Insurer's bankruptcy: Supreme Court rules on Lugano Convention's insolvency exception

Facts
Legal starting point
Importance of Riel judgment
Action was inadmissible
Comment

On 11 November 2020 the Norwegian Supreme Court issued a ruling on the insolvency exception in the Lugano Convention and other jurisdictional issues in cross-border insolvencies in a case concerning Danish insurer Alpha Insurance A/S.(1)

Facts

The claimant, a Norwegian resident, was covered by his Norwegian employer's occupational injury insurance with Alpha Insurance, a Danish insurer which was declared bankrupt in 2018. Prior to the opening of the bankruptcy proceedings, the claimant filed an insurance claim against the insurer, which was rejected. The claimant challenged the rejection before the Bergen District Court, seeking a declaratory judgment to determine his entitlement to insurance coverage.

However, the action was filed after the opening of the bankruptcy proceedings in Copenhagen, Denmark. The bankruptcy estate challenged the jurisdiction of the Norwegian courts, arguing that the Danish courts had exclusive jurisdiction to decide actions for the declaration of the existence of a claim in order for the claim to compete in the bankruptcy. The claimant, on the other hand, believed that Section 3 of the Lugano Convention applied, which allows insureds, in matters relating to insurance, to bring actions against insurers before the courts in the insured's domicile state. To that end, the bankruptcy estate argued that the matter was excluded from the scope of the Lugano Convention pursuant to the insolvency exception in Article 1(2)(b) thereof.

Legal starting point

At the beginning of its analysis, the Supreme Court emphasised that pursuant to domestic Norwegian insolvency law (ie, Section 145 of the Act Relating to Bankruptcy), an action for the declaration of the existence of a claim, filed against a bankruptcy estate, can be heard only by the court that handles the bankruptcy proceedings. Therefore, the question was whether the matter at hand could be treated differently because of the cross-border elements to the case, as bankruptcy proceedings were handled by a foreign court.

Importance of Riel judgment

The Lugano Convention is parallel to the EU Brussels I Regulation (44/2001). Therefore, the Supreme Court, in addition to leaning on its own case law, placed significant emphasis on European Court of Justice (ECJ) case law. In particular, the ECJ's September 2019 Riel judgment (C-47/18) was found to be of great significance.

In Riel, the ECJ concluded that an action filed against a bankruptcy estate, challenging the estate's rejection of the claim and seeking a declaration of the existence of the claim, was excluded from the scope of the EU Brussels I Regulation pursuant to Article 1(2)(b).

In the matter at hand, the bankruptcy estate of Alpha Insurance had not yet assessed the claimant's claim, as the bankruptcy proceedings were still in progress. However, the Supreme Court did not find this difference from Riel to be decisive. Neither did the Supreme Court find it relevant that the claimant had not filed a claim seeking the declaration of a claim for a specific amount. Thus, the Supreme Court concluded that the action against Alpha Insurance's bankruptcy estate was excluded from the scope of the Lugano Convention pursuant to Article 1(2)(b).

Action was inadmissible

Further, in accordance with its previous practice, the Supreme Court found that actions excluded from the scope of the Lugano Convention on account of the insolvency exception are not sufficiently connected to Norway under Section 4-3 of the Disputes Act 2005, unless insolvency proceedings are opened in Norway. The Supreme Court also referred to the choice of law provisions in the EU Solvency II Directive (2009/138/EC) and the Nordic Bankruptcy Convention. In conclusion, the Supreme Court found the action inadmissible.

Comment

The decision demonstrates the interaction between the Lugano Convention and the EU Brussels I Regulation and the significance which ECJ case law regarding the EU Brussels I Regulation has for the interpretation of the Lugano Convention.

Moreover, whether an action merely seeking to obtain a declaration of the existence of a claim against a bankruptcy estate falls within the insolvency exception has up to now been unclear and debated. The Supreme Court's follow up of Riel confirms that it is now settled that such actions are excluded from the scope of the Lugano Convention and the EU Brussels I Regulation, pursuant to Article 1(2)(b) of both.

For further information on this topic please contact Bettina Thaulow Harto, Andreas Meidell or Henning Harborg at Advokatfirmaet Thommessen AS by telephone (+47 23 11 11 11) or email (bth@thommessen.no, ame@thommessen.no or hhr@thommessen.no). The Advokatfirmaet Thommessen AS website can be accessed at www.thommessen.no.

Endnotes

(1) HR-2020-2175-A.