Herbert Smith Freehills LLP

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Updates

Banking

Negative interest on existing cash deposits imposed by change in terms and conditions unlawful
Germany | 16 February 2018

The Tubingen Regional Court recently held that negative interest on a consumer's existing cash deposits imposed by a German bank by unilaterally changing the bank's general terms and conditions was unlawful. According to the court, the defendant bank violated the rules of the general terms and conditions regime because it did not differentiate between existing deposits and newly deposited cash.

EAPO regulation: initial experiences with German courts
Germany | 05 January 2018

As of January 2018, the EU regulation which established a new European Account Preservation Order (EAPO) procedure will have been effective and in force for one year. In Germany, the most important conclusion which can be drawn from the past year is that the German courts are adopting EAPOs. However, as the procedure is still fairly new to the courts, it has taken time and effort on the part of creditors.

Are arrangement and processing fee clauses in commercial loan agreements invalid?
Germany | 08 September 2017

The Federal Court of Justice recently issued two rulings declaring that processing fee clauses in standardised commercial loan agreements are invalid as they unreasonably disadvantage borrowers. Previously, the majority of lower German court rulings had upheld the validity of such clauses in commercial loan agreements. Going forward, lenders have a number of options to deal with the issues raised in these new court decisions.

Insurance

Broker not in breach of duty to advise in failing to provide oral advice in relation to duty to disclose
United Kingdom | 14 August 2018

In holding that a broker was not in breach of duty by failing to give oral advice in relation to the disclosure of criminal convictions, the High Court has provided a useful reminder of the extent of a broker's duty to advise in relation to disclosure. The court also held that a lack of expert evidence materially limited, but did not exclude, the possibility of a finding that the broker had breached its duty to act with reasonable care and skill.

PRA and FCA clarify impact of Brexit transition for insurance sector
United Kingdom | 24 April 2018

Recent announcements made by the Prudential Regulation Authority and the Financial Conduct Authority have clarified their approach to Brexit following the European Council's agreement to a transition period for the United Kingdom's withdrawal from the European Union. Insurers, insurance intermediaries and other financial services firms have been encouraged to assume that they will continue to benefit from passporting rights until December 2020. While this is welcome, firms cannot be complacent.

Insurance arbitrator reinstated on basis that he or she qualifies for appointment under arbitration clause
United Kingdom | 03 April 2018

The English Court of Appeal has reversed the High Court's decision on whether a party-appointed arbitrator met the contractual requirements as to requisite experience. The English Court of Appeal held that that an English queen's counsel with experience of insurance and reinsurance law was sufficient to comply with a contractual clause requiring arbitrators to have "experience of insurance and reinsurance". The decision highlights once again the importance of drafting arbitration clauses clearly.

Brexit – PRA consults on approach to UK branches of incoming insurers
United Kingdom | 20 February 2018

The Treasury, Prudential Regulation Authority (PRA) and Financial Conduct Authority recently clarified their approach to EEA-headquartered financial services firms wishing to carry on business in the United Kingdom post-Brexit. More recent evidence to the House of Commons Treasury Committee sheds further light on the PRA's thinking. It also highlights the difficulty for the PRA of giving guidance to firms while so much uncertainty surrounds the United Kingdom's future relationship with the European Union.

Brexit – EIOPA publishes opinion on cross-border legacy business
United Kingdom | 16 January 2018

A recent opinion published by the European Insurance and Occupational Pensions Authority warns that UK insurers are unlikely to be able to meet obligations to European Economic Area (EEA) policyholders post-Brexit unless they mitigate the anticipated loss of passporting rights that will come with leaving the single market. The opinion raises concerns for UK insurers which have policyholders in EEA states other than the United Kingdom.

Court of Appeal clarifies extent to which ATE insurance policy is relevant when considering security for costs
United Kingdom | 19 December 2017

The Court of Appeal recently ordered two companies in liquidation to provide security to the defendants despite an after-the-event (ATE) policy. The decision confirms that the court can take account of a claimant's ATE insurance policy when considering whether to make an order for security for costs. However, the court stressed that the outcome of any security for costs application involving an ATE policy will depend on the terms of the particular policy.

Construction of exclusions in insurance policies
United Kingdom | 05 December 2017

In a recent case, the Commercial Court found in favour of the defendant insurer in regard to the disputed construction of an insolvency exclusion in a professional indemnity insurance policy. The case is a useful restatement of the law on the interpretation of exclusion clauses in insurance contracts. It also serves as a reminder that policyholders should not assume, simply because an exclusion is widely drafted, that it will not be upheld by the courts in the event of a dispute.

PRA adopts questionable approach to regulatory compliance
United Kingdom | 15 August 2017

Recent comments made by the chief executive officer of the Prudential Regulation Authority (PRA) about its approach to supervision are worrying. An undelivered speech argues, among other things, that it is not enough for firms to meet the requirements of the regulatory regime, they must also comply with the spirit of the rules. Further, it states that the PRA will form its own judgement about what this means for firms, despite UK obligations under EU law.

No inducement: Court of Appeal upholds first-instance decision
United Kingdom | 18 July 2017

The Court of Appeal has held that a reinsurer failed to establish that material non-disclosure of past loss statistics induced it to enter into two reinsurance contracts. Though the reinsurance contracts at issue predated the Insurance Act 2015, the judgment is relevant to insurance and reinsurance contracts governed by the new act. The new proportionate remedies for breach of the duty of fair presentation are available only if the (re)insurer is able to demonstrate inducement.

High Court refuses to order pre-action disclosure of a defendant's public liability insurance policy
United Kingdom | 27 June 2017

Peel Port applied for pre-action disclosure of the defendant's insurance policy. The court refused to order disclosure of a solvent insured's insurance policy contrary to established practice. However, the judgment does leave open the possibility that pre-action disclosure of a defendant's insurance policy may be ordered where the test is met.

Supreme Court construes aggregation provision in minimum terms and conditions of professional indemnity insurance
United Kingdom | 04 April 2017

The Supreme Court recently handed down its judgment in a case relating to underlying claims arising out of services provided by a solicitors' firm. The court allowed the appeal and remitted the case back to the High Court. The Supreme Court held that determining the meaning of "a series of related matters or transactions" in the aggregation clause contained in the minimum terms and conditions for solicitors' professional indemnity insurance necessitated a fact-sensitive inquiry.

Court of Appeal considers meaning of notification wording
United Kingdom | 14 February 2017

The Court of Appeal recently upheld the Commercial Court's finding that an insurer could not rely on a notification condition precedent to avoid liability under a public and product liability policy. The judgment serves as a reminder that it is crucial for policyholders to be aware of the notification provisions in their policies and when their obligations to notify are triggered.

Reminder to brokers of need to advise insureds on policy terms
United Kingdom | 07 February 2017

A court recently held a broker liable for failing to advise its insured client that certain safety precautions were required by insurers as a condition precedent to cover under a property policy. The case serves as a reminder to brokers of the importance of advising clients on the terms of the policies that they place, particularly onerous terms such as conditions precedent.

High Court construes wording as aggregating language to give effect to limit of liability
United Kingdom | 17 January 2017

The High Court recently considered the wording of a clause in an insurance policy and was prepared to interpret the clause as an aggregating clause. Although aggregating provisions are normally worded so as to aggregate claims for the purposes of both the insured's excess and the insurer's limit of indemnity, the court was not prepared to rewrite the policy to achieve this effect. The aggregating provision applied only to the limit of indemnity.

International Trade

EU reaction to US national security measures
European Union | 30 March 2018

The European Union has rejected the US claim that the recently issued Section 232 national security investigation reports on steel and aluminium measures are necessary or even intended to address a national security concern. The European Union has announced three actions in response to the measures, including a World Trade Organisation dispute settlement action.

Modification of trade defence rules regarding non-market economy costs and prices
European Union | 23 February 2018

The European Union recently issued Regulation 2321/2017, amending the basic EU Anti-dumping Regulation (1036/2016). Among other things, Regulation 2321/2017 sets out new rules for the calculation of normal value in the case of significant distortions that affect cost and price and removes rules which previously allowed for normal value to be determined via an analogue country methodology for non-market economy World Trade Organisation members.

Recent developments in EU trade and investment policy
European Union | 20 October 2017

The European Court of Justice recently handed down its opinion regarding the European Union's competence to conclude its proposed free trade agreement (FTA) with Singapore. FTA proposals incorporating provisions on the protection of non-direct foreign investments or investor-state dispute settlement mechanisms should be treated as mixed agreements, requiring ratification from not only the European Union, but also each member state.

EU-Japan 'agreement in principle' for economic and partnership agreement
European Union | 25 August 2017

The European Union and Japan recently announced having reached an 'agreement in principle' on a future economic and partnership agreement. The final agreement is expected to boost EU-Japan trade by cutting red tape and scrapping duties. EU businesses importing from and exporting to Japan should prepare for the agreement's entry into force. This requires assessing the exact effect of the agreement on their operations and identifying potential opportunities and challenges.

Brexit – United Kingdom's access to European Union's preferential trade partners
United Kingdom | 07 July 2017

There is much discussion about what kind of trade relationship the United Kingdom will have with the European Union following Brexit. Less often discussed is the trade relationship between the United Kingdom and the approximately 60 third countries with a preferential trade relationship with the European Union from which the United Kingdom, as an EU member state, currently benefits. Brexit will disrupt the United Kingdom's trade with these countries as well as with the European Union.