) 8 B & C 119) and conduct of the crew (Elton v. Brogden (1747) 2 Str 1264; Driscol v. Bovil (1798) 1 Bos & P 313). The mere fact that the vessel deviated due to the master’s lack of knowledge of the geography of an area is no excuse (Tait v. Levi (1811) 14 East 481). Subs (1)(c) primarily relates back to s 39(3) of the 1906 Act. The combined effect of the two sections is that delay in order to make a vessel seaworthy for the next stage of its voyage is excused. For the common law origin, see: Motteux v. London Assurance (1739) 1 Atk 545; Bouillon v. Lupton (1863) 15 CBNS 113. Subs (1)(d) This ground overlaps with (b) above. The carrying out of necessary repairs to or refitting of the ship is a defence under this head (Clason v. Simmons (1741) 6 TR 533n; Smith v. Surridge (1801) 4 Esp 25; Weir v. Aberdeen (1819) 2 B & Ald 320), as is the taking on of provisions (Raine v. Bell (1808) 9 East 195). Deviating to avoid uninsured risks does not suffice (Scott v. Thompson (1805) 1 Bos & PNR 181). Subs (1)(e) See Lawrence v. Sydebotham (1805) 6 East 45. There is no excuse for delay or deviation to save third party property (Company of African Merchants v. British Insurance Co (1873) LR 8 Ex 154; Scaramanga v. Stamp (1880) 5 CPD 295). Subs (1)(f) See Woolf v. Claggett (1800) 3 Esp 257. Subs (1)(g) Barratry is conduct by the master or crew in breach of the assured’s instructions or wishes (see Marine Insurance Act 1906, Sched, r 11), and is an insured peril in its own right. Where barratry results in delay or deviation, the assured remains covered. For the origins of this principle, see Ross v. Hunter (1790) 4 TR 33. Negligence by the master and crew which results in deviation or delay is outside this provision (Tait v. Levi (1811) 14 East 481; Mentz, Decker & Co v. Maritime Insurance Co [1910] 1 KB 132). For barratry in general, see Marine Insurance Act 1906, Sched, r 11. Subs (2) For the origins and illustrations of this principle, see: Harrington v. Halkeld (1778) 2 Park on Marine Insurance 639; Lavabre v. Wilson (1779) 1 Doug KB 284; Delany v. Stoddart (1785) 1 TR 22. The subsection is probably superfluous, under the general prohibition on unreasonable delay under s 48.

Assignment of Policy When and how policy is assignable 50.—(1) A marine policy is assignable unless it contains terms expressly prohibiting assignment. It may be assigned either before or after loss. (2) Where a marine policy has been assigned so as to pass the beneficial interest in such policy, the assignee of the policy is entitled to sue thereon in his own name; and the defendant

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is entitled to make any defence arising out of the contract which he would have been entitled to make if the action had been brought in the name of the person by or on behalf of whom the policy was effected. (3) A marine policy may be assigned by indorsement thereon or in other customary manner. Notes Subs (1) The assignability of marine policies is necessary to facilitate commercial practice in the sale of cargoes under CIF and related arrangements. Policies governed by the Institute Clauses do not prohibit assignment, although notice must be given to the underwriters where a policy on a vessel is assigned (Institute Time Clauses Hulls, cl 5, Institute Voyage Clauses Hulls, cl 3, International Hull Clauses, cl 23); if notice is not given the assignment is void (Laurie v. West Hartlepool SS Thirds Indemnity Association and David (1899) 4 Com Cas 322). See also s 15 of the Marine Insurance Act 1906, which provides that the assignment of the subject-matter of the policy does not carry with it the policy itself, and that a separate assignment is necessary; moreover, the assignment of the policy and the subject-matter must be contemporaneous (s 51). For the principle that assignment is possible after loss, see: Sparkes v. Marshall (1836) 2 Bing NC 761; Lloyd v. Fleming (1872) LR 7 QB 299; Aron & Co Inc v. Miall (1928) 34 Com Cas 18, confirmed by Marine Insurance Act 1906, s 51, proviso. Subs (2) The section, replacing s 1 of the Policies of Marine Insurance Act 1868 (and thus predating the general right to assign choses in action at law first conferred by the Judicature Act 1873—now s 136 of the Law of Property Act 1925), gives the assignee a right to sue in his own name only where the policy itself has been assigned so as to transfer to the assignee the entire beneficial interest in the policy (Williams v. Atlantic Assurance Co Ltd [1933] 1 KB 81), so that if the assignee retains any benefits under the policy, the section is inapplicable (Raiffeisen Zentralbank Osterreich AG v. Five Star General Trading LLC, ‘‘The Mount I’’ [2001] Lloyd’s Rep IR 460). However, once a loss has occurred, the only benefit under the policy is the claim itself, so that assignment of the entirety of the claim can be effected under s 50 (so held in The Mount I, applied in Linelevel Ltd v. Powszechny Zaklad Ubezpieczen SA, ‘‘The Nore Challenger’’ [2005] 2 Lloyd’s Rep 534). The assignment is subject to equities, so that the underwriters can plead against the assignee any defence which may have been pleaded against the original assured, eg non-disclosure (Pickersgill v. London and Provincial Marine Insurance Co [1912] 3 KB 614), scuttling by the assignor prior to the assignment (Graham Joint Stock Shipping Co Ltd v. Merchants’ Marine Insurance Co Ltd (1923) 17 Ll LR 44, a case of an equitable mortgage), the absence of loss due to indemnification of the assured by a third party (Colonia Versicherung AG v. Amoco Oil Co [1995] 1 Lloyd’s Rep 570 affirmed [1997] 1 Lloyd’s Rep 261) or the fact that the policy is illegal because the assignor was an enemy alien (Bank of New South Wales v. South British Insurance Co Ltd (1920) 4 Ll LR 266). The underwriters are not, however, given the right to set off claims under the policy against other sums owed to him by the assignee (Baker v. Adam (1910) 15 Com Cas 227), unless either party is insolvent in which case all mutual debts can be set off against each other (Insolvency Rules 1986, SI 1986 No 1925, r 4.90). Equally, the underwriters cannot claim a set off in respect of post-assignment debts owed by the original assignor (Pellas v. Neptune Marine Insurance Co Ltd (1879) 5 CPD 34). If the policy is subject to a lien in favour of the broker, the assignment of the policy is subject to the lien (Man v. Shiffner (1802) 2 East 523). The fact of assignment which is effective to pass the entire beneficial interest does not remove the right of the assignor to rely upon policy terms inserted for his benefit, eg subrogation waiver provisions: ‘‘The Surf City’’ [1995] 2 Lloyd’s Rep 242. Subs (3) This subsection reproduces s 2 of the Policies of Marine Insurance Act 1868, which permitted assignment by indorsement (Aron & Co Inc v. Miall (1928) 34 Com Cas 18). A marine policy may, therefore, be assigned without notice to the underwriters (unless the policy otherwise provides, as in the case of hull insurance). Mere delivery is not, however, a customary assignment (Baker v. Adam (1910) 15 Com Cas 227; Safadi v. Western Assurance Co (1933) 46 Ll LR 140). Where this section cannot be used, in order to achieve an assignment at law it will be necessary to comply with the formalities of s 136 of the Law of Property Act 1925, under which the assignee can sue in his own name if the assignment is in writing, for value, and notified to the underwriters. If neither statutory provision is satisfied, it remains possible for an assignment to be effected in equity, for which no formalities are required although notice to the underwriters will be needed for the assignee to take priority over subsequent equitable assignees. An equitable assignment differs from a legal assignment in that the assignee cannot sue in his own name and must join the assignor, although it was said in Raiffeisen Zentralbank Osterreich AG v. Five Star General Trading LLC, ‘‘The Mount I’’ [2001] Lloyd’s Rep IR 460 that the court will not insist upon joinder if it is clear that the assignor himself will not be making a claim against the underwriters. The section does not deal with the possibility of the assignment of the right to claim under the policy, as opposed to the policy itself, although a claim is a chose in action which can be assigned at law or in equity (Swan & Cleland’s Graving Dock & Slipway Co v. Maritime Insurance Co [1907] 1 KB 116).

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Marine Insurance

Assured who has no interest cannot assign 51. Where the assured has parted with or lost his interest in the subject-matter insured, and has not, before or at the time of so doing, expressly or impliedly agreed to assign the policy, any subsequent assignment of the policy is inoperative: Provided that nothing in this section affects the assignment of a policy after loss. Notes Under s 15 of the 1906 Act, the assignment of the subject-matter does not carry with it the policy, and contemporaneous assignment of both is required. If the subject-matter is assigned first, the policy normally lapses, although s 51 does not say this in terms, and there is nothing left to assign at any future date (North of England Oil-Cake Co v. Archangel Insurance Co (1875) LR 10 QB 249; Powles v. Innes (1843) 11 M & W 10, although contrast the motor iinsurance decision, Dodson v. Peter H Dodson Insurance Services [2001] Lloyd’s Rep IR 278, in which the assured was held to have retained an insurable interest despite having sold his car, as the policy covered him for driving other vehicles). If, however, the subject-matter has been lost by reason of an insured peril, the assured may assign the policy to a third party after loss (Lloyd v. Fleming (1872) LR 7 QB 299; cf Marine Insurance Act 1906, s 50(1)).

The Premium When premium payable 52. Unless otherwise agreed, the duty of the assured or his agent to pay the premium, and the duty of the insurer to issue the policy to the assured or his agent, are concurrent conditions, and the insurer is not bound to issue the policy until payment or tender of the premium. Notes Section 52 is based on Burges v. Wickham (1863) 33 LJCP 17, although the modern view is that the premium is payable as soon as the contract is made unless there are express terms to the contrary (Heath Lambert Ltd v. Sociedad de Corretage de Seguros [2004] Lloyd’s Rep IR 905). If the premium is not payable immediately, the section does not make the attachment of the risk dependent upon the payment of the premium, so that losses incurred prior to payment can be recovered (subject to contract): the significance of the issue of the policy is that no action can be brought in a marine case other than on the policy itself (Marine Insurance Act 1906, s 22). The underwriters may additionally sue for the amount of the premium (although the liability is borne by the broker—s 53(1), below). Unless the policy otherwise provides, failure to pay premiums on time will rarely give the underwriters the right to treat the contract as repudiated by the assured (Fenton Insurance Co Ltd v. Gothaer Verischerungsbank VVag [1991] 1 Lloyd’s Rep 172, Figre Ltd v. Mander [1999] Lloyd’s Rep IR 193, but contrast Pacific & General v. Hazell [1997] LRLR 65, where the assured was insolvent), although the International Hull Clauses, cl 35, provides that the premium is to be paid within 45 days, failing which the underwriters have a right of cancellation by giving 15 days’ notice. If there is no premium payment condition or warranty, the underwriters may in practice obtain payment by giving notice to the assured demanding payment within a stated reasonable period and making time of the essence for compliance (Figre Ltd v. Mander [1999] Lloyd’s Rep IR 193). (For the amount of premium, see Marine Insurance Act 1906, s 31.)

Policy effected through broker 53.—(1) Unless otherwise agreed, where a marine policy is effected on behalf of the assured by a broker, the broker is directly responsible to the insurer for the premium, and the insurer is directly responsible to the assured for the amount which may be payable in respect of losses, or in respect of returnable premium. (2) Unless otherwise agreed, the broker has, as against the assured, a lien upon the policy for the amount of the premium and his charges in respect of effecting the policy; and, where he has dealt with the person who employs him as a principal, he has also a lien on the policy in respect of any balance on any insurance account which may be due to him from such person, unless when the debt was incurred he had reason to believe that such person was only an agent. Notes Subs (1) The responsibility of the broker for the premiums, a principle which applies to marine policies but not to Lloyd’s insurances and apparently not other forms of cover (Pacific & General Insurance v. Hazell

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[1997] LRLR 65; Goshawk Dedicated Ltd v. Tyser Co Ltd [2005] Lloyd’s Rep IR 379) is of some antiquity (Airy v. Bland (1774) 2 Park 811; Edgar v. Fowler (1803) 3 East 222; Edgar v. Bumstead (1809) 1 Camp 411; Shee v. Clarkson (1810) 12 East 507; Power v. Butcher (1829) 10 B & C 329), and was rationalised by the Court of Appeal in Universo Insurance Co of Milan v. Merchants’ Marine Insurance Co [1897] 2 QB 93 by the fiction that the premium has been paid by the assured and has been lent back to the broker by the underwriters. The fiction underlying the rule that the broker is primarily responsible for the premium leads to the curious result that there can never be in breach of any premium warranty or other obligation to make payment by a given date, as the fiction deems the premium to have been paid: for that reason it was held by the Court of Appeal in Heath Lambert Ltd v. Sociedad de Corretage de Seguros [2004] Lloyd’s Rep IR 905 that the fiction is overridden by any express payment obligation, so that if there is late payment by the broker the underwriters are entitled to rely upon any express clause discharging them from liability (the contrary assumption in Prentis Donegan & Partners Ltd v. Leeds & Leeds Co Inc [1998] 2 Lloyd’s Rep 326 is no longer good law). The rule imposing personal liability for premiums upon the broker under a marine policy may be ousted by express agreement and imposed upon the assured, as is stated by the opening words of s 53(1). However, the rule will not be ousted lightly. In J A Chapman & Co Ltd v. Kadirga Denizcilik Ve Ticaret [1998] Lloyd’s Rep IR 377, the Court of Appeal held that a premium warranty, whereby each instalment of the premium was warranted to be paid by given dates, did not operate to make the assured responsible for payment but rather retained the broker’s personal liability even though it meant that the assured had no control over the payment of premiums and thus potential loss of cover in the event of delay, and see also Heath Lambert Ltd v. Sociedad de Corretage de Seguros [2004] Lloyd’s Rep IR 905. Section 53(1) may be overriden by agreement, including net accounting arrangements, but only if such arrangements are expressly entered into (see the note to s 54). The broker’s liability to pay the premium is brought to an end in the event of the assured’s provisional liquidation, as this terminates the broker’s authority to act for the assured (Pacific & General v. Hazell [1997] LRLR 65). If a Lloyd’s broker is acting as a sub-broker, to place risks on behalf of a non-Lloyd’s broker, the Lloyd’s broker remains liable to the underwriters for the premium although he will have a right of indemnity against the original broker (Harris and Dixon (Insurance Brokers) Ltd v. Graham (Run-Off) Ltd, 1989, unreported, Prentis Donegan & Partners Ltd v. Leeds & Leeds Co Inc [1998] 2 Lloyd’s Rep 326). For limitation purposes the right of indemnity accrues on the date on which payment was due under the policy, and not from the date on which payment was actually made (Heath Lambert Ltd v. Sociedad de Corretage de Seguros [2004] Lloyd’s Rep IR 905). The concluding words of subs (1) impose upon the underwriters the obligation to pay losses to the assured. The cases illustrate that the loss may be paid to a broker acting as the assured’s agent as long as the loss is paid in a manner authorised by the assured (Hine Bros v. Steamship Insurance Syndicate Ltd, ‘‘The Netherholme’’ (1895) 72 LT 79). In particular, the broker is not deemed to have been paid by the underwriters by means of set off under a net accounting system and the assured thus remains free to bring proceedings against the underwriters (Jell v. Pratt (1817) 2 Stark 67; Todd v. Reid (1821) 4 B & Ald 210; Russell v. Bangley (1821) 4 B & Ald 395; Scott v. Irving (1830) 1 B & Ad 605; Bartlett v. Pentland (1830) 10 B & C 760; McGowin Lumber & Export Co Inc v. Pacific Marine Insurance Co Ltd (1922) 12 Ll LR 496) unless the assured has given specific authority to the broker (Stewart v. Aberdein (1838) 4 M & W 211) or was aware of the custom when the broker was engaged (Sweeting v. Pearce (1861) 9 CBNS 534). Once the broker has been paid, directly or notionally on account, he must account to the assured for the proceeds (Andrew v. Robinson (1812) 3 Camp 199; Wilkinson v. Clay (1815) 6 Taunt 110). It is only where the broker is insolvent that it becomes necessary to consider whether the broker has been paid in a fashion authorised by the assured so that the underwriters may be called upon to pay the assured whatever their arrangement with the broker may have been. The broker is under no legal duty to the assured to pay losses, and if the broker does so without the underwriters’ express authorisation, such payment is to be regarded as a gift to the assured, which leaves intact the assured’s right to sue the underwriters for the full amount of the loss: Merrett v. Capitol Indemnity Corporation [1991] 1 Lloyd’s Rep 169. If authority is given to a broker to make payments, it may be withdrawn: A A Mutual Insurance Co v. Bradstock Blunt & Crawley Ltd [1996] LRLR 161. Subs (2) Two distinct liens are involved here. As regards the lien on the premium and charges, see: Godin v. London Assurance Co (1758) 1 Burr 489; Mildred, Goyeneche & Co v. Maspons (1883) 8 App Cas 874; Fairfield Shipbuilding & Engineering Co Ltd v. Gardner, Mountain & Co Ltd (1912) 104 LT 288. As regards the general lien, see Olive v. Smith (1815) 5 Taunt 56. The broker’s right of lien, ie to retain the policy until the assured has indemnified the broker, is a necessary corollary of the rule in s 53(1). If the broker parts with possession of the policy and then regains possession, the lien reattaches (Levy v. Barnard (1818) 8 Taunt 149). The lien attaches also to the proceeds of the policy as a matter of market usage flowing from the existence of a lien on the policy itself: Eide UK Ltd v. Lowndes Lambert Group Ltd, The Sun Tender [1998] 1 Lloyd’s Rep 389. In this case the Court of Appeal held that if the broker receives the proceeds of the policy, he is entitled to retain them as security for any premium owed to him by the assured, and can set off the sum due against the proceeds. However, the lien does not apply where the policy is composite, as it may be that the premium is owed by co-assured A while the policy moneys are payable to co-assured B, and in line with the general

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rule that composite insurance involves distinct contracts the broker cannot treat the policy moneys as indivisible. The lien is exercisable against the proceeds in the hands of a placing broker even though the premiums are owed to him not by the assured but by the assured’s placing broker (Heath Lambert Ltd v. Sociedad de Corretage de Seguros (No 2) [2006] Lloyd’s Rep IR 797). A sub-broker has a lien on the policy as against the head broker even though the head broker has received his commission and charges from the assured (Mann v. Forrester (1814) 4 Camp 60; Westwood v. Bell (1815) 4 Camp 349), provided that the sub-broker was unaware that the head broker was himself an agent (Maanss v. Henderson (1801) 1 East 335; Man v. Shiffner (1802) 2 East 523; Snook v. Davidson (1809) 2 Camp 218; Lanyon v. Blanchard (1811) 2 Camp 597; Mann v. Forrester (1814) 4 Camp 60; Fisher v. Smith (1878) 4 App Cas 1; Near East Relief v. King, Chausseur & Co Ltd [1930] 2 KB 40). A broker will typically be remunerated by deduction of brokerage from the net premium paid or payable by the assured. The amount of brokerage will generally be agreed between the broker and the underwriters and the cases proceed on the basis that the broker is paid by the underwriters and earns his brokerage by finding business for them (McNeill v. Law Union Rock Insurance Co Ltd (1925) 23 Ll LR 314; Norreys (Lord) v. Hodgson (1897) 13 TLR 421; Harding Maughan Hambly v. CECAR [2000] Lloyd’s Rep IR 293; Absalom v. TCRU Ltd [2005] 2 Lloyd’s Rep 735). These rules are are somewhat curious, if not anomalous, in that they contemplate that the assured’s agent is paid by the third party and they also make it difficult to see exactly what consideration is given by the assured to the broker to support the broker’s undoubted duty to progress claims for the assured (see Grace v. Leslie Godwin [1995] LRLR 472) and more recently the Court of Appeal has accepted that there is at least an argument that the liability for brokerage is incurred by the assured and not the underwriters (see Carvill American Inc v. Camperdown UK Ltd [2006] Lloyd’s Rep IR 1, a reinsurance case, in which the Court of Appeal’s views on the rule that brokerage is paid by the underwriters were expressed rather more moderately than than by the trial judge, [2005] Lloyd’s Rep IR 55).

Effect of receipt on policy 54. Where a marine policy effected on behalf of the assured by a broker acknowledges the receipt of the premium, such acknowledgment is, in the absence of fraud, conclusive as between the insurer and the assured, but not as between the insurer and broker. Notes See Dalzell v. Mair (1808) 1 Camp 532; Du Gaminide v. Pigou (1812) 4 Taunt 246. It is market practice at Lloyd’s for the premium not to be paid by the broker, but rather for the broker and the underwriters to operate a quarterly accounting system under which the broker receives the premiums and pays the losses, subject to quarterly settlement with the underwriters. To facilitate this, the policy may state that the premium has been received by the underwriter even when this is not the case. For that reason, the statement prevents the underwriter from proceeding against the assured for a premium which he may have paid to the broker. It does not, however, create an estoppel as between underwriter and broker. Net accounting has not been recognised as a custom by the courts, so that in the absence of a net accounting agreement the broker remains liable for the premium under s 53(1), and cannot rely upon net accounting as a defence (Grand Union Insurance Co Ltd v. Evans-Lombe Ashton & Co 1989, unreported).

Loss and Abandonment Included and excluded losses 55.—(1) Subject to the provisions of this Act, and unless the policy otherwise provides, the insurer is liable for any loss proximately caused by a peril insured against, but, subject as aforesaid, he is not liable for any loss which is not proximately caused by a peril insured against. (2) In particular— (a) The insurer is not liable for any loss attributable to the wilful misconduct of the assured, but, unless the policy otherwise provides, he is liable for any loss proximately caused by a peril insured against, even though the loss would not have happened but for the misconduct or negligence of the master or crew; (b) Unless the policy otherwise provides, the insurer on ship or goods is not liable for any loss proximately caused by delay, although the delay be caused by a peril insured against; (c) Unless the policy otherwise provides, the insurer is not liable for ordinary wear and tear, ordinary leakage and breakage, inherent vice or nature of the subject-matter insured, or for any loss proximately caused by rats or vermin, or for any injury to machinery not proximately caused by maritime perils.

760

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Notes Subs (1) The modern development of the doctrine of proximate cause can be traced back to Leyland Shipping Co v. Norwich Union Fire Insurance Society [1918] AC 350, in which a vessel holed by a torpedo was lost in a storm after being refused entry to a nearby port for repairs. In holding that the proximate cause of the loss was the torpedo rather than sea perils, the House of Lords emphasised that the last cause is not necessarily the proximate cause. The question of proximate cause has arisen in a large number of cases and in a large number of contexts. In freight cases, for example, there may be an issue as to whether loss of freight is due to a marine peril affecting the vessel or to a fall in the market for the chartering of vessels (Continental Grain Co Inc v. Twitchell (1945) 78 Ll LR 251, and cf Cepheus Shipping Corporation v. Guardian Royal Exchange Assurance plc [1995] 1 Lloyd’s Rep 622, where the loss of earnings was due to the vessel being off-hire and would have occurred independently of damage to the vessel). Three of the most problematic are the following. (1) A vessel may be lost by a combination of its unseaworthiness and perils of the sea. Assuming that the matter is unaffected by s 39 of the Marine Insurance Act 1906, its resolution depends upon whether perils of the sea or unseaworthiness was the proximate cause. See: Dudgeon v. Pembroke (1877) 2 App Cas 284; Ballantyne v. Mackinnon [1896] 2 QB 455; Sassoon & Co Ltd v. Western Assurance Co [1921] AC 561; Grant, Smith & Co & McDonnell v. Seattle Construction & Dry Dock Co [1920] AC 162; Lloyd Instruments Ltd v. Northern Star Insurance Co Ltd, ‘‘The Miss Jay Jay’’ [1987] 1 Lloyd’s Rep 32. (2) A standard marine cover excludes war risks. The risks typically excluded (and covered by a war risks policy) are the following (taken from the International Hull Clauses, cll 29–31): ‘‘War’’ A war may be a war between nations, a civil war or a guerrilla war. ‘‘Hostilities’’ This term refers to operations of war (Britain Steamship Co v. R [1921] AC 99). ‘‘Rebellion’’ A rebellion is organised resistance to the government, the object being to supplant the government (Spinney’s (1948) Ltd v. Royal Insurance Co Ltd [1980] 1 Lloyd’s Rep 406). ‘‘Revolution’’ There is no authority on the meaning of this term. ‘‘Civil War’’ There are three elements of civil war (Spinney’s (1948) Ltd v. Royal Insurance Co Ltd [1980] 1 Lloyd’s Rep 406, and see Pesquereas y Secaderos Bacalao de Espana SA v. Beer [1949] 1 All ER 845): (i) there must be opposing sides rather than mere factional strife; (ii) the objectives of the sides must be coherent, and must ultimately be political; (iii) the violence must be on a scale in excess of mere outbreaks of strife, and must be judged in terms of the number of people involved, the duration of the conflict and the degree of civil dislocation. ‘‘Insurrection’’ This is a rebellion with political objectives (Spinney’s (1948) Ltd v. Royal Insurance Co Ltd [1980] 1 Lloyd’s Rep 406; National Oil Co of Zimbabwe (Private) Ltd v. Sturge [1991] 2 Lloyd’s Rep 281. ‘‘Civil strife’’ There is no authority on the meaning of this term. ‘‘Piracy’’ is generally an insured peril. See the definition in the Marine Insurance Act 1906, Sched, r 8. ‘‘Capture, seizure, arrest, restraint or detainment’’. The word ‘‘seizure’’ is to be taken to include both belligerent and non-belligerent seizure: Cory v. Burr (1883) 8 App Cas 393; Kuwait Airways Corporation v. Kuwait Insurance Co SAK [1999] 1 Lloyd’s Rep 803. Forcible dispossession is required for seizure (Shell International Petroleum Co Ltd v. Gibbs, ‘‘The Salem’’ [1983] 2 AC 375)—it is thus not enough that goods are put into a compound by customs authorities and then stolen (Mitsui Marine Fire Insurance Co v. Bayview Motors Ltd [2003] Lloyd’s Rep IR 117). ‘‘Derelict mines, torpedoes, bombs or other weapons of war’’ ‘‘Strikes’’ ‘‘Loss arising from any terrorist, any person acting from a political motive’’. It is uncertain whether an act of terrorism can also be an act of war: different views were expressed in by members of the Court of Appeal in If P Insurance Ltd (Publ) v. Silversea Cruises Ltd [2004] Lloyd’s Rep IR 696. ‘‘The use of any weapon or the detonation of an explosive by any person acting maliciously or from a political motive’’. The term ‘‘acting maliciously’’ refers to a generalised malicious act and not simply to one aimed against the assured in particular (Strive Shipping Corporation v. Hellenic Mutual War Risks Association (Bermuda) Ltd, ‘‘The Grecia Express’’ [2002] Lloyd’s Rep IR 669; contrast Tektrol Ltd v. International Insurance Co of Hanover Ltd [2005] 2 Lloyd’s Rep 701 where there was held to be an exception to the general rule where the reference to acts by malicious persons appeared in the context of an exclusion relating to other specific acts targeted against the assured). The mere fact that a loss has been caused by a malicious act does not operate to exclude coverage: the malicious act must consist of the detonation of an explosive, and not merely the setting of a fire (Kiriacoulis Lines SA v. Compagnie d’Assurances Maritime Ariennes et Terrestres, ‘‘The Demetra K’’ [2002] Lloyd’s Rep IR 795). ‘‘Nuclear risks’’

761

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War risks policies also cover ‘‘arrest restraint detainment confiscation or expropriation . . . by reason of infringement of any customs or trading regulations’’. The phrase ‘‘trading regulations’’ is concerned with the regulation of carriage of goods and the fulfilment of international trading transactions, so that a seizure for infringement of environmental and ecological protection measures by reason of illegal fishing is not covered (Svenska Handelsbanken AB v. Dandridge, ‘‘The Alicia Glazial’’ [2003] Lloyd’s Rep IR 10). The phrase ‘‘customs regulations’’ is a wide one, and covers form of control in the form of the grant of import or export licences and prohibitions on the import or export of particular products, so that seizure of a vessel by reason of its carrying prohibited imported goods is covered (Panamanian Oriental Steamship Corporation v. Wright, ‘‘The Anita’’ [1971] 1 Lloyd’s Rep 487—smuggled radios; Sunport Shipping Ltd v. Atkin, The Kleovoulos of Rhodes [2003] Lloyd’s Rep IR 27, affirmed [2003] Lloyd’s Rep IR 349—smuggled drugs). (3) There is frequently a difficulty in distinguishing between marine and war perils. In some cases this may be a matter of proximate cause. The mere fact that a war exists, for example, does not mean that all losses occurring in the territory affected by the war are proximately caused by the war: the state of affairs is generally not regarded as sufficient to amount to proximate cause (France, Fenwick & Co Ltd v. North of England Protection and Indemnity Association [1917] 2 KB 522; Moor Line v. R (1920) 4 Ll LR 208; Green v. British India Steam Navigation Co, ‘‘The Matiana’’ [1921] 1 AC 99; Harrison v. Shipping Controller, ‘‘The Inkonka’’ [1921] 1 KB 122; Adelaide SS Co v. R, ‘‘The Warilda’’ (1923) 14 Ll LR 41; Mazarakis Bros v. Furness, Withy & Co (1924) 17 Ll LR 113; Clan Line Steamers Ltd v. Board of Trade, ‘‘The Clan Matheson’’ [1929] AC 514; Hain SS Co v. Board of Trade [1929] AC 534). Other wordings may, however, be involved. Where the policy excludes ‘‘all consequences of’’ war and related risks, the doctrine of proximate cause is ousted and the underwriters are not liable for negligent navigation or other marine perils which have resulted or been encountered because of the existence of a war. Equally, where the policy covers ‘‘all consequences of hostilities or warlike operations’’, the underwriters are liable for losses directly or indirectly caused by such operations, including collisions with vessels involved in warlike operations (Atlantic Transport Co v. R, ‘‘The Maryland’’ (1921) 9 Ll LR 208; Charente SS Co v. Director of Transport (1922) 10 Ll LR 514; Ard Coasters v. Attorney General [1921] 2 AC 141; Liverpool & London War Risks Insurance Association v. Marine Underwriters of SS Richard de Larringa [1921] 2 AC 144; Peninsular and Oriental Branch Service v. Commonwealth Shipping Representative, ‘‘The Geelong’’ [1922] 1 KB 766) and loss while providing ancillary assistance to the war effort, eg refuelling and conveying casualties (‘‘The Caroline’’ (1921) 7 Ll LR 56; Hindustan SS Co v. Admiralty Commissioners (1921) 8 Ll LR 230; Ocean Steamship Co Ltd v. Liverpool & London War Risks Insurance Association, ‘‘The Priam’’ [1948] AC 243; Yorkshire Dale Steamship Co v. Minister of War Transport, ‘‘The Coxwold’’ [1942] AC 691). The modern wording in the Institute Clauses narrows the liability of war risks underwriters to the situation in which the loss is directly caused by a war risk. (4) If the voyage is abandoned due to an anticipated peril, the insurer’s liability depends upon whether the abandonment was justifiable or premature. In the latter case, the proximate cause of any loss is the assured’s own conduct. In the former case, there is a total loss and no notice of abandonment is required (see Marine Insurance Act 1906, s 62(7) and the note thereto). The principle applies to hulls, cargo and freight policies alike: (Milles v. Fletcher (1779) 1 Doug KB 231; Lubbock v. Rowcroft (1803) 5 Esp 50; Hadkinson v. Robinson (1803) 3 Bos & P 388; Forster v. Christie (1809) 11 East 205; Parkin v. Tunno (1809) 11 East 22; Mordy v. Jones (1825) 4 B & C 394; Philpott v. Swann (1861) 11 CBNS 270; Mercantile Steamship Co Ltd v. Tyser (1881) 7 QBD 73; Inman Steamship Co v. Bischoff (1882) 7 App Cas 670; ‘‘The Alps’’ [1893] P 109; Nickels & Co v. London & Provincial Marine & General Insurance Co Ltd (1900) 6 Com Cas 15; Manchester Liners Ltd v. British & Foreign Marine Insurance Co Ltd (1901) 7 Com Cas 26; Williams & Co v. Canton Insurance Office Ltd [1901] AC 462; Kacianoff v. China Traders Insurance Co Ltd [1914] 3 KB 1121; Becker, Gray & Co v. London Assurance Corporation [1918] AC 101). A similar situation may arise under a hull or cargo policy, where the master (assuming that he is unable to communicate with the assured—Australasian Steam Navigation Co v. Morse (1872) LR 4 PC 222) determines in the case of an emergency to sell the subject-matter following damage: if the sale is unjustified in that there is no actual total loss, the assured will be confined to claiming for a partial loss (Tanner v. Bennett (1825) Ry & M 182; Somes v. Sugrue (1830) 4 C & P 276; Roux v. Salvador (1836) 3 Bing NC 266; Knight v. Faith (1850) 15 QB 649; Navone v. Hadden (1859) 9 CB 30; Kaltenbach v. Mackenzie (1878) 3 CPD 467, and cf the note to s 57(1)). In the case of freight policies, the common law established the principle that where a vessel was lost and abandoned to hull insurers, there could be no claim for loss of freight if the freight was subsequently earned by the hull insurers—the loss of freight to the assured was caused not by a peril of the sea but rather by abandonment of the vessel to the hull underwriters (M’Carthy v. Abel (1804) 5 East 388; Scottish Marine Insurance Co v. Turner (1853) 4 HL Cas 312n). Under the Institute Hulls Clauses, hulls underwriters now waive their right to freight: see the note to s 63(2)). Steps taken to avoid loss from an insured peril, which result in loss in a different form, will not break the chain of causation from the original peril (‘‘The Thruscoe’’ [1897] P 301; ‘‘The Knight of St Michael’’ [1898]

762

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P 30; Symington & Co v. Union Insurance Society of Canton (1928) 31 Ll LR 179; Canada Rice Mills Ltd v. Union Marine & General Insurance Co Ltd [1941] AC 55; Quinta Communications SA v. Warrington [2000] Lloyd’s Rep IR 81). However, an underwriter on cargo is not liable where the cargo is sold to pay for repairs to the vessel, rendered necessary by perils of the sea, as in such a case the loss of the cargo is proximately caused not by perils of the sea but by reason of the assured’s impecuniosity (Powell v. Gudgeon (1816) 5 M & S 431; Sarquy v. Hobson (1827) 4 Bing 131; and cf Greer v. Poole (1880) 5 QBD 272). In some cases it may not be possible to disentangle the proximate cause from two distinct causes, so that the causes are concurrent. The rule here is that if one of the causes is insured and one is uninsured the assured may recover (Lloyd Instruments Ltd v. Northern Star Insurance Co Ltd, ‘‘The Miss Jay Jay’’ [1987] 1 Lloyd’s Rep 32; Martini Investments Ltd v. McGinn [2001] Lloyd’s Rep IR 374; Seashore Marine SA v. Phoenix Assurance plc [2002] Lloyd’s Rep IR 51; If P Insurance Ltd (Publ) v. Silversea Cruises Ltd [2004] Lloyd’s Rep IR 696), whereas if one of the causes is insured and the other excluded, the exclusion takes priority (Wayne Tank and Pump Co Ltd v. Employers Liability Assurance Corporation Ltd [1974] QB 57; Kuwait Airways Corporation v. Kuwait Insurance Co SAK [1999] 1 Lloyd’s Rep 803; Kiriacoulis Lines SA v. Compagnie d’Assurances Maritime Ariennes et Terrestres, ‘‘The Demetra K’’ [2002] Lloyd’s Rep IR 795; Svenska Handelsbanken AB v. Dandridge, ‘‘The Alicia Glazial’’ [2003] Lloyd’s Rep IR 10; Midland Mainline Ltd v. Eagle Star Insurance Co Ltd [2004] Lloyd’s Rep IR 739; Blackburn Rovers Football Athletic Club Ltd v. Avon Insurance plc [2005] Lloyd’s Rep IR 447; Tektrol Ltd v. International Insurance Co of Hanover Ltd [2005] 2 Lloyd’s Rep 701). This has significance, for London market marine policies and war risks policies are drafted in mutually exclusive terms. In practice insurers may agree to pay half of the loss each on a provisional basis, with the incidence of liability being determined as between the underwriters by arbitration. The assured may not, therefore, actually lose out even if the arbitrator cannot split the two causes. The doctrine of proximate cause is nevertheless merely a rule of construction which may be ousted by express agreement, eg where the policy states that a risk is covered only if it is the sole and direct cause of the loss (Merchants’ Marine Insurance Co Ltd v. Liverpool Marine and General Insurance Co Ltd (1928) 31 Ll LR 45), or where the policy excludes liability for a loss if it is in any way caused or contributed to by an excluded peril (Coxe v. Employers’ Liability Insurance Corporation [1916] 2 KB 629; American Tobacco Co v. Guardian Assurance Co (1925) 22 Ll LR 37). A policy which insures against the ‘‘consequences of’’ a peril has been held to reflect exactly the doctrine of proximate cause (Ionides v. Universal Marine Insurance Association (1863) 14 CBNS 259; The Nassau Bay [1979] 1 Lloyd’s Rep 395), although an exclusion for all consequences of a peril may oust the doctrine (see above, in relation to war risks). The burden of proving that a loss was caused by an insured peril is borne by the assured, so that if there is no evidence as to how a loss was caused the assured will lose (Rhesa Shipping v. Edmunds, ‘‘The Popi M’’ [1985] 2 All ER 712; Lamb Head Shipping Co Ltd v. Jennings, ‘‘The Marel’’ [1994] 1 Lloyd’s Rep 624; Glowrange Ltd v. CGU Insurance, 2001, unreported; North Star Shipping Ltd v. Sphere Drake Insurance plc [2005] 2 Lloyd’s Rep 76). Thus, it is not enough for the assured to show that cargo has suffered water damage, as he must go on to show that the loss was caused by sea water and was attributable to a peril of the sea (Cobb & Jenkins v. Volga Insurance Co Ltd of Petrograd (1920) 4 Ll LR 130; Miceli v. Union Marine and General Insurance Co Ltd (1938) 60 Ll LR 275). However, if the policy is ‘‘all risks’’ it is enough for the assured to show that a loss has occurred (British and Foreign Marine Insurance Co v. Gaunt [1921] 2 AC 41, and see Institute Cargo Clauses A, which are written on an ‘‘all risks’’ basis, unlike clauses B and C). If the assured has proved his loss, the burden then switches to the underwriters to demonstrate that the peril proximately causing the loss was uninsured or that some other defence exists (Munro, Brice & Co v. War Risks Association Ltd [1918] 2 KB 78). It is permissible for the underwriters to seek to reverse the burden of proof by express wording to the effect that the assured must disprove any allegation by the underwriters that the loss was proximately caused by an excepted cause. However, in order to benefit from this type of clause, the underwriters must produce prima facie evidence demonstrating that the loss was caused by an excepted peril, and only then is the assured required to rebut that evidence (Spinney’s (1948) Ltd v. Royal Insurance Co [1980] 1 Lloyd’s Rep 406). Subs (2)(a) ‘‘Wilful misconduct’’ requires a deliberate act by the assured which is designed to cause loss, or which is committed recklessly with a blind eye to its consequences, and in respect of which he intends to make an insurance claim (Forder v. Great Western Railway Co [1905] 2 KB 532; National Oilwell (UK) Ltd v. Davy Offshore Ltd [1993] 2 Lloyd’s Rep 582). Most of the marine cases on wilful misconduct involve the deliberate casting away of the vessel by or with the privity of the assured, the main issue being the underwriters’ ability to prove the assured’s complicity: the standard of proof increases in proportion to the seriousness of the allegations against the assured. Relevant factors in wilful misconduct cases include the level of insurance on the vessel, the assured’s financial position, the conduct of the assured immediately following the loss (eg in accepting or refusing offers of salvage), whether the crew have managed to salvage all of their possessions or whether they have escaped with the bare minimum of possessions, and the condition of the vessel and its equipment—the many authorities are considered in National Justice Compania Naviera SA v. Prudential Assurance Co, ‘‘The Ikarian Reefer’’ [1993] 2 Lloyd’s Rep 68, and include: Bowring v. Elmslie (1790) 7 TR 216n; Visscherrij Maatschappij Nieuwe Onderneming v. Scottish Metropolitan Assurance Co (1922) 10 Ll LR 579; Coulouras v. British General Insurance Co Ltd (1922) 12 Ll LR 220; Dorigo Y Sanudo v. Royal Exchange Assurance Corporation (1922) 13 Ll LR 126; Ansoleaga Y Cia v. Indemnity Mutual Marine Insurance Co

763

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Marine Insurance

(1922) 13 Ll LR 231; Issaias (Elfie) v. Marine Insurance Co Ltd (1923) 15 Ll LR 186; Comunidad Naviera Baracaldo v. Norwich Union Fire Insurance Society (1923) 16 Ll LR 45; Anghelatos v. Northern Assurance Co (1924) 19 Ll LR 255; Compania Martiartu v. Royal Exchange Assurance [1923] 1 KB 650; Compania Naviera Martiartu v. Royal Exchange Assurance Corporation (1924) 18 Ll LR 247; Soci´et´e d’Avances Commerciales v. Merchants’ Marine Insurance Co (1924) 20 Ll LR 74; Domingo Mumbru SA v. Laurie (1924) 20 Ll LR 122; Banco de Barcelona v. Union Marine Insurance Co Ltd (1925) 22 Ll LR 209; Empire SS Co Inc v. Threadneedle Insurance Co (1925) 22 Ll LR 437; Lemos v. British and Foreign Marine Insurance Co Ltd (1931) 39 Ll LR 275; Piper v. Royal Exchange Assurance (1932) 42 Ll LR 103; Pateras v. Royal Exchange Assurance (1934) 49 Ll LR 400; Grouds v. Dearsley (1935) 51 Ll LR 203; Maris v. London Assurance (1935) 52 Ll LR 211; Compania Naviera Vascongada v. British and Foreign Marine Insurance Co Ltd (1936) 54 Ll LR 35; Canning v. Maritime Insurance Co Ltd (1936) 56 Ll LR 91; Bank of Athens v. Royal Exchange Assurance (1937) 59 Ll LR 67; Compania Naviera Santi SA v. Indemnity Mutual Marine Assurance Co Ltd, ‘‘The Tropaioforos’’ [1960] 2 Lloyd’s Rep 469; Astrovlanis Compania Naviera SA v. Linard, ‘‘The Gold Sky’’ [1972] 2 Lloyd’s Rep 187; Michalos & Sons Maritime SA v. Prudential Assurance Co Ltd, ‘‘The Zinovia’’ [1984] 2 Lloyd’s Rep 264; Continental Illinois National Bank of Chicago v. Alliance Assurance Co Ltd [1986] 2 Lloyd’s Rep 470; Strive Shipping Corporation v. Hellenic Mutual War Risks Association (Bermuda) Ltd, ‘‘The Grecia Express’’ [2002] Lloyd’s Rep IR 669; North Star Shipping Ltd v. Sphere Drake Insurance plc [2005] 2 Lloyd’s Rep 76. If the loss was deliberately caused by the master or crew, and the underwriters cannot establish that the assured was involved (‘‘The Ikarian Reefer’’ [1995] 1 Lloyd’s Rep 445), the loss is covered under the insured peril of barratry (see Marine Insurance Act 1906, Sched, r 11 and the notes thereto for the burden of proof in barratry cases). For pleadings in relation to wilful misconduct, see: Astrovlanis Compania Naviera SA v. Linard, ‘‘The Gold Sky’’ [1972] 2 QB 611; Palamisto General Enterprises SA v. Ocean Marine Insurance Co Ltd [1972] 2 QB 625. It is not possible for a policy to insure against loss by wilful misconduct, as such a loss falls outside the contingency requirement of insurance. There is a fine line between wilful misconduct, which bars a claim, and negligence, which does not bar a claim—the running of a risk is the latter rather than the former (Papademetriou v. Henderson (1939) 64 Ll LR 345). If there are co-assureds, the effect of wilful misconduct by one of them depends upon whether the policy is joint (same interests) or composite (different interests). In the case of a joint policy, neither party can recover (Direct Line v. Khan [2002] Lloyd’s Rep IR 364). By contrast, if the policy is composite, each assured has a distinct contract with the underwriters and can recover independently of any defence that the underwriters may have against any other co-assured (General Accident Fire and Life Assurance Corporation v. Midland Bank [1940] 2 KB 388; Murphy v. Murphy [2004] Lloyd’s Rep IR 744, although contrast Direct Line v. Khan [2002] Lloyd’s Rep IR 364 in which it was held that if the policy was one of composite rather than joint insurance, the fraudulent assured had acted as the agent for the other composite assured in committing the fraud). Thus if the mortgagor of the vessel scuttles it, the mortgagor cannot recover although the mortgagee’s rights are unaffected, provided that scuttling by the mortgagor is an insured peril (Samuel & Co v. Dumas [1924] AC 431). Again, if the builder of a vessel is guilty of wilful misconduct in relation to its construction, and the employer suffers loss, the employer but not the builder is able to recover from the insurers under a composite policy: it was held in State of Netherlands v. Youell [1997] 2 Lloyd’s Rep 440 (aff’d on other grounds [1998] 1 Lloyd’s Rep 236) that the underwriters remains liable to pay the employer in these circumstances even if, under the building contract, the insurance moneys are to be handed to the builder by the employer. ‘‘Negligence’’, whether of the assured himself or of the master or crew, is neutral in its effect. If the loss is caused by an insured peril, it is irrelevant that the peril was brought about by negligence (Busk v. Royal Exchange Assurance Co (1818) 2 B & Ald 73; Walker v. Maitland (1821) 5 B & Ald 171; Hahn v. Corbett (1824) 2 Bing 205; Bishop v. Pentland (1827) 7 B & C 219; Shore v. Bentall (1828) 7 B & C 798n; Dixon v. Sadler (1839) 5 M & W 405; Redman v. Wilson (1845) 14 M & W 476; Thompson v. Hopper (1856) 6 E & B 172; Trinder Anderson & Co v. Thames and Mersey Marine Insurance Co [1898] 2 QB 114; Blackburn v. Liverpool, Brazil and River Plate Steam Navigation Co [1902] 1 KB 290; Cohen, Sons & Co v. National Benefit Assurance Co Ltd (1924) 18 Ll LR 199; Lind v. Mitchell (1928) 32 Ll LR 70). These cases also decide that the warranty of seaworthiness in s 39 of the Marine Insurance Act 1906 applies only to the commencement of the voyage, so that any subsequent negligence by the master and crew does not provide a defence under that section. Equally, if the loss is not caused by an insured peril, the fact that the peril was brought about by negligence cannot give the assured the right to recover. Policies may require the assured to take all reasonable steps to avoid a loss, but such clauses have been construed as requiring the assured only to avoid recklessness (Sofi v. Prudential Assurance Co [1993] 2 Lloyd’s Rep 559) and are subjective in that the assured’s conduct must be assessed in the light of his own experience and qualifications (Stephen v. Scottish Boatowners Mutual Insurance Association, ‘‘The Talisman’’ [1989] 1 Lloyd’s Rep 535). The Institure Clauses themselves modify the common law rule, and provide that loss from whatever source is recoverable if caused by the negligence of the master, officers or crew, or of repairers or charterers (for an illustration, see Seashore Marine SA v. Phoenix Assurance plc [2002] Lloyd’s Rep IR 51), provided that the assured, owners and managers have themselves exercised due diligence: cl 6.2 of the Institute Time Clauses Hulls, cl 4.2 of the Institute Voyage Clauses Hulls and cl 2.2 of the International Hull Clauses (the last of these additionally allowing the assured to obtain cover for loss caused by the negligence of any person whatsoever as long as the he assured, owners and managers have themselves exercised due diligence: cll 41.1.3 and 42.2).

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There is some overlap, as yet not fully resolved, between the principle that negligence does not defeat a claim and the obligation of the assured under s 78(4) of the Marine Insurance Act 1906 to sue and labour, ie, to take reasonable steps to avoid or mitigate a loss. This conflict is discussed in the note to s 78. Subs (2)(b) It was usual under the Lloyd’s SG policy to exclude delay as an insured peril in respect of the vessel and its cargo (Gregson v. Gilbert (1783) 3 Doug 232; Tatham v. Hodgson (1796) 6 TR 656; Taylor v. Dunbar (1869) LR 4 CP 206; Pink v. Fleming (1890) 25 QBD 396; St Margaret’s Trust Ltd v. Navigators and General Insurance Co Ltd (1949) 82 Ll LR 752). This is codified by s 55(2)(b). The exclusion was not extended to freight (Jackson v. Union Marine Insurance Co (1874) LR 10 CP 125; ‘‘The Bedouin’’ [1894] P 1), although the ‘‘time charter’’ clause now in operation (Institute Time Clauses (Freight), cl 14; Institute Voyage Clauses (Freight), cl 12) excludes freight claims ‘‘consequent on loss of time’’. This wording was held by the House of Lords in Naviera de Canarias SA v. Nacional Hispanica Asequradora SA [1978] AC 873 to mean that any delay, whether or not the proximate cause of the loss, precluded recovery. After this decision, it is clear that loss of freight as a result of delay is recoverable only where the adventure has been frustrated, delay being the inevitable consequence of frustration: the position is that if the assured has to show delay independently of frustration he will be unable to claim. For illustrations of frustration, see: Re Jamieson and Newcastle SS Freight Insurance Association [1895] 2 QB 90; Roura & Forgas v. Townend [1919] 1 KB 189; Carras v. London and Scottish Assurance Corp Ltd [1936] 1 KB 291; Petros M Nomikos v. Robertson [1939] AC 371; Atlantic Maritime Co Inc v. Gibbon [1954] 1 QB 88. Contrast: Bensuade & Co v. Thames & Mersey Marine Insurance Co [1897] AC 609; Turnbull, Martin & Co v. Hull Underwriters Association [1900] 2 QB 242; Russian Bank for Foreign Trade v. Excess Insurance Co [1918] 2 KB 123. Subs (2)(c) The perils listed in this section relate to the nature of the subject-matter insured, and reflect the exclusions found in the Institute of London Underwriters Cargo Clauses, cl 4. However, as long as loss is not inevitable (eg in the case of perishable goods which are not appropriately stored), it is possible to insure against these perils. The point is illustrated by a series of inherent vice cases (Traders and General Insurance Association v. Bankers & General Insurance Co (1921) 9 Ll LR 223; Maignen & Co v. National Benefit Assurance Co (1922) 10 Ll LR 30; Sassoon & Co Ltd v. Yorkshire Insurance Co (1923) 16 Ll LR 129; Dodwell & Co Ltd v. British Dominions General Insurance Co Ltd [1955] 2 Lloyd’s Rep 391n (decided in 1918); Overseas Commodities Ltd v. Style [1958] 1 Lloyd’s Rep 546; Soya GmbH v. White [1983] 1 Lloyd’s Rep 122; Wunsche International v. Tai Ping Insurance Co [1998] 2 Lloyd’s Rep 8). ‘‘Ordinary wear and tear’’: For illustrations, see: Harrison v. Universal Marine Insurance Co (1862) 3 F & F 190; Wadsworth Lighterage and Coaling Co Ltd v. Sea Insurance Co Ltd (1929) 35 Com Cas 1. The exclusion does not extend to design defects (Prudent Tankers Ltd SA v. Dominion Insurance Co Ltd, ‘‘The Caribbean Sea’’ [1980] 1 Lloyd’s Rep 338). ‘‘Leakage or breakage’’: For the common law position, see Crofts v. Marshall (1836) 7 C & P 597. This peril is nevertheless insurable where the policy so states, as loss from this source is not inevitable (Traders & General Insurance Association Ltd v. Bankers & General Insurance Co Ltd (1921) 38 TLR 94; Maignen & Co v. National Benefit Assurance Co Ltd (1922) 10 Ll LR 30; De Monchy v. Phoenix Insurance Co of Hartford (1929) 34 Ll LR 201; Dodwell & Co Ltd v. British Dominions General Insurance Co Ltd [1955] 2 Lloyd’s Rep 391n). ‘‘Inherent vice’’ involves a non-external cause of loss, arising from the nature of the subject-matter, eg sweating, mildew, natural deterioration or the method by which it has been transported. The question in these cases is whether the loss was the result of external forces or whether it was caused by the nature of the subject-matter and the manner in which it had been packed or transported (Gregson v. Gilbert (1783) 3 Doug KB 232; Tatham v. Hodgson (1796) 6 TR 656; Boyd v. Dubois (1811) 3 Camp 133; Koebel v. Saunders (1864) 17 CBNS 71; Blower v. Great Western Railway Co (1872) LR 7 CP 655; Bird’s Cigarette Manufacturing Co Ltd v. Rouse (1924) 19 Ll LR 301; Bowring & Co Ltd v. Amsterdam London Insurance Co Ltd (1930) 36 Ll LR 309; Gee & Garnham Ltd v. Whittall [1955] 2 Lloyd’s Rep 562; Berk & Co Ltd v. Style [1955] 2 Lloyd’s Rep 382; Biddle, Sawyer & Co Ltd v. Peters [1957] 2 Lloyd’s Rep 339; Noten BV v. Harding [1990] 2 Lloyd’s Rep 527; Wunsche International v. Tai Ping Insurance Co Ltd [1998] 2 Lloyd’s Rep 8; Mayban General Insurance BHD v. Alstom Power Plants Ltd [2005] Lloyd’s Rep IR 18). By contrast, if the loss is externally caused and not inevitable from the nature of the subject-matter, it is covered (Wilson, Holgate & Co Ltd v. Lancashire and Cheshire Insurance Corporation Ltd (1922) 13 Ll LR 486; Sassoon & Co Ltd v. Yorkshire Insurance Co (1923) 16 Ll LR 129; Whiting v. New Zealand Insurance Co Ltd (1932) 44 Ll LR 179). ‘‘Rats or vermin’’: This exclusion is based on: Rohl v. Parr (1796) 1 Esp 445; Hunter v. Potts (1815) 4 Camp 203; Laveroni v. Drury (1852) 22 LJ Ex 2. See also Hamilton v. Pandorf (1887) 12 App Cas 518, where the proximate cause of the loss was perils of the sea due to the entry of sea water caused by rats gnawing at the side of the vessel, although this decision is now open to doubt: see the note to Marine Insurance Act 1906, Sched, r 7. Cf the position as regards insects (Schloss Brothers v. Stevens [1906] 2 KB 665). ‘‘Injury to machinery’’: In Thames and Mersey Marine Insurance Co v. Hamilton, Fraser & Co, ‘‘The Inchmaree’’ (1887) 12 App Cas 484, the House of Lords held that mechanical failure was not a peril of the sea, as it could occur on land. The market responded with the ‘‘Inchmaree Clause’’, presently cl 6.2 of the Institute Time Clauses Hulls and cl 4.2 of the Institute Voyage Clauses Hulls, under which the assured is covered for, inter alia, bursting of boilers, breakage of shafts or any latent defect in the machinery or hull. The clause covers

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external or additional damage resulting from a latent defect, as opposed to a latent defect merely becoming patent without causing any further damage to the machinery or to other property. For this point, and the meaning of latent defect, see: Jackson v. Mumford (1904) 9 Com Cas 114; Oceanic SS Co v. Faber (1907) 13 Com Cas 28; Hutchins Bros v. Royal Exchange Corporation [1911] 2 KB 398; Stott (Baltic) Steamers Ltd v. Marten [1916] 1 AC 304; Scindia SS (London) Ltd v. London Assurance (1936) 56 Ll LR 136; Wills & Sons v. World Marine Insurance Ltd, ‘‘The Mermaid’’ [1980] 1 Lloyd’s Rep 350n; Prudent Tankers Ltd SA v. Dominion Insurance Co Ltd, ‘‘The Caribbean Sea’’ [1980] 1 Lloyd’s Rep 338. The leading authority on defects is now Promet Engineering (Singapore) Pte Ltd v. Sturge, The Nukila [1997] 2 Lloyd’s Rep 146, in which the footings of an oil rig, which were defective, caused severe cracking in the oil rig’s legs. The Court of Appeal held that if there is merely a defect which becomes apparent or patent, the underwriters are not liable. However, in the present case, the defect had caused further damage, and that additional damage was recoverable under the policy. The International Hull Clauses contain an Inchmaree clause in modified form: where (under cl 2.2) the assured is also able to claim for damage caused by the bursting of a boiler or the breaking of a shaft, the policy covers one-half of the costs common to repairing the boiler or shaft and repairing the damge caused by the burst or breach (cll 2.3 and 2.4). The International Hull Clauses also for the first time allow the assured to insure against the full cost of repairing a burst boiler or broken shaft (cl 41.1.1) and for making good a latent defect (cl 41.1.2).

Partial and total loss 56.—(1) A loss may be either total or partial. Any loss other than a total loss, as hereinafter defined, is a partial loss. (2) A total loss may be either an actual total loss, or a constructive total loss. (3) Unless a different intention appears from the terms of the policy, an insurance against total loss includes a constructive, as well as an actual, total loss. (4) Where the assured brings an action for a total loss and the evidence proves only a partial loss, he may, unless the policy otherwise provides, recover for a partial loss. (5) Where goods reach their destination in specie, but by reason of obliteration of marks, or otherwise, they are incapable of identification, the loss, if any, is partial, and not total. Notes Whatever the form of loss, the six year limitation period for the issue of a claim form against the underwriters runs from the date of the casualty (Chandris v. Argo Insurance Co Ltd [1963] 2 Lloyd’s Rep 65; Castle Insurance Co Ltd v. Hong Kong Islands Shipping Co Ltd [1983] 2 Lloyd’s Rep 376; Bank of America National Trust and Savings Corporation v. Chrismas, ‘‘The Kyriaki’’ [1993] 1 Lloyd’s Rep 137; Callaghan v. Dominion Insurance [1997] 2 Lloyd’s Rep 541; Universities Superannuation Scheme Ltd v. Royal Insurance (UK) Ltd [2000] Lloyd’s Rep IR 524; Virk v. Gan Life Holdings plc [2000] Lloyd’s Rep IR 159). This period may be reduced by contract, eg by a clause providing that an action may be brought against the underwriters only within one year running from the date of the loss (Phoenix Assurance Co of Hartford v. De Monchy (1929) 34 Ll LR 201). Subs (1) The distinction between total and partial loss is relevant for the measure of indemnity, as defined in Marine Insurance Act 1906, ss 67–72. Subs (2) For the definition of actual total loss, see s 57, below. For the definition of constructive total loss, see s 60. In general terms, a constructive total loss (which is confined to marine insurance—Moore v. Evans [1918] AC 185—is an economic rather than physical loss, in that the subject-matter remains in existence but is not worth repairing or capable of retrieval. Where there has been a constructive total loss, the assured is entitled to seek indemnity on the basis of an actual total loss by giving a notice of abandonment to the underwriters (ss 61–62). If the assured fails to serve a notice of abandonment, his loss remains a constructive total loss but is held to an indemnity based on partial loss only: thus, a policy term restricting cover to total losses will not prevent recovery for a constructive total loss despite the lack of a notice of abandonment (Bank of America National Trust and Savings Association v. Chrismas, ‘‘The Kyriaki’’ [1993] 1 Lloyd’s Rep 137). Subs (3) This provision is illustrated by Adams v. Mackenzie (1863) 13 CBNS 442. Policies rarely provide to the contrary. Subs (4) See, for illustrations: Gardiner v. Croasdale (1760) 2 Burr 904; King v. Walker (1864) 2 H & C 384; Helmville Ltd v. Yorkshire Insurance Co Ltd, ‘‘The Medina Princess’’ [1965] 1 Lloyd’s Rep 361. Some policies are confined to total loss only (Continental Grain Co Inc v. Twitchell (1945) 78 Ll LR 251—freight), as to which see Marine Insurance Act 1906, s 76. Subs (5) This is based on Spence v. Union Marine Insurance Co (1868) LR 3 CP 427.

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Actual total loss 57.—(1) Where the subject-matter insured is destroyed, or so damaged as to cease to be a thing of the kind insured, or where the assured is irretrievably deprived thereof, there is an actual total loss. (2) In the case of an actual total loss no notice of abandonment need be given. Notes Subs (1) There are many instances in the cases of actual total loss, relating to vessels, cargo and freight. (1) In the case of a vessel there will be an actual total loss where the vessel is fatally damaged (Cambridge v. Anderton (1824) 2 B & C 691; Cossman v. West (1887) 13 App Cas 160), where it is unable to sail in order for repairs to be effected (Barker v. Janson (1868) LR 3 CP 303) or where it is seized with no prospect of recovery (Stringer v. English and Scottish Marine Insurance Co Ltd (1870) LR 5 QB 599; Panamanian Oriental Steamship Corporation v. Wright [1970] 2 Lloyd’s Rep 365—no actual total loss on the facts). In the case of seizure, there is actual total loss only at the point at which it is clear that the subject matter will not be returned (a ‘‘wait and see’’ approach): Scott v. Copenhagen Reinsurance Co (UK) Ltd [2003] Lloyd’s Rep IR 696. If the vessel continues to exist in specie (Bell v. Nixon (1816) Holt NP 423), or is capable of salvage (Captain JA Cates Tug and Wharfage Co Ltd v. Franklin Insurance Ltd [1927] AC 698) or, where seized or stranded, is not irretrievable (Kemp v. Halliday (1865) LR 1 QB 520; George Cohen Sons & Co v. Standard Marine Insurance Co Ltd (1925) 21 Ll LR 30; Marstrand Fishing Co Ltd v. Beer, ‘‘The Girl Pat’’ (1937) 56 Ll LR 163; St Margaret’s Trust Ltd v. Navigators and General Insurance Co Ltd (1949) 82 Ll LR 752; Fraser Shipping Ltd v. Colton [1997] 1 Lloyd’s Rep 586), there is no actual total loss although there may be a constructive total loss. (2) In the case of cargo there will be an actual total loss where the cargo ceases to meet its description (Cologan v. London Assurance Co (1816) 5 M & S 447; Montoya v. London Assurance Co (1851) 6 Exch 451; Garrett v. Melhuish (1858) 4 Jur NS 943; Duthie v. Hilton (1868) LR 4 CP 138; Asfar v. Blundell [1896] 1 QB 123; Montreal Light, Heat & Power Co v. Sedgwick [1910] AC 598; Berger and Light Diffusers Pty Ltd v. Pollock [1973] 2 Lloyd’s Rep 442), where it is damaged and will be unable to meet its description by the time of its arrival at its destination (Dyson v. Rowcroft (1803) 3 Bos & P 474; Roux v. Salvador (1836) 3 Bing 266; Farnworth v. Hyde (1865) LR 2 CP 204; Saunders v. Baring (1876) 34 LT 419) or where it is seized with no reasonable prospect of recovery (Mullett v. Shedden (1811) 13 East 304; Mellish v. Andrews (1812) 15 East 13; Stringer v. English & Scottish Marine Insurance Co (1870) LR 5 QB 599; De Mattos v. Saunders (1872) LR 7 CP 570). If the cargo is merely damaged, but retains its essential character, there is no actual total loss (Cocking v. Foster (1785) 4 Doug KB 295; M’Andrews v. Vaughan (1793) 1 Park on Marine Insurances 252; Anderson v. Royal Exchange Assurance Co (1805) 7 East 38; Glennie v. London Assurance (1814) 2 M & S 371; Navone v. Hadden (1859) 9 CB 30; Francis v. Boulton (1895) 65 LJQB 153). Where part of a cargo is damaged, there is generally a partial loss only, and not a total loss either of the whole or of the part lost. See the note to s 76. If there is a mere paper loss of cargo, eg, because the amount shipped has been overstated, such loss does not fall within a marine policy at all (Coven SpA v. Hong Kong Chinese Insurance Co [1999] Lloyd’s Rep IR 565). (3) In the case of freight or profits, there is a total loss when the operation of an insured peril affecting the vessel or cargo, rendering it an actual or total constructive loss or causing delay, prevents the assured from earning freight or profits. Whether or not freight has been lost depends upon the allocation of the risk of non-arrival of or damage to the cargo as laid down by the contract of carriage. The general principle is that freight is earned only when the cargo is delivered, but that damage to the cargo, short of its total loss, does not discharge liability for freight. For illustrations, see, in addition to the authorities on loss of cargo cited above and in the note to s 60: Atty v. Lindo (1805) 1 Bos & PNR 236; Horncastle v. Suart (1807) 7 East 400; Mackenzie v. Shedden (1810) 2 Camp 431; De Vaux v. J’Anson (1839) 5 Bing NC 519; De Cuadra v. Swann (1864) 16 CBNS 772; Byrne v. Schiller (1871) LR 6 Ex 319; Rankin v. Potter (1873) LR 6 HL 83; Jackson v. Union Marine Insurance Co (1874) LR 10 CP 125; Metcalfe v. Britannia Iron Works Co (1877) 2 QBD 423; Asfar v. Blundell [1896] 1 QB 123; Price v. Maritime Insurance Co [1901] 2 KB 412; French Marine v. Compagnie Napolitaine d’Eclairage et de Chauffage par le Gaz [1921] 2 AC 494. In the case of a damaged or delayed vessel, freight will be lost if the vessel is unable to proceed and transhipment is not possible, whether or not the vessel is an actual or constructive total loss within the meaning of the hull policy (Shipton v. Thornton (1838) 9 A & E 314; Carras v. London and Scottish Assurance Corporation Ltd [1936] 1 KB 291; Kulukundis v. Norwich Union Fire Insurance Society [1937] 1 KB 1), although the policy may provide that freight is deemed to be lost only where the vessel itself has been lost within the meaning of the 1906 Act (Petros M Nomikos Ltd v. Robertson [1939] AC 371; Papadimitriou v. Henderson (1939) 64 Ll LR 345; Vrondissis v. Stevens [1940] 2 KB 90). The Institute Freight Clauses appear to be in the latter form, as they require the subject-matter insured (which seems to be a reference to the vessel rather than to the freight) to be lost.

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There will commonly be a causation issue as to whether the loss of freight was caused by loss of the vessel due to an insured peril or by some act of the master or assured. If the cargo is sold en route, following the occurrence of an insured peril, on the basis that it will not survive the voyage, there is a loss of freight. However, if the sale is precipitate, the loss is not caused by an insured peril (Milles v. Fletcher (1779) 1 Doug KB 231; Parmeter v. Todhunter (1808) 1 Camp 541; Everth v. Smith (1814) 2 M & S 278; Green v. Royal Exchange Assurance Co (1815) 6 Taunt 68; Mordy v. Jones (1825) 4 B & C 394; Guthrie v. North China Insurance Co Ltd (1902) 7 Com Cas 130; Vrondissis v. Stevens [1940] 2 KB 90). The loss in such a case is an actual total loss and no notice of abandonment is required. See the note to s 55(1) and also the note to s 62(7). Subs (2) This was so held in Cossman v. West (1887) 13 App Cas 160. In practice it is always sensible to give a notice of abandonment, as the assured’s right to claim an indemnity based on total loss is preserved in the event of a later ruling that the loss was a constructive, rather than an actual, total loss. Where there is a constructive total loss in respect of which no notice of abandonment has been given, and it is followed by an actual total loss, the assured is not precluded from claiming for the latter because of his failure in relation to the former (Mellish v. Andrews (1812) 5 East 13).

Missing ship 58. Where the ship concerned in the adventure is missing, and after the lapse of a reasonable time no news of her has been received, an actual total loss may be presumed. Notes Section 58 is based on: Green v. Brown (1743) 2 Str 1199; Cohen v. Hinkley (1809) 2 Camp 51; Koster v. Reed (1826) 6 B & C 19. What constitutes a reasonable time is a question of fact: Marine Insurance Act 1906, s 88. The section gives rise to questions of proof which it does not resolve. If a vessel disappears, and is not heard of for, say, six months, in which time the policy has expired, is it to be assumed not only that the vessel has been lost but that the loss occurred during the currency of the policy? The issue was treated as one of fact in Reid v. Standard Marine Insurance Co Ltd (1886) 2 TLR 807 and Houstman v. Thornton (1816) Holt NP 242. The presumption is in any event rebuttable by evidence of some other cause of the disappearance (Compania Martiartu v. Royal Exchange Assurance [1923] 1 KB 650). Once the underwriters have paid for an actual total loss, they are entitled to take over the vessel by way of salvage in the event that it subsequently reappears (Marine Insurance Act 1906, s 79). The disappearance of a vessel in time of war may give rise to problems of determining whether the claim should be met by marine or war risks underwriters. The presumption applies in time of war: British & Burmese Steam Navigation Co Ltd v. Liverpool & London War Risks Association Ltd (1917) 34 TLR 140; Compania Maritima of Barcelona v. Wishart (1918) 23 Com Cas 264. However, if the vessel is lost in a war zone, the presumption that the loss is by marine perils would seem to be somewhat weaker (General Steam Navigation Co Ltd v. Commercial Union Assurance Co Ltd (1915) 31 TLR 630; Macbeth & Co v. King (1916) 32 TLR 581; Euterpe SS Co Ltd v. North of England Protecting & Indemnity Association Ltd (1917) 33 TLR 540; Munro, Brice & Co v. Marten [1920] 3 KB 94; Zachariessen v. Importers and Exporters Marine Insurance Co (1924) 29 Com Cas 202; United Scottish Insurance Co Ltd v. British Fishing Vessels Mutual War Risks Association Ltd, ‘‘The Braconbush’’ (1944) 78 Ll LR 70).

Effect of transhipment, etc 59. Where, by a peril insured against, the voyage is interrupted at an intermediate port or place, under such circumstances as, apart from any special stipulation in the contract of affreightment, to justify the master in landing and re-shipping the goods or other moveables, or in transhipping them, and sending them on to their destination, the liability of the insurer continues, notwithstanding the landing or transhipment. Notes For transhipment generally, see: Platamour v. Staples (1781) 3 Doug KB 1; Oliverson v. Brightman (1846) 8 QB 781; De Cuadra v. Swann (1864) 16 CBNS 772; Hansen v. Dunn (1906) 11 Com Cas 100. Where transhipment is required as the result of the operation of an insured peril, cl 12 of the Institute Cargo Clauses provides that the underwriters are liable for the costs of transhipment (including unload, storing and reloading).

Constructive total loss defined 60.—(1) Subject to any express provision in the policy, there is a constructive total loss where the subject-matter insured is reasonably abandoned on account of its actual total loss appearing to be unavoidable, or because it could not be preserved from actual total loss without an expenditure which would exceed its value when the expenditure had been incurred.

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(2) In particular, there is a constructive total loss— (i) Where the assured is deprived of the possession of his ship or goods by a peril insured against, and (a) it is unlikely that he can recover the ship or goods, as the case may be, or (b) the cost of recovering the ship or goods, as the case may be, would exceed their value when recovered; or (ii) In the case of damage to a ship, where she is so damaged by a peril insured against that the cost of repairing the damage would exceed the value of the ship when repaired. In estimating the cost of repairs, no deduction is to be made in respect of general average contributions to those repairs payable by other interests, but account is to be taken of the expense of future salvage operations and of any future general average contributions to which the ship would be liable if repaired; or (iii) In the case of damage to goods, where the cost of repairing the damage and forwarding the goods to their destination would exceed their value on arrival. Notes The definitions in this section are reproduced with some modifications in cl 13 of the Institute Cargo Clauses, cl 19 of the Institute Time Clauses Hulls, cl 19 and the Institute Voyage Clauses Hulls, cl 17. The effect of those provisions is that there is a constructive total loss where the repair costs exceed the insured value of the vessel. The position is modified under cl 21 of the International Hull Clauses, which provides that a vessel is to be taken as a constructive total loss if the repair cost is 80% or more of the insured value. Subs (1) Two forms of constructive total loss are set out in the general provisions of subs (1). (a) Reasonable abandonment of subject-matter. See: Anderson v. Wallis (1813) 2 M & S 240; Rowland & Marwood SS Co Ltd v. Maritime Insurance Co Ltd (1901) 6 Com Cas 160. If the subject-matter is abandoned prematurely, the loss is caused by the abandonment rather than by an insured peril and the assured cannot recover (Becker, Gray & Co v. London Assurance Corporation [1918] AC 101; Lind v. Mitchell (1928) 32 Ll LR 70, and cf the position when the vessel is sold prematurely as the master erroneously believes that the vessel is a total loss—Gardner v. Salvador (1831) 1 Moo & Rob 116). A vessel is not abandoned merely because the master and crew leave due to the vessel’s damaged state (Court Line v. R, ‘‘The Lavington Court’’ (1945) 78 Ll LR 390). See also the note to s 55. (b) Expenditure to avoid actual total loss greater than salvaged value. For the calculation of expenditure and salvaged value, see the note to subs (2)(c), below. Subs (2) The situations set out in subs (2) are stated to be illustrations of subs (1), but as drafted appear to be rather different in nature (cf the comments of Lord Wright in Rickards v. Forestal Land, Timber and Railway Co Ltd [1942] AC 50). Four different forms of constructive total loss are identified. (a) Deprivation of possession of ship or goods, it being unlikely that they can be recovered. In Polurrian Steamship Co v. Young [1915] 1 KB 922 and in Kuwait Airways Corporation v. Kuwait Insurance Co SAK [1996] 1 Lloyd’s Rep 664 it was pointed out that the test was ‘‘unlikely’’ and not the more generous ‘‘uncertain’’. For illustrations, see: Goss v. Withers (1758) 2 Burr 683; Rotch v. Edie (1795) 6 TR 413; Brown v. Smith (1813) 1 Dow 349; Forster v. Christie (1809) 11 East 205; Rodocanachi v. Elliott (1874) LR 9 CP 518; Anderson v. Marten [1908] 1 AC 334; Roura & Forgas v. Townend [1919] 1 KB 189; Fooks v. Smith [1924] 2 KB 505; Captain J A Cates Tug & Wharfage Co Ltd v. Franklin Insurance Co [1927] AC 698; Soci´et´e Belge des B´etons SA v. London and Lancashire Insurance Co Ltd (1938) 60 Ll LR 225; Czarnikow Ltd v. Java Sea and Fire Insurance Co Ltd (1941) 70 Ll LR 319; Court Line v. R, ‘‘The Lavington Court’’ (1945) 78 Ll LR 390; Marstrand Fishing Co Ltd v. Beer, ‘‘The Girl Pat’’ (1937) 56 Ll LR 163; London and Provincial Leather Processes Ltd v. Hudson [1939] 2 KB 724; Czarnikow Ltd v. Java Sea and Fire Insurance Co Ltd (1940) 70 Ll LR 319; Rickards v. Forestal Land, Timber and Railway Co Ltd [1942] AC 50; Panamanian Oriental Steamship Co v. Wright [1970] 2 Lloyd’s Rep 365; Mitsui Marine Fire Insurance Co v. Bayview Motors Ltd [2003] Lloyd’s Rep IR 117. The word ‘‘unlikely’’ means in practice that if the assured is likely to be deprived of his property for a period of 12 months, there is a constructive total loss (‘‘The Bamburi’’ [1982] 1 Lloyd’s Rep 312), although some policies may specify a lesser period (Rowland & Marwood SS Co Ltd v. Maritime Insurance Co Ltd (1901) 6 Com Cas 160). If the vessel is captured and recovered by the assured on payment of a sum of money to the captors, the loss is the sum paid and the vessel itself cannot be regarded as totally lost (M’Masters v. Shoolbred (1794) 1 Esp 236; Wilson v. Forster (1815) 6 Taunt 25). In ‘‘The Bamburi’’ [1982] 1 Lloyd’s Rep 312 it was pointed out that loss of possession means loss of the right to use the subject-matter, so that the detention of a vessel or cargo while in the physical possession of the master is nevertheless a loss of possession for insurance purposes. Cf: Rodocanachi v. Elliott (1874) LR 9 CP 518; Fooks v. Smith [1924] 2 KB 508; Czarnikow Ltd v. Java Sea and Fire Insurance Co Ltd [1941] 3 All ER 256; Kuwait Airways Corporation v. Kuwait Insurance Co SAK [1996] 1 Lloyd’s Rep 664. By contrast if the assured is allowed to retain possession and use, there is no constructive total

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loss, although a sum paid (or debt waived) to avoid capture, by way of ransom, is an effective war risks loss (A v. B, 1996, unreported). (b) Deprivation of possession of ship or goods, the cost of recovery exceeding recovered value. For illustrations, see: Rodocanachi v. Elliott (1874) LR 9 CP 518; Sailing Ship Blaimore v. Macredie [1898] AC 593. There is no constructive total loss where the subject-matter is sold by order of a foreign court and the proceeds are swallowed up by costs or by expenses incurred by the master (De Mattos v. Saunders (1872) LR 7 CP 570; Meyer v. Ralli (1876) 1 CPD 358). (c) Damage to vessel, the cost of repair exceeding repaired value. See: Allen v. Sugrue (1828) 8 B & C 561; Phillips v. Nairne (1847) 4 CB 343; Irving v. Manning (1847) 1 HL Cas 287; Moss v. Smith (1850) 19 LJCP 225. Contrast: Gardner v. Salvador (1831) 1 Moo & Rob 116, in which the repaired value exceeded the cost of repair; and Grainger v. Martin (1863) 4 B & S 9 (cf ‘‘The Harmonides’’ [1903] P 1), where the special nature of the vessel meant that no market comparison was possible and thus made repair the only real option even though the cost of repair exceeded the repaired value. In determining the cost of repairs, the common law reached the conclusion that the value of the wreck must be added to the cost of repairs (Macbeth & Co v. Maritime Insurance Co Ltd [1908] AC 144, overruling Angel v. Merchants’ Marine Insurance Co [1903] 1 KB 811 and reinstating Young v. Turing (1841) 2 Man & G 593), but the Macbeth case reached the House of Lords only after the passing of the 1906 Act, which has subsequently been construed as requiring the value of the wreck to be disregarded (Hall v. Hayman [1912] 2 KB 5). The Institute Hulls Clauses, cl 17 (voyage) and 19 (hulls), confirm s 60(2)(ii) and require the value of the wreck to be disregarded. The repairs must restore the vessel more or less to her pre-casualty condition (North Atlantic SS Co Ltd v. Bure (1904) 9 Com Cas 164). In considering the repaired value for determining whether there has been a constructive total loss, the market and not the agreed value must be taken into account (Irving v. Manning (1847) 1 HL Cas 287, operating as an exception to Marine Insurance Act 1906, s 27(3)—see s 27(4)). The Institute Clauses reverse the statutory rule, and provide that the agreed value is the relevant measure: Institute Voyage Clauses Hulls, cl 17; Institute Time Clauses Hulls, cl 19; International Hull Clauses, cl 21. The proviso relating to general average contributions is based on Kemp v. Halliday (1866) LR 1 QB 520. (d) Damage to goods, the cost of repair and forwarding exceeding arrived value. See: Boyfield v. Brown (1736) 2 Str 1065; Glennie v. London Assurance Co (1814) 2 M & S 371; Parry v. Aberdein (1829) 9 B & C 411; Reimer v. Ringrose (1851) 6 Exch 263. It was held in Rosetto v. Gurney (1851) 11 CB 176 and Farnworth v. Hyde (1866) LR 2 CP 204 that the forwarding cost must be considered net of the original freight, but the section apparently reverses the common law rule by providing that all the forwarding costs must be taken into account. No mention is made in the section of constructive total loss of freight, presumably on the basis that freight is either lost or not lost. The possibility of constructive total loss of freight was recognised at common law in Rankin v. Potter (1873) LR 6 HL 83, but doubted in Carras v. London & Scottish Assurance Corporation Ltd [1936] 1 KB 291. Equally, s 60 does not refer to the possibility of constructive total loss of goods by frustration of the voyage, a pre-Act concept (illustrated by: Barker v. Blakes (1808) 9 East 283; Anderson v. Wallis (1813) 2 M & S 240; Cologan v. London Assurance Co (1816) 5 M & S 447; Miller v. Law Accident Insurance Co [1903] 1 KB 712; Mansell & Co v. Hoade (1903) 20 TLR 150) which was held by the House of Lords in British and Foreign Marine Insurance Co v. Samuel Sanday & Co [1916] 1 AC 650, Becker, Gray & Co v. London Assurance Corporation [1918] AC 101 and Rickards v. Forestal Land, Timber and Railway Co [1942] AC 50 to have survived the Act. There is no loss of voyage if the master has abandoned the voyage prematurely: Wilson Bros Bobbin Co Ltd v. Green (1915) 31 TLR 605. Loss of voyage is normally caused by a war risk, and frustration and loss of voyage are now excluded by the Institute War Clauses for cargo (cl 3.7, applied in Atlantic Maritime Co Inc v. Gibbon [1953] 2 Lloyd’s Rep 294). Finally, s 60 does not contemplate the possibility that the policy may deem particular events as constituting a constructive total loss, although this may be done. Thus, in the case of seizure, the subjectmatter may be deemed by the contract to be a constructive total loss if it has not been returned to the assured at the end of a specified period (Fowler v. English & Scottish Marine Insurance Co Ltd (1865) 18 CBNS 818; Rowland & Marwood SS Co v. Maritime Insurance Co (1901) 6 Com Cas 160). These exceptional situations apart, the definition of constructive total loss in s 60 is exhaustive. Thus, if a vessel cannot be repaired due to the assured’s inability to obtain a licence, there is no constructive total loss (Irvin v. Hine [1950] 1 KB 555). In all cases the question whether there has been a constructive total loss has to be determined both at the date of the loss and at the date at which the claim form against the underwriters is issued by the assured (Bainbridge v. Nielson (1808) 10 East 329; Paterson v. Ritchie (1815) 4 M & S 393; M’Iver v. Henderson (1816) 4 M & S 576; Brotherston v. Barber (1816) 5 M & S 418; Naylor v. Taylor (1829) 9 B & C 718; Lozano v. Janson (1859) 2 E & E 160; Shepherd v. Henderson (1881) 7 App Cas 49; Ruys v. Royal Exchange Assurance Corporation [1897] 2 QB 135; Sailing Ship Blaimore v. Macredie [1898] AC 593; Roura and Forgas v. Townend [1919] 1 KB 189), so that if what appears to be a loss at the date of loss proves not to be by the date of the writ, there is no total loss. However, as a matter of practice, insurers accept that the date at which the notice of

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abandonment is rejected is the relevant date for determining whether there is a constructive total loss so that a change of circumstances after the issue of the claim form is to be disregarded (Barque Robert S Besnard Co Ltd v. Murton (1909) 14 Com Cas 267; Polurian Steamship Co v. Young (1913) 19 Com Cas 143; Panamanian Oriental Steamship Corporation v. Wright [1970] 2 Lloyd’s Rep 365; ‘‘The Bamburi’’ [1982] 1 Lloyd’s Rep 312). Cf the situation in which the policy states that the loss is deemed to be that which it appears to be on a given day, referred to above and illustrated by Fowler v. English & Scottish Marine Insurance Co Ltd (1865) 18 CBNS 818.

Effect of constructive total loss 61. Where there is a constructive total loss the assured may either treat the loss as a partial loss, or abandon the subject-matter insured to the insurer and treat the loss as if it were an actual total loss. Notes There is a distinction in the legislation between abandonment and notice of abandonment. The former arises whenever there has been a total loss of the insured subject matter. The assured must hand over what remains of the assured subject matter to the insurers—the act of abandonment, as set out in s 63 and discussed in the notes to that section—in return for payment for a total loss. A notice of abandonment, by contrast, is a formal notice which allows the assured to treat a constructive total loss as an actual total loss. The significance of service of a notice of abandonment is that without such notice the assured is entitled to an indemnity measured only for a partial loss, whereas the service of a notice of abandonment entitles the assured to recover the measure of indemnity appropriate to a total loss. If there is a constructive total loss and the assured fails to serve a notice of abandonment, the loss nevertheless remains a total loss for all purposes other than for the calculation of the measure of indemnity: thus, if the policy covers total loss only, a constructive total loss is covered whether or not a notice of abandonment is served (Petros M Nomikos Ltd v. Robertson [1939] AC 371; Bank of America National Trust and Savings Corporation v. Chrismas, ‘‘The Kyriaki’’ [1993] 1 Lloyd’s Rep 137, discussed in the note to s 56(1)). Once the assured has elected to claim for a partial loss only, he cannot alter his approach and claim for a total loss even though relevant evidence has later come to light (Martin v. Crokatt (1811) 14 East 465; Fleming v. Smith (1848) 1 HL Cas 513). Formal notice is not required for abandonment. If the assured has suffered an actual total loss, he need not serve any form of notice on the underwriters abandoning the insured subject matter to them as a condition of seeking an indemnity for actual total loss. Similarly, if the assured has suffered a constructive total loss, and has either served a notice of abandonment or has been exempted from the need to do so (under s 62(7)–(9)—see below), there is no need for the assured to serve any form of notice abandoning the insured subject matter to the underwriters: Kastor Navigation Co Ltd v. AGF MAT, The Kastor Too [2004] Lloyd’s Rep IR 481. It was also decided in Kastor Navigation Co Ltd v. AGF MAT, The Kastor Too [2004] Lloyd’s Rep IR 481 that a constructive total loss is a fully crystallised loss in its own right, and the assured can make a claim for a constructive total loss irrespective of any later events that may occur. In this case the assured suffered a constructive total loss by fire, followed almost immediately by an actual total loss caused by an uninsured peril: the Court of Appeal held that the assured was entitled to claim for the constructive total loss even though by the time the claim was made the vessel had become an actual total loss. The existence of a constructive total loss has to be tested at the date of the casualty.

Notice of abandonment 62.—(1) Subject to the provisions of this section, where the assured elects to abandon the subject-matter insured to the insurer, he must give notice of abandonment. If he fails to do so the loss can only be treated as a partial loss. (2) Notice of abandonment may be given in writing, or by word of mouth, or partly in writing and partly by word of mouth, and may be given in terms which indicate the intention of the assured to abandon his insured interest in the subject-matter insured unconditionally to the insurer. (3) Notice of abandonment must be given with reasonable diligence after the receipt of reliable information of the loss, but where the information is of a doubtful character the assured is entitled to a reasonable time to make inquiry. (4) Where notice of abandonment is properly given, the rights of the assured are not prejudiced by the fact that the insurer refuses to accept the abandonment. (5) The acceptance of an abandonment may be either express or implied from the conduct of the insurer. The mere silence of the insurer after notice is not an acceptance.

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(6) Where notice of abandonment is accepted the abandonment is irrevocable. The acceptance of the notice conclusively admits liability for the loss and the sufficiency of the notice. (7) Notice of abandonment is unnecessary where, at the time when the assured receives information of the loss, there would be no possibility of benefit to the insurer if notice were given to him. (8) Notice of abandonment may be waived by the insurer. (9) Where an insurer has re-insured his risk, no notice of abandonment need be given by him. Notes This section is concerned only with preserving the assured’s right, following a constructive total loss, to recover an indemnity based on total rather than partial loss; this is achieved by the service of a notice of abandonment. The policy may independently contain notice of loss provisions, which, if expressed as conditions precedent to the underwriters’ liability have to be complied with whatever the form of the loss (see Institute Time Clauses, cl 10; Institute Voyage Clauses, cl 8), failing which the underwriters are not liable for the loss in question. This is so even if the underwriters are not prejudiced by the breach of condition. By contrast, if the clause is not a condition precedent, the underwriters will have to pay unless (and this is a matter of law conceptually all but impossible in relation to a claims condition) the assured’s breach amounts to a repudiation of the policy itself: see the majority comments in Friends Provident Life and Pensions Ltd v. Sirius International Insurance Corporation [2006] Lloyd’s Rep IR 45 (applied in Ronson International Ltd v. Patrick [2006] Lloyd’s Rep IR 194, affirmed on other grounds as Patrick v Royal London Mutual Insurance Society Ltd [2007] Lloyd’s Rep IR 85) rejecting the suggestion in Alfred McAlpine v. BAI (Runoff) Ltd [2000] Lloyd’s Rep IR 352 that breach of a condition which is not a condition precedent may give the insurers the right to refuse to pay the claim if the breach is a serious one and caused prejudice to the insurers (in the light of Sirius, the decision in Bankers Insurance Co Ltd v. South [2004] Lloyd’s Rep IR 1 would seem to be wrongly decided on this point, and in the same way the analysis of conditions in K/S Merc-Skandia XXXXII v. Lloyd’s Underwriters, ‘‘The Mercandian Continent’’ [2001] Lloyd’s Rep IR 802 and Glencore International AG v. Ryan, ‘‘The Beursgracht’’ [2002] Lloyd’s Rep IR 335 is no longer to be followed). The notification and co-operation clauses in the International Hull Clauses, respectively cll 43 and 45.1–45.2, are not expressed to be conditions precedent, although there is a specific exception in relation to fraud as it is a condition precedent to the insurers’ liability that there is no fraud in the claim prior to the commencement of proceedings (cl 45.3–45.4). Failure by the assured to disclose all material facts on making the claim is not a breach of the assured’s duty of utmost good faith and the policy is not voidable ab initio where there is a fraudulent claim: at best, the insurers may have the right to refuse to pay the claim or to treat the policy as repudiated: see the note to s 17. The International Hull Clauses for the first time set out the powers and duties of the underwriters on receiving a claim. Any claim is to be handled by a leading underwriter nominated by the subscribers and his decisions are binding on them (cl 42). The leading underwriter is entitled to nominate a port to which the vessel is to proceed for docking or repair and may invite tenders for repair: any failure by the assured to comply may lead to a deduction of 15% from the insured sum (cl 44). The leading underwriter may also appoint a surveyor and average adjuster at the underwriters’ expense, and prompt consideration is to be given to making a payment on account if this is recommended by the adjuster or requested by the assured. In any event, a decision on a claim is to be made within 28 days (cl 46). The underwriters are also to give due consideration to assisting an assured who is required to provide security to avoid the arrest of the vessel following any accident (cl 47). A claim is under cl 48 to be paid to the assured or nominated loss payee (who is entitled to enforce the payment obligation under the Contracts (Rights of Third Parties) Act 1999—see cl 36, which disapplies the 1999 Act but without prejudice to cl 48). Subs (1) See ‘‘The Kyriaki’’ [1993] 1 Lloyd’s Rep 137, which emphasises that whether or not a notice of abandonment is served, a loss cannot lose its character as a total loss other than for the purpose of the measure of indemnity. For illustrations of the consequences of failure to give notice of abandonment, see Goldsmid v. Gillies (1813) 4 Taunt 803. The rationale of the notice of abandonment was discussed by Cotton LJ in Kaltenbach v. Mackenzie (1878) 3 CPD 467: (a) the assured is required to make a decision and to inform the insurers of that decision by means of a notice of abandonment, thereby preventing the assured from changing his mind if circumstances should alter; (b) the underwriters, following receipt of a notice of abandonment, are able to decide what approach to adopt with respect to the property abandoned to them. Subs (2) The principle that the word ‘‘abandon’’ need not be used as long as the assured’s intentions are clear, comes from M’Masters v. Shoolbred (1794) 1 Esp 236, King v. Walker (1864) 3 H & C 209 and Currie & Co v. Bombay Native Insurance Co (1869) LR 3 PC 72. Several documents may be joined for this purpose (Panamanian Oriental Steamship Corporation v. Wright [1971] 1 Lloyd’s Rep 487). A claim may constitute a

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valid notice of abandonment (Cohen Sons & Co v. Standard Marine Insurance Co Ltd (1925) 21 Ll LR 30). A request or proposal to the underwriters is not a notice of abandonment (Parmeter v. Todhunter (1808) 1 Camp 541; Martin v. Crokatt (1811) 14 East 465; Russian Bank for Foreign Trade v. Excess Insurance Co [1919] 1 KB 39; Vacuum Oil Co v. Union Insurance Society of Canton Ltd (1926) 25 Ll LR 546). A notice of abandonment, to be valid, must be given to a person authorised by the underwriters to receive it, and not merely to the assured’s own agent (Vacuum Oil Co v. Union Insurance Society of Canton Ltd (1926) 25 Ll LR 546). It may be given by a co-assured in respect of his own interest only or on behalf of all interested parties (Hunt v. Royal Exchange Assurance (1816) 5 M & S 47), but not by a person with a mere security interest in the insured subject-matter (Jardine v. Leathley (1863) 32 LJQB 132). Subs (3) The first part of this provision reflects the justification of a notice of abandonment, that the assured, having become aware of the loss, cannot wait to see how things develop (Kaltenbach v. Mackenzie (1878) 3 CPD 467). See also: Mitchell v. Edie (1797) 1 TR 608; Anderson v. Royal Exchange Assurance Co (1805) 7 East 38; Barker v. Blakes (1808) 9 East 283; Kelly v. Walton (1808) 2 Camp 155; Hunt v. Royal Exchange Assurance Co (1816) 5 M & S 47; Aldridge v. Bell (1816) 1 Stark 498; Hudson v. Harrison (1821) 3 B & B 97; Fleming v. Smith (1848) 1 HL Cas 513; Grainger v. Martin (1863) 4 B & S 9; King v. Walker (1864) 3 H & C 209; Potter v. Campbell (1867) 17 LT 474; Currie v. Bombay Native Assurance Co (1869) LR 3 PC 72. Under s 88 of the Marine Insurance Act 1906, what is a reasonable time is a question of fact. For the second part of the section, delay pending confirmation of the extent of the loss, see Gernon v. Royal Exchange Assurance (1815) 6 Taunt 383. Subs (4) See Brooks v. MacDonnell (1835) 1 Y & C Ex 500. One consequence of this provision is that the assured can withdraw a notice of abandonment before acceptance (Pesquerias y Secaderos de Bacalao de Espa˜na SA v. Beer (1947) 80 Ll LR 318) and this may be done by conduct, eg in operating the vessel (A v. B, 1996, unreported). Subs (5) The position is illustrated by Provincial Insurance Co of Canada v. Leduc (1874) LR 6 PC 224, where silence on the part of the insurers, coupled with their taking over the abandoned subject-matter, was held to be acceptance. See also: Bainbridge v. Nielson (1808) 10 East 329; Hudson v. Harrison (1821) 3 B & B 97, where inactivity for a lengthy period was held to be acceptance; Sailing Ship Blaimore v. Macredie [1898] AC 593. Contrast: Thelluson v. Fletcher (1793) 1 Esp 73; Shepherd v. Henderson (1881) 7 App Cas 49, where there was no acceptance by underwriters taking possession only in order to effect repairs and informing the assured accordingly, Captain JA Cates Tug and Wharfage Co Ltd v. Franklin Insurance Co [1927] AC 698, where salvage was effected but coupled with a rejection of the assured’s notice of abandonment. The Institute Cargo Clauses make it clear that any action taken by the insurers to preserve the subject-matter shall not be taken as any acceptance of a notice of abandonment (cl 17). Subs (6) This is based on: Da Costa v. Firth (1766) 4 Burr 1966; Smith v. Robertson (1814) 2 Dow 474. For an illustration of waiver of insufficiency of notice, see Provincial Insurance Co of Canada v. Leduc (1874) LR 6 PC 224. Subs (6) has been held not to preclude an underwriter from revoking a binding acceptance on subsequently discovering that the loss had been caused by an uninsured peril (Norwich Union Fire Insurance Society v. Price Ltd [1934] AC 455) or that the policy was voidable for non-disclosure (Fraser Shipping Ltd v. Colton [1997] 1 Lloyd’s Rep 586). In the same way an underwriter who accepts an adjustment may set it aside if the loss proves to have been caused by an uninsured peril or if the underwriter possessed some other defence under the policy which had not been waived (Shepherd v. Chewter (1808) 1 Camp 274; Steel v. Lacy (1810) 3 Taunt 285; Scottish Metropolitan Assurance Co v. Samuel & Co [1923] 1 KB 348; and cf Holland v. Russell (1863) 4 B & S 14, where the underwriters failed to obtain a return of the insurance moneys from the assured’s broker who had transmitted the money to the assured). An adjustment is in any event presumed not to be binding on the underwriters until it has been accepted (Castle Insurance Co v. Hong Kong Islands Shipping Co [1983] 2 Lloyd’s Rep 376; Attaleia Marine Co Ltd v. Iran Insurance Co, ‘‘The Zeus’’ [1993] 2 Lloyd’s Rep 497). Subs (7) This provision is narrow in its impact on losses affecting vessels and cargo, as it is based on the notion that the underwriters are entitled to insist upon notice unless no further useful action can be taken by him in relation to the subject-matter: such a possibility is unlikely unless there has been an actual total loss (cf: Associated Oil Carriers Ltd v. Union Insurance Society of Canton Ltd [1917] 2 KB 184; Vacuum Oil Co v. Union Insurance Society of Canton (1926) 25 Ll LR 546). Justifiable emergency sale by the master for the benefit of the underwriters may, however, excuse the need for a notice of abandonment, as no benefit can accrue to them (Farnworth v. Hyde (1865) 18 CBNS 835; Cobequid Marine Insurance Co v. Barteaux (1875) LR 6 PC 319; Trinder, Anderson & Co v. Thames and Mersey Marine Insurance Co [1898] 2 QB 114). The assured is entitled to claim for a constructive total loss which has been followed immediately by an actual total loss caused by a different peril, as where a vessel is damaged by fire and then sinks: there is clearly no useful purpose served by the assured in serving a notice of abandonment in such circumstances (Kastor Navigation Co Ltd v. AGF MAT, The Kastor Too [2004] Lloyd’s Rep IR 481). There is much authority for the proposition that no notice of abandonment is necessary in the case of lost freight, which may be another way of saying that there cannot be a constructive total loss of freight (Green v. Royal Exchange Assurance (1815) 6 Taunt 68; Mount v. Harrison (1827) 4 Bing 388; Rankin v. Potter (1873) LR 6 HL 83; Trinder, Anderson & Co v. Thames and Mersey Marine Insurance Co [1898] 2 QB 114; Associated Oil Carriers Ltd v. Union Insurance Society of Canton Ltd [1917] 2 KB 184).

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Subs (8) For waiver, see: Houstman v. Thornton (1816) Holt NP 242; Rickards v. Forestal Land, Timber and Railway Co Ltd [1942] AC 50. Subs (9) This is based on Uzielli v. Boston Marine Insurance Co (1884) 15 QBD 11.

Effect of abandonment 63.—(1) Where there is a valid abandonment the insurer is entitled to take over the interest of the assured in whatever may remain of the subject-matter insured, and all proprietary rights incidental thereto. (2) Upon the abandonment of a ship, the insurer thereof is entitled to any freight in course of being earned, and which is earned by her subsequent to the casualty causing the loss, less the expenses of earning it incurred after the casualty; and, where the ship is carrying the owner’s goods, the insurer is entitled to a reasonable remuneration for the carriage of them subsequent to the casualty causing the loss. Notes Subs (1) The underwriters are given the right to take over property abandoned to them in the case of a total loss, a right which is retroactive to the date of the loss and not merely from the acceptance of the notice of abandonment (Cammell v. Sewell (1858) 3 H & N 617). The underwriters may, therefore, take over the remains of a vessel or cargo, or of a ship presumed lost which has been discovered safe and sound (Houstman v. Thornton (1816) Holt NP 242). The assured is divested of ownership as from the date of the loss following the acceptance of a notice of abandonment (Arrow Shipping Co v. Tyne Improvement Commissioners [1894] AC 508; Barraclough v. Brown [1897] AC 615). Earlier liabilities incurred by the assured remain with him (‘‘The Ella’’ [1915] P 111; Dee Conservancy Board v. McConnell [1928] 2 KB 159). It is unclear whether the underwriters can refuse to take over property having accepted a notice of abandonment. Prior to the 1906 Act the point was unresolved (and was expressly left open in Arrow Shipping Co v. Tyne Improvement Commissioners [1894] AC 508), but the wording of the 1906 Act indicates that the matter is optional as far as the underwriters are concerned, and it has been said that if the underwriters decline to take over abandoned property, it becomes res nullius (Boston Corporation v. Fenwick & Co Ltd (1923) 15 Ll LR 85; Allgemeine Versicherungs-Gesellschaft Helvetia v. Administrator of German Property [1931] 1 KB 672), but in later cases the view has been expressed that the property vests in the underwriters irrespective of the underwriters’ wishes (Oceanic Steam Navigation Co Ltd v. Evans (1934) 50 Ll LR 1; Blane Steamships Ltd v. Minister of Transport [1951] 2 KB 965). Salvage is not available to the underwriters in the event of a partial loss (Tunno v. Edwards (1810) 12 East 488; Goldsmid v. Gillies (1813) 4 Taunt 803; Brooks v. Macdonnell (1835) 1 Y & C Ex 500). Subs (2) The principle that the hull underwriters are entitled to freight in the course of being earned was settled by Sea Insurance Co v. Hadden (1884) 13 QBD 706. Cf also: Luke v. Lyde (1759) 2 Burr 882; Barclay v. Stirling (1816) 5 M & S 6; Davidson v. Case (1820) 2 Brod & Bing 379; Stewart v. Greenock Insurance Co (1848) 2 HL Cas 159; Keith v. Burrows (1877) 2 App Cas 636; ‘‘The Red Sea’’ [1896] P 20, and see the note to s 55(1). This rule necessarily did not apply where the assured transhipped the cargo and earned freight in so doing (Hickie & Borman v. Rodocanachi (1859) 4 H & N 455). The practice is for the hull underwriters to waive freight in favour of the freight underwriters (Institute Time Clauses Hulls, cl 20; Institute Voyage Clauses Hulls, cl 18; International Hull Clauses, cl 22, and see: United Kingdom Mutual SS Assurance v. Boulton (1898) 3 Com Cas 330; Coker v. Bolton [1912] 3 KB 315). As to the right of the underwriters to claim reasonable remuneration for carriage of goods, see: Miller v. Woodfall (1857) 27 LJQB 120; Keith v. Burrows (1877) 2 App Cas 636.

Partial Losses (including Salvage and General Average and Particular Charges) Particular average loss 64.—(1) A particular average loss is a partial loss of the subject-matter insured, caused by a peril insured against, and which is not a general average loss. (2) Expenses incurred by or on behalf of the assured for the safety or preservation of the subject-matter insured, other than general average and salvage charges, are called particular charges. Particular charges are not included in particular average. Notes Subs (1) A particular average loss is simply a partial loss, excluding any general average contributions which the assured has to make to any person who has sacrificed expenditure or property for common good (Marine Insurance Act 1906, s 66). General average contributions are covered separately by a standard marine policy.

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Subs (2) ‘‘Particular charges’’ are losses incurred by the assured in preserving the subject-matter, other than by way of general average contributions. Particular charges also exclude ‘‘salvage charges’’, defined by s 65, below, as charges payable to a salvor in the absence of contract. See Kidston v. Empire Marine Insurance Co (1867) LR 2 CP 357. Consequently, particular charges will include contractual salvage charges, and will be recoverable under the suing and labouring clause (Marine Insurance Act 1906, s 78).

Salvage charges 65.—(1) Subject to any express provision in the policy, salvage charges incurred in preventing a loss by perils insured against may be recovered as a loss by those perils. (2) ‘‘Salvage charges’’ means the charges recoverable under maritime law by a salvor independently of contract. They do not include the expenses of services in the nature of salvage rendered by the assured or his agents, or any person employed for hire by them, for the purpose of averting a peril insured against. Such expenses, where properly incurred, may be recovered as particular charges or as a general average loss, according to the circumstances under which they were incurred. Notes Salvage charges—defined by subs (2) as excluding salvage under contract—are recoverable under the policy as marine losses (Nourse v. Liverpool SS Owners’ Mutual Protection and Indemnity Association [1896] 2 QB 21; Grand Union Shipping Ltd v. London SS Owners’ Mutual Insurance Association Ltd, ‘‘The Bosworth’’ [1962] 1 Lloyd’s Rep 483). Contractual salvage, which in practice accounts for most salvage (under the Lloyd’s Open Form), is recoverable under the suing and labouring clause (Marine Insurance Act 1906, s 78), although this is subject to contract so that contractual charges may be treated as salvage charges for this purpose (Seashore Marine SA v. Phoenix Assurance plc [2002] Lloyd’s Rep IR 51, holding this to be the effect of the Institute Time Clauses Hulls, cl 11.1—the same principle applies to the Institute Voyage Clauses Hulls, cl 8.1 and the International Hull Clauses, cl 8.11). The distinction between contractual and maritime salvage was drawn by the House of Lords in Aitchison v. Lohre (1879) 4 App Cas 755, where their Lordships held that salvage under maritime law did not fall within the suing and labouring clause, on the basis that a voluntary salvor was not the agent of the assured for the purposes of a suing and labouring clause. The most significant difference between contractual and maritime salvage charges is that the former, as they fall within the suing and labouring clause, are recoverable independently of the insurance contract and without reference to the maximum sum insured under the policy, while the latter form part of the cover provided by the policy and must thus be added to the loss under the policy itself which may be subject to a maximum figure. Salvage charges are recoverable only where the salvage is in consequence of the operation of an insured peril (Ballantyne v. Mackinnon [1896] 2 QB 455). The same principle applies to contractual salvage under the suing and labouring clause.

General average loss 66.—(1) A general average loss is a loss caused by or directly consequential on a general average act. It includes a general average expenditure as well as a general average sacrifice. (2) There is a general average act where any extraordinary sacrifice or expenditure is voluntarily and reasonably made or incurred in time of peril for the purpose of preserving the property imperilled in the common adventure. (3) Where there is a general average loss, the party on whom it falls is entitled, subject to the conditions imposed by maritime law, to a rateable contribution from the other parties interested, and such contribution is called a general average contribution. (4) Subject to any express provision in the policy, where the assured has incurred a general average expenditure, he may recover from the insurer in respect of the proportion of the loss which falls upon him; and, in the case of a general average sacrifice, he may recover from the insurer in respect of the whole loss without having enforced his right of contribution from the other parties liable to contribute. (5) Subject to any express provision in the policy, where the assured has paid, or is liable to pay, a general average contribution in respect of the subject insured, he may recover therefor from the insurer. (6) In the absence of express stipulation, the insurer is not liable for any general average loss or contribution where the loss was not incurred for the purpose of avoiding, or in connexion with the avoidance of, a peril insured against.

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(7) Where ship, freight, and cargo, or any two of those interests, are owned by the same assured, the liability of the insurer in respect of general average losses or contributions is to be determined as if those subjects were owned by different persons. Notes The rules laid down in s 66(1)–(3) and (7) are general common law principles. In practice, general average is adjusted in accordance with the York Antwerp Rules as revised in 2004, which contain detailed definitions of general average acts as well as rules for making adjustments. Insurance aspects of general average are dealt with by s 66(4)–(7). Subs (4) If the assured has suffered a loss in the form of a general average expenditure his proportion of the loss is recoverable from the underwriters (Carisbrook Steamship Co Ltd v. London and Provincial Marine and General Insurance Co Ltd (1901) 6 Com Cas 291; Brandeis, Goldschmidt & Co Ltd v. Economic Insurance Co Ltd (1922) 11 Ll LR 42; Green Star Shipping Co Ltd v. London Assurance [1933] 1 KB 378). However, the right of contribution from third parties must be enforced before recovery from insurers is possible: Comatra Ltd v. Lloyd’s Underwriters [2000] 2 Lloyd’s Rep 575. If the assured has suffered a loss in the form of a general average sacrifice the full amount of the loss (disregarding any contributions due to him) is recoverable from the underwriters who are then subrogated to the assured’s rights against persons liable to make contributions (Dickinson v. Jardine (1868) LR 3 CP 639: Steamship Balmoral Co v. Marten [1901] 2 KB 896). These principles are repeated in the Institute Time Clauses Hulls, cl 11.1, the Institute Voyage Clauses Hulls, cl 9.1 and the International Hull Clauses, cl 8.1. The measure of loss under a general average sacrifice is not subject to the one-third customary deduction for repaired vessels laid down by the common law under s 69 (Henderson Brothers v. Shankland [1896] 1 QB 525). Subs (5) General average contributions payable by the assured to a person incurring a general average expenditure or general average sacrifice are themselves recoverable under the policy. See the Institute Cargo Clauses, cl 2. The amount recoverable is regulated by Marine Insurance Act 1906, s 73. Subs (6) General average losses and contributions are recoverable only where an insured peril has led to the general average act. If the assured mistakenly believes that there is a peril in operation, and a sacrifice is made accordingly, the insurers are not liable (Watson & Son Ltd v. Firemen’s Fund Insurance Co of San Francisco [1922] 2 KB 355). Standard London market policies do not provide to the contrary: Institute Time Clauses Hulls, cl 11.4, Institute Voyage Clauses Hulls, cl 9.4, International Hull Clauses, cl 8.4 (modifiable by agreement under cl 40) and Institute Cargo Clauses, cl 2 (which covers general average contributions as long as the event was insured against). Accordingly it is necessary, in applying these provisions, for the assured to prove that the expenditure was incurred by reason of avoiding loss which would otherwise have been proximately caused by a peril insured against under the terms of the relevant Clauses (Seashore Marine SA v. Phoenix Assurance plc [2002] Lloyd’s Rep IR 51). Subs (7) This is based on Montgomery & Co v. Indemnity Mutual Marine Insurance Co [1902] 1 KB 734.

Measure of Indemnity Extent of liability of insurer for loss 67.—(1) The sum which the assured can recover in respect of a loss on a policy by which he is insured, in the case of an unvalued policy to the full extent of the insurable value, or, in the case of a valued policy to the full extent of the value fixed by the policy, is called the measure of indemnity. (2) Where there is a loss recoverable under the policy, the insurer, or each insurer if there be more than one, is liable for such proportion of the measure of indemnity as the amount of his subscription bears to the value fixed by the policy in the case of a valued policy, or to the insurable value in the case of an unvalued policy. Notes The measure of indemnity laid down in this and the succeeding sections is exhaustive. Losses falling outside these sections, other than interest, are irrecoverable. An assured may not, therefore, recover damages for distress or disturbance resulting from the underwriters’ late payment (Ventouris v. Mountain, The Italian Express [1992] 2 Lloyd’s Rep 281). The policy may, however, extend the range of sums available, eg in respect of exemplary damages (see the note to s 74). A claim under an insurance policy is in any event a claim for unliquidated damages (Boddington v. Castelli (1853) 1 E & B 879; Pellas v. Neptune Marine Insurance Co (1879) 5 CPD 34) so that late payment cannot be a breach of contract, the underwriters being in deemed breach as from the date of loss and not being liable to pay damages for not paying damages (President of India v. Lips Maritime Corporation, ‘‘The Lips’’ [1988] AC 395; Ventouris v. Mountain, The Italian Express [1992] 2 Lloyd’s Rep 281; Sprung v. Royal Insurance Co (UK) [1999] Lloyd’s Rep IR 111 where it was accepted that it was arguable that a policy of insurance contained an implied term that payment would be made within

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a reasonable time; and see also: Pride Valley Foods Ltd v. Independent Insurance Co Ltd [1999] Lloyd’s Rep IR 120; Normhurst Ltd v. Dornoch Ltd [2005] Lloyd’s Rep IR 27). The remedy for late payment is the award of interest. The general principle is that interest runs from the date on which the loss occurred, although the insurers may be allowed a short period of time for investigation of the claim before interest starts to run. The court may impose interest rests, or vary the rate of interest (normally 1% above base rate) to the extent that the assured’s own delays have caused his own loss; The relevant principles are set out in: Kuwait Airways Corporation v. Kuwait Insurance Co SAK (No 3) [2000] Lloyd’s Rep IR 678; Adcock v. Co-operative Insurance Society Ltd [2000] Lloyd’s Rep IR 657; Quorum AS v. Schramm (No 2) [2002] Lloyd’s Rep IR 315; Hellenic Industrial Development Bank SA v. Atkin, ‘‘The Julia’’ [2003] Lloyd’s Rep IR 365. Subs (1) The measure of indemnity is calculated, in the case of a valued policy by reference to the agreed value and in the case of an unvalued policy by reference to the insurable value as calculated in accordance with s 16 of the 1906 Act. Subs (2) The underwriter is liable only for the proportion of the insurable value which he has insured. Thus, if the agreed or insurable value is £100,000, and the insured sum is £50,000, the underwriter is liable for one-half of the amount of any loss. It follows that, in the event of underinsurance, the assured is deemed to be his own insurer for the uninsured sum and is deemed to be required to contribute the uninsured proportion. Where more than one underwriter is involved, the same principle applies, so that if the agreed or insurable value is £150,000 and the assured is insured for £50,000 with each of two underwriters, a loss of £75,000 would require contributions of £25,000 from each of the insurers while the assured is deemed to be his own insurer for the uninsured amount.

Total loss 68. Subject to the provisions of this Act and to any express provision in the policy, where there is a total loss of the subject-matter insured— (1) If the policy be a valued policy, the measure of indemnity is the sum fixed by the policy: (2) If the policy be an unvalued policy, the measure of indemnity is the insurable value of the subject-matter insured. Notes This section is relatively straightforward. If there is a total loss under a valued policy, the assured receives the agreed value, subject to any excess or financial ceiling in the policy (Lidgett v. Secretan (1871) LR 6 CP 616). Actual values are disregarded, so that the assured may make a profit or suffer a shortfall (Barker v. Janson (1868) LR 3 CP 303; Steamship Balmoral Co v. Marten [1902] AC 511). If there is a total loss under an unvalued policy, the assured receives the insurable value as defined by s 16 of the 1906 Act, subject to any excess or financial ceiling in the policy.

Partial loss of ship 69. Where a ship is damaged, but is not totally lost, the measure of indemnity, subject to any express provision in the policy, is as follows:— (1) Where the ship has been repaired, the assured is entitled to the reasonable cost of the repairs, less the customary deductions, but not exceeding the sum insured in respect of any one casualty; (2) Where the ship has been only partially repaired, the assured is entitled to the reasonable cost of such repairs, computed as above, and also to be indemnified for the reasonable depreciation, if any, arising from the unrepaired damage, provided that the aggregate amount shall not exceed the cost of repairing the whole damage, computed as above; (3) Where the ship has not been repaired, and has not been sold in her damaged state during the risk, the assured is entitled to be indemnified for the reasonable depreciation arising from the unrepaired damage, but not exceeding the reasonable cost of repairing such damage, computed as above. Notes In the event of the partial loss of a ship, the agreed or insurable values of the ship remain the basis of the calculation of the assured’s indemnity, and the measure of indemnity is based on the three situations set out in s 69. In each case, the maximum amount recoverable is the sum insured under the policy (Goole and Hull Steam Towing Co Ltd v. Ocean Marine Insurance Co Ltd (1927) 29 Ll LR 242).

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Subs (1) (full repair by the assured). Here, the assured obtains the reasonable cost of repairs, subject to customary deductions. The reasonable cost of repairs will include docking and surveyors’ costs (Ruabon SS Co v. London Assurance [1900] AC 6; Agenoria SS Co v. Merchants’ Marine Insurance Co (1903) 8 Com Cas 212; Helmville Ltd v. Yorkshire Insurance Co Ltd, ‘‘The Medina Princess’’ [1965] 1 Lloyd’s Rep 361, but contrast Marine Insurance Co v. China Transpacific SS Co (1886) 11 App Cas 573 where dock expenses were incurred for the assured’s own purposes) and the cost of towing the vessel to the port of repair (‘‘The Medina Princess’’ [1965] 1 Lloyd’s Rep 361), but excludes costs incurred in relation to the cargo (Field SS Co v. Burr [1899] 1 QB 579; Polurrian SS Co v. Young (1913) 9 Com Cas 142) and other consequential losses such as the wages of the crew and loss of profit (Robertson v. Ewer (1786) 1 TR 127; Sharp v. Gladstone (1805) 7 East 24; Everth v. Smith (1814) 2 M & S 278; De Vaux v. Salvador (1836) 4 Ad & El 420; Shelbourne & Co v. Law Investment and Insurance Corporation [1898] 2 QB 626). The customary deduction referred to was the old ‘‘two-thirds’’ rule under which the assured would lose one-third of reasonable repair costs (Da Costa v. Newnham (1788) 2 TR 407; Poindestre v. Royal Exchange Corporation (1826) Ry & M 378; Aitchison v. Lohre (1879) 4 App Cas 755). This rule did not extend to a vessel on its first voyage (Fenwick v. Robinson (1828) 3 C & P 323), to an iron vessel (Lidgett v. Secretan (1871) LR 6 CP 616), to a vessel which was not restored to the assured following repair (Da Costa v. Newnham (1788) 2 TR 407), and to the cost of a general average sacrifice (Henderson Brothers v. Shankland & Co [1896] 1 QB 525) and is no longer applied in practice (see the Institute Time Clauses Hulls, cl 14 , the Institute Voyage Clauses Hulls, cl 12 and the International Hull Clauses, cl 16, which give the assured full recovery on a ‘‘new for old’’ basis). The market clauses exclude cover for treatment to the vessel’s bottom, the wages and maintenance of the master and crew and costs incurred by the assured in supplying information to the insurers (Institute Time Clauses, Hulls, cll 15–17, Institute Voyage Clauses Hulls, cll 13–15, International Hull Clauses, cll 17–19). Subs (2) (partial repair by the assured). Here, the assured obtains the reasonable cost of the repairs effected, plus depreciation flowing from the unrepaired damage, subject to a maximum recovery of the reasonable cost of full repairs as calculated under subs (1). The assured may not, therefore, profit by effecting only partial repairs. It is unclear how, in the case of a valued policy, depreciation is to be calculated under this provision: see the discussion in Irvin v. Hine [1950] 1 KB 555, where the court refused to choose between agreed value minus actual damaged value, and the proportion of the agreed value given by the proportion of actual depreciation. See also Institute Time Clauses Hulls, cl 18, Institute Voyage Clauses Hulls, cl 16 and International Hull Clauses, cl 20, which are concerned only with partial losses and not constructive total losses (Kastor Navigation Co Ltd v. AGF MAT, The Kastor Too [2004] Lloyd’s Rep IR 481). For the earlier common law, see Lidgett v. Secretan (1871) LR 6 CP 616. The point was considered by Colman J in Kusel v. Atkin, ‘‘The Catariba’’ [1997] 2 Lloyd’s Rep 749, where it was held that depreciation is the reduced value of the damaged vessel as against the insured value. Subs (3) (no repair). Here, the assured recovers the depreciation flowing from the unrepaired damage (as to which see Irvin v. Hine [1950] 1 KB 555, subs (2) above and Manifest Shipping & Co Ltd v. Uni-Polaris Shipping Co Ltd, ‘‘The Star Sea’’ [1995] 1 Lloyd’s Rep 651 (the point did not arise on appeal, [2001] Lloyd’s Rep IR 247), subject to a maximum recovery of the reasonable cost of full repair had the repairs been carried out, as calculated under subs (1). The date at which the amount of depreciation is to be assessed is, under a voyage policy, when the voyage is abandoned, and, under a time policy, when the policy expires (Helmville Ltd v. Yorkshire Insurance Co, ‘‘The Medina Princess’’ [1965] 1 Lloyd’s Rep 361; ‘‘The Catariba’’ [1997] 2 Lloyd’s Rep 749). Section 69 does not deal in express terms with a fourth possibility, namely, the case in which the vessel has not been repaired but has been sold. In Pitman v. Universal Marine Insurance Co (1882) 9 QBD 192 the Court of Appeal ruled that the correct measure was the reasonable cost of repairs, as calculated under subs (1), but subject to a ceiling represented by depreciation.

Partial loss of freight 70. Subject to any express provision in the policy, where there is a partial loss of freight, the measure of indemnity is such proportion of the sum fixed by the policy in the case of a valued policy, or of the insurable value in the case of an unvalued policy, as the proportion of freight lost by the assured bears to the whole freight at the risk of the assured under the policy. Notes Where freight is partially lost, the agreed or insurable value is the basis of the calculation, the assured recovering such proportion of that value as the amount of freight lost bears to the total freight. This is based on: Forbes v. Cowie (1808) 1 Camp 520; Forbes v. Aspinall (1811) 13 East 323; Denoon v. Home & Colonial Assurance (1872) LR 7 CP 341. Contrast ‘‘The Main’’ [1894] P 320, in which part of the freight had ceased to be at risk. At common law the assured is entitled to recover gross freight, ie, without deduction for savings in wages and other costs which would have been incurred had the vessel completed its voyage (Palmer v. Blackburn (1822) 1 Bing 61; United States Shipping Co v. Empress Assurance Corporation [1907] 1 KB 259). The Institute

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Freight Clauses maintain gross freight recovery, subject to deduction for other insurance recoveries: Institute Time Clauses (Freight), cl 13; Institute Voyage Clauses (Freight), cl 11.

Partial loss of goods, merchandise, etc 71. Where there is a partial loss of goods, merchandise, or other moveables, the measure of indemnity, subject to any express provision in the policy, is as follows:— (1) Where part of the goods, merchandise or other moveables insured by a valued policy is totally lost, the measure of indemnity is such proportion of the sum fixed by the policy as the insurable value of the part lost bears to the insurable value of the whole, ascertained as in the case of an unvalued policy: (2) Where part of the goods, merchandise, or other moveables insured by an unvalued policy is totally lost, the measure of indemnity is the insurable value of the part lost, ascertained as in case of total loss: (3) Where the whole or any part of the goods or merchandise insured has been delivered damaged at its destination, the measure of indemnity is such proportion of the sum fixed by the policy in the case of a valued policy, or of the insurable value in the case of an unvalued policy, as the difference between the gross sound and damaged values at the place of arrival bears to the gross sound value: (4) ‘‘Gross value’’ means the wholesale price, or, if there be no such price, the estimated value, with, in either case, freight, landing charges, and duty paid beforehand; provided that, in the case of goods or merchandise customarily sold in bond, the bonded price is deemed to be the gross value. ‘‘Gross proceeds’’ means the actual price obtained at a sale where all charges on sale are paid by the sellers. Notes Subs (1) In the case of a valued policy, the assured recovers the proportion of the agreed value that the actual value (ie insurable value calculated under s 16) lost bears to the actual (insurable) value of the whole. This is based on: Lewis v. Rucker (1761) 2 Burr 1167; Johnson v. Sheddon (1802) 2 East 581; Goldsmid v. Gillies (1813) 4 Taunt 803; Irving v. Manning (1847) 1 HL Cas 287; Anstey v. Ocean Marine Insurance Co (1913) 19 Com Cas 8. If the insurable value cannot be ascertained, the assured is entitled to recover the full amount of the loss (Tobin v. Harford (1863) 13 CBNS 791). If the remainder of the cargo is undamaged but is devalued as a result of the loss, the underwriters are not liable for the depreciation (Cator v. Great Western Insurance Co of New York (1873) LR 8 CP 552; Lysaght Ltd v. Coleman [1895] 1 QB 49; but contrast Brown Bros v. Fleming (1902) 7 Com Cas 245). Subs (2) In the case of an unvalued policy, the assured simply recovers the proportion of the insured value which the sum lost bears to the full insurable value. Subs (3) This provision lays down a special rule for cargo which is delivered at its destination in a damaged state. If the policy is valued, the assured recovers the proportion of the agreed value that the actual diminution in value bears to the actual value. Thus, if cargo with an agreed value of £90,000 would have been worth £120,000 at its destination had it arrived in a sound condition, and in its damaged condition was worth at its destination only £40,000, the assured recovers 80:120 of £90,000, ie £60,000. In the case of an unvalued policy, the same calculation is carried out, using the insurable value as determined under s 16 of the 1906 Act. The subsection is based on: Lewis v. Rucker (1761) 2 Burr 1167; Johnson v. Sheddon (1802) 2 East 581; Hurry v. Royal Exchange Assurance (1802) 3 Bos & P 308; Francis v. Boulton (1895) 65 LJQB 153. For an application of the subsection, see Whiting v. New Zealand Insurance Co (1932) 44 Ll LR 179.

Apportionment of valuation 72.—(1) Where different species of property are insured under a single valuation, the valuation must be apportioned over the different species in proportion to their respective insurable values, as in the case of an unvalued policy. The insured value of any part of a species is such proportion of the total insured value of the same as the insurable value of the part bears to the insurable value of the whole, ascertained in both cases as provided by this Act. (2) Where a valuation has to be apportioned, and particulars of the prime cost of each separate species, quality, or description of goods cannot be ascertained, the division of the valuation may be made over the net arrived sound values of the different species, qualities, or descriptions of goods.

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Marine Insurance

Notes This section deals with the situation in which different types of property are insured under a single valued policy. Subs (1) provides that if just one type of property is damaged, the assured’s measure of indemnity is based on the relationship between the insurable value (ie, actual value at the inception of risk, in accordance with s 16) of the property damaged and the total sum insured. Thus, if the assured procures a valued policy for £16,000 covering property A with an insurable value of £10,000 and property B with an insurable value of £10,000, and property A is destroyed, the assured recovers £8,000 and not £10,000. The purpose is to protect the underwriters in the event of underinsurance. The above process operates automatically in the case of an unvalued policy. Subs (2) If, for the purposes of the above calculation the insurable value cannot be ascertained, then in the case of goods the net arrived sound value is to be taken as the basis of measurement.

General average contributions and salvage charges 73.—(1) Subject to any express provision in the policy, where the assured has paid, or is liable for, any general average contribution, the measure of indemnity is the full amount of such contribution, if the subject-matter liable to contribution is insured for its full contributory value; but, if such subject-matter be not insured for its full contributory value, or if only part of it be insured, the indemnity payable by the insurer must be reduced in proportion to the under insurance, and where there has been a particular average loss which constitutes a deduction from the contributory value, and for which the insurer is liable, that amount must be deducted from the insured value in order to ascertain what the insurer is liable to contribute. (2) Where the insurer is liable for salvage charges the extent of his liability must be determined on the like principle. Notes Subs (1) This section carries over the proportionate recovery principle, which operates in respect of underinsurance, to general average contributions (see s 66 of the 1906 Act). If the assured is liable for general average contributions, the underwriters need indemnify him only for a sum representing the proportion of cover obtained by the assured. Thus, if the assured is 50 per cent underinsured, the underwriters will be liable only for 50 per cent of the assured’s general average contributions. This rule is based on SS Balmoral Co v. Marten [1902] AC 511. The same principle applies to cases in which the assured’s own property has been partially lost. Subs (2) The principle applicable to general average contributions applies equally to salvage charges (see s 65). The underwriters’ obligation to indemnify the assured for suing and labouring costs—in accordance with s 78 of the Marine Insurance Act 1906—is in practice also restricted to the proportion of primary cover which the assured has obtained.

Liabilities to third parties 74. Where the assured has effected an insurance in express terms against any liability to a third party, the measure of indemnity, subject to any express provision in the policy, is the amount paid or payable by him to such third party in respect of such liability. Notes The underwriters’ obligation to indemnify the assured against liability is a separate type of undertaking to insurance on property, even though it appears in the same policy. Consequently, if the assured is underinsured as regards the hull and machinery, the amount payable by the underwriters under the liability section is not reduced proportionately (Joyce v. Kennard (1871) LR 7 QB 78; Cunard SS Co v. Marten [1902] 2 KB 624). The London Hulls clauses do cover collision liability on this basis. A liability policy may legitimately indemnify the assured for exemplary damages awarded against him (Lancashire County Council v. Municipal Mutual Insurance Ltd [1995] LRLR 293). There may on occasion be some difficulty in distinguishing between a first party property policy and a third party liability policy, particularly where the assured is a bailee and is entitled to insure for the full value of the cargo as well as or as an alternative to insuring against his own liability. There is a presumption that a bailee’s policy covers the property rather than liability (Hepburn v. Tomlinson (Hauliers) [1966] AC 451; Ramco (UK) Ltd v. International Insurance Co of Hannover Ltd [2004] Lloyd’s Rep IR 606). A policy which provides coverage for a specified use of a vessel will apply to liability incurred even though the vessel was at the time being used for more than one purpose, as long as the primary purpose was that

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covered by the policy (Caple v. Sewell [2002] Lloyd’s Rep IR 627, applying a test adopted in a motor case, Seddons v. Binions [1978] 1 Lloyd’s Rep 381).

General provisions as to measure of indemnity 75.—(1) Where there has been a loss in respect of any subject-matter not expressly provided for in the foregoing provisions of this Act, the measure of indemnity shall be ascertained, as nearly as may be, in accordance with those provisions, in so far as applicable to the particular case. (2) Nothing in the provisions of this Act relating to the measure of indemnity shall affect the rules relating to double insurance, or prohibit the insurer from disproving interest wholly or in part, or from showing that at the time of the loss the whole or any part of the subject-matter insured was not at risk under the policy. Notes Subs (1) The subsection extends the principles of indemnity set out in the Act to forms of cover which are marine in nature but which are not caught by the Act, as in the case of share certificates (which are not within the definition of cargo) despatched by sea (Baring Brothers & Co v. Marine Insurance Co (1894) 10 TLR 276). Subs (2) The obvious point here made is that the measure of indemnity is subject to other provisions of the Act which may operate to reduce the underwriters’ liability, eg double insurance (s 32), want of insurable interest (s 6) or the fact that the subject-matter was not at risk—for any one of a variety of factual or legal reasons—when the loss occurred. Equally, if part of the subject-matter was not at risk, the underwriters’ liability is reduced proportionately (Forbes v. Aspinall (1811) 13 East 323; Rickman v. Carstairs (1833) 5 B & Ad 651; Tobin v. Harford (1864) 34 LJCP 37).

Particular average warranties 76.—(1) Where the subject-matter insured is warranted free from particular average, the assured cannot recover for a loss of part, other than a loss incurred by a general average sacrifice unless the contract contained in the policy be apportionable; but, if the contract be apportionable, the assured may recover for a total loss of any apportionable part. (2) Where the subject-matter insured is warranted free from particular average, either wholly or under a certain percentage, the insurer is nevertheless liable for salvage charges, and for particular charges and other expenses properly incurred pursuant to the provisions of the suing and labouring clause in order to avert a loss incurred against. (3) Unless the policy otherwise provides, where the subject-matter insured is warranted free from particular average under a specified percentage, a general average loss cannot be added to a particular average loss to make up the specified percentage. (4) For the purpose of ascertaining whether the specified percentage has been reached, regard shall be had only to the actual loss suffered by the subject-matter insured. Particular charges and the expenses of and incidental to ascertaining and proving the loss must be excluded. Notes Subs (1) Under a particular average warranty, where the vessel is warranted ‘‘fpa’’ (free from particular average) the underwriters are liable only for a total loss (Lawther v. Black (1901) 6 Com Cas 196; Wait & James v. British & Foreign Marine Insurance Co (1921) 9 Ll LR 552), although the policy may allow particular average in respect of specific perils (Great Indian Peninsula Railway Co v. Saunders (1862) 2 B & S 266; Otago Farmers Co-Operative Association of New Zealand v. Thompson [1910] 2 KB 145; Renton & Co Ltd v. Cornhill Insurance Co Ltd (1933) 46 Ll LR 14; ‘‘The Glenlivet’’ [1894] P 48). The old form of fpa excluded loss by stranding and burning, in which cases a partial loss was recoverable. See the note to Marine Insurance Act 1906, Sched, r 14. The fpa terminology is relatively uncommon, and it is more usual for the underwriters expressly to confine cover to arranged or compromised total loss. Where the assured has suffered a constructive total loss, and has failed to give notice of abandonment, his loss remains a total loss for the purposes of a particular average warranty even though his measure of indemnity is as for partial loss (Unirise Development Ltd and Noble Resources Ltd v. Greenwood, ‘‘The Vasso’’ [1993] 2 Lloyd’s Rep 309). Where part of the cargo has been lost, the assured’s claim depends upon whether or not the lost part is apportionable from the remainder of the subject-matter. If the lost part is apportionable, the assured may claim for a total loss of that part (Duff v. Mackenzie (1857) 3 CBNS 16; Wilkinson v. Hyde (1858) 3 CBNS 30;

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Marine Insurance

General Insurance Co Ltd of Trieste v. Royal Exchange Assurance (1897) 2 Com Cas 144; La Fabrique de Produits Chimiques SA v. Large [1923] 1 KB 203). If, however, the lost part is not apportionable, the assured will be treated as suffering a partial loss of the whole (Hills v. London Assurance Corporation (1839) 5 M & W 569; Ralli v. Janson (1856) 6 E & B 422; Entwisle v. Ellis (1857) 2 H & N 549, and therefore unable to recover if there is a fpa warranty) and will generally be unable to recover for a total loss of the whole unless the undamaged part is de minimis in comparison to the lost part (Hedburg v. Pearson (1816) 7 Taunt 154, and see also the note to s 60, on the possibility of a total loss of cargo where a substantial part is lost). Subs (2) The underwriters’ liability for suing and labouring costs was established by Kidston v. Empire Marine Insurance Co (1866) LR 1 CP 535. See also s 78(1). Subs (3) This provision is based on Price & Co v. AI Ships Small Damage Insurance Association (1889) 22 QBD 580. It does not preclude the aggregation of partial losses occurring on the same voyage (Blackett v. Royal Exchange Assurance Co (1832) 2 Cr & J 244) although it is not permissible to aggregate partial losses on different voyages (Stewart v. Merchants’ Marine Insurance Co (1885) 16 QBD 619, but see Portvale SS Co Ltd v. Royal Exchange Assurance Corporation (1932) 43 Ll LR 161 in which there was an extended definition of ‘‘voyage’’). Subs (4) In determining the ‘‘actual loss’’ here referred to, dock dues are included, but there is proportionate deduction in respect of uninsured repairs effected while the vessel is in dry dock: Marine Insurance Co v. China Transpacific SS Co (1886) 11 App Cas 573; Ruabon SS Co v. London Assurance [1900] AC 6; ‘‘The Haversham Grange’’ [1905] P 307.

Successive losses 77.—(1) Unless the policy otherwise provides, and subject to the provisions of this Act, the insurer is liable for successive losses, even though the total amount of such losses may exceed the sum insured. (2) Where, under the same policy, a partial loss, which has not been repaired or otherwise made good, is followed by a total loss, the assured can only recover in respect of the total loss: Provided that nothing in this section shall affect the liability of the insurer under the suing and labouring clause. Notes Subs (1) The principle that the underwriters’ are liable for successive partial losses whatever their aggregate cost is derived from Le Cheminant v. Pearson (1812) 4 Taunt 367 and Lidgett v. Secretan (1871) LR 6 CP 616. See also ‘‘The Dora Foster’’ [1900] P 241. The subsection applies only to successive repaired losses, so that where a vessel has been damaged but has not been repaired, and is damaged again, the assured cannot recover more than the total sum insured under the policy: Kusel v. Atkins, ‘‘The Catariba’’ [1997] 2 Lloyd’s Rep 749. Subs (2) This section codifies the common law doctrine of merger, whereby an unrepaired partial loss merges into, and is extinguished by, a subsequent independently caused total loss. The assured’s claim in such a case is, therefore, only for total loss (Barker v. Janson (1868) LR 3 CP 303). The rule means that the assured will be unable to recover if the total loss is caused by an uninsured peril (Livie v. Janson (1810) 12 East 648; British and Foreign Insurance Co v. Wilson Shipping Co Ltd [1921] 1 AC 188) or if the total loss occurs after the policy has run off (Rankin v. Potter (1873) LR 6 HL 83, doubting the decision to the contrary in Knight v. Faith (1850) 15 QB 649). See also Institute Time Clauses Hulls, cl 18.2, the Institute Voyage Clauses Hulls, cl 16.2 and the International Hull Clauses, cl 20.2. If the subsequent total loss is the natural consequence of the event giving rise to the original partial loss, with no break in the chain of causation, there is a total loss (Anderson v. Royal Exchange Assurance (1805) 7 East 38; Mellish v. Andrews (1812) 15 East 13; Fooks v. Smith [1924] 2 KB 508). Section 77 does not deal with the case in which a constructive total loss for which a notice of abandonment has not been served is followed by an actual total loss. In Woodside v. Globe Marine Insurance Co Ltd [1896] 1 QB 105 it was held that the first loss is to be treated as a partial loss, with the result that the doctrine of merger applies to it and it is subsumed by the total loss. Woodside would seem not to be able to stand alongside ‘‘The Kyriaki’’ [1993] 1 Lloyd’s Rep 137, where it was held that a constructive loss in respect of which no notice of abandonment is served is nevertheless to be treated as a total loss for all purposes other than the calculation of the measure of indemnity, and not a partial loss (see s 61). The section also does not deal with the situation in which a constructive total loss is followed immediately by an actual total loss. The doctrine of merger does not operate in this situation, so that if the constructive total loss is caused by an insured peril but the actual total loss is not, the assured is nevertheless able to recover: Kastor Navigation Co Ltd v. AGF MAT, The Kastor Too [2004] Lloyd’s Rep IR 481.

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Suing and labouring clause 78.—(1) Where the policy contains a suing and labouring clause, the engagement thereby entered into is deemed to be supplementary to the contract of insurance, and the assured may recover from the insurer any expenses properly incurred pursuant to the clause, notwithstanding that the insurer may have paid for a total loss, or that the subject-matter may have been warranted free from particular average, either wholly or under a certain percentage. (2) General average losses and contributions and salvage charges, as defined by this Act, are not recoverable under the suing and labouring clause. (3) Expenses incurred for the purpose of averting or diminishing any loss not covered by the policy are not recoverable under the suing and labouring clause. (4) It is the duty of the assured and his agents, in all cases, to take such measures as may be reasonable for the purpose of averting or minimising a loss. Notes Subs (1) The suing and labouring clause is all but universal in English policies (Institute Cargo Clauses, 15; Institute Time Clauses, cl 13; Institute Voyage Clauses Hulls, cl 11; International Hull Clauses, cl 9). Subs (1), requiring indemnification of suing and labouring expenses by the underwriters, is the mirror of the assured’s obligation in s 78(4) to take the relevant action. In those rare situations where there is no obligation to sue and labour there are marine cases which hold that the assured is nevertheless able to recover expenditure designed to prevent or mitigate any loss arising from an insured peril (Emperor Goldmining Co v. Switzerland General Insurance Co [1964] 1 Lloyd’s Rep 348; Netherlands Insurance Co (Est 1845) Ltd v. Karl Ljungberg Co AB [1986] 2 Lloyd’s Rep 19), although the contrary view was assumed to be correct in Cunard SS Co v. Marten [1903] 2 KB 511 (where the clause was found to be inapplicable) and at first instance in Integrated Container Service Inc v. British Traders Insurance Co [1981] 2 Lloyd’s Rep 460 and there is a body of authority for the proposition that there is no duty to sue and labour and thus no right to recover the costs of preventing or mitigating loss under liability policies (Yorkshire Water v. Sun Alliance & London Insurance Ltd [1997] 2 Lloyd’s Rep 21 and Pilkington United Kingdom Ltd v. CGU Insurance [2004] Lloyd’s Rep IR 891, although see King v. Brandywine Reinsurance Co (UK) Ltd [2004] Lloyd’s Rep IR 554, affirmed on different grounds [2005] Lloyd’s Rep IR 235). The separability of the suing and labouring obligation has long been established, most importantly in Aitchison v. Lohre (1879) 4 App Cas 755, and cf Dixon v. Whitworth (1880) 49 LJQB 408. The main effect of separability is that the financial limits of the policy relate only to the marine loss itself, and not to the suing and labouring claim: to this extent, the suing and labouring clause is a distinct contract (Kuwait Airways Corporation v. Kuwait Insurance Co SAK [1996] 1 Lloyd’s Rep 664, reversed on the wording of the clause itself [1999] 1 Lloyd’s Rep 803.) If, however, the assured is underinsured, he is under standard London wording deemed to be his own insurer for the uninsured sum and must bear that proportion of any suing and labouring expense (Cunard SS Co v. Marten [1903] 2 KB 511). See also North Star Shipping Ltd v. Sphere Drake Insurance plc, ‘‘The North Star’’ [2005] Lloyd’s Rep IR 404, where it was noted that in an action against insurers for an insured loss, a separate claim for suing and labouring expenses has to be made. The sums recoverable under the clause are those properly incurred in averting or minimising a loss. An insured peril must have occurred, as the suing and labouring clause relates to the prevention or mitigation of loss flowing from that insured peril (Xenos v. Fox (1868) LR 3 CP 630; Integrated Container Service Inc v. British Traders Insurance Co [1984] 1 Lloyd’s Rep 154). The sums recoverable will include, eg, the costs of preserving perishable cargo or repairing damaged cargo (Meyer v. Ralli (1876) 1 CPD 358; ‘‘The Pomeranian’’ [1895] P 349; Wilson Brothers Bobbin Co v. Green [1917] 1 KB 860), the costs of transhipment (Kidston v. Empire Marine Insurance Co (1867) LR 2 CP 357; Francis v. Boulton (1895) 1 Com Cas 217), salvage and related costs other than those incurred under maritime law (St Margaret’s Trust Ltd v. Navigators and General Insurance Co Ltd (1949) 82 Ll LR 752) and the costs involved in retaking cargo which is in danger of being seized (Integrated Container Service Inc v. British Traders Insurance Co Ltd [1984] 1 Lloyd’s Rep 154). Payment to a third party to secure release of the insured subject-matter, or waiver of a sum owing by the third party to the assured, are potentially suing and labouring expenses, although if payment or waiver are by way of ransom and the agreement is either illegal or voidable, the assured is not to be treated as having suffered any loss as the sums involved can be reclaimed: Royal Boskalis Westminster NV v. Mountain [1997] 2 All ER 929. The clause does not extend to expenses incurred by the assured after the loss has occurred (Xenos v. Fox (1869) LR 4 CP 665; Dixon v. Whitworth (1880) 49 LJQB 408), including legal expenses incurred in pursuing a third party who has wrongfully taken possession of the insured property (Kuwait Airways Corporation v. Kuwait Insurance Co SAK [1996] 1 Lloyd’s Rep 664, [1999] 1 Lloyd’s Rep 803). The amount recoverable is reasonable rather than actual expenditure (Lee v. Southern Insurance Co (1870) LR 5 CP 397; Integrated Containers Service Inc v. British Traders Insurance Co Ltd [1984] 1 Lloyd’s Rep 154). In determining what is reasonable, the test is that the assured can recover those expenses which a reasonable person would have incurred in the absence of insurance in order to preserve his property, ie, the test under s 78(4) (Integrated Container Service Inc v. British Traders Insurance Co Ltd [1984] 1 Lloyd’s Rep 154).

783

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Marine Insurance

When an assured takes steps to avoid or mitigate a loss, the result may be that the loss occurs despite his efforts, possibly in some other form. As long as the steps taken are reasonable, the assured’s conduct will not be regarded as having broken the chain of causation from the original peril (Gordon v. Rimmington (1807) 1 Camp 123; Butler v. Wildman (1820) 3 B & Ald 398, and cf the note to s 55(2)(a)). Subs (2) This subsection stems from the distinction drawn in Aitchison v. Lohre (1879) 4 App Cas 755 (and cf: Dixon v. Whitworth (1880) 49 LJQB 408; Ballantyne v. Mackinnon [1896] 2 QB 455) between contractual salvage charges, which are recoverable under the suing and labouring clause, and maritime salvage charges which are recoverable under the policy (and thus are subject to policy financial limits) but not under the suing and labouring clause. See s 65 of the 1906 Act. The distinction is based upon the wording of the old suing and labouring clause, under which the assured was liable for costs incurred by his agents, factors and assigns: an independent salvor not working under contract did not fit into any of these categories. Subs (3) See: Great Indian Peninsula Railway Co v. Saunders (1862) 2 B & S 266; Booth v. Gair (1863) 15 CBNS 291 (cost of transhipping insured goods which were undamaged despite loss of vessel); Weissberg v. Lamb (1950) 84 Ll LR 509 (loss proximately caused by excluded peril, delay); Berk & Co Ltd v. Style [1955] 2 Lloyd’s Rep 382 (loss proximately caused by excluded peril, inherent vice); Promet v. Sturge, ‘‘The Nukila’’ [1996] 1 Lloyd’s Rep 85 (returning oil rig to place of operation after repair) If the assured is underinsured, and the assured incurs expenditure which does not reduce the loss to a level within the policy, the assured has no right to recover that expenditure under s 78 (Kuwait Airways Corporation v. Kuwait Insurance Co SAK [1996] 1 Lloyd’s Rep 664, varied [1999] 1 Lloyd’s Rep 803). As long as an insured peril has operated, the insurers are liable under the suing and labouring clause even where non-insured subject-matter is also preserved, although apportionment may be appropriate. It was held in Royal Boskalis Westminster v. Mountain [1997] 2 All ER 929 that if uninsured lives are also saved, there is no apportionment and the underwriters are liable for the full sum. If there is no risk to the goods when the expenditure is incurred, the assured cannot recover it from the underwriters (Hadkinson v. Robinson (1803) 3 B & P 388; Lubbock v. Rowcroft (1803) 5 Esp 50; Blackenhagen v. London Assurance Co (1808) 1 Camp 454; Forster v. Christie (1809) 11 East 205; Great Indian Peninsula Railway Co v. Saunders (1862) 2 B & S 266; Nickels & Co v. London and Provincial Marine and General Insurance Co Ltd (1906) 17 TLR 54, but contrast: ‘‘The Knight of St Michael’’ [1898] P 30; Pyman SS Co v. Lords Commissioners of the Admiralty [1919] 1 KB 49; Green v. British India Steam Navigation Co [1921] 1 AC 99; Atlantic Maritime Co v. Gibbon [1954] 1 QB 88; Integrated Container Service Inc v. British Traders & General Insurance Co Ltd [1984] 1 Lloyd’s Rep 154). If a vessel is, following the occurrence of an insured peril, preserved from being a constructive total loss and the underwriters are liable only for total losses, the salvage costs are nevertheless recoverable under the suing and labouring clause (Crouan v. Stanier [1904] 1 KB 87, where the underwriters unsuccessfully sought to recover salvage costs incurred by them from the assured). Subs (4) The obligation to avert or minimise a loss arises independently of any suing and labouring clause, although in practice the obligation is spelt out in contractual provisions in more or less the same language, and it is made clear that, where a third party is potentially liable for the assured’s loss, the assured is under a duty to take steps to preserve his action against the third party (eg by issuing a claim form within the limitation period or seeking a freezing injunction preserving the third party’s assets). See, as well as the Hulls Clauses referred to in the note to subs (1), the Institute Cargo Clauses, cl 17. The common law does not recognise any duty to sue and labour: Yorkshire Water v. Sun Alliance & London Insurance [1997] 2 Lloyd’s Rep 21. Subsection (4) was said by Chalmers to have been based on a series of cases—Kidston v. Empire Marine Insurance Co (1866) LR 1 CP 535, Currie v. Bombay Native Insurance Co (1869) LR 3 CP 72, Benson v. Chapman (1849) 2 HLC 496 and Notara v. Henderson (1872) LR 7 QB 225—although only Currie was on the point and was decided on the basis that the loss was proximately caused not by an insured peril but rather by the master’s conduct. It may be, therefore, that the subsection does no more than to state a rule of causation. It has indeed been doubted in recent years whether s 78(4) imposes a ‘‘duty’’ in the strict sense of the word, and it is now recognised that the question is whether the assured’s conduct is such as to amount to a break in the chain of causation between the insured peril and the loss, so that the assured has caused his own loss. This has also been expressed in terms of an obligation on the assured to act as a prudent uninsured and not to cause his own loss in the face of an insured peril. It will be very rare for the assured to be found to have caused his own loss, and this can only happen where it is shown that the insured peril has occurred and that the assured’s response to it is sufficiently culpable to amount to a break in the chain of causation: if loss is inevitable, it is difficult to see how the assured’s response can have made any difference. The causation test has been applied in: Integrated Container Service Inc v. British Traders Insurance Co Ltd [1984] l Lloyd’s Rep 154; National Oilwell (UK) Ltd v. Davy Offshore Ltd [1993] 2 Lloyd’s Rep 582; ‘‘The Vasso’’ [1993] 2 Lloyd’s Rep 309; State of Netherlands v. Youell [1998] 1 Lloyd’s Rep 236; Strive Shipping Corporation v. Hellenic Mutual War Risks Association (Bermuda) Ltd, ‘‘The Grecia Express’’ [2002] Lloyd’s Rep IR 669; Mitsui Marine Fire Insurance Co v. Bayview Motors Ltd [2003] Lloyd’s Rep IR 117. Linelevel Ltd v. Powszechny Zaklad Ubezpieczen SA, The Nore Challenger [2005] 2 Lloyd’s Rep 534 was a rare case in which the assured had in part caused his own loss, by failing to investigate the damage caused by a marine peril, but the degree of blame was regarded as minimal. The test is subjective to the extent that the assured is not expected to possess skill beyond that attributable to his actual knowledge and experience (Stephen v. Scottish Boatowners Mutual Insurance Association, ‘‘The Talisman’’ [1989] 1 Lloyd’s Rep 535).

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Marine Insurance Act 1906

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The nature of the duty is problematic, and has given rise to two particular difficulties. (a) What is the relationship between s 78(4) and s 55(2)(a) of the 1906 Act? Under s 55(2)(a) the assured is entitled to recover despite the negligence of the master or crew (and, at common law, his own negligence), whereas under s 78(4) the assured and his agents are in effect under a duty to take reasonable care. In Astrovlanis v. Linard, ‘‘The Gold Sky’’ [1972] 2 Lloyd’s Rep 187 it was suggested that the phrase ‘‘agents’’ in s 78(4) excluded the master and crew, so that the duty to sue and labour applied only to the assured personally and to other (unspecified) agents: failure by the master and crew to take reasonable steps to avert or minimise a loss would not, therefore, fall within s 78(4) and would be governed by s 55(2)(a). This conflict has been resolved by the adoption of the causation test for s 78(4). In National Oilwell (UK) Ltd v. Davy Offshore Ltd [1993] 2 Lloyd’s Rep 582 Colman J expressed the view that the matter was one of causation, and that if the assured or his agents (including master and crew) failed to take steps to avert or minimise a loss, s 78(4) stated that the loss would be proximately caused by their conduct and not by any insured peril. On this reasoning, s 55(2)(a) has little role to play. In State of Netherlands v. Youell [1998] 1 Lloyd’s Rep 236, Phillips LJ held that s 78(4) was applicable after the occurrence of the insured peril, whereas s 55(2)(a) applied prior to the occurrence of the peril: on this view, s 78(4) would provide a defence only where the assured’s failure to sue and labour was of itself the proximate cause of the loss, a situation likely to be extremely rare. See also: Strive Shipping Corporation v. Hellenic Mutual War Risks Association (Bermuda) Ltd, ‘‘The Grecia Express’’ [2002] Lloyd’s Rep IR 669, where the assured was found not to have contributed to his own loss by failing to board a sinking vessel in an attempt to close valves); Linelevel Ltd v. Powszechny Zaklad Ubezpieczen SA, The Nore Challenger [2005] 2 Lloyd’s Rep 534, where the assured was held to have caused a very small part of his own loss by failing to investigate a collision as soon as it occurred but waited for a short period. (b) What is the underwriters’ remedy if the assured fails to sue and labour? This depends upon the view taken of the nature of the suing and labouring obligation. Given that the matter is one of causation, the assured’s failure to sue and labour means that there is no insured loss and thus the assured cannot recover (and cf Currie & Co v. Bombay Native Insurance Co (1869) LR 3 PC 72). In State of Netherlands v. Youell [1998] 1 Lloyd’s Rep 236, Phillips LJ commented that as the duty to sue and labour constituted a separate obligation a failure by the assured to act would not give the underwriters a defence under the policy. The phrase ‘‘avert or minimise a loss’’ cannot, in the absence of additional words, extend to a failure by the assured to take steps to ascertain the extent of a loss (Irvin v. Hine [1949] 2 All ER 1089). Suing and labouring expenses paid by the underwriters are not recoverable from reinsurers unless the reinsurance agreement expressly provides: this is because the reinsured is not the agent of the reinsurers (Uzielli v. Boston Marine Insurance Co (1884) 15 QBD 11).

Right of Insurer on Payment Right of subrogation 79.—(1) Where the insurer pays for a total loss, either of the whole, or in the case of goods of any apportionable part, of the subject-matter insured, he thereupon becomes entitled to take over the interest of the assured in whatever may remain of the subject-matter so paid for, and he is thereby subrogated to all the rights and remedies of the assured in and in respect of that subject-matter as from the time of the casualty causing the loss. (2) Subject to the foregoing provisions, where the insurer pays for a partial loss, he acquires no title to the subject-matter insured, or such part of it as may remain, but he is thereupon subrogated to all rights and remedies of the assured in and in respect of the subject-matter insured as from the time of the casualty causing the loss, in so far as the assured has been indemnified, according to this Act, by such payment for the loss. Notes General: The section deals with two separate issues: salvage and subrogation. Salvage is the right of an underwriter who has paid for a total loss (actual or constructive) to assert proprietary rights over whatever remains of the insured subject-matter. This overlaps with s 63(1). The principle of s 79 is that the underwriter is subrogated to the rights of the assured as against any person who has caused the assured’s loss and in respect of any payments made by a third party to the assured to meet his loss. Subrogation is an equitable doctrine (Napier and Ettrick v. Hunter [1993] 1 All ER 385) and can thus be refused on equitable grounds (Morris v. Ford Motor Co [1973] QB 792, per Lord Denning MR; The Surf City [1995] 2 Lloyd’s Rep 242) but not where the policy contemplates subrogation (Woolwich Building Society v. Brown [1996] CLC 625). For the basis of subrogation, see Banque Financi`ere de la Cit´e v. Parc (Battersea) Ltd [1998] 1 All ER 737, at p 744. Payments by the third party which are intended not to diminish the assured’s loss as such

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Marine Insurance

but to compensate him for ancillary uninsured losses (Sea Insurance v. Hadden (1884) 13 QBD 706; Attorney General v. Glen Line (1930) 37 Ll LR 55) or for personal discomfort (Burnand v. Rodocanachi Sons & Co (1882) 7 App Cas 33) do not fall to be counted in determining whether the assured has received an indemnity and cannot be claimed by the underwriters. However, a sum which does go towards reducing the assured’s loss is to be taken into account, even if it has been paid ex gratia by the third party (Randal v. Cockran (1748) 1 Ves Sen 98; Blaaupot v. Da Costa (1758) 1 Eden 130; Stearns v. Village Main Reef Gold Mining Co (1905) 21 TLR 236; Colonia Versicherung AG v. Amoco Oil Co [1995] 1 Lloyd’s Rep 570, affirmed [1997] 1 Lloyd’s Rep 261. If the assured has received payment from a third party, he has suffered no loss to that extent and the underwriters can deduct that payment from the amount of its own liability (Goole and Hull Steam Towing Co v. Ocean Marine Insurance Co Ltd [1928] 1 KB 589). By contrast, if the assured has yet to be paid by the third party, the underwriters are liable for the full amount but, having paid the assured, are subrogated to his rights against the third party. For the origins of the doctrine, see: Randal v. Cockran (1748) 1 Ves Sen 98; Blaaupot v. Da Costa (1758) 1 Eden 130; Mason v. Sainsbury (1782) 3 Doug 61. Subrogation is reliant on the rule that payment by the underwriters does not discharge the liability of the third party who has caused the assured’s loss (Yates v. White (1838) 1 Arnold 85). This proposition was to some extent doubted by the Court of Session in Elf Enterprises (Caledonia) Ltd v. London Bridge Engineering Ltd [2000] Lloyd’s Rep IR 249, where it was held that where an underwriter had paid the assured’s losses, it had no subrogation rights against a third party which had caused the loss and which was obliged under its contract with the assured to provide an indemnity for its losses: the court’s view was that the underwriter and the third party were co-indemnifiers and that the underwriter was merely entitled to contribution (see the Marine Insurance Act 1906, s 80) rather than subrogation. This reasoning was reversed on appeal by the House of Lords, Caledonia North Sea Ltd v. British Telecommunications plc [2002] Lloyd’s Rep IR 26, their Lordships confirming that insurance underwriters are for subrogation purposes quite distinct from other contractual indemnifiers, and that the underwriters are indemnifiers of last resort. Accordingly, if the assured seeks payment from the contractual indemnifiers the underwriters are discharged from liability to the extent of any payment (as the assured has suffered no loss) whereas if the assured looks to the underwriters then they can seek to exercise subrogation rights against the contractual indemnifier. Subrogation is in its origins an equitable doctrine, but is modified by terms implied into the contract of insurance (Napier and Ettrick v. Hunter [1993] 1 All ER 385). The right of subrogation may be conferred upon an underwriter by the express terms of the policy, but this is not necessary for its operation. As an alternative to subrogation, it is open to an underwriter to seek an assignment of the assured’s rights against the third party, in which case the underwriter can sue the third party in his own name without having paid the assured and may retain for his own account a nominal sum in excess of the amount paid to the assured (Compania Columbiana de Seguros v. Pacific Steam Navigation Co [1965] 1 QB 101). Provision of an indemnity: The underwriters may exercise subrogation rights only after they have indemnified the assured, and until that date the underwriters have no rights against the wrongdoing third party and it is doubtful whether the underwriters have any rights against the assured. This means that the underwriters must at least have made payment to the limits of the policy in respect of the loss. It is doubtful whether the payment must be made under legal liability, and it may be that an ex gratia payment by the underwriters will suffice (as was assumed in Napier and Ettrick v. Hunter [1993] 1 All ER 385, and cf King v. Victoria Insurance Co [1896] AC 250), although there is no subrogation under a ppi policy as such a contract is by its terms not to be regarded as one of indemnity (John Edwards & Co v. Motor Union Insurance Co Ltd [1922] 2 KB 249. The sum which constitutes the assured’s indemnity is the amount of his loss, including sums reasonably incurred by the assured in bringing successful legal proceedings against a third party: England v. Guardian Insurance [2000] Lloyd’s Rep IR 404. Prior to making payment, the underwriters have no subrogation rights as such. If the assured is underinsured (other than by virtue of an excess, which is deemed not to be any part of the loss—Napier and Ettrick v. Hunter [1993] 1 All ER 385), the assured retains the right to control any proceedings against the third party (Commercial Union Assurance Co v. Lister (1874) LR 9 Ch App 483) and the underwriters are limited to claiming its share of the sum recovered from the third party. That said, the International Hull Clauses, cl 49, make provision for the assured to take steps to preserve the rights of the insurers before and after the payment of a claim, eg, by issuing protective proceedings or seeking a freezing order to preserve the assets of any person potentially subject to a subrogation action. Exercise of subrogation rights by action: If the underwriters have fully indemnified the assured, they may commence proceedings against the third party in the assured’s name (Esso Petroleum Co Ltd v. Hall Russell & Co [1988] 3 WLR 730). The underwriters’ claim is, therefore, subject to any defences which the third party may have against the assured, including a time-bar or an express agreement between the assured and the third party restricting the former’s rights against the latter. One benefit of the use of the assured’s name is that interest is payable to the assured by the third party on the full amount of his loss, even if by the date of payment the underwriters have indemnified the assured, and in such a case they will be subrogated to the interest from the date of their payment to the assured (Cousins & Co v. D & C Carriers Ltd [1970] 2 Lloyd’s Rep 397). If the assured himself brings the action, it is arguably subject to an equitable charge in favour of the underwriters (Napier and Ettrick v. Hunter [1993] 1 All ER 385, although this was denied in Re

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Ballast plc, St Paul Travellers Insurance Co Ltd v. Dargan [2007] BCC 620). In Graham v. Entec Europe Ltd [2004] Lloyd’s Rep IR 661 the Court of Appeal held, by way of exception to the general rule that the role of the underwriters is to be disregarded, that for the purposes of the running of the limitation period for claims in tort (under s 14A of the Limitation Act 1980) the knowledge of the underwriters rather than that of the assured is the relevant knowledge. Sums recovered by way of subrogation: Where the assured has recovered sums from the third party, and the underwriters have a subrogation claim, the assured holds those sums subject to an equitable lien or charge in favour of the underwriters, so that in the event of the assured’s insolvency the underwriters have a prior claim (Napier and Ettrick v. Hunter [1993] 1 All ER 385, confirming Re Miller, Gibb & Co [1957] 2 All ER 266). See also England v. Guardian Insurance Ltd [2000] Lloyd’s Rep IR 404, where the underwriters’ lien was held to attach to moneys paid into court by the third party, giving the insurers priority over the Legal Aid Board which had funded the assured’s action against the third party. The moneys are also traceable into the hands of third parties (Elgood v. Harris [1896] 2 QB 491—broker) and the underwriters can restrain the third party from making payment to the assured (White v. Dobinson (1844) 14 Sim 273). If the underwriters have effected recovery from the third party, any sums in excess of the amount paid by the underwriters to the assured, or which is otherwise the assured’s entitlement, are similarly held on trust by the underwriters for the assured: Lonrho Exports Ltd v. Export Credit Guarantee Department [1996] 4 All ER 673. The amount which may be recovered and retained by the underwriters from the third party may not exceed the nominal amount which the underwriters have paid to the assured, a principle which may cause the underwriters loss if there have been adverse currency movements (Yorkshire Insurance Co v. Nisbet Shipping Co [1962] 2 QB 330, not following North of England Iron Steamship Insurance Association v. Armstrong (1870) LR 5 QB 244). The fact that underwriters have recovered a part of that payment from another source does not preclude their subrogation action, which is based on the assured’s loss and their payment to him (Bee v. Jenson (No 2) [2007] EWCA Civ 923). Any excess borne by the assured is to be disregarded in allocating subrogation recoveries, and in non-marine insurance law any moneys are distributed on a recover down basis. Thus, if the assured under a policy for loss up to £500 bears an excess of £100, and suffers a loss of £800, a recovery from the third party of £750 would be distributed in the following order: £200 to the assured for the top layer uninsured loss; £500 to the underwriters in respect of its payment; and the remaining £50 to the assured in respect of his excess. The same principle applies to insurances arranged in layers (Napier and Ettrick v. Hunter [1993] 1 All ER 385, but contra Boag v. Standard Marine Insurance Ltd [1937] 1 All ER 714, which was not cited in Napier and Ettrick). In Boag a cargo was insured with primary layer underwriters in the sum of £685 and with increased value underwriters in the sum of £215. A total loss occurred, for which both sets of underwriters made payment, and a subrogation recovery of £532 was obtained. The Court of Appeal held that the sum belonged in its entirety to the primary layer underwriters. This decision has been reversed by cl 14 of the Cargo Clauses, which provides for a pro rata apportionment of recoveries. In marine insurance in a case where the assured is underinsured, the assured is deemed to be his own insurer for the uninsured sum (see Marine Insurance Act 1906, s 81). Thus, assume that the assured bears an excess of £100 under a policy for £500, and suffers a loss of £800. If only £400 is recoverable from the third party, that sum must be allocated between the underwriters and assured in proportion to their respective insurances: the £400 would thus be allocated in the proportions 300/800 to the assured and 500/800 to the underwriters (‘‘The Commonwealth’’ [1907] P 216; ‘‘The Welsh Girl’’ (1906) 22 TLR 475; Kuwait Airways Corporation v. Kuwait Insurance Co SAK [1996] 1 Lloyd’s Rep 664). The excess continues to be ignored unless the sum recovered from the third party exceeds the insured and uninsured totals. If the policy is a valued policy, the relevant figure for determining the amount of the assured’s loss is the agreed rather than actual value (Thames & Mersey Marine Insurance Co v. British & Chilian SS Co [1916] 1 KB 30). No subrogation against an insured party: A person who is insured under a policy cannot have subrogation rights exercised against him (Simpson v. Thompson (1877) 3 App Cas 279, although see the modification of this in respect of sisterships in the Institute Time Clauses Hulls, cl 9, the Institute Voyage Clauses Hulls, cl 7 and the International Hull Clauses, cl 7, which treat vessels under common ownership or management as separately owned in the event of a collision). In the case of co-insurance, the insurer cannot, having paid one co-assured, seek to exercise subrogation rights against the other unless that other was uninsured in respect of the loss in question (Tate Gallery (Trustees) v. Duffy Construction Ltd [2007] 1 All ER (Comm) 1004) or was guilty of wilful misconduct which caused the loss (‘‘The Yasin’’ [1979] 2 Lloyd’s Rep 45, explained in National Oilwell (UK) Ltd v. Davy Offshore Ltd [1993] 2 Lloyd’s Rep 582, and see also: Co-operative Retail Services Ltd v. Taylor Young Partnership [2002] Lloyd’s Rep IR 555; BP Exploration Operating Co Ltd v. Kvaerner Oilfield Products Ltd [2005] 1 Lloyd’s Rep 307). This immunity is based on an implied term in the insurance contract. The insurer may also be prevented from exercising subrogation rights against a third party who is not insured as such but for whose benefit the contract was made, eg where the third party has indirectly paid the premiums under a contract with the assured (Mark Rowlands Ltd v. Berni Inns Ltd [1985] 3 All ER 473, followed in National Oilwell). Subrogation is not, however, ousted, if the policy is not for the third party’s benefit, even if he has paid the premium: Woolwich Building Society v. Brown [1996] CLC 625; Europe Mortgage Ltd v. Halifax Estate Agencies, 1996, unreported. London market cargo clauses make it clear that the benefit of the policy does not extend to the carrier or other bailee (Institute Cargo Clauses, cl 15).

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Subrogation waiver clause: Under a subrogation waiver clause the underwriters agree with the assured not to pursue the assured’s rights against a third party. An illustration of subrogation waiver in the marine context is found in the International Hull Clauses, cl 28, where subrogation rights are waived against a charterer who is an associate, subsidiary or affiliate of the assured. At common law, prior to the passing of the Contracts (Rights of Third Parties) Act 1999, such a clause was of no value to the third party: if the third party was a party to the insurance contract by way of co-insurance or agency, he was immune from a subrogation action, and if he was not a party then the doctrine of privity of contract prevented his reliance on the clause. Moreover, if he was a party to the insurance contract in respect of some risks but not others, he could not rely upon the subrogation waiver clause as regards uninsured risks, and he had no need to rely upon it in respect of insured risks (National Oilwell (UK) Ltd v. Davy Offshore Ltd [1993] 2 Lloyd’s Rep 582). However, in Enimont Supply SA v. Chesapeake Shipping Inc, The Surf City [1995] 2 Lloyd’s Rep 242, Clarke J held that, as subrogation is an equitable doctrine, it could be refused by a court where appropriate, eg where the underwriters sought to exercise it in the face of a subrogation waiver clause. The assured himself may be able to insist upon the underwriters adhering to a subrogation waiver clause, but presumably only if the assured has a sufficient interest in so doing, eg where the assured is obliged to indemnify the third party where subrogation rights have been exercised. These principles have been superseded by the 1999 Act, which permits a third party to rely upon a contract term which the contract allows him to enforce or which is otherwise for his benefit. The 1999 Act may, however, be excluded by agreement, and in the only set of Institute Clauses drafted since 1999, there is an express exclusion to that effect, so that the common law rules set out above continue to apply (International Hull Clauses, cl 36). Prejudice to subrogation rights: Although the underwriters have no subrogation rights prior to indemnifying the assured, the law confers various rights upon an underwriter who loses subrogation rights by virtue of the assured’s dealings with the third party. If the assured has entered into an agreement with the third party prior to taking out the insurance, under which the third party is exempted from any liability in the event that loss is caused to the assured, that agreement may be a material fact requiring disclosure to the underwriters: the policy may therefore be voidable under s 18 of the 1906 Act (Tate & Sons v. Hyslop (1885) 15 QBD 368; Thomas & Co v. Brown (1891) 4 Com Cas 186). If the assured, having suffered a loss, enters into an agreement with the third party to restrict or discharge the third party’s liability, the underwriters may hold the assured accountable for the loss of subrogation rights at least in so far as the assured’s agreement with the third party was not entered into as a bona fide compromise of a doubtful liability (Commercial Union Assurance Co v. Lister (1874) LR 9 Ch App 483). Subs (2) This is based on Brooks v. MacDonnell (1835) 1 Y & C Ex 500.

Right of contribution 80.—(1) Where the assured is over-insured by double insurance, each insurer is bound, as between himself and the other insurers, to contribute rateably to the loss in proportion to the amount for which he is liable under his contract. (2) If any insurer pays more than his proportion of the loss, he is entitled to maintain an action for contribution against the other insurers, and is entitled to the like remedies as a surety who has paid more than his proportion of the debt. Notes There is double insurance only where there are concurrent policies by the same assured and on the same interest (North British and Mercantile Insurance Co v. London, Liverpool and Globe Insurance Co (1877) 5 Ch D 569). As to double insurance generally, see Marine Insurance Act 1906, s 32. In Elf Enterprises (Caledonia) Ltd v. London Bridge Engineering Ltd [2000] Lloyd’s Rep IR 249 the Court of Session held that an underwriter and a contractual indemnifier were to be regarded as being in the same position as two insurers, so that if the underwriter indemnified the assured that underwriter would be entitled to contribution from the contractual indemnifier, but had no subrogation rights. This reasoning gave the contractual indemnifier the benefit of the insurance policy, and in particular led to the situation in which the contractual indemnifier would be entitled to seek contribution from the underwriter if the former had paid the assured first. The House of Lords, on appeal in this decision, Caledonia North Sea Ltd v. British Telecommunications plc [2002] Lloyd’s Rep IR 26, reversed the approach of the Court of Session and held that a contractual indemnifier is not in the same position as an underwriter, and that if the underwriter makes payment it has subrogation rights (and not simply contribution rights) against the contractual indemnifier whereas if the contractual indemnifier pays then the underwriter is that extent discharged from liability to the assured on the basis that the assured has suffered no loss. The right of contribution is an equitable right, but is nevertheless governed by the contract of insurance in that an underwriter who has a defence against the assured (eg breach of duty of utmost good faith) cannot be liable to contribute. In assessing whether a right of contribution exists in favour of the paying underwriter, it is necessary to look at the position of the insurers when the loss occurs and not at the date when contribution is claimed: as long as both underwriters were liable for the loss when it occurred, the fact

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that one of the underwriters subsequently obtains a defence against the assured (eg because the policy is cancelled or a claims condition is met) does not preclude the paying underwriter from claiming contribution. This proposition was originally laid down by the Court of Appeal in Legal and General Assurance Society v. Drake Insurance Co [1992] 2 QB 887, and although it was doubted by the Privy Council in Eagle Star Insurance Co Ltd v. Provincial Insurance plc [1993] 2 Lloyd’s Rep 143, a subsequent High Court decision, O’Kane v. Jones, ‘‘The Martin P ’’ [2005] Lloyd’s Rep IR 174, preferred the approach taken in Legal and General as the correct interpretation of s 80(1). If one policy is avoided ab initio, that underwriter cannot be liable for contribution under any circumstances as he was never on risk: Drake Insurance plc v. Provident Insurance plc [2004] Lloyd’s Rep IR 277. An underwriter who pays any part of the claim ex gratia will not be able to seek contribution, on the basis that equity does not assist a volunteer. Thus if the policy provides that the underwriter is liable only for its rateable proportion of the loss in the event that some other policy is in place, but nevertheless pays the full amount of the loss, there is no right of contribution: Legal and General Assurance Society v. Drake Insurance Co [1992] 2 QB 887. This decision was, however, distinguished in Drake Insurance plc v. Provident Insurance plc [2004] Lloyd’s Rep IR 277, a case which makes it clear that if the paying underwriter attempts to secure payment by the other underwriter and protests against the latter’s unwillingness to pay, the paying underwriter cannot be said to be a volunteer. Where contribution is possible, there are three separate bases of contribution. The first, the independent liability method (favoured by the balance of authority—North British & Mercantile Insurance Co v. London, Liverpool and Globe Insurance Co (1877) 5 Ch D 569; Commercial Union Assurance Co Ltd v. Hayden [1977] QB 804), operates on the basis that the liability of each underwriter for the loss is calculated, and each then pays that proportion of the loss. Thus, if the subject-matter is insured by underwriter A for £50,000, and by underwriter B for £100,000, then: (i) a loss of £50,000 would be met by them equally, as each is independently liable for the entire loss; (ii) a loss of £75,000 would be met by them in the proportions of A 50/125 and B 75/125. The second method is the maximum liability, under which the key factor is the limit of liability under each policy, the underwriters apportioning the loss in by reference to the maximum amount for which they could be liable under the policy. Thus, in the above example, any loss would be borne on the ratio 1 between underwriters A and B. The third method is the common liability approach, under which the underwriters bear the loss equally up to the limit of the lower of the two insured sums, and the other underwriter bears the surplus. In O’Kane v. Jones, ‘‘The Martin P ’’ [2005] Lloyd’s Rep IR 174 the court ruled that the common liability approach was not contemplated by the legislation, as it was not an apportionment as such. The court found it unnecessary to choose between the independent and maximum liability measures as on the facts the result was the same in either case.

Effect of under insurance 81. Where the assured is insured for an amount less than the insurable value or, in the case of a valued policy, for an amount less than the policy valuation, he is deemed to be his own insurer in respect of the uninsured balance. Notes The principle of average expressed in this section operates automatically where there is a total loss, for in such a case the assured recovers to the financial limits of the policy and must carry any uninsured loss himself. Average is of real significance in the case of a partial loss, for here the assured is treated as an insurer and is required to share the loss with the insurer in proportion to their respective shares of the value of the subject-matter. The principle is enshrined in ss 70–71 of the 1906 Act (partial loss of cargo and freight).

Return of Premium Enforcement of return 82. Where the premium or a proportionate part thereof is, by this Act, declared to be returnable— (a) If already paid, it may be recovered by the assured from the insurer; and (b) If unpaid, it may be retained by the assured or his agent. Notes For the circumstances in which all or a part of the premium is returnable, see ss 83–84. Under the Act, the premium is returnable to the assured and not to the broker, unless the broker is authorised to receive it on

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the assured’s behalf. This is so even though the obligation to pay the premium under a contract of marine insurance is on the broker: see s 53(1). It was decided in Velos Group Ltd v. Harbour Insurance Services Ltd [1997] 2 Lloyd’s Rep 461 that if the premium is returned to the broker, he may set off against the return premium any commission which is owed to him by the assured. The case further decides (although perhaps the point is open to doubt) that the broker’s commission is fully earned as soon as the policy is effected, so that if it is subsequently cancelled and premium is returned to the broker, he can deduct the full amount of the commission from the proportion of premium returned to him.

Return by agreement 83. Where the policy contains a stipulation for the return of the premium, or a proportionate part thereof, on the happening of a certain event, and that event happens, the premium, or, as the case may be, the proportionate part thereof, is thereupon returnable to the assured. Notes This is simply a declaratory provision, and its operation turns upon the proper construction of the policy to determine whether an event giving rise to proportionate return has occurred (see, eg: Simond v. Boydell (1779) 1 Doug KB 268; Aguilar v. Rodgers (1797) 7 TR 421; Audley v. Duff (1800) 2 Bos & P 111: Hunter v. Wright (1830) 10 B & C 714; Gorsedd SS Co Ltd v. Forbes (1900) 5 Com Cas 413; Pyman v. Marten (1906) 13 Com Cas 64; North Shipping Co Ltd v. Union Marine Insurance Co Ltd (1919) 24 Com Cas 161). The premium is returnable under a hulls time policy as the contract is terminated automatically when the vessel changes its classification or flag (Institute Time Clauses Hulls, cl 4. International Hull Clauses, cl 13.2) or when the vessel is laid up or the contract terminated by agreement (Institute Time Clauses Hulls, cl 22, International Hull Clauses, cll 25, 34 and 39, cl 34 requiring the vessel to be inspected if she has been laid up for 180 consecutive days or more).

Return for failure of consideration 84.—(1) Where the consideration for the payment of the premium totally fails, and there has been no fraud or illegality on the part of the assured or his agents, the premium is thereupon returnable to the assured. (2) Where the consideration for the payment of the premium is apportionable and there is a total failure of any apportionable part of the consideration, a proportionate part of the premium is, under the like conditions, thereupon returnable to the assured. (3) In particular— (a) Where the policy is void, or is avoided by the insurer as from the commencement of the risk, the premium is returnable, provided that there has been no fraud or illegality on the part of the assured; but if the risk is not apportionable, and has once attached, the premium is not returnable; (b) Where the subject-matter insured, or part thereof, has never been imperilled, the premium, or, as the case may be, a proportionate part thereof, is returnable: Provided that where the subject-matter has been insured ‘‘lost or not lost’’ and has arrived in safety at the time when the contract is concluded, the premium is not returnable unless, at such time, the insurer knew of the safe arrival. (c) Where the assured has no insurable interest throughout the currency of the risk, the premium is returnable, provided that this rule does not apply to a policy effected by way of gaming of wagering; (d) Where the assured has a defeasible interest which is terminated during the currency of the risk, the premium is not returnable; (e) Where the assured has over-insured under an unvalued policy, a proportionate part of the premium is returnable; (f) Subject to the foregoing provisions, where the assured has over-insured by double insurance, a proportionate part of the several premiums is returnable: Provided that, if the policies are effected at different times, and any earlier policy has at any time borne the entire risk, or if a claim has been paid on the policy in respect of the full sum insured thereby, no premium is returnable in respect of that policy, and when the double insurance is effected knowingly by the assured no premium is returnable.

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Notes Section 84 is founded on the twin principles of Tyrie v. Fletcher (1777) 2 Cowp 666 (cf Bermon v. Woodbridge (1781) 2 Doug KB 781; Gale v. Mitchell (1781) Park on Insurance 797; Stone v. Marine Insurance Co of Gothenburg (1876) 1 Ex D 81): the premium is returnable if there is total failure of consideration, but the premium is not apportionable so that once the risk has attached—even only momentarily—the underwriters have earned the full amount of the premium and no part of it is returnable. Thus, if there has been a deviation or change of voyage, the underwriters are discharged only from that date and the unearned part of the premium is not recoverable (Tait v. Levi (1811) 14 East 481; Moses v. Pratt (1815) 4 Camp 297). Thus in J A Chapman & Co Ltd v. Kadirga Denizcilik Ve Ticaret [1998] Lloyd’s Rep IR 377, the assured’s failure to pay an instalment of the premium amounted to breach of a premium warranty clause, thereby putting an end to the risk under the policy but as the risk had commenced, the assured remained liable to pay outstanding and future instalments of the premium. Subs (1) This sets out the first principle in Tyrie v. Fletcher. If the assured has been guilty of fraudulent nondisclosure or misrepresentation, or if the policy is on an illegal adventure, the right to recover the premium will be lost (Tyler v. Horne (1785) Marshall on Marine Insurances 525; Andree v. Fletcher (1789) 3 TR 266; Vandyck v. Hewitt (1800) 1 East 96; Morck v. Abel (1802) 3 Bos & P 35; Lubbock v. Potts (1806) 7 East 449; Feise v. Parkinson (1812) 4 Taunt 640; Rivaz v. Gerussi (1880) 6 QBD 222; Re National Benefit Assurance Co Ltd [1931] 1 Ch 46). The assured will, however, be entitled to a return of the premium despite the illegality if he repents in good time (Lowry v. Bordieu (1780) 2 Doug KB 468; Palyart v. Leckie (1817) 6 M & S 290) or if he was unaware of the facts which rendered the adventure illegal (Oom v. Bruce (1810) 12 East 225). Equally, if the policy provides for the forfeiture of the premium, the assured will not be entitled to return of the premium despite the fact that the risk has not attached. Subs (2) The subsection assumes the application of the second principle of Tyrie v. Fletcher, and deals with the case in which the premium can be apportioned to divisible parts of the risk. It will rarely be the case that the risk under a single policy can be subdivided in this way (Meyer v. Gregson (1784) 3 Doug KB 402; Loraine v. Thomlinson (1781) 2 Doug KB 585; Annen v. Woodman (1810) 3 Taunt 299; Moses v. Pratt (1815) 4 Camp 297; Swiss Reinsurance Co v. United India Insurance Co Ltd [2005] Lloyd’s Rep IR 341), although exceptional cases may exist (Stevenson v. Snow (1761) 3 Burr 1237; Rothwell v. Cooke (1797) 1 Bos & P 172—policy covering distinct voyages). Subs (3) contains a list of illustrations of the principles in subs (1) and (2). The list is not exhaustive and does not cover, for example, cases of deviation, change of voyage, delay or breach of warranty, where the risk has attached but has subsequently lapsed due to the assured’s conduct (Annen v. Woodman (1810) 3 Taunt 299). Subs (3)(a) See generally: Hogg v. Horner (1797) 2 Park on Marine Insurance 782; Duffell v. Wilkinson (1808) 1 Camp 401; Tait v. Levi (1811) 14 East 481; Feise v. Parkinson (1812) 4 Taunt 640; Anderson v. Thornton (1853) 8 Exch 425. For an illustration of illegality, see Vandyck v. Hewitt (1800) 1 East 96 (trading with the enemy). Subs (3)(b) This provision operates where the risk has not attached, fully or in part: Henkle v. Royal Exchange Assurance Co (1749) 1 Ves Sen 317; Stevenson v. Snow (1761) 3 Burr 1237; Forbes v. Aspinall (1811) 13 East 323; Colby v. Hunter (1827) 3 C & P 7; Rickman v. Carstairs (1833) 5 B & Ad 651; Tobin v. Harford (1864) 17 CBNS 528; ‘‘The Main’’ [1894] P 320. The proviso is illustrated by Bradford v. Symondson (1881) 7 QBD 456. Subs (3)(c) A number of different possibilities are contained in this section. First, if the assured has a reasonable expectation of acquiring insurable interest, but fails to do so, the policy is valid but the risk never attaches, and the premium is recoverable for total failure of consideration (Routh v. Thompson (1809) 11 East 428). Secondly, if the assured has no expectation of acquiring an insurable interest and is gambling from the outset (in accordance with s 4(2)(a)), the policy is void and the assured forfeits his premium (Lowry v. Bordieu (1780) 2 Doug KB 468; M’Culloch v. Royal Exchange Assurance Co (1813) 3 Camp 406; Allkins v. Jupe (1877) 2 CPD 375). Thirdly, if the assured has an insurable interest but the policy is deemed to be a wagering policy by s 4(2)(b) of the 1906 Act because it is made ‘‘ppi’’, the premium is returnable despite the express wording of s 84(3)(c) (Re London County Commercial Reinsurance Office Ltd [1922] 2 Ch 67, but contra Allkins v. Jupe (1877) 2 CPD 375). Fourthly, if the assured has an insurable interest at the outset, but loses his interest during the currency of the policy, the premium is not returnable as the risk has to some extent been run (Boehm v. Bell (1799) 8 TR 154). Subs (3)(d) See Boehm v. Bell (1799) 8 TR 154. Subs (3)(e) This rule does not apply in non-marine insurance. Subs (3)(f) The proviso is based on Fisk v. Masterman (1841) 8 M & W 165.

Mutual Insurance Modification of Act in case of mutual insurance 85.—(1) Where two or more persons mutually agree to insure each other against marine losses there is said to be a mutual insurance.

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(2) The provisions of this Act relating to the premium do not apply to mutual insurance, but a guarantee, or such other arrangement as may be agreed upon, may be substituted for the premium. (3) The provisions of this Act, is so far as they may be modified by the agreement of the parties, may in the case of mutual insurance be modified by the terms of the policies issued by the association, or by the rules and regulations of the association. (4) Subject to the exceptions mentioned in this section, the provisions of this Act apply to a mutual insurance. Notes Mutual insurance, the earliest form of marine insurance and a type which continues to operate in the marine market, particularly for liability risks through the Protection and Indemnity Clubs, differs from insurance provided by the private company market and Lloyd’s in a number of respects. (a) Insurance is based not on a policy but on membership of the Club. The cover granted to members is laid down by the rule book. A duty of disclosure identical in its nature to that owed to an underwriter is owed by a member when applying for membership. (b) Club rules do not give the member a right to recover in the event of loss, but confer a discretion on those administering the rules as to whether or not payment should be made. Decisions must be reached on the basis of natural justice. This feature of club rules renders it uncertain whether membership of a club amounts to a contract of insurance, as a mere discretion to pay would appear not to create insurance. (c) Club rules are normally framed on a ‘‘pay to be paid’’ basis, thereby preventing the member from recovering from the club until he has actually paid the sum owing to his victim. One side effect of this feature is that the Third Parties (Rights against Insurers) Act 1930, which transfers insurance rights to the victim of an insolvent assured, cannot apply to P & I Clubs, as the club is not liable until the assured has made payment, with the result that there are no rights to be transferred to the victims. See Firma C-Trade v. Newcastle Protection and Indemnity Association (‘‘The Fanti’’) [1990] 2 Lloyd’s Rep 191. (d) Clubs are formed not for profit but to provide a fund to meet claims by members. The premiums paid to an underwriter are fixed at the outset, and thereafter the risk of loss or chance of profit accrues to shareholders. By contrast, under P & I rules any shortfalls in the fund must be made up by members (by means of calls) and any profits accrue to the members (by means of lower contributions in the following year). This difference forms the basis of subs (2).

Supplemental Ratification by assured 86. Where a contract of marine insurance is in good faith effected by one person on behalf of another, the person on whose behalf it is effected may ratify the contract even after he is aware of a loss. Notes There are many illustrations of this point in the early cases, for the most part involving brokers insuring without authority but on behalf of the assured. See: Lucena v. Craufurd (1808) 1 Taunt 325; Routh v. Thompson (1812) 13 East 274. It is a prerequisite to ratification that the agent intended to insure on behalf of the assured. In the case of a broker this is relatively easy to establish, but if the agent has an insurable interest in his own right it may be difficult for a third party to establish that the agent intended to insure on the third party’s behalf as well as his own: this point was explored in National Oilwell (UK) Ltd v. Davy Offshore Ltd [1993] 2 Lloyd’s Rep 582 (construction of an oil rig) where it was held that if the agent is under an obligation to the third party to insure on the third party’s behalf, the necessary intention to do so will be presumed. See also: Grant v. Hill (1812) 4 Taunt 380; Hagedorn v. Oliverson (1814) 2 M & S 485; Watson v. Swann (1862) 11 CBNS 756; Byas v. Miller (1897) 3 Com Cas 39; Boston Fruit Co v. British and Foreign Marine Insurance Co [1906] AC 336. If the assured is not identified in the policy as the intended beneficiary, ratification is in any event not possible, in line with the rule in Keighley, Maxsted & Co v. Durant [1901] AC 240 that an undisclosed principal cannot ratify. The rule that the assured can ratify after knowledge of loss was laid down in Williams v. North China Insurance Co (1876) 1 CPD 757, but has been rejected for non-marine insurance (Grover and Grover Ltd v. Matthews [1910] 2 KB 401). However, in the National Oilwell case Colman J doubted the non-marine rule.

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Implied obligations varied by agreement or usage 87.—(1) Where any right, duty, or liability would arise under a contract of marine insurance by implication of law, it may be negatived or varied by express agreement, or by usage, if the usage be such as to bind both parties to the contract. (2) The provisions of this section extend to any right, duty, or liability declared by this Act which may be lawfully modified by agreement. Notes Subs (1) A usage is binding on the parties only if its existence is established by evidence and if both parties were aware of it. Many usages recognised by the common law are found in the 1906 Act itself, eg s 53(1) (liability of the broker for the premium), and other sections are expressly made subject to usages, eg s 47 (deviation where there are several ports of discharge). Subs (2) Few of the provisions of the 1906 Act are not subject to contrary agreement. The two clearest examples are s 41 (warranty of legality) and s 55(2)(a) (loss caused by wilful misconduct).

Reasonable time, etc, a question of fact 88. Where by this Act any reference is made to reasonable time, reasonable premium, or reasonable diligence, the question what is reasonable is a question of fact. Notes This definition is relevant for a number of sections of the 1906 Act, eg s 58 (missing ship) s 42 (commencement of voyage) and Sched, r 5 (cargo safely landed).

Slip as evidence 89. Where there is a duly stamped policy, reference may be made, as heretofore, to the slip or covering note, in any legal proceeding. Notes A slip is a binding contract in its own right (Cory v. Patton (1874) LR 9 QB 577). The contract is made as soon as the slip is scratched (Ionides v. Pacific Insurance Co (1871) LR 6 QB 674; Morrison v. Universal Marine Insurance Co (1873) LR 8 Ex 194; Citizens’ Insurance Co of Canada v. Parsons (1881) 7 App Cas 96; Thompson v. Adams (1889) 23 QBD 361; Tyser v. Shipowners’ Syndicate [1896] 1 QB 135; Eagle Star Insurance Co Ltd v. Spratt [1971] 2 Lloyd’s Rep 116; American Airlines Inc v. Hope [1974] 2 Lloyd’s Rep 301; General Reinsurance Corporation v. Forskringsaktiebolaget Fennia Patria [1983] 2 Lloyd’s Rep 287; Roadworks (1952) Ltd v. Charman [1994] 2 Lloyd’s Rep 99). Given that the slip is a binding contract, it follows that the assured’s duty of disclosure comes to an end as regards any underwriter when the slip has been scratched by that underwriter: see the note to s 17 of the Marine Insurance Act 1906. Further, it is not open to either party unilaterally to vary the terms of the policy once they have been agreed. There is a series of cases in which the assured has attempted to do this, and the courts have ruled that a material variation has the effect of avoiding the policy as from the date of variation (Laird v. Robertson (1791) 4 Bro Parl Cas 488; Fairlie v. Christie (1817) 7 Taunt 416; Campbell v. Christie (1817) 2 Stark 64; Forshaw v. Chabert (1821) 6 Moo CP 369; Norwich Union Fire Insurance Co v. Colonial Mutual Fire Insurance Co Ltd (1922) 12 Ll LR 94), although immaterial variations are of no effect (Clapham v. Cologan (1813) 3 Camp 382; Sanderson v. Symonds (1819) 4 Moo CP 42; Sanderson v. M’Cullom (1819) 4 Moo CP 5). There is a customary exception to this rule where the slip has been oversubscribed, in which case a proportionate signing down of the underwriters’ liabilities is permissible: the custom was recognised in General Accident Fire and Life Assurance Corporation v. Tanter, ‘‘The Zephyr’’ [1985] 2 Lloyd’s Rep 529. In practice Lloyd’s slips contain leading underwriter clauses, authorising the leading underwriter to accept amendments to the slip and thereby to bind all of the signatories to the slip: a leading underwriter clause in suitably wide terms authorises the leader to vary the risk or alter conditions laid down for the inception of the risk (Barlee Marine Corporation v. Mountain, ‘‘The Leegas’’ [1987] l Lloyd’s Rep 471; Roadworks (1952) Ltd v. Charman [1994] 2 Lloyd’s Rep 99). It is not always clear exactly who the leading underwriter is and what the extent of his powers may be, although it is clear that if the policy has been avoided the leading underwriter no longer has any authority in respect of the following market (Unum Life Insurance Co of America v. Israel Phoenix Assurance Co Ltd [2002] Lloyd’s Rep IR 374). The role of the leading underwriter is expressly provided for in the International Hull Clauses, which implement the ‘‘London Market Principles’’ established in 2002 and designed to provide for standardised slips, policy wordings and claims settlements. For the relationship between slip and policy, see the note to s 89 of the Marine Insurance Act 1906.

793

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In the event of inconsistency between the slip and the policy, the policy may be rectified to conform to the slip (Mackenzie v. Coulson (1869) LR 8 Eq 368; Ionides v. Pacific Marine Insurance Co Ltd (1872) LR 7 QB 517; Cory v. Patton (1872) LR 7 QB 304; Empress Assurance Corporation v. Bowring (1905) 11 Com Cas 107; Spalding v. Crocker (1897) 13 TLR 396; Wilson, Holgate & Co Ltd v. Lancashire and Cheshire Insurance Corporation Ltd (1922) 13 Ll LR 486; Eagle Star and British Dominions Insurance Co Ltd v. Reiner (1927) 27 Ll LR 173; Kiriacoulis Lines SA v. Compagnie d’Assurances Maritime Ariennes et Terrestres, ‘‘The Demetra K’’ [2002] Lloyd’s Rep IR 795). Rectification is available only where the slip represents the actual agreement between the parties and the policy has incorrectly recorded that agreement (Henkle v. Royal Exchange Assurance (1749) 1 Ves Sen 317; British and Foreign Marine Insurance Co Ltd v. Sturge (1897) 2 Com Cas 244; Scottish Metropolitan Assurance Co v. Stewart (1923) 15 Ll LR 55; Pindos Shipping Corporation v. Raven, ‘‘The Mata Hari’’ [1983] 2 Lloyd’s Rep 449). The section deals only with rectification of the policy to conform with the slip. However, rectification is not confined to cases in which the policy is preceded by a slip: any form of agreement or common understanding prior to the issue of the policy can be used as a basis for rectification, although a mere misunderstanding of the arrangements by one part will not justify rectification (Motteux v. London Assurance (1739) 1 Atk 545; Collett v. Morrison (1851) 9 Hare 162; Lowlands SS Co v. North of England Protecting and Indemnity Association (1921) 6 Ll LR 230; Gagniere Co Ltd v. Eastern Co of Warehouses Insurance (1921) 8 Ll LR 365). It is unclear whether a slip can be used in evidence to clarify an ambiguity in the policy itself. The slip was admitted for this purpose in Lower Rhine Wurtenburg Insurance Association v. Sedgwick [1899] 1 QB 179, but the Court of Appeal’s decision in Youell v. Bland Welch (No 1) [1992] 2 Lloyd’s Rep 127 indicates that the slip probably cannot be admitted for this purpose, and cf Punjab National Bank v. De Boinville [1992] 1 Lloyd’s Rep 7, Quinta Communications SA v. Warrington [2000] Lloyd’s Rep IR 81 and Great North Eastern Railway v. Avon Insurance [2001] Lloyd’s Rep IR 793). The principle underlying these cases was disapproved by Rix LJ in HIH Casualty and General Insurance Ltd v. New Hampshire Insurance Co [2001] Lloyd’s Rep IR 596, the preferred view being that there was no rule of law that the wording of the policy superseded the slip and that in every case the matter was one of construction. The Court of Appeal rejected dicta in earlier authorities for the proposition that a slip was no more than a provisional contract which was replaced by the policy (see: Xenos v. Wickham (1867) LR 2 HL 296; Ionides v. Pacific Fire Marine (1871) LR 6 QB 674; Thompson v. Adams (1889) 23 QBD 361).

Interpretation of terms 90. In this Act, unless the context or subject-matter otherwise requires,— ‘‘Action’’ includes counter-claim and set off: ‘‘Freight’’ includes the profit derivable by a shipowner from the employment of his ship to carry his own goods or moveables, as well as freight payable by a third party, but does not include passage money: ‘‘Moveables’’ means any moveable tangible property, other than the ship, and includes money, valuable securities, and other documents: ‘‘Policy’’ means a marine policy. Notes Freight: See the note to Sched, r 16. Moveables: The definition of moveables in the Act is somewhat wider than the definition of ‘‘goods’’: see Sched, r 17. Securities and money are moveables (Baring Brothers & Co v. Marine Insurance Co (1894) 10 TLR 276) but are not goods.

Savings 91.—(1) Nothing in this Act, or in any repeal effected thereby, shall affect— (a) The provisions of the Stamp Act 1891, or any enactment for the time being in force relating to the revenue; (b) The provisions of the Companies Act 1862, or any enactment amending or substituted for the same; (c) The provisions of any statute not expressly repealed by this Act. (2) The rules of the common law including the law merchant, save in so far as they are inconsistent with the express provisions of this Act, shall continue to apply to contracts of marine insurance.

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Section 92 [Repealed by the Statute Law Revision Act 1927.] Section 93 [Repealed by the Statute Law Revision Act 1927.] Short title 94. This Act may be cited as the Marine Insurance Act 1906.

SCHEDULES FIRST SCHEDULE SECTION 30 Form of Policy as well in own name as for and in the name and BE IT KNOWN THAT names of all and every other person or persons to whom the same doth, may, or shall appertain, in part or in all doth make assurance and cause and them, and every of them, to be insured lost or not lost, at and from Upon any kind of goods and merchandises, and also upon the body, tackle, apparel, ordnance, munition, artillery, boat, and other furniture, of and in the good ship or vessel called the whereof is master under God, for this present voyage, or whosoever else shall go for master in the said ship, or by whatsoever other name or names the said ship, or the master thereof, is or shall be named or called; beginning the adventure upon the said goods and merchandises from the loading thereof aboard the said ship. upon the said ship, etc and so shall continue and endure, during her abode there, upon the said ship, etc And further, until the said ship, with all her ordnance, tackle, apparel, etc, and goods and merchandises whatsoever shall be arrived at upon the said ship, etc, until she hath moored at anchor twenty-four hours in good safety; and upon the goods and merchandises, until the same be there discharged and safely landed. And it shall be lawful for the said ship, etc, in this voyage, to proceed and sail to and touch and stay at any ports or places whatsoever without prejudice to this insurance. The said ship, etc, goods and merchandises, etc, for so much as concerns the assured by agreement between the assured and assurers in this policy, are and shall be valued at Touching the adventures and perils which we the assurers are contented to bear and do take upon us in this voyage: they are of the seas, men of war, fire, enemies, pirates, rovers, thieves, jettisons, letters of mart and counterpart, surprisals, takings at sea, arrests, restraints, and detainments of all kings, princes, and people, of what nation, condition, or quality soever, barratry of the master and mariners, and of all other perils, losses, and misfortunes, that have or shall come to the hurt, detriment, or damage of the said goods and merchandises, and ship, etc, or any part thereof. And in case of any loss or misfortune it shall be lawful to the assured, their factors, servants and assigns, to sue, labour, and travel for, in and about the defence, safeguards, and recovery of the said goods and merchandises, and ship, etc, or any part thereof, without prejudice to this insurance; to the charges whereof we, the assurers, will contribute each one according to the rate and quantity of his sum herein assured. And it is especially declared and agreed that no acts of the insurer or insured in recovering, saving, or preserving the property insured shall be considered as a waiver, or acceptance of abandonment. And it is agreed by us, the insurers, that this writing or policy of assurance shall be of as much force and effect as the surest writing or policy of assurance heretofore made in Lombard Street, or in the Royal Exchange, or elsewhere in London. And so we, the assurers, are contented, and do hereby promise and bind ourselves, each one for his own part, our heirs, executors, and goods to the

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assured, their executors, administrators, and assigns, for the true performance of the premises, confessing ourselves paid the consideration due unto us for this assurance by the assured, at and after the rate of IN WITNESS whereof we, the assurers, have subscribed our names and sums assured in London. N.B.—Corn, fish, salt, fruit, flour, and seed are warranted free from average, unless general, or the ship be stranded—sugar, tobacco, hemp, flax, hides and skins are warranted free from average, under five pounds per cent, and all other goods, also the ship and freight, are warranted free from average, under three pounds per cent unless general, or the ship be stranded. Notes Form of policy: The Lloyd’s SG (Ship and Goods) policy, which had existed since 1779, was superseded in 1983 after frequent instances of judicial criticism, ‘‘absurd and incoherent’’ being the description by Buller J as early as Brough v. Whitmore (1791) 4 TR 206. The practice was for amendments to the policy to be written in the margins or gummed to the policy. The following rules are intended to give guidance to the meaning of words used in the Lloyd’s policy. Many of these words are used in the new forms of policy, although various of the definitions are now obsolete, eg rr 6 (touch and stay), 10 (restraint of princes) and 12 (all other perils). For general principles of construction, see s 30 and the note thereto.

Rules for Construction of Policy The following are the rules referred to by this Act for the construction of a policy in the above or other like form, where the context does not otherwise require:— 1. Where the subject-matter is insured ‘‘lost or not lost,’’ and the loss has occurred before the contract is concluded, the risk attaches unless, at such time the assured was aware of the loss, and the insurer was not. Notes This rule reflects the proviso to s 6(1) of the Marine Insurance Act 1906.

2. Where the subject-matter is insured ‘‘from’’ a particular place, the risk does not attach until the ship starts on the voyage insured. Notes A voyage policy ‘‘from’’ a particular place excludes port risks at the outward port, so that there is no cover if loss occurs in port (Sun Alliance & London Insurance plc v. PT Asuraynsri Dayin Mitra TBK, The No 1 Dae Bu [2006] Lloyd’s Rep IR 860). If the voyage does not commence within a reasonable time of the risk attaching, the underwriter is discharged (Marine Insurance Act 1906, s 42). The rule is ousted where the Institute Cargo Clauses apply, as cl 8 sets out the ‘‘warehouse to warehouse’’ provision whereby the risk attaches as soon as the cargo leaves the warehouse of origin. However, if the voyage commenced is not that insured, the cover provided by the warehouse to warehouse clause is revoked under the Marine Insurance Act 1906, s 44 and post-sailing losses are irrecoverable– see Nima SARL v. Deves Insurance plc [2002] Lloyd’s Rep IR 752 and the note to s 44).

3.—(a) Where a ship is insured ‘‘at and from’’ a particular place, and she is at that place, in good safety when the contract is concluded, the risk attaches immediately. (b) If she be not at that place when the contract is concluded, the risk attaches as soon as she arrives there in good safety, and, unless the policy otherwise provides, it is immaterial that she is covered by another policy for a specified time after arrival. (c) Where chartered freight is insured ‘‘at and from’’ a particular place, and the ship is at that place in good safety when the contract is concluded the risk attaches immediately. If she be not there when the contract is concluded, the risk attaches as soon as she arrives there in good safety. (d) Where freight, other than chartered freight, is payable without special conditions and is insured ‘‘at and from’’ a particular place, the risk attaches pro rata as the goods or merchandise are shipped; provided that if there be cargo in readiness

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which belongs to the shipowner, or which some other person has contracted with him to ship, the risk attaches as soon as the ship is ready to receive such cargo. Notes Rule 3(a) A voyage policy ‘‘at and from’’ a particular port includes the risks of that port, the risk attaching as soon as the vessel arrives at that port in good safety. As to what constitutes a port, see: Camden v. Cowley (1763) 1 Wm Bl 417; Kingston v. Knibbs (1808) 1 Camp 508n; Cruickshank v. Janson (1810) 2 Taunt 301; Constable v. Noble (1810) 2 Taunt 403; Payne v. Hutchinson (1810) 2 Taunt 405n; Moxon v. Atkins (1812) 3 Camp 200; Cockey v. Atkinson (1819) 2 B & Ald 460; Warre v. Miller (1825) 4 B & C 538; Sea Insurance Co of Scotland v. Gavin (1829) 4 Bli NS 578; Brown v. Tayleur (1835) 4 Ad & El 241. The term ‘‘good safety’’ refers to the physical condition of the vessel. See: Waples v. Eames (1746) 2 Str 1243; Lockyer v. Offley (1786) 1 TR 252; Minett v. Anderson (1794) Peake 212; Shawe v. Felton (1801) 2 East 109; Parmeter v. Cousins (1809) 2 Camp 235; Bell v. Bell (1810) 2 Camp 475; Annen v. Woodman (1810) 3 Taunt 299; Horneyer v. Lushington (1812) 15 East 46; Foley v. United Fire and Marine Insurance Co of Sydney (1870) LR 5 CP 155; Lidgett v. Secretan (1870) LR 5 CP 190. Thereafter, the voyage must commence within a reasonable time (Marine Insurance Act 1906, s 42). Rule 3(b) This is based on Haughton v. Empire Marine Insurance Co (1866) LR 1 Ex 206. Rule 3(c) This is based on: Horncastle v. Suart (1806) 7 East 400; Mackenzie v. Shedden (1810) 2 Camp 431; Davidson v. Willasey (1813) 1 M & S 313; Foley v. United Fire & Marine Insurance Co of Sydney (1870) LR 5 CP 155. Rule 3(d) For the pro rata rule, see: Montgomery v. Eggington (1789) 3 TR 362; Patrick v. Eames (1813) 3 Camp 441; Davidson v. Willasey (1813) 1 M & S 313; Truscott v. Christie (1820) 2 Brod & Bing 320. For the readiness rule, see: Williamson v. Innes (1831) 8 Bing 81n. The effect of rule 3(d) was frequently ousted in practice by policy wording which permitted the risk for freight to be earned on cargo to attach only ‘‘from the loading thereof’’ (Beckett v. West of England Marine Insurance Co Ltd (1871) 25 LT 739; Jones v. Neptune Marine Insurance Co (1872) LR 7 QB 702; Hopper v. Wear Marine Insurance Co (1882) 46 LT 107; Hydarnes SS Co v. Indemnity Mutual Marine Assurance Co [1895] 1 QB 500, and cf the note to r 4, below) or ‘‘from the time of the engagement of the goods’’ (‘‘The Copernicus’’ [1896] P 237).

4. Where goods or other moveables are insured ‘‘from the loading thereof,’’ the risk does not attach until such goods or moveables are actually on board, and the insurer is not liable for them while in transit from the shore to ship. Notes This rule is concerned with cargo, although similar wording was found in freight policies (see r 3(d)). The cases on this wording have established that the underwriter is not liable for goods in transit prior to the date of the policy (Robertson v. French (1803) 4 East 130; Spitta v. Woodman (1810) 2 Taunt 416; Nonnen v. Reid (1812) 16 East 176; Langhorn v. Hardy (1812) 4 Taunt 628; Mellish v. Allnutt (1813) 2 M & S 166; Carr v. Montefiore (1864) 5 B & S 408). Contrast the position if the policy is the continuation of a previous insurance (Bell v. Hobson (1812) 16 East 240) or otherwise contemplates wider cover (Gladstone v. Clay (1813) 1 M & S 418).

5. Where the risk on goods or other moveables continues until they are ‘‘safely landed,’’ they must be landed in the customary manner and within a reasonable time after arrival at the port of discharge, and if they are not so landed the risk ceases. Notes This wording has been superseded by the warehouse to warehouse clause in the Institute Cargo Clauses. If landing is prevented by external forces, the policy remains effective (Samuel v. Royal Exchange Assurance Co (1828) 8 B & C 119). The wording does not cover a cargo which has actually been landed (DeutschAustralische Dampfschiffsgesellschaft v. Sturge (1913) 109 LT 905), or which has been left in barges pending use, as the assured is here regarded as having waived the need for landing (Lindsay Blee Depots Ltd v. Motor Union Insurance Co Ltd (1930) 37 Ll LR 220). If the goods have been removed from the vessel and into the consignee’s own lighter the underwriter is off risk, but the risk remains if the goods are put into a publiclyoperated lighter (Sparrow v. Carruthers (1745) 2 Stra 1236; Rucker v. London Assurance Co (1784) 2 Bos & P 432n; Hurry v. Royal Exchange Assurance Co (1801) 3 Esp 289) or if the policy expressly covers ‘‘all risks of craft to and from the vessel’’ (Paul Ltd v. Insurance Co of North America (1899) 15 TLR 534). If the goods have been landed but are in the custody of Customs officials rather than the assured himself, they are nevertheless safely landed and the insurer is not liable for any loss after landing (Brown v. Carstairs (1811) 3 Camp 161; Marten v. Nippon Sea & Land Insurance Co Ltd (1898) 3 Com Cas 164). A policy which covers both cargo and loss of export refund in the event of rejection of the cargo is, absent contrary provision, to be construed as a cargo policy, so that if the cargo risk terminates following discharge then the risk in

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relation to the export subsidy terminates on the same date: Hibernia Foods plc v. McAuslin, ‘‘The Joint Frost’’ [1998] 1 Lloyd’s Rep 310.

6. In the absence of any further license or usage, the liberty to touch and stay ‘‘at any port or place whatsoever’’ does not authorise the ship to depart from the course of her voyage from the port of departure to the port of destination. Notes The ‘‘liberty to touch and stay’’ clause was the traditional method of excusing the assured’s deviation, as to which see Marine Insurance Act 1906, ss 46–47. The clause is no longer used, and has been superseded by ‘‘held covered’’ provisions. The ‘‘liberty to touch and stay’’ provision did not confer an absolute right on the assured to visit any port, and was subject to the limitation that even where the geographical region was not specifically indicated by the policy (as was common) the ports visited had to be within the contemplation of the policy and not wholly outside the scope of the voyage. Of the many illustrations, see: Gairdner v. Senhouse (1810) 3 Taunt 16; Hammond v. Reid (1820) 4 B & Ald 72; Bottomley v. Bovill (1826) 5 B & C 210.

7. The term ‘‘perils of the seas’’ refers only to fortuitous accidents or casualties of the seas. It does not include the ordinary action of the winds and waves. Notes Perils of the sea is the most important of the marine perils. It is concerned only with fortuitous events, even though readily foreseeable (Neter & Co v. Licences and General Insurance Co Ltd (1944) 77 Ll LR 202), the burden of proving fortuity being borne by the assured (Schiffshypothekenbank Zu Luebeck AG v. Compton, ‘‘The Alexion Hope’’ [1988] 1 Lloyd’s Rep 311; National Justice Compania Naviera SA v. Prudential Assurance Co, ‘‘The Ikarian Reefer’’ [1995] 1 Lloyd’s Rep 455; Glowrange Ltd v. CGU Insurance, 2001, unreported; North Star Shipping Ltd v. Sphere Drake Insurance plc [2005] 2 Lloyd’s Rep 76). If the vessel is cast away by the crew, there is no peril of the sea but there will be barratry (see r 11), and equally an innocent mortgagee who is party to the contract cannot plead peril of the sea where the vessel is cast away with the connivance of the owner (Samuel & Co Ltd v. Dumas [1924] AC 431). The peril must be ‘‘of the sea’’, and this generally requires proof of adverse, but not necessarily abnormal, weather conditions (Hagedorn v. Whitmore (1816) 1 Stark 157; Fletcher v. Inglis (1819) 2 B & Ald 315; Lawrence v. Aberdein (1821) 5 B & Ald 107; Gabay v. Lloyd (1825) 3 B & C 793; Montoya v. London Assurance Co (1851) 6 Ex 451; Magnus v. Buttemer (1852) 11 CB 876; Mountain v. Whittle [1921] 1 AC 615; Lind v. Mitchell (1928) 32 Ll LR 70; Baxendale v. Fane, ‘‘The Lapwing’’ (1940) 66 Ll LR 174). There must, therefore, be some form of incident which causes the ingress of water (Sassoon v. Western Assurance Co [1912] AC 561; Mountain v. Whittle [1921] 1 AC 615; Seashore Marine SA v. Phoenix Assurance plc [2002] Lloyd’s Rep IR 51): a mere ingress of water without such incident or adverse conditions is not a peril of the seas (Kastor Navigation Co Ltd v. AGF MAT, The Kastor Too [2004] Lloyd’s Rep IR 481). The phrase also includes losses from perils in or on the sea, such as ice, rocks and other vessels, ie innocent or negligent collision losses (Smith v. Scott (1811) 4 Taunt 126; Wilson, Sons & Co v. Xantho, ‘‘The Xantho’’ (1887) 12 App Cas 503; Popham v. St Petersburg Insurance Co (1904) 10 Com Cas 31; Linelevel Ltd v. Powszechny Zaklad Ubezpieczen SA, The Nore Challenger [2005] 2 Lloyd’s Rep 534), but not deliberate collision or other wilful destruction by a third party. The Institute Clauses are based upon the assumption that collisions are covered, although earlier policies specifically included damage caused by collision with various objects (Re Margetts & & Ocean Accident & Guarantee Corporation [1901] 2 KB 792; Mancomunidad del Vapor Frumiz v. Royal Exchange Assurance [1927] 1 KB 567). Mechanical failure is not a peril of the sea, so held by the House of Lords in Thames & Mersey Marine Insurance Co Ltd v. Hamilton, Fraser & Co, ‘‘The Inchmaree’’ (1887) 12 App Cas 484, although losses caused by mechanical failure are in practice within hulls policies by virtue of the ‘‘Inchmaree’’ clause (see the note to s 55 of the 1906 Act). Loss by stranding is a peril of the sea (Fletcher v. Inglis (1819) 2 B & Ald 315), although a vessel damaged by the sea while not at sea is not covered by this peril (Rowcroft v. Dunsmore (1810) 3 Taunt 228n; Thompson v. Whitmore (1810) 3 Taunt 227; Phillips v. Barber (1821) 5 B & Ald 161; Magnus v. Buttemer (1852) 11 CB 876, but see Marine Insurance Act 1906, Sched, r 12 and Fletcher v. Inglis (1819) 2 B & Ald 315). Reasonable steps taken by the assured to avoid a peril of the sea, and which result in a loss by some other means, do not break the chain of causation from the peril of the sea. This follows from Canada Rice Mills Ltd v. Union Marine & General Insurance Co Ltd [1940] 4 All ER 169, where damage to cargo from overheating, resulting from the closing of valves to prevent the ingress of sea water, was held to be a peril of the sea. Cf Redman v. Wilson (1845) 14 M & W 476. The ordinary action of the wind and the waves is not a peril of the sea (Paterson v. Harris (1861) 1 B & S 336), and unless the assured can demonstrate that weather conditions were adverse the underwriter is not liable without having to raise any defence of its own, eg that the vessel was unseaworthy. If there is bad weather and the vessel is unseaworthy, then, assuming that the assured is not precluded from recovering by

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virtue of s 39 of the 1906 Act the claim will depend upon which of the two causes of loss was the proximate cause (Fawcus v. Sarsfield (1856) 6 E & B 192; Lloyd Instruments Ltd v. Northern Star Insurance Co Ltd, ‘‘The Miss Jay Jay’’ [1987] 1 Lloyd’s Rep 32). If there has been a peril of the sea, and loss occurs subsequently, eg loss of cargo by theft or seizure following the stranding of the vessel, it is a question of fact as to whether there is a break in the chain of causation from the peril of the sea (Bondrett v. Hentigg (1816) Holt NP 149; Hahn v. Corbett (1824) 2 Bing 205; Dent v. Smith (1869) LR 4 QB 414). Equally, causation issues arise where an uninsured peril results in the exposure of the vessel to perils of the sea (Hodgson v. Malcolm (1806) 2 Bos & PNR 336, and cf the war risks cases discussed in the note to s 55(1)). It is to be stressed that the mere ingress of water is not a peril of the sea: what is required is that the ingress was caused by a peril of the sea as opposed to, say, a war risk (Leyland Shipping Co Ltd v. Norwich Union Fire Insurance Society Ltd [1918] AC 350), scuttling (Samuel & Co Ltd v. Dumas [1924] AC 431) or unseaworthiness (Sassoon & Co Ltd v. Western Assurance Co [1921] AC 561; Grant Smith & Co v. Seattle Construction & Dry Dock Co [1920] AC 162; Lamb Head Shipping Co Ltd v. Jennings, ‘‘The Marel’’ [1992] 1 Lloyd’s Rep 402). If a vessel is in a rusty condition, and water enters as a result, there is no peril of the sea in the absence of abnormal action of the wind and waves (Sassoon & Co v. Western Assurance Co [1912] AC 561). A contrary decision is Hamilton, Fraser & Co v. Pandorf & Co (1887) 12 App Cas 518, where water entered the vessel due to action by vermin and the loss was held to have been caused by perils of the sea. The decision appears to be unsupportable on this point, and vermin damage is now presumed to be excluded (Marine Insurance Act 1906, s 55(2)(c)). See also Cohen, Sons & Co v. National Benefit Assurance Co Ltd (1924) 18 Ll LR 199, where Bailhache J came close to saying that any unintended ingress of water constituted a peril of the sea.

8. The term ‘‘pirates’’ includes passengers who mutiny and rioters who attack the ship from the shore. Notes The reference in the definition to passengers is based on Palmer v. Naylor (1854) 10 Exch 382 and Kleinwort v. Shepherd (1859) 1 E & E 447, and the reference to attacks from shore is based on Nesbitt v. Lushington (1792) 4 TR 783. Piracy may also be committed by the crew (Brown v. Smith (1813) 1 Dow 349), although in practice the claim in these circumstances will normally be for barratry (see Rule 11). Piracy requires robbery or attempted robbery (Re Piracy Jure Gentium [1934] AC 586) effected with the use of violent rather than clandestine conduct (Shell International Petroleum Co Ltd v. Gibbs, ‘‘The Salem’’ [1982] QB 946; Athens Maritime Enterprises Corporation v. Hellenic Mutual War Risks Association (Bermuda) Ltd, ‘‘The Andreas Lemos’’ [1983] 1 All ER 591) for private rather than political gain (Republic of Bolivia v. Indemnity Mutual Marine Assurance Co Ltd [1909] 1 KB 785; Banque Monetaca v. Motor Union Insurance Co Ltd (1923) 14 Ll LR 48). It must take place on the high seas, tidal waters or in a port or harbour, but not on a mere inland waterway (The Magellan Pirates (1852) 1 Ecc & Ad 81; Republic of Bolivia v. Indemnity Mutual Marine Assurance Co Ltd [1909] 1 KB 785; United Africa Co v. NV Tolten [1946] P 135n; ‘‘The Andreas Lemos’’ [1983] 1 All ER 591). Seizure by pirates is to be regarded as at least a constructive total loss (Dean v. Hornby (1854) 3 E & B 180). For the reference to riot, see the Public Order Act 1986, ss 1 and 10.

9. The term ‘‘thieves’’ does not cover clandestine theft or a theft committed by any one of the ship’s company, whether crew or passengers. Notes The word ‘‘theft’’ generally bears its statutory meaning (under s 1 of the Theft Act 1968) in insurance policies (Dobson v. General Accident Fire and Theft Assurance Co [1989] 3 All ER 927; Deutsche Genossenschaftsbank v. Burnhope [1995] 4 All ER 717). That meaning is modified in marine insurance to encompass only nonclandestine theft and theft by strangers (Harford v. Maynard (1785) 1 Park on Marine Insurances 36; Taylor v. Liverpool and Great Western Steam Co (1874) LR 9 QB 546; Nishina Trading Co Ltd v. Chiyoda Fire & Marine Insurance Co Ltd [1969] 2 QB 449). Some element of violence is required, but that may be violence towards property, eg the smashing down of doors (La Fabrique de Produits Chimiques SA v. Large (1922) 13 Ll LR 269) or even the turning of a key in the lock of a door (Dino Services Ltd v. Prudential Assurance Co Ltd [1989] 1 Lloyd’s Rep 379) rather than violence towards persons. Where a vessel is shipwrecked and her cargo is stolen, the loss is to be regarded as one by perils of the sea and not theft (Bondrett v. Hentigg (1816) Holt NP 149, and see the note to rule 7).

10. The term ‘‘arrests, etc, of kings, princes, and people’’ refers to political or executive acts, and does not include a loss caused by riot or by ordinary judicial process.

799

5.20

Marine Insurance

Notes The terminology of the ‘‘restraint of princes’’ clause appeared in the Lloyd’s SG Policy which was abandoned in 1983, and the clause is now obsolete. The most recent authorities on the clause are Rickards v. Forestal Land, Timber and Railway Co Ltd [1942] AC 50 (seizure of cargo by agents of government is restraint of princes) and Panamanian Oriental SS Corporation v. Wright [1970] 2 Lloyd’s Rep 365 (decision of customs officials to detain a ship was restraint of princes despite subsequent judicial proceedings). For the reference to riot, see the Public Order Act 1986, ss 1 and 10.

11. The term ‘‘barratry’’ includes every wrongful act wilfully committed by the master or crew to the prejudice of the owner, or, as the case may be, the charterer. Notes Barratry consists of fraud by the master (Arcangelo v. Thompson (1811) 2 Camp 620) or crew (Elton v. Brogden (1747) 2 Str 1264) against the owner of the vessel (Nutt v. Bordieu (1768) 1 TR 323; Bradford v. Levy (1825) 2 C & P 137). There can be no barratry where the master and crew have failed to understand the assured’s instructions or otherwise have innocently disobeyed the assured (Phyn v. Royal Exchange Assurance Co (1798) 7 TR 505; Hibbert v. Martin (1808) 1 Camp 538; Todd v. Ritchie (1816) 1 Stark 240; Bottomley v. Bovill (1826) 5 B & C 210). If the assured or his agent (Hobbs v. Hannam (1811) 3 Camp 93) is implicated in the conduct, either because he has authorised it (Stamma v. Brown (1743) 2 Str 1173; Ross v. Hunter (1790) 4 TR 33; Everth v. Hannam (1815) 6 Taunt 375; Soares v. Thornton (1817) 7 Taunt 627; Visscherij Maatschappij Nieuw Onderneming v. Scottish Metropolitan Assurance Co Ltd (1922) 10 Ll LR 579) or because he was aware of it and took no steps to prevent further conduct of that type (Pipon v. Cope (1808) 1 Camp 434; Panamanian Oriental Steamship Co v. Wright [1971] 1 Lloyd’s Rep 487), there is no barratry. The burden of proving barratry rests on the assured, with the burden switching to the underwriter if there is an allegation that the assured was party to the barratry (Elfie A Issaias v. Marine Insurance Co Ltd (1923) 15 Ll LR 186; Banco de Barcelona v. Union Marine Insurance Co Ltd (1925) 22 Ll LR 209; Piermay Shipping Co SA v. Chester, ‘‘The Michael’’ [1979] 2 Lloyd’s Rep 1; Michalos & Sons Maritime SA v. Prudential Assurance Co Ltd, ‘‘The Zinovia’’ [1984] 2 Lloyd’s Rep 264; Continental Illinois National Bank & Trust Co of Chicago v. Alliance Assurance Co Ltd [1986] 2 Lloyd’s Rep 470; Houghton and Mancon Ltd v. Sunderland Marine Mutual Insurance Co, ‘‘The Ny-Eeasteyr’’ [1988] 1 Lloyd’s Rep 60; National Justice Compania Naviera SA v. Prudential Assurance Co, ‘‘The Ikarian Reefer’’ [1993] 2 Lloyd’s Rep 68; North Star Shipping Ltd v. Sphere Drake Insurance plc [2005] 2 Lloyd’s Rep 76). There can be barratry by one co-owner against another (Jones v. Nicholson (1854) 10 Ex 28). The definition of barratry in r 11 fails to reflect the common law in one important respect, namely, that an act of barratry need not be intended to operate contrary to the assured’s interests: see Earle v. Rowcroft (1806) 8 East 126, which held that an act in breach of the assured’s instructions but nevertheless intended to be in the assured’s interests could be barratry (overruling on this point: Knight v. Cambridge (1724) 1 Str 581; Stamma v. Brown (1743) 2 Str 1173; Vallejo v. Wheeler (1774) 1 Cowp 143; Nutt v. Bordieu (1786) 1 TR 323; Lockyer v. Offley (1786) 1 TR 252). Barratry may be committed against a charterer of the vessel as well as its owner (Vallejo v. Wheeler (1774) 1 Cowp 143; Soares v. Thornton (1817) 7 Taunt 627; Ionides v. Pender (1872) 27 LT 244; Shell International Petroleum Co v. Gibbs, ‘‘The Salem’’ [1982] 1 Lloyd’s Rep 369). The mortgagee of a vessel may also recover for barratry (Small v. United Kingdom Marine Mutual Insurance Association [1897] 2 QB 311). Fraud by the crew authorised by the charterer is not barratry as far as the owner is concerned (Hobbs v. Hannam (1811) 3 Camp 93). Barratry has typically taken the form of: deviation from the agreed voyage by the crew, for their own purposes (Ross v. Hunter (1790) 4 TR 33; Moss v. Byrom (1795) 6 TR 379; Vallejo v. Wheeler (1774) 1 Cowp 143; Roscow v. Corson (1819) 1 Taunt 684; Mentz, Decker & Co v. Maritime Insurance Co Ltd [1910] 1 KB 132); delay (Roscow v. Corson (1819) 8 Taunt 684); fraud in relation to the cargo, commonly involving sale of the cargo and scuttling of the vessel to disguise the fraud, misappropriation of the vessel or detention of the cargo (Pole v. Fitzgerald (1754) Amb 214; Toulmin v. Inglis (1808) 1 Camp 421; Toulmin v. Anderson (1808) 1 Taunt 227; Heyman v. Parrish (1809) 2 Camp 149; Brown v. Smith (1813) 1 Dow 349; Falkner v. Ritchie (1814) 2 M & S 290; Hucks v. Thornton (1815) Holt NP 30; Soares v. Thornton (1817) 7 Taunt 627; Dixon v. Reid (1822) 5 B & Ald 597; Ionides v. Pender (1872) 27 LT 244; Small v. UK Marine Insurance Association [1897] 2 QB 311; Compania Naviera Bachi v. Henry Hosegood & Co Ltd [1938] 2 All ER 189; Marstrand Fishing Co Ltd v. Beer, ‘‘The Girl Pat’’ (1937) 56 Ll LR 163); or illegal trading (Knight v. Cambridge (1724) 1 Str 581; Stamma v. Brown (1742) 2 Str 1173; Robertson v. Ewer (1786) 1 TR 127; Lockyer v. Offley (1786) 1 TR 252; Havelock v. Hancill (1789) 3 TR 277; Goldschmidt v. Whitmore (1811) 3 Taunt 508; Australian Insurance Co v. Jackson (1875) 33 LT 286).

12. The term ‘‘all other perils’’ includes only perils similar in kind to the perils specifically mentioned in the policy.

800

Marine Insurance Act 1906

5.20

Notes The phrase ‘‘all other perils’’ was the ‘‘sweeping up’’ provision in the old form of policy set out in the Sched to the 1906 Act. Rule 12 codifies a series of cases which held that the phrase did not greatly extend the specific cover provided by the policy, and was to be construed ejusdem generis (Cullen v. Butler (1816) 5 M & S 461; Butler v. Wildman (1820) 3 B & Ald 398; Thames & Mersey Marine Insurance Co Ltd v. Hamilton, Fraser & Co, ‘‘The Inchmaree’’ (1887) 12 App Cas 484). The assured has, under this principle, been held to be covered where the vessel was damaged by the sea while on a beach, a risk not constituting a peril of the sea (Thompson v. Whitmore (1810) 3 Taunt 227, and see also Phillips v. Barber (1821) 5 B & Ald 161).

13. The term ‘‘average unless general’’ means a partial loss of the subject-matter insured other than a general average loss, and does not include ‘‘particular charges’’. Notes See s 64.

14. Where the ship has stranded, the insurer is liable for the excepted losses, although the loss is not attributable to the stranding, provided that when the stranding takes place the risk has attached and, if the policy be on goods, that the damaged goods are on board. Notes The peril ‘‘stranding’’ no longer appears in standard marine policies. It was historically of greatest significance in policies warranted free of particular average (see s 76 and the note thereto), as the exclusion of partial losses was lifted where the vessel was ‘‘stranded’’. Rule 14 consolidates the common law, which had established that the assured could recover despite the fact that the cargo had not been damaged by the stranding (Bowring v. Elmslie (1790) 7 TR 216n; Burnett v. Kensington (1797) 7 TR 210; Harman v. Vaux (1813) 3 Camp 429), as long as it was on board at the time of the stranding (‘‘The Alsace Lorraine’’ [1893] P 209; Thames & Mersey Marine Insurance Co v. Pitts, Son & King [1893] 1 QB 476). Stranding, which should be distinguished from sinking (Baker-Whiteley Coal Co v. Marten (1910) 26 TLR 314) involves two elements. (1) The vessel must be grounded by reason of an accident or fortuity rather than in the ordinary course of a voyage (Burnett v. Kensington (1797) 7 TR 210; Thompson v. Whitmore (1810) 3 Taunt 227; Harman v. Vaux (1813) 3 Camp 429; Carruthers v. Sydebotham (1815) 4 M & S 77; Hearne v. Edmunds (1819) 1 Brod & Bing 388; Rayner v. Godmond (1821) 5 B & Ald 225; Barrow v. Bell (1825) 4 B & C 736; Bishop v. Pentland (1827) 7 B & C 219; Wells v. Hopwood (1832) 3 B & Ad 20; Kingsford v. Marshall (1832) 8 Bing 458; Magnus v. Buttemer (1852) 11 CB 876; Corcoran v. Gurney (1853) 1 E & B 456; De Mattos v. Saunders (1872) LR 7 CP 570; Letchford v. Oldham (1880) 5 QBD 538). (2) Some form of settling on dry land is required (M’Dougle v. Royal Exchange Assurance Co (1816) 4 M & S 503; Baker v. Towry (1816) 1 Stark 436; Wells v. Hopwood (1832) 3 B & Ad 20; Bryant & May Ltd v. London Assurance Corporation (1886) 2 TLR 591). See also r 7 and the note thereto.

15. The term ‘‘ship’’ includes the hull, materials and outfit, stores and provisions for the officers and crew, and, in the case of vessels engaged in a special trade, the ordinary fittings requisite for the trade, and also, in the case of a steamship, the machinery, boilers, and coals and engine stores, if owned by the assured. Notes See the note to s 16.

16. The term ‘‘freight’’ includes the profit derivable by a shipowner from the employment of his ship to carry his own goods or moveables, as well as freight payable by a third party, but does not include passage money. Notes This is based on Flint v. Flemyng (1830) 1 B & Ad 45 and Denoon v. Home and Colonial Assurance Co (1872) LR 7 CP 341. Expenses incidental to the voyage are outside the definition of freight (Winter v. Haldimand (1831) 2 B & Ad 649). The phrase ‘‘charges on cargo’’ includes freight (Gulf & Southern SS Co Inc v. British Traders Insurance Co Ltd [1930] 1 KB 451).

17. The term ‘‘goods’’ means goods in the nature of merchandise, and does not include personal effects or provisions and stores for use on board.

801

5.20

Marine Insurance

In the absence of any usage to the contrary, deck cargo and living animals must be insured specifically, and not under the general denomination of goods. Notes ‘‘Goods’’ by this definition basically means cargo. Where effects are insured specifically, the term incorporates nautical instruments, clothes, books and furniture (Duff v. Mackenzie (1857) 3 CBNS 16). Whether the term ‘‘goods’’ includes the materials in which the goods are packed depends upon the description of the insured cargo. The cases are not fully consistent, but the principle appears to be that if it is contemplated from the agreement or from market practice that the goods are to be packaged rather than carried in bulk, the insurance covers the packaging, whereas if the packaging does not form part of the description of the risk it is not covered (Brown Brothers v. Fleming (1902) 7 Com Cas 245; Berk v. Style [1955] 2 Lloyd’s Rep 383. Contrast Vacuum Oil Co v. Union Insurance Society of Canton (1925) 24 Ll LR 188). The second paragraph of r 17 excludes cargo in the form of deck cargo and live animals from the term ‘‘goods’’. It is uncertain whether the deck cargo rule (illustrated by Hood v. West End Motor Car Packing Co [1917] 2 KB 38) applies to inland voyages, the point being expressly left open in Apollinaris Co v. Nord Deutsche Insurance Co [1904] 1 KB 252. Profits on goods must be insured separately (Lucena v. Craufurd (1806) 2 Bos & PNR 269; Anderson v. Morice (1875) LR 10 CP 609; Royal Exchange Assurance Co v. M’Swiney (1850) 14 QB 646, and see the note to s 3(2)(a)).

Schedule 2 [Repealed by the Statute Law Revision Act 1927.]

5.21 MARINE INSURANCE (GAMBLING POLICIES) ACT 1909 (9 Edw 7 c 12) An Act to prohibit Gambling on Loss by Maritime Perils General Note This Act superimposes criminal sanctions upon the civil consequences contained in the Marine Insurance Act 1906 of insuring under a marine policy where there is no insurable interest. The Act is to all effects redundant, and there are no reported prosecutions under the Act.

Prohibition of gambling on loss by maritime perils 1.—(1) If— (a) any person effects a contract of marine insurance without having any bona fide interest, direct or indirect, either in the safe arrival of the ship in relation to which the contract is made or in the safety or preservation of the subject-matter insured, or a bona fide expectation of acquiring such an interest; or (b) any person in the employment of the owner of a ship, not being a part owner of the ship, effects a contract of marine insurance in relation to the ship, and the contract is made ‘‘interest or no interest,’’ or ‘‘without further proof of interest than the policy itself,’’ or ‘‘without benefit of salvage to the insurer,’’ or subject to any other like term, the contract shall be deemed to be a contract by way of gambling on loss by maritime perils, and the person effecting it shall be guilty of an offence, and shall be liable, on summary conviction, to imprisonment, with or without hard labour, for a term not exceeding six months or to a fine not exceeding [level 3 on the standard scale], and in either case to forfeit to the Crown any money he may receive under the contract. (2) Any broker or other person through whom, and any insurer with whom, any such contract is effected shall be guilty of an offence and liable on summary conviction to the like penalties if he acted knowing that the contract was by way of gambling on loss by maritime perils within the meaning of this Act.

802

Marine and Aviation Insurance (War Risks) Act 1952

5.22

(3) Proceedings under this Act shall not be instituted without the consent in England of the Attorney-General, in Scotland of the Lord Advocate, and in Ireland of the Attorney-General for Ireland. (4) Proceedings shall not be instituted under this Act against a person (other than a person in the employment of the owner of the ship in relation to which the contract was made) alleged to have effected a contract by way of gambling on loss by maritime perils until an opportunity has been afforded him of showing that the contract was not such a contract as aforesaid, and any information given by that person for that purpose shall not be admissible in evidence against him in any prosecution under this Act. (5) If proceedings under this Act are taken against any person (other than a person in the employment of the owner of the ship in relation to which the contract was made) for effecting such a contract, and the contract was made ‘‘interest or no interest,’’ or ‘‘without further proof of interest than the policy itself,’’ or ‘‘without benefit of salvage to the insurer,’’ or subject to any other like term, the contract shall be deemed to be a contract by way of gambling on loss by maritime perils unless the contrary is proved. (6) For the purpose of giving jurisdiction under this Act, every offence shall be deemed to have been committed either in the place in which the same actually was committed or in any place in which the offender may be. (7) Any person aggrieved by an order or decision of a court of summary jurisdiction under this Act, may appeal to [the Crown Court]. (8) For the purposes of this Act the expression ‘‘owner’’ includes charterer. (9) Subsection (7) of this section shall not apply to Scotland. Notes Subs (1) This subsection was amended by the Criminal Justice Act 1982, s 38. Subs (1)(a) corresponds to s 5(2) of the Marine Insurance Act 1906, and subs (1)(b) corresponds to s 4(2)(b) of the Marine Insurance Act 1906. Subs (2) The imposition of criminal sanctions against a broker who arranges insurance by way of gambling is intended to prevent the creation of such contracts. The existence of this provision is virtually unknown in the broking industry. Subs (7) This subsection was amended by the Courts Act 1971, s 56.

Short title 2.—This Act may be cited as the Marine Insurance (Gambling Policies) Act 1909, and the Marine Insurance Act 1906 and this Act may be cited together as the Marine Insurance Acts 1906 and 1909.

5.22 MARINE AND AVIATION INSURANCE (WAR RISKS) ACT 1952 (15 & 16 Geo 6 1 Eliz 2 c 57) An Act to make provision for authorising the Minister of Transport to undertake the insurance of ships, aircraft and certain other goods against war risks and, in certain circumstances, other risks; for the payment by him of compensation in respect of certain goods lost or damaged in transit in consequence of war risks; and for purposes connected with the matters aforesaid General Note In time of war commercial insurance or reinsurance against marine and aviation risks is virtually unobtainable. The purpose of the 1952 Act was to facilitate insurance arrangements by providing reinsurance to commercial insurers of British aircraft, vessels and cargo (s 1) or, in the absence of willing insurers, to provide insurance directly to assureds (s 2). The 1952 Act replaced the scheme originally contained in the War Risks Insurance Act 1939.

Agreements for re-insurance by Minister of Transport of war risks in respect of ships, aircraft and cargoes 1.—(1) The Minister of Transport (hereafter in this Act referred to as ‘‘the Minister’’) may, with the approval of the Treasury, enter into agreements with any authorities or persons—

803

5.22

Marine Insurance

(a) whereby he undertakes the liability of re-insuring any war risks against which a ship or aircraft is for the time being insured; and (b) whereby he undertakes the liability of re-insuring any war risks against which the cargo carried in a ship or aircraft is for the time being insured: Provided that the Minister shall not enter into an agreement whereby he undertakes the liability of re-insuring any war risks against which a ship or aircraft not being a British ship or British aircraft is for the time being insured, except in so far as they arise during the continuance of any war or other hostilities in which Her Majesty is engaged or arise after any such war or hostilities in consequence of things done or omitted during the continuance thereof. (2) A copy of every agreement made in pursuance of this section shall, as soon as may be after the agreement is made, be laid before each House of Parliament; and if either House, within the period of fourteen days beginning with the day on which a copy of such an agreement is laid before it, resolves the agreement be annulled, the agreement shall thereupon become void except in so far as it confers rights or imposes obligations in respect of things previously done or omitted to be done, without prejudice, however, to the making of a new agreement. In reckoning for the purposes of this subsection any such period of fourteen days as aforesaid, no account shall be taken of any time during which Parliament is dissolved or prorogued or during which both Houses are adjourned for more than four days. (3) The reference in paragraph (a) of subsection (1) of this section to a ship or aircraft shall be construed as including a reference to any machinery, tackle, furniture or equipment of a ship or aircraft, and to any goods on board of a ship or aircraft, not being cargo carried therein, and the first reference in the proviso to that subsection to a ship or aircraft shall accordingly be similarly construed. Notes The power to reinsure is confined to British ships and British aircraft, and their cargoes. Contracts need not conform to the requirement in s 22 of the Marine Insurance Act 1906 of embodiment in a policy: Marine and Aviation Insurance (War Risks) Act 1952, s 7.

Insurance by Minister of Transport of ships, aircraft and cargoes 2.—(1) The Minister may, with the approval of the Treasury, carry on business under and in accordance with all or any of the following provisions of this subsection, that is to say:— (a) at any time when it appears to him that reasonable and adequate facilities for the insurance of British ships or British aircraft against war risks, or any description of such risks, are not available, for the insurance by him of such ships, or as the case may be, such aircraft, against such risks or, as the case may be, that description thereof; (b) during the continuance of any war or other hostilities in which Her Majesty is engaged, for the insurance by him of ships and aircraft (whether British or not); (c) at any time when it appears to him that reasonable and adequate facilities for the insurance of cargoes carried in ships or aircraft against war risks, or any description of such risks, are not available, for the insurance by him of such cargoes against such risks or, as the case may be, that description thereof; (d) during the continuance of any war or other hostilities in which Her Majesty is engaged for the insurance by him of cargoes carried in ships or aircraft; (e) during the continuance of any such war or hostilities, for the insurance by him of goods consigned for carriage by sea or by air, while the goods are in transit between the premises from which they are consigned and the ship or aircraft or between the ship or aircraft and their destination: Provided that the Minister shall not, by virtue of paragraph (b), (d) or (e) of this subsection, undertake the insurance of a ship, aircraft or cargo against risks other than war risks unless he is satisfied that, in the interests of the defence of the realm or the efficient prosecution of any such war or hostilities as aforesaid, it is necessary or expedient so to do. (2) References in paragraphs (a) and (b) of the foregoing subsection to ships of any description and to aircraft of any description shall be construed as including references to any machinery, tackle, furniture or equipment of ships of that description and aircraft of that description respectively and to any goods on board of ships of that description and aircraft of

804

Marine and Aviation Insurance (War Risks) Act 1952

5.22

that description respectively, not being cargo carried therein, and the reference in the proviso to that subsection to a ship or aircraft shall accordingly be similarly construed. (3) In paragraph (e) of subsection (1) of this section the expression ‘‘the ship or aircraft’’, in relation to goods consigned for carriage by sea or by air, does not include a vessel from which the goods are discharged for the purpose of being carried by sea or by air or into which they are discharged for the purpose of being landed. Notes This section contains the power to issue direct insurance where commercial cover is otherwise not available. Cover must normally be confined to war risks. Contracts need not conform to the requirement in s 22 of the Marine Insurance Act 1906 of embodiment in a policy: Marine and Aviation Insurance (War Risks) Act 1952, s 7.

Transitional provisions for compensation in respect of goods lost or damaged in transit after discharge or before shipment 3.—(1) Where a person satisfies the Minister with respect to any goods— (a) that the goods, having been consigned for carriage by sea or by air from a place outside any one of the countries to which this paragraph applies to a place in that country,— (i) were discharged in that country from the ship or aircraft before the expiration of the period of seven days beginning with such day as the Minister may declare to be the day as from which he will carry on business for the purpose mentioned in paragraph (e) of subsection (1) of the last foregoing section; (ii) were, after the beginning of that day and before the expiration of the appropriate period, lost or damaged in consequence of a war risk, being one which the Minister was, on that day, prepared to insure under the said paragraph (e); and (iii) were lost or damaged while in transit between the ship or aircraft and their destination; or, having been consigned for carriage by sea or by air from a place in any one of the countries to which this paragraph applies to a place outside that country before the expiration of the said period of seven days, were, after the beginning of the said day, lost or damaged in consequence of such a war risk as aforesaid while in transit between the premises from which they were consigned and the ship or aircraft; and (b) that the goods were not insured against the risk in consequence of which they were lost or damaged; and (c) that he and his agents exercised all due diligence for securing that no delay occurred while the goods were in such transit as aforesaid; and (d) that at the time when the loss or damage occurred the property in the goods was vested in him; the Minister shall pay to him, by way of compensation for that loss or damage, an amount ascertained in accordance with the next following subsection. (2) The amount of compensation payable under the foregoing subsection shall be— (a) in the case of lost goods, an amount equal to the insurable value of the goods; (b) in the case of damaged goods— (i) where the goods have been delivered at their destination, an amount equal to such proportion of the insurable value of the goods as the difference between the gross sound and damaged values at the place of arrival bears to the gross sound value; (ii) where the goods have not been so delivered, an amount equal to such proportion of the insurable value of the goods as the difference between the gross sound and damaged values at the premises from which they were consigned bears to the gross sound value. (3) Where, at a time when the loss or damage for which compensation in respect of any goods has become payable under this section occurred, the goods were subject to a mortgage, charge or other similar obligation, the amount of the compensation shall be deemed to be comprised in that mortgage, charge or other obligation. (4) The countries to which paragraph (a) of subsection (1) of this section applies are the United Kingdom, the Isle of Man and any of the Channel Islands.

805

5.22

Marine Insurance

(5) In this section— (a) the expression ‘‘the ship or aircraft’’, in relation to goods consigned for carriage by sea or by air to or from a country to which paragraph (a) of subsection (1) of this section applies, does not include a vessel into which the goods are discharged at a port or place in that country for the purpose of being landed at that port or place, or from which the goods are discharged for the purpose of being carried by sea or by air from that country, as the case may be; (b) the expression ‘‘the appropriate period’’ means— (i) in a case where the destination of the goods is within the port or place at which they were discharged from the ship or aircraft, the period of fifteen days beginning with the day on which they were so discharged; or (ii) in a case where the destination of the goods is outside the said port or place, the period of thirty days beginning with the day on which they were so discharged; and (c) the expression ‘‘insurable value’’ means, in relation to goods consigned for carriage by sea or by air, the prime cost of the goods plus the expenses of and incidental to the carriage thereof as aforesaid and the charges of insurance upon the whole; and for the purposes of this section the gross value of goods shall be taken to be the wholesale price or, if there be no such price, the estimated value, with, in either case, the expenses of and incidental to the carriage of the goods. Notes This section is purely transitional.

Liabilities of re-insurer in the event of insurer’s insolvency 4. Where a sum becomes payable to a person (hereafter in this section referred to as ‘‘the insurer’’) in respect of any loss or damage arising from a risk against which the insurer has, either originally or by way of re-insurance, insured another person (hereafter in this section referred to as ‘‘the assured’’) and either— (a) the sum has become payable by the Minister by virtue of an agreement under section one of this Act; or (b) the sum has become payable under a contract of insurance by some person other than the Minister (hereafter in this section referred to as ‘‘the intermediate insurer’’) and the risk has been re-insured under such an agreement as aforesaid, then, if before payment of that sum is made by the Minister or the intermediate insurer, the insurer becomes bankrupt or, in a case where the insurer is a company, the company commences to be wound up, or a receiver is appointed on behalf of the holders of any debentures of the company secured by a floating charge or possession is taken by or on behalf of the holders of such debentures of any property comprised in or subject to the charge, that sum shall cease to be payable to the insurer and the amount thereof shall be paid to the assured by the Minister or the intermediate insurer, as the case may be, and the right of the assured to receive payment in respect of the loss or damage from the insurer shall, to the extent to which the risk has been re-insured by the Minister, be extinguished. Notes This section authorises a ‘‘cut-through’’ arrangement under which, in the event of the insolvency of an underwriter who is reinsured directly or indirectly by the Minister under the Act, the reinsurance moneys are payable directly to the assured. Any moneys received by the assured go towards discharging the underwriter’s obligation, and any surplus over and above the reinsurance moneys payable to the assured must be recovered by the assured from the underwriter’s liquidator in the usual way. The section applies equally where the government is the retrocessionaire of a reinsurance arrangement and the reinsurer becomes insolvent: in such a case, the sums payable under the retrocession go directly to the reinsured. It was necessary to legislate specifically for this result, as the Third Parties (Rights against Insurers) Act 1930 does not apply to reinsurance: see s 1(4) of the 1930 Act.

Establishment of fund for purposes of this Act 5.—(1) There shall be established under the control of the Minister a fund, to be called the ‘‘marine and aviation insurance (war risks) fund’’,—

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(a) into which shall be paid— (i) all sums received by the Minister by virtue of this Act; (ii), (iii) . . . (b) out of which shall be paid— (i) all sums required for the fulfilment by the Minister of any of his obligations under this Act; . . . (ii) . . . (2) If, at any time when a payment falls to be made out of the marine and aviation insurance (war risks) fund, the sum standing to the credit of that fund is less than the sum required for the making of that payment, an amount equal to the deficiency shall be paid into that fund out of moneys provided by Parliament, but if and so far as that amount is not paid out of such moneys, it shall be charged on and issued out of the Consolidated Fund of the United Kingdom . . . (hereafter in this Act referred to as ‘‘the Consolidated Fund’’). (3) If, at any time, the amount standing to the credit of the marine and aviation insurance (war risks) fund exceeds the sum which, in the opinion of the Minister and the Treasury, is likely to be required for the making of payments out of that fund, the excess shall be paid into the Exchequer . . . (4) The Minister shall prepare, in such form and manner as the Treasury may direct, an account of the sums received into and paid out of the marine and aviation insurance (war risks) fund in each financial year, and shall, on or before the thirtieth day of November in each year, transmit the account to the Comptroller and Auditor General, who shall examine and certify the account and lay copies thereof together with copies of his report thereon, before both Houses of Parliament: Provided that if the Treasury certify that, in the interests of the defence of the realm or the efficient prosecution of any war or other hostilities in which Her Majesty is engaged, it is inexpedient that copies of the account for any year and of the report thereon should be laid before Parliament, a copy of the certificate shall be laid before both Houses of Parliament and, so long as the certificate remains in force, those copies of the account and of the report shall not be so laid. Notes Subs (1) This was amended by the Statute Law (Reform) Act 1981. Subs (2) This was amended by the Statute Law (Reform) Act 1963. Subs (3) This was amended by the National Loans Act 1968, s 24(2).

Section 6 [Repealed by the National Loans Act 1968, s 24.] Exemption of certain instruments from provisions of Stamp Act 1891 and Marine Insurance Act 1906 7.—(1) None of the following instruments shall . . . be inadmissible in evidence by reason only that it is not embodied in a marine policy in accordance with the Marine Insurance Act 1906, that is to say:— (a) an agreement for re-insurance made in pursuance of section one of this Act between the Minister and any other authority or person, and a policy of reinsurance issued by the Minister in pursuance of such an agreement; (b) an agreement entered into by a body to which this paragraph applies, being an agreement for the re-insurance of a risk insured by another person which may be again re-insured by the Minister, and a policy issued in pursuance of such an agreement, being a policy for the re-insurance only of such a risk as aforesaid; (c) a contract of insurance entered into by the Minister in exercise of the powers conferred on him by section two of this Act, and a policy of insurance and a certificate of insurance issued by the Minister in connection with any such contract. (2), (3) . . . (4) Paragraph (b) of subsection (1) of this section applies to any body of persons for the time being approved for the purposes of this Act by the Minister, being a body the objects of which are or include the carrying on of business by way of the re-insurance of risks which may be

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re-insured under any agreement for the purpose mentioned in paragraph (b) of subsection (1) of section one of this Act. Notes Subs (1) This was amended by the Finance Act 1959, s 37. For the significance of this provision, see the notes to ss 1 and 2. Subs (2) This was repealed by the Finance Act 1970, s 36. Subs (3) This was repealed by the Finance Act 1959, s 37 and the Finance Act 1970, s 36.

Section 8 [See s 1(2)(b) of the Restriction of Advertisement (War Risks Insurance) Act 1939.] Expenses of the Minister of Transport 9. The expenses incurred for the purposes of this Act by the Minister shall, except in so far as they are required to be defrayed out of the marine and aviation insurance (war risks) fund, be defrayed out of moneys provided by Parliament. Interpretation and savings 10.—(1) In this Act, unless the context otherwise requires, the following expressions have the meanings hereby respectively assigned to them, that is to say:— ‘‘British aircraft’’ means aircraft registered in Her Majesty’s dominions; ‘‘goods’’ includes currency and any securities payable to bearer, not being either bills of exchange or promissory notes; ‘‘war risks’’ means risks arising from any of the following events, that is to say, hostilities, rebellion, revolution and civil war, from civil strife consequent on the happening of any of those events, or from action taken (whether before or after the outbreak of any hostilities, rebellion, revolution or civil war) for repelling an imagined attack or preventing or hindering the carrying out of any attack, and includes piracy. (2) The provisions of this Act relating to British ships shall apply also to ships of India and ships of the Republic of Ireland, and references in this Act to British ships shall be construed accordingly. (3) The provisions of this Act relating to British aircraft shall apply also to aircraft registered in India, the Republic of Ireland, the Federation of Malaya, a protectorate, a protected state, a trust territory or a mandated territory, and references in this Act to British aircraft shall be construed accordingly. The references in this subsection to a protectorate, a protected state, a trust territory and a mandated territory shall be construed as if they were references contained in the British Nationality Act 1948. (4) . . . Notes Subs (1) There are numerous authorities on the risks mentioned in the definition of war risks. See the note to s 55. Subs (4) This was repealed by the Statute Law (Reform) Act 1981.

Short title, extent and repeal 11.—(1) This Act may be cited as the Marine and Aviation Insurance (War Risks) Act 1952. (2) It is hereby declared that this Act extends to Northern Ireland. (3) . . . Notes Subs (3) This was repealed by the Statute Law (Reform) Act 1974.

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Schedule [Repealed by the Statute Law (Reform) Act 1974.]

5.23 PUBLIC ORDER ACT 1986 (1986 c 64) General Note This Act redefined various common law public order offences. The only significant change for insurance purposes relates to riot, which was recognised as a crime at common law and constituted an excluded peril from most marine and other policies.

1.—(1) Where twelve or more persons who are present together use or threaten unlawful violence for a common purpose and the conduct of them (taken together) is such as would cause a person of reasonable firmness present at the scene to fear for his personal safety, each of the persons using unlawful violence for the common purpose is guilty of riot. (2) It is immaterial whether or not the twelve or more use or threaten unlawful violence simultaneously. (3) The common purpose may be inferred from conduct. (4) No person of reasonable firmness need actually be, or be likely to be, present at the scene. (5) Riot may be committed in private as well as in public places. Notes At common law it was sufficient if three persons were involved (Field v. Receiver of Metropolitan Police [1907] 2 KB 853). In other respects, the definition follows the common law. See generally: London and Manchester Plate Glass Co v. Heath [1913] 3 KB 411; London and Lancashire Fire Insurance Co v. Bolands [1924] AC 836. See also the Riot (Damages) Act 1886.

10. In Schedule 1 to the Marine Insurance Act 1906 (form and rules for the construction of certain insurance policies) ‘‘rioters’’ in rule 8 and ‘‘riot’’ in rule 10 shall, in the application of the rules to any policy taking effect on or after the coming into force of this section, be construed in accordance with section 1 above unless a different intention appears. Notes It is unclear whether the Act applies to non-marine policies, but it must be assumed—in line with the general rule of construction applicable to insurance policies—that the word ‘‘riot’’ when encountered in a non-marine policy must have been intended to have been used in its statutory sense.

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CHAPTER 6

LIABILITY INSURANCE

OVERVIEW 6.1 There has been greater statutory intervention in the field of liability insurance than in any other area of substantive insurance law. A number of statutes require compulsory insurance to be in place as a condition of carrying on a particular form of activity. The relevant statutes are: (a) Riding Establishments Act 1964 (insurance against liability for personal injuries arising out of the use or hire of a horse); (b) Nuclear Installations Act 1965 (insurance to be held by operators of nuclear establishments against the consequences of nuclear accidents); (c) Employers’ Liability (Compulsory Insurance) Act 1969 (insurance against liability for personal injury to employees employed in Great Britain); (d) Solicitors Act 1974 (insurance against professional negligence); (e) Credit Unions Act 1979 (insurance against loss or liability caused or incurred by reason of fraud or dishonesty of employees); (f) Estate Agents Act 1979 (insurance against liability for mishandling client money); (g) Road Traffic Act 1988 (insurance against liability for use or permitting use of a motor vehicle, in respect of personal injury or property damage); (h) Osteopaths Act 1993 (insurance against professional negligence); (i) Merchant Shipping Act 1995 (insurance by owners of oil tankers and other vessels against liability for oil pollution, including liability for bunker oil); (j) Merchant Shipping and Maritime Security Act 1997 (insurance against liability for ships in UK waters, other than oil pollution liability). The relevant parts of the legislation and implementing regulations are set out in this chapter, with the exception of the Road Traffic Act 1988 which is treated separately in chapter 7. 6.2 In addition to legislation requiring insurance, the rules of professional organisations commonly do the same. 6.3 The statutes which impose a requirement for liability insurance do not on the whole dictate the terms upon which liability insurance is to be taken out, other than by identifying the risks against which insurance must be available. There are, however, important exceptions to this principle in the Employers’ Liability (Compulsory Insurance) Act 1969 and the Road Traffic Act 1988, both of which to a greater or lesser extent intervene in the contractual arrangements between the parties by depriving the insurer of the right to plead defences that would otherwise be available. Professional rules may also require insurers to forego rights of avoidance and termination for breach of warranty in policies issued by them to lawyers, accountants and others. 6.4 The existence of liability insurance, whether or not compulsory, is expressly recognised by the Third Parties (Rights against Insurers) Act 1930. This Act overcomes the common law rule that the proceeds of a liability policy form part of the assured’s 811

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general assets in the event of his insolvency, by permitting the third party victim of an insolvent assured to bring direct proceedings against the liability insurer and thereby preventing the insurance proceeds from forming part of assets which are to be applied in favour of all creditors. As will be apparent from the annotations to the 1930 Act, it has, over the years, been proved to have a series of fundamental weaknesses, and in 1995 the Law Commission instigated an investigation of its provisions, producing a consultation paper in January 1997 and a final report in 2000. To date the Law Commission’s recommendations for fundamental changes to the 1930 Act has not been implemented. One change, contained in the amended version of s 651 of the Companies Act 1985, is modification of the time limits available for an application to be made for the restoration of a dissolved company to the register of companies so that its liability can be established for the purposes of the 1930 Act. That section has been replaced by Chapter 3 of Part 31 of the Companies Act 2006 (ss 1029 to 1032). 6.5 Liability insurers are affected by Government policy to recoup from those inflicting personal injuries on victims any social security payments made to, and National Health Service charges incurred by, the victim. This is achieved by two pieces of legislation, the Social Security (Recovery of Benefits) Act 1997 and the Health and Social Care (Community Health and Standards) Act 2003. These Acts, supported by implementing Regulations, establish the Central Recovery Unit which is charged with the responsibility of recovering payments and charges from wrongdoers and their liability insurers. The schemes under the two pieces of legislation are more or less identical, and only the latter is reproduced in this work. 6.20 THIRD PARTIES (RIGHTS AGAINST INSURERS) ACT 1930 (20 & 21 Geo 5 c 25) An Act to confer on third parties rights against insurers of third-party risks in the event of the insured becoming insolvent, and in certain other events [10 July 1930] General Note Prior to the 1930 Act, the proceeds of a liability policy of an insolvent assured were payable to the assured’s trustee in bankruptcy or liquidator, as the case may be. This meant that if the assured incurred liability to a third party, and became insolvent prior to making payment to the third party and receiving indemnification from his insurers, the third party’s claim would give the assured a claim against the liability insurers, and the policy moneys would be paid to the assured for the benefit of the assured’s general creditors and not the third party whose loss generated the claim against the insurers. This position, established by Re Harrington Motor Co [1928] Ch 105 and Hood’s Trustees v. Southern Union General Insurance Co of Australasia [1928] Ch 739, was regarded as unfair to the injured third party, who could expect only a small dividend from the assured’s insolvency. The effect of the 1930 Act is to transfer to the third party the assured’s claim against the assured’s liability insurers once the assured’s liability to the third party has been established and quantified.

Rights of third parties against insurers on bankruptcy, etc, of the insured 1.—(1) Where, under any contract of insurance a person (hereinafter referred to as the insured) is insured against liabilities to third parties which he may incur, then— (a) in the event of the insured becoming bankrupt or making a composition or arrangement with his creditors; or (b) in the case of the insured being a company, in the event of a winding-up order being made, or a resolution for a voluntary winding-up being passed, [or of the company entering administration,]or of a receiver or manager of the company’s business or undertaking being duly appointed, or of possession being taken, by or on behalf of the holders of any debentures secured by a floating charge, of any property comprised in or subject to the charge or of a voluntary arrangement proposed for the purposes of Part I of the Insolvency Act 1986 being approved under that Part;

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if, either before or after that event, any such liability as aforesaid is incurred by the insured, his rights against the insurer under the contract in respect of the liability shall, notwithstanding anything in any Act or rule of law to the contrary, be transferred to and vest in the third party to whom the liability was so incurred. (2) Where [the estate of any person falls to be administered in accordance with an order under section [421 of the Insolvency Act 1986]], then, if any debt provable in bankruptcy [(in Scotland, any claim accepted in the sequestration)] is owing by the deceased in respect of a liability against which he was insured under a contract of insurance as being a liability to a third party, the deceased debtor’s rights against the insurer under the contract in respect of that liability shall, notwithstanding anything in [any such order], be transferred to and vest in the person to whom the debt is owing. (3) In so far as any contract of insurance made after the commencement of this Act in respect of any liability of the insured to third parties purports, whether directly or indirectly, to avoid the contract or to alter the rights of the parties thereunder upon the happening to the insured of any of the events specified in paragraph (a) or paragraph (b) of subsection (1) of this section or upon the [estate of any person falling to be administered in accordance with an order under section [421 of the Insolvency Act 1986]], the contract shall be of no effect. (4) Upon a transfer under subsection (1) or subsection (2) of this section, the insurer shall, subject to the provisions of section three of this Act, be under the same liability to the third party as he would have been under to the insured, but— (a) if the liability of the insurer to the insured exceeds the liability of the insured to the third party, nothing in this Act shall affect the rights of the insured against the insurer in respect of the excess; and (b) if the liability of the insurer to the insured is less than the liability of the insured to the third party, nothing in this Act shall affect the rights of the third party against the insured in respect of the balance. (5) For the purposes of this Act, the expression ‘‘liabilities to third parties’’, in relation to a person insured under any contract of insurance, shall not include any liability of that person in the capacity of insurer under some other contract of insurance. (6) This Act shall not apply— (a) where a company is wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company; or (b) to any case to which subsections (1) and (2) of section seven of the Workmen’s Compensation Act 1925 applies. Notes Subs (1) was amended by the Insolvency Act 1985, s 235 and Sched 8, para 7, the Insolvency Act 1986, s 439 and Sched 14 and the Enterprise Act 2002 (Insolvency) Order, SI 2003 No 2096, Sched 1, para 2. The effect of subs (1) is to transfer the assured’s rights against his insurers to the third party on the happening of any of the events listed in subs (1), as qualified by subs (4)(a) (excluding voluntary winding-up for reconstruction or amalgamation). An assured company which goes into administration, or an individual assured who enters into an individual voluntary arrangement with his creditors is, under the Insolvency Act 1986, given immunity from claims during the period of the insolvency proceedings and that this will bind a contingent claimant against the assured. It was held in Sea Voyager Maritime Inc v. Bielecki [1999] Lloyd’s Rep IR 356, a case involving an individual voluntary arrangement, that a moratorium against a claimant is unfairly prejudicial to his rights as it prevents him from triggering the 1930 Act, and accordingly that it was appropriate to disapply the individual voluntary arrangement in his favour. Where an assured has incurred an established and quantified liability to a third party, and has failed to pay, the third party may seek a winding-up order against the assured in order to take advantage of the 1930 Act and to proceed against the assured’s liability insurers. It is not necessary that the assured carries on business in England, and it is enough that the assured has assets in England: Re Compania Merabello San Nicholas SA [1973] Ch 75; Re Allabrogia Steamship Corporation [1978] 3 All ER 423. ‘‘Contract of insurance’’: The 1930 Act in principle applies to mutual insurances as well as to other forms of insurance (Wooding v. Monmouthshire and South Wales Mutual Indemnity Society Ltd [1939] 4 All ER 570), although a mutual insurance contract which confers on the insurer the right to refuse payment in its absolute discretion is probably not a contract of insurance (Medical Defence Union v. Department of Trade [1979] Ch 82). Further, a mutual association which uses ‘‘pay to be paid’’ provisions is de facto outside the 1930 Act: see the note to subs (4). In Re OT Computers [2004] Lloyd’s Rep IR 669 the Court of Appeal held that the Act applies to all forms of liability insurance, including those which insure against contractual liability, overruling T&N Ltd v. Royal and Sun Alliance plc [2004] Lloyd’s Rep IR 106. The Court of Appeal

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also cast doubt on the first instance ruling in Tarbuck v. Avon Insurance Ltd [2002] Lloyd’s Rep IR 393 in which it was held that the 1930 Act did not apply to the insurance of a liability voluntarily incurred, in that case by an assured to his solicitors under a legal expenses policy Territorial scope: It is unclear whether the 1930 Act applies to contracts which are not governed by English law, or whether it is enough that (irrespective of the applicable law) the proceeds are payable in England or that the assured company has been wound up in England: Irish Shipping Ltd v. Commercial Union Assurance Co plc [1989] 2 Lloyd’s Rep 144. The better view is that the 1930 Act applies to insolvency proceedings opened in the UK irrespective of the law applicable to the policy. ‘‘Such liability is . . . incurred’’: The 1930 Act cannot be used by a third party until the assured’s liability to him has been established and quantified, by judgment, award or binding settlement. Until that date, any claim under the 1930 Act is premature: Post Office v. Norwich Union Fire Insurance Society [1967] 1 All ER 577; Bradley v. Eagle Star Insurance Co [1989] 2 WLR 568; Cox v. Bankside Members Agency Ltd [1995] 2 Lloyd’s Rep 437. Any future proceeds may, therefore, be the subject of a settlement agreement between the supervisor of the assured’s assets under an individual voluntary arrangement and the insurers (Re Greenfield , Jackson v. Greenfield 1997, unreported). An interim payment ordered by the High Court, under the Civil Procedure Rules 1998 Rule 25.7 and Part 41, is nevertheless to be regarded as an established and quantified liability for these purposes, on the basis that such a payment can be ordered only where a finding of liability is inevitable and the payment itself is one on account (Cox v. Bankside Members’ Agency Ltd [1995] 2 Lloyd’s Rep 437). Proof of the assured’s liability may be problematic where the assured is a company which has been removed from the register of companies and has thus ceased to exist, rendering it incapable of legal proceedings against it: in such a case, ss 1029–1032 of the Companies Act 2006 (see para 6.31) may be used to resurrect the company for the purposes of establishing its legal liability. The limitation period for the third party’s claim against the assured is unaffected by the 1930 Act so that the usual rules apply and if the third party’s claim is time-barred then he cannot establish the liability of the assured for the purposes of a claim under the 1930 Act. However, if the assured has become insolvent before the expiry of the limitation period, then the effect of the insolvency is to suspend the running of time and the third party may prove in the assured’s insolvency free of any limitation constraints. The transfer under s 1 is that of the assured’s rights of claim against the insurers. Other rights, eg, the right of the assured to control claims against him, are not transferred to the assured: Centre Reinsurance Co v. Freakley [2005] Lloyd’s Rep IR 303. Subs (2) was amended by the Insolvency Act 1985, s 235 and Sched 8, para 7, the Bankruptcy (Scotland) Act 1985, s 75 and Sched 7, and the Insolvency Act 1986, s 439 and Sched 14. Subs (3) was amended by the Insolvency Act 1985, s 235 and Sched 8, and the Insolvency Act 1986, s 439 and Sched 14. The subsection avoids agreements which as a matter of law vary the assured’s rights on his insolvency, eg, where the insurer’s liability is restricted or discharged on the assured’s insolvency. The provision applies as soon as the assured has become insolvent, even though the third party has not at that stage established and quantified the assured’s liability, so that a clause which purports to vary the assured’s rights under the policy once his liabilities exceed a given figure is caught by the prohibition: Centre Reinsurance International Co v. Freakley [2005] Lloyd’s Rep IR 303. Subs (3) does not, however, affect contract terms which do not discriminate between solvency and insolvency but which de facto restrict the rights of an insolvent assured: in the joined cases Firma C-Trade SA v. Newcastle Protection and Indemnity Association, ‘‘The Fanti’’ and Socony Mobil Oil Co Inc v. West of England Shipowners Mutual Insurance Association Ltd, ‘‘The Padre Island’’ [1990] 2 All ER 705 the House of Lords held that a ‘‘pay to be paid’’ clause, requiring the assured to make payment to the third party as a condition of receiving an indemnity, did not fall foul of subs 1(3) even though in practice it could only take effect on the assured’s insolvency. Not all ‘‘pay to be paid’’ wordings achieve their objective: Charter Reinsurance Co Ltd v. Fagan [1996] 3 All ER 46. See also Centre Reinsurance International Co v. Freakley [2005] Lloyd’s Rep IR 303, where it was held that subs (3) did not apply to a clause which shifted claims control from the assured to the insurers, as such a provision did not affect the rights of the third party to make a claim under the policy. Subs (4) Once the liability of the assured to the third party has been established and quantified, the insurer is then ‘‘under the same liability to the third party as he would have been under to the insured’’. The third party’s right to claim from the insurer is contingent as soon as his claim against the assured accrues (see Cox v. Bankside Members Agency Ltd [1995] 2 Lloyd’s Rep 437 and Re OT Computers [2004] Lloyd’s Rep IR 669). This means that the third party is entitled to be joined to any proceedings between the assured and the insurers: Chubb Insurance Co of Europe SA v. Davies [2005] Lloyd’s Rep IR 1. The claim crystallises as soon as his claim is established and quantified, with the result that claims must be satisfied by the insurer as they fall due until the policy moneys are exhausted. The rights of competing claimants are thus determined on a ‘‘first past the post’’ basis rather than on a pro rata basis (Cox v. Bankside Members Agency Ltd [1995] 2 Lloyd’s Rep 437). For the allocation of sums as between claimants where the policies are layered, see Cox v. Deeny [1996] LRLR 288. Any policy excess is, in accordance with Cox, to be borne by the earliest claimants with established and quantified claims. It is uncertain whether the third party must sue the insurers, or whether he retains his right to sue the assured and to prove in the assured’s insolvency. This point may be important where the insurers themselves

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have become insolvent. There was a disagreement in the Court of Appeal on this issue in Centre Reinsurance International Co v. Freakley [2005] Lloyd’s Rep IR 303. The rights of the third party are derivative and identical to those of the assured, with the following consequences. (a) Any defence which the insurer has against the assured, most importantly the right to avoid the policy for breach of the duty of utmost good faith, will defeat the third party’s claim (McCormick v. National Motor and Accident Insurance Union Ltd (1934) 40 Com Cas 76; Cleland v. London General Insurance Co (1935) 51 Ll LR 156). (b) The financial limits of the policy apply to the third party. If, therefore, the policy covers interest and costs, those sums may equally be paid by the third party (Cox v. Bankside Members’ Agency Ltd [1995] 2 Lloyd’s Rep 437). Where, however, the policy confers upon the insurer a discretion to make a particular payment, the third party has no better right than the assured, ie, the right to have the claim fairly considered (CVG Siderugicia del Orinoco SA v. London Steamship Owners’ Mutual Insurance Association, ‘‘The Vainqueur Jose’’ [1979] 1 Lloyd’s Rep 557). (c) Policy terms which set out the conditions to be met for a claim to be valid (eg, notice of loss provisions) must have been met, if necessary by the third party, assuming that the relevant conditions are conditions precedent to the insurer’s liability (Hassett v. Legal and General Assurance Society (1939) 63 Ll LR 278; Farrell v. Federated Employers’ Insurance Association Ltd [1970] 3 All ER 632; ‘‘The Vainquer Jose’’ [1979] 1 Lloyd’s Rep 557; Pioneer Concrete (UK) Ltd v. National Employers’ Mutual General Insurance Association Ltd [1985] 2 All ER 395; Edwards v. Minster Insurance Co Ltd 1994, unreported; Cox v. Bankside Members’ Agency Ltd [1995] 2 Lloyd’s Rep 437; Alfred McAlpinev. BAI (Run-off) Ltd [2000] Lloyd’s Rep IR 352; K/S Merc-Skandia v.Certain Lloyd’s Underwriters [2001] Lloyd’s Rep IR 802; George Hunt Cranes Ltd v.Scottish Boiler and General Insurance Co [2002] Lloyd’s Rep IR 178). (d) If the policy imposes personal obligations on the assured which cannot be performed by the third party, the assured’s failure to perform those obligations will defeat the claim. Thus, the third party cannot use the 1930 Act if the assured has wrongfully admitted liability to the third party (Post Office v. Norwich Union Fire Insurance Society [1967] 1 All ER 577) or if the policy contains a ‘‘pay to be paid’’ clause under which the insurer’s liability to the assured attaches only once the assured has made payment to the third party, thereby reversing common law presumption that a liability insurer is liable to the assured as soon as the assured’s liability has been ascertained and quantified (‘‘The Fanti’’ and the ‘‘Padre Island’’ [1990] 2 All ER 705). (e) If the premium is outstanding, and payment of the premium is a condition precedent to the insurer’s liability, the third party must tender the necessary premium (Murray v. Legal and General Assurance Society Ltd [1970] 2 QB 495). (f) Any obligation on the assured to submit the claim against the insurer to arbitration is binding on the third party (Freshwater v. Western Australia Assurance Co Ltd [1933] 1 KB 515; Denney v. Bellamy [1938] 2 All ER 262; Smith v. Pearl Assurance Co [1939] 1 All ER 95). (g) The third party’s right to bring proceedings against the insurer is not distinct from the assured’s right, so that there is no fresh limitation period running in favour of the third party on the assured’s insolvency. Thus if the assured has allowed the action against the insurer to become timebarred, the third party cannot commence proceedings on the assured’s insolvency. Moreover, if the assured has issued a claim form within the limitation but has thereafter become insolvent, the third party cannot issue a fresh claim form if the limitation period applicable to the assured’s action has expired, and neither can the third party take over the assured’s claim form (Lefevre v. White [1990] 1 Lloyd’s Rep 569; Matadeen v.Caribbean Insurance Co [2003] 1 WLR 670). Similar difficulties arise in arbitration: if the assured has commenced arbitration proceedings against the insurer within the limitation period, and has then become insolvent, the third party cannot take over the arbitration proceedings (London Steamship Owners’ Mutual Association Ltd v. Bombay Trading Ltd, ‘‘The Felicie’’ [1990] 2 Lloyd’s Rep 21, but contrast on this point ‘‘The Jordan Nicolov’’ [1990] 2 Lloyd’s Rep 11). The third party must, therefore, commence fresh arbitration proceedings, but will be prevented from doing so if by that date the limitation period has expired (Lefevre v. White [1990] 1 Lloyd’s Rep 569, but contrast ‘‘The Felicie’’ [1990] 2 Lloyd’s Rep 21 on this point). It is arguable that an insurer who, by way of subrogation, defends the substantive claim against the assured is thereby subsequently estopped from raising defences under the policy against the third party: Wood v. Perfection Travel Ltd [1996] LRLR 233. There is no possibility of treating the insurers as having waived rights under the policy in that situation, because any waiver would have to be as between the assured and the insurers rather than as between the third party and the insurers (Spriggs v.Wessington School [2005] Lloyd’s Rep IR 474), so the third party can only rely upon some form of estoppel in such circumstances, assuming the elements of estoppel are made out.. However, if the insurer chooses to ignore the substantive proceedings against the assured, and judgment is given against the assured because the assured—being insolvent—has not defended the proceedings properly or at all, the insurer cannot subsequently seek to have the judgment set aside: Re Base, Rees and Rees v. Mabco (102) Ltd and Eagle Star Insurance Co 1998, unreported.

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Subs (4)(a) This subsection preserves the rights of the assured against the insurer where there is a surplus of policy moneys once all third party claims have been satisfied. The assured’s right to receive indemnification for, eg, costs, may be caught by this provision. Subs (4)(b) makes it clear that the insurer’s liability under the 1930 Act for third party claims cannot exceed the sum insured under the policy. As noted above, Cox v. Bankside Members’ Agency Ltd [1995] 2 Lloyd’s Rep 437, holds that claims are to be met in the order in which they are established and quantified as against the assured. Subs (5) This inelegantly framed provision operates to exclude reinsurance from the 1930 Act, so that in the event that an insurer becomes insolvent the assured has no direct action against the reinsurers. The common law does not permit such an action, on the grounds of privity of contract. The privity doctrine would also seem to defeat the ‘‘cut through’’ clause found in many reinsurance agreements, under which the reinsurer undertakes to the insurer that payment will be made directly to the assured in the event of the insurer’s insolvency. As the assured is not a party to the reinsurance agreement, he cannot enforce the cut through clause even though he is the intended third party beneficiary of it.

Duty to give necessary information to third parties 2.—(1) In the event of any person becoming bankrupt or making a composition or arrangement with his creditors, or in the event of the estate of any person falling to be administered in accordance with an order under section 421 of f the Insolvency Act 1986, or in the event of a winding-up order being made, or a resolution for a voluntary winding-up being passed, with respect to any company[ or of the company entering administration] or of a receiver or manager of the company’s business or undertaking being duly appointed or of possession being taken by or on behalf of the holders of any debentures secured by a floating charge of any property comprised in or subject to the charge it shall be the duty of the bankrupt, debtor, personal representative of the deceased debtor or company, and, as the case may be, of the trustee in bankruptcy, trustee, liquidator, administrator, receiver, or manager, or person in possession of the property to give at the request of any person claiming that the bankrupt, debtor, deceased debtor, or company is under a liability to him such information as may reasonably be required by him for the purposes of ascertaining whether any rights have been transferred to and vested in him by this Act and for the purpose of enforcing such rights, if any, and any contract of insurance, in so far as it purports, whether directly or indirectly, to avoid the contract or to alter the rights of the parties thereunder upon the giving of any such information in the events aforesaid or otherwise to prohibit or prevent the giving thereof if the said events shall be of no effect. [(1A) The reference in subsection (1) of this section to a trustee includes a reference to the supervisor of a [voluntary arrangement proposed for the purposes of, and approved under, Part I or Part VIII of the Insolvency Act 1986].] (2) If the information given to any person in pursuance of subsection (1) of this section discloses reasonable ground for supposing that there have or may have been transferred to him under this Act rights against any particular insurer, that insurer shall be subject to the same duty as is imposed by the said subsection on the persons therein mentioned. (3) The duty to give information imposed by this section shall include a duty to allow all contracts of insurance, receipts for premiums, and other relevant documents in the possession or power of the person on whom the duty is so imposed to be inspected and copies thereof to be taken. Notes Subs (1) was amended by the Insolvency Act 1985, s 235, Sched 8, para 7, and the Insolvency Act 1986, s 439 and Sched 14 and the Enterprise Act 2002 (Insolvency) Order, SI 2003 No 2096, Sched 1, para 3. By the express wording of s 2, the liability of the assured to provide information under this section relates to the enforcement by the third party of his rights under the 1930 Act. However, in accordance with the cases decided under s 1, the third party has no rights under the Act until the liability of the assured to the third party has been established and quantified. This initially led the courts to conclude that no information as to insurance has to be provided by the assured until the assured’s liability has been established and quantified (Upchurch (Nigel) Associates v. Aldridge Estates Investment Co Ltd [1993] 1 Lloyd’s Rep 535; Woolwich Building Society v. Taylor [1995] 1 BCLC 132, a position which gravely damaged the efficacy of the 1930 Act. However, those cases were overturned by the Court of Appeal in Re OT Computers [2004] Lloyd’s Rep IR 669, the Court of Appeal there holding that there was an immediate right to information under s 2, although it is not clear exactly when and how the right to information is to be triggered.

816

Third Parties (Rights Against Insurers) Act 1930

6.20

Subs (1A) was inserted by the Insolvency Act 1985, s 235 and Sched 8, para 7, and was amended by the Insolvency Act 1986, s 439 and Sched 14. Subs (2) confers upon the insurer a duty similar to that imposed on the assured under subs (1), and is subject to the same restriction as to the prior establishment and quantification of the assured’s liability to the third party.

Settlement between insurers and insured persons 3. Where the insured has become bankrupt or where in the case of the insured being a company, a winding-up order [or an administration order] has been made or a resolution for a voluntary winding-up has been passed, with respect to the company, no agreement made between the insurer and the insured after liability has been incurred to a third party and after the commencement of the bankruptcy or winding-up [or the day of the making of the administration order], as the case may be, nor any waiver, assignment, or other disposition made by, or payment made to the insured after the commencement [or day] aforesaid shall be effective to defeat or affect the rights transferred to the third party under this Act, but those rights shall be the same as if no such agreement, waiver, assignment, disposition or payment had been made. Notes This section was amended by the Insolvency Act 1985, s 235 and Sched 8, para 7. At common law, an agreement between the assured and the insurer capping the insurer’s liability to the assured could not be impeached by the third party victim of the assured’s negligence, even though its effect was to diminish the sum available to the assured to pay the third party (Rowe v. Kenway and United Friendly Insurance Co (1921) 8 Ll LR, where the agreement was attacked as fraudulent conspiracy). The effect of s 3 is to prohibit any such agreement after the assured’s insolvency. If the agreement is reached before the assured has become insolvent, it is binding on the third party (Normid Housing Association Ltd v. Ralphs [1989] 1 Lloyd’s Rep 265). An agreement entered into before the liability of the assured has been established and quantified is similarly unaffected by s 3: Re Greenfield, Jackson v.Greenfield 1998, unreported; Re T&N Ltd (No 4) [2006] Lloyd’s Rep IR 817.

[Application to limited liability partnerships 3A.—(1) This Act applies to limited liability partnerships as it applies to companies. (2) In its application to limited liability partnerships, references to a resolution for a voluntary winding-up being passed are references to a determination for a voluntary windingup being made.] Notes This section was inserted by the Limited Liability Partnerships Regulations 2001, SI 2001 No 1090, Sched 5, para 2.

Section 4 In the application of this Act to Scotland— (a) . . . (b) any reference to an estate falling to be administered in accordance with an order under section 421 of the Insolvency Act 1986 shall be deemed to include a reference to an award or sequestration of the estate of a deceased debtor and reference to an appointment of a judicial factor, under section 11A of the Judicial Factors (Scotland) Act 1889, on the insolvent estate of a deceased person. Notes This section was amended by the Bankruptcy (Scotland) Act 1985, Sched 7, and the Insolvency Act 1985, s 235 and Sched 8, para 7.

Short title 5. This Act may be cited as the Third Parties (Rights Against Insurers) Act 1930.

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Liability Insurance

Notes The Law Commission initiated an inquiry into the operation of the 1930 Act in 1995, prompted by responses to its Working Paper on Privity of Contract which indicated that the operation of the 1930 Act was far from satisfactory. The Law Commission Report, published in 2001, proposed an entirely new statute. The proposed reform would remove the need for separate proceedings by the third party against the assured and then against the assured’s liability insurers. Under the proposed scheme the third party would proceed directly against the assured’s liability insurers, thereby removing the need to reinstate an assured company which has been removed from the register of companies. Other features of the bill are: (a) the Act would be extended to other forms of insolvency arrangement; (b) the third party should not be bound by an individual voluntary arrangement entered into by the assured with his creditors; (c) it should be confirmed that the Act applies to all forms of liability insurance—this recommendation anticipated the reversal of Tarbuck v.Avon Insurance plc [2002] Lloyd’s Rep IR 393 by Re OT Computers [2004] Lloyd’s Rep IR 669; (d) the assured and the insurers should be required to disclose information about the insurance cover to the third party in advance of any judgment against the assured—this recommendation anticipated the overturning of Nigel Upchurch Associates v.Aldridge Estates Investment Co Ltd [1993] 1 Lloyd’s Rep 535 and Woolwich Building Society v.Taylor [1995] 1 BCLC 132 by Re OT Computers [2004] Lloyd’s Rep IR 669; (e) the third party should be permitted to give notice to the insurers and to fulfil the other obligations of the assured under the policy so that the claim against the insurers is maintained.

6.21 RIDING ESTABLISHMENTS ACT 1964 (1964 c 70) An Act to regulate the keeping of riding establishments; and for purposes connected therewith [31 July 1964] General Note The Riding Establishments Act 1964, as amended by the Riding Establishments Act 1970, places riding establishments under the control of local authorities. A riding establishment must be licensed by the local authority, and the licence must contain provisions as to liability insurance. The 1964 Act, which is set out in full in the following paragraphs, is largely concerned with the enforcement powers of local authorities. As will be seen in the annotations, a local authority appears to have no sanctions available to it to ensure compliance with the compulsory insurance requirement.

Licensing of riding establishments 1.—(1) No person shall keep a riding establishment except under the authority of a licence granted in accordance with the provisions of this Act. (2) Every local authority may, on application being made to them for that purpose by a person who is an individual over the age of eighteen years or a body corporate, being a person who is not for the time being disqualified,— (a) under this Act from keeping a riding establishment; or (b) . . . ; (c) . . . ; (d) under the Pet Animals Act 1951, from keeping a pet shop; or (e) under the Protection of Animals (Amendment) Act 1954, from having the custody of animals; or (f) under the Animal Boarding Establishments Act 1963, from keeping a boarding establishment for animals; grant, on payment of such fee as may be determined by the local authority a licence to that person to keep a riding establishment at such premises in their area as may be specified in the application and subject to compliance with such conditions as may be specified in the licence. (3) Where an application for the grant of a licence for the keeping of a riding establishment at any premises is made to a local authority, they shall not proceed to a decision in the matter unless they have received and considered a report by a veterinary surgeon or veterinary

818

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practitioner authorised by them to carry out inspections under the next following section of an inspection of the premises carried out by him within the period of twelve months immediately preceding the date on which the application is received by the local authority or on or after that date, being a report containing such particulars as in their view enable them to determine whether the premises are suitable for the keeping thereat of a riding establishment, and describing the condition of the premises and of any horses found thereon or anything thereat. (4) In determining whether to grant a licence for the keeping of a riding establishment by any person at any premises a local authority shall in particular (but without prejudice to their discretion to withhold a licence on any grounds) have regard to— (a) whether that person appears to them to be suitable and qualified, either by experience in the management of horses or by being the holder of an approved certificate or by employing in the management of the riding establishment a person so qualified, to be the holder of such a licence; and (b) the need for securing— (i) that paramount consideration will be given to the condition of horses and that they will be maintained in good health, and in all respects physically fit and that, in the case of a horse kept for the purpose of its being let out on hire for riding or a horse kept for the purpose of its being used in providing instruction in riding, the horse will be suitable for the purpose for which it is kept; (ii) that the feet of all animals are properly trimmed and that, if shod, their shoes are properly fitted and in good condition; (iii) that there will be available at all times, accommodation for horses suitable as respects construction, size, number of occupants, lighting, ventilation, drainage and cleanliness and that these requirements be complied with not only in the case of new buildings but also in the case of buildings converted for use as stabling; (iv) that in the case of horses maintained at grass there will be available for them at all times during which they are so maintained adequate pasture and shelter and water and that supplementary feeds will be provided as and when required; (v) that horses will be adequately supplied with suitable food, drink and (except in the case of horses maintained at grass, so long as they are so maintained) bedding material, and will be adequately exercised, groomed and rested and visited at suitable intervals; (vi) that all reasonable precautions will be taken to prevent and control the spread among horses of infectious or contagious diseases and that veterinary first aid equipment and medicines shall be provided and maintained in the premises; (vii) that appropriate steps will be taken for the protection and extrication of horses in case of fire and, in particular, that the name, address and telephone number of the licence holder or some other responsible person will be kept displayed in a prominent position on the outside of the premises and that instructions as to action to be taken in the event of fire, with particular regard to the extrication of horses, will be kept displayed in a prominent position on the outside of the premises; (viii) that adequate accommodation will be provided for forage, bedding, stable equipment and saddlery; and shall specify such conditions in the licence, if granted by them, as appear to the local authority necessary or expedient in the particular case for securing all the objects specified in sub-paragraphs (i) to (viii) of paragraph (b) of this subsection. (4A) Without prejudice to the provisions of subsection (2) or (4) of this section, every licence granted under this Act after 31st December 1970 shall be subject to the following conditions (whether they are specified in the licence or not), namely— (a) a horse found on inspection of the premises by an authorised officer to be in need of veterinary attention shall not be returned to work until the holder of the licence has obtained at his own expense and has lodged with the local authority a veterinary certificate that the horse is fit for work; (b) no horse will be let out on hire for riding or used for providing instruction in riding without supervision by a responsible person of the age of 16 years or over unless (in the

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case of a horse let out for hire for riding) the holder of the licence is satisfied that the hirer of the horse is competent to ride without supervision; (c) the carrying on of the business of a riding establishment shall at no time be left in the charge of any person under 16 years of age; (d) the licence holder shall hold a current insurance policy which insures him against liability for any injury sustained by those who hire a horse from him for riding and those who use a horse in the course of receiving from him, in return for payment, instruction in riding and arising out of the hire or use of a horse as aforesaid and which also insures such persons in respect of any liability which may be incurred by them in respect of injury to any person caused by, or arising out of, the hire or use of a horse as aforesaid; (e) a register shall be kept by the licence holder of all horses in his possession aged three years and under and usually kept on the premises which shall be available for inspection by an authorised officer at all reasonable times. (5) Any person aggrieved by the refusal of a local authority to grant such a licence, or by any condition subject to which such a licence is proposed to be granted (not being one of the conditions set out in subsection (4A) of this section) may appeal to a magistrates’ court; and the court may on such an appeal give such directions with respect to the issue of a licence or, as the case may be, with respect to the conditions subject to which a licence is to be granted as it thinks proper. (6) Any such licence shall (according to the applicant’s requirements) relate to the year in which it is granted or to the next following year. In the former case, the licence shall come into force at the beginning of the day on which it is granted, and in the latter case it shall come into force at the beginning of the next following year. (7) Subject to the provisions hereinafter contained with respect to cancellation, any such licence shall remain in force for one year beginning with the day on which it comes into force and shall then expire. (8) In the event of the death of a person who is keeping a riding establishment at any premises under the authority of a licence granted under this Act, that licence shall be deemed to have been granted to his personal representatives in respect of those premises and shall, notwithstanding subsection (7) of this section (but subject to the provision hereinafter contained with respect to cancellation), remain in force until the end of the period of one year beginning with the death and shall then expire: Provided that the local authority by whom the licence was granted may from time to time on the application of those representatives, extend or further extend the said period of one year if the authority are satisfied that the extension is necessary for the purpose of winding up the deceased’s estate and that no other circumstances make it undesirable. (9) Any person who contravenes the provisions of subsection (1) of this section shall be guilty of an offence; and if any condition to which a licence under this Act is subject (whether by virtue of subsection (4A) of this section or otherwise) is contravened or not complied with, the person to whom the licence was granted shall be guilty of an offence. Notes This section sets out the obligation of a riding establishment to obtain a local authority licence, and specifies the conditions to be satisfied before a licence can be granted and the minimum terms of any licence. Subs (2) was amended by the Protection of Animals (Amendment) Act 1988, s 3 and Sched. Subs (4) was substituted by the Riding Establishments Act 1970, s 2(1). Subs (4A) was inserted by the Riding Establishments Act 1970, s 2(1). The insurance policy required by subs (4A)(d) must cover: (i) the licence holder’s liability for the personal injury of any person hiring a horse from him; (ii) the licence holder’s liability for the personal injury of any person having riding lessons, other than free lessons; (iii) the liability of any hirer or user of a horse for personal injury caused to a third party. Section 1(4A) does not confer upon a user insured under category (iii) above any right of action against the insurer, and it must be assumed that the Act creates some form of statutory agency under which the licence holder insures on behalf of himself and any user. Subs (5) was amended by the Riding Establishments Act 1970, s 2(2). Subs (9) was amended by the Riding Establishments Act 1970, s 2(2).

820

Riding Establishments Act 1964

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Inspection of Riding Establishments 2.—(1) A local authority may, subject to the provisions of this section, authorise in writing any such person as the following, namely, an officer of theirs, an officer of any other local authority, a veterinary surgeon and a veterinary practitioner, to inspect any such premises in their area as the following, that is to say,— (a) any premises where they have reason to believe a person is keeping a riding establishment; (b) any premises as respects which a licence granted in accordance with the provisions of this Act is for the time being in force; and (c) any premises as respects which a licence has been applied for under this Act. (2) Any person authorised under this section may, on producing his authority if so required, enter at all reasonable times any premises which he is authorised under this section to enter and inspect them and any horses found thereon or any thing therein for the purpose (except in the case of any such premises as are mentioned in paragraph (a) of the foregoing subsection) of making a report to the local authority for the purposes of section 1(3) of this Act or for the purpose of ascertaining whether an offence has been or is being committed against this Act. (3) A local authority shall not authorise a veterinary surgeon or veterinary practitioner to inspect any premises under this section except one chosen by them from a list of such persons drawn up jointly by the Royal College of Veterinary Surgeons and the British Veterinary Association. (4) Any person who wilfully obstructs or delays any person in the exercise of his powers of entry or inspection conferred by subsection (2) above shall be guilty of an offence. Notes The power of the local authority to inspect premises, set out in this section, relates to determining whether any offence has been committed under the Act. The offences are set out in s 3 of the 1964 Act. Under s 3, no offence is committed where the licence holder has failed to procure such liability insurance as is required by s 1(4A), and it follows that a local authority cannot demand the production of the licence holder’s insurance policy in the course of an inspection.

Offences 3.—(1) If any person— (a) at a time when a horse is in such a condition that its riding would be likely to cause suffering to the horse, lets out the horse on hire or uses it for the purpose of providing, in return for payment, instruction in riding or for the purpose of demonstrating riding; (aa) lets out on hire for riding or uses for the purpose of providing, in return for payment, instruction in riding or for the purpose of demonstrating riding any horse aged three years or under or any mare heavy with foal or any mare within three months after foaling; (b) supplies for a horse which is let out on hire by him for riding equipment which is used in the course of the hiring and suffers, at the time when it is supplied, from a defect of such a nature as to be apparent on inspection and as to be likely to cause suffering to the horse or an accident to the rider; (c) fails to provide such curative care as may be suitable, if any, for a sick or injured horse which is kept by him with a view to its being let out on hire or used for a purpose mentioned in paragraph (a) of this subsection; (d) in keeping a riding establishment knowingly permits any person, who is for the time being disqualified under this Act from keeping a riding establishment, to have control or management of the keeping of the establishment; or (e) with intent to avoid inspection under section 2 of this Act, conceals, or causes to be concealed, any horse maintained by the riding establishment; he shall be guilty of an offence under this Act. (2) A person who for the purpose of obtaining the grant of a licence under this Act gives any information which he knows to be false in a material particular or makes a statement which he knows to be so false or recklessly gives any information which is so false or recklessly makes any statement which is so false shall be guilty of an offence under this Act.

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Notes As commented in the note to s 2 of the 1964 Act, it appears not to be an offence under the Act for a licence holder to fail to procure, or to renew, a liability policy complying with s 1(4A), unless a deliberate or reckless false statement to this effect has been made contrary to s 3(2). Subs (1)(aa) was inserted by the Riding Establishments Act 1970, s 3.

Penalties and disqualifications 4.—(1) Any person guilty of an offence under any provision of this Act other than section 2(4) thereof shall be liable on summary conviction to a fine not exceeding level 3 on the standard scale or to imprisonment for a term not exceeding three months or to both such fine and such imprisonment. (2) Any person guilty of an offence under section 2(4) of this Act shall be liable on summary conviction to a fine not exceeding level 2 on the standard scale. (3) Where a person is convicted of any offence under this Act or of any offence under the Protection of Animals Act 1911 or the Protection of Animals (Scotland) Act 1912 or the Pet Animals Act 1951 or the Animal Boarding Establishments Act 1963, the court by which he is convicted may cancel any licence held by him under this Act and may, whether or not he is the holder of such a licence, disqualify him from keeping a riding establishment for such period as the court thinks fit. (4) A court which has ordered the cancellation of a person’s licence, or his disqualification in pursuance of the last foregoing subsection may, if it thinks fit, suspend the operation of the order pending an appeal. Notes Subs (1) was amended by the Criminal Justice Act 1982, s 38. Subs (2) was amended by the Criminal Justice Act 1982, s 38. Subs (3) It would appear not to be possible for a local authority to cancel a licence for a riding establishment’s failure to obtain the insurance required by s 1(4A), as no offence is committed where such insurance is not obtained: see the note to s 2.

Power of local authorities to prosecute 5.—(1) A local authority in England or Wales may subject to the provisions of this section prosecute proceedings for any offence under this Act committed in the area of the authority. (2) In England and Wales no proceedings for an offence under section 1(9) of this Act in respect of a contravention of or failure to comply with a condition subject to which a licence is granted in accordance with the provisions of this Act shall be instituted except by a local authority, and a local authority shall not institute any such proceedings except after receiving and considering a report by a veterinary surgeon or veterinary practitioner authorised by them to carry out inspections under section 2 of this Act being a report which in their opinion indicates that such an offence has been committed. Interpretation 6.—(1) References in this Act to the keeping of a riding establishment shall, subject to the provisions of this section, be construed as references to the carrying on of a business of keeping horses for either or both of the following purposes, that is to say, the purpose of their being let out on hire for riding or the purpose of their being used in providing, in return for payment, instruction in riding, but as not including a reference to the carrying on of such a business— (a) in a case where the premises where the horses employed for the purposes of the business are kept are occupied by or under the management of the Secretary of State for Defence; or (b) solely for police purposes; or (c) by the Zoological Society of London; or (d) by the Royal Zoological Society of Scotland. (2) Where a university provides courses of study and examinations leading to a veterinary degree to which relates an order made under section 1 of the Veterinary Surgeons Act 1948

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(which section enables the Privy Council, where a university provides such courses, and it appears to the Privy Council that the courses are of the standard therein mentioned, to direct that a holder of the degree to which the courses lead shall be qualified to be a member of the Royal College of Veterinary Surgeons), horses kept by the university for use in the instruction of students undergoing such courses shall, during the continuance in force of the order, be deemed for the purposes of the foregoing subsection not to be kept as mentioned in that subsection. (3) For the purposes of this Act a person keeping a riding establishment shall be taken to keep it at the premises where the horses employed for the purposes of the business concerned are kept. (4) In this Act the following expressions have the meanings respectively assigned to them, that is to say— ‘‘approved certificate’’ means— (a) any one of the following certificates issued by the British Horse Society, namely, Assistant Instructor’s Certificate, Instructor’s Certificate and Fellowship; (b) Fellowship of the Institute of the Horse; or (c) any other certificate for the time being prescribed by order by the Secretary of State; ‘‘authorised officer’’ means a person authorised by a local authority in pursuance of section 2 of this Act; ‘‘horse’’ includes any mare, gelding, pony, foal, colt, filly or stallion and also any ass, mule or jennet; ‘‘local authority’’ means the council of a district, the council of a London borough or the Common Council of the City of London; . . . and in Scotland means [a council constituted under section 2 of the Local Government etc. (Scotland) Act 1994]; ‘‘premises’’ includes land; ‘‘veterinary practitioner’’ means a person who is for the time being registered in the Supplementary Veterinary Register in pursuance of the Veterinary Surgeons Act 1948; ‘‘veterinary surgeon’’ means a person who is for the time being registered in the Register of Veterinary Surgeons in pursuance of the Veterinary Surgeons Act 1881. Notes Subs (4) was amended by the Riding Establishments Act 1970, s 5 and by the Local Government etc. (Scotland) Act 1994, Sched 13, para 64.

6A. Any order made under this Act shall be made by statutory instrument and may be varied or revoked by a subsequent order made in the like manner. Notes This section was inserted by the Riding Establishments Act 1970, s 6.

Section 7 [Repealed by the Statute Law (Reform) Act 1976.]

Section 8 [Repealed by the Statute Law (Reform) Act 1976.]

Short title, commencement and extent 9.—(1) This Act may be cited as the Riding Establishments Act 1964. (2) This Act shall not extend to Northern Ireland. (3) This Act shall come into operation on 1st April 1965.

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Liability Insurance 6.22 NUCLEAR INSTALLATIONS ACT 1965 (1965 c 57)

An Act to consolidate the Nuclear Installations Act 1959 and 1965

[5 August 1965]

General Note The Nuclear Installations Act 1965 consolidated the Nuclear Installations Act 1959 as subsequently amended, and was itself amended by the Nuclear Installations Act 1970, the Atomic Energy Authority Act 1971, the Nuclear Installations Act etc (Repeals and Modifications) Regulations 1974, SI 1974 No 2056 and the Energy Act 1983. This Act implements the Paris Convention on Third Party Liability in the Field of Nuclear Energy 1960 (as amended). The Act authorises the carrying on of nuclear operations by the UK Atomic Energy Authority (the ‘‘Authority’’), and requires other operators to obtain licences or permits from the Health and Safety Executive (established under the Health and Safety at Work etc Act 1974). The amendments to the 1965 Act made in 1974 are consequential upon the role of the Executive. In addition to establishing a regulatory regime, the 1965 Act imposes absolute liability upon the operator of a nuclear establishment for personal injury or property damage caused to third parties. Losses are covered by a state compensate fund (s 18), but the Act additionally requires the operator to take out insurance or similar cover to protect itself in the event of a claim (s 19). Similar liability is imposed upon the Authority and the Crown, while lesser liability is faced by carriers of nuclear material. Liabilities are modified in relation to ‘‘excepted matter’’, as defined in s 26 of the Act. Under the jurisdiction rules of the Paris Convention, proceedings are to be brought in the territory of the contracting state in which the nuclear incident occurred, although if the incident occurs outside a contracting state jurisdiction is conferred upon the courts of the contracting state in which the installation of the operator facing liability is situated (for the enforcement of the jurisdiction rules, see s 17 of the 1965 Act). Damage suffered exclusively in the territory of a non-contracting state is in any event excluded, under s 13(1)(b). The 1965 Act is set out in its entirety, as amended, and the annotations are concentrated on those parts relevant to insurance.

Control of certain nuclear installations and operations Restriction of certain nuclear installations to licensed sites 1.—(1) Without prejudice to the requirements of any other Act, no person . . . shall use any site for the purpose of installation or operating— (a) any nuclear reactor (other than such a reactor comprised in a means of transport, whether by land water or air); or (b) subject to subsection (2) of this section, any other installation of such class or description as may be prescribed, being an installation designed or adapted for— (i) the production or use of atomic energy; or (ii) the carrying out of any process which is preparatory or ancillary to the production or use of atomic energy and which involves or is capable of causing the emission of ionising radiations; or (iii) the storage, processing or disposal of nuclear fuel or of bulk quantities of other radioactive matter, being matter which has been produced or irradiated in the course of the production or use of nuclear fuel, unless a licence so to do (in this Act referred to as a ‘‘nuclear site licence’’) has been granted in respect of that site by the Health and Safety Executive and is for the time being in force. (2) Regulations made by virtue of paragraph (b) of the foregoing subsection may exempt, or make provision for exempting, from the requirements of that subsection, either unconditionally or subject to prescribed conditions, any installation which the Minister is satisfied is not, or if the prescribed conditions were complied with would not be, a relevant installation. (3) Any person who contravenes subsection (1) of this section shall be guilty of an offence . . . Notes This section requires nuclear operations carried out by persons other than the Authority to be licensed by the Health and Safety Executive. Subs (1) was amended by SI 1974 No 2056, reg 2(1).

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Subs (2) The regulations here referred to are the Nuclear Installations Regulations 1971, SI 1971 No 381 (not reproduced in this work). Subs (3) was amended by SI 1974 No 2056, reg 2(1).

Prohibition of certain operations except under permit 2.—(1) Notwithstanding that a nuclear site licence is for the time being in force or is not for the time being required in respect thereof, no person other than the Authority shall use any site— (a) for any treatment of irradiated matter which involves the extraction therefrom of plutonium or uranium; or (b) for any treatment of uranium such as to increase the proportion of the isotope 235 contained therein, except under, and in accordance with the terms of, a permit in writing . . . granted by the Authority or a government department and for the time being in force; and any fissile material produced under such a permit shall be disposed of only in such manner as may be approved by the authority by whom the permit was granted. (1A) A permit granted under this section, unless it is granted by the Minister, shall not authorise the use of a site as mentioned in paragraph (a) or paragraph (b) of the foregoing subsection otherwise than for purposes of research and development. (1B) Where a permit granted under this section by the Minister to a body corporate authorises such a use of a site for purposes other than, or not limited to, research and development, the Minister may by order direct that the provisions set out in Schedule 1 to this Act shall have effect in relation to that body corporate. (1C) Any power conferred by this section to make an order shall include power to vary or revoke the order by a subsequent order; and any such power shall be exercisable by statutory instrument, which shall be subject to annulment in pursuance of a resolution of either House of Parliament. (1D) Any permit granted under this section by the Authority or by the Minister or any other government department may at any time be revoked by the Authority or by the Minister or that department, as the case may be, or may be surrendered by the person to whom it was granted. (2) Any person who contravenes subsection (1) of this section shall be guilty of an offence and be liable— (a) on summary conviction, to a fine not exceeding [the prescribed sum or to imprisonment for a term not exceeding three months, or to both; (b) on conviction on indictment, to a fine . . . , or to imprisonment for a term not exceeding five years, or to both. Notes The particular operations referred to in subs (1) may be carried out by a licensee only under the terms of an additional permit granted by the Authority or a minister. Subs (1) was amended by the Atomic Energy Authority Act 1971, s 17. Subs (1A) was inserted by the Atomic Energy Authority Act 1971, s 17. Subs (1B) was inserted by the Atomic Energy Authority Act 1971, s 17. Subs (1C) was inserted by the Atomic Energy Authority Act 1971, s 17. Subs (1D) was inserted by the Atomic Energy Authority Act 1971, s 17. Subs (2) was amended by the Atomic Energy Authority Act 1971, s 17. For prosecutions under this subsection, see s 25.

Nuclear site licences Grant and variation of nuclear site licences 3.—(1) A nuclear site licence shall not be granted to any person other than a body corporate and shall not be transferable. (2) Two or more installations in the vicinity of one another may, if the Health and Safety Executive thinks fit, be treated for the purposes of the grant of a nuclear site licence as being on the same site.

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(3) Subject to subsection (4) of this section, where it appears to the Health and Safety Executive appropriate so to do in the case of any application for a nuclear site licence in respect of any site, they may direct the applicant to serve on such bodies of any of the following descriptions as may be specified in the direction, that is to say— (a) any local authority; (b) any river authority, any local fisheries committee and any statutory water undertakers within the meaning of the Water Acts 1945 and 1948; (c) (applies to Scotland only); and (d) any other body which is a public or local authority, notice that the application has been made, giving such particulars as may be so specified with respect to the use proposed to be made of the site under the licence, and stating that representations with respect thereto may be made to the Health and Safety Executive by the body upon whom the notice is served at any time within three months of the date of service; and where such a direction has been given, the Health and Safety Executive shall not grant the licence unless they are satisfied that three months have elapsed since the service of the last of the notices required thereby nor until after they have has considered any representations made in accordance with any of those notices. (4) Subsection (3) of this section shall not apply in relation to an application in respect of a site for a generating station made by an electricity board within the meaning of the Electricity Acts 1947 to 1961 or of the Electricity (Scotland) Acts 1943 to 1957 or by any authorised undertakers within the meaning of the Electricity (Supply) Acts (Northern Ireland) 1882 to 1959. (5) A nuclear site licence may include provision with respect to the time from which section 19(1) of this Act is to apply in relation to the licensed site, and where such provision is so included the said section 19(1) shall not apply until that time or the first occasion after the grant of the licence on which any person uses the site for the operation of a nuclear installation, whichever is the earlier provided that no such provision shall be so included without the consent of the Secretary of State. (6) The Health and Safety Executive may from time to time vary any nuclear site licence by excluding therefrom any part of the licensed site— (a) which the licensee no longer needs for any use requiring such a licence; and (b) with respect to which the Health and Safety Executive is satisfied that there is no danger from ionising radiation from anything on that part of the site. (6A) The Health and Safety Executive shall consult the appropriate Agency before varying a nuclear site licence in respect of a site in Great Britain, if the variation relates to or affects the creation, accumulation or disposal of radioactive waste, within the meaning of the Radioactive Substances Act 1993. Notes This section sets out the qualifications of applicants for licences, and the application procedure. Subs (2) was amended by SI 1974 No 2056, reg 2(1). Subs (3) was amended by SI 1974 No 2056, reg 2(1). Subs (5) was amended by SI 19/4 No 2056, reg 2(1). It allows the postponement of compulsory insurance, required under s 19. Subs (6) was amended by SI 1974 No 2056, reg 2(1). Subs (6A) was inserted by the Environment Act 1995, Sched 2, para 7.

Attachment of conditions to licences 4.—(1) The Health and Safety Executive by instrument in writing shall on granting any nuclear site licence, and may from time to time thereafter, attach to the licence such conditions as may appear to the Health and Safety Executive to be necessary or desirable in the interests of safety, whether in normal circumstances or in the event of any accident or other emergency on the site, which conditions may in particular include provision— (a) for securing the maintenance of an efficient system for detecting and recording the presence and intensity of any ionising radiations from time to time emitted from anything on the site or from anything discharged on or from the site;

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(b) with respect to the design, siting, construction, installation, operation, modification and maintenance of any plant or other installation on, or to be installed on, the site; (c) with respect to preparations for dealing with, and measures to be taken on the happening of, any accident or other emergency on the site; (d) without prejudice to sections 6 and 8 of the Radioactive Substances Act 1960, with respect to the discharge of any substance on or from the site. (2) The Health and Safety Executive may at any time by instrument in writing attach to a nuclear site licence such conditions as the Executive may think fit with respect to the handling, treatment and disposal of nuclear matter. (3) The Health and Safety Executive may at any time by a further instrument in writing vary or revoke any condition for the time being attached to a nuclear site licence by virtue of this section. [(3A) The Health and Safety Executive shall consult the appropriate Agency— (a) before attaching any condition to a nuclear site licence in respect of a site in Great Britain, or (b) before varying or revoking any condition attached to such a nuclear site licence, if the condition relates to or affects the creation, accumulation or disposal of radioactive waste, within the meaning of the Radioactive Substances Act 1993.] (4) While a nuclear site licence remains in force in respect of any site, the Health and Safety Executive shall consider any representations by any organisation representing persons having duties upon the site which may from time to time be made to them with a view to the exercise by them in relation to the site of any of [their] powers under the foregoing provisions of this section. (5) At all times while a nuclear site licence remains in force, the licensee shall cause copies of any conditions for the time being in force under this section to be kept posted upon the site, and in particular on any part thereof which an inspector may direct, in such characters and in such positions as to be conveniently read by persons having duties upon the site which are or may be affected by those conditions. (6) Any person who contravenes subsection (5) of this section, and, in the event of any contravention of any condition attached to a nuclear site licence by virtue of this section, the licensee and any person having duties upon the site in question by whom the contravention was committed, shall be guilty of an offence . . . and any person who without reasonable cause pulls down, injuries or defaces any document posted in pursuance of the said subsection (5) shall be guilty of an offence and be liable on summary conviction to a fine not exceeding level 2 on the standard scale. Notes This section empowers the Health and Safety Executive to impose on a licensee, either in the licence or subsequently, terms which it regards desirable in the interests of safety. Subs (1) was amended by SI 1974 No 2056, reg 2(1). Subs (2) was amended by SI 1974 No 2056, reg 2(1). Subs (3) was amended by SI 1974 No 2056, reg 2(1). Subs (3A) was inserted by the Environment Act 1995, Sched 2, para 8. Subs (4) was amended by SI 1974 No 2056, reg 2(1). Subs (6) was amended by SI 1974 No 2056, reg 2(1) and the Criminal Justice Act 1982, ss 38 and 46.

Revocation and surrender of licences 5.—(1) A nuclear site licence may at any time be revoked by the Health and Safety Executive or surrendered by the licensee. [(1A) The Health and Safety Executive shall consult the appropriate Agency before revoking a nuclear site licence in respect of a site in Great Britain.] (2) Where nuclear site licence has been revoked or surrendered, the licensee shall, if so required by the Health and Safety Executive deliver up or account for the licence to such person as the Health and Safety Executive may direct, and shall during the remainder of the period of his responsibility cause to be kept posted upon the site such notices indicating the limits thereof in such positions as may be directed by an inspector; and the Health and Safety Executive may on the revocation or surrender and from time to time thereafter until the

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expiration of the said period give to the licensee such other directions as the Health and Safety Executive may think fit for preventing or giving warning of any risk of injury to any person or damage to any property by ionising radiations from anything remaining on the site. (3) In this Act, the expression ‘‘period of responsibility’’ in relation to the licensee under a nuclear site licence means, as respects the site in question or any part thereof, the period beginning with the grant of the licence and ending with whichever of the following dates is the earlier, that is to say— (a) the date when the Health and Safety Executive gives notice in writing to the licensee that in the opinion of the Health and Safety Executive there has ceased to be any danger from ionising radiations from anything on the site or, as the case may be, on that part thereof; (b) the date when a new nuclear site licence in respect of a site comprising the site in question or, as the case may be, that part thereof is granted either to the same licensee or to some other person, except that it does not include any period during which section 19(1) of this Act does not apply in relation to the site. (4) If the licensee contravenes any direction for the time being in force under subsection (2) of this section, he shall be guilty of an offence . . . and any person who without reasonable cause pulls down, injuries or defaces any notice posted in pursuance of the said subsection (2) shall be guilty of an offence and be liable on summary conviction to a fine not exceeding level 2 on the standard scale. (5) . . . Notes Subs (1) was amended by SI 1974 No 2056, reg 2(1). Subs (1A) was inserted by the Environment Act 1995, Sched 2, para 9. Subs (2) was amended by SI 1974 No 2056, reg 2(1). Subs (3) was amended by SI 1974 No 2056, reg 2(1). Subs (4) was amended by SI 1974 No 2056, reg 2(1). Subs (5) was repealed by SI 1974 No 2056, reg 2(1).

Maintenance of list of licensed sites 6.—(1) Subject to subsection (2) of this section, the Minister shall maintain a list showing every site in respect of which a nuclear site licence has been granted . . . and including a map or maps showing the position and limits of each such site, and make arrangements for the list or a copy thereof to be available for inspection by the public; and he shall cause notice of those arrangements to be made public in such manner as may appear to him appropriate. (2) The said list shall not be required to show any site or part of a site in the case of which— (a) no nuclear site licence is for the time being in force; and (b) thirty years have elapsed since the expiration of the last licencee’s period of responsibility. Notes Subs (1) was amended by SI 1974 No 2056, reg 2(1).

Duty of licensee, etc, in respect of nuclear occurrences Duty of licensee of licensed site 7.—(1) [Subject to subsection (4) below,] where a nuclear site licence has been granted in respect of any site, it shall be the duty of the licensee to secure that— (a) no such occurrence involving nuclear matter as is mentioned in subsection (2) of this section causes injury to any person or damage to any property of any person other than the licensee, being injury or damage arising out of or resulting from the radioactive properties, or a combination of those and any toxic, explosive or other hazardous properties, of that nuclear matter; and (b) no ionising radiations emitted during the period of the licensee’s responsibility—

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(i) from anything caused or suffered by the licensee to be on the site which is not nuclear matter; or (ii) from any waste discharged (in whatever form) on or from the site, cause injury to any person or damage to any property of any person other than the licensee. (2) The occurrences referred to in subsection (1)(a) of this section are— (a) any occurrence on the licensed site during the period of the licensee’s responsibility, being an occurrence involving nuclear matter; (b) any occurrence elsewhere than on the licensed site involving nuclear matter which is not excepted matter and which at the time of the occurrence— (i) is in the course of carriage on behalf of the licensee as licensee of that site; or (ii) is in the course of carriage to that site with the agreement of the licensee from a place outside the relevant territories; and (iii) in either case, is not on any other relevant site in the United Kingdom; (c) any occurrence elsewhere than on the licensed site involving nuclear matter which is not excepted matter and which— (i) having been on the licensed site at any time during the period of the licensee’s responsibility; or (ii) having been in the course of carriage on behalf of the licensee as licensee of that site, has not subsequently been on any relevant site, or in the course of any relevant carriage, or (except in the course of relevant carriage) within the territorial limits of a country which is not a relevant territory. (3) In determining the liability by virtue of subsection (1) of this section in respect of any occurrence of the licensee of a licensed site, any property which at the time of the occurrence is on that site, being— (a) a nuclear installation; or (b) other property which is on that site— (i) for the purpose of use in connection with the operation, or the cessation of the operation, by the licensee of a nuclear installation which is or has been on that site; or (ii) for the purpose of the construction of a nuclear installation on that site, shall, notwithstanding that it is the property of some other person, be deemed to be the property of the licensee. [ [(4) Section 8 of this Act shall apply in relation to sites occupied by the Authority.] Notes Subs (1) was amended by the Nuclear Installations Act 1965 (Repeal and Modifications) Regulations 1990 SI 1990 No 1918, reg 2. Subs (4) was inserted by the Nuclear Installations Act 1965 (Repeal and Modifications) Regulations 1990 SI 1990 No 1918, reg 2. This section imposes a duty upon a licensed operator to secure that the occurrence of any of the events listed in subs (2) do not cause personal injury or property damage. There is no criminal sanction for breach of duty, but infringement gives rise to a tortious action for breach of statutory duty, in accordance with ss 12 to 14 of the 1965 Act, at the instance of any person suffering injury or property damage. The section does not limit the duty by reference to negligence, with the result that liability is absolute: all that a plaintiff need show is that injury or damage has been inflicted upon him by the properties of radioactive matter, and that the loss was caused by an occurrence listed in subs (2). The duty is owed to any person other than the licensee, although subs (3) excludes from scope of the duty property belonging to a third party which is on the licensed site and used in connection with the site’s nuclear operations or with the construction of the site. In the case of excepted matter, as defined in s 26 of the 1965 Act, there is no liability for off-site occurrences. The duty in s 7 is restricted by the provisions of s 13, in the case of nuclear war or natural disaster (s 13(4)) and where the person suffering damage contributed to the loss intentionally or recklessly (s 13(6)). Liability under s 7 is also restricted on territorial grounds: see the note to s 13(1) of the 1965 Act. Financial limits on liability are imposed by s 16 of the 1965 Act.

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Duty of Authority 8.—Section 7 of this Act shall apply in relation to the Authority— (a) as if any premises which are or have been occupied by the Authority were a site in respect of which a nuclear site licence has been granted to the Authority; and (b) as if in relation to any such premises any reference to the period of the licensee’s responsibility were a reference to any period during which the Authority is in occupation of those premises; and section 7 shall so apply whether or not a nuclear site licence has been granted in respect of the premises in question. Notes This section imposes upon the Authority in respect of its operations the same liability as is imposed on licensees under s 7 of the 1965 Act.

Duty of Crown in respect of certain sites 9. If a government department uses any site for any purpose which, if section 1 of this Act applied to the Crown, would require the authority of a nuclear site licence in respect of that site, section 7 of this Act shall apply in like manner as if— (a) the Crown were the licensee under a nuclear site licence in respect of that site; and (b) any reference to the period of the licensee’s responsibility were a reference to any period during which the department occupies the site. Notes This section imposes upon the Crown in respect of its operations the same liability as is imposed on licensees under s 7 of the 1965 Act.

Duty of certain foreign operators 10.—(1) In the case of any nuclear matter which is not excepted matter and which— (a) is— (i) in the course of carriage on behalf of a relevant foreign operator; or (ii) in the course of carriage to such an operator’s relevant site with the agreement of that operator from a place outside the relevant territories, and is not for the time being on any relevant site in the United Kingdom; or (b) having been on such an operator’s relevant site or in the course of carriage on behalf of such an operator, has not subsequently been on any relevant site or in the course of any relevant carriage or (except in the course of relevant carriage) within the territorial limits of a country which is not a relevant territory, it shall be the duty of that operator to secure that no occurrence such as is mentioned in subsection (2) of this section causes injury to any person or damage to any property of any person other than that operator, being injury or damage arising out of or resulting from the radioactive properties, or a combination of those and any toxic, explosive or other hazardous properties, of that nuclear matter. (2) The occurrences referred to in the foregoing subsection are— (a) an occurrence taking place wholly or partly within the territorial limits of the United Kingdom; or (b) an occurrence outside the said territorial limits which also involves nuclear matter in respect of which a duty is imposed on any person by section 7, 8 or 9 of this Act. Notes This section imposes upon a relevant foreign operator (as defined in s 26) the duty to secure that nuclear matter other than excepted matter (as defined in s 26) being carried on his behalf does not cause death or personal injury. Subs (2) reflects the jurisdictional principle under the Paris Convention 1960 (on which the 1960 Act is based) that the English courts have jurisdiction only as regards occurrences taking place either within the UK or in the territory of a non-contracting state where the operator’s installation is in the UK. Damage occurring within a non-contracting state is, however, irrecoverable under the Act (s 13(1)(b)). Where the occurrence takes place in the territory of another contracting state, the action is established by, and must be brought in, that state. In any event, an operator of an installation in a contracting state faces liability under s 10 only if the domestic law of that contracting state, corresponding to ss 7 to 9 of the 1965

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Act and implementing the Paris Convention, requires compensation to the paid in these circumstances (s 16(2) of the 1965 Act). Contractual liability under subs (1)(a)(ii) arises only where the agreement was in writing: s 13(3).

Duty of other persons causing nuclear matter to be carried 11. Where any nuclear matter, not being excepted matter, is in the course of carriage within the territorial limits of the United Kingdom on behalf of any person (hereafter in this section referred to as ‘‘the responsible party’’) and— (a) the carriage is not relevant carriage; and (b) the nuclear matter is not for the time being on any relevant site, it shall be the duty of the responsible party to secure that no occurrence involving that nuclear matter causes injury to any person or damage to any property of any person other than the responsible party, being injury or damage incurred within the said territorial limits and arising out of or resulting from the radioactive properties, or a combination of those and any toxic, explosive or other hazardous properties, of that nuclear matter. Notes This section imposes upon a person (other than any of the persons facing liability under ss 7 to 10 above) the duty to secure that nuclear matter other than excepted matter (as defined in s 26) carried on his behalf within the UK does not cause death or personal injury within the UK.

Right to compensation in respect of breach of duty Right to compensation by virtue of ss 7 to 10 12.—(1) Where any injury or damage has been caused in breach of a duty imposed by section 7, 8, 9 or 10 of this Act— (a) subject to sections 13(1), (3) and (4), 15 and 17(1) of this Act, compensation in respect of that injury or damage shall be payable in accordance with section 16 of this Act wherever the injury or damage was incurred; (b) subject to subsections (3) and (4) of this section and to section 21(2) of this Act, no other liability shall be incurred by any person in respect of that injury or damage. (2) Subject to subsection (3) of this section, any injury or damage which, though not caused in breach of such a duty as aforesaid, is not reasonably separable from injury or damage so caused shall be deemed for the purposes of subsection (1) of this section to have been so caused. (3) Where any injury or damage is caused partly in breach of such a duty as aforesaid and partly by an emission of ionising radiations which does not constitute such a breach, subsection (2) of this section shall not affect any liability of any person in respect of that emission apart from this Act, but a claimant shall not be entitled to recover compensation in respect of the same injury or damage both under this Act and otherwise than under this Act. (3A) Subject to subsection (4) of this section, where damage to any property has been caused which was not caused in breach of a duty imposed by section 7, 8, 9 or 10 of this Act but which would have been caused in breach of such a duty if in subsection (1)(a) or (b) of the said section 7 the words ‘‘other than the licensee’’ or in subsection (1) of the said section 10 the words ‘‘other than that operator’’ had not been enacted, no liability which, apart from this subsection, would have been incurred by any person in respect of that damage shall be so incurred except— (a) in pursuance of an agreement to incur liability in respect of such damage entered into in writing before the occurrence of the damage; or (b) where the damage was caused by an act or omission of that person done with intent to cause injury or damage. (4) Subject to section 13(5) of this Act, nothing in subsection (1)(b) or in subsection (3A) of this section shall affect— (a) . . . (b) the operation of the Carriage by Air Act 1932, the Carriage by Air Act 1961 or the Carriage by Air (Supplementary Provisions) Act 1962 in relation to any international carriage to which a convention referred to in the Act in question applies; or

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Notes Section 12 imposes the basic operation for damages to be paid in respect of a loss falling under ss 7 to 10. Limits on compensation are found in ss 13 and 14. Subs (3A) was inserted by the Nuclear Installations Act 1969, s 1. Subs (4) was amended by the Nuclear Installations Act 1969, s 1 and the Carriage of Goods by Sea Act 1971, s 6(3). The relevant road legislation referred to is the Carriage of Goods by Road Act 1965. Each of these pieces of legislation implements the rules of the respective Conventions on liability for carriage of goods. Where liability is incurred under any of these Conventions, the person liable may seek indemnity from any person liable under the Nuclear Installations Act 1965: see s 13(5)(a) of the 1965 Act.

Exclusion, extension or reduction of compensation in certain cases 13.—(1) Subject to subsections (2) and (5) of this section, compensation shall not be payable under this Act in respect of injury or damage caused by a breach of duty imposed by section 7, 8, 9 or 10 thereof if the injury or damage— (a) was caused by such an occurrence as is mentioned in section 7(2)(b) or (c) or 10(2)(b) of this Act which is shown to have taken place wholly within the territorial limits of one, and one only, of the relevant territories other than the United Kingdom; or (b) was incurred within the territorial limits of a country which is not a relevant territory. (2) In the case of a breach of duty imposed by section 7, 8 or 9 of this Act, subsection (1)(b) of this section shall not apply to injury or damage incurred by, or by persons or property on, a ship or aircraft registered in the United Kingdom. (3) Compensation shall not be payable under this Act in respect of injury or damage caused by a breach of a duty imposed by section 10 of this Act in respect of such carriage as is referred to in subsection (1)(a)(ii) of that section unless the agreement so referred to was expressed in writing. (4) The duty imposed by section 7, 8, 9, 10 or 11 of this Act— (a) shall not impose any liability on the person subject to that duty with respect to injury or damage caused by an occurrence which constitutes a breach of that duty if the occurrence, or the causing thereby of the injury or damage, is attributable to hostile action in the course of any armed conflict, including any armed conflict within the United Kingdom; but (b) shall impose such a liability where the occurrence, or the causing thereby of the injury or damage, is attributable to a natural disaster, notwithstanding that the disaster is of such an exceptional character that it could not reasonably have been foreseen. (5) Where, in the case of an occurrence which constitutes a breach of a duty imposed by section 7, 8, 9 or 10 of this Act, a person other than the person subject to that duty makes any payment in respect of injury or damage caused by that occurrence and— (a) the payment is made in pursuance of any of the international conventions referred to in the Acts mentioned in section 12(4) of this Act; or (b) the occurrence took place or the injury or damage was incurred within the territorial limits of a country which is not a relevant territory, and the payment is made by virtue of a law of that country and by a person who has his principal place of business in a relevant territory or is acting on behalf of such a person, the person making the payment may make the like claim under this Act for compensation of the like amount, if any, subject to subsection (5A) of this section, as would have been available to him if— (i) the injury in question had been suffered by him or, as the case may be, the property suffering the damage in question had been his; and (ii) subsection (1) of this section had not been passed. (5A) The amount that a person may claim by virtue of subsection (5) of this section shall not exceed the amount of the payment made by him and, in the case of a claim made by virtue of

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paragraph (b) of that subsection, shall not exceed the amount applicable under section 16(1) or (2) of this Act to the person subject to the duty in question. (6) The amount of compensation payable to or in respect of any person under this Act in respect of any injury or damage caused in breach of a duty imposed by section 7, 8, 9 to 10 of this Act may be reduced by reason of the fault of that person if, but only if, and to the extent that, the causing of that injury or damage is attributable to any act of that person committed with the intention of causing harm to any person or property or with reckless disregard for the consequences of his act. Notes This section limits the availability of compensation under s 12 of the 1965 Act. Its broad effect is to exclude: events occurring in other contracting states, in which case the action must be brought in the relevant contracting state; or damage suffered outside the UK, in which case the Rome Convention does not confer any cause of action and the applicant has to rely upon the domestic law of the territory in which the accident occurred. In the latter case, if liability is imposed upon a person operating within a contracting state, that person may seek an indemnity under the 1965 Act as if he were the person suffering loss (see the note to subs (5) below). Subs (2) modifies the rule that there is no cause of action for loss outside a contracting state, where the loss occurs on a UK-registered ship or aircraft. Subs (3) See the note to s 10 of the 1965 Act. Subs (4) See the note to s 7 of the 1965 Act. Subs (5) was amended by the Nuclear Installations Act 1969, s 3 and the Energy Act 1983, s 27(3). In each of the two cases mentioned here, the person liable may seek indemnification from a person liable to pay compensation under the 1965 Act. For the operation of s 13(5)(a), see the note to s 12(4). Section 13(5)(b) accords with the principle that there is no liability under the Paris Convention where the loss is suffered in a non-convention country: if the domestic law of such a country does provide a remedy, the person located within a contracting state and liable under the law of that country may seek an indemnity from any person liable under the 1965 Act. Subs (5A) was inserted by the Energy Act 1983, s 27(3).

Protection for ships and aircraft 14.—(1) A claim under this Act in respect of any occurrence such as is mentioned in section 7(2)(b) or (c), 10 or 11 of this Act which constitutes a breach of a person’s duty under section 7, 8, 9, 10 or 11 of this Act shall not give rise to any lien or other right in respect of any ship or aircraft; and the following provisions of the Administration of Justice Act 1956 (which relate to the bringing of actions in rem against ships or aircraft in England and Wales, Scotland and Northern Ireland respectively), that is to say— (a) section 3(3) and (4); (b) section 47; and (c) paragraph 3(3) and (4) of Part I of Schedule 1, . . . shall not apply to that claim (2) Subsection (1) of this section shall have effect in relation to any claim notwithstanding that by reason of section 16 of this Act no payment for the time being falls to be made in satisfaction of the claim. Notes Subs (1) was amended by the Merchant Shipping Act 1979, s 50(4) and Sched 7.

Bringing and satisfaction of claims Time for bringing claims under ss 7 to 11 15.—(1) Subject to subsection (2) of this section and to section 16(3) of this Act, but notwithstanding anything in any other enactment, a claim by virtue of any of sections 7 to 11 of this Act may be made at any time before, but shall not be entertained if made at any time after, the expiration of thirty years from the relevant date, that is to say, the date of the occurrence which gave rise to the claim or, where that occurrence was a continuing one, or was one of a succession of occurrences all attributable to a particular happening on a particular relevant site or to the carrying out from time to time on a particular relevant site of a particular

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operation, the date of the last event in the course of that occurrence or succession of occurrences to which the claim relates. (2) Notwithstanding anything in subsection (1) of this section, a claim in respect of injury or damage caused by an occurrence involving nuclear matter stolen from, or lost, jettisoned or abandoned by, the person whose breach of a duty imposed by section 7, 8, 9 or 10 of this Act gave rise to the claim shall not be entertained if the occurrence takes place after the expiration of the period to twenty years beginning with the day when the nuclear matter in question was so stolen, lost, jettisoned or abandoned. Notes The limitation periods in this section are both more and less generous than those under English law. If the claim is tortious, s 11 of the Limitation Act 1980 as amended by the Latent Damage Act allows, in nonpersonal injury cases, six years from the date of breach of duty, with an alternative three years from the date at which the breach of duty could have been discovered (subject to a maximum 15-year cut-off running from the date of breach of duty). As regards such claims, s 15 of the Nuclear Installations Act 1965 is more generous than English law. However, in the case of personal injury claims, English law, while permitting only three years running from the date of discoverability, allows time to be extended indefinitely under s 33 of the Limitation Act 1980: the power of the court to extend time is, under the 1965 Act, subject to a 30-year cut-off.

Satisfaction of claims by virtue of ss 7 to 10 16.—(1) The liability of any person to pay compensation under this Act by virtue of a duty imposed on that person by section 7, 8 or 9 thereof shall not require him to make in respect of any one occurrence constituting a breach of that duty payments by way of such compensation exceeding in the aggregate, apart from payments in respect of interest or costs, £20 million or, in the case of the licensees of such sites as may be prescribed, £5 million. (1A) The Secretary of State may with the approval of the Treasury by order increase or further increase either or both of the amounts specified in subsection (1) of this section; but an order under this subsection shall not affect liability in respect of any occurrence before (or beginning before) the order comes into force. (2) A relevant foreign operator shall not be required by virtue of section 10 of this Act to make any payment by way of compensation in respect of an occurrence— (a) if he would not have been required to make that payment if the occurrence had taken place in his home territory and the claim had been made by virtue of the relevant foreign law made for purposes corresponding to those of section 7, 8 or 9 of this Act; or (b) to the extent that the amount required for the satisfaction of the claim is not required to be available by the relevant foreign law made for purposes corresponding to those of section 19(1) of this Act and has not been made available under section 18 of this Act or by means of a relevant foreign contribution. (3) Any claim by virtue of a duty imposed on any person by section 7, 8, 9 or 10 of this Act— (a) to the extent to which, by virtue of subsection (1) or (2) of this section though duly established, it is not or would not be payable by that person; or (b) which is made after the expiration of the relevant period; or (c) which, being such a claim as is mentioned in section 15(2) of this Act, is made after the expiration of the period of twenty years so mentioned; or (d) which is a claim the full satisfaction of which out of funds otherwise required to be, or to be made, available for the purpose is prevented by section 21(1) of this Act, shall be made to the appropriate authority, that is to say— (i) in the case of a claim by virtue of the said section 8 the Minister of Technology; (ii) in the case of a claim by virtue of the said section 9 (other than a claim in connection with a site used by a department of the Government of Northern Ireland), the Minister in charge of the government department concerned [or where the government department concerned is a part of the Scottish Administration the Scottish Ministers]; (iii) in any other case, the Minister,

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and, if established to the satisfaction of the appropriate authority, and to the extent to which it cannot be satisfied out of sums made available for the purpose under section 18 of this Act or by means of a relevant foreign contribution, shall be satisfied by the appropriate authority to such extent and out of funds provided by such means as Parliament may determine. (4) Where in pursuance of subsection (3) of this section a claim has been made to the appropriate authority, any question affecting the establishment of the claim or as to the amount of any compensation in satisfaction of the claim may, if the authority thinks fit, be referred for decision to the appropriate court, that is to say, to whichever of the High Court, the Court of Session and the High Court of Justice in Northern Ireland would, but for the provisions of this section, have had jurisdiction in accordance with section 17(1) and (2) of this Act to determine the claim; and the claimant may appeal to that court from any decision of the authority on any such question which is not so referred; and on any such reference or appeal— (a) the authority shall be entitled to appear and be heard; and (b) notwithstanding anything in any Act, the decision of the court shall be final. (5) In this section, the expression ‘‘the relevant period’’ means the period of ten years beginning with the relevant date within the meaning of section 15(1) of this Act. Notes Subs (1) was amended by the Energy Act 1983, s 27. Liability is here limited to ‘‘any one occurrence’’. Cf the analogous provision in the Employers’ Liability (Compulsory Insurance) General Regulations 1971, SI 1971 No 1117, reg 3(1), which requires an employer to insure for liability up to £2 million for loss arising from ‘‘any one occurrence’’. The use of the word ‘‘aggregate’’ in s 16(1), and the definition of occurrence in s 26, makes it clear that the word ‘‘occurrence’’ refers to an incident (eg, an explosion) or a continuing incident (eg, a leakage over a period of time) and not to each individual claim against the operator (eg, individual personal injuries or damaged properties). Subs (1A) was inserted by the Energy Act 1983, s 27. The powers under this section have yet to be exercised. Subs (2) See the note to s 10. Subs (3) was amended by the Scotland Act 1998 (Consequential Modifications) (No 2) Order 1999, SI 1999 No 1820, Sched 2, para 38. This subsection imposes upon the UK government fallback liability where a person suffering loss is unable to make a claim on any of the grounds here set out.

Jurisdiction, shared liability and foreign judgments 17.—(1) No court in the United Kingdom or any part thereof shall have jurisdiction to determine any claim or question under this Act certified by the Minister to be a claim or question which, under any relevant international agreement, falls to be determined by a court of some other relevant territory or, as the case may be, of some other part of the United Kingdom; and any proceedings to enforce such a claim which are commenced in any court in the United Kingdom or, as the case may be, that part thereof shall be set aside. (2) Where under the foregoing subsection the Minister certifies that any claim or question falls to be determined by a court in a particular part of the United Kingdom, that certificate shall be conclusive evidence of the jurisdiction of that court to determine that claim or question. (3) Where by virtue of any one or more of the following, that is to say, sections 7, 8, 9 and 10 of this Act and any relevant foreign law made for purposes corresponding to those of any of those sections, liability in respect of the same injury or damage is incurred by two or more persons, then, for the purposes of any proceedings in the United Kingdom relating to that injury or damage, including proceedings for the enforcement of a judgment registered under the Foreign Judgments (Reciprocal Enforcement) Act 1933— (a) both or all of those persons shall be treated as jointly and severally liable in respect of that injury or damage; and (b) until claims against each of those persons in respect of the occurrence by virtue of which the person in question is liable for that injury or damage have been satisfied— (i) in the case of a licensee, the Authority or the Crown, up to an aggregate amount of equal to that applicable to the person in question under section 16(1) of this Act; or

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(ii) in the case of a relevant foreign operator, up to such aggregate amount, . . . , as may be provided for by the relevant foreign law made for purposes corresponding to those of section 19(1) of this Act, no sums in excess of those required for the purposes of sub-paragraph (i) of this paragraph shall be required to be made available under section 18 of this Act for the purpose of paying compensation in respect of that injury or damage. (4) Part I of the said Act of 1933 shall apply to any judgment given in a court of any foreign country which is certified by the Minister to be a relevant foreign judgment for the purposes of this Act, whether or not it would otherwise have so applied, an shall have effect in relation to any judgment so certified as if in section 4 of that Act subsections (1)(a)(ii), (2) and (3) were omitted. (5) Subject to subsection (5A) of this section it shall be sufficient defence to proceedings in the United Kingdom against any person for the recovery of a sum alleged to be payable under a judgment given in a country outside the United Kingdom for that person to show that— (a) the sum in question was awarded in respect of injury or damage of a description which is the subject of a relevant international agreement; and (b) the country in question is not a relevant territory; and (c) the sum in question was not awarded in pursuance of any of the international conventions referred to in the Acts mentioned in section 12(4) of this Act. (5A) Subsection (5) of this section shall not have effect where the judgment in question is enforceable in the United Kingdom in pursuance of an international agreement. (6) Where, in the case of any claim by virtue of section 10 of this Act, the relevant foreign operator is the government of a relevant territory, then, for the purposes of any proceedings brought in a court in the United Kingdom to enforce that claim, that government shall be deemed to have submitted to the jurisdiction of that court, and accordingly rules of court may provide for the manner in which any such action is to be commenced and carried on; but nothing in this subsection shall authorise the issue of execution, or in Scotland the execution of diligence, against the property of that government. Notes Subs (1) This subsection allows the Secretary of State to enforce the jurisdiction rules in the Paris Convention by certifying that the courts of a part of the UK do or do not have jurisdiction to hear a claim. An English action on a claim which must be heard in another contracting state (eg, because the occurrence took place in that state) will, therefore, be stayed. Subs (3) was amended by the Energy Act 1983. The 1933 Act permits foreign judgments to be enforced in England, so that assets held in England by the defendant can be proceeded against in order to satisfy the judgment. Subs (4) Subs (4) allows the enforcement in England of judgments given under the Paris Convention in other contracting states. Subs (5), by contrast, prevents a plaintiff from enforcing in England a judgment given by the courts of a non-contracting state, a provision based on want of reciprocity. Subs (5) was amended by the Energy Act 1983, s 31. See the note to subs (4). Subs (5A) was inserted by the Energy Act 1983, s 28, and allows the judgment of a non-contracting state to be enforced in England if some other international agreement is in force allowing the mutual enforcement of judgments.

Cover for compensation General cover for compensation by virtue of ss 7 to 10 18.—(1) In the case of any occurrence in respect of which one or more persons incur liability by virtue of section 7, 8, 9 or 10 of this Act or by virtue of any relevant foreign law made for purposes corresponding to those of any of those sections, but subject to subsections (2) to (4B) of this section and to sections 17(3)(b) and 21(1) of this Act, there shall be made available out of moneys provided by Parliament such sums as, when aggregated— (a) with any funds required by, or by any relevant foreign law made for purposes corresponding to those of, section 19(1) of this Act to be available for the purpose of satisfying claims in respect of that occurrence against any licensee or relevant foreign operator; and (b) in the case of a claim by virtue of any such foreign law, with any relevant foreign contributions towards the satisfaction of claims in respect of that occurrence, [and

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(c) in the case of an occurrence in respect of which the Authority incurs liability, with any amounts payable under a contract of insurance or other arrangements for satisfying claims in respect of that occurrence against the Authority,] may be necessary to ensure that all claims in respect of that occurrence made within the relevant period and duly established, excluding, but without prejudice to, any claim in respect of interest or costs, are satisfied up to the aggregate amount specified in subsection (1A) of this section. (1A) The aggregate amount referred to in subsection (1) of this section is the equivalent in sterling of 300 million special drawing rights on— (a) the day (or first day) of the occurrence in question, or (b) if the Secretary of State certifies that another day has been fixed in relation to the occurrence in accordance with an international agreement, that other day. (1B) The Secretary of State may with the approval of the Treasury by order increase or further increase the sum expressed in special drawing rights in subsection (1A) of this section; but an order under this subsection shall not have effect in respect of an occurrence before (or beginning before) the order comes into force. (2) Subsection (1) of this section shall not apply to any claim by virtue of such a relevant foreign law as is mentioned in that subsection in respect of injury or damage incurred within the territorial limits of a country which is not a relevant territory or to any claim such as is mentioned in section 15(2) of this Act which is not made within the period of twenty years so mentioned. (3) Where any claim such as is mentioned in subsection (1) of this section is satisfied wholly or partly out of moneys provided by Parliament under that subsection, there shall also be made available out of moneys so provided such sums as are necessary to ensure the satisfaction of any claim in respect of interest or costs in connection with the first-mentioned claim. (4) In relation to liability by virtue of any relevant foreign law, there shall be left out of account for the purposes of subsection (1) of this section any claim which, though made within the relevant period, was made after the expiration of any period of limitation imposed by that law and permitted by a relevant international agreement. (4A) Where— (a) a relevant foreign law provides in pursuance of a relevant international agreement for sums additional to those referred to in subsection (1)(a) of this section to be made available out of public funds, but (b) the maximum aggregate amount of compensation for which it provides in respect of an occurrence in pursuance of that agreement is less than that specified in subsection (1A) of this section, then, in relation to liability by virtue of that law in respect of the occurrence, subsection (1) of this section shall have effect as if for the reference to the amount so specified there were substituted a reference to the maximum aggregate amount so provided. (4B) Where a relevant foreign law does not make the provision mentioned in subsection (4A)(a) of this section, then in relation to liability by virtue of that law in respect of any occurrence— (a) subsection (1) of this section shall not have effect unless the person (or one of the persons) liable is a licensee, the Authority or the Crown; and (b) if a licensee, the Authority or the Crown is liable, subsection (1) shall have effect as if for the reference to the amount specified in subsection (1A) there were substituted a reference to the amount which would be applicable to that person under section 16(1) of this Act in respect of the occurrence (or, if more than one such person is liable, to the aggregate of the amounts which would be so applicable) if it had constituted a breach of duty under section 7, 8 or 9 of this Act. (5) Any sums received by the Minister by way of a relevant foreign contribution towards the satisfaction of any claim by virtue of section 7, 8, 9 or 10 of this Act shall be paid into the Exchequer. (6) In this section, the expression ‘‘the relevant period’’ has the same meaning as in section 16 of this Act.

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Notes This section establishes a state compensation fund against which claims can be made in respect of liabilities incurred under the 1965 Act. Under the Paris Convention, the paying state can call for a contribution from the contracting state in which the occurrence took place. Subs (1) was amended by the Energy Act 1983, s 28 and by the Atomic Energy Act 1989, s 3. Subs (1A) was inserted by the Energy Act 1983, s 28. Subs (1B) was inserted by the Energy Act 1983, s 28. Subs (4) was substituted by the Energy Act 1983, s 28. Subs (4A) was inserted by the Energy Act 1983, s 28. Subs (4B) was inserted by the Energy Act 1983, s 28.

Special cover for licensee’s liability 19.—(1) Subject to section 3(5) of this Act and to subsection (3) of this section, where a nuclear site licence has been granted in respect of any site, the licensee shall make such provision (either by insurance or by some other means) as the Minister may with the consent of the Treasury approve for sufficient funds to be available at all times to ensure that any claims which have been or may be duly established against the licensee as licensee of that site by virtue of section 7 of this Act or any relevant foreign law made for purposes corresponding to those of section 10 of this Act (excluding, but without prejudice to, any claim in respect of interest or costs) are satisfied up to the required amount in respect of each severally of the following periods, that is to say— (a) the current cover period, if any; (b) any cover period which ended less than ten years before the time in question; (c) any earlier cover period in respect of which a claim remains to be disposed of, being a claim made— (i) within the relevant period within the meaning of section 16 of this Act; and (ii) in the case of a claim such as is mentioned in section 15(2) of this Act, also within the period of twenty years so mentioned; and for the purposes of this section the cover period in respect of which any claim is to be treated as being made shall be that in which the beginning of the relevant period aforesaid fell. (1A) In this section ‘‘the required amount’’, in relation to the provision to be made by a licensee in respect of a cover period, means an aggregate amount equal to the amount applicable under section 16(1) of this Act to the licensee, as licensee of the site in question, in respect of an occurrence within that period. (2) In this Act, the expression ‘‘cover period’’ means subject to subsection (2A) of this section the period of the licensee’s responsibility or, if a direction has been given in respect of the site under subsection (4) of this section, any of the following periods, that is to say— (a) the period beginning with the grant of the nuclear site licence and ending with the date specified in the first such direction; (b) the period beginning with the date specified in any such direction and ending with the date specified in the next such direction, if any; (c) the period beginning with the date specified in the last such direction and ending with the ending of the period of the licensee’s responsibility; and for the purposes of this definition the period of the licensee’s responsibility shall be deemed to include any time after the expiration of that period during which it remains possible for the licensee to incur any liability by virtue of section 7(2)(b) or (c) of this Act, or by virtue of any relevant foreign law made for purposes corresponding to those of section 10 of this Act. (2A) When the amount applicable under section 16(1) of this Act to a licensee of a site changes as a result of— (a) the coming into force of an order under section 16(1A) or of regulations made for the purposes of section 16(1), or (b) an alteration relating to the site which brings it within, or takes it outside, the description prescribed by such regulations, the current cover period relating to him as licensee of that site shall end and a new cover period shall begin.

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(2B) The current cover period continues to run (and no new cover period begins) on the grant of a new nuclear site licence to the same licensee in respect of a site consisting of or including the site in respect of which his existing nuclear site licence is in force. (3) Where in the case of any licensed site the provision required by subsection (1) of this section is to be made otherwise than by insurance and, apart from this subsection, provision would also fall to be so made by the same person in respect of two or more other sites, the requirements of that subsection shall be deemed to be satisfied in respect of each of those sites if funds are available to meet such claims as are mentioned in that subsection in respect of all the sites collectively, and those funds would for the time being be sufficient to satisfy the requirements of that subsection in respect of those two of the sites in respect of which those requirements are highest; Provided that the Minister may in any particular case at any time direct either that this subsection shall not apply or that the funds available as aforesaid shall be of such amount higher than that provided for by the foregoing provisions of this subsection, but lower than that necessary to satisfy the requirements of the said subsection (1) in respect of all the sites severally, as may be required by the direction. (4) Where, by reason of the gravity of any occurrence which has resulted or may result in claims such as are mentioned in subsection (1) of this section against a licensee as licensee of a particular licensed site, or having regard to any previous occurrences which have resulted or may result in such claims against the licensee, the Minister thinks it proper so to do, he shall by notice in writing to the licensee direct that a new cover period for the purposes of the said subsection (1) shall begin in respect of that site on such date not earlier than two months after the date of the service of the notice as may be specified therein. (5) If at any time while subsection (1) of this section applies in relation to any licensed site the provisions of that subsection are not complied with in respect of that site, the licensee shall be guilty of an offence and be liable— (a) on summary conviction to a fine not exceeding [the prescribed sum] or to imprisonment for a term not exceeding three months, or to both; (b) on conviction on indictment, to a fine . . . , or to imprisonment for a term not exceeding two years, or to both. Notes Subs (1) was amended by the Energy Act 1983, s 27. It requires a licensee to procure cover, by insurance or otherwise, in respect of his potential liabilities under s 7 cf the 1965 Act, or under the law of another contracting state corresponding to s 10 of the 1965 Act (liability where material is being carried on the licensee’s behalf). The policy must cover the entire limitation period during which a claim may be brought by a third party. Subs (1A) was inserted by the Energy Act 1983, s 27. It requires the insurance to cover the full maximum amount of the licensee’s potential liability under s 16 of the 1965 Act. Subs (2) was amended by the Energy Act 1983, s 27. Subs (2A) was inserted by the Energy Act 1983, s 27. Subs (2B) was inserted by the Atomic Energy Act 1989, s 4. Subs (5) was amended by the Criminal Law Act 1977, s 32, and the Magistrates Court Act 1980, s 32. For prosecutions under this subsection, see s 25.

Furnishing of information relating to licensee’s cover 20.—(1) In the case of each licensed site, the licensee shall give notice in writing to the Minister forthwith upon its appearing to the licensee that the aggregate amount of any claims such as are mentioned in section 19(1) of this Act made in respect of any cover period falling within the period of the licensee’s responsibility has reached three-fifths of the required amount within the meaning of section 19; and where the licensee has given such a notice, no payment by way of settlement of any claim in respect of the cover period in question by agreement between the licensee and the claimant shall be made except after consultation with the Minister and in accordance with the terms of any direction which the Minister may give to the licensee in writing with respect to any particular claim. (2) If in the case of any licensed site any cover period falling within the period of the licensee’s responsibility has ended, the licensee shall not later than 31st January in each year send to the Minister in writing a statement showing the date when that cover period ended and

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the following particulars of any claims in respect of that cover period as at the beginning and end respectively of the last preceding calendar year, that is to say— (a) the aggregate number of claims received; (b) the aggregate number of claims established; and (c) the aggregate number and aggregate amount of claims satisfied. (3) The Minister shall as soon as may be lay before each House of Parliament a copy of any notice received by him under subsection (1) of this section and a report (in such form, as having regard to section 16 of this Act, he may consider appropriate) with respect to any statements received by him under sub-section (2) of this section. (4) Any person by whom any funds such as are mentioned in section 19(1) of this Act for the time being fall to be provided shall give to the Minister not less than two months notice in writing before ceasing to keep those funds available and, notwithstanding any such notice, so far as those funds relate to nuclear matter for the time being in the course of carriage, shall not so cease while that carriage continues. Notes This section requires a licensee to inform the Secretary of State when the level of claims reaches three-fifths of the licensee’s potential maximum liability, at which point claims cannot be met without the Secretary of State’s consent. There is also a continuing obligation on the licensee to provide information as to claims made and settled. Subs (1) was amended by the Energy Act 1983, s 27.

Supplementary provisions with respect to cover for compensation in respect of carriage 21.—(1) Where, in the case of an occurrence involving nuclear matter in the course of carriage, a claim in respect of damage to the means of transport being used for that carriage is duly established— (a) against any person by virtue of section 7, 8, 9 or 10 of this Act; or (b) against a licensee, the Authority or the Crown by virtue of any relevant foreign law made for purposes corresponding to those of the said section 10, then, without prejudice to any right of the claimant to the satisfaction of that claim, no payment towards its satisfaction shall be made out of funds which are required to be available for the purpose by, or by any relevant foreign law made for purposes corresponding to those of, section 19(1) of this Act, or which have been made available for the purpose under section 18 of this Act or by means of a relevant foreign contribution, such as to prevent the satisfaction out of those funds up to an aggregate amount which is the equivalent in sterling (on the day, or first day, of that occurrence) of 5 million special drawing rights of all claims which have been or may be duly established against the same person in respect of injury or damage caused by that occurrence other than damage to the said means of transport. (1A) The Secretary of State may with the approval of the Treasury by order increase or further increase the sum expressed in special drawing rights in subsection (1) of this section; but an order under this subsection shall not have effect in respect of any occurrence before (or beginning before) the order comes into force. (2) Where, in the case of an occurrence involving nuclear matter in the course of carriage, a claim in respect of damage to the means of transport being used for that carriage is duly established against a relevant foreign operator by virtue of section 10 of this Act, but by virtue of section 16(2)(a) thereof that operator is not required to make a payment in satisfaction of the claim, section 12(1)(b) of this Act shall not apply to any liability of that operator with respect to the damage in question apart from this Act. (3) Where any nuclear matter is to be carried by, or on behalf or with the agreement of, a licensee, the Authority, a government department or a relevant foreign operator in such circumstances that, while the matter is in the course of that carriage, the licensee, the Authority, the Crown or the operator, as the case may be (in this and the next following subsection referred to as ‘‘the responsible party’’) may incur liability by virtue of section 7, 8, 9 or 10 of this Act or by virtue of any relevant foreign law made for purposes corresponding to those of the said section 10, the responsible party shall, before the carriage is begun, cause to be delivered to the person who is to carry that matter a document issued by or on behalf of the appropriate person mentioned in the next following subsection (in this subsection referred to as ‘‘the

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guarantor’’) which shall contain such particulars as may be prescribed of the responsible party, of that nuclear matter and carriage, and of the funds available in pursuance of, or of the relevant foreign law made for purposes corresponding to those of, section 18 or 19(1) of this Act to satisfy any claim by virtue of that liability, and the guarantor shall be debarred from disputing in any court any of the particulars stated in that document; and if in any case there is a wilful failure to comply with this subsection, the responsible party (except where that party is the Crown), and also, if the carrier knew or ought to have known the matter carried to be such matter for carriage in such circumstances as aforesaid, the carrier, shall be guilty of an offence and liable on summary conviction to a fine not exceeding [level 3 on the standard scale]. (4) The person by whom or on whose behalf the document referred to in the last foregoing subsection is to be issued shall be— (a) where the responsible party is a licensee, the person by whom there fall to be provided the funds required by section 19(1) of this Act to be available to satisfy any claim in respect of the carriage in question; (b) where the responsible party is the Authority, the Minister of Technology; (c) where the responsible party is the Crown, the Minister in charge of the government department concerned, [or in relation to any part of the Scottish Administration the Scottish Ministers]; (d) where the responsible party is a relevant foreign operator, the person by whom there fall to be provided the funds required by the relevant foreign law made for purposes corresponding to those of section 18 or 19(1) of this Act to be made available to satisfy any claim in respect of the carriage in question. (4A) Subsection (3) of this section shall not apply where the carriage in question is wholly within the territorial limits of the United Kingdom. (5) The requirements of Part VI of the Road Traffic Act 1960 (which relates to compulsory insurance or security against third-party risks of users of motor vehicles) shall not apply in relation to any injury to any person for which any person is liable by virtue of section 7, 8, 9 or 10 of this Act. Notes Subs (1) was amended by the Energy Act 1983, s 29. Its effect is to postpone claims against the funds maintained under ss 18 and 19 for damage to the means of transport used to carry nuclear matter. Subs (1A) was inserted by the Energy Act 1983, s 29. Subs (3) was amended by the Criminal Justice Act 1982, ss 38 and 46. Subs (4) was amended by the Scotland Act 1998 (Consequential Modifications) (No 2) Order 1999, SI 1999 No 1820, Sched 2, para 38. Subs (4A) was inserted by the Energy Act 1983, s 29.

Miscellaneous and general Reporting of and inquiries into dangerous occurrences 22.—(1) The provisions of this section shall have effect on the happening of any occurrence of any such class or description as may be prescribed, being an occurrence— (a) on a licensed site; or (b) in the course of the carriage of nuclear matter on behalf of any person where a duty with respect to that carriage is imposed on that person by section 7, 10 or 11 of this Act. (2) The licensee or person aforesaid shall cause the occurrence to be reported forthwith in the prescribed manner to the Health and Safety Executive and to such other persons, if any, as may be prescribed in relation to occurrences of that class or description, and if the occurrence is not so reported the licensee or person aforesaid shall be guilty of an offence . . . (3)–(6) . . . Notes Subs (2) was amended by SI 1974 No 2056, reg 2(1). Subs (3)–(6) were repealed by SI 1974 No 2056, reg 2(1).

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Registration in connection with certain occurrences 23.—(1) Without prejudice to any right of any person to claim against any person by virtue of any of sections 7 to 11 of this Act, the appropriate authority may, on the happening of any occurrence in respect of which liability may be incurred by virtue of any of those sections, by order make provision for enabling such particulars of any person shown to have been within such area during such period (being the period during which the occurrence took place) as may be specified in the order to be registered by or on behalf of that person in such manner as may be so specified, and any such registration in respect of any person shall be sufficient evidence of his presence within that area during that period unless the contrary is proved; and any such order shall be made by statutory instrument and be laid before Parliament after being made. (2) In the foregoing subsection, the expression ‘‘the appropriate authority’’ means, in relation to any occurrence, the authority hereinafter specified in relation to the person against whom any claim in respect of that occurrence falls to be made, that is to say— (a) where that person is the Authority, the Minister of Technology; (b) where that person is the Crown, the Minister in charge of the government department concerned [or where any part of the Scottish Administration is concerned the Minister]; (c) in any other case, the Minister. Notes Subs (2) was amended by the Scotland Act 1998 (Consequential Modifications) Order 1999, SI 1999 No 1756, Sched 1, para 2.

Inspectors 24.—(1) The Secretary of State may appoint as inspectors for the purpose of assisting him in the execution of the provisions of this Act, other than provisions which are mentioned in Schedule 1 to the Health and Safety at Work etc. Act 1974, such number of persons appearing to him to be qualified for the purpose as he may from time to time consider necessary or expedient, and may make to or in respect of any person so appointed such payments by way of remuneration, allowances or other payments as the Secretary of State may with the approval of the Minister for the Civil Service determine. (2) Any such inspector may for that purpose exercise such of the powers set out in section 20(2) of the Health and Safety at Work etc. Act 1974 as are specified in his instrument of appointment and the provisions of sections 28 (restrictions on disclosure of information), 33 (offences) and 39 (prosecutions by inspectors) of that Act shall apply in the case of inspectors so appointed as they apply in the case of inspectors appointed under section 19 of that Act. (3) In such cases and to such extent as it may appear to the Secretary of State, with the agreement of the Treasury, to be appropriate so to do, the Secretary of State shall require a licensee to repay to the Secretary of State such part as may appear to the Secretary of State to be attributable to the nuclear installations in respect of which nuclear site licences have been granted to that licensee of— (a) any sum paid at any time by the Secretary of State or the Health and Safety Executive by way of remuneration, allowances or other payments to inspectors, whether appointed under this Act or under the Health and Safety at Work etc. Act 1974, in respect of the enforcement and execution of this Act; and (b) any expenses, whenever incurred, being— (i) expenses incurred by the Secretary of State; or (ii) expenses incurred by the Health and Safety Commission or Executive; or (iii) expenses incurred by any government department; or (iv) such sums as the Treasury may determine in respect of the use of any premises belonging to the Crown, which the Secretary of State may, with the consent of the Treasury, determine to be incurred in connection with the enforcement or execution of this Act, and the licensee shall comply with such requirement; and any sums so repaid to the Secretary of State shall be paid into the Consolidated Fund, [and except that in so far as sums so repaid

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relate to expenses incurred by the Scottish Administration they shall be paid to the Scottish Ministers] (4) Any liability of a licensee in respect of sums payable by him under subsection (3) of this section on account of pensions shall, if the Secretary of State so determines, be satisfied by way of contributions calculated, at such rate as may be determined by the Minister for the Civil Service, by reference to remuneration. Notes This section was inserted by SI 1974 No 2056, reg 2(1). Subs (3) was amended by the Scotland Act 1998 (Consequential Modifications) (No 2) Order 1999, SI 1999 No 1820, Sched 2, para 38.

Recovery of expenses by Health and Safety Executive 24A.— (1) This section applies to any expenses incurred by the Health and Safety Executive (‘‘the Executive’’) and any expenses incurred by the Health and Safety Commission (‘‘the Commission’’) which, in either case, the Executive may determine to be incurred wholly or partly in connection with— (a) the carrying into effect of such of the provisions of this Act as are mentioned in Schedule 1 to the Health and Safety at Work etc. Act 1974; or (b) the carrying out of research into nuclear safety at the direction of the Commission. (2) Without prejudice to the generality of subsection (1) of this section, the reference in that subsection to expenses incurred by the Executive includes any sums paid by it by way of remuneration, allowances or other payments to inspectors appointed under the Health and Safety at Work etc. Act 1974. (3) In such cases and to such extent as it may appear to the Executive appropriate to do so, the Executive shall required a person who has applied for a nuclear site licence to repay to it so much of any expenses to which this section applies as may appear to it to be attributable to dealing with the application. (4) In such cases and to such extent as it may appear to the Executive to be appropriate to do so, the Executive shall require a person to whom a nuclear site licence has been granted to repay to it— (a) so much of any expenses to which this section applies as may appear to it to be attributable to any nuclear installation in respect of which the licence has been granted; and (b) so much of any expenses to which this section applies which are not otherwise recoverable under this section as it thinks fit. (5) A person shall comply with any requirement made of him under this section. (6) Any liability of a person in respect of sums payable by him under this section on account of pensions shall, if the Executive so determines, be satisfied by way of contributions, calculated, at such rate as may be determined by the Treasury, by reference to remuneration. (7) Where the Executive anticipates that a person who has applied for or has been granted a nuclear site licence will become subject to a liability under this section, it may require him to make to it a payment or payments on account of the liability. (8) Where a person has made a payment under subsection (7) of this section on account of an anticipated liability, then— (a) if he does not become subject to the liability, the Executive shall be liable to repay the payment to him; and (b) if the amount of the liability to which he becomes subject is less than the amount paid under that subsection, the Executive shall be liable to repay the difference to him. Notes This section was inserted by the Atomic Energy Act 1989, s 2.

Offences—general 25.—(1) Where a body corporate is guilty of an offence under section 2(2) or 19(5) of this Act and that offence is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, any director, manager, secretary or other similar

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officer of the body corporate or any person who was purporting to act in any such capacity, he, as well as the body corporate, shall be guilty of that offence and shall be liable to be proceeded against and punished accordingly; and where the body corporate was guilty of the offence in the capacity of licensee under a nuclear site licence, he shall be so liable as if he, as well as the body corporate, were the licensee. In this subsection, the expression ‘‘director’’, in relation to a body corporate established by or under any enactment for the purpose of carrying on under national ownership any industry or part of an industry or undertaking, being a body corporate whose affairs are managed by its members, means a member of that body corporate. (2) Where a body corporate is convicted on indictment of an offence under any of the following provisions of this Act, that is to say, sections . . . 2(2) . . . and 19(5), so much of the provision in question as limits the amount of the fine which may be imposed shall not apply, and the body corporate shall be liable to a fine of such amount as the court thinks just. (3) Proceedings in respect of any offence under section 2(2) or 19(5) of this Act shall not be instituted in England or Wales except by the Minister or by or with the consent of the Director of Public Prosecutions. Notes Subs (1) was amended by SI 1974 No 2056, reg 2(1). Subs (2) was amended by SI 1974 No 2056, reg 2(1). Subs (3) was amended by SI 1974 No 2056, reg 2(1).

Orders 25A. The power to make orders under section 16(1A), 18(1B) or 21(1A) of this Act shall be exercisable by statutory instrument; but no such order shall be made unless a draft of it has been laid before and approved by resolution of the House of Commons. Notes This section was inserted by the Energy Act 1983, s 30.

Special drawing rights 25B.—(1) In this Act ‘‘special drawing rights’’ means special drawing rights as defined by the International Monetary Fund; and for the purpose of determining the equivalent in sterling on any day of a sum expressed in special drawing rights, one special drawing right shall be treated as equal to such a sum in sterling as the International Monetary Fund have fixed as being the equivalent of one special drawing right— (a) for that day, or (b) if no sum has been so fixed for that day, for the last day before that day for which a sum has been so fixed. (2) A certificate given by or on behalf of the Treasury stating— (a) that a particular sum in sterling has been so fixed for a particular day, or (b) that no sum has been so fixed for a particular day and that a particular sum in sterling has been so fixed for a day which is the last day for which a sum has been so fixed before the particular day, shall be conclusive evidence of those matters for the purposes of subsection (1) of this section; and a document purporting to be such a certificate shall in any proceedings be received in evidence and, unless the contrary is proved, be deemed to be such a certificate. (3) The Treasury may charge a reasonable fee for any certificate given in pursuance of subsection (2) of this section and any fee received by the Treasury by virtue of this subsection shall be paid into the Consolidated Fund. Notes This section was inserted by the Energy Act 1983, s 30.

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Interpretation 26.—(1) In this Act, except where the context otherwise requires, the following expressions have the following meanings respectively, that is to say— ‘‘the Act of 1959’’ means the Nuclear Installations (Licensing and Insurance) Act 1959; ‘‘atomic energy’’ has the meaning assigned by the Atomic Energy Act 1946; ‘‘the Authority’’ means the United Kingdom Atomic Energy Authority; ‘‘contravention’’, in relation to any enactment or to any condition imposed or direction given thereunder, includes a failure to comply with the enactment, condition or direction, and cognate expressions shall be construed accordingly; ‘‘cover period’’ has the meaning assigned by section 19(2) of this Act; ‘‘excepted matter’’ means nuclear matter consisting only of one or more of the following, that is to say— (a) isotopes prepared for use for industrial, commercial, agricultural, medical scientific or educational purposes; (b) natural uranium; (c) any uranium of which isotope 235 forms not more than 0.72 per cent; (d) nuclear matter of such other description, if any, in such circumstances as may be prescribed (or, for the purposes of the application of this Act to a relevant foreign operator, as may be excluded from the operation of the relevant international agreement by the relevant foreign law); ‘‘home territory’’, in relation to a relevant foreign operator, means the relevant territory in which, for the purposes of a relevant international agreement, he is the operator of a relevant installation; ‘‘injury’’ means personal injury and includes loss of life; ‘‘inspector’’ in sections 4(5) and 5(2) of this Act means an inspector appointed by the Health and Safety Executive under section 19 of the Health and Safety at Work etc. Act 1974; ‘‘licensed site’’ means a site in respect of which a nuclear site licence has been granted, whether or not that licence remains in force; ‘‘licensee’’ means a person to whom a nuclear site licence has been granted, whether or not that licence remains in force; ‘‘the Minister’’ means— (a) in the application of this Act to England and Wales, the Minister of Power; (b) (applies to Scotland only); ‘‘nuclear installation’’ means a nuclear reactor or an installation such as is mentioned in section 1(1)(b) of this Act; ‘‘nuclear matter’’ means, subject to any exceptions which may be prescribed— (a) any fissile material in the form of uranium metal, alloy or chemical compound (including natural uranium), or of plutonium metal, alloy or chemical compound, and any other fissile material which may be prescribed; and (b) any radioactive material produced in, or made radioactive by exposure to the radiation incidental to, the process of producing or utilising any such fissile material as aforesaid; ‘‘nuclear reactor’’ means any plant (including any machinery, equipment or appliance, whether affixed to land or not) designed or adapted for the production of atomic energy by a fission process in which a controlled chain reaction can be maintained without an additional source of neutrons; ‘‘nuclear site licence’’ has the meaning assigned by section 1(1) of this Act; ‘‘occurrence’’ in sections 16(1) and (1A), 17(3) and 18 of this Act (a) in the case of a continuing occurrence, means the whole of that occurrence; and (b) in the case of an occurrence which is one of a succession of occurrences all attributable to a particular happening on a particular relevant site or to the carrying out from time to time on a particular relevant site of a particular operation, means all those occurrences collectively; ‘‘period of responsibility’’, in relation to a licensee, has the meaning assigned by section 5(3) of this Act;

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‘‘prescribed’’ means prescribed by regulations made by the [Secretary of State], which shall be made by statutory instrument and be subject to annulment in pursuance of a resolution of either House of Parliament; ‘‘relevant carriage’’, in relation to a nuclear matter, means carriage on behalf of— (a) a licensee as the licensee of a particular licensed site; or (b) the Authority; or (c) a government department for the purposes of such use of a site by that department as is mentioned in section 9 of this Act; or (d) a relevant foreign operator; or (e) a person authorised to operate a nuclear reactor which is comprised in a means of transport and in which the nuclear matter in question is intended to be used; ‘‘relevant foreign contribution’’, in relation to any claim, means any sums falling by virtue of any relevant international agreement to be paid by the government of any relevant territory other than the United Kingdom towards the satisfaction of that claim; ‘‘relevant foreign judgment’’ means a judgment of a court of a relevant territory other than the United Kingdom which, under a relevant international agreement, is to be enforceable anywhere within the relevant territories; ‘‘relevant foreign law’’ means the law of a relevant territory other than the United Kingdom or any part thereof regulating in accordance with a relevant international agreement matters falling to be so regulated and, in relation to a particular relevant foreign operator, means the law such as aforesaid of his home territory; ‘‘relevant foreign operator’’ means a person who, for the purposes of a relevant international agreement, is the operator of a relevant installation in a relevant territory other than the United Kingdom; ‘‘relevant installation’’ means an installation to which a relevant international agreement applies; ‘‘relevant international agreement’’ means an international agreement with respect to third-party liability in the field of nuclear energy to which the United Kingdom or Her Majesty’s Government therein are party, other than an agreement relating to liability in respect of nuclear reactors comprised in means of transport; ‘‘relevant site’’ means any of the following, that is to say— (a) a licensed site at any time during the period of the licensee’s responsibility; (b) any premises at any time when they are occupied by the Authority; (c) any site at any time when it is occupied by a government department, if that site is being or has been used by that department as mentioned in section 9 of this Act; (d) any site in a relevant territory other than the United Kingdom at any time when that site is being used for the operation of a relevant installation by a relevant foreign operator; ‘‘relevant territory’’ means a country for the time being bound by a relevant international agreement; ‘‘territorial limits’’ includes territorial waters. (2) References in this Act to the carriage of nuclear matter shall be construed as including references to any storage incidental to the carriage of that matter before its delivery at its final destination. (3) Any question arising under this Act as to whether— (a) any person is a relevant foreign operator; or (b) any law is the relevant foreign law with respect to any matter; or (c) any country is for the time being a relevant territory, shall be referred to and determined by the Minister. (4) Save where the context otherwise requires, any reference in this Act to any enactment shall be construed as a reference to that enactment as amended, extended or applied by or under any other enactment. Notes Subs (1) was amended by SI 1974 No 2056, reg 3, the Energy Act 1983, ss 27 and 32 and the Transfer of Functions (Nuclear Installations) Order 1999, SI 1999 No 2786, art 3.

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Northern Ireland 27.—(1) In the application to Northern Ireland of the following provisions of this Act (hereafter in this section referred to as ‘‘the designated provisions’’), that is to say, sections 1 to 6 and 22 to 24 and Schedules 1 and 2— (a) any reference to the Minister shall be construed as a reference to the Minister of Commerce for Northern Ireland; (b) the expression ‘‘prescribed’’ shall mean prescribed by regulations made by the said Minister of Commerce, which shall be subject to negative resolution within the meaning of section 41(6) of the Interpretation Act (Northern Ireland) 1954; (c) any reference to the Treasury shall be construed as a reference to the Ministry of Finance for Northern Ireland; (d) any reference to Parliament shall be construed as a reference to the Parliament of Northern Ireland; (dd) in section 2(1) and in section 2(1D) any reference to a government department shall be construed as including a reference to a department of the Government of Northern Ireland; and in section 2(1C), for the words from ‘‘and any such power’’ onwards there shall be substituted the words ‘‘and any order under this section shall be subject to negative resolution within the meaning of section 41(6) of the Interpretation Act (Northern Ireland) 1954’’; (e) for section 3(3)(b) and (c) there shall be substituted the following, that is to say— ‘‘(b) any board of conservators for a fishery district constituted under the Fisheries Acts (Northern Ireland) 1842 to 1954 and any statutory water undertaking within the meaning of the Water Supplies and Sewerage Act (Northern Ireland) 1945’’; (f) section 23(1) shall have effect as if the words ‘‘be made by statutory instrument and’’ were omitted; (g) in section 24(6)— (i) references to the Ministry of Power or to the Crown shall be construed as references respectively to the Ministry of Commerce for Northern Ireland or to the Crown in right of Her Majesty’s Government in Northern Ireland; (ii) for the words from ‘‘and any sums’’ onwards there shall be substituted the words ‘‘and any sums so repaid to the Ministry of Commerce shall be treated as part of the revenues of that Ministry’’; (h) in Schedule 2, any reference to a master of the Supreme Court or to the High Court shall be construed respectively as a reference to the taxing master of the Supreme Court of Northern Ireland or to a judge of the High Court of Justice in Northern Ireland. (2) In the application to Northern Ireland of any provision of this Act other than the designated provisions— (a) any reference to the Minister shall be construed as a reference to the Minister of Power; (b) any reference to an enactment of the Parliament of the United Kingdom shall be construed as a reference to that enactment as it applies in Northern Ireland; (c) any reference to a government department shall be construed as including a reference to a department of the Government of Northern Ireland. (3) In relation to a department of the Government of Northern Ireland using any site as mentioned in section 9 of this Act— (a) references in this Act to the Crown shall be construed as references to the Crown in right of Her Majesty’s Government in Northern Ireland; (b) references in this Act to the Minister in charge of that department shall be construed as references to the Minister of the Government of Northern Ireland so in charge. (4) In the application to Northern Ireland of section 21(5) of this Act, the reference to Part VI of the Road Traffic Act 1960 shall be construed as a reference to Part II of the Motor Vehicles and Road Traffic Act (Northern Ireland) 1930 as amended or re-enacted (with or without modification) by any subsequent enactment of the Parliament of Northern Ireland for the time being in force. (5) Proceedings in respect of any offence under this Act shall not be instituted in Northern Ireland except—

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(a) in the case of an offence under any of the designated provisions, by the said Minister of Commerce; or (b) in the case of any other offence, by the Minister of Power; or (c) in either case, by or with the consent of the Attorney-General for Northern Ireland. (6) Nothing in this Act shall authorise any department of the Government of Northern Ireland to incur any expenses attributable to the provisions of this Act until provision has been made by the Parliament of Northern Ireland for those expenses to be defrayed out of moneys provided by that Parliament. (7) . . . Notes Subs (1) was amended by the Atomic Energy Authority Act 1971, s 17. Subs (7) was repealed by the Northern Ireland Constitution Act 1973, s 41.

Channel Islands, Isle of Man, etc 28.—(1) Her Majesty may by Order in Council direct that any of the provisions of this Act specified in the Order shall extend, with such exceptions, adaptations and modifications as may be so specified, to any of the Channel Islands, to the Isle of Man or to any other territory outside the United Kingdom for the international relations of which Her Majesty’s Government in the United Kingdom are responsible. (2) Any Order in Council made by virtue of this section may be varied or revoked by any subsequent Order in Council so made. Repeals and savings 29.—(1) . . . (2) Anything done under or by virtue of any enactment repealed by this Act shall be deemed for the purposes of this Act to have been done under or by virtue of the corresponding provision of this Act, and anything begun under any of the enactments so repealed may be continued under the corresponding provision of this Act. (3) So much of any enactment or document as refers expressly or by implication to any enactment repealed by this Act shall, if and so far as the context permits, be construed as a reference to this Act or the corresponding enactment therein. (4) Nothing in this section shall be construed as affecting the general application of section 38 of the Interpretation Act 1889 with respect of the effect of repeals. Notes Subs (1) was repealed by the Statute Law (Reform) Act 1974.

Short title and commencement 30.—(1) This Act may be cited as the Nuclear Installations Act 1965. (2) This Act shall come into force on such day as Her Majesty may by Order in Council appoint; and a later day may be appointed for the purposes of section 17(5) than that appointed for the purposes of the other provisions of this Act.

SCHEDULES SCHEDULE 1 SECURITY PROVISIONS APPLICABLE BY ORDER UNDER S 2 General Note This schedule was inserted by the Atomic Energy Authority Act 1971, s 17(6), and was subsequently amended by SI 1974 No 2056, reg 2, The Atomic Energy Authority (Special Constables) Act 1976, s 2(1), the Nuclear Safeguards and Electricity (Finance) Act 1978, s 2(3), the Ministry of Defence Police Act 1987,

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s 7(4), the Official Secrets Act 1989, s 16, the Nuclear Safeguards Act 2000, s 11 and the Energy Act 2004, Sched 23, para 1.

1. In this Schedule ‘‘the specified body corporate’’, in relation to an order made under section 2 of this Act, means the body corporate specified in that order, as being a body to whom the Minister has granted a permit as mentioned in subsection (1B) of that section, and ‘‘site to which a permit applies’’ means a site in respect of which a permit so granted to the specified body corporate is for the time being in force. 2. . . . 3.—(1) Every site to which a permit applies shall, for the purposes of section 3(c) of the Official Secrets Act 1911 (which provides that places belonging to or used for the purposes of Her Majesty may be declared by order of the Secretary of State to be prohibited places for the purposes of that Act), be deemed to be a place belonging to or used for the purposes of Her Majesty. (2) No person other than— (a) a constable acting in the execution of his duty as such or, (b) an officer of customs and excise or inland revenue, acting in the execution of his duty as such, or (bb) a person designated as an inspector of the International Atomic Energy Agency under article 85 of the Agreement made on 6th September 1976 for the application of Safeguards in the United Kingdom in connection with the Treaty on the NonProliferation of Nuclear Weapons (Cmnd. 6730) or under Article 11 of the Additional Protocol (within the meaning of the Nuclear Safeguards Act 2000), or (c) an inspector appointed under section 24 of this Act, or (cc) an inspector appointed under section 19 of the Health and Safety at Work etc. Act 1974 and specially authorised in that behalf by or on behalf of a Minister of the Crown, or (d) an officer of any government department specially authorised in that behalf by or on behalf of a Minister of the Crown, shall, except with the consent of the specified body corporate and in accordance with any conditions imposed by them, be entitled to exercise any right of entry (whether arising by virtue of any statutory provision or otherwise) upon any site which is for the time being declared to be a prohibited place by virtue of an order made under the said section (3)(c) as extended by the preceding sub-paragraph: Provided that any person aggrieved by a refusal of the specified body corporate to consent to, or by conditions imposed by that body on, the exercise of any such right of entry may apply to the Minister who may, if he thinks fit, himself authorise the exercise of the right subject to such conditions, if any, as he may think fit to impose. 4. . . . 5.—(1) The specified body corporate shall comply with any directions which the Minister may give to them for the purpose of safeguarding information in the interests of national security; and a direction under this sub-paragraph may in particular require the specified body corporate to terminate the employment of any person specified in the direction who is an officer of, or employed by, that body or may require that body not to appoint a person so specified to be an officer of, or to any employment under, that body. (2) The specified body corporate shall also comply with any directions given to them by the Minister with respect to the safe-keeping of material of any description specified in the directions, whether in the interests of national security or of safety. (3) The Minister may with the approval of the Treasury make grants out of moneys provided by Parliament for reimbursing to the specified body corporation, in whole or in part, any expenses incurred by that body in complying with any directions given under sub-paragraph (1) of this paragraph and any directions given under sub-paragraph (2) of this paragraph with respect to the safe-keeping of material in the interests of national security. 6.—(1) Except, with the consent of the Minister the specified body corporate shall not terminate on security grounds the employment of any person employed by them. (2) In this paragraph ‘‘security grounds’’ means grounds which are grounds for dismissal from the civil service of Her Majesty, in accordance with any arrangements for the time being in force relating to dismissals from that service for reasons of national security. 7. In the application of this Schedule to Northern Ireland—

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(a) in paragraph 3(2)(d) the reference to a government department shall be construed as including a reference to a department of the Government of Northern Ireland; .. Schedule 2 [This schedule, which was renumbered by the Atomic Energy Authority Act 1971, was repealed by SI 1974 No 2056, reg 2.]

6.23 EMPLOYERS’ LIABILITY (COMPULSORY INSURANCE) ACT 1969 (1969 c 57) An Act to require employers to insure against their liability for personal injury to their employees; and for purposes connected with the matter aforesaid [22 October 1969] General Note The Employers’ Liability (Compulsory Insurance) Act 1969 makes it obligatory for an employer to insure against his liability to employees for death or personal injury, to a minimum of £5 million per occurrence. Much of the detail of the legislation is set out in the Employers’ Liability (Compulsory Insurance) Regulations 1998, SI 1998 No 2573, made under the Act. The scheme established by the 1969 Act compares unfavourably to the compulsory insurance regime under the Road Traffic Act 1988 (as to which, see chapter 7). The differences include: (a) the 1988 Act applies to property damage as well as death and personal injury; (b) the injured victim has a direct action against the insurer under the 1988 Act, whereas an injured employee has a direct action under the less satisfactory provisions of the Third Parties (Rights against Insurers) Act 1930 only when the employer is insolvent; (c) the 1988 Act deprives the insurer of a variety of defences, including breach of policy conditions and breach of the duty of utmost good faith, whereas the 1969 Act, with limited exceptions, allows the insurer to rely upon contractual defences and the defence of want of utmost good faith; (d) there is no fallback guarantee fund where the employer is uninsured—contrast the operation of the Motor Insurers Bureau, which provides cover in just that situation; (e) failure to insure against motor insurance risks is breach of statutory duty, giving the victim of an uninsured road user a tortious action against any person who has caused or permitted the uninsured use of the vehicle—there is no equivalent action under the 1969 Act, so that the directors of an uninsured employer company cannot be sued in their personal capacities by an injured victim (Richardson v. Pitt-Stanley [1995] 1 All ER 460). The Act applies to employees on offshore installations, but various modifications are made to it in that situation. See the annotations to the Offshore Installations and Pipeline Works (Management and Administration) Regulations 1995, SI 1995 No 738, where the operation of the Act in that context is commented upon. The variations are noted in the following annotations to the 1969 Act. An employer owes a common law duty of care to his employees, to provide a safe system of work. An employer is also vicariously liable at common law for the negligence of fellow-employees who cause injury to the plaintiff employee, and may face liability for the negligence of an independent contractor where the independent contractor has been negligently selected or supervised. In addition to these common law liabilities, an employer owes statutory duties under various pieces of legislation, most importantly: the Factories Act 1961 which imposes obligations as regards access to place of work and the safe maintenance of machinery: and the Employers’ Liability (Defective Equipment) Act 1969, which renders an employer liable for injury caused by defective equipment supplied for an employee’s use even if the defect was the result of the negligence of a third party manufacturer or supplier.

Insurance against liability for employees 1.—(1) Except as otherwise provided by this Act, every employer carrying on any business in Great Britain shall insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great Britain. (2) Regulations may provide that the amount for which an employer is required by this Act to insure and maintain insurance shall, either generally or in such cases or classes of case as may be prescribed by the regulations, be limited in such manner as may be so prescribed. (3) For the purposes of this Act—

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Employers’ Liability (Compulsory Insurance) Act 1969

6.23

(a) ‘‘approved policy’’ means a policy of insurance not subject to any conditions or exceptions prohibited for those purposes by regulations; (b) ‘‘authorised insurer’’ means— (i) a person who has permission under Part 4 of the Financial Services and Markets Act 2000 to effect and carry out contracts of insurance of a kind required by this Act and regulations made under this Act, or (ii) an EEA firm of the kind mentioned in paragraph 5(d) of Schedule 3 to the Financial Services and Markets Act 2000, which has permission under paragraph 15 of that Schedule to effect and carry out contracts of insurance of a kind required by this Act and regulations made under this Act (c) ‘‘business’’ includes a trade or profession, and includes any activity carried on by a body of persons, whether corporate or unincorporate; (d) except as otherwise provided by regulations, an employer not having a place of business in Great Britain shall be deemed not to carry on business there. Notes Subs (1) was amended by the Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001, SI 2001 No 3649, art 280. This subsection sets out the compulsory insurance obligation, and is amplified by the rest of the Act and statutory instruments made under it. ‘‘Carrying on business in Great Britain’’: ‘‘Business’’ includes any trade or profession: subs (3)(c). An employer must have a place of business in the UK, subject to modification by regulations made under subs (3)(d). The Offshore Installations and Pipeline Works (Management and Administration) Regulations 1995, SI 1995 No 738 extend the Act in a modified form to employees on oil rigs, vessels and other offshore installations. The Employers’ Liability (Compulsory Insurance) Regulations 1998, SI 1998 No 2573 apply to workers on offshore installations (1995 Regulations, reg 21(2)) even if they are not ordinarily resident in the UK providing that they have been employed for a continuous period of not less than 14 days (reg 1(2) of the 1998 Regulations). ‘‘Shall insure and maintain insurance’’: As noted above, in the General Note, Richardson v. Pitt-Stanley [1994] 1 All ER 460 decides that failure to insure is not a tortious breach of statutory duty. The phrase ‘‘insure and maintain’’ has been held to mean no more than that a policy must be in force. Thus, once a policy has lapsed and been replaced, there is nothing in the legislation which requires the efficacy of the original policy to be maintained, so that the assured may reach a settlement with the insurers in respect of potential claims arising during the time when it was in force even though those settlements may prejudice the prospects of recovery by any employee: see Re T&N Ltd (No 4) [2006] Lloyd’s Rep IR 817. ‘‘Approved policy’’: The policy must meet the requirements of subs (3)(a), and must not be subject to conditions prohibited by the Employers’ Liability (Compulsory Insurance) Regulations 1998, SI 1998 No 2573, reg 2. The regulations prohibit notice of loss provisions and other post-loss conditions, reasonable care clauses, obligations to comply with health and safety legislation, and conditions relating to the keeping of records. For the text of the Regulations, see para 6.47. ‘‘Authorised insurer’’: The insurer must meet the requirements of subs (3)(b), ie, must be authorised under the Financial Services and Markets Act 2000 to carry on the relevant business or must be an EEA insurer entitled to provide such insurance in the UK under the single market rules of the EEA. ‘‘Bodily injury or disease’’: Property damage is excluded from the 1969 Act. These words encompass a claim by dependents under the Fatal Accidents Act 1976: Re T&N Ltd (No 4) [2006] Lloyd’s Rep IR 817. ‘‘Arising out of and in the course of employment’’: Activities which the employee carries on out of working hours and falling outside his duties are excluded by this requirement. Such activity might include travelling to and from the place of work (where the obligation to travel is not part of the contract) and sporting activity (eg, playing for the employer’s football or cricket team). ‘‘Employee’’: This term is to be construed in its technical sense, excluding workers working under contracts for services. See s 2(1) of the 1969 Act. In Bernadone v. Pall Mall Services Group [1999] IRLR 617, Blofeld J held that where an employer transferred his business, and therefore his employees (by virtue of the Transfer of Undertakings (Protection of Employment) Regulations 1981, SI 1981 No 1794) to a transferee, any liability incurred by the transferor to the employee for personal injury is also transferred to the transferee but the transferee then has a claim against the transferor’s insurers in respect of the transferor’s liability. Subs (2) The required amount of insurance is £5 million per occurrence; Employers’ Liability (Compulsory Insurance) Regulations 1998, SI 1998 No 2573, reg 3. The term ‘‘occurrence’’ is intended to refer to incidents giving rise to losses, and not to the individual losses themselves. The £5 million minimum sum may, therefore, provide little to each injured employee in the case of a major disaster causing many injuries. Subs (3)(a) See the note to subs (1).

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Liability Insurance

Subs (3)(b) was amended by the Insurance Companies Act 1981, s 36(1), the Insurance Companies Act 1982, s 99(2) and the Insurance Companies (Amendment) Regulations 1992, SI 1992 No 2890, reg 11. See the note to subs (1). Subs (3)(c) See the note to subs (1). Subs (3)(d) See the note to subs (1).

Employees to be covered 2.—(1) For the purposes of this Act the term ‘‘employee’’ means an individual who has entered into or works under a contract of service or apprenticeship with an employer whether by way of manual labour, clerical work or otherwise, whether such contract is expressed or implied, oral or in writing. (2) This Act shall not require an employer to insure— (a) in respect of an employee of whom the employer is the husband, wife, civil partner, father, mother, grandfather, grandmother, step-father, step-mother, son, daughter, grandson, granddaughter, stepson, stepdaughter, brother, sister, half-brother or halfsister; or (b) except as otherwise provided by regulations, in respect of employees not ordinarily resident in Great Britain. Notes Subs (1) was amended by the Civil Partnerships Act 2004, Sched 27, para 33. The distinction between an employee working under a contract of service and an independent contractor working under a contract for services is elusive. Readers are referred to standard works on employment law. Subs (2)(b) This section is disregarded as regards offshore installation workers, by the Offshore Installations and Pipeline Works (Management and Administration) Regulations 1995, SI 1995 No 738, reg 21(3). The Employers’ Liability (Compulsory Insurance) Regulations 1998, SI 1998 No 2573, reg 1(1), provide that an employee is outside the protection of the Act if he is not ordinarily resident in the UK unless he has been employed on an offshore installation for a continuous period of not less than seven days or is present in Great Britain in the course of employment for a continuous period of not less than 14 days. An employee who does not qualify under the Regulations is not owed any duty of care by his employer to be warned of the absence of insurance in his favour: Reid v. Rush & Tompkins Group plc [1989] 3 All ER 228.

Employers exempted from insurance 3.—(1) This Act shall not require any insurance to be effected by— (a) any such authority as is mentioned in subsection (2) below; or (b) any body corporate established by or under any enactment for the carrying on of any industry or part of an industry, or of any undertaking, under national ownership or control; or (c) in relation to any such cases as may be specified in the regulations, any employer exempted by regulations. (2) The authorities referred to in subsection (1)(a) above are: (a) a health service body, as defined in section 60(7) of the National Health Service and Community Care Act 1990, and a National Health Service trust established under Part I of that Act or the National Health Service (Scotland) Act 1978, an NHS foundation trust and a Primary Care Trust established under section 16A of the National Health Service Act 1977; (b) are the Common Council of the City of London, the Council of a London Borough, the council of a county or county borough I in Wales, the Broads Authority, a council constituted under section 2 of the Local Government etc. (Scotland) Act 1994 in England and Wales or joint committee in Scotland which is so constituted as to include among its members representatives of any such council, the Strathclyde Passenger Transport Authority, any joint authority established by Part IV of the Local Government Act 1985,the London Fire and Emergency Planning Authority and any police authority; and (c) the Commission for Equality and Human Rights.

852

Employers’ Liability (Compulsory Insurance) Act 1969

6.23

Notes Subs (1) The regulations made under this section are the Employers’ Liability (Compulsory Insurance) Regulations 1998, SI 1998 No 2573, Sched 2. The regulations exempt a number of government and official agencies from the compulsory insurance requirement. An employer’s liability for road accidents is governed by the Road Traffic Act 1988 and not the 1969 Act. Subs (2) was amended by: the Local Government Act 1972, s 272 and Sched 30; the Local Government (Scotland) Act 1973, s 159; the Local Government Act 1985, ss 84 and 102(2), and Scheds 14 and 17; the Norfolk and Suffolk Broads Act 1988, s 21 and Sched 6; the Education Reform Act 1988, s 237(2) and Sched 13; and the Equality Act 2006,. Sched 1, para 8.

Certificates of insurance 4.—(1) Provision may be made by regulations for securing that certificates of insurance in such form and containing such particulars as may be prescribed by the regulations, are issued by insurers to employers entering into contracts of insurance in accordance with the requirements of this Act and for the surrender in such circumstances as may be so prescribed of certificates so issued. (2) Where a certificate of insurance is required to be issued to an employer in accordance with regulations under subsection (1) above, the employer (subject to any provision made by the regulations as to the surrender of the certificate) shall during the currency of the insurance and such further period (if any) as may be provided by regulations— (a) comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees; (b) produce the certificate of insurance or a copy on demand to any inspector duly authorised by the Secretary of State for the purposes of this Act and produce or send the certificate or a copy thereof to such other persons, at such place and in such circumstances as may be prescribed by regulations; (c) permit the policy of insurance or a copy thereof to be inspected by such persons and in such circumstances as may be so prescribed. (3) A person who fails to comply with a requirement imposed by or under this section shall be liable on summary conviction to a fine not exceeding level 3 on the standard scale. Notes Subs (1) The form of certificate of insurance, which must be issued to and displayed by the employer, is set out in the Employers’ Liability (Compulsory Insurance) Regulations 1998, SI 1998 No 2573, reg 4 and Sched 1. The certificate must be issued within 30 days of the inception of the risk. Subs (2) The Employers’ Liability (Compulsory Insurance) Regulations 1998, SI 1998 No 2573, reg 5, requires certificates to be displayed on work premises. Reg 6 requires the certificate or a copy thereof to be produced to an inspector appointed by the Secretary of State. In the case of an offshore installation, reg 5 of the 1998 Regulations removes the need for the certificate to be displayed and instead provides that the employer is required to produce a copy of the certificate to any employee within 10 days of a request by him (see also Offshore Installations and Pipeline Works (Management and Administration) Regulations 1995, SI 1995 No 738, reg 21(4)).

Penalty for failure to insure 5. An employer who on any day is not insured in accordance with this Act when required to be so shall be guilty of an offence and shall be liable on summary conviction to a fine not exceeding level 4 on the standard scale and where an offence under this section committed by a corporation has been committed with the consent or connivance of, or facilitated by any neglect on the part of, any director, manager, secretary or other officer of the corporation, he, as well as the corporation shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Notes This section was amended by the Criminal Justice Act 1982, s 46. A director or other officer may face criminal liability under s 5 but, as noted in the General Note above, he does not face personal civil liability in such circumstances.

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Liability Insurance

Offshore installations 5A.—(1) In respect of any offshore installation, it shall be the duty of the owner of the installation to ensure that requirements imposed by or under this Act are complied with and where, in respect of that installation— (a) any employer is on any day not insured in accordance with this Act, the owner of the installation shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the standard scale; or (b) any person fails to comply with a requirement imposed by or under section 4 of this Act, the owner of the installation shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 2 on the standard scale. (2) In proceedings against the owner of an installation for an offence under this section it shall be a defence for the accused to prove— (a) that he has used all due diligence to prevent the commission of the offence; and (b) that any relevant contravention was committed without his consent, connivance or wilful default. (3) Section 37 of the Health and Safety at Work etc. Act 1974 shall apply in relation to an offence under this section as if it were an offence under that Act. (4) In proceedings for an offence under this section an averment in any process of the fact that anything was done or situated within relevant waters shall, until the contrary is proved, be sufficient evidence of that fact as stated in the averment. (5) Proceedings for any offence under this section may be taken, and the offence may for all incidental purposes be treated as having been committed, in any place in Great Britain. (6) References in this section to ‘‘the owner’’ , in relation to an offshore installation, are to the person who controls the operation of the installation. 5B. No proceedings shall be instituted in England and Wales for any offence under this Act in respect of an offshore installation except by the Secretary of State or by a person authorised in that behalf by the Secretary of State. Notes As regards offshore installations, the onus of ensuring that the employer has insured is cast upon the owner of the installation to ensure that the requirements of the 1969 Act are complied with by the employer, and a criminal offence is committed by the owner of the installation if there is no insurance in place unless he can demonstrate that he has used all due diligence to prevent the offence and that the contravention was committed without his consent, connivance or default. Proceedings may be brought only by or on behalf of the Secretary of State (Offshore Installations and Pipeline Works) (Management and Administration) Regulations 1995, SI 1995 No 738, reg 21(5), which inserts ss 5A and 5B into the 1969 Act for the purposes of those regulations only.

Regulations 6.—(1) The Secretary of State may by statutory instrument make regulations for any purpose for which regulations are authorised to be made by this Act, but any such statutory instrument shall be subject to annulment in pursuance of a resolution of either House of Parliament. (2) Any regulations under this Act may make different provision for different cases or classes of case, and may contain such incidental and supplementary provisions as appear to the Secretary of State to be necessary or expedient for the purposes of the regulations. Short title, extent and commencement 7.—(1) This Act may be cited as the Employers’ Liability (Compulsory Insurance) Act 1969. (2) This Act shall not extend to Northern Ireland. (3) This Act shall come into force for any purpose on such date as the Secretary of State may by order contained in a statutory instrument appoint, and the purposes for which this Act is to come into force at any time may be defined by reference to the nature of an employer’s business, or to that of an employee’s work, or in any other way.

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Solicitors Act 1974

6.24

Notes The Act was brought into force on 1 January 1972 by the Employers’ Liability (Compulsory Insurance) Act 1969 (Commencement) Order 1971, SI 1971 No 1116.

6.24 SOLICITORS ACT 1974 (1974 c 47) General Notes The Solicitors Act 1974 governs many aspects of the training of solicitors and the conduct of solicitors’ practices. It also contains two provisions which are intended to make sums available to persons suffering loss as a result of misconduct by solicitors: (a) a Compensation Fund, which provides compensation in the case of loss caused by dishonesty or breach of fiduciary duty; and (b) a professional indemnity insurance requirement. The relevant provisions of the Act relating to these matters are set out in the following paragraphs. If negligence on behalf of a solicitor is alleged, the claim must be pursued through the courts in the ordinary way. A complaint may be made to the Law Society, but this may result only in disciplinary measures being taken against the defaulting solicitor and not in damages to the complainant. In investigating complaints, the Law Society does owe a duty of care to complainants, but breach of that duty is unlikely to result in damages, as such breach is unlikely to have caused any loss (other than distress, which is irrecoverable): Wood v. Law Society (1995) Independent, l March. A solicitor owes parallel contractual and tortious duties of care to his client, and may in some circumstances owe a tortious duty of care to a third party who has suffered loss as a result of the solicitor failing to obey his client’s instructions. The latter possibility was confirmed by White v. Jones [1995] 1 All ER 691, where the solicitor’s failure to execute his client’s will led to a successful action by the disappointed expectant beneficiaries.

Compensation Fund 36.—(1) The fund, known as the ‘‘Compensation Fund’’, shall be maintained and administered in accordance with the provisions of Schedule 2. (2) Where the Council are satisfied— (a) that a person has suffered or is likely to suffer loss in consequence of dishonesty on the part of a solicitor, or of an employee of a solicitor, in connection with that solicitor’s practice or purported practice or in connection with any trust of which that solicitor is or formerly was a trustee; or (b) that a person has suffered or is likely to suffer hardship in consequence of failure on the part of a solicitor to account for money which has come to his hands in connection with his practice or purported practice or in connection with any trust of which he is or formerly was a trustee; or (c) that a solicitor has suffered or is likely to suffer loss or hardship by reason of his liability to any of his or his firm’s clients in consequence of some act or default of any of his partners or employees in circumstances where but for the liability of that solicitor a grant might have been made out of the Compensation Fund to some other person; the Society may make a grant out of the Compensation Fund for the purpose of relieving that loss or hardship. (3) A grant under subsection (2)(c) may be made by way of a loan upon such terms and conditions (including terms and conditions as to the time and manner of repayment, the payment of interest and the giving of security for repayment) as the Council may determine, and the Society may at any time or times, upon such terms and conditions (if any) as the Council think fit, waive or refrain from enforcing the repayment of the whole or any part of the loan, the payment of any interest on the loan or any of its terms or conditions. (4) Where— (a) a grant is made otherwise than by way of loan, or (b) a grant is made by way of loan and a condition specified in subsection (5) is satisfied in relation to it,

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Liability Insurance

the Society shall be subrogated, to the extent specified in subsection (6), to any rights and remedies of the person to whom the grant is made in relation to the act or default in respect of which it is made, and shall be entitled, upon giving him a sufficient indemnity against costs, to require him, whether before or after payment of the grant, to sue in his own name but on behalf of the Society for the purpose of giving effect to the Society’s rights, and to permit the Society to have the conduct of the proceedings. (5) The conditions mentioned in subsection (4) are— (a) that repayment of the whole or part of the loan has been waived; (b) that the borrower has failed to repay the whole or part of the loan in accordance with the terms and conditions of the loan. (6) The extent to which the Society is subrogated under subsection (4) is— (a) for a grant made by way of loan, the amount in relation to which a condition specified in subsection (5) is satisfied, and (b) for any other grant, the amount of the grant. (7) Where the Society refuses a grant, the Council shall state the reasons for the refusal. (8) The Council may make rules about the Compensation Fund and the procedure for making grants from it. Notes This section establishes the Compensation Fund, against which claims may be made on any of the grounds set out in subs (2). It will be seen that there is no right to receive sums from the fund, and the Council of the Law Society has a discretion in determining whether to make an award, either at all or by way of loan or grant. Subs (4), (6) confer upon the Law Society a right of subrogation against the wrongdoing solicitor to the amount of payments made to the complainant. The rules made under subs (8) are the Solicitors Compensation Fund Rules 1975 (not reproduced in this work).

Professional indemnity 37.—(1) The Council, with the concurrence of the Master of the Rolls, may make rules (in this Act referred to as ‘‘indemnity rules’’) concerning indemnity against loss arising from claims in respect of any description of civil liability incurred— (a) by a solicitor or former solicitor in connection with his practice or with any trust of which he is or formerly was a trustee; (b) by an employee or former employee of a solicitor or former solicitor in connection with that solicitor’s practice or with any trust of which that solicitor or the employee is or formerly was a trustee. (2) For the purpose of providing such indemnity, indemnity rules— (a) may authorise or require the Society to establish and maintain a fund or funds; (b) may authorise or require the Society to take out and maintain insurance with authorised insurers; (c) may require solicitors or any specified class of solicitors to take out and maintain insurance with authorised insurers. (3) Without prejudice to the generality of subsections (1) and (2), indemnity rules— (a) may specify the terms and conditions on which indemnity is to be available, and any circumstances in which the right to it is to be excluded or modified; (b) may provide for the management, administration and protection of any fund maintained by virtue of subsection (2)(a) and require solicitors or any class of solicitors to make payments to any such fund; (c) may require solicitors or any class of solicitors to make payments by way of premium on any insurance policy maintained by the Society by virtue of subsection (2)(b); (d) may prescribe the conditions which an insurance policy must satisfy for the purposes of subsection (2)(c); (e) may authorise the Society to determine the amount of any payments required by the rules, subject to such limits, or in accordance with such provisions, as may be prescribed by the rules; (f) may specify circumstances in which, where a solicitor for whom indemnity is provided has failed to comply with the rules, the Society or insurers may take proceedings

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Estate Agents Act 1979

6.25

against him in respect of sums paid by way of indemnity in connection with a matter in relation to which he has failed to comply; (g) may specify circumstances in which solicitors are exempt from the rules; (h) may empower the Council to take such steps as they consider necessary or expedient to ascertain whether or not the rules are being complied with; and (i) may contain incidental, procedural or supplementary provisions. (4) If any solicitor fails to comply with indemnity rules, any person may make a complaint in respect of that failure to the Tribunal. (5) The Society shall have power, without prejudice to any of its other powers, to carry into effect any arrangements which it considers necessary or expedient for the purpose of indemnity under this section. Notes The Rules made under this section are the Solicitors’ Indemnity (Enactment) Rules 1992 (not reproduced in this work). The role of the Law Society under this section was considered by the House of Lords in Swain v. Law Society [1982] 2 All ER 827. Under subs (2)(b) the Law Society is empowered to take out and maintain insurance. The Solicitors’ Indemnity Rules 1975 made under s 37 incorporated a master policy to which solicitors had to subscribe, and premiums were payable under it by solicitors. The Law Society appointed sole brokers to administer the scheme, and the Law Society itself shared the commission payable to the brokers. The claimant solicitor argued that the commission could not be retained by the Law Society as it acted on behalf of the profession, and accordingly held the commission as a fiduciary or agent for all solicitors. The House of Lords held that it was not possible to imply any fiduciary relationship, and that in any event the Law Society was exercising public rather than private duties under s 37 and could not therefore be required to account to individual solicitors for the commission.

6.25 ESTATE AGENTS ACT 1979 (1979 c 38) General Note The Estate Agents Act 1979 regulates the operation of estate agency business. Such business is defined in s 1 of the 1979 Act (not reproduced in this work) as effecting introductions between buyers and sellers of interests in land, but excluding the business of solicitors, credit brokers, insurance brokers, surveyors and those acting in connection with planning matters. The Act does not impose a general obligation to procure liability insurance, but lays down a narrow obligation to do so specifically in the context of client money. Regulations have not been made implementing the compulsory insurance requirement. The sections of the 1979 Act set out below are those dealing with client money and accounts only.

Clients’ money and accounts Meaning of ‘‘clients’ money’’ etc 12.—(1) In this Act ‘‘clients’ money’’, in relation to a person engaged in estate agency work, means any money received by him in the course of that work which is a contract or pre-contract deposit— (a) in respect of the acquisition of an interest in land in the United Kingdom, or (b) in respect of a connected contract, whether that money is held or received by him as agent, bailee, stakeholder or in any other capacity. (2) In this Act ‘‘contract deposit’’ means any sum paid by a purchaser— (a) which in whole or in part is, or is intended to form part of, the consideration for acquiring such an interest as is referred to in subsection (1)(a) above or for a connected contract; and (b) which is paid by him at or after the time at which he acquires the interest or enters into an enforceable contract to acquire it. (3) In this Act ‘‘pre-contract deposit’’ means any sum paid by any person—

857

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Liability Insurance

(a) in whole or in part as an earnest of his intention to acquire such an interest as is referred to in subsection (1)(a) above, or (b) in whole or in part towards meeting any liability of his in respect of the consideration for the acquisition of such an interest which will arise if he acquires or enters into an enforceable contract to acquire the interest, or (c) in respect of a connected contract, and which is paid by him at a time before he either acquires the interest or enters into an enforceable contract to acquire it. (4) In this Act ‘‘connected contract’’, in relation to the acquisition of an interest in land, means a contract which is conditional upon such an acquisition or upon entering into an enforceable contract for such an acquisition (whether or not it is also conditional on other matters). Notes This section defines client money as sums received by an estate agent by way of contract or pre-contract deposit.

Clients’ money held on trust or as agent 13.—(1) It is hereby declared that clients’ money received by any person in the course of estate agency work in England, Wales or Northern Ireland— (a) is held by him on trust for the person who is entitled to call for it to be paid over to him or to be paid on his direction or to have it otherwise credited to him, or (b) if it is received by him as stakeholder, is held by him on trust for the person who may become so entitled on the occurrence of the event against which the money is held. (2) It is hereby declared that clients’ money received by any person in the course of estate agency work in Scotland is held by him as agent for the person who is entitled to call for it to be paid over to him or to be paid on his direction or to have it otherwise credited to him. (3) The provisions of sections 14 and 15 below as to the investment of clients’ money, the keeping of accounts and records and accounting for interest shall have effect in place of the corresponding duties which would be owed by a person holding clients’ money as trustee, or in Scotland as agent, under the general law. (4) Where an order of the OFT under section 3 above has the effect of prohibiting a person from holding clients’ money the order may contain provision— (a) appointing another person as trustee, or in Scotland as agent, in place of the person to whom the order relates to hold and deal with clients’ money held by that person when the order comes into effect; and (b) requiring the expenses and such reasonable remuneration of the new trustee or agent as may be specified in the order to be paid by the person to whom the order relates or, if the order so provides, out of the clients’ money; but nothing in this subsection shall affect the power conferred by section 41 of the Trustee Act 1925 or section 40 of the Trustee Act (Northern Ireland) 1958 to appoint a new trustee to hold clients’ money. (5) For the avoidance of doubt it is hereby declared that the fact that any person has or may have lien on clients’ money held by him does not affect the operation of this section and also that nothing in this section shall prevent such a lien from being given effect. Notes Subs (3) was amended by the Enterprise Act 2002, Sched 25, para 9. Client money received by an estate agent is deemed to be held by him as a trustee, so that in the event of insolvency the person to whom the sum is payable has an equitable tracing claim. In equity, the beneficiary also has a right to investment income, although under subs (3) that right is substituted by ss 14 and 15 of the 1979 Act.

Keeping of client accounts 14.—(1) Subject to such provision as may be made by accounts regulations, every person who receives clients’ money in the course of estate agency work shall, without delay, pay the money into a client account maintained by him or by a person in whose employment he is.

858

Estate Agents Act 1979

6.25

(2) In this Act a ‘‘client account’’ means a current or deposit account which— (a) is with an institution authorised for the purposes of this section, and (b) is in the name of a person who is or has been engaged in estate agency work; and (c) contains in its title the word ‘‘client’’. (3) The Secretary of State may make provision by regulations (in this section referred to as ‘‘accounts regulations’’) as to the opening and keeping of client accounts, the keeping of accounts and records relating to clients’ money and the auditing of those accounts; and such regulations shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament. (4) As to the opening and keeping of client accounts, accounts regulations may in particular specify— (a) the institutions which are authorised for the purposes of this section; (b) any persons or classes of persons to whom, or any circumstances in which, the obligation imposed by subsection (1) above does not apply; (c) any circumstances in which money other than clients’ money may be paid into a client account; and (d) the occasions on which, and the persons to whom, money held in a client account may be paid out. (5) As to the auditing of accounts relating to clients’ money, accounts regulations may in particular make provision— (a) requiring such accounts to be drawn up in respect of specified accounting periods and to be audited by a qualified auditor within a specified time after the end of each such period; (b) requiring the auditor to report whether in his opinion the requirements of this Act and of the accounts regulations have been complied with or have been substantially complied with; (c) as to the matters to which such a report is to relate and the circumstances in which a report of substantial compliance may be given; and (d) requiring a person who maintains a client account to produce on demand to a duly authorised officer of an enforcement authority the latest auditor’s report. (6) Subject to subsection (7) below, ‘‘qualified auditor’’ in subsection (5)(a) above means a person who is— (a) eligible for appointment as a company auditor under section 25 of the Companies Act 1989; or (b) in Northern Ireland, is eligible for appointment as a company auditor under Article 28 of the Companies (Northern Ireland) Order 1990. (7) A person is not qualified for the purposes of subsection (5)(a) above if, in the case of a client account maintained by a company, he is ineligible for appointment as auditor to a company by virtue of Part II of the Companies Act 1989 or Part III of the Companies (Northern Ireland) Order 1990. (8) A person who— (a) contravenes any provision of this Act or of accounts regulations as to the manner in which clients’ money is to be dealt with or accounts and records relating to such money are to be kept, or (b) fails to produce an auditors’ report when required to do so by accounts regulations, shall be liable on summary conviction to a fine not exceeding level 4 on the standard scale. Notes Subs (3) The regulations are the Estate Agents (Accounts) Regulations 1981, SI 1981 No 1520, as amended by the Banking Coordination (Second Council Directive) Regulations 1992, SI 1992 No 3218, reg 82 and Sched 10. Subs (6) was amended by the Companies Consolidation (Consequential Provisions) Act 1985, s 30 and the Companies Consolidation (Consequential Provisions) (Northern Ireland) Order 1986, SI 1986 No 1035. It was subsequently substituted by the Companies Act 1989 (Eligibility for Appointment as Company Auditor) (Consequential Amendments) Regulations 1991, SI 1991 No 1997, reg 2 and Sched, para 33, as amended by the Companies (1990 Order) (Eligibility for Appointment as Company Auditor) (Consequential Amendments) Regulations (Northern Ireland) 1993, SR 1993 No 67. Subs (7) was amended by the Companies Consolidation (Consequential Provisions) Act 1985, s 30 and the Companies Consolidation (Consequential Provisions) (Northern Ireland) Order 1986, SI 1986 No 1035. It

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was subsequently substituted by the Companies Act 1989 (Eligibility for Appointment as Company Auditor) (Consequential Amendments) Regulations 1991, SI 1991 No 1997, reg 2 and Sched, para 33, as amended by the Companies (1990 Order) (Eligibility for Appointment as Company Auditor) (Consequential Amendments) Regulations (Northern Ireland) 1993, SR 1993 No 67. Subs (8) was amended by the Criminal Justice Act 1982, s 46.

Interest on clients’ money 15.—(1) Accounts regulations may make provision for requiring a person who has received any clients’ money to account, in such cases as may be prescribed by the regulations, to the person who is or becomes entitled to the money for the interest which was, or could have been, earned by putting the money in a separate deposit account at an institution authorised for the purposes of section 14 above. (2) The cases in which a person may be required by accounts regulations to account for interest as mentioned in subsection (1) above may be defined, amongst other things, by reference to the amount of the sum held or received by him or the period for which it is likely to be retained, or both. (3) Except as provided by accounts regulations and subject to subsection (4) below, a person who maintains a client account in which he keeps clients’ money generally shall not be liable to account to any person for interest received by him on money in that account. (4) Nothing in this section or in accounts regulations shall affect any arrangement in writing, whenever made, between a person engaged in estate agency work and any other person as to the application of, or of any interest on, money in which that other person has or may have an interest. (5) Failure of any person to comply with any provision of accounts regulations made by virtue of this section may be taken into account by the OFT in accordance with section 3(1)(c) above and may form the basis of a civil claim for interest which was or should have been earned on clients’ money but shall not render that person liable to any criminal penalty. (6) In this section ‘‘accounts regulations’’ has the same meaning as in section 14 above. Notes Subs (5) was amended by the Enterprise Act 2002, Sched 25, para 9. For regulations under this section, see the note to s 14.

Insurance cover for clients’ money 16.—(1) Subject to the provisions of this section, a person may not accept clients’ money in the course of estate agency work unless there are in force authorised arrangements under which, in the event of his failing to account for such money to the person entitled to it, his liability will be made good by another. (2) The Secretary of State may by regulations made by statutory instrument, which shall be subject to annulment in pursuance of a resolution of either House of Parliament— (a) specify any persons or classes of persons to whom subsection (1) above does not apply; (b) specify arrangements which are authorised for the purposes of this section including arrangements to which an enforcement authority nominated for the purpose by the Secretary of State or any other person so nominated is a party; (c) specify the terms and conditions upon which any payment is to be made under such arrangements and any circumstances in which the right to any such payment may be excluded or modified; (d) provide that any limit on the amount of any such payment is to be not less than a specified amount; (e) require a person providing authorised arrangements covering any person carrying on estate agency work to issue a certificate in a form specified in the regulations certifying that arrangements complying with the regulations have been made with respect to that person; and (f) prescribe any matter required to be prescribed for the purposes of subsection (4) below.

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(3) Every guarantee entered into by a person (in this subsection referred to as ‘‘the insurer’’ who provides authorised arrangements covering another person (in this subsection referred to as ‘‘the agent’’) carrying on estate agency work shall ensure for the benefit of every person from whom the agent has received clients’ money as if— (a) the guarantee were contained in a contract made by the insurer with every such person; and (b) except in Scotland, that contract were under seal; and (c) where the guarantee is given by two or more insurers, they had bound themselves jointly and severally. (4) No person who carries on estate agency work may describe himself as an ‘‘estate agent’’ or so use any name or in any way hold himself out as to indicate or reasonably be understood to indicate that he is carrying on a business in the course of which he is prepared to act as a broker in the acquisition or disposal of interests in land unless, in such manner as may be prescribed,— (a) there is displayed at his place of business, and (b) there is included in any relevant document issued or displayed in connection with his business, any prescribed information relating to arrangements authorised for the purposes of this section. (5) for the purposes of subsection (4) above— (a) any business premises at which a person carries on estate agency work and to which the public has access is a place of business of his; and (b) ‘‘relevant document’’ means any advertisement, notice or other written material which might reasonably induce any person to use the services of another in connection with the acquisition or disposal of an interest in land. (6) A person who fails to comply with any provision of subsection (1) or subsection (4) above or of regulations under subsection (2) above which is binding on him shall be liable on conviction on indictment or on summary conviction to a fine which, on summary conviction, shall not exceed the statutory maximum. Notes This section lays down the compulsory insurance requirement in respect of client money held by an estate agent. This section has not been brought into force and no regulations have been made under it.

Exemptions from section 16 17.—(1) If, on an application made to him in that behalf, the OFT considers that a person engaged in estate agency work may, without loss of adequate protection to consumers, be exempted from all or any of the provisions of subsection (1) of section 16 above or of regulations under subsection (2) of that section, it may issue to that person a certificate of exemption under this section. (2) An application under subsection (1) above— (a) shall state the reasons why the applicant considers that he should be granted a certificate of exemption; and (b) shall be accompanied by the prescribed fee. (3) A certificate of exemption under this section— (a) may impose conditions of exemption on the person to whom it is issued; (b) may be issued to have effect for a period specified in the certificate or without limit of time. (4) If and so long as— (a) a certificate of exemption has effect, and (b) the person to whom it is issued complies with any conditions of exemption specified in the certificate, that person shall be exempt, to the extent so specified, from the provisions of subsection (1) of section 16 above and of any regulations made under subsection (2) of that section. (5) If the OFT decides to refuse an application under subsection (1) above it shall give the applicant notice of his decision and of the reasons for it, including any facts which in his opinion justify the decision.

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Liability Insurance

(6) If a person who made an application under subsection (1) above is aggrieved by a decision of the OFT— (a) to refuse his application, or (b) to grant him a certificate of exemption subject to conditions, he may appeal against the decision to the Secretary of State; and subsections (2) to (6) of section 7 above shall apply to such an appeal as they apply to an appeal under that section. (7) A person who fails to comply with any condition of exemption specified in a current certificate of exemption issued to him shall be liable on conviction on indictment or on summary conviction to a fine which, on summary conviction, shall not exceed the statutory maximum. Notes Subs (1) was amended by the Enterprise Act 2002, Sched 25, para 9. Subs (5) was amended by the Enterprise Act 2002, Sched 25, para 9. This section allows the Office of Fair Trading to exempt an estate agent from the compulsory insurance requirements in s 16. As with s 16, this section has not been brought into force.

6.26 SUPREME COURT ACT 1981 (1981 c 54) Costs in civil division of Court of Appeal and High Court 51.—(1) Subject to the provisions of this or any other enactment and to rules of court, the costs of and incidental to all proceedings in— (a) the civil division of the Court of Appeal; (b) the High Court; and (c) any county court, shall be in the discretion of the court. (2) Without prejudice to any general power to make rules of court, such rules may make provision for regulating matters relating to the costs of those proceedings including, in particular, prescribing scales of costs to be paid to legal or other representatives or for securing that the amount awarded to a party in respect of the costs to be paid by him to such representatives is not limited to what would have been payable by him to them if he had not been awarded costs. (3) The court shall have full power to determine by whom and to what extent the costs are to be paid. (4) In subsections (1) and (2) ‘‘proceedings’’ includes the administration of estates and trusts. (5) Nothing in subsection (1) shall alter the practice in any criminal cause, or in bankruptcy. (6) In any proceedings mentioned in subsection (1), the court may disallow, or (as the case may be) order the legal or other representative concerned to meet, the whole of any wasted costs or such part of them as may be determined in accordance with rules of court. (7) In subsection (6), ‘‘wasted costs’’ means any costs incurred by a party— (a) as a result of any improper, unreasonable or negligent act or omission on the part of any legal or other representative or any employee of such a representative; or (b) which, in the light of any such act or omission occurring after they were incurred, the court considers it is unreasonable to expect that party to pay. (8) Where— (a) a person has commenced proceedings in the High Court; but (b) those proceedings should, in the opinion of the court, have been commenced in a county court in accordance with any provision made under section 1 of the Courts and Legal Services Act 1990 or by or under any other enactment, the person responsible for determining the amount which is to be awarded to that person by way of costs shall have regard to those circumstances.

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(9) Where, in complying with subsection (8), the responsible person reduces the amount which would otherwise be awarded to the person in question— (a) the amount of that reduction shall not exceed 25 per cent; and (b) on any taxation of the costs payable by that person to his legal representative, regard shall be had to the amount of the reduction. (10) The Lord Chancellor may by order amend subsection (9)(a) by substituting, for the percentage for the time being mentioned there, a different percentage. (11) Any such order shall be made by statutory instrument and may make such transitional or incidental provision as the Lord Chancellor considers expedient. (12) No such statutory instrument shall be made unless a draft of the instrument has been approved by both Houses of Parliament. (13) In this section ‘‘legal or other representative’’, in relation to a party to proceedings, means any person exercising a right of audience or right to conduct litigation on his behalf. Notes The rules referred to in subs (1) are the CPR, Part 48. The significance of this section for liability insurers is the possibility that an insurer who defends proceedings in the name of its defendant assured may find that it is exposed to an order for the plaintiff’s costs in its own capacity, in the event that the defence fails. Such an award is independent of any sums which may be due to the assured under the policy, with the result that the totality of the insurer’s liability may well be greater than the maximum sum payable by it under the policy. The possibility of a court awarding costs against a non-party, albeit only in exceptional cases was confirmed by the House of Lords in Aiden Shipping Co v. Interbulk [1986] 1 AC 965. The decision was applied by the Court of Appeal in T G A Chapman Ltd v. Christopher [1998] Lloyd’s Rep (IR) 1, followed in Pendennis Shipyard Ltd v. Magrathea (Pendennis) Ltd [1998] 1 Lloyd’s Rep 315. In each of these cases, the insurers had defended the claims purely for their own interest. The decisions were distinguished in Gloucestershire Health Authority v. M A Torpy & Partners [1999] Lloyd’s Rep IR 203, and Citibank v. Excess Insurance Co [1999] Lloyd’s Rep IR 122, in each of which the defence was conducted for the benefit of the assured as well as the insurers, in that the policies were against professional liability so that there were reputations to protect and in that there were uninsured sums. See also Bristol and West plc v. Bhadresa [1999] Lloyd’s Rep IR 138. The cases make it clear that the insurer potentially faces liability for the plaintiff’s costs if five conditions are met: (1) the insurers themselves determined that the claim would be fought; (2) the insurers funded the defence of the claim; (3) the insurers had the conduct of the litigation, disregarding any assistance provided by the assured in the form of answers to questions, etc; (4) the insurers fought the claim exclusively to defend their own interests and not to protect the financial position or professional reputation of the assured; (5) the defence failed in its entirety. It was held by the Court of Appeal in Comninos and National Justice Compania Naviera SA v. Prudential Assurance Co Ltd, The Ikarian Reefer (No 2) [2000] 1 Lloyd’s Rep 129, that there was power under RSC Ord 11 (now CPR Pt 6.19) for the court to give permission for the service of claim form on a defendant domiciled outside the jurisdiction where the sole claim is for costs under s 51 of the Supreme Court Act 1981. The fact that the defendant is domiciled in an EC state is immaterial, as either the Brussels Regulation, Council Regulation 44/2001 has no application to a claim under s 51 as the defendant is not being ‘‘sued’’, or if that is wrong and the Regulation does apply, the court has jurisdiction to join the defendant as a third party under art 6(2) of the Regulation.

6.27 MERCHANT SHIPPING ACT 1995 (1995 c 21) An Act to consolidate the Merchant Shipping Acts 1894 to 1994 and other enactments relating to Merchant Shipping General Note Sections 152 to 182 of, and Schedule 4 to, the Merchant Shipping Act 1995 contain provisions laying down the compulsory insurance requirement for liability for oil pollution. These sections of the 1995 Act have a complex legislative history. International agreement on liability for oil pollution was reached in the Brussels Convention on Civil Liability for Oil Pollution Damage, 1969. That Convention was ratified and brought into effect in England by the Merchant Shipping (Oil Pollution) Act 1971. The Oil Pollution Liability Convention imposes strict liability upon shipowners for pollution damage caused by the release of oil.

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Liability Insurance

Liability, which is capped by the Convention, is to be covered by means of compulsory insurance, and the insurance provisions are of particular interest in that they confer upon the victim of oil pollution a right to bring direct proceedings against the shipowner’s liability insurers. The Oil Pollution (Compulsory Insurance) Regulations 1981, SI 1981 No 912 (as amended) were made under the 1971 Act and set out the detail of the compulsory insurance requirements. The 1971 Act was supplemented by the Merchant Shipping Act 1974. The 1974 Act ratified and implemented into English law the Convention on the Establishment of a Fund for Compensation for Oil Pollution Damage, 1971, the purpose of which was to provide fallback financial protection for the victims of oil pollution. The 1974 Act established a compensation fund contributed to by oil cargo owners, thereby dividing the responsibility for oil pollution damage between shipowners and cargo owners. Certain sums not recoverable under the 1971 Act became recoverable under the 1974 Act, and a shipowner liable under the 1971 Act had in some circumstances the right to seek indemnity from the fund established under the 1974 Act. Payments from the fund could be recouped by means of subrogation proceedings. The Merchant Shipping (Oil Pollution) Act 1971 was amended by the Merchant Shipping Acts 1979 and 1984, to take account of modifications to the Oil Pollution Liability Convention. Far-reaching changes to the Convention were agreed in 1984—in the Convention on Civil Liability for Oil Pollution Damage, and in the Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (which took effect primarily as protocols to the earlier Conventions)—and the Merchant Shipping Act 1988, s 34 and Sched 4, prospectively amended the Merchant Shipping (Oil Pollution) Act 1971 to take account of the changes. However, the new Conventions did not come into force, as a result of the decision of the United States not to ratify them but to implement its own oil pollution legislation. Consequently, the prospective changes made to the 1971 Act by the Merchant Shipping Act 1988 were formally repealed by the Merchant Shipping (Registration) Act 1993, Sched 4, para 18. Minor changes were nevertheless effected to the 1971 Act by the 1993 Act. In 1992 further Protocols to the 1969 and 1971 Conventions were agreed internationally, the purpose being to allow the 1992 Protocols to be ratified and thereby to bring the 1984 Conventions into force despite the absence of the United States. To this end, s 5 of the Merchant Shipping (Salvage and Pollution) Act 1994 conferred a power on government to implement the 1984 Conventions by Order in Council following UK ratification (UK ratification in fact took place in 1994), and consequential amendments to the Merchant Shipping (Oil Pollution) Act 1971 were enacted ready to be brought into force following the exercise of the implementing power under s 5 of the Merchant Shipping (Salvage and Pollution) Act 1994. Section 6 of the 1994 Act extended strict liability to oil pollution emanating from vessels other than oil tankers, and s 7 modified the operation of subrogation rights acquired by the Fund following payment by it. All of the above legislation was repealed and consolidated by the Merchant Shipping Act 1995, which came into force on 1 January 1996. The broad effect of the 1995 Act is to impose strict liability for most forms of oil pollution, coupled with compulsory insurance and a direct right of action by the victim against the assured’s liability insurers. The legislation goes further than the Conventions, in that s 154 extends the principles to pollution damage caused by persistent hydrocarbon mineral oil from vessels other than tankers. The legislation will be amended by the Merchant Shipping (Oil Pollution) (Bunkers Convention) Regulations 2006, SI 2006 No 1244, giving effect to the International Convention on Civil Liability for Bunker Oil Pollution Damage 2001 (the Bunkers Convention) when that Convention enters into force. The Bunkers Convention is designed to ensure that there is available compensation for pollution caused by fuel oil other than persistent hydrocarbon mineral oil, the latter being covered by the Oil Pollution Liability Convention. The legislation is reproduced as amended by the 2006 Regulations. The Merchant Shipping (Pollution) Act 2006 makes further changes to the regime. Section 1 of the 2006 Act authorises the UK to ratify the supplementary protocol to the Fund Convention, agreed in May 2003. Under the Supplementary Fund Protocol additional compensation, up to an overall total of £614 million, becomes available should the costs of damage arising from an incident exceed the compensation available under the original Liability and Fund Conventions. The Merchant Shipping (Oil Pollution) (Supplementary Fund Protocol) Order 2006, SI 2006 No 1265 further amends the 1995 Act so as to implement in the UK the Supplementary Fund Protocol as ratified on 8 September 2006. The Order implements European Council Decision 2004/246/EC (OJ L78/.22) authorising member states to sign, ratify or accede to the Supplementary Fund Protocol and requiring them to take the necessary steps to consent to be bound by it. Section 2 of the 2006 Act authorises the UK to ratify additional annexes of the MARPOL Convention 1973 (as modified by Protocols in 1978 and 1997), in particular Annex VI which is concerned with the prevention of air pollution by ships.

Meaning of ‘‘the Bunkers Convention’’, ‘‘the Liability Convention’’ and related expressions (1) In this Chapter— ‘‘the Bunkers Convention’’ means the International Convention on Civil Liability for Bunker Oil Pollution Damage 2001;

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Merchant Shipping Act 1995

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‘‘Bunkers Convention country’’ means a country in respect of which the Bunkers Convention is in force; ‘‘Bunkers Convention State’’ means a State which is a party to the Bunkers Convention; ‘‘the Liability Convention’’ means the Liability International Convention on Civil Liability for Oil Pollution Damage 1992; ‘‘Liability Convention country’’ means a country in respect of which the Liability Convention is in force; and ‘‘Liability Convention State’’ means a State which is a party to the Convention. (2) If Her Majesty by Order in Council declares that any State specified in the Order is a party to the Liability Convention or the Bunkers Convention in respect of any country so specified the Order shall, while in force, be conclusive evidence that that State is a party to that Convention in respect of that country.

Liability Liability for oil pollution in case of tankers 153.—(1) Where, as a result of any occurrence, any oil is discharged or escapes from a ship to which this section applies, then (except as otherwise provided by this Chapter) the registered owner of the ship shall be liable— (a) for any damage caused outside the ship in the territory of the United Kingdom by contamination resulting from the discharge or escape; and (b) for the cost of any measures reasonably taken after the discharge or escape for the purpose of preventing or minimising any damage so caused in the territory of the United Kingdom by contamination resulting from the discharge or escape; and (c) for any damage caused in the territory of the United Kingdom by any measures so taken. (2) Where, as a result of any occurrence, there arises a grave and imminent threat of damage being caused outside a ship to which this section applies by the contamination that might result if there were a discharge or escape of oil from the ship, then (except as otherwise provided by this Chapter) the registered owner of the ship shall be liable— (a) for the cost of any measures reasonably taken for the purpose of preventing or minimising any such damage in the territory of the United Kingdom; and (b) for any damage caused outside the ship in the territory of the United Kingdom by any measures so taken. (2A) In this Chapter, such a threat is referred to as a relevant threat of contamination falling within subsection (2) of this section. (3) Subject to subsection (4) below, this section applies to any ship constructed or adapted for carrying oil in bulk as cargo. (4) Where any ship so constructed or adapted is capable of carrying other cargoes besides oil, this section shall apply to any such ship— (a) while it is carrying oil in bulk as cargo; and (b) unless it is proved that no residues from the carriage of any such oil remain in the ship, while it is on any voyage following the carriage of any such oil, but not otherwise. (5) Where a person incurs a liability under subsection (1) or (2) above he shall also be liable for any damage or cost for which he would be liable under that subsection if the references in it to the territory of the United Kingdom included the territory of any other Liability Convention country. (6) Where— (a) as a result of any occurrence, a liability is incurred under this section by the registered owner of each of two or more ships, but (b) the damage or cost for which each of the registered owners would be liable cannot reasonably be separated from that for which the other or others would be liable, each of the registered owners shall be liable, jointly with the other or others, for the whole of the damage or cost for which the registered owners together would be liable under this section.

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Notes This section imposes strict liability upon oil tanker owners for oil pollution damage and clean-up costs, whether the damage occurs within the UK or in any other country which is a party to the 1969 Convention and whether the damage is caused by cargo or fuel oil. Liability is strict (ie, without proof of negligence) and not absolute, and is restricted in a number of respects: in particular, s 157 allows liability to be limited where pollution has occurred without the shipowner’s fault or privity. In the case of joint contributors to pollution, liability is to be apportioned between them in accordance with the principles laid down in the Law Reform (Contributory Negligence) Act 1945, but in the present context whether or not there has been negligence. The term ‘‘oil’’ is not defined in the 1995 Act itself, but there is a definition for the purposes of the compulsory insurance requirement in s 163 of the 1995 Act, contained in reg 3 of the Oil Pollution (Compulsory Insurance) Regulations 1997, SI 1997 No 1820. See para 6.46. If compensation cannot be obtained under this section due to the operation of the exceptions or limitations of liability contained in ss 155 to 159 of the 1995 Act, the compensation fund established by cargo owners under the Merchant Shipping Act 1974, now provided for in ss 172 to 179 of the 1995 Act, faces liability. The fund is exempted fully or partially under s 175 in respect of: war and related risks; damage suffered by a person who intentionally or negligently contributed to the cause of the pollution; and losses above the financial limits set by the fund. The fund may, under s 176A, also be required to provide indemnification to the shipowner above the specified financial limits. Actions under s 153 of the Act, and actions against the Fund, are to be brought in the Admiralty Division of the High Court (Civil Procedure Rules 1998, Part 49).

Liability for pollution by bunker oil 153A.—(1) Subject to subsection (3), where, as a result of any occurrence, any bunker oil is discharged or escapes from a ship then (except as otherwise provided by this Chapter) the owner of the ship shall be liable— (a) for any damage caused outside the ship in the territory of the United Kingdom by contamination resulting from the discharge or escape; and (b) for the cost of any measures reasonably taken after the discharge or escape for the purpose of preventing or minimising any damage so caused in the territory of the United Kingdom by contamination resulting from the discharge or escape; and (c) for any damage caused in the territory of the United Kingdom by any measures so taken. (2) Subject to subsection (3), where, as a result of any occurrence, there arises a grave and imminent threat of damage being caused outside a ship by the contamination that might result if there were a discharge or escape of bunker oil from the ship then (except as otherwise provided by this Chapter) the owner of the ship shall be liable— (a) for the cost of any measures reasonably taken for the purpose of preventing or minimising any such damage in the territory of the United Kingdom; and (b) for any damage caused outside the ship in the territory of the United Kingdom by any measures so taken. (3) There shall be no liability under this section in relation to— (a) a discharge or escape of bunker oil from a ship to which section 153 applies, or (b) a threat mentioned in subsection (2) arising in relation to a potential discharge or escape of bunker oil from such a ship, where that bunker oil is also persistent hydrocarbon mineral oil. (4) In the subsequent provisions of this Chapter— (a) a discharge or escape of bunker oil from a ship, other than a discharge or escape of oil excluded by subsection (3), is referred to as a discharge or escape of bunker oil falling within subsection (1) of this section; and (b) a threat mentioned in subsection (2), other than one excluded by subsection (3), is referred to as a relevant threat of contamination falling within subsection (2) of this section. (5) Where a person incurs a liability under subsection (1) or (2) he shall also be liable for any damage or cost for which he would be liable under that subsection if the references in it to the territory of the United Kingdom included the territory of any other Bunkers Convention country. (6) Where—

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(a) as a result of any occurrence, a liability is incurred under this section by the owner of each of two or more ships, but (b) the damage or cost for which each of the owners would be liable cannot reasonably be separated from that for which the other or others would be liable, each of the owners shall be liable, jointly with the other or others, for the whole of the damage or cost for which the owners together would be liable under this section. (7) In this Chapter (except in section 170(1)) ‘‘owner’’, except when used in the term ‘‘registered owner’’, means the registered owner, bareboat charterer, manager and operator of the ship. Notes This provision implements the Bunkers Convention by imposing liability for pollution caused by the escape of non-persistent fuel oil from a vessel other than a tanker.

Liability for oil pollution in other cases 154.—(1) Subject to subsection (2A), where, as a result of any occurrence, any oil is discharged or escapes from a ship, then (except as otherwise provided by this Chapter) the registered owner of the ship shall be liable— (a) for any damage caused outside the ship in the territory of the United Kingdom by contamination resulting from the discharge or escape; and (b) for the cost of any measures reasonably taken after the discharge or escape for the purpose of preventing or minimising any damage so caused in the territory of the United Kingdom by contamination resulting from the discharge or escape; and (c) for any damage so caused in the territory of the United Kingdom by any measures so taken. (2) Subject to subsection (2A), where, as a result of any occurrence, there arises a grave and imminent threat of damage being caused outside a ship by the contamination which might result if there were a discharge or escape of oil from the ship, then (except as otherwise provided by this Chapter) the registered owner of the ship shall be liable— (a) for the cost of any measures reasonably taken for the purpose of preventing or minimising any such damage in the territory of the United Kingdom; and (b) for any damage caused outside the ship in the territory of the United Kingdom by any measures so taken. (2A) No liability shall be incurred under this section by reason of— (a) a discharge or escape of oil from a ship to which section 153 applies or a relevant threat of contamination falling within subsection (2) of that section; (b) a discharge or escape of bunker oil falling within section 153A(1) or a relevant threat of contamination falling within section 153A(2). (2B) In the subsequent provisions of this Chapter— (a) a discharge or escape of oil from a ship, other than one excluded by subsection (2A), is referred to as a discharge or escape of oil falling within subsection (1) of this section; and (b) a threat mentioned in subsection (2), other than one excluded by subsection (2A), is referred to as a relevant threat of contamination falling within subsection (2) of this section. (3) Where— (a) as a result of any occurrence, a liability is incurred under this section by the registered owner of each of two or more ships, but (b) the damage or cost for which each of the registered owners would be liable cannot reasonably be separated from that for which the other or others would be liable, each of the registered owners shall be liable, jointly with the other or others, for the whole of the damage or cost for which the registered owners together would be liable under this section. (4) The Law Reform (Contributory Negligence) Act 1945 and, in Northern Ireland, the Law Reform (Miscellaneous Provisions) Act (Northern Ireland) 1948 shall apply in relation to any damage or cost for which a person is liable under this section, but which is not due to his fault, as if it were due to his fault.

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(5) In this section (apart from subsection (2A)) ‘‘ship’’ includes a vessel which is not seagoing. Notes Section 153 applies to oil tankers. The present section extends the liability provided for in s 153 to other vessels, ie vessels which are not carrying oil as a cargo but which are fuelled by oil. The section is confined to persistent hydrocarbon mineral oil: for liability for pollution by other bunker oil, see section 153A. In addition, it imposes liability for the cost of preventative measures in the case of grave and imminent threat from pollution. Liability does not extend to loss of profits suffered by any victim of the oil pollution: Landcatch Ltd v. The Braer Corporation [1999] 2 Lloyd’s Rep 316.

Exceptions from liability under section 153 155.—(1) No liability shall be incurred by a person (‘‘the defendant’’) under section 153, 153A or 154 by reason of a discharge or escape of oil or bunker oil from a ship, or of a relevant threat of contamination, if the defendant proves that subsection (2) applies. (2) This subsection applies if the discharge or escape or the relevant threat of contamination (as the case may be)— (a) resulted from an act of war, hostilities, civil war, insurrection or an exceptional, inevitable and irresistible natural phenomenon; or (b) was due wholly to anything done or omitted to be done by another person, not being a servant or agent of the defendant, with intent to do damage; or (c) was due wholly to the negligence or wrongful act of a government or other authority in exercising its function of maintaining lights or other navigational aids for the maintenance of which it was responsible. Notes This section sets out the situations in which a shipowner is not liable for oil pollution. The fund is liable in these cases, with the exception of loss resulting from war and related risks (see s 175(1), (7)).

Restriction of liability for pollution from oil or bunker oil 156.—(1) Where, as a result of any occurrence— (a) there is a discharge or escape of oil from a ship to which section 153 applies or there arises a relevant threat of contamination falling within subsection (2) of that section, or (b) there is a discharge or escape of oil falling within section 154(1) or there arises a relevant threat of contamination falling within section 154(2), then, whether or not the registered owner of the ship in question incurs a liability under section 153 or 154— (i) he shall not be liable otherwise than under that section for any such damage or cost as is mentioned in it, and (ii) no person to whom this paragraph applies shall be liable for any such damage or cost unless it resulted from anything done or omitted to be done by him either with intent to cause any such damage or cost or recklessly and in the knowledge that any such damage or cost would probably result. (2) Subsection (1)(ii) above applies to— (a) any servant or agent of the registered owner of the ship; (b) any person not falling within paragraph (a) above but employed or engaged in any capacity on board the ship or to perform any service for the ship; (c) any charterer of the ship (however described and including a bareboat charterer), and any manager or operator of the ship; (d) any person performing salvage operations with the consent of the registered owner of the ship or on the instructions of a competent public authority; (e) any person taking any such measures as are mentioned in subsection (1)(b) or (2)(a) of section 153 or 154; (f) any servant or agent of a person falling within paragraph (c), (d) or (e) above. (2A) Where, as a result of any occurrence— (a) there is a discharge or escape of bunker oil falling within section 153A(1), or

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(b) there arises a relevant threat of contamination falling within section 153A(2), then, whether or not the owner of the ship in question incurs any liability under section 153A— (i) he shall not be liable otherwise than under that section for any such damage or cost as is mentioned in it; and (ii) no person to whom this paragraph applies shall be liable for any such damage or cost unless it resulted from anything done or omitted to be done by him either with intent to cause any such damage or cost or recklessly and in the knowledge that any such damage or cost would probably result. (2B) Subsection (2A)(ii) applies to— (a) any servant or agent of the owner; (b) any person not falling within paragraph (a) above but engaged in any capacity on board the ship or to perform any service for the ship; (c) any person performing salvage operations with the consent of the owner of the ship or on the instructions of a competent public authority; (d) any person taking any such measures as are mentioned in subsection (1)(b) or (2)(a) of section 153A; (e) any servant or agent of a person falling within paragraph (c) or (d). (3) The liability of a person under section 153, 153A or 154 for any impairment of the environment shall be taken to be a liability only in respect of— (a) any resulting loss of profits, and (b) the cost of any reasonable measures of reinstatement actually taken or to be taken. Notes This section stipulates that liability under ss 153 and 154 is the only liability which may be faced by a shipowner.

Liability under section 153, 153A or 154: supplementary provisions 156A.—(1) For the purposes of this Chapter— (a) references to a discharge or escape of oil or bunker oil from a ship are references to such a discharge or escape wherever it may occur; (b) references to a discharge or escape of oil from a ship include a discharge or escape of oil carried in the bunkers of the ship; (c) where more than one discharge or escape of oil or bunker oil results from the same occurrence or from a series of occurrences having the same origin, they shall be treated as one, but any measures taken after the first of them shall be deemed to have been taken after the discharge or escape; and (d) where a relevant threat of contamination results from a series of occurrences having the same origin, they shall be treated as a single occurrence. (2) The Law Reform (Contributory Negligence) Act 1945 and, in Northern Ireland, the Law Reform (Miscellaneous Provisions) Act (Northern Ireland) 1948 shall apply in relation to any damage or cost for which a person is liable under section 153, 153A or 154, but which is not due to his fault, as if it were due to his fault. Notes This section, which is the equivalent of s 156, stipulates that liability under s 154 is the only liability which may be faced by the owner of a vessel which is not an oil tanker.

Limitation of liability Limitation of liability under section 153 157.—(1) Where, as a result of any occurrence, the registered owner of a ship incurs liability under section 153 by reason of a discharge or escape or by reason of any relevant threat of contamination falling within subsection (2) of that section, then (subject to subsection (3) below)— (a) he may limit that liability in accordance with the provisions of this Chapter, and

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(b) if he does so, his liability (being the aggregate of his liabilities under section 153 resulting from the occurrence) shall not exceed the relevant amount. (2) In subsection (1) above, ‘‘the relevant amount’’ means— (a) in relation to a ship not exceeding 5,000 tons, 4.51 million special drawing rights; (b) in relation to a ship exceeding 5,000 tons, 4.51 million special drawing rights together with an additional 631 special drawing rights for each ton of its tonnage in excess of 5,000 tons up to a maximum amount of 89.77 million special drawing rights; but the Secretary of State may by order make such amendments of paragraphs (a) and (b) above as appear to him to be appropriate for the purpose of giving effect to the entry into force of any amendment of the limits of liability laid down in paragraph 1 of Article V of the Liability Convention. (3) Subsection (1) above shall not apply in a case where it is proved that the discharge or escape, or (as the case may be) the relevant threat of contamination, resulted from anything done or omitted to be done by the registered owner either with intent to cause any such damage or cost as is mentioned in section 153 or recklessly and in the knowledge that any such damage or cost would probably result. (4) For the purposes of this section a ship’s tonnage shall be its gross tonnage calculated in such manner as may be prescribed by an order made by the Secretary of State. (5) Any such order shall, so far as it appears to the Secretary of State to be practicable, give effect to the regulations in Annex 1 of the International Convention on Tonnage Measurement of Ships 1969. Notes Under this section, the liability of the owner of an oil tanker under s 153 of the 1995 Act may be limited, based on tonnage, where the pollution occurred independently of the owner’s fault or privity. The procedure for invoking the limitation provisions is contained in ss 158 and 159.

Limitation actions 158.—(1) Where the registered owner of a ship has or is alleged to have incurred a liability under section 153 he may apply to the court for the limitation of that liability to an amount determined in accordance with section 157. (2) If on such an application the court finds that the applicant has incurred such a liability but has not found that he is not entitled to limit it, the court shall, after determining the limit which would apply to the applicant’s liability if he were entitled to limit it and directing payment into court of the amount of that limit— (a) determine the amounts that would, apart from the limit, be due in respect of the liability to the several persons making claims in the proceedings; and (b) direct the distribution of the amount paid into court (or, as the case may be, so much of it as does not exceed the liability) among those persons in proportion to their claims, subject to the following provisions of this section. (2A) Where— (a) a distribution is made under subsection (2)(b) above without the court having found that the applicant is entitled to limit his liability, and (b) the court subsequently finds that the applicant is not so entitled, the making of the distribution is not to be regarded as affecting the applicant’s liability in excess of the amount distributed. (3) A payment into court of the amount of a limit determined in pursuance of this section shall be made in sterling; and (a) for the purpose of converting such an amount from special drawing rights into sterling one special drawing right shall be treated as equal to such a sum in sterling as the International Monetary Fund have fixed as being the equivalent of one special drawing right for— (i) the day on which the determination is made; or (ii) if no sum has been so fixed for that day, the last day before that day for which a sum has been so fixed; (b) a certificate given by or on behalf of the Treasury stating—

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(i) that a particular sum in sterling has been so fixed for the day on which the determination was made, or (ii) that no sum has been so fixed for that day and that a particular sum in sterling has been so fixed for a day which is the last day for which a sum has been so fixed before the day on which the determination was made, shall be conclusive evidence of those matters for the purposes of this Chapter; (c) a document purporting to be such a certificate shall, in any proceedings, be received in evidence and, unless the contrary is proved, be deemed to be such a certificate. (4) No claim shall be admitted in proceedings under this section unless it is made within such time as the court may direct or such further time as the court may allow. (5) Where any sum has been paid in or towards satisfaction of any claim in respect of the damage or cost to which the liability extends— (a) by the registered owner or the persons referred to in section 165 as ‘‘the insurer’’ (in relation to any insurance or other security provided as mentioned in subsection (1) of that section); or (b) by a person who has or is alleged to have incurred a liability, otherwise than under section 153, for the damage or cost and who is entitled to limit his liability in connection with the ship by virtue of section 185 or 186; the person who paid the sum shall, to the extent of that sum, be in the same position with respect to any distribution made in proceedings under this section as the person to whom it was paid would have been. (6) Where the person who incurred the liability has voluntarily made any reasonable sacrifice or taken any other reasonable measures to prevent or reduce damage to which the liability extends or might have extended he shall be in the same position with respect to any distribution made in proceedings under this section as if he had a claim in respect of the liability equal to the cost of the sacrifice or other measures. (7) The court may, if it thinks fit, postpone the distribution of such part of the amount to be distributed as it deems appropriate having regard to any claims that may later be established before a court of any country outside the United Kingdom. (8) No lien or other right in respect of any ship or other property shall affect the proportions in which any amount is distributed in accordance with subsection (2)(b) above. Notes This section sets out the procedure for the limitation of liability by the owner of an oil tanker who qualifies for limitation under s 157 of the 1995 Act. Application is to be made to the court, which is to determine the amount of the liability. The sum so determined is to be paid into court, for subsequent distribution to those suffering losses. The shipowner himself may qualify for payment if, in accordance with subs (8), he has incurred costs in taking reasonable steps to avoid or mitigate the loss. Under subs (5)(a) the insurer of the tanker owner is given express statutory subrogation rights against the fund to the extent that the insurer has indemnified any person suffering loss and with a claim in the distribution. For limitation actions generally, see the Civil Procedure Rules 1998, Part 61, The Practice Direction to which provides that, unless the name of all potential claimants are known, the order limiting liability must be publicised and that the time allowed for the making of claims must be at least two months (longer if the court thinks fit) after the appearance of the advertisement.

Restriction on enforcement after establishment of limitation fund 159.—(1) Where the court has found that a person who has incurred a liability under section 153 is entitled to limit that liability to any amount and he has paid into court a sum not less than that amount— (a) the court shall order the release of any ship or other property arrested in connection with a claim in respect of that liability or any security given to prevent or obtain release from such an arrest; and (b) no judgment or decree for any such claim shall be enforced, except so far as it is for costs (or, in Scotland, expenses); if the sum paid into court, or such part thereof as corresponds to the claim, will be actually available to the claimant or would have been available to him if the proper steps in the proceedings under section 158 had been taken.

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(2) In the application of this section to Scotland, any reference (however expressed) to release from arrest shall be construed as a reference to the recall of an arrestment. Notes A vessel may be arrested as security for the purposes of an action under the 1995 Act (Civil Procedure Rules 1998, Part 61). This section requires the release of a vessel and the discharge of any security provided by the tanker owner or his insurer where the sum paid into court represents the extent of the tanker owner’s liability as limited.

Concurrent liabilities of owners and others 160.—Where, as a result of any discharge or escape of oil from a ship or as a result of any relevant threat of contamination, the registered owner of the ship incurs a liability under section 153 and any other person incurs a liability, otherwise than under that section, for any such damage or cost as is mentioned in subsection (1) or (2) of that section then, if— (a) the registered owner has been found, in proceedings under section 158 to be entitled to limit his liability to any amount and has paid into court a sum not less than that amount; and (b) the other person is entitled to limit his liability in connection with the ship by virtue of section 185 or 186; no proceedings shall be taken against the other person in respect of his liability, and if any such proceedings were commenced before the registered owner paid the sum into court, no further steps shall be taken in the proceedings except in relation to costs. Notes Under the Convention of Limitation of Liability for Maritime Claims 1976, first implemented in the UK by the Merchant Shipping Act 1979, ss 17 to 19 (now the Merchant Shipping Act 1995, ss 185 to 186), a shipowner or salvor is entitled to limit liability for personal injury claims, cargo loss and claims arising from salvage efforts. If concurrent liability is incurred by the tanker owner, or another owner or salvor, and each is entitled to limit liability under the respective pieces of legislation, neither may seek contribution from the other.

Establishment of limitation fund outside United Kingdom 161. Where the events resulting in the liability of any person under section 153 also resulted in a corresponding liability under the law of another Liability Convention country sections 159 and 160 shall apply as if the references to sections 153 and 158 included references to the corresponding provisions of that law and the references to sums paid into court included references to any sums secured under those provisions in respect of the liability. Limitation period for claims under this Chapter Extinguishment of claims 162. No action to enforce a claim in respect of a liability incurred under section 153, 153A or 154 shall be entertained by any court in the United Kingdom unless the action is commenced not later than three years after the claim arose nor later than six years after the occurrence or first of the occurrences resulting in the discharge or escape by reason of which the liability was incurred. Notes The limitation periods for claims against the owners of oil tankers and other vessels are less generous than those set out in the Limitation Act 1980, which provide for a six-year limitation period running from the date on which the action accrued. Under s 162 of the 1995 Act, the action must be brought within three years, and there is a long-stop running for six years from the date at which the first of the occurrences took place even though no action has accrued (in that no actual loss has been suffered) by that date. The longstop in the Limitation Act 1980, as amended by the Latent Damage Act 1986, is normally 15 years.

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Compulsory insurance Compulsory insurance against liability for pollution 163.— (1) Subject to the provisions of this Chapter relating to Government ships, subsection (2) below shall apply to any ship carrying in bulk a cargo of more than 2,000 tons of oil of a description specified in regulations made by the Secretary of State. (2) The ship shall not enter or leave a port in the United Kingdom or arrive at or leave a terminal in the territorial sea of the United Kingdom nor, if the ship is a United Kingdom ship, a port in any other country or a terminal in the territorial sea of any other country, unless there is in force a certificate complying with the provisions of subsection (3) below and showing that there is in force in respect of the ship a contract of insurance or other security satisfying the requirements of Article VII of the Liability Convention (cover for owner’s liability). (3) The certificate must be— (a) if the ship is a United Kingdom ship, a certificate issued by the Secretary of State; (b) if the ship is registered in a Liability Convention country other than the United Kingdom, a certificate issued by or under the authority of the government of the other Liability Convention country; and (c) if the ship is registered in a country which is not a Liability Convention country, a certificate issued by the Secretary of State or by or under the authority of the government of any Liability Convention country other than the United Kingdom. (4) Any certificate required by this section to be in force in respect of a ship shall be carried in the ship and shall, on demand, be produced by the master to any officer of customs and excise or of the Secretary of State and, if the ship is a United Kingdom ship, to any proper officer. (5) If a ship enters or leaves, or attempts to enter or leave, a port or arrives at or leaves, or attempts to arrive at or leave, a terminal in contravention of subsection (2) above, the master or registered owner shall be liable on conviction on indictment to a fine, or on summary conviction to a fine not exceeding £50,000. (6) If a ship fails to carry, or the master of a ship fails to produce, a certificate as required by subsection (4) above, the master shall be liable on summary conviction to a fine not exceeding level 4 on the standard scale. (7) If a ship attempts to leave a port in the United Kingdom in contravention of this section the ship may be detained. Notes Subs (1) This section requires a shipowner carrying a bulk cargo or more than 2,000 tons of oil to procure liability insurance. ‘‘Oil’’ is defined by the Oil Pollution (Compulsory Insurance) Regulations 1997, SI 1997 No 1820, reg 2. Subs (2) provides that certification of insurance, meeting the requirements of subs (3), must be presented to the UK authorities on arrival and departure. All Convention countries impose the same requirement, so that a UK-registered vessel must be certified by the UK government as possessing the relevant insurance. For issue of certificates by the UK authorities, see s 164 of the 1995 Act. State-owned vessels are treated differently: under s 167(2) the certificate need only state that the vessel is state-owned and that oil pollution liabilities will be met. For sanctions, see subs (6). Subs (3) A certificate is to be recognised for the purposes of subs (2) if issued by a government of a Liability Convention country as regards a vessel registered in that country. Subs (3)(c) deals with vessels registered in non-Liability Convention countries, and provides for recognition in accordance with regulations made under subs (4). Subs (4) See the note to subs (3). Subs (6) Liability is imposed upon the ‘‘master or owner’’ for infringement of subs (2). In Federal Steam Navigation Co v. Department of Trade [1974] 2 All ER 97 the House of Lords ruled that identical wording in s 1(1) of the Oil in Navigable Waters Act 1955 allowed the prosecution of either or both the master or owner and not simply one of them. The regulations concerning compulsory insurance are the Oil Pollution Compulsory Insurance Regulations 1997, SI 1997 No 1820, revoking the Oil Pollution (Compulsory Insurance) Regulations 1981, SI 1981 No 912 as amended by the Oil Pollution (Compulsory Insurance) (Amendment) Regulations 1982, SI 1982 No 257 and the Oil Pollution (Compulsory Insurance) (Amendment) (No 2) Regulations 1990, SI 1990 No 2345.

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Compulsory insurance against liability for pollution from bunker oil 163A.—(1) Subject to the provisions of this Chapter relating to Government ships, subsection (2) below shall apply to any ship having a gross tonnage greater than 1,000 tons calculated in the manner prescribed by an order made by the Secretary of State under paragraph 5(2) of Part II of Schedule 7. (2) The ship shall not enter or leave a port in the United Kingdom or arrive at or leave a terminal in the territorial sea of the United Kingdom nor, if the ship is a United Kingdom ship, a port in any other country or a terminal in the territorial sea of any other country, unless there is in force— (a) a contract of insurance or other security in respect of the ship satisfying the requirements of Article 7 of the Bunkers Convention; and (b) a certificate complying with the provisions of subsection (3) showing that there is in force in respect of the ship a contract of insurance or other security satisfying those requirements. (3) The certificate must be— (a) if the ship is a United Kingdom ship, a certificate issued by the Secretary of State; (b) if the ship is registered in a Bunkers Convention country other than the United Kingdom, a certificate issued by or under the authority of the government of the other Bunkers Convention country; and (c) if the ship is registered in a country which is not a Bunkers Convention country, a certificate issued by the Secretary of State or by or under the authority of the government of any Bunkers Convention country other than the United Kingdom. (4) Any certificate required by this section to be in force in respect of a ship shall be carried in the ship and shall, on demand, be produced by the master to any officer of Revenue and Customs or of the Secretary of State and, if the ship is a United Kingdom ship, to any proper officer. (5) If a ship enters or leaves, or attempts to enter or leave, a port or arrives at or leaves, or attempts to arrive at or leave, a terminal in contravention of subsection (2) by reason of there being no certificate in force as mentioned in that subsection, the master or registered owner shall be liable on conviction on indictment to a fine, or on summary conviction to a fine not exceeding the statutory maximum. (6) If a ship fails to carry, or the master of a ship fails to produce, a certificate as required by subsection (4), the master shall be liable on summary conviction to a fine not exceeding level 5 on the standard scale. (7) If a ship attempts to leave a port in the United Kingdom in contravention of subsection (2), the ship may be detained. (8) Any document required or authorised, by virtue of any statutory provision, to be served on a foreign company for the purposes of the institution of (or otherwise in connection with) proceedings for an offence under subsection (5) against the company as registered owner of the ship shall be treated as duly served on the company if the document is served on the master of the ship. In this subsection ‘‘foreign company’’ means a company or body which is not one to which any of sections 695 and 725 of the Companies Act 1985 and Articles 645 and 673 of the Companies (Northern Ireland) Order 1986 applies so as to authorise the service of the document under any of those provisions. (9) Any person authorised to serve any document for the purposes of the institution of (or otherwise in connection with) the institution of proceedings for an offence under this section shall, for that purpose, have the right to go on board the ship in question. (10) In the case of a ship of which, at any relevant time, the tonnage has not been and cannot be ascertained in the manner set out in subsection (1), the best available evidence shall be used in calculating the tonnage of the ship in accordance with any order under paragraph 5(2) of Part II of Schedule 7. Notes This section extends the compulsory insurance provisions to liability for pollution caused by bunker oil.

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Issue of certificate by Secretary of State 164.—(1) Subject to subsection (2) below, if the Secretary of State is satisfied, on the application for such a certificate as is mentioned in section 163(2) in respect of a United Kingdom ship or a ship registered in any country which is not a Liability Convention country, that there will be in force in respect of the ship, throughout the period for which the certificate is to be issued, a contract of insurance or other security satisfying the requirements of Article VII of the Liability Convention, the Secretary of State shall issue such a certificate to the registered owner. (1A) Subject to subsection (2) below, if the Secretary of State is satisfied, on the application for such a certificate as is mentioned in section 163A(2) in respect of a United Kingdom ship or a ship registered in any country which is not a Bunkers Convention country, that there will be in force in respect of the ship, throughout the period for which the certificate is to be issued, a contract of insurance or other security satisfying the requirements of Article 7 of the Bunkers Convention, the Secretary of State shall issue such a certificate to the registered owner. (2) The Secretary of State may refuse the certificate if he is of the opinion that there is a doubt whether— (a) the person providing the insurance or other security will be able to meet his obligations thereunder; or (b) the insurance or other security will cover the registered owner’s liability under section 153, or the owner’s liability under section 153A, as the case may be. (3) The Secretary of State may make regulations providing for the cancellation and delivery up of a certificate under this section in such circumstances as may be prescribed by the regulations. (4) If a person required by regulations under subsection (3) above to deliver up a certificate fails to do so he shall be liable on summary conviction to a fine not exceeding level 4 on the standard scale. (5) The Secretary of State shall send a copy of any certificate issued by him under this section in respect of a United Kingdom ship to the Registrar General of Shipping and Seamen, and the Registrar shall make the copy available for public inspection. Notes Subs (1)–(2) This section requires the Secretary of State to issue a certification of insurance for the purpose of s 163 and the Liability Convention as regards UK-registered vessels or vessels registered in nonConvention countries. The certificate can be refused only where the Secretary of State is not satisfied that there is insurance in force (subs (1)) or where the Secretary of State is of the opinion that there is a doubt as to whether the insurer will be able to meet its obligations. Subs (3) For the Regulations made under this subsection, see the Oil Pollution (Compulsory Insurance) Regulations 1997, SI 1997 No 1820, regs 4 (cancellation and delivery up) and 5 (fees). Subs (4) requires delivery up of certification where it has been cancelled. The Oil Pollution (Compulsory Insurance) Regulations 1997, SI 1997 No 1820, reg 4, provides for cancellation of certification where: there is a change in the ownership of a vessel; the insurance is cancelled; there is a doubt as to whether the insurance is in force; and the insurer is insolvent.

Rights of third parties against insurers 165.— (1) Where it is alleged that the registered owner of a ship has incurred a liability under section 153 as a result of any discharge or escape of oil occurring, or as a result of any relevant threat of contamination arising, while there was in force a contract of insurance or other security to which such a certificate as is mentioned in section 163(2) related, proceedings to enforce a claim in respect of the liability may be brought against the person who provided the insurance or other security. (1A) Where it is alleged that the owner of a ship has incurred a liability under section 153A as a result of any discharge or escape of bunker oil occurring, or as a result of any relevant threat of contamination arising, while there was in force a contract of insurance or other security to which such a certificate as is mentioned in section 163A(2) related, proceedings to enforce a claim in respect of the liability may be brought against the person who provided the insurance or other security.

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(1B) In the following provisions of this section, ‘‘the insurer’’ means the person who provided the insurance or other security referred to in subsection (1) or subsection (1A), as the case may be. (2) In any proceedings brought against the insurer by virtue of this section in respect of liability under section 153 it shall be a defence (in addition to any defence affecting the registered owner’s liability) to prove that the discharge or escape, or (as the case may be) the threat of contamination, was due to the wilful misconduct of the registered owner himself. (3) The insurer may limit his liability in respect of claims in respect of liability under section 153 which are made against him by virtue of this section in like manner and to the same extent as the registered owner may limit his liability under section 157 but the insurer may do so whether or not the discharge or escape, or (as the case may be) the threat of contamination, resulted from anything done or omitted to be done by the registered owner as mentioned in section 157(3). (4) Where the registered owner and the insurer each apply to the court for the limitation of his liability (in relation to liability under section 153) any sum paid into court in pursuance of either application shall be treated as paid also in pursuance of the other. (4A) In any proceedings brought against the insurer by virtue of this section in respect of liability under section 153A it shall be a defence (in addition to any defence affecting the owner’s liability) to prove that the discharge or escape, or (as the case may be) the threat of contamination, was due to the wilful misconduct of the owner himself. (4B) The insurer may limit his liability in respect of claims in respect of liability under section 153A which are made against him by virtue of this section in like manner and to the same extent as the owner may limit his liability by virtue of section 185; but the insurer may do so whether or not the discharge or escape, or (as the case may be) the threat of contamination, resulted from any act or omission mentioned in Article 4 of the Convention set out in Part I of Schedule 7. (4C) Where the owner and the insurer each apply to the court for the limitation of his liability (in relation to liability under section 153A) any sum paid into court in pursuance of either application shall be treated as paid also in pursuance of the other. (5) The Third Parties (Rights against Insurers) Act 1930 and the Third Parties (Rights against Insurers) Act (Northern Ireland) 1930 shall not apply in relation to any contract of insurance to which such a certificate as is mentioned in [section 163 or 163A] relates. Notes Subs (1) The effect of s 165 is to transfer to the victim of oil pollution a direct action against the owner’s insurers. The phrase ‘‘incurred a liability’’ indicates that the liability of the shipowner must have been established and quantified before the action may be brought. Subs (2) preserves the right of the insurer to plead as against the third party victim any defence which would have been available to the insurer against the owner. The reference to wilful misconduct adds nothing to the common law, which gives the insurer a defence in the event of wilful misconduct by the assured. For codification of this principle, see Marine Insurance Act 1906, s 55(2), para 5.20. Subs (5) The Third Parties (Rights against Insurers) Act 1930 (see para 6.20) operates in a similar fashion, but only where the assured is insolvent. The main effect of s 165 of the 1995 Act is to remove the need to prove that the owner is insolvent as a condition of bringing direct proceedings against the owner’s insurers.

Supplementary Jurisdiction of United Kingdom courts and registration of foreign judgments 166.—(1) Paragraph 1(1)(d) of Schedule 1 to the Administration of Justice Act 1956 (Admiralty jurisdiction in claims for damage done by ships) shall be construed as extending to any claim in respect of a liability incurred under this Chapter, and the Admiralty jurisdiction of the Court of Session shall extend to any case arising out of any such claim. (2) Where— (a) there is a discharge or escape of oil from a ship to which section 153 applies, or a discharge or escape of oil falling within section 154(1), which does not result in any damage caused by contamination in the territory of the United Kingdom and no

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measures are reasonably taken to prevent or minimise such damage in that territory, or (b) any relevant threat of contamination falling within section 153(2) or 154(2) arises but no measures are reasonably taken to prevent or minimise such damage in the territory of the United Kingdom, no court in the United Kingdom shall entertain any action (whether in rem or in personam) to enforce a claim arising from any relevant damage or cost— (i) against the registered owner of the ship, or (ii) against any person to whom section 156(1)(ii) applies, unless any such damage or cost resulted from anything done or omitted to be done as mentioned in that provision. (3) In subsection (2) above, ‘‘relevant damage or cost’’ means— (a) in relation to any such discharge or escape as is mentioned in paragraph (a) of that subsection, any damage caused in the territory of another Liability Convention country by contamination resulting from the discharge or escape, or any cost incurred in taking measures to prevent or minimise such damage in the territory of another Liability Convention country, (b) in relation to any such threat of contamination as is mentioned in paragraph (b) of that subsection, any cost incurred in taking measures to prevent or minimise such damage in the territory of another Liability Convention country; or (c) any damage caused by any measures taken as mentioned in paragraph (a) or (b) above; and section 156(2)(e) shall have effect for the purposes of subsection (2)(ii) above as if it referred to any person taking any such measures as are mentioned in paragraph (a) or (b) above. (3A) Where— (a) there is a discharge or escape of bunker oil falling within section 153A(1) which does not result in any damage caused by contamination in the territory of the United Kingdom and no measures are reasonably taken to prevent or minimise such damage in that territory, or (b) any relevant threat of contamination falling within section 153A(2) arises but no measures are reasonably taken to prevent or minimise such damage in the territory of the United Kingdom, no court in the United Kingdom shall entertain any action (whether in rem or in personam) to enforce a claim arising from any relevant damage or cost— (i) against the owner of the ship, or (ii) against any person to whom section 156(2A)(ii) applies, unless any such damage or cost resulted from anything done or omitted to be done as mentioned in that provision. (3B) In subsection (3A) above, ‘‘relevant damage or cost’’ means— (a) in relation to any such discharge or escape as is mentioned in paragraph (a) of that subsection, any damage caused in the territory of another Bunkers Convention country by contamination resulting from the discharge or escape, or any cost incurred in taking measures to prevent or minimise such damage in the territory of another Bunkers Convention country; (b) in relation to any such threat of contamination as is mentioned in paragraph (b) of that subsection, any cost incurred in taking measures to prevent or minimise such damage in the territory of another Bunkers Convention country; or (c) any damage caused by any measures taken as mentioned in paragraph (a) or (b) above; and section 156(2B)(d) shall have effect for the purpose of subsection (3A)(ii) above as if it referred to any person taking any such measures as are mentioned in paragraph (a) or (b) above. (4) Part I of the Foreign Judgments (Reciprocal Enforcement) Act 1933 shall apply, whether or not it would so apply apart from this section, to— (a) any judgment given by a court in a Liability Convention country to enforce a claim in respect of a liability incurred under any provision corresponding to section 153; and (b) any judgment given by a court in a Bunkers Convention country to enforce a claim in respect of a liability incurred under any provision corresponding to section 153A;

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and in its application to any such judgment that Part shall have effect with the omission of section 4(2) and (3) of that Act. Notes Subs (1) Oil pollution claims are within the Admiralty jurisdiction of the Supreme Court, so that Admiralty powers (most importantly, of arrest) may be exercised. Subs (2) This subsection prevents the enforcement of a judgment of any court of a Convention country relating to liabilities under the 1968 Convention if no measures have been taken in that country to prevent or reduce damage. The section does not prevent the enforcement in England of judgments delivered elsewhere in the UK. Where a vessel is arrested in respect of a claim under the 1995 Act, the affidavit must state the facts relied on, which establish that the court is not prevented from issuing a warrant of arrest. Subs (4) Subject to subs (2), judgments given in other Liability Convention or Bunker Convention countries based upon the liabilities imposed under that Convention (as set out in the UK in s 153 of the 1995 Act) may be enforced by registration in the High Court under the Foreign Judgments (Reciprocal Enforcement) Act 1933. The 1933 Act applies whether or not it would otherwise apply to judgments from the Convention country in question (as the 1933 Act operates on a reciprocal basis and requires an agreement between England and the country in question).

Government ships 167.— (1) Nothing in the preceding provisions of this Chapter applies in relation to any warship or any ship for the time being used by the government of any State for other than commercial purposes. (2) In relation to a ship owned by a State and for the time being used for commercial purposes— (a) it shall be sufficient compliance with section 163(2) if there is in force a certificate issued by the government of that State and showing that the ship is owned by that State and that any liability for pollution damage as defined in Article I of the Liability Convention will be met up to the limit prescribed by Article V of that Convention; and (b) it shall be sufficient compliance with section 163A(2) if there is in force a certificate issued by the government of that State and showing that the ship is owned by that State and that any liability for pollution damage as defined in Article 1 of the Bunkers Convention will be met up to the limits set out in Chapter II of the Convention in Part I of Schedule 7. (3) Every Liability Convention State shall, for the purposes of any proceedings brought in a court in the United Kingdom to enforce a claim in respect of a liability incurred under section 153, be deemed to have submitted to the jurisdiction of that court, and accordingly rules of court may provide for the manner in which such proceedings are to be commenced and carried on; but nothing in this subsection shall authorise the issue of execution, or in Scotland the execution of diligence, against the property of any State. (4) Every Bunkers Convention State shall, for the purposes of any proceedings brought in a court in the United Kingdom to enforce a claim in respect of a liability incurred under section 153A, be deemed to have submitted to the jurisdiction of that court, and accordingly rules of court may provide for the manner in which such proceedings are to be commenced and carried on; but nothing in this subsection shall authorise the issue of execution, or in Scotland, the execution of diligence, against the property of any State. Notes Subs (3) prevents jurisdictional questions from arising where proceedings are brought in the UK courts for liabilities incurred under s 153 of the 1995 Act. If the action falls within s 153 or s 153A, the action may be heard in England even though the defendant has no English presence. The Civil Procedure Rules 1998, Part 61, assigns such actions to the Admiralty division of the High Court.

Limitation of liability under section 153A or 154 168. For the purposes of section 185 any liability incurred under section 153A or 154 shall be deemed to be a liability to damages in respect of such damage to property as is mentioned in paragraph 1(a) of Article 2 of the Liability Convention in Part I of Schedule 7.

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Notes The right of the owner to limit liability is governed by the general right of an owner to bring limitation proceedings under s 185 of the 1995 Act and not by the special rules contained in s 158.

Saving for recourse actions 169. Nothing in this Chapter shall prejudice any claim, or the enforcement of any claim, a person incurring any liability under this Chapter may have against another person in respect of that liability. Notes Any right of a person held to be liable under the 1995 Act to seek indemnification from a third party is expressly preserved by this section.

Interpretation 170.— (1) In this Chapter (except this subsection)— ‘‘bunker oil’’ means any hydrocarbon mineral oil (including lubricating oil) which is carried by a ship and used or intended to be used for the operation or propulsion of that ship and any residues of such oil; ‘‘the court’’ means the High Court or, in Scotland, the Court of Session; ‘‘damage’’ includes loss; ‘‘oil’’, except in the term ‘‘bunker oil’’, means persistent hydrocarbon mineral oil; ‘‘owner’’ has the meaning given by section 153A(7); ‘‘registered owner’’ means the person or persons registered as the owner of the ship or, in the absence of registration, the person or persons owning the ship, except that, in relation to a ship owned by a State which is operated by a person registered as the ship’s operator, it means the person registered as its operator; ‘‘relevant threat of contamination’’ includes (unless a contrary intention appears)— (a) a relevant threat of contamination falling within section 153(2) (as defined in section 153(2A)); (b) a relevant threat of contamination falling within section 153A(2) (as defined in section 153A(4)); and (c) a relevant threat of contamination falling within section 154(2) (as defined in section 154(2B)); and ‘‘ship’’ (subject to section 154(5)) means any sea-going vessel or sea-borne craft of any type whatsoever. (2) In relation to any damage or cost resulting from the discharge or escape of any oil or bunker oil from a ship, or from a relevant threat of contamination, references in this Chapter to the owner or the registered owner of the ship are references to the owner or the registered owner (as the case may be) at the time of the occurrence or first of the occurrences resulting in the discharge or escape or (as the case may be) in the threat of contamination. (3) References in this Chapter in its application to Scotland— (a) to payment into court, shall be construed as references to the payment to the Accountant of Court for Consignation (within the meaning of the Court of Session Consignations (Scotland) Act 1895); and (b) to costs, shall be construed as references to expenses. (4) References in this Chapter to the territory of any country include the territorial sea of that country and— (a) in the case of the United Kingdom, any area specified by virtue of section 129(2)(b); and (b) in the case of any other Liability Convention country or Bunkers Convention country, the exclusive economic zone of that country established in accordance with international law, or, if such a zone has not been established, such area adjacent to the territorial sea of that country and extending not more that 200 nautical miles from the baselines from which the breadth of that sea is measured as may have been determined by that State in question in accordance with international law.

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Transitory text of this Chapter and power to make transitional provisions 171.— (1) Until such day as the Secretary of State may by order appoint, the provisions set out in Schedule 4 as Chapter III shall have effect instead of the foregoing provisions of this Chapter; and references in that Schedule to a section whose number is included in that Schedule is a reference to the section so included. (2) Notwithstanding subsection (1) above, Her Majesty may by Order in Council make such provision as appears to Her Majesty to be appropriate in connection with the implementation of any transitional provisions contained in the 1992 Protocol or the Conventions which they amend; and any such Order may in particular provide, in relation to occurrences of any description specified in the Order— (a) for specified provisions of this Chapter, whether as contained in this Chapter or in the Chapter III set out in Schedule 4, to have effect; (b) for any such provisions to have effect subject to specified modifications. (3) In subsection (2) above— ‘‘the 1992 Protocol’’ means the Protocol of 1992 to amend the International Convention for Oil Pollution Damage 1969 signed in London on 27th November 1992; and ‘‘specified’’ means specified in the Order.

CHAPTER IV I N T E R N AT I O N A L O I L P O L L U T I O N C O M P E N S AT I O N F U N D Preliminary Meaning of the ‘‘Liability Convention’’, ‘‘the Fund Convention’’ and related expressions 172.—(1) In this Chapter— (a) ‘‘the Liability Convention’’ has the same meaning as in Chapter III of this Part; (b) ‘‘the Fund Convention’’ means the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage 1992; (c) ‘‘the Fund’’ means the International Fund established by the Fund Convention; (d) ‘‘Fund Convention country’’ means a country in respect of which the Fund Convention is in force. (e) ‘‘the Supplementary Fund Protocol’’ means the Protocol of 2003 to the Fund Convention; (f) ‘‘the Supplementary Fund’’ means the International Supplementary Fund established by the Supplementary Fund Protocol; and (g) ‘‘Supplementary Fund Protocol country’’ means a country in respect of which the Supplementary Fund Protocol is in force. (2) If Her Majesty by Order in Council declares that any State specified in the Order is a party to the Fund Convention in respect of any country so specified, the Order shall, while in force, be conclusive evidence that that State is a party to that Convention in respect of that country. (3) Subsection (2) applies in relation to the Supplementary Fund Protocol as it applies in relation to the Fund Convention. Notes This section was amended by SI 2006 No 1265, reg 3.

Contributions to Fund Contributions by importers of oil and others 173.—(1) Contributions shall be payable to the Fund and to the Supplementary Fund in respect of oil carried by sea to ports or terminal installations in the United Kingdom otherwise than on a voyage only within its national waters.

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(2) Subsection (1) above applies whether or not the oil is being imported, and applies even if contributions are payable in respect of carriage of the same oil on a previous voyage. (3) Contributions shall also be payable— (a) to the Fund in respect of oil when first received in any installation in the United Kingdom after having been carried by sea and discharged in a port or terminal installation in a country which is not a Fund Convention country; and (b) to the Supplementary Fund in respect of oil when first received in any installation in the United Kingdom after having been carried by sea and discharged in a port or terminal installation in a country which is not a Supplementary Fund Protocol country. (4) The person liable to pay contributions is— (a) in the case of oil which is being imported into the United Kingdom, the importer, and (b) otherwise, the person by whom the oil is received. (5) A person shall not be liable to make contributions in respect of the oil imported or received by him in any year if the oil so imported or received in the year does not exceed 150,000 tonnes. (6) For the purpose of subsection (5) above— (a) all the members of a group of companies shall be treated as a single person, and (b) any two or more companies which have been amalgamated into a single company shall be treated as the same person as that single company. (7) The contributions payable by a person for any year shall— (a) be of such amount as may be determined— (i) in the case of contributions to the Fund, by the Director of the Fund under Article 12 of the Fund Convention and notified to that person by the Fund; (ii) in the case of contributions to the Supplementary Fund, by the Director of the Supplementary Fund under Article 11 of the Supplementary Fund Protocol and notified to that person by the Supplementary Fund; (b) be payable in such instalments, becoming due at such times, as may be so notified to him; and if any amount due from him remains unpaid after the date on which it became due, it shall from then on bear interest, at a rate determined from time to time by the Assembly of the Fund or the Assembly of the Supplementary Fund (as the case may be), until it is paid. (8) The Secretary of State may by regulations impose on persons who are or may be liable to pay contributions under this section obligations to give security for payment to the Secretary of State, or the Fund. (9) Regulations under subsection (8) above— (a) may contain such supplemental or incidental provisions as appear to the Secretary of State expedient, and (b) may impose penalties for contravention of the regulations punishable on summary conviction by a fine not exceeding level 5 on the standard scale, or such lower limit as may be specified in the regulations. (10) In this section and in section 174, unless the context otherwise requires— ‘‘company’’ means a body incorporated under the law of the United Kingdom, or of any other country; ‘‘group’’ in relation to companies, means a holding company and its subsidiaries as defined by section 736 of the Companies Act 1985 (or for companies in Northern Ireland Article 4 of the Companies (Northern Ireland) Order 1986), subject, in the case of a company incorporated outside the United Kingdom, to any necessary modifications of those definitions; ‘‘importer’’ means the person by whom or on whose behalf the oil in question is entered for customs or excise purposes on importation, and ‘‘import’’ shall be construed accordingly; ‘‘oil’’ means crude oil and fuel oil, and— (a) ‘‘crude oil’’ means any liquid hydrocarbon mixture occurring naturally in the earth whether or not treated to render it suitable for transportation, and includes— (i) crude oils from which distillate fractions have been removed, and

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(ii) crude oils to which distillate fractions have been added, (b) ‘‘fuel oil’’ means heavy distillates or residues from crude oil or blends of such materials intended for use as a fuel for the production of heat or power of a quality equivalent to the ‘‘American Society for Testing and Materials’ Specification for Number Four Fuel Oil (Designation D396–69)’’, or heavier, ‘‘terminal installation’’ means any site for the storage of oil in bulk which is capable of receiving oil from waterborne transportation, including any facility situated offshore and linked to any such site. Notes This section was amended by SI 2006 No 1265, reg 4. The funds established under the Fund and Supplementary Fund Conventions are constituted by levies on importers of oil whose level of imports exceed 150,000 tonnes in any year.

Power to obtain information 174.—(1) For the purpose of transmitting to the Fund or the Supplementary Fund the names and addresses of the persons who under section 173 are liable to make contributions to the Fund or the Supplementary Fund for any year, and the quantity of oil in respect of which they are so liable, the Secretary of State may by notice require any person engaged in producing, treating, distributing or transporting oil to furnish such information as may be specified in the notice. (2) A notice under this section may require a company to give such information as may be required to ascertain whether its liability is affected by section 173(6). (3) A notice under this section may specify the way in which, and the time within which, it is to be complied with. (4) In proceedings by the Fund or the Supplementary Fund against any person to recover any amount due under section 173, particulars contained in any list transmitted by the Secretary of State to either of those Funds shall, so far as those particulars are based on information obtained under this section, be admissible as evidence of the facts stated in the list; and so far as particulars which are so admissible are based on information given by the person against whom the proceedings are brought, those particulars shall be presumed to be accurate until the contrary is proved. (5) If a person discloses any information which has been furnished to or obtained by him under this section, or in connection with the execution of this section, then, unless the disclosure is made— (a) with the consent of the person from whom the information was obtained, or (b) in connection with the execution of this section, or (c) for the purposes of any legal proceedings arising out of this section or of any report of such proceedings, he shall be liable on summary conviction to a fine not exceeding level 5 on the standard scale. (6) A person who— (a) refuses or wilfully neglects to comply with a notice under this section, or (b) in furnishing any information in compliance with a notice under this section makes any statement which he knows to be false in a material particular, or recklessly makes any statement which is false in a material particular, shall be liable— (i) on summary conviction, to a fine not exceeding level 4 on the standard scale in the case of an offence under paragraph (a) above and not exceeding the statutory maximum in the case of an offence under paragraph (b) above, and (ii) on conviction on indictment, to a fine, or to imprisonment for a term not exceeding twelve months, or to both. Notes This section was amended by SI 2006 No 1265, reg 4.

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Compensation for persons suffering pollution damage Liability of the Fund 175.—(1) The Fund shall be liable for pollution damage in the territory of the United Kingdom if the person suffering the damage has been unable to obtain full compensation under section 153— (a) because the discharge or escape, or the relevant threat of contamination, by reason of which the damage was caused— (i) resulted from an exceptional, inevitable and irresistible phenomenon, or (ii) was due wholly to anything done or omitted to be done by another person (not being a servant or agent of the owner) with intent to do damage, or (iii) was due wholly to the negligence or wrongful act of a government or other authority in exercising its function of maintaining lights or other navigational aids for the maintenance of which it was responsible, (and because liability is accordingly wholly displaced by section 155), or (b) because the owner or guarantor liable for the damage cannot meet his obligations in full, or (c) because the damage exceeds the liability under section 153 as limited by section 157. (2) Subsection (1) above shall apply with the substitution for the words ‘‘United Kingdom’’ of the words ‘‘a Fund Convention country’’ where— (a) the headquarters of the Fund is for the time being in the United Kingdom, and proceedings under the Liability Convention for compensation for the pollution damage have been brought in a country which is not a Fund Convention country, or (b) the incident has caused pollution damage in the territory of the United Kingdom and of another Fund Convention country, and proceedings under the Liability Convention for compensation for the pollution damage have been brought in a country which is not a Fund Convention country or in the United Kingdom. (3) Where the incident has caused pollution damage in the territory of the United Kingdom and of another country in respect of which the Liability Convention is in force, references in this section to the provisions of Chapter III of this Part shall include references to the corresponding provisions of the law of any country giving effect to the Liability Convention. (4) Where proceedings under the Liability Convention for compensation for pollution damage have been brought in a country which is not a Fund Convention country and the Fund is liable for the pollution damage by virtue of subsection (2)(a) above, references in this section to the provisions of Chapter III of this Part shall be treated as references to the corresponding provisions of the law of the country in which those proceedings were brought. (5) For the purposes of this section an owner or guarantor is to be treated as incapable of meeting his obligations if the obligations have not been met after all reasonable steps to pursue the legal remedies available have been taken. (6) Expenses reasonably incurred, and sacrifices reasonably made, by the owner voluntarily to prevent or minimise pollution damage shall be treated as pollution damage for the purposes of this section, and accordingly he shall be in the same position with respect to claims against the Fund under this section as if he had a claim in respect of liability under section 153. (7) The Fund shall incur no obligation under this section if— (a) it proves that the pollution damage— (i) resulted from an act of war, hostilities, civil war or insurrection, or (ii) was caused by oil which has escaped or been discharged from a warship or other ship owned or operated by a State and used, at the time of the occurrence, only on Government non-commercial service, or (b) the claimant cannot prove that the damage resulted from an occurrence involving a ship identified by him, or involving two or more ships one of which is identified by him. (8) If the Fund proves that the pollution damage resulted wholly or partly— (a) from anything done or omitted to be done with intent to cause damage by the person who suffered the damage, or (b) from the negligence of that person,

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the Fund may (subject to subsection (10) below) be exonerated wholly or partly from its obligations to pay compensation to that person. (9) Where the liability under section 153 in respect of the pollution damage is limited to any extent by subsection (8) of that section, the Fund shall (subject to subsection (10) below) be exonerated to the same extent. (10) Subsections (8) and (9) above shall not apply where the pollution damage consists of the costs of preventive measures or any damage caused by such measures. Limitation of Fund’s liability under section 175 176.—(1) The Fund’s liability under section 175 shall be subject to the limits imposed by paragraphs 4 and 5 of Article 4 of the Fund Convention (which impose an overall limit on the liabilities of the Fund and the text of which is set out in Part I of Schedule 5), and in those provisions references to the Liability Convention are references to the Liability Convention within the meaning of this Chapter. (2) A certificate given by the Director of the Fund stating that subparagraph (c) of paragraph 4 of Article 4 of the Fund Convention is applicable to any claim under section 175 shall be conclusive evidence for the purposes of this Chapter that it is so applicable. (3) For the purpose of giving effect to paragraphs 4 and 5 of Article 4 of the Fund Convention a court giving judgment against the Fund in proceedings under section 175 shall notify the Fund, and— (a) no steps shall be taken to enforce the judgment unless and until the court gives leave to enforce it, (b) that leave shall not be given unless and until the Fund notifies the court either that the amount of the claim is not to be reduced under those paragraphs, or that it is to be reduced to a specified amount, and (c) in the latter case the judgment shall be enforceable only for the reduced amount. (4) Any steps taken to obtain payment of an amount or a reduced amount in pursuance of such a judgment as is mentioned in subsection (3) above shall be steps to obtain payment in sterling; and— (a) for the purpose of converting such an amount from special drawing rights into sterling one special drawing right shall be treated as equal to such a sum in sterling as the International Monetary Fund have fixed as being the equivalent of one special drawing right for— (i) the relevant day, namely the day on which the Assembly of the Fund decide the date for the first payment of compensation in respect of the incident, or (ii) if no sum has been so fixed for the relevant day, the last day before that day for which a sum has been so fixed; and (b) a certificate given by or on behalf of the Treasury stating— (i) that a particular sum in sterling has been so fixed for the relevant day, or (ii) that no sum has been so fixed for the relevant day and that a particular sum in sterling has been so fixed for a day which is the last day for which a sum has been so fixed before the relevant day, shall be conclusive evidence of those matters for the purposes of this Chapter. (5) The Secretary of State may by order make such amendments of this section and Part I of Schedule 5 as appear to him to be appropriate for the purpose of giving effect to the entry into force of any amendment of the provisions set out in that Schedule. (6) Any document purporting to be such a certificate as is mentioned in subsection (2) or (4)(b) above shall, in any legal proceedings, be received in evidence and, unless the contrary is proved, be deemed to be such a certificate. Liability of the Supplementary Fund 176A.—(1) The Supplementary Fund shall be liable for pollution damage in the territory of the United Kingdom in accordance with the Supplementary Fund Protocol in the circumstances mentioned in paragraph 1 of Article 4 of that Protocol (cases where full compensation cannot be obtained because of the limit imposed by paragraph 4 of Article 4 of the Fund Convention).

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The text of paragraph 1 of Article 4 of the Supplementary Fund Protocol is set out in Schedule 5ZA. (2) Subsection (1) shall apply with the substitution for the words ‘‘the United Kingdom’’ of the words ‘‘a Supplementary Fund Protocol country’’ where— (a) the headquarters of the Supplementary Fund is for the time being in the United Kingdom, and proceedings under the Liability Convention or the Fund Convention for compensation for the pollution damage have been brought in a country which is not a Supplementary Fund Protocol country, or (b) the incident has caused pollution damage in the territory of the United Kingdom and of another Supplementary Fund Protocol country, and proceedings under the Liability Convention or the Fund Convention for compensation for the pollution damage have been brought in a country which is not a Supplementary Fund Protocol country or in the United Kingdom. (3) Nothing in this section applies to pollution damage resulting from an incident if— (a) in the case of a single occurrence, it took place before the day on which the Supplementary Fund Protocol enters into force as respects the United Kingdom; or (b) in the case of a series of occurrences having the same origin, the first of those occurrences took place before that day. Notes This section was inserted by SI 2006 No 1265, reg 5

Limitation of the Supplementary Fund’s liability under section 176A 176B.—(1) The Supplementary Fund’s liability under section 176A shall be subject to— (a) paragraphs 2 and 3 of Article 4 of the Supplementary Fund Protocol (which impose an overall limit on the liabilities of the Supplementary Fund); and (b) paragraphs 2 and 3 of Article 15 of the Supplementary Fund Protocol (which prevent the Supplementary Fund from paying compensation temporarily and permanently where obligations to communicate information to the Director under paragraph 1 of Article 13 and paragraph 1 of Article 15 have not been met). The text of paragraphs 2 and 3 of Article 4, paragraph 1 of Article 13 and paragraphs 1, 2 and 3 of Article 15 of the Supplementary Fund Protocol is set out in Schedule 5ZA. (2) For the purpose of giving effect to paragraphs 2 and 3 of Article 4 of the Supplementary Fund Protocol a court giving judgment against the Supplementary Fund in proceedings under section 176A shall notify the Supplementary Fund, and— (a) no steps shall be taken to enforce the judgment unless and until the court gives leave to enforce it, (b) that leave shall not be given unless and until the Supplementary Fund notifies the court either that the amount of the claim is not to be reduced under those paragraphs, or that it is to be reduced to a specified amount, and (c) in the latter case the judgment shall be enforceable only for the reduced amount. (3) Any steps taken to obtain payment of an amount or a reduced amount in pursuance of such a judgment as is mentioned in subsection (2) shall be steps to obtain payment in sterling; and— (a) for the purpose of converting such an amount from special drawing rights into sterling, one special drawing right shall be treated as equal to such a sum in sterling as the International Monetary Fund have fixed as being the equivalent of one special drawing right for— (i) the relevant date, namely the date referred to in paragraph 2(b) of Article 4 of the Supplementary Fund Protocol, or (ii) if no sum has been so fixed for the relevant date, the last day before that date for which a sum has been so fixed; and (b) a certificate given by or on behalf of the Treasury stating— (i) that a particular sum in sterling has been so fixed for the relevant date, or (ii) that no sum has been so fixed for the relevant date and that a particular sum in sterling has been so fixed for a day which is the last day for which a sum has been so fixed before the relevant date,

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shall be conclusive evidence of those matters for the purposes of this Chapter. (4) Any document purporting to be such a certificate as is mentioned in subsection (3)(b) shall, in any legal proceedings, be received in evidence and, unless the contrary is proved, be deemed to be such a certificate. Notes This section was inserted by SI 2006 No 1265, reg 5

Supplemental Jurisdiction and effect of judgments 177.—(1) Paragraph 1(1)(d) of Schedule 1 to the Administration of Justice Act 1956 (Admiralty jurisdiction in claims for damage done by ships) shall be construed as extending to any claim in respect of a liability falling on the Fund or the Supplementary Fund under this Chapter; and the Admiralty jurisdiction of the Court of Session shall extend to any case arising out of any such claim. (2) Where in accordance with rules of court made for the purposes of this subsection the Fund has been given notice of proceedings brought against an owner or guarantor in respect of liability under section 153— (a) the notice shall be deemed to have been given to the Supplementary Fund as well; and (b) any judgment given in the proceedings shall, after it has become final and enforceable, become binding on the Fund and the Supplementary Fund in the sense that the facts and evidence in the judgment may not be disputed by the Fund or the Supplementary Fund even if it has not intervened in the proceedings. (3) Where a person incurs a liability under the law of a Fund Convention country corresponding to Chapter III of this Part for damage which is partly in the territory of the United Kingdom, subsection (2) above shall, for the purpose of proceedings under this Chapter, apply with any necessary modifications to a judgment in proceedings under that law of the said country. (4) Subject to subsections (5) and (6), Part 1 of the Foreign Judgments (Reciprocal Enforcement) Act 1933 shall apply, whether or not it would so apply apart from this subsection, to— (a) any judgment given by a court in a Fund Convention country to enforce a claim in respect of liability incurred under any provision corresponding to section 175; and (b) any judgment given by a court in a Supplementary Fund Protocol country to enforce a claim in respect of liability incurred under any provision corresponding to section 176A, and in its application to such a judgment the said Part 1 shall have effect with the omission of sections 4(2) and (3). (5) No steps shall be taken to enforce such a judgment unless and until the court in which it is registered under Part 1 of the Act of 1933 gives leave to enforce it; and that leave shall not be given unless and until— (a) in the case of a judgment within subsection (4)(a), the Fund notifies the court either that the amount of the claim is not to be reduced under paragraphs 4 and 5 of Article 4 of the Fund Convention (as set out in Part 1 of Schedule 5 to this Act) or that it is to be reduced to a specified amount; or (b) in the case of a judgment within subsection (4)(b), the Supplementary Fund notifies the court either that the amount of the claim is not to be reduced under paragraphs 2 and 3 of Article 4 of the Supplementary Fund Protocol (as set out in Schedule 5ZA to this Act) or that it is to be reduced to a specified amount. (6) Where the court is so notified that a claim is to be reduced to a specified amount, the judgment shall be enforceable only for the reduced amount. Notes This section was amended by SI 2006 No 1265, reg 7.

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Extinguishment of claims 178.—(1) No action to enforce a claim against the Fund under this Chapter shall be entertained by a court in the United Kingdom unless— (a) the action is commenced, or (b) a third party notice of an action to enforce a claim against the owner or his guarantor in respect of the same damage is given to the Fund, not later than three years after the damage occurred. In this subsection ‘‘third party notice’’ means a notice of the kind described in section 177(2) and (3). (2) No action to enforce a claim against the Fund under this Chapter shall be entertained by a court in the United Kingdom unless the action is commenced not later than six years after the occurrence, or first of the occurrences, resulting in the discharge or escape, or (as the case may be) in the relevant threat of contamination, by reason of which the claim against the Fund arose. (3) Subsections (1) and (2) apply in relation to claims against the Supplementary Fund as they apply in relation to claims against the Fund (with the substitution for the reference to the Fund in subsection (1)(b) of a reference to the Supplementary Fund). (4) For the purposes of this section— (a) a person who commences an action to enforce a claim against the Fund in relation to any damage shall be deemed to have also commenced an action to enforce any claim he may have against the Supplementary Fund in relation to that damage; and (b) a person who gives a third party notice to the Fund in relation to any damage as mentioned in subsection (1)(b) shall be deemed to have also given a notice to the Supplementary Fund in relation to that damage. Notes This section was amended by SI 2006 No 1265, reg 8.

Subrogation 179.—(1) In respect of any sum paid by the Fund as compensation for pollution damage the Fund shall acquire by subrogation any rights in respect of the damage which the recipient has (or but for the payment would have) against any other person. (1A) In respect of any sum paid by the Supplementary Fund as compensation for pollution damage the Supplementary Fund shall acquire by subrogation any rights in respect of the damage which the recipient has (or but for the payment would have) against any other person. (2) In respect of any sum paid by a public authority in the United Kingdom as compensation for pollution damage, that authority shall acquire by subrogation any rights which the recipient has against the Fund or the Supplementary Fund under this Chapter. Notes This section was amended by SI 2006 No 1265, reg 9.

Supplementary provisions as to proceedings involving the Fund 180.—(1) Any proceedings by or against the Fund may either be instituted by or against the Fund in its own name or be instituted by or against the Director of the Fund as the Fund’s representative. (2) Evidence of any instrument issued by any organ of the Fund or of any document in the custody of the Fund, or any entry in or extract from such a document, may be given in any legal proceedings by production of a copy certified as a true copy by an official of the Fund; and any document purporting to be such a copy shall, in any such proceedings, be received in evidence without proof of the official position or handwriting of the person signing the certificate. (3) Subsections (1) and (2) apply in relation to the Supplementary Fund as they apply in relation to the Fund (with the substitution for references to the Director, any organ or an official of the Fund of references to the Director, any organ or an official of the Supplementary Fund).

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Notes This section was amended by SI 2006 No 1265, reg 10.

Interpretation 181.—(1) In this Chapter, unless the context otherwise requires— ‘‘damage’’ includes loss; ‘‘discharge or escape’’, in relation to pollution damage, means the discharge or escape of oil from the ship; ‘‘guarantor’’ means any person providing insurance or other financial security to cover the owner’s liability of the kind described in section 163; ‘‘incident’’ means any occurrence, or series of occurrences having the same origin, resulting in a discharge or escape of oil from a ship or in a relevant threat of contamination; ‘‘oil’’, except in sections 173 and 174, means persistent hydrocarbon mineral oil; ‘‘owner’’ means the person or persons registered as the owner of the ship or, in the absence of registration, the person or persons owning the ship, except that, in relation to a ship owned by a State which is operated by a person registered as the ship’s operator, it means the person registered as its operator; ‘‘pollution damage’’ means— (a) damage caused outside a ship by contamination resulting from a discharge or escape of oil from the ship, (b) the cost of preventive measures, and (c) further damage caused by preventive measures, but does not include any damage attributable to any impairment of the environment except to the extent that any such damage consists of— (i) any loss of profits, or (ii) the cost of any reasonable measures of reinstatement actually taken or to be taken; ‘‘preventive measures’’ means any reasonable measures taken by any person to prevent or minimise pollution damage, being measures taken— (a) after an incident has occurred, or (b) in the case of an incident consisting of a series of occurrences, after the first of those occurrences; ‘‘relevant threat of contamination’’ means a grave and imminent threat of damage being caused outside a ship by contamination resulting from a discharge or escape of oil from the ship; and ‘‘ship’’ means any ship (within the meaning of Chapter III of this Part) to which section 153 applies. (2) For the purposes of this Chapter— (a) references to a discharge or escape of oil from a ship are references to such a discharge or escape wherever it may occur, and whether it is of oil carried in a cargo tank or of oil carried in a bunker fuel tank; and (b) where more than one discharge or escape results from the same occurrence or from a series of occurrences having the same origin, they shall be treated as one. (3) References in this Chapter to the territory of any country shall be construed in accordance with section 170(4) reading the reference to a Liability Convention country as a reference to a Fund Convention country or a Supplementary Fund Protocol country (as the case may be). Notes This section was amended by SI 2006 No 1265, reg 11.

[Regulations requiring insurance or security 192A.—(1) Subject to subsections (2) and (3) below, the Secretary of State may make regulations requiring that, in such cases as may be prescribed by the regulations, while a ship is in United Kingdom waters, there must be in force in respect of the ship—

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6.28

(a) a contract of insurance insuring such person or persons as may be specified by the regulations against such liabilities as may be so specified and satisfying such other requirements as may be so specified, or (b) other security relating to those liabilities as satisfies requirements specified by or under the regulations. (2) Regulations under this section shall not apply in relation to— (a) a qualifying foreign ship while it is exercising— (i) the right of innocent passage, or (ii) the right of transit passage through straits used for international navigation, (b) any warship, or (c) any ship for the time being used by the government of any State for other than commercial purposes. (3) Regulations under this section may not require insurance or security to be maintained in respect of a ship in relation to any liability in any case where an obligation to maintain insurance or security in respect of that ship in relation to that liability is imposed by section 163 or by or under an Order in Council under section 182B. (4) Regulations under this section may require that, where a person is obliged to have in force in respect of a ship a contract of insurance or other security, such documentary evidence as may be specified by or under the regulations of the existence of the contract of insurance or other security must be carried in the ship and produced on demand, by such persons as may be specified in the regulations, to such persons as may be so specified. (5) Regulations under this section may provide— (a) that in such cases as are prescribed, a ship which contravenes the regulations shall be liable to be detained and that section 284 shall have effect, with such modifications (if any) as are prescribed by the regulations, in relation to the ship, (b) that a contravention of the regulations shall be an offence punishable on summary conviction by a fine of an amount not exceeding £50,000, or such less amount as is prescribed by the regulations, and on conviction on indictment by a fine, and (c) that any such contravention shall be an offence punishable only on summary conviction by a fine of £50,000, or such less amount as is prescribed by the regulations. (6) Regulations under this section may— (a) make different provision for different cases, (b) make provision in terms of any document which the Secretary of State or any person considers relevant from time to time, and (c) include such incidental, supplemental and transitional provision as appears to the Secretary of State to be expedient for the purposes of the regulations.] Notes This section was inserted by the Merchant Shipping and Maritime Security Act 1997, s 16 which is concerned with compulsory insurance of shipowners’ liabilities other than pollution liabilities incurred by any vessel (other than the classes set out in subs (2)) in UK waters. The section does not create any liabilities as such, and the liabilities which are to be covered by insurance are to be set out in the regulations. To date, no regulations under this section have been made.

6.28 MERCHANT SHIPPING AND MARITIME SECURITY ACT 1997 (1997 c 28) General Note The only relevant part of this Act is s 16, which inserts a new s 192A into the Merchant Shipping Act 1995. Under s 192A of the 1995 Act, any ship in UK waters is to be required to procure liability insurance for risks to be specified by regulations. This is in addition to any compulsory pollution liability insurance provided for by the 1995 Act. The Merchant Shipping Act 1995, s 192A is set out in para 6.27: the remainder of the 1997 Act is not reproduced in this work.

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6.29 HEALTH AND SOCIAL CARE (COMMUNITY HEALTH AND STANDARDS) ACT 2003 (2003 c 43) General Note Part 3 of the 2003 Act, which was brought into force with effect from 29 January 2007, provides a mechanism whereby National Health Service charges incurred by the victim of a third party’s wrongful act can be recovered by the Compensation Recovery Unit of the Department of Social Security from the wrongdoer or his liability insurers. The Act is based on the Social Security (Recovery of Benefits) Act 1997 (not reproduced here) which, with effect from 3 September 1997, allows the CRU to recover social security payments from the wrongdoer or his liability insurers: see also the Social Security (Recovery of Benefits) Regulations 1997, SI 1997 No 2205 and the Social Security (Recovery of Benefits) (Appeals) Regulations 1997, SI 1997 No 2237, as amended. The 2003 Act and its implementing Regulations, the Personal Injuries (NHS Charges) (General) and Road Traffic (NHS Charges) (Amendment) Regulations 2006, SI 2006 No 3388, and the Personal Injuries (NHS Charges) (Reviews and Appeals) and Road Traffic (NHS Charges) (Reviews and Appeals) (Amendment) Regulations 2006, SI 2006 No 3398, extend this concept to NHS charges. The recovery of NHS charges scheme had been in operation since 1999 in respect of road traffic injuries, under the Road Traffic (NHS Charges) Act 1999, but the 1999 Act and its implementing regulations ceased to have effect with respect to accidents occurring on or after 29 February 2007. The 1999 Act remains in force for road accidents occurring before that date. The Road Traffic Act retains its provisions for the recovery of private hospital and emergency treatment charges from wrongdoers and their liability insurers, but NHS charges are now governed by the 2003 Act. The 2003 Act applies where the victim has suffered any physical or psychological injury other than a disease, and has received treatment at an NHS hospital or has received NHS ambulance services. Any person liable to make a compensation payment to the victim is also required to pay the NHS charges incurred by the victim. Payment is made by a certification process. The wrongdoer may apply for certification before or after payment has been made, the certificate setting out the amount payable. The amount certified may be reviewed and thereafter provisions for appeal are made. A liability policy which requires the insurers to indemnify the wrongdoer is deemed, by s 164, to contain an implied term covering liability under the 2003 Act, and requires indemnification from the insurers even though the total payment exceeds the sum insured.

NHS charges Liability to pay NHS charges 150.—(1) This section applies if— (a) a person makes a compensation payment to or in respect of any other person (the ‘‘injured person’’) in consequence of any injury, whether physical or psychological, suffered by the injured person, and (b) the injured person has— (i) received NHS treatment at a health service hospital as a result of the injury, (ii) been provided with NHS ambulance services as a result of the injury for the purpose of taking him to a health service hospital for NHS treatment (unless he was dead on arrival at that hospital), or (iii) received treatment as mentioned in sub-paragraph (i) and been provided with ambulance services as mentioned in sub-paragraph (ii). (2) The person making the compensation payment is liable to pay the relevant NHS charges— (a) in respect of— (i) the treatment, in so far as received at a hospital in England or Wales, (ii) the ambulance services, in so far as provided to take the injured person to such a hospital, to the Secretary of State, (b) in respect of— (i) the treatment, in so far as received at a hospital in Scotland, (ii) the ambulance services, in so far as provided to take the injured person to such a hospital, to the Scottish Ministers. (3) ‘‘Compensation payment’’ means a payment, including a payment in money’s worth, made—

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Health and Social Care (Community Health and Standards) Act 2003

6.29

(a) by or on behalf of a person who is, or is alleged to be, liable to any extent in respect of the injury, or (b) in pursuance of a compensation scheme for motor accidents, but does not include a payment mentioned in Schedule 10. (4) Subsection (1)(a) applies— (a) to a payment made— (i) voluntarily, or in pursuance of a court order or an agreement, or otherwise, and (ii) in the United Kingdom or elsewhere, and (b) if more than one payment is made, to each payment. (5) ‘‘Injury’’ does not include any disease. (6) Nothing in subsection (5) prevents this Part from applying to— (a) treatment received as a result of any disease suffered by the injured person, or (b) ambulance services provided as a result of any disease suffered by him, if the disease in question is attributable to the injury suffered by the injured person (and accordingly that treatment is received or those services are provided as a result of the injury). (7) ‘‘NHS treatment’’ means any treatment (including any examination of the injured person) other than— (a) treatment provided by virtue of section 18A(4) or 65 of the 1977 Act, section 57 of, or paragraph 14 of Schedule 7A to, the 1978 Act or paragraph 14 of Schedule 2 to the National Health Service and Community Care Act 1990 (c. 19) (accommodation and services for private patients), (b) other treatment provided by an NHS foundation trust in pursuance of an undertaking to pay in respect of the treatment given by or on behalf of the injured person, (c) treatment provided at a health service hospital by virtue of section 72 of the 1977 Act or section 64 of the 1978 Act (permission for use of national health service accommodation or facilities in private practice), or (d) treatment provided by virtue of— (i) section 16CA, 16CC, 28C, 28K or 28Q of the 1977 Act (primary medical and dental services), or (ii) section 17C, 19 or 25 of the 1978 Act (personal or general medical or dental services). (8) In relation to any time before sections 170 and 172 come into force, the references in subsection (7)(d)(i) to sections 16CA and 28K of the 1977 Act are to be taken as a reference to section 35 of that Act (arrangements for general dental services). (9) In relation to any time before sections 174 and 175 come into force, the references in subsection (7)(d)(i) to sections 16CC and 28Q of the 1977 Act are to be taken as a reference to section 29 of that Act (arrangements for general medical services). (10) ‘‘Relevant NHS charges’’ means the amount (or amounts) specified in a certificate of NHS charges— (a) issued under this Part, in respect of the injured person, to the person making the compensation payment, and (b) in force. (11) ‘‘Compensation scheme for motor accidents’’ means any scheme or arrangement under which funds are available for the payment of compensation in respect of motor accidents caused, or alleged to have been caused, by uninsured or unidentified persons. (12) Regulations may amend Schedule 10 by omitting or modifying any payment for the time being specified in that Schedule. (13) This section applies in relation to any injury which occurs after the date on which this section comes into force. (14) For the purposes of this Part, it is irrelevant whether a compensation payment is made with or without an admission of liability. Notes Compensation payments which trigger the 2003 Act exclude those set out in Sched 10 to the 2003 Act. Excluded payments are, most importantly, criminal compensation orders, payments made under the

891

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Liability Insurance

Criminal Injuries Compensation Act 1995, payments made under the Vaccine Damage Payments Act 1979 and payments to the victim under any first party insurance policy. See also SI 2006 No 3388, reg 11.

Certificates of NHS charges Applications for certificates of NHS charges 151.—(1) Before a person makes a compensation payment in consequence of any injury suffered by an injured person, he may apply for a certificate to the Secretary of State, the Scottish Ministers or both, according to whether he believes the relevant NHS charges payable by him (if any) would be due to the Secretary of State, the Scottish Ministers or both. (2) If the Secretary of State receives or the Scottish Ministers receive an application under subsection (1), he or they must arrange for a certificate to be issued as soon as is reasonably practicable (subject to section 152). (3) A certificate may provide that it is to remain in force— (a) until a specified date, (b) until the occurrence of a specified event, or (c) indefinitely. (4) A person may apply under subsection (1) for a fresh certificate from time to time. (5) Subsection (2) does not require the Secretary of State or the Scottish Ministers to arrange for a fresh certificate to be issued to a person applying under subsection (4) if, when the application is received, a certificate issued to the applicant in respect of the injured person is still in force; but the Secretary of State or the Scottish Ministers (as the case may be) may arrange for a fresh certificate to be issued so as to have effect on the expiry of the current certificate. (6) If a certificate expires, the Secretary of State or the Scottish Ministers (as the case may be) may arrange for a fresh certificate to be issued without an application having to be made. (7) In the circumstances mentioned in subsection (8), a person who has made a compensation payment in consequence of an injury suffered by an injured person must apply for a certificate to the Secretary of State, the Scottish Ministers or both, according to whether he believes the relevant NHS charges payable by him (if any) would be due to the Secretary of State, the Scottish Ministers or both. (8) The circumstances are that— (a) at the time the payment is made by the person— (i) no certificate has been issued to him in respect of the injured person, or (ii) if such a certificate has been issued to him, it is no longer in force, and (b) no application for a certificate has been made by him during the prescribed period ending immediately before the day on which the compensation payment is made. (9) An application for a certificate must be made in the prescribed manner and, in the case of an application under subsection (7), within the prescribed period. (10) On receiving an application under subsection (7), the Secretary of State or the Scottish Ministers must arrange for a certificate to be issued as soon as is reasonably practicable (subject to section 152). (11) In this section and section 152, ‘‘relevant NHS charges’’ has the meaning given in section 150(10). Notes Subs (8). The prescribed period is 28 days: SI 2006 No 3388, reg 2(3). Subs (9). The form of the application for a certificate is set out in SI 2006 No 3388. The prescribed period is 14 days: SI 2006 No 3388, reg 2(2).

Section 151: supplementary 152.—(1) Subsection (2) applies if— (a) an application is made under subsection (1) or (7) of section 151 to the Secretary of State or the Scottish Ministers, and (b) it appears to the Secretary of State or the Scottish Ministers that the relevant NHS charges payable by the applicant (if any) would be due to the Scottish Ministers or the Secretary of State (respectively) instead.

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Health and Social Care (Community Health and Standards) Act 2003

6.29

(2) The Secretary of State or the Scottish Ministers (as the case may be) must refer the application to the Scottish Ministers or the Secretary of State (respectively), and the application is to be treated, for the purposes of this Part, as having been made to the Scottish Ministers or the Secretary of State (as the case may be). (3) Subsection (4) applies if— (a) an application is made under subsection (1) or (7) of section 151 to the Secretary of State or the Scottish Ministers, and (b) it appears to the Secretary of State or the Scottish Ministers that the relevant NHS charges payable by the applicant (if any) would be due in part to him or them and in part to the Scottish Ministers or the Secretary of State (respectively). (4) The Secretary of State or the Scottish Ministers (as the case may be) must refer the application to the Scottish Ministers or the Secretary of State (respectively) in so far as the application relates to relevant NHS charges due to them or him, and the application is to be treated, for the purposes of this Part, as having been made to the Secretary of State in so far as it relates to relevant NHS charges due to him under subsection (2) of section 150 and to the Scottish Ministers in so far as it relates to relevant NHS charges due to them under that subsection. (5) A certificate may be issued under section 151 jointly by the Secretary of State and the Scottish Ministers specifying— (a) an amount (or amounts) for which a person is liable under subsection (2) of section 150 to the Secretary of State, and (b) an amount (or amounts) for which that person is liable under that subsection to the Scottish Ministers, in respect of the same injured person in consequence of the same injury. (6) In the case of a certificate issued under section 151 specifying an amount (or amounts) as mentioned in paragraphs (a) and (b) of subsection (5), references in the following provisions of this Part to a certificate are to be taken as being to the certificate in so far as it relates to the liability to the Secretary of State or in so far as it relates to the liability to the Scottish Ministers (as the case may require). Information contained in certificates 153.—(1) A certificate must specify the amount (or amounts) for which the person to whom it is issued is liable under section 150(2). (2) The amount (or amounts) to be specified is (or are) to be that (or those) set out in, or determined in accordance with, regulations, reduced if applicable in accordance with subsection (3) or regulations under subsection (10). (3) If a certificate relates to a claim made by or on behalf of an injured person— (a) in respect of which a court in England and Wales or Scotland has ordered a reduction of damages in accordance with section 1 of the Law Reform (Contributory Negligence) Act 1945 (c. 28), (b) in respect of which a court in Northern Ireland has ordered a reduction of damages in accordance with section 2 of the Law Reform (Miscellaneous Provisions) Act (Northern Ireland) 1948 (c. 23), (c) in respect of which a court in a country other than England and Wales, Scotland or Northern Ireland has ordered a reduction of damages under any provision of the law of that country which appears to the Secretary of State or the Scottish Ministers (as the case may be) to correspond to section 1 of the Law Reform (Contributory Negligence) Act 1945, (d) in respect of which an officer of a court in England and Wales or Northern Ireland has entered or sealed an agreed judgement or order which specifies— (i) that the damages are to be reduced to reflect the injured person’s share in the responsibility for the injury in question, and (ii) the amount or proportion by which they are to be so reduced, (e) in the case of which the parties to any resulting action before a court in Scotland have executed a joint minute which specifies— (i) that the action has been settled extra-judicially, and (ii) the matters mentioned in paragraph (d)(i) and (ii),

893

6.29

Liability Insurance

(f) in respect of which a document has been made under any provision of the law of a country other than England and Wales, Scotland or Northern Ireland— (i) which appears to the Secretary of State to correspond to an agreed judgement or order entered or sealed by an officer of a court in England and Wales, and (ii) which specifies the matters mentioned in paragraph (d)(i) and (ii), or (g) in the case of which a document has been made under any provision of the law of a country other than England and Wales, Scotland or Northern Ireland— (i) which appears to the Scottish Ministers to correspond to a joint minute executed by the parties to a resulting action before a court in Scotland specifying that the action has been settled extra-judicially, and (ii) which specifies the matters mentioned in paragraph (d)(i) and (ii), the amount (or amounts) specified in the certificate is (or are) to be that (or those) which would be so specified apart from this subsection, reduced by the same proportion as the reduction of damages. (4) If a certificate relates to an injured person who has not received NHS treatment at a health service hospital or been provided with NHS ambulance services as a result of the injury, it must indicate that no amount is payable to the Secretary of State or the Scottish Ministers (as the case may be) by reference to that certificate. (5) Regulations under subsection (2) may, in particular, provide— (a) that the amount, or the aggregate amount, specified in a certificate is not to exceed a prescribed sum, (b) for different amounts to be specified in respect of different circumstances or areas, (c) for cases in which an injured person receives treatment at two or more health service hospitals, (d) for cases in which an injured person receives treatment at one or more health service hospitals and is provided with NHS ambulance services, (e) for cases in which liability under section 150(2) is to be apportioned between two or more persons making compensation payments to or in respect of the same injured person in consequence of the same injury, (f) for cases in which a fresh certificate is issued or a certificate is revoked as a result of a review under or by virtue of section 156 or an appeal under section 157 or 159, (g) for the amount specified in a certificate issued by the Secretary of State or the Scottish Ministers to be adjusted to take into account any amount for which the person to whom the certificate is issued is liable under section 150(2), in respect of the same injured person in consequence of the same injury, in accordance with a certificate issued by the Scottish Ministers or the Secretary of State (respectively), (h) for any matter requiring determination under or in consequence of the regulations to be determined by the Secretary of State or the Scottish Ministers (as the case may require), and in the case of paragraph (e) may make such provision by modifying this Part. (6) Any reference in subsection (5)(a) or (b) to any amount (or amounts) specified in a certificate is to the amount (or amounts) which would be so specified apart from subsection (3) or regulations under subsection (10). (7) Regulations under subsection (2) which provide for cases mentioned in subsection (5)(e) may (among other things) provide in the case of each compensator for— (a) determining, or re-determining, the amount for which he is liable under section 150(2), (b) giving credit for amounts already paid, and (c) the payment by any person of any balance or the recovery from any person of any excess. (8) Regulations under subsection (2) which provide for cases mentioned in subsection (5)(f) may (among other things) provide in the case of any compensator for the matters mentioned in paragraphs (b) and (c) of subsection (7). (9) For the purposes of subsection (10), a claim made by or on behalf of an injured person is a qualifying claim if— (a) it is settled by mediation of a prescribed description, and (b) the damages payable under the settlement are to be reduced to reflect the injured person’s share in the responsibility for the injury in question.

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Health and Social Care (Community Health and Standards) Act 2003

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(10) Regulations may make provision as to the circumstances in which the amount (or amounts) specified in a certificate relating to a qualifying claim is (or are) to be that (or those) which would be so specified apart from the regulations, reduced by the same proportion as the reduction of damages. (11) A person to whom a certificate is issued is entitled to such particulars of the manner in which any amount (or amounts) specified in the certificate has (or have) been determined as may be prescribed, if he applies to the Secretary of State or the Scottish Ministers (as the case may require) for those particulars. (12) Regulations under subsection (2) may be made so as to apply to any certificate issued after the time the regulations come into force, other than one relating to a compensation payment made before that time. Notes Subs (10). See SI 2006 No 3388, reg 3. Subs (11). See SI 2006 No 3388, reg 4.

Recovery of NHS charges Payment of NHS charges 154.—(1) If the certificate by reference to which an amount payable under section 150(2) is determined is issued before the settlement date, that amount must be paid before the end of the period of 14 days beginning with the settlement date. (2) If the certificate by reference to which an amount payable under section 150(2) is determined is issued on or after the settlement date, that amount must be paid before the end of the period of 14 days beginning with the day on which the certificate is issued. (3) ‘‘Settlement date’’ means the date on which the compensation payment is made. (4) This section is subject to section 155(2). Recovery of NHS charges 155.—(1) This section applies if a person has made a compensation payment and either— (a) subsection (7) of section 151 applies but he has not applied for a certificate as required by that subsection, or (b) he has not made payment, in full, of any amount due under section 150(2) by the end of the period allowed under section 154. (2) The Secretary of State, the Scottish Ministers or both, according to the circumstances of the case, may— (a) in a case within subsection (1)(a), issue the person who made the compensation payment with a certificate, and (b) in a case within subsection (1)(b), issue him with a copy of the certificate or (if more than one has been issued) the most recent one, and, in either case, issue him with a demand that payment of any amount due under section 150(2) be made immediately. (3) Subsections (5) and (6) of section 152 apply to certificates issued under subsection (2) above as they apply to certificates issued under section 151. (4) A demand issued under subsection (2) may be issued jointly by the Secretary of State and the Scottish Ministers specifying— (a) an amount due under subsection (2) of section 150 to the Secretary of State, and (b) an amount due under that subsection to the Scottish Ministers, in respect of the same injured person in consequence of the same injury. (5) In the case of a demand specifying amounts as mentioned in subsection (4)(a) and (b), references in the following provisions of this section to a demand are to be taken as being (as the case may require) to— (a) the demand in so far as it relates to any amount due to the Secretary of State, or (b) the demand in so far as it relates to any amount due to the Scottish Ministers, and related expressions are to be read accordingly.

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Liability Insurance

(6) The Secretary of State or the Scottish Ministers may recover the amount for which a demand for payment is made under subsection (2) from the person who made the compensation payment. (7) If the person who made the compensation payment resides or carries on business in England or Wales and a county court so orders, the amount demanded is recoverable by execution issued from the county court or otherwise as if it were payable under an order of that court. (8) If the person who made the compensation payment resides or carries on business in Scotland, the demand may be enforced as if it were an extract registered decree arbitral bearing a warrant for execution issued by the sheriff court of any sheriffdom in Scotland. (9) A document which states that it is a record of the amount recoverable under subsection (6) is conclusive evidence that the amount is so recoverable if it is signed by a person authorised to do so by the Secretary of State or the Scottish Ministers (as the case may be). (10) For the purposes of subsection (9), a document purporting to be signed by a person authorised to do so by the Secretary of State or the Scottish Ministers (as the case may be) is to be treated as so signed unless the contrary is proved.

Review and appeal Review of certificates 156.—(1) The Secretary of State or the Scottish Ministers must review a certificate issued by him or them if the certificate relates to a claim made by or on behalf of an injured person— (a) in respect of which, after the certificate is issued, a court in England and Wales or Scotland orders a reduction of damages in accordance with section 1 of the Law Reform (Contributory Negligence) Act 1945 (c. 28), (b) in respect of which, after the certificate is issued, a court in Northern Ireland orders a reduction of damages in accordance with section 2 of the Law Reform (Miscellaneous Provisions) Act (Northern Ireland) 1948 (c. 23), (c) in respect of which, after the certificate is issued, a court in a country other than England and Wales, Scotland or Northern Ireland orders a reduction of damages under any provision of the law of that country which appears to the Secretary of State or the Scottish Ministers (as the case may be) to correspond to section 1 of the Law Reform (Contributory Negligence) Act 1945, (d) in respect of which, after the certificate is issued, an officer of a court in England and Wales or Northern Ireland enters or seals an agreed judgement or order which specifies— (i) that the damages are to be reduced to reflect the injured person’s share in the responsibility for the injury in question, and (ii) the amount or proportion by which they are to be so reduced, (e) in the case of which, after the certificate is issued, the parties to any resulting action before a court in Scotland execute a joint minute which specifies— (i) that the action has been settled extra-judicially, and (ii) the matters mentioned in paragraph (d)(i) and (ii), (f) in respect of which, after the certificate is issued, a document is made under any provision of the law of a country other than England and Wales, Scotland or Northern Ireland— (i) which appears to the Secretary of State to correspond to an agreed judgement or order entered or sealed by an officer of a court in England and Wales, and (ii) which specifies the matters mentioned in paragraph (d)(i) and (ii), or (g) in the case of which, after the certificate is issued, a document is made under any provision of the law of a country other than England and Wales, Scotland or Northern Ireland— (i) which appears to the Scottish Ministers to correspond to a joint minute executed by the parties to a resulting action before a court in Scotland specifying that the action has been settled extra-judicially, and (ii) which specifies the matters mentioned in paragraph (d)(i) and (ii),

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and notification of the order, judgement, minute or document has been given to the Secretary of State or the Scottish Ministers (as the case may be) in the prescribed manner. (2) Regulations may make provision as to the circumstances in which the Secretary of State or the Scottish Ministers must review a certificate relating to a claim which, after the certificate is issued, becomes a qualifying claim (as defined in section 153(9)). (3) If— (a) the Secretary of State and the Scottish Ministers have issued certificates to a person specifying an amount (or amounts) for which that person is liable under section 150(2) in respect of the same injured person in consequence of the same injury, and (b) either the Secretary of State or the Scottish Ministers subsequently adjusts or adjust the amount (or amounts) specified in the certificate issued by him or them on a review of, or an appeal against, that certificate, the other must review the certificate issued by him or them (as the case may be) if he is or they are satisfied that it is necessary or expedient to make consequential adjustments to that certificate. (4) The Secretary of State or the Scottish Ministers may review a certificate issued by him or them— (a) either within the prescribed period or in prescribed cases or circumstances, and (b) either on application made for the purpose or on his or their initiative. (5) On a review under or by virtue of this section, the Secretary of State or the Scottish Ministers may— (a) confirm the certificate, (b) issue a fresh certificate containing such variations as he considers or they consider appropriate, or (c) revoke the certificate. (6) But the Secretary of State or the Scottish Ministers may not vary a certificate so as to increase the amount, or the aggregate amount, specified unless it appears to him or them that the variation is required as a result of his or their having been supplied with incorrect or insufficient information by the person to whom the certificate is issued. (7) Subsections (5) and (6) of section 152 apply to certificates issued under subsection (5)(b) above as they apply to certificates issued under section 151. Appeal against a certificate or a waiver decision 157.—(1) An appeal against a certificate may be made by the person to whom the certificate was issued on one or more of the following grounds— (a) that an amount (or amounts) specified in the certificate is (or are) incorrect, (b) that an amount (or amounts) so specified takes (or take) into account— (i) treatment which is not NHS treatment received by the injured person, as a result of his injury, at a health service hospital, (ii) ambulance services which are not NHS ambulance services provided to the injured person as a result of his injury, or (iii) treatment as mentioned in sub-paragraph (i) and ambulance services as mentioned in sub-paragraph (ii), (c) that the payment on the basis of which the certificate was issued is not a compensation payment. (2) No appeal may be made until— (a) the claim against the person to whom the certificate was issued, which gives rise to the compensation payment, has been finally disposed of, and (b) payment of the amount (or amounts) specified in the certificate has been made to the Secretary of State or the Scottish Ministers (as the case may be), subject to subsection (4) and sections 158(6) and 159(5). (3) For the purposes of subsection (2)(a), if an award of damages in respect of a claim has been made under or by virtue of— (a) section 32A(2)(a) of the Supreme Court Act 1981 (c. 54), (b) section 12(2)(a) of, or paragraph 10(2)(a) of Schedule 6 to, the Administration of Justice Act 1982 (c. 53), or

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Liability Insurance

(c) section 51(2)(a) of the County Courts Act 1984 (c. 28), (orders for provisional damages in personal injury cases), the claim is to be treated as having been finally disposed of. (4) The Secretary of State or the Scottish Ministers may, on an application by the person to whom the certificate was issued, waive the requirement in subsection (2)(b) that payment of the amount (or amounts) specified in the certificate be made before making an appeal. (5) The Secretary of State or the Scottish Ministers may only grant a waiver if it appears to him or them that payment of the amount (or amounts) specified in the certificate would cause exceptional financial hardship. (6) An appeal against a decision of the Secretary of State or the Scottish Ministers on an application under subsection (4) (referred to in this section and sections 158 and 159 as a ‘‘waiver decision’’) may be made by the person to whom the certificate was issued. (7) Regulations may make provision— (a) as to the manner in which, and the time within which, an appeal against a certificate or waiver decision may be made, (b) as to the procedure to be followed if an appeal against a certificate or waiver decision is made, (c) as to the circumstances in which appeals may be consolidated (including the consolidation of an appeal against a certificate issued by the Secretary of State with an appeal against a certificate issued by the Scottish Ministers), and (d) for the purpose of enabling an appeal against a certificate to be treated as an application for a review under section 156. Notes For the appeal procedures generally, see SI 2006 No 3398.

Appeal tribunals 158.—(1) The Secretary of State or the Scottish Ministers must refer to an appeal tribunal constituted under Chapter 1 of Part 1 of the Social Security Act 1998 (c. 14) an appeal against— (a) a certificate, or (b) a waiver decision. (2) In determining an appeal against a certificate, the tribunal must take into account any decision of a court relating to the same, or any similar, issue arising in connection with the injury in question. (3) On an appeal against a certificate, the tribunal may— (a) confirm the amount or amounts specified in the certificate, (b) specify any variations which are to be made on the issue of a fresh certificate under subsection (4), or (c) declare that the certificate is to be revoked. (4) When the Secretary of State or the Scottish Ministers (as the case may be) has or have received the decision of the tribunal on an appeal against a certificate, he or they must in accordance with that decision— (a) confirm the certificate, (b) issue a fresh certificate, or (c) revoke the certificate. (5) Subsections (5) and (6) of section 152 apply to certificates issued under subsection (4)(b) above as they apply to certificates issued under section 151. (6) On an appeal against a waiver decision, the tribunal may— (a) confirm the decision, or (b) waive the requirement in question. (7) Regulations under section 157 may (among other things) provide for the non-disclosure of medical advice or medical evidence given or submitted following a reference under subsection (1).

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Appeal to Social Security Commissioner 159.—(1) An appeal may be made to a Commissioner against any decision of an appeal tribunal under section 158 on the ground that the decision was erroneous in point of law. (2) An appeal under this section may be made by— (a) the Secretary of State or the Scottish Ministers (as the case may be), or (b) the person to whom the certificate was issued. (3) If an appeal is made under this section, subsections (7) to (12) of section 14 of the 1998 Act apply to the appeal as they apply to an appeal under that section (reading references to a tribunal as references to an appeal tribunal constituted as mentioned in section 158(1)). (4) In a case in which subsection (7) or (8)(b) of section 14 of the 1998 Act applies by virtue of subsection (3) above to an appeal against a decision of an appeal tribunal under subsection (3) of section 158, subsections (2) to (4) of that section apply as they apply to an appeal determined on a reference under subsection (1)(a) of that section. (5) In a case in which subsection (7) or (8)(b) of section 14 of the 1998 Act applies by virtue of subsection (3) above to an appeal against a decision of an appeal tribunal under subsection (6) of section 158, the appeal tribunal may— (a) confirm the waiver decision, or (b) waive the requirement in question. (6) In a case in which subsection (8)(a) of section 14 of the 1998 Act applies by virtue of subsection (3) above to an appeal against a decision of an appeal tribunal under subsection (3) of section 158, subsection (4) of that section applies as if the references to the decision of the tribunal on an appeal against a certificate were references to the decision of the Commissioner on an appeal under this section. (7) In this section— ‘‘Commissioner’’ has the same meaning as in Chapter 2 of Part 1 of the 1998 Act, and ‘‘the 1998 Act’’ means the Social Security Act 1998 (c. 14). Information Provision of information 160.—(1) If compensation is sought in consequence of any injury suffered by an injured person, such information with respect to the circumstances of the case as may be prescribed must be given by the following persons to the Secretary of State or the Scottish Ministers (as the case may require)— (a) the person against whom the claim is made and anyone acting on behalf of that person, whether or not proceedings have been commenced, (b) the injured person or, if the injured person has died, his personal representative, (c) anyone not within paragraph (a) who is, or is alleged to be, liable to any extent in respect of the injury, (d) if the claim is not made by the injured person, the person by whom it is made, (e) anyone acting on behalf of the person within any of paragraphs (b) to (d), (f) the responsible body of each health service hospital at which the injured person has received NHS treatment as a result of his injury, (g) any ambulance trust which provided NHS ambulance services as a result of his injury. (2) A person who is required to give information under this section must do so— (a) in the prescribed manner, and (b) within the prescribed period. (3) Regulations under this section may, in particular, require the provision of information about any NHS treatment which an injured person has received at a health service hospital and any NHS ambulance services provided to the injured person. (4) In this section— ‘‘ambulance trust’’— (a) in relation to England or Wales, means— (i) a National Health Service trust established under section 5 of the National Health Service and Community Care Act 1990 (c. 19), or (ii) an NHS foundation trust,

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Liability Insurance

(b) in relation to Scotland, means a Special Health Board established under section 2(1)(b) of the 1978 Act; ‘‘responsible body’’, in relation to a health service hospital, means— (a) in the case of a hospital vested in— (i) a National Health Service trust established under section 5 of the National Health Service and Community Care Act 1990 (c. 19) or section 12A of the 1978 Act, or (ii) a Primary Care Trust, the trust, and (b) in any other case, the body responsible for the management of the hospital. Notes The information required is set out in SI 2006 No 3388, reg 5.

Use of information held by the Secretary of State or the Scottish Ministers etc. 161.—(1) Subsection (2) applies to information which is held— (a) by the Secretary of State, or (b) by a person providing services to the Secretary of State in connection with the provision of those services, for the purposes of, or for any purpose connected with, the exercise of functions under the Social Security (Recovery of Benefits) Act 1997 (c. 27). (2) The information may— (a) be used for the purposes of, or for any purpose connected with, the exercise of functions under this Part, and (b) be supplied to a qualifying person for use for those purposes. (3) In subsection (2), ‘‘qualifying person’’ means— (a) in the case of information held by the Secretary of State— (i) a person providing services to the Secretary of State, or (ii) the Scottish Ministers or a person providing services to the Scottish Ministers, or (b) in the case of information held by a person providing services to the Secretary of State— (i) the Secretary of State or another person providing services to the Secretary of State, or (ii) the Scottish Ministers or a person providing services to the Scottish Ministers. (4) Subsection (5) applies to information which is held— (a) by the Secretary of State or the Scottish Ministers, or (b) by a person providing services to the Secretary of State or the Scottish Ministers in connection with provision of those services, for the purposes of, or for any purpose connected with, the exercise of functions under this Part. (5) The information may— (a) be used for the purposes of, or for any purpose connected with, the exercise of functions under the Social Security (Recovery of Benefits) Act 1997, and (b) be supplied to a qualifying person for use for those purposes. (6) In subsection (5), ‘‘qualifying person’’ means— (a) in the case of information held by the Secretary of State, a person providing services to the Secretary of State, (b) in the case of information held by the Scottish Ministers, the Secretary of State or a person providing services to the Secretary of State, (c) in the case of information held by a person providing services to the Secretary of State, the Secretary of State or another person providing services to the Secretary of State,

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6.29

(d) in the case of information held by a person providing services to the Scottish Ministers, the Secretary of State or a person providing services to the Secretary of State. Payments to hospitals or ambulance trusts Payment of NHS charges to hospitals or ambulance trusts 162.—(1) If the Secretary of State receives or the Scottish Ministers receive a payment of relevant NHS charges under section 150(2)— (a) if the payment relates only to NHS treatment received at a health service hospital, he or they must pay the amount received to the responsible body of the health service hospital, (b) if the payment relates only to the provision of NHS ambulance services, he or they must pay the amount received to the relevant ambulance trust, (c) if the payment relates to NHS treatment received at more than one health service hospital, he or they must divide the amount received among the responsible bodies of the hospitals concerned in such manner as he considers or they consider appropriate, (d) if the payment relates to NHS treatment received at one or more health service hospitals and the provision of NHS ambulance services, he or they must divide the amount received among the responsible body or bodies of the hospital or hospitals and any relevant ambulance trusts concerned in such manner as he considers or they consider appropriate. (2) Subsection (1) does not apply to any amount received by the Secretary of State or the Scottish Ministers under section 150(2) which he is or they are required to repay in accordance with regulations under section 153(2). (3) Regulations under this section may— (a) make provision for the manner in which and intervals at which any payments due under this section are to be made, (b) make provision for cases where the responsible body of the health service hospital or relevant ambulance trust concerned has ceased to exist (including provision modifying this Part). (4) Any amounts received under this section by the responsible bodies of the health service hospitals concerned must be used for the purposes of providing goods and services for the benefit of patients receiving NHS treatment at those hospitals. (5) Any amounts received under this section by the relevant ambulance trusts concerned must be used for the purposes of NHS ambulance services. (6) In this section— ‘‘relevant ambulance trust’’— (a) in relation to England or Wales, means— (i) the National Health Service trust established under section 5 of the National Health Service and Community Care Act 1990 (c. 19), or (ii) the NHS foundation trust, which is designated by the Secretary of State for the purposes of this section in relation to the health service hospital to which the injured person was taken for treatment, (b) in relation to Scotland, means the Special Health Board, established under section 2(1)(b) of the 1978 Act, which is designated by the Scottish Ministers for the purposes of this section in relation to the health service hospital to which the injured person was taken for treatment; ‘‘responsible body’’ has the meaning given in section 160(4). Notes Subs (3). The regulations are SI 2006 No 3388, regs 6 and 8.

901

6.29

Liability Insurance Miscellaneous and general

Regulations governing lump sums, periodical payments etc 163.—(1) Regulations may make provision (including provision modifying this Part)— (a) for cases to which section 150(2) applies in which two or more compensation payments in the form of lump sums are made by the same person in respect of the same injury, (b) for cases to which section 150(2) applies in which an agreement is entered into for the making of— (i) periodical compensation payments (whether of an income or capital nature), or (ii) periodical compensation payments and lump sum compensation payments, (c) for cases in which the compensation payment to which section 150(2) applies is an interim payment of damages which a court orders to be repaid. (2) Regulations made by virtue of subsection (1)(a) may (among other things) provide— (a) for giving credit for amounts already paid, and (b) for the payment by any person of any balance or the recovery from any person of any excess. (3) Regulations may make provision modifying the application of this Part in relation to cases in which a payment into court is made and, in particular, may provide— (a) for the making of a payment into court to be treated in prescribed circumstances as the making of a compensation payment, (b) for application for, and issue of, certificates.

Liability of insurers 164.—(1) If a compensation payment is made in a case where— (a) a person is liable to any extent in respect of the injury, and (b) the liability is covered to any extent by a policy of insurance, the policy is also to be treated as covering any liability of that person under section 150(2). (2) Liability imposed on the insurer by subsection (1) cannot be excluded or restricted. (3) For that purpose excluding or restricting liability includes— (a) making the liability or its enforcement subject to restrictive or onerous conditions, (b) excluding or restricting any right or remedy in respect of the liability, or subjecting a person to any prejudice in consequence of his pursuing any such right or remedy, or (c) excluding or restricting rules of evidence or procedure. (4) Regulations may in prescribed cases limit the amount of the liability imposed on the insurer by subsection (1). (5) This section applies in relation to policies of insurance issued before (as well as those issued after) the date on which it comes into force. (6) References in this section to policies of insurance and their issue include references to contracts of insurance and their making. Notes SI 2006 No 3388, reg 10 provides that if the amount of the insurers’ liability exceeds the sum insured, the payment under the 2003 Act is reduced proportionately.

Power to apply Part 3 to treatment at non-health service hospitals 165.—(1) Regulations may make provision for this Part to apply, with such modifications as may be prescribed, if— (a) a person makes a compensation payment as mentioned in section 150(1)(a), but (b) the person to or in respect of whom the payment is made has— (i) received treatment as a result of the injury at a qualifying hospital under an NHS arrangement,

902

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6.29

(ii) been provided with NHS ambulance services as a result of the injury for the purpose of taking him to a qualifying hospital for treatment under an NHS arrangement (unless he was dead on arrival at that hospital), or (iii) received treatment as mentioned in sub-paragraph (i) and been provided with NHS ambulance services as mentioned in sub-paragraph (ii), (subject to subsection (2)). (2) Subsection (1)(b) does not apply where the person to or in respect of whom the payment is made receives, or is taken to a hospital for, treatment which would be provided as mentioned in paragraph (a), (b) or (d) of section 150(7) if it were provided at a health service hospital. (3) In subsection (1), ‘‘NHS arrangement’’ means an arrangement or agreement between— (a) the hospital in question or a body responsible for it, and (b) any of the following— (i) a Primary Care Trust, (ii) a National Health Service trust established under section 5 of the National Health Service and Community Care Act 1990 (c. 19) or section 12A of the 1978 Act, (iii) a Local Health Board, (iv) a Health Board or Special Health Board established under section 2 of the 1978 Act, or (v) an NHS foundation trust. (4) Regulations under subsection (1) may include provision excluding the application of sections 157 to 159 of the Road Traffic Act 1988 (c. 52) in such description of case as may be prescribed. (5) In this section ‘‘qualifying hospital’’ means a hospital (within the meaning of section 128(1) of the 1977 Act or section 108(1) of the 1978 Act) which is not a health service hospital. The Crown 166.—This Part binds the Crown. Regulations 167.—(1) Any power to make regulations conferred by this Part is exercisable— (a) in relation to England and Wales, by the Secretary of State; and (b) in relation to Scotland, by the Scottish Ministers. (2) Regulations under section 157(7) may only be made by the Scottish Ministers with the consent of the Secretary of State. Interpretation of Part 3 168.—In this Part— ‘‘the 1978 Act’’ means the National Health Service (Scotland) Act 1978 (c. 29); ‘‘compensation payment’’ has the meaning given in section 150; ‘‘health service hospital’’ means a health service hospital within the meaning of the 1977 Act or the 1978 Act; ‘‘injured person’’ has the meaning given in section 150(1); ‘‘NHS ambulance services’’ means ambulance services provided under section 3(1)(c) of the 1977 Act or section 45 of the 1978 Act; ‘‘NHS treatment’’ has the meaning given in section 150(7); ‘‘prescribed’’ means prescribed by regulations. Consequential and minor repeals 169.—(1) The Road Traffic (NHS Charges) Act 1999 (c. 3) shall cease to have effect. (2) In the Road Traffic Act 1988, in section 161(1), in the definition of ‘‘hospital’’, paragraph (b) is omitted.

903

6.30

Liability Insurance 6.30 MERCHANT SHIPPING (POLLUTION) ACT 2006 (2006 c 8)

General note This is an enabling Act, empowering the ratification of amendments to international conventions on marine pollution. It is not reproduced separately here.

6.31 COMPANIES ACT 2006 (2006 c 46) General Note The only sections of the Act reproduced here, as being relevant to liability insurance, are ss 1029 to 1032. These sections allow a company which has been removed from the register and which has ceased to exist, thereby preventing legal action against it, to be restored to the register so that proceedings can be brought against it. This section is critical to the operation of the Third Parties (Rights against Insurers) Act 1930 which confers upon the victim of an insolvent assured a direct action against the assured’s liability insurers. In a case in which there is a substantial gap between the injury inflicted on the victim and the commencement of proceedings (typically, exposure to harmful substances in the workplace, where the symptoms either develop some time later or are not associated with the exposure), the employing company may have been dissolved by the time that proceedings can be contemplated. In order to mount an action against the employer’s insurers under the 1930 Act, it is necessary to establish and quantify the employer’s liability, and this can be done only by seeking to have the employer restored to the register of companies. The sections replace s 651 of the Companies Act 1985, which was amended by the Companies Act 1989, s 141. The amendments to s 651 of the 1985 Act were rendered necessary by the decision of the House of Lords in Bradley v. Eagle Star Insurance Co [1989] 2 WLR 568, where their Lordships held, by a majority, that the liability of a dissolved company could not be established other than by a resurrection of the company under s 651. The effect of the amendments was to extend the period during which resurrection was possible. The section has been made retroactive, to allow Bradley and the many test cases which rested upon it, to proceed. The new provisions retain the principle set out in the amended s 651, that a company may be restored at any time for the purposes of establishing its liability in an action for damages for death or personal injury. As far as other actions are concerned, the amended s 651 laid down a time limit of two years, whereas the new provisions allow a period of six years.

Restoration to the register by the court Application to court for restoration to the register 1029.—(1) An application may be made to the court to restore to the register a company— (a) that has been dissolved under Chapter 9 of Part 4 of the Insolvency Act 1986 (c. 45) or Chapter 9 of Part 5 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)) (dissolution of company after winding up), (b) that is deemed to have been dissolved under paragraph 84(6) of Schedule B1 to that Act or paragraph 85(6) of Schedule B1 to that Order (dissolution of company following administration), or (c) that has been struck off the register— (i) under section 1000 or 1001 (power of registrar to strike off defunct company), or (ii) under section 1003 (voluntary striking off), whether or not the company has in consequence been dissolved. (2) An application under this section may be made by— (a) the Secretary of State, (b) any former director of the company, (c) any person having an interest in land in which the company had a superior or derivative interest,

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(d) any person having an interest in land or other property— (i) that was subject to rights vested in the company, or (ii) that was benefited by obligations owed by the company, (e) any person who but for the company’s dissolution would have been in a contractual relationship with it, (f) any person with a potential legal claim against the company, (g) any manager or trustee of a pension fund established for the benefit of employees of the company, (h) any former member of the company (or the personal representatives of such a person), (i) any person who was a creditor of the company at the time of its striking off or dissolution, (j) any former liquidator of the company, (k) where the company was struck off the register under section 1003 (voluntary striking off), any person of a description specified by regulations under section 1006(1)(f) or 1007(2)(f) (persons entitled to notice of application for voluntary striking off), or by any other person appearing to the court to have an interest in the matter. When application to the court may be made 1030.—(1) An application to the court for restoration of a company to the register may be made at any time for the purpose of bringing proceedings against the company for damages for personal injury. (2) No order shall be made on such an application if it appears to the court that the proceedings would fail by virtue of any enactment as to the time within which proceedings must be brought. (3) In making that decision the court must have regard to its power under section 1032(3) (power to give consequential directions etc) to direct that the period between the dissolution (or striking off) of the company and the making of the order is not to count for the purposes of any such enactment. (4) In any other case an application to the court for restoration of a company to the register may not be made after the end of the period of six years from the date of the dissolution of the company, subject as follows. (5) In a case where— (a) the company has been struck off the register under section 1000 or 1001 (power of registrar to strike off defunct company), (b) an application to the registrar has been made under section 1024 (application for administrative restoration to the register) within the time allowed for making such an application, and (c) the registrar has refused the application, an application to the court under this section may be made within 28 days of notice of the registrar’s decision being issued by the registrar, even if the period of six years mentioned in subsection (4) above has expired. (6) For the purposes of this section— (a) ‘‘personal injury’’ includes any disease and any impairment of a person’s physical or mental condition; and (b) references to damages for personal injury include— (i) any sum claimed by virtue of section 1(2)(c) of the Law Reform (Miscellaneous Provisions) Act 1934 (c. 41) or section 14(2)(c) of the Law Reform (Miscellaneous Provisions) Act (Northern Ireland) 1937 (1937 c. 9 (N.I.)) (funeral expenses)), and (ii) damages under the Fatal Accidents Act 1976 (c. 30), the Damages (Scotland) Act 1976 (c. 13) or the Fatal Accidents (Northern Ireland) Order 1977 (S.I. 1977/1251 (N.I. 18)). Decision on application for restoration by the court 1031.—(1) On an application under section 1029 the court may order the restoration of the company to the register—

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Liability Insurance

(a) if the company was struck off the register under section 1000 or 1001 (power of registrar to strike off defunct companies) and the company was, at the time of the striking off, carrying on business or in operation; (b) if the company was struck off the register under section 1003 (voluntary striking off) and any of the requirements of sections 1004 to 1009 was not complied with; (c) if in any other case the court considers it just to do so. (2) If the court orders restoration of the company to the register, the restoration takes effect on a copy of the court’s order being delivered to the registrar. (3) The registrar must cause to be published in the Gazette notice of the restoration of the company to the register. (4) The notice must state— (a) the name of the company or, if the company is restored to the register under a different name (see section 1033), that name and its former name, (b) the company’s registered number, and (c) the date on which the restoration took effect. Effect of court order for restoration to the register 1032.—(1) The general effect of an order by the court for restoration to the register is that the company is deemed to have continued in existence as if it had not been dissolved or struck off the register. (2) The company is not liable to a penalty under section 453 or any corresponding earlier provision (civil penalty for failure to deliver accounts) for a financial year in relation to which the period for filing accounts and reports ended— (a) after the date of dissolution or striking off, and (b) before the restoration of the company to the register. (3) The court may give such directions and make such provision as seems just for placing the company and all other persons in the same position (as nearly as may be) as if the company had not been dissolved or struck off the register. (4) The court may also give directions as to— (a) the delivery to the registrar of such documents relating to the company as are necessary to bring up to date the records kept by the registrar, (b) the payment of the costs (in Scotland, expenses) of the registrar in connection with the proceedings for the restoration of the company to the register, (c) where any property or right previously vested in or held on trust for the company has vested as bona vacantia, the payment of the costs (in Scotland, expenses) of the Crown representative— (i) in dealing with the property during the period of dissolution, or (ii) in connection with the proceedings on the application. (5) In this section the ‘‘Crown representative’’ means— (a) in relation to property vested in the Duchy of Lancaster, the Solicitor to that Duchy; (b) in relation to property vested in the Duke of Cornwall, the Solicitor to the Duchy of Cornwall; (c) in relation to property in Scotland, the Queen’s and Lord Treasurer’s Remembrancer; (d) in relation to other property, the Treasury Solicitor.

6.32 EMPLOYERS’ LIABILITY (COMPULSORY INSURANCE) GENERAL REGULATIONS 1971 (SI 1971 No 1117) General Note These Regulations were made under the Employers’ Liability (Compulsory Insurance) Act 1969, and were repealed and replaced with effect from 1 January 1999 by the Employers’ Liability (Compulsory Insurance) Act Regulations 1998, SI 1998 No 2573. Transitional provisions are set out in reg 10 of the 1998 Regulations.

906

Employers’ Liability Regulations 1975

6.37

6.33 EMPLOYERS’ LIABILITY (COMPULSORY INSURANCE) EXEMPTION REGULATIONS 1971 (SI 1971 No 1933) General Note These Regulations were made under the Employers’ Liability (Compulsory Insurance) Act 1969, and were repealed and replaced with effect from 1 January 1999 by the Employers’ Liability (Compulsory Insurance) Act Regulations 1998, SI 1998 No 2573. Transitional provisions are set out in reg 10 of the 1998 Regulations.

6.34 EMPLOYERS’ LIABILITY (COMPULSORY INSURANCE) (AMENDMENT) REGULATIONS 1974 (SI 1974 No 208) General Note These Regulations were made under the Employers’ Liability (Compulsory Insurance) Act 1969, amending SI 1971 No 1117, and were repealed and replaced with effect from 1 January 1999 by the Employers’ Liability (Compulsory Insurance) Act Regulations 1998, SI 1998 No 2573. Transitional provisions are set out in reg 10 of the 1998 Regulations.

6.35 EMPLOYERS’ LIABILITY (COMPULSORY INSURANCE) (AMENDMENT) REGULATIONS 1975 (SI 1975 No 194) General Note These Regulations were made under the Employers’ Liability (Compulsory Insurance) Act 1969, amending SI 1971 No 1117, and were repealed and replaced with effect from 1 January 1999 by the Employers’ Liability (Compulsory Insurance) Act Regulations 1998, SI 1998 No 2573. Transitional provisions are set out in reg 10 of the 1998 Regulations.

6.36 OFFSHORE INSTALLATIONS (APPLICATION OF THE EMPLOYERS’ LIABILITY (COMPULSORY INSURANCE) ACT 1969) REGULATIONS 1975 (SI 1975 No 1289) General Note These Regulations were made under the Employers’ Liability (Compulsory Insurance) Act 1969, and were repealed and replaced by the Offshore Installations and Pipeline Works (Management and Administration) Regulations 1995, SI 1995 No 738.

6.37 EMPLOYERS’ LIABILITY (COMPULSORY INSURANCE) (OFFSHORE INSTALLATIONS) REGULATIONS 1975 (SI 1975 No 1443) General Note These Regulations were made under the Employers’ Liability (Compulsory Insurance) Act 1969, and were repealed and replaced with effect from 1 January 1999 by the Employers’ Liability (Compulsory Insurance)

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Act Regulations 1998, SI 1998 No 2573. Transitional provisions are set out in reg 10 of the 1998 Regulations.

6.38 OIL POLLUTION (COMPULSORY INSURANCE) REGULATIONS 1981 (SI 1981 No 912) General Note These Regulations were in force until 1 September 1997 and were repealed by the Oil Pollution (Compulsory Insurance) Regulations 1997, SI 1997 No 1820.

6.39 EMPLOYERS’ LIABILITY (COMPULSORY INSURANCE) (AMENDMENT) REGULATIONS 1981 (SI 1981 No 1489) General Note These Regulations were made under the Employers’ Liability (Compulsory Insurance) Act 1969, amending SI 1971 No 1117, and were repealed and replaced with effect from 1 January 1999 by the Employers’ Liability (Compulsory Insurance) Act Regulations 1998, SI 1998 No 2573. Transitional provisions are set out in reg 10 of the 1998 Regulations.

6.40 OIL POLLUTION (COMPULSORY INSURANCE) (AMENDMENT) REGULATIONS 1982 (SI 1982 No 287) General Note These Regulations amend the now repealed Oil Pollution (Compulsory Insurance) Regulations 1981, SI 1981 No 912, and accordingly are not reproduced here.

6.41 OIL POLLUTION (COMPULSORY INSURANCE) (AMENDMENT NO 2) REGULATIONS 1990 (SI 1990 No 2345) General Note These Regulations amend the now repealed Oil Pollution (Compulsory Insurance) Regulations 1981, SI 1981 No 912, and accordingly are not reproduced here.

6.42 EMPLOYERS’ LIABILITY (COMPULSORY INSURANCE) (AMENDMENT) REGULATIONS 1992 (SI 1992 No 3172) General Note These Regulations were made under the Employers’ Liability (Compulsory Insurance) Act 1969, amending SI 1971 No 1117, and were repealed and replaced with effect from 1 January 1999 by the Employers’ Liability (Compulsory Insurance) Act Regulations 1998, SI 1998 No 2573. Transitional provisions are set out in reg 10 of the 1998 Regulations.

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6.43 EMPLOYERS’ LIABILITY (COMPULSORY INSURANCE) EXEMPTION (AMENDMENT) REGULATIONS 1994 (SI 1994 No 520) General Note These Regulations were made under the Employers’ Liability (Compulsory Insurance) Act 1969, amending SI 1971 No 1933, and were repealed and replaced with effect from 1 January 1999 by the Employers’ Liability (Compulsory Insurance) Act Regulations 1998, SI 1998 No 2573. Transitional provisions are set out in reg 10 of the 1998 Regulations.

6.44 EMPLOYERS’ LIABILITY (COMPULSORY INSURANCE) (AMENDMENT) REGULATIONS 1994 (SI 1994 No 3301) General Note These Regulations were made under the Employers’ Liability (Compulsory Insurance) Act 1969, amending SI 1971 No 1117, and were repealed and replaced with effect from 1 January 1999 by the Employers’ Liability (Compulsory Insurance) Act Regulations 1998, SI 1998 No 2573. Transitional provisions are set out in reg 10 of the 1998 Regulations.

6.45 OFFSHORE INSTALLATIONS AND PIPELINE WORKS (MANAGEMENT AND ADMINISTRATION) REGULATIONS 1995 (SI 1995 No 738) General Note The Employers’ Liability (Compulsory Insurance) Act 1969 does not extend to employees who are not normally resident in the UK. These Regulations, made under s 2(2) of the 1969 Act and replacing the Offshore Installations (Application of the Employers’ Liability (Compulsory Insurance) Act 1969) Regulations 1975, SI 1975 No 1289, introduce modifications into the 1969 Act which operate to apply it to offshore workers. In this work only the definition provisions and the regulations relating to the 1969 Act are reproduced. The Regulations were amended by the Offshore Safety (Miscellaneous Amendments) Regulations 2002, SI 2002 No 2175 and by the Offshore Installation (Safety Care) Regulations 2005, SI 2005 No 3117.

Citation and commencement 1 These Regulations may be cited as the Offshore Installations and Pipeline Works (Management and Administration) Regulations 1995 and shall come into force on 20 June 1995, except regulation 23(2), which shall come into force on 20 June 1997. Interpretation 2.—(1) In these Regulations, unless the context otherwise requires— ‘‘the 1969 Act’’ means the Employers’ Liability (Compulsory Insurance) Act 1969; ‘‘the 1971 Act’’ means the Mineral Workings (Offshore Installations) Act 1971; ‘‘the 1995 Order’’ means the Health and Safety at Work etc. Act 1974 (Application Outside Great Britain) Order 1995; ‘‘apparatus or works’’ means— (a) apparatus or works described in paragraphs (a) to (f); and (b) a structure described in paragraph (g), of the definition of ‘‘pipeline’’ in article 6(2) of the 1995 Order;

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‘‘associated structure’’ means, in relation to an offshore installation, a vessel, aircraft or hovercraft attendant on the installation or any floating structure used in connection with the installation; ‘‘concession owner in relation to an offshore installation’’ means the person who at any time has the right to exploit it or explore mineral resources in any area, or to store gas in any area and to recover gas so stored if, at that time, the installation is, or is to be, used in the exercise of that right; ‘‘duty holder’’ means— (a) in relation to a fixed installation, the operator; and (b) in relation to a mobile installation, the owner; ‘‘fixed installation’’ means an offshore installation other than a mobile installation; ‘‘installation manager’’ means, in relation to an offshore installation, the person appointed for the purposes of regulation 6(1)(a) who is for the time being in charge of it; ‘‘mobile installation’’ means an offshore installation (other than a floating production platform) which can be moved from place to place without major dismantling or modification, whether or not it has its own motive power; ‘‘offshore installation’’ shall be construed in accordance with regulation 3; ‘‘operator’’ in relation to a fixed installation means the person appointed by a concession owner to execute any function of organising or supervising any operation to be carried out by such installation or, where no such person has been appointed, the concession owner; ‘‘owner’’ in relation to a mobile installation means the person who controls the operation of the installation; ‘‘pipeline’’ means a pipeline within the meaning of article 6(2) of the 1995 Order; ‘‘pipeline works’’ means pipeline works within the meaning of article 6(2) of the 1995 Order; ‘‘production installation’’ means an installation which— (a) extracts petroleum from beneath the sea-bed by means of a well; (b) stores gas in or under the shore or bed of relevant waters and recovers gas so stored; or (c) is used for the conveyance of petroleum by means of a pipe, and— (a) includes a— (i) non-production installation converted for use as a production installation for so long as it is so converted; (ii) production installation which has ceased production for so long as it is not converted to a non-production installation; and (iii) production installation which has not come into use; and (b) does not include an installation which, for a period of no more than 90 days, extracts petroleum from beneath the sea-bed for the purposes of well testing; ‘‘relevant employee means an employee— (a) who is ordinarily resident in the United Kingdom, or (b) who is not ordinarily resident in the United Kingdom but who has been present in the United Kingdom and relevant waters in the course of employment there for a continuous period of not less than 7 days; ‘‘relevant waters’’ means— (a) tidal waters and parts of the sea in or adjacent to Great Britain up to the seaward limits of territorial waters; and (b) any area designated by order under section 1(7) of the Continental Shelf Act 1964; and ‘‘vessel’’ includes a hovercraft and any floating structure which is capable of being staffed. (2) Any reference in these Regulations to operating an offshore installation is a reference to using the installation for any of the purposes described in regulation 3(1). (3) For the purpose of these Regulations any structures and devices on top of a well shall be treated as forming part of the well. (4) Unless the context otherwise requires, any reference in these Regulations to—

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(a) a numbered regulation is a reference to the regulation in these Regulations so numbered; (b) a numbered paragraph is a reference to the paragraph so numbered in the regulation in which the reference appears; and (c) a numbered Schedule is a reference to the Schedule in these Regulations so numbered. Meaning of ‘‘offshore installation’’ 3.—(1) Subject to the provisions of this regulation, in these Regulations the expression ‘‘offshore installation’’ means a structure which is, or is to be, or has been used, while standing or stationed in relevant waters, or on the foreshore or other land intermittently covered with water— (a) for the exploitation or exploration with a view to exploitation, of mineral resources by means of a well; (b) for the storage of gas in or under the shore or bed of relevant waters or the recovery of gas so stored; (c) for the conveyance of things by means of a pipe; or (d) mainly for the provision of accommodation for persons who work on or from a structure falling within any of the provisions of this paragraph, and which is not an excepted structure. (2) For the purposes of paragraph (1), the excepted structures are— (a) a structure which is connected with dry land by a permanent structure providing access at all times and for all purposes; (b) a well; (c) a structure or device which does not project above the sea at any state of the tide; (d) a structure which has ceased to be used for any of the purposes specified in paragraph (1), and has since been used for a purpose not so specified; (e) a mobile structure which has been taken out of use and is not yet being moved with a view to its being for the time being intended to be used for any of the purposes specified in paragraph (1); and (f) any part of a pipeline. (3) For the purposes of these Regulations there shall be deemed to be part of an offshore installation— (a) any well for the time being connected to it by pipe or cable; (b) such part of any pipeline connected to it as is within 500 metres of any part of its main structure; (c) any apparatus or works which are situated— (i) on or affixed to its main structure; or (ii) wholly or partly within 500 metres of any part of its main structure and associated with a pipe or system of pipes connected to any part of that installation. (4) Where two or more structures are, or are to be, connected permanently above the sea at high tide they shall for the purposes of these Regulations be deemed to comprise a single offshore installation. Application 4.—(1) These Regulations shall apply— (a) in Great Britain; and (b) to and in relation to offshore installations, wells, pipelines and activities outside Great Britain to which sections 1 to 59 and 80 to 82 of the Health and Safety at Work etc Act 1974 apply by virtue of articles 4(1) and (2)(b), 5 and 6 of the 1995 Order . . . . Application of the Employers’ Liability (Compulsory Insurance) Act 1969 21.—(1) The 1969 Act shall apply to employers of relevant employees employed for work on or from offshore installations, or on or from associated structures in the course of activities undertaken on or in connection with such installations, subject to such modifications and extensions as are hereafter in this regulation prescribed.

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(2) In section 1 of the 1969 Act applied as aforesaid— (a) in subsection (1) the words ‘‘carrying on any business in Great Britain’’ shall be omitted and, for the words from ‘‘his employees’’ to the end of the subsection, there shall be substituted the words ‘‘those of his relevant employees who are employed by him for work on or from an offshore installation, or on or from an associated structure in the course of an activity undertaken on or in connection with an offshore installation, and arising out of and in the course of their employment for that work’’; and (b) at the end of paragraph (d) of subsection (3) there shall be added the following paragraph— ‘‘(e) any expression to which a meaning is given by the Offshore Installations and Pipeline Works (Management and Administration) Regulations 1995, and to which a meaning is not given by this Act, shall have the same meaning in this Act.’’ (3) Section 2(2)(b) of the 1969 Act applied as aforesaid shall have no effect. (4) In section 4(2)(a) of the 1969 Act applied as aforesaid, after the word ‘‘insurance’’ there shall be inserted the words ‘‘or make arrangements to secure the maintenance of such copies on offshore installations or associated structures’’. (5) After section 5 of the 1969 Act applied as aforesaid there shall be inserted the following sections— ‘‘Liability of owners of offshore installations 5A.—(1) In respect of any offshore installation, it shall be the duty of the owner of the installation to ensure that requirements imposed by or under this Act are complied with and where, in respect of that installation— (a) any employer is on any day not insured in accordance with this Act, the owner of the installation shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the standard scale; or (b) any person fails to comply with a requirement imposed by or under section 4 of this Act, the owner of the installation shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 2 on the standard scale. (2) In proceedings against the owner of an installation for an offence under this section it shall be a defence for the accused to prove— (a) that he has used all due diligence to prevent the commission of the offence; and (b) that any relevant contravention was committed without his consent, connivance or wilful default. (3) Section 37 of the Health and Safety at Work etc. Act 1974 shall apply in relation to an offence under this section as if it were an offence under that Act. (4) In proceedings for an offence under this section an averment in any process of the fact that anything was done or situated within relevant waters shall, until the contrary is proved, be sufficient evidence of that fact as stated in the averment. (5) Proceedings for any offence under this section may be taken, and the offence may for all incidental purposes be treated as having been committed, in any place in Great Britain. (6) References in this section to ‘‘the owner’’, in relation to an offshore installation, are to the person who controls the operation of the installation. 5B. No proceedings shall be instituted in England and Wales for any offence under this Act in respect of an offshore installation except by the Secretary of State or by a person authorised in that behalf by the Secretary of State.’’ Note Reg 21 of the 1995 Regulations has a number of effects: (a) it modifies s 1 of the 1969 Act so that its wording accords to the extension of the Act to employees on offshore installations; (b) it disapplies s 2(2)(b) of the 1969 Act, which requires employees to be ordinarily resident in the UK;

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(c) the requirement that a certificate of employers’ liability insurance be displayed at every premises owned by the employer is modified, with the result that it is enough for the certificate to be made available to any employee within 10 days of a request (Employers’ Liability (Compulsory Insurance) Regulations 1998, SI 1998 No 2573, reg 5(4)); (d) ss 5A and 5B of the 1969 Act, which are inserted by the 1995 Regulations purely for the purposes of the application of the Act to offshore installations, impose an obligation on the owner of the installation to ensure that the employer has complied with the 1969 Act—the owner is himself liable to criminal sanctions if the employer is in default unless the owner can demonstrate that he exercised all due diligence and that the contravention was committed without his consent, connivance or wilful default.

6.46 OIL POLLUTION (COMPULSORY INSURANCE) REGULATIONS 1997 (SI 1997 No 1820) General Note These Regulations replace, with effect from 1 September 1997, the Oil Pollution (Compulsory Insurance) Regulations 1981, SI 1981 No 912, as amended. The 1997 Regulations are made under the Merchant Shipping Act 1995, and amplify various aspects of the compulsory insurance scheme for oil pollution set out in that Act. The Regulations were amended by the Merchant Shipping (Fees) Regulations 2006, SI 2006 No 2055.

Citation, commencement and interpretation 1.—(1) These Regulations may be cited as the Oil Pollution (Compulsory Insurance) Regulations 1997 and shall come into force on 1st September 1997. (2) In these Regulations ‘‘the Act’’ means the Merchant Shipping Act 1995. Revocation 2. The Oil Pollution (Compulsory Insurance) Regulations 1981 and the Oil Pollution (Compulsory Insurance) (Amendment) (No. 2) Regulations 1990 are hereby revoked. Definition 3. For the purposes of section 163(1) of the Act, ‘‘oil’’ means any persistent hydrocarbon mineral oil such as crude oil, fuel oil, heavy diesel oil and lubricating oil, but excluding any oil which at the time of shipment, consists of hydrocarbon fractions— (a) at least 50% of which, by volume, distil at a temperature of 340ºC, and (b) at least 95% of which, by volume, distil at a temperature of 370ºC, when tested by the ASTM Method D86/78 published by the American Society for Testing and Materials. Cancellation and delivery up of certificates 4.—(1) Where, at any time while a certificate under section 164 of the Act is in force, the person to whom the certificate has been issued ceases to be the owner of the ship to which the certificate relates, he shall forthwith deliver up the certificate to the Secretary of State or to a proper officer and in such a case the certificate shall be cancelled by the Secretary of State. (2) Where, at any time while a certificate under the said section 164 is in force, it is established in any legal proceedings that the contract of insurance or other security in respect of which the certificate was issued is or may be treated as invalid, the certificate may be cancelled by the Secretary of State and, if so cancelled, shall on demand forthwith be delivered up to him by the person to whom it was issued. (3) Where, at any time while a certificate under the said section 164 is in force, circumstances arise in relation to the insurer or guarantor named in the certificate (or, where more than one is so named, to any of them) such that, if the certificate were applied for at that time, the

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Secretary of State would be entitled to refuse the application under subsection (2) of that section the certificate may be cancelled by the Secretary of State and, if so cancelled, shall on demand forthwith be delivered up to him by the person to whom it was issued.

6.47 EMPLOYERS’ LIABILITY (COMPULSORY INSURANCE) REGULATIONS 1998 (SI 1998 No 2573) General Note These Regulations, which revoke and replace a number of earlier Regulations set out in Sched 3, most importantly the Employers’ Liability (Compulsory Insurance) General Regulations 1971, SI 1971 No 1117, fill in various details left open by the Employers’ Liability (Compulsory Insurance) Act 1969. The 1998 Regulations are for the most part a codification of the earlier law, but make a number of technical changes. The 1998 Regulations apply in a modified form to offshore installations, in accordance with the terms of the Offshore Installations and Pipeline Works (Management and Administration) Regulations 1995, SI 1995 No 738. The Regulations have been amended by the National Assembly for Wales (Transfer of Functions) Order 2000, SI 2000 No 253, Sched 5 para 8, by the Employers’ Liability (Compulsory Insurance) (Amendment) Regulations 2004, SI 2004 No 2882, reg 2 and by the Transport for London (Consequential Provisions) Order 2003, SI 2003 No 1615, Sched 1, para 53.

Citation, commencement and interpretation 1.—(1) These Regulations may be cited as the Employers’ Liability (Compulsory Insurance) Regulations 1998 and shall come into force on 1 January 1999. (2) In these Regulations— ‘‘the 1969 Act’’ means the Employers’ Liability (Compulsory Insurance) Act 1969; ‘‘associated structure’’ means, in relation to an offshore installation, a vessel, aircraft or hovercraft attendant on the installation of any floating structure used in connection with the installation; ‘‘company’’ has the same meaning as in section 735 of the Companies Act 1985; ‘‘inspector’’ means an inspector duly authorised by the Secretary of State under section 4(2)(b) of the 1969 Act; ‘‘offshore installation’’ has the same meaning as in the Offshore Installations and Pipeline Works (Management and Administration) Regulations 1995; ‘‘relevant employee’’ means an employee— (a) who is ordinarily resident in the United Kingdom; or (b) who, though not ordinarily resident in the United Kingdom, has been employed on or from an offshore installation or associated structure for a continuous period of not less than 7 days; or (c) who, though not ordinarily resident in Great Britain, is present in Great Britain in the course of employment for a continuous period of not less than 14 days; and ‘‘subsidiary’’ has the same meaning as in section 736 of the Companies Act 1985. Prohibition of certain conditions in policies of insurance 2.—(1) For the purposes of the 1969 Act, there is prohibited in any contract of insurance any condition which provides (in whatever terms) that no liability (either generally or in respect of a particular claim) shall arise under the policy, or that any such liability so arising shall cease, if— (a) some specified thing is done or omitted to be done after the happening of the event giving rise to a claim under the policy; (b) the policy holder does not take reasonable care to protect his employees against the risk of bodily injury or disease in the course of their employment; (c) the policy holder fails to comply with the requirements of any enactment for the protection of employees against the risk of bodily injury or disease in the course of their employment; or

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(d) the policy holder does not keep specified records or fails to provide the insurer with or make available to him information from such records. (2) For the purposes of the 1969 Act there is also prohibited in a policy of insurance any condition which requires— (a) a relevant employee to pay; or (b) an insured employer to pay the relevant employee, the first amount of any claim or any aggregation of claims. (3) Paragraphs (1) and (2) above do not prohibit for the purposes of the 1969 Act a condition in a policy of insurance which requires the employer to pay or contribute any sum to the insurer in respect of the satisfaction of any claim made under the contract of insurance by a relevant employee or any costs and expenses incurred in relation to any such claim. Notes This regulation replaces reg 2 of the 1971 Regulations, and applies to any insurance policy issued after 1 January 2000 or expiring between 1 January 1999 and 1 January 2000. It implements s 1(3)(a) of the 1969 Act, in setting out terms which may not be included in an approved policy. Those in reg 2(1) appeared in the 1971 Regulations, although that in reg 2(2)—relating to deductibles—was new in 1998.

Limit of amount of compulsory insurance 3.—(1) Subject to paragraph (2) below, the amount for which an employer is required by the 1969 Act to insure and maintain insurance in respect of relevant employees under one or more policies of insurance shall be, or shall in aggregate be not less than £5 million in respect of— (a) a claim relating to any one or more of those employees arising out of any one occurrence; and (b) any costs and expenses incurred in relation to any such claim. (2) Where an employer is a company with one or more subsidiaries, the requirements of paragraph (1) above shall be taken to apply to that company with any subsidiaries together, as if they were a single employer. Notes This regulation replaces reg 3 of the 1971 Regulations, and applies to any insurance policy issued after 1 January 2000 or expiring between 1 January 1999 and 1 January 2000 (reg 10(2) of the 1998 Regulations). Reg 3(1) implements s 1(2) of the 1969 Act, by laying down the minimum amount of insurance required per occurrence. The figure was raised from £2 million to £5 million by the 1998 Regulations.

Issue of certificates of insurance 4.—(1) Every authorised insurer who enters into a contract of insurance with an employer in accordance with the 1969 Act shall issue the employer with a certificate of insurance in the form, and containing the particulars, set out in Schedule 1 to these Regulations. (2) The certificate shall be issued by the insurer not later than thirty days after the date on which the insurance commences or is renewed. (3) Where a contract of insurance for the purposes of the 1969 Act is entered into together with one or more other contracts of insurance which jointly provide insurance cover of no less than £5 million, the certificate shall specify both— (a) the amount in excess of which insurance cover is provided by the policy; and (b) the maximum amount of that cover. (4) An employer shall retain each certificate issued to him under this regulation, or a copy of each such certificate, for a period of 40 years beginning on the date on which the insurance to which it relates commences or is renewed. (5) Where the employer is a company, retaining in any eye readable form a copy of a certificate in any one of the ways authorised by sections 722 and 723 of the Companies Act 1985 shall count as keeping a copy of it for the purposes of paragraph (4) above. (6) In any case where it is intended that a contract of insurance for the purposes of the 1969 Act is to be effective, not only in Great Britain, but also—

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(a) in Northern Ireland, the Isle of Man, the Island of Guernsey, the Island of Jersey or the Island of Alderney; (b) in any waters outside the United Kingdom to which the 1969 Act may have been applied by any enactment, the form set out in Schedule 1 to these Regulations may be modified by a reference to the relevant law which is applicable and a statement that the policy to which it relates satisfies the requirements of that law. Notes This regulation replaces reg 5 of the 1971 Regulations, and applies to any insurance policy issued after 1 January 2000 or expiring between 1 January 1999 and 1 January 2000 (reg 10(2) of the 1998 Regulations), with the modifications noted below. The regulation implements s 4(1) of the 1969 Act; the form of the certificate is set out in Sched 1 to the 1969 Act. Reg 4(3)–(6) was new in 1998. Reg 4(1) sets out the form of the certificate. In respect of an insurance commenced or renewed between 1 January 1999 and 1 April 1999, the form of certificate specified by the 1971 Regulations may still be used, provided that it is replaced by 1 April 2000 (see reg 10(3)–(4) of the 1998 Regulations). Reg 4(3) requires the certificate to state the amount of any insurance in excess of the minimum £5 million. Reg 4(4) requires any certificate to be retained for 40 years, so that if the employee’s claim does not become apparent for years in the future, the identity of the insurer who may be called upon to meet the claim can be ascertained. This duty applies only to certificates issued immediately before 1 January 1999 and to all certificates thereafter issued, so the obligation is not retroactive (see reg 10(5) of the 1998 Regulations).

Display and production of copies of certificates of insurance 5.—(1) Subject to paragraph (4) below, an employer who has been issued with a certificate in accordance with regulation 4 above shall display one or more copies of it, in accordance with paragraphs (2) and (3) below, at each place of business at which he employs any relevant employee of the class or description to which such certificate relates. (2) Any relevant certificate which is required to be displayed in accordance with paragraph (1) above, shall be displayed in such number and in such positions and be of such size and legibility that they may be easily seen and read by any relevant employees, and shall be reasonably protected from being defaced or damaged. (3) Copies of a certificate which are required to be displayed in accordance with paragraph (1) above shall be kept on display until the date of expiry or earlier termination of the approved policy mentioned in the certificate. (4) The requirements of paragraphs (1), (2) and (3) above do not apply where an employer employs a relevant employee on or from an offshore installation or associated structure, but in such a case the employer shall produce, at the request of that employee and within the period of ten days from such request, a copy of the certificate which relates to that employee. Notes This regulation replaces reg 6 of the 1971 Regulations, and applies to any insurance policy issued after 1 January 2000 or expiring between 1 January 1999 and 1 January 2000 (art 10(2) of the 1998 Regulations). The regulation implements s 4(2)(a) of the 1969 Act, and requires to display copies of the certificate on his work premises. The requirement in reg 4(2) relating to protection from damage was extended in 1998 to all forms of damage and not simply weather damage. The regulation is modified in the case of offshore installations, in accordance with the Offshore Installations and Pipeline Works (Management and Administration) Regulations 1995, SI 1995 No 738: the employer’s obligation is to make a copy available to an employee within 10 days of any request.

Production of certificates of insurance to an Inspector 6. An employer who is required by a written notice issued by an inspector to do so shall produce or send to any person specified in the notice, at the address and within the time specified in the notice— (a) either the original or a copy of every certificate issued to him under regulation 4 above which relates to a period of insurance current at the date of issue of the notice;

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(b) either the original or a copy of every certificate issued to him under regulation 4 above and retained by him in accordance with regulation 4(4) above. Notes This regulation replaces reg 7 of the 1971 Regulations, and applies to any insurance policy issued after 1 January 2000 or expiring between 1 January 1999 and 1 January 2000 (reg 10(2) of the 1998 Regulations). The regulation implements s 4(2)(b) of the 1969 Act. Under the 1971 Regulations, only the Health and Safety Executive was empowered to require the production of a copy of the certificate: the power is now transferred to the Secretary of State.

Inspection of policies of insurance 7. Where a certificate is required to be issued to an employer in accordance with regulation 4 above, the employer shall during the currency of the insurance permit the policy of insurance or a copy of it to be inspected by an inspector— (a) at such reasonable time as the inspector may require; (b) at such place of business of the employer (which, in the case of an employer who is a company, may include its registered office) as the inspector may require. Notes This regulation replaces reg 8 of the 1971 Regulations and came into force on 1 January 1999. The regulation implements s 4(2)(c) of the 1969 Act.

Production by inspectors of evidence of authority 8. Any inspector shall, if so required when visiting any premises for the purposes of the 1969 Act, produce to an employer or his agent some duly authenticated document showing that he is authorised by the Secretary of State under section 4(2)(b) of the 1969 Act. Notes This regulation replaces reg 9 of the 1971 Regulations, and came into force on 1 January 2000.

8.121B.17 Employers exempted from insurance 9.—(1) The employers specified in Schedule 2 to these Regulations are exempted from the requirement of the 1969 Act to insure and maintain insurance. (2) The exemption applies to all cases to which that requirement would otherwise apply, except that for the employers specified in paragraphs 1, 12, 13 and 14 it applies only so far as is mentioned in those paragraphs. Notes This regulation replaces the Employers’ Liability (Compulsory Insurance) Exemption Regulations 1971, SI 1971 No 1933, and came into force on 1 January 1999.

Revocations and transitional 10.—(1) Subject to paragraphs (2) and (3) below, the instruments specified in column 1 of Schedule 3 to these Regulations are hereby revoked to the extent specified in column 3 of that Schedule. (2) Subject to paragraphs (4) and (5) below, in the case of an insurance policy commenced before, and current at, 1st January 1999, regulations 2 to 6 of, and the Schedule to, the 1971 Regulations shall continue to apply, instead of regulations 2 to 6 of, and Schedule 1 to, these Regulations, until the expiry or renewal of the policy or until 1st January 2000, whichever is the earlier. (3) The certificate required to be issued by regulation 4(1) of these Regulations in respect of insurance commenced or renewed on or after 1st January 1999 but before 1st April 1999 may, instead of being in the prescribed form, be in the form and contain the particulars specified in the Schedule to the 1971 Regulations.

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(4) Every authorised insurer who has issued a certificate in the form, and containing the particulars, specified in the Schedule to the 1971 Regulations in respect of insurance current at 1st April 2000 shall replace it by that date with a certificate in the prescribed form and the replacement shall then be the relevant certificate for the purposes of regulation 5 of these Regulations. (5) The certificates to which regulation 4(4) of these Regulations applies include any certificate of which a copy is required to be displayed or maintained by regulation 6(1) of the 1971 Regulations immediately before 1st January 1999, and any such certificate shall be treated for the purposes of regulation 6 of these Regulations as having been issued under regulation 4 of these Regulations. (6) Regulation 7 of these Regulations applies where a certificate is required, in accordance with paragraph (2) above, to be issued in accordance with the 1971 Regulations as it applies where a certificate is required to be issued in accordance with regulation 4 of these Regulations. (7) In this regulation— ‘‘in the prescribed form’’ means in the form, and containing the particulars, required by regulation 4(1) and (3) of, and Schedule 1 to, these Regulations; ‘‘the 1971 Regulations’’ means the Employers’ Liability (Compulsory Insurance) General Regulations 1971 as in force on 31st December 1998, including those Regulations as applied by the Employers’ Liability (Compulsory Insurance) (Offshore Installations) Regulations 1975.

SCHEDULE 1 ‘‘Certificate of Employers’ Liability Insurance(a) (Where required by regulation 5 of the Employers’ Liability (Compulsory Insurance) Regulations 1998 (the Regulations), one or more copies of this certificate must be displayed at each place of business at which the policy holder employs persons covered by the policy) Policy No 1. Name of policy holder. 2. Date of commencement of insurance policy. 3. Date of expiry of insurance policy. We hereby certify that subject to paragraph 2— 1. the policy to which this certificate relates satisfies the requirements of the relevant law applicable in [Great Britain](b) ; and 2. (a) the minimum amount of cover provided by this policy is no less than £5 million (c); or (b) the cover provided under this policy relates to claims in excess of [£ ] but not exceeding [£ ] Signed on behalf of (Authorised Insurer) Signature Notes (a) Where the employer is a company to which regulation 3(2) of the Regulations applies, the certificate shall state in a prominent place, either that the policy covers the holding company and all its subsidiaries, or that the policy covers the holding company and all its subsidiaries except any specifically excluded by name, or that the policy covers the holding company and only the named subsidiaries. (b) Specify applicable law as provided for in regulation 4(6) of the Regulations.

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(c) See regulation 3(1) of the Regulations and delete whichever of paragraphs 2(a) or 2(b) does not apply. Where 2(b) is applicable, specify the amount of cover provided by the relevant policy.’’

SCHEDULE 2 Employers Exempted from Insurance 1. A person who for the time being holds a current certificate issued by a government department or the Scottish Ministers or the National Assembly for Wales stating that claims established against that person in respect of any liability to such employees of the kind mentioned in section 1(1)) of the 1969 Act as are mentioned in the certificate will, to any extent to which they are incapable of being satisfied by that person, be satisfied out of money provided by parliament or, in the case of a certificate issued by the Scottish Ministers, out of the Scottish Consolidated Fund or, in the case of a certificate issued by the National Assembly for Wales, out of monies provided by that Assembly; but only in respect of employees covered by the certificate. 2. The Government of any foreign state or Commonwealth country. 3. Any inter-governmental organisation which by virtue of any enactment is to be treated as a body corporate. 4. Any subsidiary of any such body as is mentioned in section 3(1)(b) of the 1969 Act (which exempts any body corporate established by or under any enactment for the carrying on of any industry or part of an industry, or of any undertaking, under national ownership or control) and any company of which two or more such bodies are members and which would, if those bodies were a single corporate body, be a subsidiary of that body corporate. 5. Any Passenger Transport Executive and any subsidiary thereof. 6. Transport for London or any of its subsidiaries (within the meaning of the Greater London Authority Act 1999). 7. The Commission for the New Towns. 8. The Qualifications and Curriculum Authority. 9. Any voluntary management committee of an approved bail or approved probation hostel within the meaning of the Probation Service Act 1993. 10. Any magistrates’ courts committee established under the Justices of the Peace Act 1997. 11. Any probation committee established under the Probation Service Act 1993. 12. Any employer who is a member of a mutual insurance association of shipowners or of shipowners and others, in respect of any liability to an employee of the kind mentioned in section 1(1) of the 1969 Act against which the employer is insured for the time being with that association for an amount not less than that required by the 1969 Act and regulations under it, being an employer who holds a certificate issued by that association to the effect that he is so insured in relation to that employee. 13. Any licensee within the meaning of the Nuclear Installations Act 1965, in respect of any liability to pay compensation under that Act to any of his employees in respect of a breach of duty imposed on him by virtue of section 7 of that Act. 14. Any employer to the extent he is required to insure and maintain insurance by subsection (1) of section 1 of the 1969 Act against liability for bodily injury sustained by his employee when the employee is— (i) carried in or upon a vehicle; or (ii) entering or getting on to, or alighting from, a vehicle, in the circumstances specified in that subsection and where that bodily injury is caused by or, arises out of, the use by the employer of a vehicle on a road; and the expression ‘‘road’’, ‘‘use’’ and ‘‘vehicle’’ have the same meanings as in Part VI of the Road Traffic Act 1988. 15. Any employer which is a company that has only one employee and that employee also owns fifty per cent or more of the issued share capital in that company.

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1 Reference 2 Title SI 1971/1117 The Employers’ Liability (Compulsory Insurance) General Regulations 1971 SI 1971/1933 The Employers’ Liability (Compulsory Insurance) Exemption Regulations 1971 SI 1974/208 The Employers’ Liability (Compulsory Insurance) (Amendment) Regulations 1974 SI 1975/194 The Employers’ Liability (Compulsory Insurance) (Amendment) Regulations 1975 SI 1975/1443 The Employers’ Liability (Compulsory Insurance) (Offshore Installations) Regulations 1975 SI 1981/1489 The Employers’ Liability (Compulsory Insurance) (Amendment) Regulations 1981 SI 1992/3172 The Employers’ Liability (Compulsory Insurance) Exemption (Amendment) Regulations 1992 SI 1994/520 The Employers’ Liability (Compulsory Insurance) Exemption (Amendment) Regulations 1994 SI 1994/3301 The Employers’ Liability (Compulsory Insurance) General (Amendment) Regulations 1994

3 Extent of revocation The whole Regulations The whole Regulations The whole Regulations The whole Regulations The whole Regulations The whole Regulations The whole Regulations The whole Regulations The whole Regulations

6.48 GENERAL OSTEOPATHIC COUNCIL (PROFESSIONAL INDEMNITY INSURANCE RULES) ORDER OF COUNCIL 1998 (SI 1998 No 1329) General Note The Osteopaths Act 1993 empowered the General Osteopathic Council to make rules requiring osteopaths to obtain liability insurance. The rules made by the Council were approved in this statutory instrument, and came into force on 9 May 1998.

PA RT I

P R E L I M I N A RY

Citation and commencement 1. These rules may be cited as the General Osteopathic Council (Professional Indemnity Insurance) Rules 1998, and shall come into force on 9th May 1998. Interpretation 2.—(1) In these Rules— ‘‘the Act’’ means the Osteopaths Act 1993; ‘‘osteopath’’ means a registered osteopath as defined in the Act; ‘‘prescribed risks’’ means the insurance risks which are prescribed under Rule 4; ‘‘prescribed amounts’’ means the minimum amounts of insurance cover to be obtained by an osteopath in order to cover the prescribed risks and which are set out in Rule 6. (2) Unless the context otherwise requires, a reference— (a) in these rules to a numbered rule is a reference to the rule bearing that number in these rules; and (b) in a rule to a numbered paragraph is a reference to the paragraph bearing that number in that rule.

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R E Q U I R E M E N T T O O B TA I N I N S U R A N C E

Obligation to insure 3.—(1) Subject to Rule 3(2) any osteopath who practises as an osteopath must be insured against claims for any of the prescribed risks; and shall obtain and maintain insurance cover for not less than the prescribed amounts. (2) An osteopath who is also a registered practitioner need not obtain separate insurance to cover his practice as an osteopath if he is indemnified in his capacity as a registered medical practitioner and that indemnity complies with the insurance requirements set out in Rules 4 and 5 and is approved by the Registrar.

Prescribed risks 4. The insurance to be obtained by an osteopath shall cover the following risks— (a) any legal liability for any negligent act, error or omission in professional services rendered or which should have been rendered by an osteopath whilst practising as an osteopath; (b) any liability for claims for public liability or product liability arising from death or injury to third parties or damage to third party property caused by the osteopath in the course of providing his professional services or in the course of supplying products in connection with those professional services; (c) any legal liability of an osteopath in respect of the risks set out in Rules 4(a) and (b) above which are attributable to his employees, partners, associates, co-directors or agents and which are connected with the provision of osteopathic services on his behalf or under his supervision; (d) any liability to pay all legal costs, of and incidental to all proceedings which may be recovered by a claimant against an osteopath arising out of any claim in respect of the prescribed risks, and all or any costs, fees and expenses which may be incurred by an osteopath in defending any claim in respect of the risks set out in rules 4(a) to (c) above. 5. Any insurance which is obtained by an Osteopath in respect of the prescribed risks need only cover his liability as a practising osteopath providing professional services in the United Kingdom.

Prescribed amounts 6. The minimum amount of insurance cover to be obtained by an Osteopath in respect of the prescribed risks is £2,500,000 in the aggregate in the cases of rules 4(a), 4(b) and 4(c).

Run off cover 7. Every practising osteopath shall maintain insurance cover for the prescribed risks and in the prescribed amounts to cover any claims in respect of his practice as an osteopath which may arise after the date on which he ceases to practise as an osteopath for whatever reason.

PA RT I I I

COMPLIANCE

Evidence of compliance 8.—(1) Following registration, subsequent renewal or at any other time that the Registrar may stipulate an osteopath must provide the General Council with evidence acceptable to it that he has a current insurance policy which complies with the requirements of these Rules. (2) Any osteopath whose insurance ceases to comply with the requirements of these Rules or ceases altogether (for whatever reason) shall notify the General Council forthwith.

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Non compliance 9. Any failure by an osteopath to maintain insurance in accordance with these Rules may be treated as constituting unacceptable professional conduct and dealt with accordingly.

6.49 MERCHANT SHIPPING (OIL POLLUTION) (SUPPLEMENTARY FUND PROTOCOL) ORDER 2006 (SI 2006 No 1265) General Note These Regulations were made under the Merchant Shipping (Pollution) Act 2006, and give effect to the Supplementary Fund Protocol as required by Council Decision 2004/246/EC (OJ 78/22). The Regulations take effect as amendments to the Merchant Shipping Act 1995 and are not reproduced separately here.

6.50 PERSONAL INJURIES (NHS) CHARGES (GENERAL) AND ROAD TRAFFIC (NHS CHARGES) (AMENDMENT) REGULATIONS 2006 (SI 2006 No 3388) General Note These Regulations set out the procedures for application for certification of payments due under Part 3 of the Health and Social Care (Community Health and Standards) Act 2003

Citation, commencement, application and interpretation 1.—(1) These Regulations may be cited as the Personal Injuries (NHS Charges) (General) and Road Traffic (NHS Charges) (Amendment) Regulations 2006 and shall come into force on 29th January 2007. (2) These Regulations apply in relation to England and Wales. (3) In these Regulations— ‘‘the Act’’ means the Health and Social Care (Community Health and Standards) Act 2003; ‘‘certificate’’ means a certificate issued under section 151; ‘‘Compensation Recovery Unit’’ means the Compensation Recovery Unit of the Department for Work and Pensions; ‘‘hospital’’ means a health service hospital within the meaning of the National Health Service Act 1977. (4) A reference in these Regulations to a numbered section or Schedule is a reference to that section of, or that Schedule to, the Act. Application for a certificate of NHS charges 2.—(1) An application for a certificate shall be made to the Compensation Recovery Unit and shall include the following particulars— (a) the full name and address of the injured person; (b) the date of birth, and where known, the national insurance number of that person; (c) the date on which the injury occurred; (d) the nature of the injury; (e) the name and address of any hospital at which the injured person received NHS treatment in respect of his injury; (f) where the applicant has made a compensation payment in respect of the injury, the date on which that payment was made;

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(g) where the certificate applied for relates to a claim to which any of the circumstances specified in paragraphs (a) to (g) of section 153(3) (reduction of NHS charges in cases of contributory negligence) applies— (i) a statement of the proportion by which the damages payable in respect of the claim are to be reduced to reflect the injured person’s share in the responsibility for the injury in question, and (ii) a copy of the order, judgement, minute or document which provides for that reduction; and (h) where the certificate applied for relates to a qualifying claim, the report referred to in regulation 3(1)(a). (2) An application under section 151(7) must be made not later than 14 days after the date on which the compensation payment is made. (3) The prescribed period for the purposes of section 151(8)(b) (circumstances in which section 151(7) applies) is 28 days. Reduction of NHS charges in certificates relating to qualifying claims 3.—(1) The circumstances in which the amount (or amounts) specified in a certificate relating to a qualifying claim are to be reduced in accordance with section 153(10) are where— (a) the applicant for the certificate sends to the Compensation Recovery Unit a report which contains the information specified in paragraph (2) and is signed by the parties to the agreement referred to in paragraph (2)(a); and (b) it appears to the Secretary of State from that report that the agreement was reached in a fair manner. (2) For the purposes of paragraph (1)(a) the following information is specified— (a) a statement that it was agreed by or on behalf of the injured person and the person who proposed to make a compensation payment that the damages payable under the settlement were to be reduced to reflect the injured person’s share in the responsibility for the injury in question; (b) a statement as to how that agreement was reached; (c) the amount of damages payable under the settlement had there been no such agreement; (d) the amount or proportion by which it was agreed that the damages were to be reduced; and (e) the names of all those involved in the settlement process. Particulars as to amounts specified in a certificate 4.—The particulars to which a person to whom a certificate is issued are entitled, in accordance with section 153(11), are— (a) in respect of NHS ambulance services counted for the purposes of determining any amount in the certificate— (i) the name of the ambulance trust which provided those services, (ii) the date on which the services were provided, and (iii) the name and address of any hospital to which the injured person was taken; and (b) in respect of NHS treatment counted for the purposes of determining any amount in the certificate— (i) the name and address of the responsible body of any hospital at which that treatment took place, and (ii) whether the injured person was admitted to any hospital and if so, the number of days of admission counted at each hospital. Information to be provided in relation to an injured person 5.—(1) A person specified in section 160(1)(a) shall send to the Compensation Recovery Unit the information set out in paragraph (3)(a) and (b) and, where known, the information

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set out in paragraph (3)(c) to (g) not later than 14 days after the date on which the claim in respect of the injury is made by or on behalf of the injured person. (2) A person specified in section 160(1)(b) to (e) shall send to the Compensation Recovery Unit, where known, such information set out in paragraph (3) as the Secretary of State may request not later than 14 days after the date of the request. (3) The information referred to in paragraphs (1) and (2) is— (a) the full name and address of the injured person; (b) the full name and address of— (i) the person against whom the claim is made, and (ii) anyone acting on behalf of that person; (c) the date of birth or national insurance number of that person; (d) the date on which the injury occurred; (e) the nature of the injury; (f) in respect of NHS treatment received at a hospital in respect of the injury— (i) the name and address of the hospital, and (ii) whether the injured person was admitted to hospital and if so the date of admission and discharge; and (g) in respect of NHS ambulance services provided to the injured person as a result of his injury— (i) the name and address of the ambulance trust which provided those services, (ii) the date on which the services were provided, and (iii) the name and address of any hospital to which the injured person was taken. (4) The responsible body of each hospital at which an injured person received NHS treatment in respect of his injury shall send the following information in relation to that person to the Compensation Recovery Unit not later than 14 days after the date on which the Secretary of State requests it— (a) the date the treatment began; (b) whether, and if so, the date on which, NHS ambulance services were provided to the injured person, as a result of his injury, for the purpose of taking him to a hospital in relation to which it is the responsible body (including taking him from one such hospital to another such hospital); (c) whether the injured person was admitted to a hospital in relation to which it is the responsible body and, if so, the dates of admission and discharge; (d) where known, the name and address of any other hospital at which the injured person received treatment; and (e) whether there is likely to be further treatment in respect of the injury. (5) Any ambulance trust which provided NHS ambulance services to an injured person as a result of his injury shall send the following information in relation to that person to the Compensation Recovery Unit not later than 14 days after the date on which the Secretary of State requests it— (a) the date on which those services were provided to the injured person as a result of his injury; and (b) the name and address of any hospital to which the injured person was taken for NHS treatment. Payments to hospitals and ambulance trusts 6.—(1) The Secretary of State— (a) shall make any payment under section 162(1) (payment to responsible body or relevant ambulance trust) not later than 40 days after the day on which she receives a payment of relevant NHS charges; (b) may make more than one such payment at the same time; and (c) may do so by direct credit transfer. (2) In respect of each payment, the Secretary of State shall send to the responsible body or relevant ambulance trust a statement showing— (a) the name and address of the injured person to whom the statement relates; (b) the amount of the payment; and (c) the date of the incident in respect of which the payment is made.

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(3) Where— (a) the Secretary of State receives a payment of relevant NHS charges; and (b) the responsible body of the hospital (‘‘the old body’’) or the relevant ambulance trust (‘‘the old trust’’) concerned has ceased to exist, the Secretary of State shall pay the amount received to the body to which the property, rights and liabilities of the old body or the old trust have been transferred. (4) If the property, rights and liabilities of the old body or the old trust have been transferred to more than one body, the Secretary of State, may, for the purposes of paragraph (3), divide the payment among those bodies in such manner as she considers appropriate. Structured settlements 7.—(1) This regulation applies where, apart from the provisions of this regulation, the payments due under an agreement or court order referred to in paragraph (2) would fall to be treated for the purposes of Part 3 of the Act as compensation payments. (2) The agreement or court order referred to in paragraph (1) is— (a) an agreement entered into in final settlement of a claim made by or on behalf of an injured person for— (i) the making of periodical compensation payments (whether of an income or capital nature), or (ii) the making of such payments and lump sum payments; or (b) an order by a court which— (i) awards damages to an injured person in respect of injury or death arising out of an incident; and (ii) orders that the damages are wholly or partly to take the form of periodical payments. (3) Where this regulation applies— (a) the person liable to make the payment under the agreement or order shall be taken to have made a single compensation payment on the day of agreement or the date of making of the court order; (b) payments made under the agreement or court order referred to in paragraph (2), and any other payment made to the injured person after the day of agreement or court order in respect of the same incident, shall be taken not to be compensation payments. (4) In this regulation, ‘‘the day of agreement’’ means— (a) if the agreement referred to in paragraph (2)(a) is approved by the court, the day on which that approval is given; and (b) in any other case, the day on which the agreement is entered into. Interim payments repaid under court order 8.—(1) This regulation applies where— (a) a person has made a payment of relevant NHS charges to the Secretary of State; (b) that payment relates to a compensation payment which was an interim payment of damages in respect of the injury, the whole amount of which a court has ordered to be repaid; and (c) no other compensation payment has been made by that person to the injured person in respect of the same injury. (2) Where this regulation applies, the Secretary of State shall pay to the person who made the compensation payment the amount of the payment referred to in paragraph (1)(a). (3) Where this regulation applies and the Secretary of State has (under section 162) paid the amount received to an ambulance trust or a responsible body, she may— (a) deduct the amount paid to that trust or body from any future payment due under that section; (b) require that trust or body to pay that amount to her; or (c) discharge her duty under paragraph (2) by requiring that trust or body to pay that amount to the person who paid the relevant NHS charges.

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(4) Where the Secretary of State makes a deduction or a requirement for payment under paragraph (3), she shall (with the requirement or the payment from which the deduction is made) send the responsible body or ambulance trust a statement showing— (a) the name and address of the injured person to whom the statement relates; (b) the amount already paid by the Secretary of State; and (c) whether that amount has been deducted, or payment to the Secretary of State or to the person who paid the relevant NHS charges is required. Payments into court 9.—(1) A payment into court made in respect of an injured person shall only be treated as the making of a compensation payment if it is— (a) accepted by or on behalf of the injured person within the initial period; (b) accepted, after the initial period, in satisfaction of the injured person’s claim by consent between the parties; or (c) made, after the initial period, in accordance with a court order and in satisfaction of the claim. (2) In paragraph (1), ‘‘the initial period’’ means the period of 21 days after the receipt by the injured person of notice of the payment into court having been made. (3) In the circumstances referred to in paragraph (1)(a), the compensation payment shall be treated as having been made on the date on which the payment into court was made. (4) In the circumstances referred to in paragraph (1)(b), the compensation payment shall be treated as having been made on the date on which the application to the court for payment out is made. (5) In the circumstances referred to in paragraph (1)(c), the compensation payment shall be treated as having been made on the date of the court order. Liability of insurers 10. Where— (a) a policy of insurance is treated under section 164(1) as covering a person’s liability under section 150(2) (liability to pay NHS charges); (b) under that policy of insurance the amount of cover in respect of the injury is limited to, or by reference to— (i) a maximum sum, or (ii) a proportion of the compensation which the insured person is liable to pay in respect of the injury; and (c) in consequence of the limitation, a proportion of the compensation which the insured person is liable to pay in respect of the injury would not be covered by the policy but for section 164(1), the liability imposed on the insurer by section 164(1) shall be reduced by the same proportion as their liability for the compensation payment. Exempted payments 11.—(1) The following payments are prescribed for the purposes of paragraph 8 of Schedule 10 (payments excluded from definition of compensation payment in section 150(3))— (a) an award of compensation made to or in respect of an injured person under the Criminal Injuries Compensation Act 1995; and (b) any payment made to or in respect of an injured person under the Vaccine Damage Payments Act 1979. Amendment of the Road Traffic (NHS Charges) Amendment Regulations 2005 12. In regulation 1(2) (interpretation) of the Road Traffic (NHS Charges) Amendment Regulations 2005, the definition of ‘‘the 2004 Regulations’’ shall be omitted.

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6.51 PERSONAL INJURIES (NHS CHARGES) (REVIEWS AND APPEALS) AND ROAD TRAFFIC (NHS CHARGES) (REVIEWS AND APPEALS) (AMENDMENT) REGULATIONS 2006 (SI 2006 No 3398) General Note These regulations set out the procedures for challenging a certification of the sums payable to the NHS or ambulance service by a person liable to make a compensation payment to a personal injury victim under the Health and Social Care (Community Health and Standards) Act 2003.

Citation, commencement, application and interpretation 1.—(1) These Regulations may be cited as the Personal Injuries (NHS Charges) (Reviews and Appeals) and Road Traffic (NHS Charges) (Reviews and Appeals) (Amendment) Regulations 2006 and shall come into force on 29th January 2007. (2) These Regulations apply in relation to England and Wales. (3) In these Regulations— ‘‘appeal’’ means an appeal against a certificate or an appeal against a waiver decision; ‘‘appeal against a certificate’’ means an appeal, under section 157(1), against a certificate; ‘‘appeal against a waiver decision’’ means an appeal, under section 157(6), against a waiver decision; ‘‘appeal tribunal’’ means an appeal tribunal constituted under Chapter 1 of Part 1 of the Social Security Act 1998 (‘‘1998 Act’’); ‘‘certificate’’ means a certificate issued under section 151; ‘‘clerk to the appeal tribunal’’ has the meaning it has in the Social Security Regulations; ‘‘Commissioner’’ has the same meaning as in Chapter 2 of Part 1 of the 1998 Act; ‘‘Compensation Recovery Unit’’ means the Compensation Recovery Unit of the Department for Work and Pensions; ‘‘compensator’’ means a person to whom a certificate has been issued; ‘‘legally qualified panel member’’ has the meaning it has in the Social Security Regulations; ‘‘medically qualified panel member’’ has the meaning it has in the Social Security Regulations; ‘‘Social Security Regulations’’ means the Social Security and Child Support (Decisions and Appeals) Regulations 1999; ‘‘waiver application’’ is to be construed in accordance with regulation 4(1). (4) A reference in these Regulations to a numbered section is a reference to that section of the Health and Social Care (Community Health and Standards) Act 2003. Review of certificates 2.—(1) For the purposes of section 156(1), notification of an order, judgement, minute or document referred to in that section is to be given to the Secretary of State by the compensator sending to the Compensation Recovery Unit— (a) a copy of the order, judgement, minute or document concerned; and (b) particulars of the proportion by which the damages payable in respect of the claim are to be reduced to reflect the injured person’s share in the responsibility for the injury in question. (2) The Secretary of State must review a certificate relating to a claim which, after the certificate is issued, becomes a qualifying claim (as defined in section 153(9)) if, not later than 3 months after the claim becomes a qualifying claim, the report containing the information required by regulation 3(1)(a) (production of report) of the Personal Injuries (NHS Charges) (General) and Road Traffic (NHS Charges) (Amendment) Regulations 2006 is sent by the compensator to the Compensation Recovery Unit. (3) Subject to paragraph (4), the Secretary of State may review a certificate where she is satisfied that—

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(a) a mistake (whether in computation of the amount specified or otherwise) may have occurred in the preparation of the certificate; (b) the amount specified in the certificate may be in excess of the amount due to the Secretary of State; (c) incorrect or insufficient information may have been supplied to the Secretary of State by the person to whom the certificate was issued and, in consequence, the amount specified in the certificate was less than it would have been had the information supplied been correct or sufficient; or (d) a ground for an appeal against a certificate may be satisfied. (4) An application for a review under section 156(4) must be in writing on a form approved by the Secretary of State and sent to the Compensation Recovery Unit not later than 3 months after— (a) the date on the certificate; or (b) if later, the date on which the compensation payment was made. Information to be provided on issue of a certificate 3.—(1) Where the Secretary of State issues a certificate to any person, she shall at the same time send the person a notice as to— (a) the grounds on which the person may appeal against the certificate; (b) the requirements under section 157(2) that are to be satisfied before an appeal may be made; and (c) the person’s right under section 157(4) to apply for the requirement in section 157(2)(b) (payment of amounts specified in certificate) to be waived. Waiver applications and appeals 4.—(1) An application under section 157(4) for a waiver of the requirement in section 157(2)(b) that payment of the amount or amounts specified in the certificate be made before making an appeal (‘‘a waiver application’’) shall be sent to the Compensation Recovery Unit with particulars of the exceptional financial hardship that would be caused by payment of the amount (or amounts) specified in the certificate. (2) A waiver application shall be sent to the Compensation Recovery Unit not later than— (a) 3 months after— (i) the date on the certificate, or (ii) if later, the date on which the compensation payment was made; or (b) if the compensator has been granted an extension of the time limit for an appeal against a certificate under regulation 7, one month after the date of that decision. (3) Where the Secretary of State makes a waiver decision, the person who made the waiver application shall be— (a) given notice of the decision; and (b) if the waiver application is refused— (i) given notice of his right of appeal against the decision under section 157(6); and (ii) informed that, if the notice of the decision does not include a statement of the reasons for the decision, he may, within one month of the date of notification of that decision, request that the Secretary of State provide him with a written statement of the reasons for the decision. (4) An appeal against a waiver decision shall be in writing on a form approved by the Secretary of State and unless an application has been granted to extend the time for an appeal against a waiver decision under regulation 7, shall be sent to the Compensation Recovery Unit not later than one month after the date of the waiver decision. (5) An appeal against a waiver decision shall contain— (a) the particulars required under regulation 5(4) in relation to the appeal against the certificate which it is proposed to bring; and (b) particulars of the exceptional financial hardship that would be caused by payment of the amount (or amounts) specified in the certificate.

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Appeals against certificates 5.—(1) Any appeal against a certificate shall be in writing on a form approved by the Secretary of State and, unless an application has been granted to extend the time for an appeal against a certificate under regulation 7, shall be sent to the Compensation Recovery Unit— (a) not later than 3 months after— (i) the date on the certificate, or (ii) if later, the date on which the compensation payment is made; (b) where a certificate is confirmed following a review by the Secretary of State under section 156, not later than 3 months after the date of that confirmation; (c) where an agreement is made under which an earlier compensation payment is treated as having been made in final discharge of a claim made by or in respect of an injured person and arising out of the injury or death, not later than 3 months after the date of that agreement; or (d) where the compensator makes a waiver application, not later than one month after— (i) the date of the waiver decision, or (ii) if the compensator appeals against that decision, the date on which the appeal is decided or withdrawn. (2) Where the points raised in an appeal against a certificate have not already been the subject of a review under section 156 the Secretary of State, if she thinks it appropriate to do so, may treat an appeal against a certificate as an application for review under section 156(4). (3) Where the Secretary of State decides to treat an appeal against a certificate as an application for review under section 156(4) she must advise the applicant that she has done so and— (a) where the certificate is confirmed, notify the applicant of that decision; or (b) otherwise issue a fresh certificate. (4) Any appeal under this regulation shall contain the following particulars— (a) the date of the certificate in relation to which the appeal is made; (b) the ground under section 157 to which the appeal relates; and (c) a summary of the arguments relied on by the person making the appeal to support his contention that the certificate is wrong. Appeals—General 6.—(1) Where an appeal is not made on the form approved for the time being, but is made in writing and contains all the particulars required under regulations 4(5) or 5(4), as the case may be, the appeal tribunal may treat that appeal as duly made. (2) Where it appears to the appeal tribunal that an appeal does not contain all the particulars required under regulations 4(5) or 5(4), as the case may be, it may require the person making the appeal to provide such particulars as are not included. (3) Where paragraph (2) applies, the appeal tribunal may extend the time specified by regulations 4(4) or 5(1), as the case may be, for making the appeal by a period of not more than 14 days. (4) Where further particulars are required under paragraph (2), they shall be sent to the Compensation Recovery Unit within such a period as the appeal tribunal may direct. (5) Where a person is required under paragraph (2) to provide further particulars and does not do so within the period of time specified under paragraph (4)— (a) the clerk to the appeal tribunal shall send a copy of the appeal together with any other relevant documents, to a legally qualified panel member; and (b) that panel member shall determine whether the appeal is to be treated as duly made, and shall inform the appellant, and the Secretary of State of his decision. (6) The date of an appeal shall be— (a) the date on which all the particulars required under regulations 4(5) or 5(4), as the case may be, are received by the Compensation Recovery Unit; or (b) where a legally qualified panel member determines under paragraph (5)(b) that the appeal is to be treated as duly made, the date on which the appeal was received by the Compensation Recovery Unit.

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Extension of time for appealing 7.—(1) The time prescribed by regulations 4 and 5 for the making of an appeal may be extended, even though the time so prescribed may already have expired, on application by the compensator. (2) Any application for an extension of time shall be sent to the Compensation Recovery Unit and shall be determined by a legally qualified panel member except that where the Secretary of State is satisfied that the condition in paragraph (3)(b) is satisfied she may also grant the application. (3) An applicant must satisfy the person determining the application that— (a) if the application is granted there are reasonable prospects that such an appeal will be successful; or (b) it is in the interests of justice that the application be granted. (4) For the purposes of paragraph (3) it shall not be considered to be in the interests of justice to grant an application unless the person determining the application is satisfied that— (a) special reasons exist which are wholly exceptional and which relate to the history or facts of the case; (b) such special reasons have existed throughout the period beginning with the day following the expiry of the time prescribed, as the case may be, by regulation 4 or 5 for the making of an appeal and ending with the day on which the application for extension of time is made; and (c) such special reasons manifestly constitute a reasonable excuse of compelling weight for the applicant’s failure to make an appeal within the prescribed time. (5) In determining whether there are special reasons for granting an application for an extension of time for making an appeal under paragraph (1) the person determining the application shall have regard to the principle that the greater the amount of time that has elapsed between the expiry of the time specified for the making of the appeal and the making of the application for an extension of time, the more cogent should be the special reasons on which the application is based. (6) In determining whether facts constitute special reasons for granting an application for an extension of time for making an appeal under paragraph (1), no account shall be taken of the following— (a) that the applicant or anyone acting for him or advising him was unaware of or misunderstood the law applicable to his case (including ignorance or misunderstanding of any time limits imposed by regulations 4 or 5); (b) that a Commissioner or a court has taken a different view of the law from that previously understood and applied. (7) The person who determines an application for an extension of time for making an appeal shall record a summary of his decision in such written form as has been approved by the President of appeal tribunals appointed under section 5 of the Social Security Act 1998. (8) Where a decision is made under this regulation by a legally qualified panel member he shall notify the applicant and the Secretary of State. (9) Where a decision is made under this regulation by the Secretary of State she shall notify the applicant. (10) Any application under paragraph (1) for an extension of time for making an appeal shall contain the following particulars— (a) particulars of the special reasons on which the application is based, if applicable; or (b) the particulars required under regulation 5(4) in relation to the appeal against the certificate which it is proposed to bring; and (c) in the case of an application for an extension of time for making an appeal against a waiver decision, the particulars required under regulation 4(5). (11) An application under paragraph (1) which has been refused may not be renewed. (12) No appeal may be brought later than 1 year after the beginning of the period prescribed in regulations 4(2) or 5(1), as the case may be, or, if more than one such period is relevant, the one beginning later or latest.

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General provisions relating to the procedure for appeals 8.—(1) Where an appeal is made, the provisions of the Social Security Regulations specified in paragraph (2) shall apply in relation to the appeal as they apply to an appeal to an appeal tribunal under section 12 of the Social Security Act 1998, subject to the modifications to those regulations set out in paragraphs (3) to (7). (2) The provisions referred to in paragraph (2) are— (a) 4 (death of a party to an appeal); (b) 6 (composition of appeal tribunals); (c) 8 (consideration and determination of appeals and referrals); (d) 9 (choice of hearing); (e) 10 (withdrawal of appeal or referral); (f) 42 (non-disclosure of medical advice or evidence); (g) 43 (summoning of witnesses and administration of oaths); (h) 46 (appeals which may be struck out); (i) 47 (reinstatement of struck out appeals); (j) 49 (procedure at oral hearings); (k) 51 (postponement and adjournment); (l) 53 (decisions of appeal tribunals); (m) 54 (late application for a statement of reasons of tribunal decision); (n) 55 (record of tribunal proceedings); (o) 56 (correction of accidental errors); (p) 57 (setting aside decisions on certain grounds); (q) 58 (application for leave to appeal to a Commissioner from an appeal tribunal); and (r) Schedule 3 (qualifications of persons appointed to the panel). (3) Any reference in the provisions specified in paragraph (2) to a party to the proceedings shall be construed as referring to— (a) the person to whom the certificate was issued; and (b) unless otherwise stated, the Secretary of State. (4) Regulation 38 (consideration and determination of appeals and referrals) of the Social Security Regulations shall apply as if the reference to ‘‘any provision of these Regulations’’ were a reference to any provisions of the Social Security Regulations specified in paragraph (2). (5) Regulation 46 (appeals which may be struck out) of the Social Security Regulations shall apply as if— (a) paragraph (1)(a) were omitted; and (b) in paragraph (1)(b), the reference to ‘‘these Regulations’’ were a reference to regulations 4(5) or 5(4), as the case may be, of these Regulations. (6) Regulations 56(1) (correction of accidental errors) and 57(1) (setting aside decisions on certain grounds) of the Social Security Regulations shall apply as if the reference to ‘‘a relevant enactment’’ were a reference to section 158. (7) Regulation 58(1) (application for leave to appeal to a Commissioner from an appeal tribunal) of the Social Security Regulations shall apply as if the reference to ‘‘section 13 of the 1997 Act or under section 12 or 13’’ were a reference to section 159. Consolidation of appeals 9. Where two or more appeals against certificates (whether issued by the Secretary of State or Scottish Ministers) relate to the same injury, the legally qualified panel member may direct that the appeals be consolidated. Amendment of regulation 11 of the Road Traffic (NHS Charges) (Reviews and Appeals) Regulations 1999 10. For regulation 11(3) of the Road Traffic (NHS Charges) (Reviews and Appeals) Regulations 1999 (corrections of accidental errors in decisions), substitute— ‘‘(3) There shall be no appeal against a correction made under paragraph (1) or a refusal to make such a correction.’’.

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CHAPTER 7

MOTOR VEHICLE INSURANCE

COMPULSORY INSURANCE UNDER DOMESTIC LAW 7.1 The Road Traffic Act 1930 made it compulsory for the user of a motor vehicle on a road to be insured against possible liability in respect of the death of, or injury to, a third party. The compulsory insurance scheme in its initial form contained a number of defects, and these were gradually remedied by amending legislation which was consolidated by the Road Traffic Act 1972. 7.2 The 1972 Act was substantially altered and extended by the Motor Vehicles (Compulsory Insurance) Regulations 1987, SI 1987 No 2171, introduced to implement the Second EC Motor Insurance Directive, Council Directive 84/5/EEC, and the amended legislation was consolidated by Part VI of the Road Traffic Act 1988. The 1988 Act has itself been amended on a number of occasions, principally to implement the changes to domestic law required under the EU’s motor Insurance Directives. The amending provisions are: the Road Traffic Act 1991 (raising the financial limits for deposits); the Motor Vehicles (Compulsory Insurance) Regulations 1992, SI 1992 No 3036, implementing the Third EC Motor Insurance Directive, Council Directive 90/232; the Motor Vehicles (Compulsory Insurance) Regulations 2000, SI 2000 No 726, reversing two simultaneous House of Lords’ rulings (Cutter v. Eagle Star and Clarke v. Kato [1998] 4 All ER 417) which excluded the use of a vehicle in car parks and other public places from the compulsory insurance requirement; and the Motor Vehicles (Compulsory Insurance) Regulations 2007, SI 2007 No 1426, which partially implement the Fifth Motor Insurance Directive by raising the minimum amount of cover for property damage to £1,000,000. 7.3 These provisions are supplemented by a series of other measures. These are: the Financial Services and Markets Act 2000 (Rights of Action) Regulations 2001, SI 2001 No 2256, which confer a civil right of action for late payment of compensation, partially implementing the EC’s Fourth Motor Insurance Directive, European Parliament and Council Directive 200/26/EC; the European Communities (Rights against Insurers) Regulations 2002, SI 2002 No 3061, which confer a direct right of action by the victim of a negligent driver against the driver’s insurers in anticipation of what was then the EC’s Draft Fifth Motor Insurance Directive (since adopted as European Parliament and Council Directive 2005/14/EC); the Financial Services and Markets Act 2000 (Fourth Motor Insurance Directive) Regulations 2002, SI 2002 No 2706, which partially implement the EU’s Fourth Motor Insurance Directive; the Motor Vehicles (Compulsory Insurance) (Information Centre and Compensation Body) Regulations 2003, SI 2003 No 37, which complete the implementation of the EU’s Fourth Motor Insurance Directive by allowing cross-border claims in respect of motor vehicle accidents and facilitating the flow of information between the relevant national authorities; and the Financial Services and Markets Act 2000 (Motor Insurance) Regulations 2007, SI 2007 No 2403, which enable the purchaser of a motor 933

Motor Vehicle Insurance vehicle from one member state to insure it in another member state as long as it is exported to the latter within 30 days 7.4 The purpose of the 1988 Act is to protect the victims of negligent road users, and much of the Act is concerned with giving rights to victims that they would not possess at common law and with extending the liability of a motor insurer beyond that which it has agreed to accept under the policy. The compulsory motor regime established under the 1988 Act and the supplementary Regulations can be summarised as follows. (a) Subject to limited exceptions, liability insurance must be in operation for any person who uses a motor vehicle on a road or other public place. (b) The policy must cover, for an unlimited sum, the user’s liability for death or personal injury, and for at least £1,000,000 the user’s liability for property damage inflicted upon third parties. The user himself, and the vehicle itself, need not be insured for first party losses, although passengers are within the protection of the compulsory insurance scheme and it is not permissible for a passenger’s rights to be modified or extinguished by agreement with the user. (c) The insurer is obliged to accept liability for injury or damage claims made against persons using the vehicle without the assured’s authority (including thieves) and for persons who do not possess a driving licence. (d) Where the loss under the policy is concerned with a third party claim required to be insured, the insurers cannot rely upon any terms of the policy relating to the condition of the user or the vehicle, and the insurers cannot plead any defence concerned with the lateness of the claim. (e) If the policy contains an extension clause under which persons other than the named assured are permitted to drive the vehicle, each of those persons is deemed to have a contract with the insurers and may claim under the policy. (f) The victim of a road user has a direct action against the insurers if the road user has failed to meet a judgment against him in the victim’s favour. Where such a claim is made, the insurers are unable to plead defences that might have been available against the assured himself, and in particular the insurers’ right to avoid the policy for non-disclosure or misrepresentation are heavily curtailed. In the alternative, in accordance with the requirements of EU law, the victim may choose to sue the insurers directly rather than suing the assured and then enforcing the judgment against the insurers. (g) The insurers also face liability to indemnify the victim for the cost of NHS hospital treatment and the provision of ambulance services. The regime was substantially redrawn by the Road Traffic (NHS Charges) Act 1999 and the implementing regulations, although the 1999 Act is now confined to accidents occurring before 29 January 2007: accidents occurring on or after that date are governed by a more general provision, Part 3 of the Health and Social Care (Community Health and Standards) Act 2003, which extends the principle of the 1999 Act to all accidents involving death or personal injury for which there is legal liability. There is limited provision in the 1988 Act itself for liability for the costs of private health treatment and emergency —normally roadside—treatment. 7.5 There are two situations in which compulsory insurance will not be available: where the road user is not insured at all, or where the injured party is a victim of a hitand-run driver who cannot be identified and thus who cannot be sued. In each of these cases the government has reached agreement with the motor insurance industry that the victims of uninsured and untraced drivers are to be compensated by the 934

Motor Vehicle Insurance industry as a whole. To this end the Motor Insurers’ Bureau—consisting of all authorised motor insurers—was established in 1946, and the Bureau presently operates two agreements with the government. The first is the Uninsured Drivers Agreement 1999, which replaces an earlier Agreement in 1988. The 1999 Agreement applies to accidents occurring on or after 1 October 1999. The second is the Untraced Drivers Agreement 2003, which applies to hit and run accidents, replacing an earlier Agreement of 1996. The Untraced Drivers Agreement 2003 applies to accidents occurring on or after 14 February 2003. COMPULSORY INSURANCE IN THE EU 7.6 The EU’s first intervention in the motor insurance market occurred in 1972, by Council Directive 72/166. Prior to this Directive, a number of countries (including the UK in 1968) had signed up to the United Nations’ Green Card scheme, whereby a person insured to drive in his own country could obtain cover to drive his vehicle in another signatory country. The Green Card scheme was modified by a Uniform Agreement, the most recent version of which was settled in 1996. The Green Card Scheme was implemented into UK law by the Motor Vehicles (International Motor Insurance Card) Regulations 1971, SI 1971 No 792 and the Motor Vehicles (Compulsory Insurance) (No 2) Regulations 1973, SI 1973 No 2143. Council Directive 72/166/EEC sought to modify the Green Card scheme in its application between member states of the EU, by eliminating border checks on the existence of insurance, a necessary element being a corresponding obligation on road users to take out liability insurance covering personal injuries to third parties. Under the Directive, national motor bureaux were to agree a scheme whereby the bureau of the host country would meet a claim in respect of an accident taking place on its territory, and would seek indemnity from the national bureau of the place of the vehicle’s registration. The most recent version is the Multilateral Guarantee Agreement of 2003, which applies to all EU member states as well as a number of other European nations. The Green Card scheme no longer applies as between EU member states, although it continues to exist elsewhere. 7.7 The Second and Third EC Directives—Council Directives 84/5 and 90/232—extended the compulsory insurance requirement. The changes are reflected in the UK in Part VI of the Road Traffic Act 1988, as amended. These Directives had the effect of extending compulsory insurance to third party property damage and obliging an insurer to meet a claim where the user of the insured vehicle was not authorised by the assured to use it. A proposed fourth Directive on motor insurance, circulated for comment at the end of 1996, would have further extended the ambit of those provisions by conferring on the victim of a motor accident a direct claim against the vehicle’s insurer, without the need first to obtain a judgment against the driver. The proposal was published in a modified form in October 1997, limiting the direct action to a victim to whom the accident occurred in a Member State outside that in which he was resident and involved a vehicle registered, and an insurer established, in a member state other than that of the victim’s residence. The Fourth Directive 2000/46/EC adopted this modified approach. However, the Fourth Directive was only ever designed to be a temporary measure, and it was left to the Fifth Motor Insurance Directive, European Parliament and Council Directive 2005/14/EC, to perfect the system and to allow direct actions in all cases, a measure which had been anticipated in the UK in 2002 by the introduction of direct actions. The Fifth Directive contained a number of miscellaneous measures, including the increase of the minimum amount of cover. The EU Directives have been implemented in the UK by a combination of legislation (Road Traffic Act 1988 and supplementary regulations) and voluntary 935

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agreement (Motor Insurers’ Bureau Agreements). It was held by the Court of Appeal in three joined case, Mighell v. Reading, Evans v. Motor Insurers’ Bureau and White v. White [1999] Lloyd’s Rep IR 30, that the EU Directives are not directly effective in proceedings between a claimant and the MIB, so that a victim who is unable to bring proceedings against the MIB for a loss required to be covered by the Directives will have to sue the government for failing to implement the Directives under the Francovich doctrine, Francovich v. Italian Republic [1991] ECR I–5337. An attempt to obtain damages from the UK Government was held by the European Court of Justice in Evans v. Secretary of State for the Environment, Transport and the Regions Case C-63/01, [2004] Lloyd’s Rep IR 1 to be available, although in subsequent domestic proceedings, Evans v. Secretary of State for the Environment, Transport and the Regions 2005, unreported, the UK Government was found not to have contravened any of the requirements of the Directives. THE SINGLE MARKET FOR MOTOR INSURANCE SERVICES 7.8 The creation of a Single Market for Non-Life Insurance, phased in by EU Council Directives 73/239 and 88/357 and completed by Directive 92/49, originally excluded compulsory motor insurance. Motor insurance was brought within the scheme by Directive 90/618, making the appropriate amendments to Directive 88/357. Directive 90/613 was implemented in the UK, in the form of amendments to the Insurance Companies Act 1982, by the Motor Vehicles (Compulsory Insurance) Regulations 1992, SI 1992 No 3036. Under the Directive, a motor insurer established and authorised anywhere in the EU can sell motor insurance anywhere in the EU, subject to the appointment of a claims representative in the host member state and to the insurer joining the insurance bureau of that state. The earlier legislation was repealed and replaced by the Financial Services and Markets Act 2000. Motor insurance forms a class of regulated business for which authorisation is required in the UK, under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, SI 2001 No 544, although in accordance with ordinary Single Market principles authorisation anywhere in the EU allows the insurer to provide insurance through an establishment, or by way of services in the form of direct selling, in any other EU member state. 7.20 ROAD TRAFFIC ACT 1988 PA RT V I

T H I R D - PA RT Y L I A B I L I T I E S

General Note Part VI of the Road Traffic Act 1988 lays down a requirement that any person using a motor vehicle on a road has to be insured against potential liability arising from its use. The legislation originated in the Road Traffic Act 1930, and has gradually been extended, most notably since 1987 on the implementation of EC Directives harmonising in part the compulsory insurance requirement. The Road Traffic Act consolidates the Road Traffic Act 1972 and the Motor Vehicles (Compulsory Insurance) Regulations 1987, SI 1987 No 2171. Where a policy is not in force, or the driver cannot be identified, the victim may have a claim against the Motor Insurers’ Bureau. The text of the MIB Agreements is reproduced below.

Compulsory insurance or security against third-party risks Users of motor vehicles to be insured or secured against third-party risks 143.—(1) Subject to the provisions of this Part of this Act— (a) a person must not use a motor vehicle on a road or other public place unless there is in force in relation to the use of the vehicle by that person such a policy of insurance

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or such a security in respect of third party risks as complies with the requirements of this Part of this Act, and (b) a person must not cause or permit any other person to use a motor vehicle on a road or other public place unless there is in force in relation to the use of the vehicle by that other person such a policy of insurance or such a security in respect of third party risks as complies with the requirements of this Part of this Act. (2) if a person acts in contravention of subsection (1) above he is guilty of an offence. (3) A person charged with using a motor vehicle in contravention of this section shall not be convicted if he proves— (a) that the vehicle did not belong to him and was not in his possession under a contract of hiring or of loan, (b) that he was using the vehicle in the course of his employment, and (c) that he neither knew nor had reason to believe that there was not in force in relation to the vehicle such a policy of insurance or security as is mentioned in subsection (1) above. (4) This Part of this Act does not apply to invalid carriages. Notes Section 143 corresponds with art 3 of Council Directive 72/166. For the definitions of ‘‘road’’ and ‘‘motor vehicle’’, see s 192, below. If an accident takes place when the vehicle is partly on a road and partly on private land, the insurance requirement will depend upon where the majority of the vehicle was located: Randall v. Motor Insurers’ Bureau [1969] 1 All ER 1. Subs (1) was amended by the Motor Insurance (Compulsory Insurance) Regulations 2002, SI 2002 No 726, reg 2. The subsection creates two separate offences: using a motor vehicle without insurance in force, and causing or permitting the use of a vehicle by another person not covered by insurance in force. The words ‘‘in force’’ mean that the policy is valid (a voidable policy suffices for this purpose: Goodbarne v. Buck [1940] 1 KB 771; Durrant v. Maclaren [1956] 2 Lloyd’s Rep 70; Adams v. Dunne [1978] RTR 281) and covers the liability of the user even though the user is not the named assured, eg, by means of an extension clause (Ellis Ltd v. Hinds [1947] KB 475). A void policy, or a policy which has been set aside, is clearly not in force (Evans v. Lewis [1964] 1 Lloyd’s Rep 258). If the policy does not cover the use or driver in question, it is not ‘‘in force’’ for the purposes of s 143(1) (Kerridge v. Rush [1952] 2 Lloyd’s Rep 305; Mumford v. Hardy [1956] 1 Lloyd’s Rep 173; J R M (Plant) Ltd v. Hodgson [1960] 1 Lloyd’s Rep 538) even though the insurer may be not able to rely upon the restriction on cover when faced with a claim by the user in respect of his liability to a third party (see ss 148(2) and 151 of the Road Traffic Act 1988). If the wording is ambiguous and the insurers have indicated that they regard the use as insured, there is no offence (Carnill v. Rowland [1953] 1 Lloyd’s Rep 99), although if the wording is clear and the user is uninsured, the insurer’s statement that it would normally honour a claim despite lack of cover is no defence to a prosecution (Egan v. Bower (1939) 63 L1 LR 266; Mumford v. Hardy [1956] 1 Lloyd’s Rep 173). The word ‘‘use’’ has been held to mean ‘‘have the use of’’. On this basis, a person who is in control of a car, even one which is immobilised, is required to insure it: Elliott v. Gray [1960] 1 QB 367; Eden v. Mitchell [1975] RTR 425; Gosling v. Howard [1975] RTR 429; Williams v. Jones [1975] RTR 433. A passenger may also be the user of a car if the passenger is involved in a ‘‘joint enterprise’’ with the driver, as where the passenger has assisted the driver to steal or otherwise remove the car (Leathley v. Tatton [1980] RTR 21), where the passenger has urged the driver to drive in a dangerous fashion (Stinton v. Stinton [1995] RTR 157, and cf O’Mahoney v. Joliffe [1999] Lloyd’s Rep IR 321), or where the passenger is the owner (Cobb v. Williams [1973] RTR 113; Bretton v Hancock [2005] Lloyd’s Rep IR 454). If there is no joint enterprise, a mere passenger will not be a user: Brown v. Roberts [1963] 2 All ER 263; Bennett v. Richardson [1980] RTR 358; B v. Knight [1981] RTR 136; Hatton v. Hall [1997] RTR 167. A vehicle driven in the course of employment is regarded as in use by the employer (Lees v. Motor Insurers’ Bureau [1952] 2 TLR 356; Windle v. Dunning [1968] 2 All ER 46; Richardson v. Baker [1976] RTR 56), although this does not apply to a vehicle being driven by an independent contractor (Howard v. Jones [1975] RTR 150; Jones v. DPP [1999] RTR 1). The phrase ‘‘cause or permit’’ is to be distinguished from the facilitation of the use of a vehicle. Thus there is no causing or permitting where: the seller of a car gives possession of it to the purchaser (Peters v. General Accident Fire and Life Assurance Corporation [1938] 2 All ER 267; Watkins v. O’Shaughnessy [1939] 1 All ER 385); the insured driver is given assistance in obtaining a policy which is voidable for fraud (Goodbarne v. Buck [1940] 1 KB 107); the insurer issues a policy which it later avoids for breach of condition (Richards v. Port of Manchester Insurance Co (1934) 50 L1 LR 88); or the accused supervises the driving of an unqualified driver (Thompson v. Lodwick [1983] RTR 76). A person is, however, guilty of causing or permitting where he allows another the use of his vehicle, whether or not he is aware of that other’s insurance position (Richards v. Port of Manchester Insurance Co (1934) 50 L1 LR 88; McLeod v. Buchanan [1940] 2 All ER 179; Lyons v. May [1948] 2 All ER 1062; Lloyd v. Singleton [1953] 1 QB 357; Baugh v. Crago [1976] 1 Lloyd’s Rep 563; Ferrymaster v. Adams [1980] RTR 139). A conviction can be avoided only where the person with control of the car makes

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it clear that his permission to use the car is conditional upon the user being covered by insurance (Sheldon Deliveries Ltd v. Willis [1972] RTR 217; Newbury v. Davis [1974] RTR 367; DPP v. Fisher [1992] RTR 93, which cast doubt on the actual ruling in Newbury). The section as originally drafted applied only to roads. In the light of the ruling of the House of Lords in combined cases Cutter v. Eagle Star and Clarke v. Kato [1998] 4 All ER 417, to the effect that the legislation did not apply to public car parks, the words ‘‘or other public place’’ were inserted by SI 2002 No 726 to ensure that compulsory insurance is required in any place to which the public have access. The term ‘‘public place’’ is not defined, but bears that meaning: see DPP v. Vivier [1991] 4 All ER 18. A person who commits an offence under s 143(1) is also civilly liable for the tort of breach of statutory duty. This was at one time significant where the uninsured user of a vehicle had injured a third party and had been unable to meet the judgment against him, as the third party could then bring proceedings against the person who had caused or permitted the uninsured use of the vehicle: Richards v. Port of Manchester Insurance Co (1934) 50 L1 LR 88; Monk v. Warbey [1935] 1 KB 75; Daniels v. Vaux [1938] 2 KB 203; Corfield v. Groves [1950] 1 All ER 488; Martin v. Dean [1971] 2 QB 208. Since 1969 the victim of an uninsured driver has had the right to recover from the Motor Insurers’ Bureau (see para 7.34) so that resort by the victim to an action for breach of statutory duty has become unnecessary, although the action remains significant in that the MIB is subrogated to the right of the third party indemnified by it and may pursue a person guilty of an offence under s 143(1) accordingly. It was confirmed in Norman v. Aziz [2000] Lloyd’s Rep IR 52, that the action for breach of statutory duty has survived the establishment of the MIB and the subsequent extension of its role under the EC Motor Insurance Directives. The tort compensates the victim only for losses required to be covered by compulsory insurance and not for other forms of loss, eg, consequential financial loss (Bretton v. Hancock [2005] Lloyd’s Rep IR 454). Subs (2) As noted above, an offence is committed even though the provisions of the Road Traffic Act 1988 oblige an insurer to meet any liabilities incurred by the user. Subs (3) The offence in s 143(2) is of strict liability, the only defence being set out in s 143(3) and being aimed at an employee who uses an uninsured motor vehicle in the course of his employment.

Exceptions from requirement of third-party insurance or security 144.—(1) Section 143 of this Act does not apply to a vehicle owned by a person who has deposited and keeps deposited with the Accountant General of the Supreme Court the sum of £500,000, at a time when the vehicle is being driven under the owner’s control. (1A) The Secretary of State may by order made by statutory instrument substitute a greater sum for the sum for the time being specified in subsection (1) above. (1B) No order shall be made under subsection (1A) above unless a draft of it has been laid before and approved by resolution of each House of Parliament. (2) Section 143 does not apply— (a) to a vehicle owned— (i) by the council of a county or county district in England and Wales, [the Broads Authority], the Common Council of the City of London, the council of a London borough, the Inner London Education Authority, or a joint authority (other than a police authority) established by Part IV of the Local Government Act 1985, (ii) by a council constituted under section 2 of the Local Government etc (Scotland) Act 1994, or (iii) by a joint board or committee in England or Wales, or joint committee in Scotland, which is so constituted as to include among its members representatives of any such council, at a time when the vehicle is being driven under the owner’s control, (b) to a vehicle owned by a police authority at a time when it is being driven under the owner’s control, or to a vehicle at a time when it is being driven for police purposes by or under the direction of a constable, or by a person employed by a police authority, (c) to a vehicle at a time when it is being driven on a journey to or from any place undertaken for salvage purposes pursuant to Part IX of the Merchant Shipping Act 1995, (d) to the use of a vehicle for the purpose of its being provided in pursuance of a direction under section 166(2)(b) of the Army Act 1955 or under the corresponding provision of the Air Force Act 1955, (da) to a vehicle owned by a health service body, as defined in section 60(7) of the National Health Service and Community Care Act 1990, by a Primary Care Trust established under section 16A of the National Health Service Act 1977, by a Local

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(db) (e)

(f)

(g)

7.20

Health Board established under section 16BA of that Act or by the Commission for Healthcare Audit and Inspection at a time when the vehicle is being driven under the owner’s control, to an ambulance owned by a National Health Service foundation trust at a time when a vehicle is being driven under the owner’s control, to a vehicle which is made available by the Secretary of State to any person, body or local authority in pursuance of section 23 or 26 of the National Health Service Act 1977 at a time when it is being used in accordance with the terms on which it is so made available. to a vehicle which is made available by the Secretary of State to any local authority, education authority or voluntary organisation in Scotland in pursuance of section 15 or 16 of the National Health Service (Scotland) Act 1978 at a time when it is being used in accordance with the terms on which it is so made available; to a vehicle owned by the Commission for Social Care Inspection, at a time when the vehicle is being driven under the owner’s control.

Notes This section corresponds with the derogations permitted by art 3 of Council Directive 72/166. Subs (1) The figure of £500,000 was substituted by the Road Traffic Act 1991, s 20(2). Subs (1A)–(1B) These provisions were added by the Road Traffic Act 1991, s 20(3). Subs (2) Subs 144(2)(da) and 144(2)(db) were added by the National Health Service and Community Care Act 1992, Sched 8, para 4. The section was also amended by the Serious Organised Crime and Police Act 2005, Sched 17, para 1.

Requirements in respect of policies of insurance 145.—(1) In order to comply with the requirements of this Part of this Act, a policy of insurance must satisfy the following conditions. (2) The policy must be issued by an authorised insurer. (3) Subject to subsection (4) below, the policy— (a) must insure such person, persons or classes of persons as may be specified in the policy in respect of any liability which may be incurred by him or them in respect of the death of or bodily injury to any person or damage to property caused by, or arising out of, the use of the vehicle on a road in Great Britain, and (aa) must, in the case of a vehicle normally based in the territory of another member State, insure him or them in respect of any civil liability which may be incurred by him or them as a result of an event related to the use of the vehicle in Great Britain if,— (i) according to the law of that territory, he or they would be required to be insured in respect of a civil liability which would arise under that law as a result of that event if the place where the vehicle was used when the event occurred were in that territory, and (ii) the cover required by that law would be higher than that required by paragraph (a) above, and (b) must, in the case of a vehicle normally based in Great Britain, insure him or them in respect of any liability which may be incurred by him or them in respect of the use of the vehicle and of any trailer, whether or not coupled, in the territory other than Great Britain and Gibraltar of each of the member States of the Communities according to (i) the law on compulsory insurance against civil liability in respect of the use of vehicles of the State in whose territory the event giving rise to the liability occurred; or (ii) if it would give higher cover, the law which would be applicable under this Part of this Act if the place where the vehicle was used when that event occurred were in Great Britain; and (c) must also insure him or them in respect of any liability which may be incurred by him or them under the provisions of this Part of this Act relating to payment for emergency treatment. (4) The policy shall not, by virtue of subsection (3)(a) above, be required—

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(a) to cover liability in respect of the death, arising out of and in the course of his employment, of a person in the employment of a person insured by the policy or of bodily injury sustained by such a person arising out of and in the course of his employment, or (b) to provide insurance of more than £1,000,000 in respect of all such liabilities as may be incurred in respect of damage to property caused by, or arising out of, any one accident involving the vehicle, or (c) to cover liability in respect of damage to the vehicle, or (d) to cover liability in respect of damage to goods carried for hire or reward in or on the vehicle or in or on any trailer (whether or not coupled) drawn by the vehicle, or (e) to cover any liability of a person in respect of damage to property in his custody or under his control, or (f) to cover any contractual liability. (4A) in the case of a person— (a) carried in or upon a vehicle, or (b) entering or getting on to, or alighting from, a vehicle, the provisions of paragraph (a) of subsection (4) above do not apply unless cover in respect of the liability referred to in that paragraph is in fact provided pursuant to a requirement of the Employers’ Liability (Compulsory Insurance) Act 1969. (5) ‘‘Authorised insurer’’ has the same meaning as in section 95. (6) If any person or body of persons ceases to be a member of the Motor Insurers’ Bureau, that person or body shall not by virtue of that cease to be treated as an authorised insurer for the purposes of this Part of this Act— (a) in relation to any policy issued by the insurer before ceasing to be such a member, or (b) in relation to any obligation (whether arising before or after the insurer ceased to be such a member) which the insurer may be called upon to meet under or in consequence of any such policy or under section 157 of this Act by virtue of making a payment in pursuance of such an obligation. Notes Subs (1) There is no prescribed form for a policy, and a cover note suffices for this purpose: Road Traffic Act 1988, s 161(1). A cover note is an offer of cover by the insurer, and a person who uses a vehicle cannot by this conduct alone be taken to have accepted the offer of cover (Taylor v. Allon [1965] 1 Lloyd’s Rep 155). Subs (2), (5), (6) An authorised insurer, as defined by reference to s 95 by subs (5), is an insurer authorised to carry on motor insurance business in the UK under the Financial Services and Markets Act 2000 and who belongs to the Motor Insurers’ Bureau. Under the Single European Insurance Market regime an insurer authorised and established elsewhere in the EU or in EFTA is deemed to have UK authorisation and may offer motor insurance business subject to appointing a claims representative in the UK. Subs 3(a) This subsection reflects art 1 of Council Directive 84/5 regarding liability for death and personal injury. There is no ceiling on the insurer’s liability for death or personal injury, the imposition of the ceiling provided for by s 145(4)(b) being an option available to member states under art 1 of Directive 84/5. Cover is extended to property damage suffered by third parties, an innovation introduced in the UK in 1987 and codified in 1988. The policy must cover the death of and personal injury to ‘‘any person’’, a phrase which excludes the user (Cooper v. Motor Insurers’ Bureau [1985] 1 All ER 449; R v. Secretary of State for Transport, ex parte National Insurance Guarantee Corporation 1996, unreported) but includes any passenger (Barnet Group Hospital Management Committee v. Eagle Star Insurance Co Ltd [1960] 1 QB 107) including the assured himself (Limbrick v. French & Farley [1990] CLY 2709). It is irrelevant that the passenger was being carried in a vehicle not designed for passengers, eg, in the back of a van without seating: Farrell v. Whitty and Motor Insurers’ Bureau of Ireland Case C-356/05, April 2007. The user’s cover must be for ‘‘any liability’’, and not simply for, eg, liability incurred while driving in the course of his employment (Sutch v. Burns [1944] KB 406). The phrase encompasses deliberate running down: Charlton v. Fisher [2001] Lloyd’s Rep IR 387). Other forms of third party loss, eg loss of profits and other consequential losses, do not have to be insured under the Road Traffic Act 1988, although the user may face liability to the third party for such losses. Cover has to be for losses ‘‘caused by’’ or ‘‘arising out of’’ the use of a vehicle. The latter concept is wider, and may extend to the case in which the assured has temporarily stopped driving and is, eg, obtaining petrol: Dunthorne v. Bentley [1996] RTR 428. Contrast Slater v. Buckinghamshire County Council [2004] Lloyd’s Rep IR 432, where the vehicle was stopped and a passenger was being assisted in crossing the road to meet it.

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Subs (3)(aa) This provision was inserted by SI 1992 No 3036, and requires a policy on a motor vehicle normally based in the EU but outside the UK to be insured in accordance with the Road Traffic Act 1988 or the law of the member state where it is normally based, whichever jurisdiction gives higher protection. Subs (3)(b) The subsection was amended by the Motor Vehicles (Compulsory Insurance) Regulations 1992, SI 1992 No 3036 to ensure that a single premium covers the assured’s liability throughout the EU, providing cover at the higher of the levels required either by the UK or the member state in which the accident occurred. Subs (4) was amended by the Motor Vehicles (Compulsory Insurance) Regulations 2007, SI 2007 No 1426, to increase the minimum amount of cover for property damage from £250,000 to £1,000, 000. This subsection lists a number of forms of liability which need not be covered by the policy. Subs (4)(a) excludes an employee injured in the course of his employment (for an illustration, see Lees v. Motor Insurers’ Bureau [1952] 2 Lloyd’s Rep 210, although see the note to subs (4A), below). A police officer is not an employee for these purposes: Miller v. Hales [2007] Lloyd’s Rep IR 54. The remaining exceptions relate to first party risks and to commercial arrangements. Subs (4A) was inserted by SI 1992 No 3036, and modifies subs (4)(a). Its effect is that the exclusion applies only where the employers’ liability policy in fact covers the employer’s liability to an injured employee. With effect from l July 1994 this form of liability will cease to be required to be covered under an employers’ liability policy (Employers’ Liability (Compulsory Insurance) (Amendment) Regulations 1992, SI 1992 No 1993), so that the employer’s motor insurers will generally face liability for this form of loss. A challenge to the validity of these Regulations was dismissed in R. v. Secretary of State for the Department of Transport, ex parte National Insurance Guarantee Corporation plc 1996, unreported. The subsection applies only where the victim was being carried: a person attempting to stop his vehicle being stolen, and who is run over and dragged along by it, is not being carried by it (Miller v. Hales [2007] Lloyd’s Rep IR 54); and a person standing on a vehicle in order to carry out work to overhead lights is similarly not being carried (Axa Insurance UK plc v Norwich Union Insurance Ltd [2007] EWHC 1046 (Comm). Subs (6) was amended by the Road Traffic (NHS Charges) Act 1999, s 18(1), although those amendments were subsequently repealed by the Health and Social Care (Community Health and Standards) Act 2003, Sched 14, para 1.

Requirements in respect of securities 146.—(1) In order to comply with the requirements of this Part of this Act, a security must satisfy the following conditions. (2) The security must be given either by an authorised insurer or by some body of persons which carries on in the United Kingdom the business of giving securities of a like kind and has deposited and keeps deposited with the Accountant General of the Supreme Court the sum of £15,000 in respect of that business. (3) Subject to subsection (4) below, the security must consist of an undertaking by the giver of the security to make good, subject to any conditions specified in it, any failure by the owner of the vehicle or such other persons or classes of persons as may be specified in the security duly to discharge any liability which may be incurred by him or them, being a liability required under section 145 of this Act to be covered by a policy of insurance. (4) In the case of liabilities arising out of the use of a motor vehicle on a road or other public place in Great Britain the amount secured need not exceed— (a) in the case of an undertaking relating to the use of public service vehicles (within the meaning of the Public Passenger Vehicles Act 1981), £25,000, (b) in any other case, £5,000. Notes The giving of a security is, under s 143, an alternative to taking out a liability policy. Subs (3) was amended by the Motor Vehicles (Compulsory Insurance) Regulations 2000, SI 2000 No 726, reg 2.

Issue and surrender of certificates of insurance and of security 147.—(1) A policy of insurance shall be of no effect for the purposes of this Part of this Act unless and until there is delivered by the insurer to the person by whom the policy is effected a certificate (in this Part of this Act referred to as a ‘‘certificate of insurance’’) in the prescribed form and containing such particulars of any conditions subject to which the policy is issued and of any other matters as may be prescribed.

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(2) A security shall be of no effect for the purposes of this Part of this Act unless and until there is delivered by the person giving the security to the person to whom it is given a certificate (in this Part of this Act referred to as a ‘‘certificate of security’’) in the prescribed form and containing such particulars of any conditions subject to which the security is issued and of any other matters as may be prescribed. (3) Different forms and different particulars may be prescribed for the purposes of subsection (1) or (2) above in relation to different cases or circumstances. (4) Where a certificate has been delivered under this section and the policy or security to which it relates is cancelled by mutual consent or by virtue of any provision in the policy or security, the person to whom the certificate was delivered must, within seven days from the taking effect of the cancellation— (a) surrender the certificate to the person by whom the policy was issued or the security was given, or (b) if the certificate has been lost or destroyed, make a statutory declaration to that effect. (5) A person who fails to comply with subsection (4) above is guilty of an offence. Notes Subs (1) The prescribed form of the certificate is set out in the Motor Vehicles (Third Party) Risks Regulations 1972, SI 1972 No 1217, as amended by SIs 1981 No 1567 and 1992 No 1283. For the text of the Regulations, see para 7.22. A certificate is not the policy itself, although if no policy has been issued the court will assume that the terms of the certificate reflect the terms that would have been in the policy (Biddle v. Johnston [1965] 2 Lloyd’s Rep 121). The certificate must be delivered ‘‘to the person by whom the policy is effected’’ before the policy becomes operative: delivery to a third party, eg the owner of the vehicle who has hired it to the assured, does not suffice (Starkey v. Hall (1936) 55 L1 LR 24). Once the certificate has been delivered to the assured, the insurer’s liability is backdated to the date at which the cover was intended under the contract to attach: Motor & General Insurance Co Ltd v. Cox [1990] 1 WLR 1443. Subs (2) This provides provisions equivalent to subs (1) for securities. Subs (4) If more than one copy of a certificate has been issued, all copies must be surrendered: Road Traffic Act 1988, s 161(2).

Avoidance of certain exceptions to policies or securities 148.—(1) Where a certificate of insurance or certificate of security has been delivered under section 147 of this Act to the person by whom a policy has been effected or to whom a security has been given, so much of the policy or security as purports to restrict— (a) the insurance of the persons insured by the policy, or (b) the operation of the security, (as the case may be) by reference to any of the matters mentioned in subsection (2) below shall, as respects such liabilities as are required to be covered by a policy under section 145 of this Act, be of no effect. (2) Those matters are— (a) the age or physical or mental condition of persons driving the vehicle, (b) the condition of the vehicle, (c) the number of persons that the vehicle carries, (d) the weight or physical characteristics of the goods that the vehicle carries, (e) the time at which or the areas within which the vehicle is used, (f) the horsepower or cylinder capacity or value of the vehicle, (g) the carrying on the vehicle of any particular apparatus, or (h) the carrying on the vehicle of any particular means of identification other than any means of identification required to be carried by or under the Vehicles Excise and Registration Act 1994. (3) Nothing in subsection (1) above requires an insurer or the giver of a security to pay any sum in respect of the liability of any person otherwise than in or towards the discharge of that liability. (4) Any sum paid by an insurer or the giver of a security in or towards the discharge of any liability of any person which is covered by the policy or security by virtue only of subsection (1) above is recoverable by the insurer or giver of the security from that person.

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(5) A condition in a policy or security issued or given for the purposes of this Part of this Act providing— (a) that no liability shall arise under the policy or security, or (b) that any liability so arising shall cease, in the event of some specified thing being done or omitted to be done after the happening of the event giving rise to a claim under the policy or security, shall be of no effect in connection with such liabilities as are required to be covered by a policy under section 145 of this Act. (6) Nothing in subsection (5) above shall be taken to render void any provision in a policy or security requiring the person insured or secured to pay to the insurer or the giver of the security any sums which the latter may have become liable to pay under the policy or security and which have been applied to the satisfaction of the claims of third parties. (7) Notwithstanding anything in any enactment, a person issuing a policy of insurance under section 145 of this Act shall be liable to indemnify the persons or classes of persons specified in the policy in respect of any liability which the policy purports to cover in the case of those persons or classes of persons. Notes This section reflects art 2 of Council Directive 84/5 (see para 7.39). Subs (1) The effect of subs (1) is to prevent the insurer from relying upon breach of any of the policy conditions specified in subs (2), but only insofar as the claim relates to the assured’s liability to a third party: if the claim is for first party loss or injury to the user, the insurer remains free to rely upon the relevant condition. Subs (2) lists the conditions affected by s 148(1). The list is exhaustive and does not apply to other restrictive conditions: Bright v. Ashfold [1932] 2 KB 153—requirement for passenger to be carried in a sidecar; Gray v. Blackmore [1934] 1 KB 95, Samuelson v. National Insurance and Guarantee Corporation [1985] 2 Lloyd’s Rep 541—restriction where vehicle was used ‘‘in connection with the motor trade’’; Gray v. Blackmore [1934] 1 KB 95, Jones v. Welsh Insurance Corporation Ltd (1937) 59 L1 LR 13, General Accident Fire and Life Assurance Corporation v. Shuttleworth (1938) 60 LR 301—restriction unless vehicle was used for ‘‘social, domestic or pleasure’’ purposes or not for business purposes. However, in Bernaldez, Case C–129/94 [1996] All ER (EC) 741, the European Court of Justice appeared to hold that any contract term which restricts the insurer’s liability in respect of third-party risks is void. If this is correct, it follows that the list in s 148(2) is meaningless, and that all pre- and post-loss conditions cannot be enforced. Subs (2)(a) does not extend to clauses by which the assured is required to exercise reasonable care in his use of the vehicle: National Farmers’ Union Mutual Insurance Society Ltd v. Dawson (1941) 70 Ll LR 167. Reasonable care clauses are in any event to be construed only as meaning that the assured must avoid acting in a reckless fashion: Devco Holder Ltd v. Legal and General Insurance Society Ltd [1993] 2 Lloyd’s Rep 567; Sofi v. Prudential Assurance Co Ltd [1993] 2 Lloyd’s Rep 559; Glenmuir v. Norwich Union 1995, unreported. Clauses prohibiting driving while intoxicated are arguably also outside subs (2)(a). In Bernaldez, Case C–129/94 [1996] All ER (EC) 741, the European Court of Justice confirmed that the Directives do not permit an insurer to deny liability for injuries caused by a drunken driver. This principle is now enshrined in the Fifth Motor Insurance Directive, which negatives clauses of this type even as regards a passenger who allowed himself to be carried in a vehicle being driven by an intoxicated driver. Subs (2)(b) is aimed at ‘‘unroadworthiness’’ clauses and clauses relating to the maintenance and servicing of the vehicle. Where such clauses are enforceable, they are based on reasonable care and not recklessness: Amey Properties v. Cornhill Insurance plc [1996] LRLR 259. Subs (2)(c) does not encompass clauses limiting the weight, as opposed to the number, of passengers. Subs (2)(e) does not prevent reliance upon a clause which limits the use of the vehicle to ‘‘social, domestic and pleasure purposes’’ (Gray v. Blackmore [1934] 1 KB 95), although see the limits on this form of restriction imposed by s 150 of the Road Traffic Act 1988, in para 7.20. Subs (3) confirms that the avoiding of policy conditions is confined to third party claims against the assured, and does not extend to first party losses. Subs (4) confers upon the insurer a right of recourse against the user where payment has been made to meet the user’s liability in circumstances in which the insurer is prevented from relying upon breach of any of the conditions in subs (2): see generally, Liverpool Corporation v. Roberts & Marsh [1964] 2 Lloyd’s Rep 219. If the right of recourse is not exercised, the insurer is deemed to have made a voluntary payment, which will prevent any claim for contribution by the insurer against any other insurer whose policy covered the same liability: Legal and General Insurance Society Ltd v. Drake Insurance Co Ltd [1992] 1 All ER 283, although contrast Drake Insurance Co v.Provident Insurance Co [2004] 1 Lloyd’s Rep 268 in which the Court of Appeal held that a paying insurer who makes payment only after protesting long and loud to another insurer allegedly on risk but who has refused to pay is not a volunteer for these purposes and retains a right of contribution.

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Subs (5) prevents the insurer from relying upon any post-loss breach of duty by the assured, eg, the submission of a late claim or an admission of liability to the third party victim of the assured’s negligence. Subs (5) does not affect the operation of an arbitration clause, but it is probably the case that an arbitration clause in Scott v. Avery form—whereby the insurer’s liability rests upon an arbitration award against it so that arbitration is a condition precedent to the claim—is void to that extent: Jones v. Birch Brothers Ltd (1933) 46 Ll LR 277. Subs (6) Under this provision there is a saving for any clause which provides for a right of recourse by the insurer against the assured where the insurer has been required to meet a third party claim. Subs (7) Where a policy contains an extension clause, extending cover to named drivers or to any class of persons (eg, persons driving with the assured’s consent), subs (7) gives the driver a direct cause of action against the insurer despite the lack of privity between himself and the insurer. The driver obtains no better right against the insurer than was possessed by the assured, and is bound by, eg, an arbitration clause in the policy (Freshwater v. Western Australian Assurance Co [1933] 1 KB 515; Guardian Assurance Co v. Sutherland [1939] 2 All ER 246) or a notice of loss provision (Austin v. Zurich General Accident & Liability Insurance Co Ltd [1945] KB 250), although the insurer will rarely be able to rely upon any post-loss breach of duty by a named insurer by virtue of s 148(5). A third party victim does not have any cause of action against the insurers under this provision: Charlton v.Fisher [2001] Lloyd’s Rep IR 387. A driver who obtains consent for use of the vehicle, and then uses the vehicle for another purpose, cannot be said to be a person driving with the assured’s consent (Singh v. Rathour[1988] 1 WLR 422), and equally the purchaser of a vehicle cannot be said to be driving with the seller’s consent in order to take advantage of the seller’s policy (Smith v. Ralph [1963] 2 Lloyd’s Rep 439), although the assured’s consent is not automatically revoked on his death (Kelly v. Cornhill Insurance Co Ltd [1964] 1 Lloyd’s Rep 1). General extension clauses were at one time thought to be illegal under s 2 of the Life Assurance Act 1774 (Vandepitte v. Preferred Accident Insurance Corporation of New York [1933] AC 70, and see notes under s 2 in para 3.20), which requires the names of all persons interested in a policy caught by that Act to be inserted in the policy. The illegality arose from the possible application of the 1774 Act to liability policies, although this was ultimately denied by the Privy Council in Siu v. Eastern Insurance Co [1994] 1 All ER 213. Prior to Siu the 1774 Act had been overcome by a holding that a compulsory motor policy was a goods rather than liability policy, goods being expressly excluded from the 1774 Act: Williams v. Baltic Insurance Association of London [1924] 2 KB 282.

Avoidance of certain agreements as to liability towards passengers 149.—(1) This section applies where a person uses a motor vehicle in circumstances such that under section 143 of this Act there is required to be in force in relation to his use of it such a policy of insurance or such a security in respect of third-party risks as complies with the requirements of this Part of this Act. (2) If any other person is carried in or upon the vehicle while the user is so using it, any antecedent agreement or understanding between them (whether intended to be legally binding or not) shall be of no effect so far as it purports or might be held— (a) to negative or restrict any such liability of the user in respect of persons carried in or upon the vehicle as is required by section 145 of this Act to be covered by a policy of insurance, or (b) to impose any conditions with respect to the enforcement of any such liability of the user. (3) The fact that a person so carried has willingly accepted as his the risk of negligence on the part of the user shall not be treated as negativing any such liability of the user. (4) For the purposes of this section— (a) references to a person being carried in or upon a vehicle include references to a person entering or getting on to, or alighting from, the vehicle, and (b) the reference to an antecedent agreement is to one made at any time before the liability arose. Notes The inclusion of passengers as a protected class of victims within the compulsory insurance regime complies with art 1 of Council Directive 90/232. Earlier legislation treated a passenger as covered by compulsory insurance only where the carriage was not ‘‘for hire or reward’’, a phrase which covered non-binding car share agreements: Wyatt v. Guildhall Insurance [1937] 1 KB 653; Coward v. Motor Insurers’ Bureau [1963] 1 QB 259; Motor Insurers’ Bureau v. Meanen [1971] 2 Lloyd’s Rep 251; Albert v. Motor Insurers’ Bureau [1972] AC 301.

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The section seeks to prevent a passenger from losing his ability to sue the negligent user of the vehicle at common law (see Dann v. Hamilton [1939] 1 KB 509; Nettleship v. Weston [1971] 2 QB 691; Owens v. Brimmell [1977] QB 859), in two respects: (a) by avoiding any agreement between the user and passenger which excludes or limits the driver’s liability; (b) by preventing the user from relying upon the defence of volenti non fit injuria against the passenger where the passenger was, eg, aware of the user’s intoxicated state—s 149(3) applies irrespective of the passenger’s degree of recklessness (Winnick v. Dick 1984 SLT 185; Pitts v. Hunt [1990] 3 All ER 344). Section 149 leaves untouched two further ways in which the passenger’s claim can be diminished or lost: (a) where the passenger has been guilty of contributory negligence which has partly caused his loss, as where the passenger has failed to wear a seat belt or crash helmet (Froom v. Butcher [1976] QB 286; O’Connell v. Jackson [1972] 1 QB 270), although the deduction for contributory negligence can never be 100 per cent (Pitts v. Hunt [1990] 3 All ER 344); (b) where the passenger has participated, as opposed merely to have acquiesced, in the user’s unlawful driving of the vehicle (Ashton v. Turner [1981] QB 137; Pitts v. Hunt [1990] 3 All ER 344), in which case there is no cause of action on public policy grounds. A passenger who does have a good claim against the user may nevertheless be deprived of the right to bring a direct claim against the insurer, if the conditions of s 151(4) are satisfied: see note to that section in para 7.20.

Insurance or security in respect of private use of vehicle to cover use under car-sharing arrangements 150.—(1) To the extent that a policy or security issued or given for the purposes of this Part of this Act— (a) restricts the insurance of the persons insured by the policy or the operation of the security (as the case may be) to use of the vehicle for specified purposes (for example, social, domestic and pleasure purposes) of a non-commercial character, or (b) excludes from that insurance or the operation of the security (as the case may be)— (i) use of the vehicle for hire or reward, or (ii) business or commercial use of the vehicle, or (iii) use of the vehicle for specified purposes of a business or commercial character, then, for the purposes of that policy or security so far as it relates to such liabilities as are required to be covered by a policy under section 145 of this Act, the use of a vehicle on a journey in the course of which one or more passengers are carried at separate fares shall, if the conditions specified in subsection (2) below are satisfied, be treated as falling within that restriction or as not falling within that exclusion (as the case may be). (2) The conditions referred to in subsection (1) above are— (a) the vehicle is not adapted to carry more than eight passengers and is not a motor cycle, (b) the fare or aggregate of the fares paid in respect of the journey does not exceed the amount of the running costs of the vehicle for the journey (which for the purposes of this paragraph shall be taken to include an appropriate amount in respect of depreciation and general wear), and (c) the arrangements for the payment of fares by the passenger or passengers carried at separate fares were made before the journey began. (3) Subsections (1) and (2) above apply however the restrictions or exclusions described in subsection (1) are framed or worded. (4) In subsections (1) and (2) above ‘‘fare’’ and ‘‘separate fares’’ have the same meaning as in section 1(4) of the Public Passenger Vehicles Act 1981. Notes The Road Traffic Act 1988 does not prevent the insurer from restricting its liability to cases in which the vehicle is being used solely for ‘‘social, domestic and pleasure’’ purposes. Section 150 nevertheless provides a statutory modification of the meaning of that phrase, by stipulating that the use of a vehicle in a carsharing arrangement (eg, for lifts to and from work) is deemed to be a social, domestic or pleasure use as long as the conditions set out in s 151(2) are met.

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Duty of insurers or persons giving security to satisfy judgment against persons insured or secured against third-party risks 151.—(1) This section applies where, after a certificate of insurance or certificate of security has been delivered under section 147 of this Act to the person by whom a policy has been effected or to whom a security has been given, a judgment to which this subsection applies is obtained. (2) Subsection (1) above applies to judgments relating to a liability with respect to any matter where liability with respect to that matter is required to be covered by a policy of insurance under section 145 of this Act and either— (a) it is a liability covered by the terms of the policy or security to which the certificate relates, and the judgment is obtained against any person who is insured by the policy or whose liability is covered by the security, as the case may be, or (b) it is a liability, other than an excluded liability, which would be so covered if the policy insured all persons or, as the case may be, the security covered the liability of all persons, and the judgment is obtained against any person other than one who is insured by the policy or, as the case may be, whose liability is covered by the security. (3) In deciding for the purposes of subsection (2) above whether a liability is or would be covered by the terms of a policy or security, so much of the policy or security as purports to restrict, as the case may be, the insurance of the persons insured by the policy or the operation of the security by reference to the holding by the driver of the vehicle of a licence authorising him to drive it shall be treated as of no effect. (4) In subsection (2)(b) above ‘‘excluded liability’’ means a liability in respect of the death of, or bodily injury to, or damage to the property of any person who, at the time of the use which gave rise to the liability, was allowing himself to be carried in or upon the vehicle and knew or had reason to believe that the vehicle had been stolen or unlawfully taken, not being a person who— (a) did not know and had no reason to believe that the vehicle had been stolen or unlawfully taken until after the commencement of his journey, and (b) could not reasonably have been expected to have alighted from the vehicle. In this subsection the reference to a person being carried in or upon a vehicle includes a reference to a person entering or getting on to, or alighting from, the vehicle. (5) Notwithstanding that the insurer may be entitled to avoid or cancel, or may have avoided or cancelled, the policy or security, he must, subject to the provisions of this section, pay to the persons entitled to the benefit of the judgment— (a) as regards liability in respect of death or bodily injury, any sum payable under the judgment in respect of the liability, together with any sum which, by virtue of any enactment relating to interest on judgments, is payable in respect of interest on that sum. (b) as regards liability in respect of damage to property, any sum required to be paid under subsection (6) below, and (c) any amount payable in respect of costs. (6) This subsection requires— (a) where the total of any amount paid, payable or likely to be payable under the policy or security in respect of damage or property caused by, or arising out of, the accident in question does not exceed £250,000, the payment of any sum payable under the judgment in respect of the liability, together with any sum which, by virtue of any enactment relating to interest on judgments, is payable in respect of interest on that sum, (b) where that total exceeds £1,000,000, the payment of either— (i) such proportion of any sum payable under the judgment in respect of the liability as £250,000 bears to that total, together with the same proportion of any sum which, by virtue of any enactment relating to interest on judgments, is payable in respect of interest on that sum, or (ii) the difference between the total of any amounts already paid under the policy or security in respect of such damage and £250,000, together with such proportion of any sum which, by virtue of any enactment relating to interest on judgments, is

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payable in respect of interest on any sum payable under the judgment in respect of the liability as the difference bears to that sum, whichever is the less, unless not less than £250,000 has already been paid under the policy or security in respect of such damage (in which case nothing is payable). (7) Where an insurer becomes liable under this section to pay an amount in respect of a liability of a person who is insured by a policy or whose liability is covered by a security, he is entitled to recover from that person— (a) that amount, in a case where he became liable to pay it by virtue only of subsection (3) above, or (b) in a case where that amount exceeds the amount for which he would, apart from the provisions of this section, be liable under the policy or security in respect of that liability, the excess. (8) Where an insurer becomes liable under this section to pay an amount in respect of a liability of a person who is not insured by a policy or whose liability is not covered by a security, he is entitled to recover the amount from that person or from any person who— (a) is insured by the policy, or whose liability is covered by the security, by the terms of which the liability would be covered if the policy insured all persons or, as the case may be, the security covered the liability of all persons, and (b) caused or permitted the use of the vehicle which gave rise to the liability. (9) In this section— (a) ‘‘insurer’’ includes a person giving a security, (b) . . . (c) ‘‘liability covered by the terms of the policy or security’’ means a liability which is covered by the policy or security or which would be so covered but for the fact that the insurer is entitled to avoid or cancel, or has avoided or cancelled, the policy or security. (10) In the application of this section to Scotland, the words ‘‘by virtue of any enactment relating to interest on judgments’’ in subsections (5) and (6) (in each place where they appear) shall be omitted. Notes Section 151 gives the victim of a user the right to enforce against the user’s liability insurer a judgment which he has obtained against the user. Subs (1) The preliminary requirement that the certificate has been delivered to the assured can be satisfied at any time before the judgment is obtained: Motor & General Insurance Co Ltd v. Cox [1990] 1 WLR 1443. Subs (2)(a) is concerned with cases in which the user’s liability is covered by the policy. It was held by the majority of the Court of Appeal in Charlton v.Fisher [2001] Lloyd’s Rep IR 387 that a third party victim of a deliberate running down was entitled to enforce against the insurers the judgment obtained against the assured, on the basis that the liability was one required to be covered by insurance under the Act. The reasoning is doubtful, and even if it is incorrect the victim has an action against the MIB under the Uninsured Drivers’ Agreement 1999 with the insurers themselves facing liability to indemnify the victim under the MIB’s internal rules (Article 75 of the MIB’s Articles, set out below). Subs (2)(b) implements art 2 of the Council Directive 84/5 by imposing upon the insurer the obligation to meet a liability resulting from use of the vehicle by an unauthorised person, reversing the common law rule that a liability insurer is not liable for injury inflicted by an unauthorised driver (Haworth v. Dawson (1946) 80 L1 LR 19). It does not remove this obligation even where the vehicle is stolen or obtained by violence, as permitted by art 2 of the Directive. Subs (3) obliges an insurer to meet, under s 151(2)(b), the liability of an uninsured user even if he is not in possession of a driving licence. The subsection implements art 2 of Directive 84/5. Subs (4) is based upon art 2 of Council Directive 84/5 which permits, but does not require, member states to withdraw the victim’s protection where the victim is a passenger in what he knew to be a stolen vehicle. A similar provision is found in cl 6 of the MIB Uninsured Drivers Agreement, although the wording there removes protection where the passenger ‘‘knew or ought to have known’’ that the vehicle was stolen or uninsured, wording which has been held to mean either actual or blind eye knowledge, consistently with the Directive: White v.White [2001] Lloyd’s Rep IR 493. The phrase ‘‘had reason to believe’’ which appears in subs (4) and which also appeared in the earlier version of the MIB Uninsured Drivers Agreement, has been held in Porter v. Motor Insurers’ Bureau [1978] 2 Lloyd’s Rep 463 to allow a passenger to recover unless there was clear evidence of theft or want of insurance. It is thought that the phrase ‘‘had reason to believe’’ is not consistent with Directive 84/5, which requires actual knowledge of the theft on the victim’s behalf, although contrast the contrary assumption in McMinn v. McMinn [2006] Lloyd’s Rep IR 802. The phrase

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‘‘unlawfully taken’’ derives its meaning from the Theft Act 1968, s 12, so that a person who with permission borrows a vehicle is to be treated as having unlawfully taken it if he uses it for purposes going beyond that permission, eg, by allowing a third party to drive it: McMinn v. McMinn [2006] Lloyd’s Rep IR 802. Subs (5) The insurer is obliged to meet the third party’s claim despite the termination of the contract, although this should be read subject to s 152(2), below, which gives the insurer a statutory right to avoid the policy and to avoid liability. Subs (6) was amended by the Motor Vehicles (Compulsory Insurance) Regulations 2007, SI 2007 No 1426. The provision places limits on the insurer’s liability in a direct action for property damage. In essence the insurer is liable for the judgment plus interest up to a ceiling of £1,000,000, raised by the 2007 Regulations from the previous figure of £250,000. Subs (7)–(8) These provisions confer upon the insurer a right of recourse against the user of the vehicle in the event that the insurer faces liability under statute but not under the policy: Lloyd-Wolper v. Moore [2004] Lloyd’s Rep IR 730, where the assured allowed his below-age son to drive the vehicle and was held to be liable in a recourse action for causing or permitting uninsured use. If the insurer fails to exercise its right of recourse, its payment is to be treated as voluntary and the insurer is thus precluded from seeking contribution from any other insurer on risk in relation to the loss: Legal and General Insurance Society Ltd v. Sphere Drake General Insurance Co Ltd [1992] 1 All ER 283, as modified by Drake Insurance Co v. Provident Insurance Co [2004] 1 Lloyd’s Rep 268. Subs (9) Subs (9)(b)—the definition of materiality—was deleted by the Road Traffic Act 1991, Sched 8, and moved to s 152(2), below.

Exceptions to section 151 152.—(1) No sum is payable by an insurer under section 151 of this Act— (a) in respect of any judgment unless, before or within seven days after the commencement of the proceedings in which the judgment was given, the insurer had notice of the bringing of the proceedings, or (b) in respect of any judgment so long as execution on the judgment is stayed pending an appeal, or (c) in connection with any liability if, before the happening of the event which was the cause of the death or bodily injury or damage to property giving rise to the liability, the policy or security was cancelled by mutual consent or by virtue of any provision contained in it, and also— (i) before the happening of that event the certificate was surrendered to the insurer, or the person to whom the certificate was delivered made a statutory declaration stating that the certificate had been lost or destroyed, or (ii) after the happening of that event, but before the expiration of a period of fourteen days from the taking effect of the cancellation of the policy or security, the certificate was surrendered to the insurer, or the person to whom it was delivered made a statutory declaration stating that the certificate had been lost or destroyed, or (iii) either before or after the happening of that event, but within that period of fourteen days, the insurer has commenced proceedings under this Act in respect of the failure to surrender the certificate. (2) Subject to subsection (3) below, no sum is payable by an insurer under section 151 of this Act if, in an action commenced before, or within three months after, the commencement of the proceedings in which the judgment was given, he has obtained a declaration— (a) that, apart from any provision contained in the policy or security, he is entitled to avoid it on the ground that it was obtained— (i) by the non-disclosure of a material fact, or (ii) by a representation of fact which was false in some material particular, or (b) if he has avoided the policy or security on that ground, that he was entitled so to do apart from any provision contained in it and for the purposes of this section, ‘‘material’’ means of such nature as to influence the judgment of a prudent insurer in determining whether he will take the risk and, if so, at what premium and on what conditions. (3) An insurer who has obtained such a declaration as is mentioned in subsection (2) above in an action does not by reason of that become entitled to the benefit of that subsection as respects any judgment obtained in proceedings commenced before the commencement of that action unless before, or within seven days after, the commencement of that action he has given

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notice of it to the person who is the plaintiff (or in Scotland pursuer) in those proceedings specifying the non-disclosure of false representation on which he proposes to rely. (4) A person to whom notice of such an action is so given is entitled, if he thinks fit, to be made a party to it. Notes Subs (1) This subsection lists three situations in which the insurer can avoid the liability imposed by s 151. A declaration as to the insurer’s non-liability may be made even though the assured has not appeared in the proceedings: Guardian Assurance v. Sutherland (1939) 63 L1 LR 220. Subs (1)(a) To be effective, formal notice must be given to an authorised agent of the insurer (Herbert v. Railway Passengers Assurance Co (1938) 60 L1 LR 143; Weldrick v. Essex and Suffolk Equitable Insurance Society (1949) 83 L1 LR 91) and must inform the insurer that proceedings are to be commenced, not merely that a claim has been made against the assured (McGoona v. Motor Insurers’ Bureau [1969] 2 Lloyd’s Rep 34) or that the third party will be advised by his solicitors to commence proceedings against the assured in the event that the insurer does not meet the third party’s claim (Harrington v. Link Motor Policies at Lloyd’s [1989] 2 Lloyd’s Rep 310). If the insurer is informed that proceedings are pending, the fact that there was no underlying intention for the communication to operate as notice under the legislation is irrelevant to its validity: Nawaz and Hussain v.Crow Insurance Group [2003] Lloyd’s Rep IR 471. It is not necessary for every detail of the action to be notified to the insurers (Ceylon Motor Insurance Association Ltd v. Thambugala [1953] AC 584). See also Stinton v. Stinton [1995] RTR 167. In McBlain v. Dolan [2001] Lloyd’s Rep IR 309 the Court of Session saw some difficulty in reconciling Harrington and Ceylon. If the claim against the assured arises by way of counterclaim in an action brought by the assured against the third party, the date of the counterclaim is the relevant date for subs (1)(a) (Cross v. British Oak Insurance Co Ltd (1938) 60 L1 LR 46). The notice is particularly significant for the purposes of s 152(2) (see below). Subs (1)(c) Where the insurer issues a single policy and a number of copies of the certificate, the surrender of all of the copies is required: see the definition in s 161(2). Prior to the introduction of this provision, the surrender of one copy of the certificate had been sufficient to bring the contract to an end (Moore v. Crowe [1972] 2 Lloyd’s Rep 563). Subs (2) was amended by the Road Traffic Act 1991, Sched 4, para 66. This subsection provides a further defence to the insurer in respect of liability under s 151. The definition of ‘‘material’’, inserted by the Road Traffic Act 1991, Sched 4, para 66 and having originally been contained in the now deleted s 151(9)(b), is consistent with the definition adopted by ss 18 and 20 of the Marine Insurance Act 1906 which has been applied to all forms of insurance (see notes for those sections in para 5.20). The insurer’s right to avoid the policy is subject to a three-month time limit running from the date of the commencement of proceedings against the assured, but only if that event has been notified to the insurer within seven days in accordance with s 152(1)(a) (above). The insurer must also prove that the policy was obtained by non-disclosure or misrepresentation, a requirement which imposes a subjective test based on the insurer’s actual state of mind (Zurich General Accident and Liability Insurance Co Ltd v. Morrison (1942) 72 L1 LR 167), a position now consistent with the general law. Subs (3) Under this provision the third party is entitled to be informed in the event that the insurer attempts to avoid the policy, and the insurer’s right to seek a declaration is dependent upon its compliance with the seven-day time limit (see Colonial Fire and General Insurance Co Ltd v. Harry [2006] UKPC 53 for a factual dispute as to whether the requisite notice had been given). The only particulars of the assured’s breach of duty which may be relied upon by the insurer are those in the claim when seven days have expired: amendments to the claim which are made after seven days fall outside the section (Contingency Insurance Co v. Lyons (1939) 65 L1 LR 53; Zurich General Accident Insurance and Liability Co v. Morrison (1942) 72 L1 LR 167). If the person driving the vehicle was not the assured, there is no need for the driver to be joined to the avoidance procedures: Colonial Fire and General Insurance Co Ltd v. Harry [2006] UKPC 53. Subs (4) The third party is, by being given the right to be made a party to the proceedings in which the declaration is sought, protected against any form of post-action settlement between the assured and the insurer under which the assured concedes that the policy can be avoided. Any admission of breach of duty made by the assured is not binding on the third party, as he is a party to the action in his own right and can insist upon proof by the insurer of the assured’s breach of duty (Merchants’ and Manufacturers Insurance Co Ltd v. Hunt (1941) 68 L1 LR 117). The Insurer’s defence may be lost if it fails to comply with the court’s orders as to furthering particulars of the allegations of breach of duty to the third party (Trafalgar Insurance Co Ltd v. McGregor [1942] 1 KB 275).

Bankruptcy, etc, of insured or secured persons not to affect claims by third parties 153.—(1) Where, after a certificate of insurance or certificate of security has been delivered under section 147 of this Act to the person by whom a policy has been effected or to whom a security has been given, any of the events mentioned in subsection (2) below happens, the happening of that event shall, notwithstanding anything in the Third Parties (Rights Against

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Insurers) Act 1930, not affect any such liability of that person as is required to be covered by a policy of insurance under section 145 of this Act. (2) In the case of the person by whom the policy was effected or to whom the security was given, the events referred to in subsection (1) above are— (a) that he becomes bankrupt or makes a composition or arrangement with his creditors or that his estate is sequestrated or he grants a trust deed for his creditors, (b) that he dies and— (i) his estate falls to be administered in accordance with an order under section 421 of the Insolvency Act 1986, (ii) an award of sequestration of his estate is made, or (iii) a judicial factor is appointed to administer his estate under section 11A of the Judicial Factors (Scotland) Act 1889, (c) that if that person is a company— (i) a winding-up order is made with respect to the company or the company enters administration, (ii) a resolution for a voluntary winding-up is passed with respect to the company, (iii) a receiver or manager of the company’s business or undertaking is duly appointed, or (iv) possession is taken, by or on behalf of the holders of any debentures secured by a floating charge, of any property comprised in or subject to the charge. (3) Nothing in subsection (1) above affects any rights conferred by the Third Parties (Rights Against Insurers) Act 1930 on the person to whom the liability was incurred, being rights so conferred against the person by whom the policy was issued or the security was given. Notes This section was amended by the Insolvency Act 1986 and by the Enterprise Act 2002 (Insolvency) Order 2003, SI 2003 No 2096. Subs (1) The insolvency of the assured does not prevent the victim from pursuing an action against the assured and, in due course, from enforcing any judgment against the insurer. Subs (2) Insofar as the judgment covers compulsory risks, the victim has a direct action against the insurer under s 151 above. Insofar as the judgment relates to the assured’s liabilities which do not have to be covered by insurance under the Road Traffic Act 1988 (eg, loss of profits or property loss in excess of £250,000), the victim can rely upon the Third Parties (Rights Against Insurers) Act 1930 for a direct cause of action against the insurer, but only where the assured has become insolvent.

Duty to give information as to insurance or security where claim made 154.—(1) A person against whom a claim is made in respect of any such liability as is required to be covered by a policy of insurance under section 145 of this Act must, on demand by or on behalf of the person making the claim— (a) state whether or not, in respect of that liability— (i) he was insured by a policy having effect for the purposes of this Part of this Act or had in force a security having effect for those purposes, or (ii) he would have been so insured or would have had in force such a security if the insurer or, as the case may be, the giver of the security had not avoided or cancelled the policy or security, and (b) if he was or would have been so insured, or had or would have had in force such a security— (i) give such particulars with respect to that policy or security as were specified in any certificate of insurance or security delivered in respect of that policy or security, as the case may be, under section 147 of this Act, or (ii) where no such certificate was delivered under that section, give the following particulars, that is to say, the registration mark or other identifying particulars of the vehicle concerned, the number or other identifying particulars of the insurance policy issued in respect of the vehicle, the name of the insurer and the period of the insurance cover. (2) If without reasonable excuse, a person fails to comply with the provisions of subsection (1) above, or wilfully makes a false statement in reply to any such demand as is referred to in that subsection, he is guilty of an offence.

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Notes This section complies with art 5 of Council Directive 90/232, and obliges a person against whom a claim is made to state whether or not he was insured and, if so, provide details of the policy. It would seem that a claim has to be made before any disclosure requirement arises, so that any demand for information at the scene of an accident is probably not covered by s 154. It is unclear whether art 5 so requires.

Deposits 155.—(1) Where a person has deposited a sum with the Accountant General of the Supreme Court under section 144 or 146 of this Act, then, so long as any liabilities incurred by him, being such liabilities as are required to be covered by a policy of insurance under section 145 of this Act, have not been discharged or otherwise provided for, no part of that sum shall be applicable in discharge of any other liabilities incurred by him. (2) Any regulations made, or having effect as if made, by the Treasury under section 20 of the Insurance Companies Act 1958 which apply to deposits made by insurers carrying on motor vehicle insurance business shall, with such necessary modifications and adaptations as, after consultation with the Lord Chancellor, may be prescribed, apply to deposits made with the Accountant General under section 144 or 146 of this Act. (3) Such provision as might be made by the [Treasury] under section 20 of the Insurance Companies Act 1958 with respect to deposits under that Act may, after consultation with the Lord Chancellor, be made by regulations with respect to deposits made with the Accountant General under section 144 or 146 of this Act. Notes Subs (2) was amended by the Transfer of Functions (Insurance) Order 1997, SI 1997 No 2781, Sched, para 115. The regulations referred to are the Motor Vehicles (Third-Party Risk Deposits) Regulations 1992, SI 1992 No 1284, the text of which is set out in para 7.25. Subs (3) was amended by the Transfer of Functions (Insurance) Order 1997, SI 1997 No 2781, Sched, para 115.

Power to require evidence of insurance or security on application for vehicle excise licence 156. Provision may be made by regulations under section 57 of the Vehicle Excise and Registration Act 1994 for requiring a person applying for a licence under that Act in respect of a motor vehicle to produce such evidence as may be prescribed that either— (a) on the date when the licence comes into operation there will be in force the necessary policy of insurance or the necessary security in relation to the use of the vehicle by the applicant or by other persons on his order or with his permission, or (b) the vehicle is a vehicle to which section 143 of this Act does not apply at a time when it is being driven under the owner’s control. Notes The Regulations referred to are the Motor Vehicles (Third Party Risks) Regulations 1972, SI 1972 No 1217, as amended by SI 1992 No 1283 and the Motor Vehicles International Motor Insurance Card) Regulations 1971, SI 1971 No 792, the text of which is set out in para 7.21.

Payments for treatment of traffic casualties Payment for hospital treatment of traffic casualties 157.—(1) Subject to subsection (2) below, where— (a) a payment, other than a payment under section 158 of this Act, is made (whether or not with an admission of liability) in respect of the death of, or bodily injury to, any person arising out of the use of a motor vehicle on a road or in a place to which the public have a right of access, and (b) the payment is made— (i) by an authorised insurer, the payment being made under or in consequence of a policy issued under section 145 of this Act, or

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(ii) by the owner of a vehicle in relation to the use of which a security under this Part of this Act is in force, or (iii) by the owner of a vehicle who has made a deposit under this Part of this Act, and (c) the person who has so died or been bodily injured has to the knowledge of the insurer or owner, as the case may be, received treatment at a hospital, whether as an in-patient or as an out-patient, in respect of the injury so arising, the insurer or owner must pay the expenses reasonably incurred by the hospital in affording the treatment, after deducting from the expenses any moneys actually received in payment of a specific charge for the treatment, not being moneys received under any contributory scheme. (2) The amount to be paid shall not exceed £2,856.00 for each person treated as an in-patient or £286.00 for each person treated as an out-patient. (3) For the purposes of this section ‘‘expenses reasonably incurred’’ means— (a) in relation to a person who receives treatment at a hospital as an in-patient, an amount for each day he is maintained in the hospital representing the average daily cost, for each in-patient, of the maintenance of the hospital and the staff of the hospital and the maintenance and treatment of the in-patients in the hospital, and (b) in relation to a person who receives treatment at a hospital as an out-patient, reasonable expenses actually incurred. Notes This section no longer applies to NHS hospitals, whose rights to recover indemnification for the costs of treatment are governed by the Health and Social Care (Community Health and Standards) Act 2003. The change is effected by the modification of the definition of ‘‘hospital’’ in s 161 of the Road Traffic Act 1988. The section is now confined to private hospitals. Subs (1) The liability of the insurer to make payments to a hospital is conditional upon the insurer knowing that the victim has received hospital treatment: Barnett Group Hospital Management Committee v. Eagle Star Insurance Co Ltd [1960] 1 QB 107. Subs (2) The figures were substituted by the Road Traffic Accidents (Payments for Treatment) Order 1993, SI 1993 No 2474.

Payment for emergency treatment of traffic casualties 158.—(1) Subsection (2) below applies where— (a) medical or surgical treatment or examination is immediately required as a result of bodily injury (including fatal injury) to a person caused by, or arising out of, the use of a motor vehicle on a road, and (b) the treatment or examination so required (in this Part of this Act referred to as ‘‘emergency treatment’’) is effected by a legally qualified medical practitioner. (2) The person who was using the vehicle at the time of the event out of which the bodily injury arose must, on a claim being made in accordance with the provisions of section 159 of this Act, pay to the practitioner (or, where emergency treatment is effected by more than one practitioner, to the practitioner by whom it is first effected)— (a) a fee of £70.65 in respect of each person in whose case the emergency treatment is effected by him, and (b) a sum, in respect of any distance in excess of two miles which he must cover in order— (i) to proceed from the place from which he is summoned to the place where the emergency treatment is carried out by him, and (ii) to return to the first mentioned place, equal to 40 pence for every complete mile and additional part of a mile of that distance. (3) Where emergency treatment is first effected in a hospital, the provisions of subsections (1) and (2) above with respect to payment of a fee shall, so far as applicable, but subject (as regards the recipient of a payment) to the provisions of section 159 of this Act, have effect with the substitution of references to the hospital for references to a legally qualified medical practitioner.

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(4) Liability incurred under this section by the person using a vehicle shall, where the event out of which it arose was caused by the wrongful act of another person, be treated for the purposes of any claim to recover damage by reason of that wrongful act as damage sustained by the person using the vehicle. Notes NHS hospitals were removed from the scope of this section by virtue of the Road Traffic (NHS Charges) Act 1999 (subsequently repealed by the Health and Social Care (Community Health and Standards) Act 2003), and there is no longer any provision for the collection of sums for emergency treatment by such hospitals on the basis that the sums involved are too small to be collected profitably. The present section is thus confined to private treatment. Subs (2) The figures were substituted by the Road Traffic Accidents (Payments for Treatment) Order 1993, SI 1993 No 2474.

Supplementary provisions as to payments for treatment 159.—(1) A payment falling to be made under section 157 or 158 of this Act in respect of treatment in a hospital must be made [to the hospital]. (2) A claim for a payment under section 158 of this Act may be made at the time when the emergency treatment is effected, by oral request to the person who was using the vehicle, and if not so made must be made by request in writing served on him within seven days from the day on which the emergency treatment was effected. (3) Any such request in writing— (a) must be signed by the claimant or, in the case of a hospital, by an executive officer of the [hospital claiming the payment], (b) must state the name and address of the claimant, the circumstances in which the emergency treatment was effected, and that it was first effected by the claimant or, in the case of a hospital, in the hospital, and (c) may be served by delivering it to the person who was using the vehicle or by sending it in a prepaid registered letter, or the recorded delivery service, addressed to him at his usual or last known address. (4) A payment made under section 158 of this Act shall operate as a discharge, to the extent of the amount paid, of any liability of the person who was using the vehicle, or of any other person, to pay any sum in respect of the expenses or remuneration of the practitioner or hospital concerned of or for effecting the emergency treatment. (5) A chief officer of police must, if so requested by a person who alleges that he is entitled to claim a payment under section 158 of this Act, provide that person with any information at the disposal of the chief officer— (a) as to the identification marks of any motor vehicle which that person alleges to be a vehicle out of the use of which the bodily injury arose, and (b) as to the identity and address of the person who was using the vehicle at the time of the event out of which it arose. Notes Subs (1) was amended by the Road Traffic (NHS Charges) Act 1999, s 18(2). Subs (3) was amended by the Road Traffic (NHS Charges) Act 1999, s 18(2).

Regulations 160.—(1) The Secretary of State may make regulations for any purpose for which regulations may be made under this Part of this Act and for prescribing anything which may be prescribed under this Part of this Act and generally for the purpose of carrying this Part of this Act into effect. In this Part of this Act ‘‘regulations’’ means regulations under this section and ‘‘prescribed’’ means prescribed by regulations. (2) In particular, but without prejudice to the generality of subsection (1) above, the regulations may make provision— (a) as to forms to be used for the purposes of this Part of this Act,

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(b) as to applications for and the issue of certificates of insurance and certificates of security and any other documents which may be prescribed, and as to the keeping of records of documents and the providing of particulars of them or the giving of information with respect to them to the Secretary of State or a chief officer of police, (c) as to the issue of copies of any such certificates or other documents which are lost or destroyed, (d) as to the custody, production, cancellation and surrender of any such certificates or other documents, and (e) for providing that any provisions of this Part of this Act shall, in relation to vehicles brought into Great Britain by persons making only a temporary stay in Great Britain, have effect subject to such modifications and adaptations as may be prescribed. Notes For regulations made under this section, see the notes to the preceding sections.

Interpretation 161.—(1) In this Part of this Act— ‘‘hospital’’ means any institution which provides medical or surgical treatment for in-patients, other than— (a) a health service hospital within the meaning of the National Health Service Act 1977 or the National Health Service Scotland) Act 1978, ... (c) any institution carried on for profit. ‘‘policy of insurance’’ includes a covering note, ‘‘salvage’’ means the preservation of a vessel which is wrecked, stranded or in distress, or the lives of persons belonging to, or the cargo or apparel of, such a vessel, and ‘‘under the owner’s control’’ means, in relation to a vehicle, that it is being driven by the owner or by a servant of the owner in the course of his employment or is otherwise subject to the control of the owner. (2) In any provision of this Part of this Act relating to the surrender, or the loss or destruction, of a certificate of insurance or certificate of security, references to such a certificate— (a) shall, in relation to policies or securities under which more than one certificate is issued, be construed as references to all certificates, and (b) shall, where any copy has been issued of any certificate, be construed as including a reference to that copy. (3) In this Part of this Act, any reference to an accident includes a reference to two or more casually related accidents. Notes Subs (1) The definition of ‘‘hospital’’ was amended by the National Health Service and Community Care Act 1990, Sched 9, para 35 and was replaced entirely by the Road Traffic (NHS Charges) Act 1999, s 18(3). It was again amended by the Health and Social Care (Community Health and Standards) Act 2003, s 169 to remove references to military hospitals, which have been phased out. The definition of policy of insurance is of particular significance for s 143: see the note to that section. Subs (2) For the significance of this, see the references to certificates in ss 147 and 152(1)(c).

Index to Part VI 162. The expressions listed in the left-hand column below are respectively defined or (as the case may be) fall to be construed in accordance with the provisions of this Part of this Act listed in the right-hand column in relation to those expressions.

954

Road Traffic Act 1988 Expression Accident Authorised insurer Certificate of insurance Certificate of security Hospital Policy of insurance Prescribed Regulations Salvage Under the owner’s control

7.20

Relevant provision Section 161(3) Section 145(2) Sections 147(1) and 161(2) Sections 147(2) and 161(2) Section 161(1) Section 161(1) Section 160(1) Section 160(1) Section 161(1) Section 161(1)

Interpretation Meaning of ‘‘motor vehicle’’ and other expressions relating to vehicles 185.—(1) In this Act— ‘‘motor vehicle’’ means, subject to section 20 of the Chronically Sick and Disabled Persons Act 1970 (which makes special provision about invalid carriages, within the meaning of that Act), a mechanically propelled vehicle intended or adapted for use on roads. Notes The most important definition in s 185, and the only one here reproduced, is that of ‘‘motor vehicle’’. To qualify, the vehicle must be ‘‘mechanically propelled’’, which means capable of mechanical propulsion, so that a vehicle in a wrecked state does not need to be insured (Lawrence v. Howlett [1952] 2 All ER 74; Smart v. Allan [1963] 1 QB 291; Reader v. Bunyard [1987] RTR 406). A vehicle which is merely temporarily immobilised but capable of repair is, however, a motor vehicle (Newberry v. Simmonds [1961] 2 QB 345; Law v. Thomas (1964) 108 Sol Jo 158; Cobb v. Wharton [1971] RTR 392; Nichol v. Leach [1972] RTR 476; Pumbien v.Vines [1996] RTR 37). A bicycle which is fitted with an engine is mechanically propelled, even though the engine is not used to propel the bicycle (Floyd v. Bush [1953] 1 Lloyd’s Rep 64, and see also Winter v.Director of Public Prosecutions [2003] RTR 14). A motor vehicle must also be ‘‘intended or adapted for use on roads’’, the test of intention being whether a reasonable person would have regarded the vehicle as one suitable for use on a road (Burns v. Currell [1963] 2 QB 433; Chief Constable of Avon and Somerset v. Fleming [1987] 1 All ER 318). On this basis, the following have been held to be motor vehicles: tractors (Woodward v. James Young (Contractors) Ltd 1958 SC 28). The following are not motor vehicles: go-karts (Burns v. Currell [1963] 2 QB 433); industrial dumpers (Daley v. Hargreaves [1961] 1 All ER 552, Chalgray Ltd v. Apsley (1965) 109 Sol Jo 437); ‘‘snowmobiles’’ (Martin v. Redshaw 65 DLR (4th) 476 (1990) and racing cars being transported from one venue to another (Brown v. Abbott (1965) 109 Sol Jo 437). It might be noted that this restriction on the definition of motor vehicle does not appear in Directive 72/166, art 1(1) and that it is enough under the Directive for the vehicle to be intended for travel on ‘‘land’’. Certain vehicles which would otherwise be motor vehicles are excluded from s 185 by s 189.

Certain vehicles not to be treated as motor vehicles 189.—(1) For the purposes of the Road Traffic Acts— (a) a mechanically propelled vehicle being an implement for cutting grass which is controlled by a pedestrian and is not capable of being used or adapted for any other purpose, (b) any other mechanically propelled vehicle controlled by a pedestrian which may be specified by regulations made by the Secretary of State for the purposes of this section and section 140 of the Road Traffic Regulation Act 1984, and (c) an electrically assisted pedal cycle of such a class as may be prescribed by regulations so made, is to be treated as not being a motor vehicle. (2) In subsection (1) above ‘‘controlled by a pedestrian’’ means that the vehicle either— (a) is constructed or adapted for use only under such control, or

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(b) is constructed or adapted for use either under such control or under the control of a person carried on it, but is not for the time being in use under, or proceeding under, the control of a person carried on it. Notes This section modifies the definition of ‘‘motor vehicle’’ in s 185.

General interpretation of Act 192.—(1) In this Act— ‘‘bridleway’’ means a way over which the public have the following, but no other, rights of way: a right of way on foot and a right of way on horseback or leading a horse, with or without a right to drive animals of any description along the way, ‘‘carriage of goods’’ includes the haulage of goods, ‘‘cycle’’ means a bicycle, a tricycle, or a cycle having four or more wheels, not being in any case a motor vehicle, ‘‘driver,’’ where a separate person acts as a steersman of a motor vehicle, includes (except for the purposes of section 1 of this Act) that person as well as any other person engaged in the driving of the vehicle, and ‘‘drive’’ is to be interpreted accordingly, ‘‘footpath,’’ in relation to England and Wales, means a way over which the public have a right of way on foot only, ‘‘goods’’ includes goods or burden of any description, ‘‘goods vehicle’’ means a motor vehicle constructed or adapted for use for the carriage of goods, or a trailer so constructed or adapted, ‘‘highway authority,’’ in relation to England and Wales, means— (a) in relation to a road other than a trunk road, the authority (being either the council of a county, metropolitan district or London borough or the Common Council of the City of London) which is responsible for the maintenance of the road, and (b) in relation to a trunk road, the Secretary of State, ‘‘international road haulage permit’’ means a licence, permit, authorisation or other document issued in pursuance of a Community instrument relating to the carriage of goods by road between member States or an international agreement to which the United Kingdom is a party and which relates to the international carriage of goods by road, ‘‘owner,’’ in relation to a vehicle which is the subject of a hiring agreement or hirepurchase agreement, means the person in possession of the vehicle under that agreement, ‘‘prescribed’’ means prescribed by regulations made by the Secretary of State, ‘‘road’’ (a) in relation to England and Wales, means any highway and any other road to which the public has access, and includes bridges over which a road passes, and, (b) in relation to Scotland, means any road within the meaning of the Roads (Scotland) Act 1984 and any other way to which the public has access, and includes bridges over which a road passes, ‘‘the Road Traffic Acts’’ means the Road Traffic Offenders Act 1988, the Road Traffic (Consequential Provisions) Act 1988 (so far as it reproduces the effect of provisions repealed by that Act) and this Act, ‘‘statutory’’, in relation to any prohibition, restriction, requirement or provision, means contained in, or having effect under, any enactment (including any enactment contained in this Act), ‘‘the Traffic Acts’’ means the Road Traffic Acts and the Road Traffic Regulation Act 1984, ‘‘traffic sign’’ has the meaning given by section 64(1) of the Road Traffic Regulation Act 1984, ‘‘tramcar’’ includes any carriage used on any road by virtue of an order under the Light Railways Act 1896, and

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7.21

‘‘trolley vehicle’’ means a mechanically propelled vehicle adapted for use on roads without rails under power transmitted to it from some external source, whether or not there is in addition a source of power on board the vehicle. (2) In this Act— ‘‘carriageway’’ ‘‘footway’’ ‘‘local roads authority’’ ‘‘public road’’ ‘‘roads authority’’ ‘‘special road’’ and ‘‘trunk road,’’ in relation to Scotland, have the same meanings as in the Roads (Scotland) Act 1984, and ‘‘footpath’’, in relation to Scotland, means a way over which the public have a right of way on foot only (whether or not associated with a carriageway). (3) References in this Act to a class of vehicles are to be interpreted as references to a class defined or described by reference to any characteristics of the vehicles or to any other circumstances whatsoever and accordingly as authorising the use of ‘‘category’’ to indicate a class of vehicles, however defined or described. Notes Subs (1) This provision was amended by the Road Traffic Act 1991, Sched 4, para 78. The definition of ‘‘road’’ has been considered in a number of cases. A car park open to the public is not a road (Griffin v. Squires [1958] 3 All ER 468) and private land to which the public are forbidden entry is not a road unless the public can in fact obtain access to the area with the express or implied consent of its owner (Harrison v. Hill 1932 JC 13; O’Brien v. Trafalgar Insurance Co Ltd (1945) 78 L1 LR 223; Buchanan v. Motor Insurers’ Bureau [1954] 2 Lloyd’s Rep 519; Walton v. Newcastle-on-Tyne Corporation [1957] 1 Lloyd’s Rep 412; Lister v. Romford Ice & Cold Storage Co Ltd [1957] AC 555; DPP v. Vivier [1991] 4 All ER 18; Severn Trent Water Authority v. Williams [1995] 10 CL 638; Charlton v. Fisher [2001] Lloyd’s Rep IR 387; Evans v. Clarke [2007] Lloyd’s Rep IR 16. A road must also go from point A to point B and must have fixed boundaries: Oxford v. Austin [1981] RTR 416; McGurk & Dale v. Coster [1995] 10 CL 521). The correctness of these cases was thrown into doubt by two decisions of the Court of Appeal, Cutter v. Eagle Star Insurance Co Ltd [1997] 2 All ER 311 and Clarke v. Kato [1997] 1 WLR 208, in each of which it was held that a car park was a road. However, these decisions were reversed by the House of Lords in a combined appeal, [1998] 4 All ER 417, where it was held that the key feature of a road was that it provided access by means of a definable route whereas a car park was a place in which vehicles were to be kept stationary rather than moving to some other destination. The House of Lords further held that the Insurance Directives did not require insurance to be obtained for liabilities incurred on private land and left the scope of cover open to member states. The legislation has since been amended so that the compulsory insurance requirement applies to the use of a motor vehicle in any public place: see the note to s 143. Subs (2) This provision was amended by the Road Traffic Act 1991, Sched 4, para 78 and Sched 8. Subs (3) Subs (3) was amended by the Road Traffic (Driver Licensing and Information Systems) Act 1989, Sched 3, para 24.

7.21 MOTOR VEHICLES (INTERNATIONAL MOTOR INSURANCE CARD) REGULATIONS 1971 (SI 1971 No 792) These Regulations implement the UK’s obligations in respect of the United Nations’ Green Card scheme, extending the insurance on a vehicle to its use in contracting states other than the state in which it is registered. The background to the Green Card scheme was given above. Title and Commencement 1. These Regulations may be cited as the Motor Vehicles (International Motor Insurance Card) Regulations 1971 and shall come into operation on the 10th June 1971.

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Motor Vehicle Insurance

Revocation 2. The Motor Vehicles (International Motor Insurance Card) Regulations 1969 are hereby revoked. Interpretation 3.—(1) In these Regulations— ‘‘the Act’’ means the Road Traffic Act 1960; ‘‘authorised insurer’’ has the same meaning as in Part VI of the Act; ‘‘British Bureau’’ means the Motor Insurers’ Bureau incorporated under the Companies Act 1929, and having its registered office at Aldermary House, Queen Street, London, E.C.4; ‘‘chief officer of police’’, and ‘‘police area’’, in relation to England and Wales, have the same meanings as in the Police Act 1964, and in relation to Scotland, have the same meanings as in the Police (Scotland) Act 1967; ‘‘Foreign Bureau’’ means a central organisation set up by motor insurers in any country outside the United Kingdom, the Isle of Man and the Channel Islands for the purpose of giving effect to international arrangements for the insurance of motorists against third-party risks when entering countries where insurance against such risks is compulsory, and with which organisation the British Bureau has entered into such an arrangement; ‘‘hired motor vehicle’’ means a motor vehicle which is:— (a) designed for private use and with seats for not more than eight persons excluding the driver, and (b) specified in an insurance card, and (c) last brought into Great Britain by a person making only a temporary stay therein, and (d) owned and let for hire by a person whose business includes the letting of vehicles for hire and whose principal place of business is outside the United Kingdom; ‘‘hiring visitor’’ means a person to whom a hire motor vehicle is let on hire, who is making only a temporary stay in Great Britain and is named as the insured or user of that vehicle in the insurance card in which that vehicle is specified; ‘‘insurance card’’ means an international motor insurance card issued under the authority of a Foreign Bureau or of the British Bureau which is green in colour and— (a) comprises two pages either in English or a foreign language containing the particulars specified in the page marked ‘‘original’’ and in the middle page set out in Part I of Schedule 1 to these Regulations and which in the case of each entry into the United Kingdom from a country outside thereof of the motor vehicle specified in the card during the period of validity so specified has attached thereto one or more pages green in colour and, either in English or a foreign language, containing the particulars specified in Part II of the said Schedule, each of which said pages is hereinafter referred to as a ‘‘duplicate page’’; or (b) until the 31st December 1977, is either in English or a foreign language in the form specified in Part I of Schedule 2 to these Regulations and which in the case of each entry into the United Kingdom from a country outside thereof of the motor vehicle specified in the card during the period of validity so specified has attached thereto one or more pages green in colour and, either in English or a foreign language, in the form specified in Part II of the said Schedule, each of which said pages is hereinafter referred to as a ‘‘duplicate page’’; ‘‘the Secretary of State’’ means the Secretary of State for the Environment; ‘‘trade licence’’ has the same meaning as in the Vehicles (Excise) Act 1971; ‘‘visitor’’ means a person bringing a motor vehicle into Great Britain, making only a temporary stay therein and named in an insurance card as the insured or user of the vehicle, and includes a hiring visitor who brings a hired motor vehicle into Great Britain, but no other hiring visitor. (2) Any Reference in these Regulations to any provision in an Act of Parliament or in subordinate legislation shall be construed as a reference to that provision as amended by any other such provision.

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Motor Vehicles (International Motor Insurance Card) Regulations 1971

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(3) The Interpretation Act 1889 shall apply for the interpretation of these Regulations as it applies for the interpretation of an Act of Parliament and as if for the purposes of section 38 of that Act these Regulations were an Act of Parliament and the Regulations revoked by Regulation 2 of these Regulations were an Act of Parliament thereby repealed. Validity of insurance card 4.—(1) An insurance card shall be valid for the purposes of these Regulations only if— (a) the motor vehicle specified in the card is brought into the United Kingdom during the period of validity so specified; (b) the application of the card in Great Britain is indicated thereon; (c) all relevant information provided for in the card has been inscribed therein; (d) the card has been duly signed by the visitor, by the insurer named in the card and, in the case of a hire motor vehicle, by every hiring visitor who is named in the card as the insured or user thereof; and (e) in the case of a card in the form of Part I of Schedule 2 to these Regulations, the card bears on page 1 thereof the name of the Foreign Bureau or the British Bureau, as the case may be, under whose authority the card was issued. (2) The information required to be inscribed in paragraphs 2, 7 and 8 in the page of the card shown in Schedule 1 to these Regulations and marked ‘‘original’’ and in paragraphs 2, 3 and 8 on page 3 of the card in the form in Schedule 2 to these Regulations is:— (a) in the said paragraph 2, the name of the Foreign Bureau or the British Bureau, as the case may be, under whose authority the card was issued; and (b) in the said paragraph 3 or 7, the name and address of the insured visitor and of every person who is, as respects a hired motor vehicle, a hiring visitor; and (c) in the said paragraph 8, the name and address of the insurer authorised to issue the card by the Foreign Bureau or the British Bureau, as the case may be, and by whom the card was issued. Third-party risks arising out of the use of motor vehicles by visitors 5.—(1) As regards the use on a road of a motor vehicle specified in a valid insurance card, being use by the visitor to whom the card was issued, or by any hiring visitor named therein, or by any other person on the order or with the permission of the said visitor or of any such hiring visitor, section 201 of the Act shall have effect as though the said card were a policy of insurance complying with the requirements of and having effect for the purposes of Part VI of the Act in relation to such use; Provided that where the said motor vehicle remains in the United Kingdom after the expiry of the period of validity specified in the card, then as respects any period whilst it so remains during which the vehicle is in Great Britain the said card shall not be regarded as having ceased to be in force for the purposes of the said section 201 by reason only of effluxion of the period of validity specified in the card. For the purposes of this paragraph a motor vehicle shall be deemed not to have left the United Kingdom whilst it is only in transit between different parts of the United Kingdom. (2) Any reference in this Regulation and in the next two following Regulations to the use on a road of a motor vehicle shall not include any use of the vehicle for the purpose of delivering it to or for the visitor at some place other than the place of entry of the vehicle into Great Britain, which is authorised under a trade licence. 6.—(1) For the purposes of sections 226, 230 and 231 of the Act, a valid insurance card shall have effect as though it were a certificate of insurance issued by an authorised insurer and in relation to any claim in respect of any such liability as is required to be covered by a policy of insurance under section 203 of the Act and arising out of the use on a road of a motor vehicle specified in such a card by the visitor to whom it was issued, by any hiring visitor named therein, or by any other person on the order or with the permission of the said visitor or of any such hiring visitor, the person against whom the claim is made shall in lieu of making the statement and giving the particulars referred to in section 209(1) of the Act, give to the person making the claim, on his demand, the serial letter or letters (if any) and serial number shown in the

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Motor Vehicle Insurance

card, the name of the Bureau under whose authority it was issued and the name and address of the person specified therein as the insured. (2) Any person making or intending to make any such claim as is mentioned in the preceding paragraph of this Regulation shall give notice of the claim in writing to the British Bureau as soon as practicable after the happening of the event out of which the claim arose specifying the nature of the claim and against whom it is made or intended to be made. (3) Where owing to the presence on the road of a motor vehicle specified in an insurance card, an accident occurs involving personal injury to a person other than the driver of the vehicle, and by reason of section 226 or 230 of the Act, as modified by paragraph (1) of this Regulation, the insurance card, together with a duplicate page, is produced to a police constable or at a police station, that police constable or a police constable at that station may detach the duplicate page from the card and arrange for its retention for the purposes of recording or producing insurance particulars relating to the accident. 7. In any civil proceedings in respect of any such liability as is required to be covered by a policy of insurance under section 203 of the Act and arising out of the use on a road of a motor vehicle specified in a valid insurance card, the production of the duplicate page detached by a police constable in pursuance of paragraph (3) of the last preceding Regulation shall be evidence that the person specified in the card as the insured has duly signed the form of authority specified in paragraph (3) on the middle page of the card shown in Schedule 1 to these Regulations or specified in paragraph (4) on page 4 of the card when in the form in Part I of Schedule 2 to these Regulations unless the contrary is proved. Production of insurance card on application for excise licence 8. Any visitor or hiring visitor applying for a licence under the Vehicles (Excise) Act 1971 for a motor vehicle specified in a valid insurance card in which he is named as the insured may, during the period of validity specified in the card, in lieu of producing to the licensing authority such evidence as is required by Regulation 9 of the Motor Vehicles (Third Party Risks) Regulations 1961, as amended produce such a card to the licensing authority. Notes The Regulations here referred to were substituted by the Motor Vehicles (Third Party Risks) Regulations 1972, SI 1972 No 1217. See para 7.22.

Requirements in connection with duplicate pages 9. The chief officer of police of each police area shall without charge:— (a) furnish to the Secretary of State, or the British Bureau on request or to an authorised insurer on request by the British Bureau any information relating to the contents of a duplicate page which may have been detached by a police constable under Regulation 6(3) of these Regulations in connection with an accident in that area; and (b) forward to the British Bureau or to an authorised insurer on request by the British Bureau any such duplicate page and the British Bureau or the authorised insurer, as the case may be, shall as soon as practicable, return the duplicate page to the chief officer of police by whom it was forwarded. Special provision for motor vehicles from Northern Ireland 10. In the case of a motor vehicle brought from Northern Ireland into Great Britain by a person making only a temporary stay in Great Britain, a policy of insurance or a security which complies with the Road Traffic Act (Northern Ireland) 1970 and which covers the driving of the motor vehicle in Great Britain and any certificate of insurance or certificate of security issued in pursuance of that Act and the Regulations made thereunder in respect of such policy or security shall have effect as a policy of insurance or a security or a certificate of insurance or certificate of security respectively for the purposes of Part VI of the Act, and of the Motor Vehicles (Third Party Risks) Regulations 1961, as amended.

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Motor Vehicles (International Motor Insurance Card) Regulations 1971 SCHEDULE 1 PA RT I

( S E E R E G U L AT I O N 3 )

PA RT I C U L A R S T O B E S H O W N I N PA G E S O F I N S U R A N C E C A R D

ORIGINAL 1. INTERNATIONAL MOTOR INSURANCE CARD 2. ISSUED UNDER THE AUTHORITY OF (NATIONAL INSURERS’ BUREAU)

3.

4. Serial and Policy Numbers VALID FROM Month Year

Day

Day

TO Month Year

(Both Dates Inclusive) 5. Registration Number (or if none) Chassis or engine number.

(Cancel Country inapplicable) GR

H

I

IL

IRL

IS

MA

P

6. Category and make of Vehicle*

A

B

L

PL

R

TN

NL CH TR

CS

D

DK

N

YU

7. Name and Address of Insured (or User of the vehicle).

8. This Card has been Issued by: (Name and address of Insurer)

9. Signature of Insurer.

* For details of Letter-Code for Category of Vehicle, see middle page.

961

S

SF

E

F

GB

7.21

Motor Vehicle Insurance PA RT I C U L A R S T O B E S H O W N I N PA G E S O F I N S U R A N C E C A R D

Middle page INTERNATIONAL MOTOR INSURANCE CARD CARTE INTERNATIONALE D’ASSURANCE AUTOMOBILE (1) In each country visited, the Bureau of that country assumes, in respect of the use of the vehicle referred to herein, the liability of an Insurer in accordance with the laws relating to compulsory insurance in that country. (2) After the date of expiry of this Card, liability is assumed by the Bureau of the country visited, if so required by the law of such country or by any agreement with its Government. In such case, the within-mentioned insured undertakes to pay the premium due for the duration of the stay after the date for which the Insurance Card is valid has passed. (3) I, the within-mentioned insured, hereby authorise the Motor Insurers’ Bureau and the Bureaux of any mentioned countries, to which it may delegate such powers, to accept service of legal proceedings, to handle and eventually settle, on my behalf, any claim for damages in respect of liability to third parties required to be covered under the compulsory insurance laws of the country or countries specified herein, which may arise from the use of the vehicle in that country (those countries). (4) Signature of the Insured

(5) For visitors to Great Britain and Northern Ireland only. Signature of any other persons who may use the vehicle.

............................................................................

............................................................................

(This Insurance Card is only valid when signed by the Insured). Cards applicable to the following countries must contain detachable copies of the form on the preceding page: Great Britain & Northern Ireland Switzerland

*CATEGORY OF VEHICLE (CODE) A. CAR

C. LORRY OR TRACTOR

E. BUS

B. MOTORCYCLE

D. CYCLE FITTED WITH AUXILIARY ENGINE

F. TRAILER

PA RT I I

PA RT I C U L A R S T O B E S H O W N I N D U P L I C AT E PA G E

DUPLICATE 1. INTERNATIONAL MOTOR INSURANCE CARD 2. ISSUED UNDER THE AUTHORITY OF (NATIONAL INSURERS’ BUREAU)

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Motor Vehicles (International Motor Insurance Card) Regulations 1971 3.

4. Serial and Policy Numbers VALID FROM TO Month Year Day Month Year

Day

(Both Dates Inclusive) 5. Registration Number (or if none) Chassis or engine number.

(Cancel Country inapplicable) GR

H

I

IL

IRL

IS

MA

P

6. Category and make of Vehicle*

A

B

L

NL CH

PL

R

TN

TR

CS

D

DK

N

S

SF

E

F

GB

YU

7. Name and Address of Insured (or User of the vehicle).

8. This Card has been Issued by: (Name and address of Insurer)

9. Signature of Insurer.

* For details of Letter-Code for Category of Vehicle, see middle page.

SCHEDULE 2

( S E E R E G U L AT I O N 3 )

(In this Schedule, references to the Convention of 1949 are references to the Convention on Road Traffic concluded at Geneva in the year 1949.) PA RT I

A LT E R N AT I V E F O R M O F I N S U R A N C E C A R D U N T I L 3 1 D E C E M B E R 1 9 7 7

Page 1 INTERNATIONAL MOTOR INSURANCE CARD CARTE INTERNATIONALE D’ASSURANCE AUTOMOBILE ———— Issued under the Authority of By

963

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