The International Comparative Legal Guide to:
Insurance & Reinsurance 2012 A practical cross-border insight into insurance and reinsurance law
Published by Global Legal Group, with contributions from: A1 Advokater Anderson Mōri & Tomotsune Bedell Cristin BULLÓ – TASSI – ESTEBENET – LIPERA – TORASSA Clyde & Co LLP Creel, García-Cuéllar, Aiza y Enríquez, S.C. De Brauw Blackstone Westbroek N.V. De la Torre & Monroy Ercin Bilgin Bektasoglu Law Firm Faoro, Fucci & Zimmermann Advogados Gross Orad Schlimoff & Co. Harris Kyriakides LLC Heenan Blaikie LLP Jorquiera & Rozas Abogados KALO & ASSOCIATES
King & Wood PRC Lawyers L.C. Rodrigo Abogados Lenczner Slaght Royce Smith Griffin LLP Lewis Baach PLLC Noerr LLP Russell McVeagh Schellenberg Wittmer Sedgwick Chudleigh Shook Lin & Bok Steptoe & Johnson LLP Studio Legale Turci Tuli & Co Webber Wentzel William Fry Wotton + Kearney
The International Comparative Legal Guide to: Insurance & Reinsurance 2012 General Chapters: 1 2
Rescission for Misrepresentation or Nondisclosure: Practical Considerations for Insurers and Reinsurers – Mark J. Leimkuhler & Jack B. Gordon, Lewis Baach PLLC
7
Hidden Treasure and Hydra’s Heads: How Clarifying Canadian Insurance Law can Address Environmental Harm – Glenn Smith & Ren Bucholz, Lenczner Slaght Royce Smith Griffin LLP 15
4
Status and Prospects for EU Legislative and Policy Initiatives in the (Re)Insurance Sector – Philip Woolfson & Daniella Terruso, Steptoe & Johnson LLP
Account Managers
Dror Levy, Maria Lopez, Florjan Osmani, Oliver Smith, Rory Smith, Toni Wyatt
1
3 Contributing Editors
Jon Turnbull & Geraldine Quirk, Clyde & Co LLP
Solvency II and the Road to 2014: The Impact on Insurers and Reinsurers – Jon Turnbull & Geraldine Quirk, Clyde & Co LLP
24
Country Question and Answer Chapters: 5
Albania
KALO & ASSOCIATES: Den Minxhozi & Fatos lazimi
30
6
Argentina
BULLÓ – TASSI – ESTEBENET – LIPERA – TORASSA: Carlos A. Estebenet & Francisco Barbarán
34
Sub Editors
Suzie Kidd Jodie Mablin
7
Australia
Wotton + Kearney: David Kearney & Adam Chylek
39
Senior Editor
8
Belgium
Steptoe & Johnson LLP: Philip Woolfson
45
Penny Smale
9
Bermuda
Sedgwick Chudleigh: Mark Chudleigh & Nick Miles
53
Managing Editor
10 Brazil
Faoro, Fucci & Zimmermann Advogados: Dennys Zimmermann & Gustavo Franco Pacheco
60
11 Canada
Heenan Blaikie LLP: Bernard Amyot & Vivian Bercovici
66
12 Chile
Jorquiera & Rozas Abogados: Ricardo Rozas & Max Morgan
73
13 China
King & Wood PRC Lawyers: Yuan Min & Kirby Carder
79
14 Colombia
De la Torre & Monroy: Camila de la Torre Blanche & Gabriela Monroy Torres
84
15 Cyprus
Harris Kyriakides LLC: Michalis Kyriakides & Marcos Economou
90
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30 Spain
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32 Switzerland
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Chapter 8
Belgium Steptoe & Johnson LLP
1 Regulatory 1.1
Which government bodies/agencies regulate insurance (and reinsurance) companies?
Philip Woolfson
The NBB website includes full details of legislation currently in force (in French and Dutch only). 1.2
What are the requirements/procedures for setting up a new insurance (or reinsurance) company?
Preliminary note Belgium has three official languages – French, Dutch (Flemish) and German, whose use may be obligatory in designated parts of the country, for example in court proceedings. In practice, French and Dutch are the most commonly used languages and this guide includes terms from both languages where appropriate. Historically, the supervision of the insurance sector was entrusted to the Office for Supervision of Insurance (Office de contrôle des assurances/Controledienst voor de verzekeringen), while the banking, investment fund and investment services sectors came within the jurisdiction of the Banking and Finance Commission (Commission bancaire et financière/Commissie voor het Bank-en Financiewezen). In 2004, in part inspired by the UK’s move towards a single regulator, the Financial Services Authority, the Office for Supervision of Insurance and the Banking and Finance Commission were merged into the Banking, Finance and Insurance Commission (Commission Bancaire, Financière et des Assurances/Commissie voor het Bank-, Financie- en Assurantiewezen) (“CBFA”). More recently, and in the wake of the financial crisis, Belgium has moved to a “twin-peaks” model. Accordingly, and pursuant to Law of 2 July 2010 amending the Law of 2 August 2002 relating to supervision of the financial sector and financial services, on 1 April 2011, the CBFA ceased to exist and its functions were transferred to the National Bank of Belgium (the “NBB” – www.nbb.be) and an authority which is successor to the CBFA, namely the Financial Services and Markets Authority (Autorité des Services et Marchés Financiers/Autoriteit voor Financiële Diensten en Markten) (“FSMA” – www.fsma.be). Under this twin-peaks approach, the NBB is, broadly, responsible for prudential supervision of insurance and reinsurance undertakings, while FSMA is responsible for regulation of financial services and markets, including the conduct of business by (re-)insurance undertakings in Belgium. The NBB is, therefore, the entity responsible for the authorisation of (re-)insurance undertakings in Belgium, and, for prudential purposes (above all, solvency), monitoring and controlling their activities. FSMA monitors and controls these entities’ compliance with conduct of business rules. Incidentally, FSMA is also responsible for the registration and regulation of (re-)insurance intermediaries. Implementing measures adopted pursuant to the above Law of 2 July 2010 ensure extensive cooperation and consultation between the two bodies.
The primary legislative text for the authorisation and supervision of insurers is a Law adopted in 1975, the Law of 9 July 1975 “relating to supervision of insurance undertakings” (the “1975 Law”). The 1975 Law applies to various categories of insurance undertakings, including the Belgian branches of foreign insurers. It is also the legal basis for authorisation and supervision by the NBB. The 1975 Law prohibits: (i) underwriting by an unauthorised insurer; and (ii) insurance mediation by agents, brokers and others in relation to prohibited underwriting. In order, however, to protect insureds’ interests, the 1975 Law adds that, although contracts covering risks situated in Belgium concluded in breach of the above prohibitions are null and void, the insurer which has concluded such contracts is bound to perform the contract, provided the policyholder has taken out the contract in good faith. Limited business is also possible on a “non-admitted” basis. Authorisation is granted on fulfilment of statutory and regulatory conditions. The insurer is authorised for specific classes of insurance, (grouped under life and non-life headings, for example, in life, unit-linked and, in non-life, accident, sickness, etc.; classes can be combined or “supplementary”). Authorisation must be granted or refused within a period of four months from date of receipt by the NBB of a complete application. Failure to reply on expiry of the formal period is deemed refusal. Authorisation is published in the State Gazette. The 1975 Law and its implementing decrees (principally, a Royal Decree of 22 February 1991 - the “1991 Decree”) provide a comprehensive list of the documentary requirements for an application for authorisation. Both Belgian and foreign companies must also demonstrate that, taking into account reinsurance cessions, the company’s technical and financial resources are sufficient for its scheme of operations and that they meet other conditions and rules of the 1975 Law. By way of example, the 1975 Law prescribes the form of a Belgian insurance company (essentially, joint stock or mutual) and the scope of the objects of the company; the constitutive documents must be free of any provision detrimental to insureds, contracting parties and beneficiaries. Likewise, absent waiver by the NBB, a Belgian insurer cannot grant loans in any form whatsoever to directors or management. Numerous provisions of the Companies Code, referring to the classic form of joint stock company under
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Belgium
Belgian law, the société anonyme or naanmloze vennootschap, apply to Belgian insurance entities, while specific adjustments also reflect the characteristics of Belgian mutual insurers. Application for authorisation for the branch of a third country insurer is subject to similar requirements. In addition, the insurer must appoint an authorised agent for its Belgian branch, such agent being officially authorised to represent the company before the Belgian authorities and courts. Lastly, authorisation may be refused to a third country company if that country refuses equivalent treatment to Belgian insurers.
the Napoleonic Code of 1804 and still includes succinct provisions on insurance, as well as the general rules on contract and tort. Belgium has also enacted specific texts on insurance contracts, all of which may restrict freedom of contract (specialist insurance texts, for example for workplace accidents and insured pension schemes, are considerably more restrictive). The numerous provisions restricting freedom of contract (often implementing EU provisions) include: the 1991 Decree provisions on pre-contractual disclosures for life and non-life contracts and on use of plain language; Belgium’s laws on use of an official language;
The 1991 Decree provides additional guidance on: how to apply; appeal procedure; classes of insurance, etc.
the 1975 Law provisions on choice of law (as well as the Rome I Regulation); and
The NBB issues the authorisation. Authorisation must be used within 12 months or it will be forfeited.
restrictions on choice of competent jurisdiction (under the Brussels I Regulation and national rules).
In 2007, the CBFA, in its former capacity of authorising entity, released a 123-page guidance memorandum for applicants seeking authorisation as insurers. These guidelines set out a two-phase procedure for the application (preparatory and approval in principle; formal filing) and comment on the scope of information required in support of the application, for example a business plan, insurance classes, organisation and management of the company, internal supervision, audit and compliance, technical and financial questions, asset liability, etc. No less than 19 annexes complete the picture.
In addition, Belgium has a key piece of insurance contract legislation, the Law of 25 June 1992 relating to the contract of terrestrial (i.e. non-marine) insurance (the “1992 Law”). Adopted at the same time as EU texts liberalising the Single Market in insurance, it contains numerous provisions designed to protect the consumer – often by virtue of its public policy basis: with the exception of provisions whose drafting enables the parties to waiver their application by agreement, the provisions of the 1992 Law are imperative, i.e. public policy.
The quality of the application and the scope of activities contemplated determine statutory and additional capital requirements which the CBFA formerly imposed and which the NBB is now likely to set in a given case.
Finally, various general texts apply to the insurance sector. A key example is the Law of 6 April 2010 relating to market practices and protection of the consumer, which sets out Belgium’s current implementation of the 1993 Unfair Contract Terms and the 2005 Unfair Commercial Practices Directives.
The NBB is no less rigorous than its larger neighbours in its scrutiny of applications. Full and frank disclosure when preparing an application will be required; the NBB will resist “forum shopping”. Furthermore, with regard to third-country applicants, the NBB will fulfil its duty, under international reciprocity arrangements, to inform the European Commission of authorisations granted to such companies. The Law of 16 February 2009 “relating to reinsurance” and implementing decrees apply broadly comparable provisions for authorisation of reinsurance undertakings. Finally, given Belgium’s experience during the financial crisis (primarily in the banking, rather than the insurance, sector), the NBB currently takes a particularly rigorous and conservative approach to authorisations generally. 1.3
Are foreign insurers able to write business directly or must they write reinsurance of a domestic insurer?
Incorporation and authorisation of a Belgian insurer (or authorisation of non-EEA branch) is not the sole basis for market entry: EEA insurers can exercise “passport” rights on to the market on a freedom of services or branch basis; insurers can also take a holding in an existing company (whether active or in run-off), but will still face authorisation requirements, for example an NBB review (within a prescribed period of three months) of the suitability of the proposed shareholders. As noted above, limited business in specialised lines is permitted for foreign insurers, as set out in the 1991 Decree. There are no formal, local insurance requirements. 1.4
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Belgium
Are there any legal rules that restrict the parties’ freedom of contract by implying extraneous terms into (all or some) contracts of insurance?
1.5
Are companies permitted to indemnify directors and officers under local company law?
This is a controversial question under Belgian law. Legal commentaries vary regarding the validity of clauses: (i) excluding or limiting liability by providing that a company waives rights of action against its corporate officers; or (ii) providing that the company will guarantee its corporate officers against claims from third parties. Some legal commentators may, for example: (i) deem any such waiver of right of action to be invalid, at any time, or only before a fault is committed; (ii) accept the validity of an indemnity in which the company undertakes to indemnify a corporate officer for liability towards third parties, except for fraud (dol) and criminal sanctions; or (iii) allow limitation of liability for management faults (Article 527, Companies Code) or for general tort liability (Article 1382, Civil Code), but not for breach of the company’s constitutive documents or of the Companies Code (Article 528, Companies Code). Minority shareholder rights may override attempts to limit liability. An indemnity granted by a third party, such as a parent company, to its employee appointed as a corporate officer in a subsidiary against liability arising out of such appointment will generally be valid, notwithstanding the ordre public or imperative basis of liability of corporate officers under general company law. Belgian law recognises the validity of liability insurance for corporate officers. The policy is typically taken out by the company for the benefit of its corporate officers. Coverage is not dependent on the legal basis for proceedings for liability of the corporate officer, nor does it depend on the legal categorisation of the fault imputed to the insured officers, subject to the exclusions of the policy itself, for example intentional fault of the insured. D & O coverage will typically insure against:
Belgium is a civil law jurisdiction: the Civil Code is derived from
general, extra-contractual (cf. tort) liability under the Civil Code for damage due to the insured’s fault;
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contractual liability based on the Companies Code (Article 527) arising out of a fault in management; contractual and extra-contractual liability based on the Companies Code (Article 528) arising out of a claim by third parties or shareholders for breach of the constitutive documents or of the Companies Code and for which each officer is jointly and severally liable unless they prove they did not commit the fault and have reported such fault at the next general meeting of shareholders; and aggravated liability under the Companies Code (Article 530) for serious and manifest fault on an insolvency with insufficient assets. 1.6
Are there any forms of compulsory insurance?
Belgium has a highly developed system of compulsory insurance. There are two particularly important examples: motor civil liability (Law of 21 November 1989 relating to compulsory insurance of motor vehicle liability); and insurance for workplace incidents (Law of 10 April 1971 on workplace accidents). There are at least 30 examples of compulsory insurance, the full list of which is published annually by FSMA, e.g. carriage, hunting, campsites, architects, travel agents, insurance intermediaries, estate agents and voluntary associations. There are also variants of compulsory insurance, for example a non-compulsory insurance may become compulsory if a certain risk is covered, e.g. civil liability in the nuclear energy sector.
2 (Re)insurance Claims 2.1
In general terms, is the substantive law relating to insurance more favourable to insurers or insureds?
See question 1.4 above. As noted above, the 1992 Law is the key text and sets out the primary source of substantive law. Commentaries on the 1992 Law distinguish between those of its provisions which protect the insured and those which protect the insurer. The legislator’s primary concern was to protect the insured, but the 1992 Law also recognises that the insured’s behaviour may be a threat to the insurer and its interests are therefore protected, for example: certain provisions in relation to declaration of risk (Articles 5-7), with the exclusion of intentional claims (Article 8); failure to pay the premium (Articles 14-19); and the insured’s duties in the event of a claim (Article 19-21). Parliamentary documents add that the insurer cannot waive these provisions in its favour. Distinguishing between protection of the insurer and the insured can be complex: the 1992 Law may impose duties on the insured (which protect the insurer) or may regulate their scope or sanctions for failure in order to avoid excess of rigour (thus protecting the insured). By way of example, detailed rules on omissions and misstatements protect the insured, in particular with regard to unintentional omissions (Article 7), whereas certain disclosure requirements (Article 5) and the consequences of intentional omissions and inaccuracies (Article 6) protect the insurer. 2.2
Can a third party bring a direct action against an insurer?
The 1992 Law expressly provides a general rule that liability insurance grants a third party, the victim, an independent right to claim from the insurer (Article 86, 1), as a result of which indemnification due by the insurer vests in the victim to the exclusion of other creditors of the insured (Article 86, 2).
Belgium This right of direct action enables the victim to pursue the insurer, without prejudice to his rights against the person liable, the insured, and to ensure the indemnification is safeguarded from other creditors. Furthermore, if there are several victims and the indemnification exceeds the insured sum, the rights of the victims against the insurer suffer a proportionate reduction. If the insurer has in good faith and in ignorance of other claims paid to a victim a sum in excess of the share to which he is entitled, the insurer is only liable to the other victims up to the amount of any balance of the sum insured (Article 86, 3).
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These general rules of liability insurance are subject to other provisions, such as: (i) separate rules for specific liabilities, e.g. carriage remains subject to an 1874 Law; workplace accidents form part of insurances of the person, not of liability, motor insurance under the above 1989 Law, etc.; (ii) the availability of defences and exceptions (generally denied in the case of compulsory insurances and allowed subject to conditions in other insurances) (Article 87); and (iii) limitation of actions (up to 23 years in extreme cases). The insurer may reserve the right to claim sums paid out to third parties from the policyholder (and insured, if different), subject to proper notification to the policyholder (and the insured, if required) (Article 88). Finally, the 1992 Law includes various rules allowing the insurer, insured and third party to intervene in proceedings (Article 89). 2.3
Can an insured bring a direct action against a reinsurer?
Under Belgian law, reinsurance does not create any legal relationship between the insured and the reinsurer. Therefore, in principle, the insured cannot seek payment of indemnity from the reinsurer. Legal commentaries do, however, note with approval the option to include a “cut through” clause enabling the insured to bring an action against the reinsurer in the event of insolvency of the insurer. The commentaries note the same option in relation to the insurer’s action against a retrocessionnaire. 2.4
What remedies does an insurer have in cases of either misrepresentation or non-disclosure by the insured?
The 1992 Law regulates disclosure and the consequences of intentional and unintentional non-disclosure (omissions) and misstatements. With regard to the duty of disclosure, the insured is bound, at the time of conclusion of the contract, to declare all circumstances known to him and which he must reasonably consider as comprising, for the insurer, factors for determining the risk. However, the insured does not have to declare to the insurer circumstances which are already known to the insurer or which the insurer should reasonably know. Genetic data may not be disclosed. If no reply is given to certain written questions of the insured and if the insured nevertheless concludes the contract, other than cases of fraud, the insurer cannot subsequently rely on such omission (Article 5). As for intentional omission or misstatement, where these induce the insurer into error as to the factors for determining the risk, the contract is null and void. Premiums due up to the time when the insurer becomes aware of the intentional omission or misstatement are payable to the insurer (Article 6). As for unintentional non-disclosure or misstatement, the contract is not null and void. Instead, within one month from the date when the insurer became aware of the omission or misstatement, the insurer must propose an amendment of the contract with effect from such date. If the insurer proves that it would not in any event have insured the risk, the insurer may terminate the contract within the
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Belgium
Steptoe & Johnson LLP same period. If the proposal to amend the contract is refused by the policyholder or if, on expiry of a period of one month from receipt of such proposal, the proposal has not been accepted, the insurer may terminate the contract within 15 days. An insurer which has not terminated the contract nor proposed an amendment within the period set out above cannot in the future contest facts which are known to it (Article 7). If the omission or misstatement is not imputable to the policyholder and a claim arises before the amendment of the contract or the termination has taken effect, the insurer must provide the agreed benefit. If the omission or misstatement can be imputed to the policyholder and if a claim arises before the amendment of the contract or the termination has taken effect, the insurer is only bound to provide a benefit proportionate to the premium paid and the premium which the policyholder should have paid if he had properly disclosed the risk. If, however, on a claim, the insurer proves that it would not in any event have insured the risk whose real nature has been disclosed by the claim, its benefit is limited to repayment of all of the premiums paid. Finally, if a circumstance which is not known to the two parties at the time of conclusion of the contract becomes known in the course of performance of the contract, specific provisions of the 1992 Law (Articles 25 and 26) apply depending on whether such circumstance is a reduction or aggravation of the insured risk. 2.5
Is there a positive duty on an insured to disclose to insurers all matters material to a risk, irrespective of whether the insurer has specifically asked about them?
See question 2.4. By way of further comment:
The insurer does not sue in the name of the insured. The insured’s rights are transferred, by operation of law, to the insurer: the subrogated insurer exercises the insured’s right of action against the third party. There is no express duty in law on the insured to cooperate, but he must not hinder the insurer’s action either, for example through negligence in preparing evidence, delay in notifying a claim, granting a discharge to the person liable, etc. As noted above, in such cases, the insurer may claim repayment of the indemnity paid up to the amount of the harm suffered. Finally, subrogation by agreement is also possible and known.
3 Litigation - Overview 3.1
Which courts are appropriate for commercial insurance disputes? Does this depend on the value of the dispute? Is there any right to a hearing before a jury?
Proceedings before the courts are mainly governed by the Judicial Code. The following sections are drawn from the relevant articles of that Code. The Brussels I Regulation is also applicable. The Judicial Code sets out jurisdiction rules which allocate jurisdiction according to the value of the claim, the basis for the claim, the capacity (e.g. trading or other capacity) and the urgency. The parties may not waive such rules. Likewise, faced with a breach of the allocation rules, a court must ex officio declare that it does not have jurisdiction to hear the case. The Judicial Code confers jurisdiction on the court of first instance for all matters except those which are reserved to other courts. Typically, where the parties are acting in a trading capacity, the commercial court will be the appropriate court.
if the insurer wishes information on certain circumstances whose relevance is likely to be missed by a layman (profane), the insurer must take the initiative to seek disclosure;
Additional rules govern territorial jurisdiction and, in certain cases, the parties may enjoy freedom to vary such jurisdiction.
genetic data must not be disclosed. Other disclosures regarding the insured’s privacy may be requested, but may be open to challenge on grounds of breach of fundamental rights. Case law includes criminal records, health (in particular AIDS), medical secrecy etc. – and, most recently, discrimination on grounds of sex. Is there an automatic right of subrogation upon payment of an indemnity by the insurer or does an insurer need a separate clause entitling subrogation?
The 1992 Law expressly provides for subrogation on payment of an indemnity. The insurer is subrogated, up to the amount of such indemnity, in rights and actions of the insured or of the beneficiary against the third party liable for the damage. If, because of the insured or beneficiary, the effects of subrogation are denied to the insurer, the insurer may claim repayment of the indemnity paid up to the amount of the harm suffered. Subrogation may not prejudice the rights of the insured or beneficiary who has only been partly indemnified. In such case, the insured or beneficiary may enforce his rights for the balance in preference to the insurer’s rights. Other than cases of ill will, the insurer has no right of action against the descendants, ascendants, spouse and in-laws in direct line of the insured, nor against persons living in his home, his guests and
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members of his domestic personnel. In the event of ill will by minors, the insurer’s right of action may be restricted depending, in particular, on whether their personal liability is insured.
the insured is not liable for not declaring what he does not know. The 1992 Law requires him to declare what “he must reasonably consider” to be pertinent, not what “he should reasonably know”;
since the insured is not required to disclose circumstances which are already or should be known, the insurer’s need to know is limited to what is actually known; and
2.6
Belgium
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In commercial matters, there is no right to a hearing before a jury. The court can, however, appoint an expert to hear the parties, conduct his own inquiries and report to the court with his own technical opinion on the matter. See question 4.5 below. 3.2
How long does a commercial case commonly take to bring to court once it has been initiated?
A commercial case will typically take 12-24 months from the date of issue of the initial writ to judgment. There are no initiatives to speed this up. The appointment of an expert, as well as other procedural steps, may substantially delay the proceedings. Certain simple cases, as prescribed in the Judicial Code, may be dealt with at the introductory hearing. In such cases, the above period may be reduced to 1-2 months. Proceedings in particularly urgent matters are subject to shorter periods.
4 Litigation - Procedure 4.1
What powers do the courts have to order the disclosure/discovery and inspection of documents in respect of (a) parties to the action and (b) non-parties to the action?
Belgium does not have a formal procedure of discovery in civil proceedings and the court has a limited role in the gathering of evidence.
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Whereas all types of evidence are admissible in commercial matters, the parties will most generally support their claims with documents and will exchange copies of these. The court is not bound to take into account arguments which are not sufficiently supported by documents or by other evidence. A court may not, in principle, consider supporting documents which have not been communicated in a timely manner to the other parties.
4.5
There is no specific duty on a party to disclose documents which contradict that party’s case. However, parties are subject to a duty of good faith and must cooperate to a certain degree in the production of evidence. If a party has reasons to believe another party or a third party possesses a document that is relevant to the proceedings, he may request the court to order the production of the document. The court may also issue such order upon its own initiative.
Therefore, a party will generally ask the court to appoint an independent expert. The court can also appoint an expert on its own initiative.
Before the case has commenced, interim measures can be ordered to make sure documents remain available (seizure or other). 4.2
Can a party withhold from disclosure documents (a) relating to advice given by lawyers or (b) prepared in contemplation of litigation or (c) produced in the course of settlement negotiations/attempts?
Correspondence between an attorney and his client (under (a)), or among attorneys (in respect of (b) and (c) above), is in principle confidential, i.e. may not be used as evidence in civil proceedings. Other privileges apply to other professions, such as the medical profession (“medical secrecy”). Such privileges are generally considered to be public policy (and may be subject to provisions of the Criminal Code), which means that the privilege may not be waived. 4.3
Do the courts have powers to require witnesses to give evidence either before or at the final hearing?
The Judicial Code sets out the procedure for hearing witnesses. However, witnesses are seldom heard before the Belgian courts. Only the court may interrogate witnesses, in the presence or in the absence of the parties, but the parties may invite the court to ask specific questions. Generally, minutes are drawn-up after an audition. The final hearing is set at a later date. However, a court may always decide, even after the final hearing, to re-open the debates. Therefore, theoretically it has the power to require witnesses to give evidence at any time. A witness who is absent or refuses to give evidence without legitimate reason may be liable for a fine. Professional secrecy is considered to be a legitimate reason. If the witness cannot attend the audition, for example because he is sick or resident abroad, the magistrate may travel to hear the witness or issue letters rogatory. 4.4
Is evidence from witnesses allowed even if they are not present?
Procedural rules require the presence of the witness. However, parties can refer, in their pleadings, to documents written or produced by third parties and file these in the court file. The court will generally take such documents into account. See also question 4.3 above.
Parties may present expert evidence, but one party’s expert statements and findings are not binding on any other party, unless accepted by that other party.
Belgium
Are there any restrictions on calling expert witnesses? Is it common to have a court-appointed expert in addition or in place of party-appointed experts?
The expert must be independent: the relevant requirements in the Judicial Code for magistrates also apply for experts. For instance, an expert can be dismissed if he is connected to one party or another. Furthermore, a party should not, in principle, meet separately with the expert, as this could give rise to a “legitimate suspicion” (of partiality). Generally, the costs of the expert must be pre-paid by the claimant, but the court enjoys discretion to decide otherwise. In most cases, the losing party is ordered to bear the costs of the expertise. Although a court is not bound by the final findings of the expert, it will follow the expert’s conclusions in most cases. 4.6
What sort of interim remedies are available from the courts?
Both seizure orders in respect of documents and freezing orders in respect of assets exist. These measures can be directed towards third parties, as for instance, attachment/garnishment. As for disclosure of documents, see question 4.1 above. The president of a court of first instance (Commercial Court/Court of First Instance) may grant a provisional order in all matters of great urgency (except for those which by law are removed from the court’s jurisdiction), including, for instance, an order to pursue an activity temporarily (and subject to sanction in the event of failure to comply), or a temporary injunction to refrain from an act. The court can also issue a partial, preliminary but definitive order against a defendant, for instance in commercial claims for payment of a sum of money and covering the part of the claim which is not contested by the defendant. 4.7
Is there any right of appeal from the decisions of the courts of first instance? If so, on what general grounds? How many stages of appeal are there?
No leave is required from a first instance court to bring an appeal against a judgment of that court (no right of appeal lies against small claims decisions of a justice of the peace). Appeal must generally be brought within 30 days from the date of formal notification of the judgment by a bailiff, but other periods can apply. In some cases, the appeal period starts to run from the date of the judgment itself. Either side may appeal on grounds of a mistake in both law and facts. When considering the appeal, the appeal court enjoys all the powers of the lower court. The appeal court has the power to affirm, set aside or vary any judgment made by the lower court. Except for cases where it confirms procedural matters, e.g. taking of evidence, ordered by the lower court, the appeal court is seized with the case: it may not therefore refer it back to the lower court and must exercise its powers in relation to all aspects of the decision of the lower court. It must address all factual and legal arguments raised by the parties before the lower court and which were included in the appeal; in practice, an appeal requires exchanges of further pleadings.
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Finally, a decision rendered on appeal may generally be challenged before the supreme court in Belgium (the Court of Cassation), but only on the basis of a mistake in law. The appeal must be lodged within three months of the notification by bailiff of such decision. 4.8
when an award is subject to proceedings for annulment, or when an award is incomplete, as explained below (Article 1708, Judicial Code); prior to enforcement, an award must be declared enforceable by means of an enforcement order (exequatur) of the president of the Court of First Instance, applied for on an ex parte basis. The court’s control is minimal, since the exequatur can only be refused for strict reasons, for example when the award is contrary to Belgian ordre public; and
Is interest generally recoverable in respect of claims? If so, what is the current rate?
In monetary claims, interest will normally be awarded as from the date a formal notice of claim has been served. The applicable rate will be that provided in the contract, subject to reduction by the court, failing which the general statutory rate (4.25% in 2012). This statutory rate also generally applies for tort claims. A party must always apply to the court for an award of interest.
when the arbitral award includes provisional enforcement, a court may suspend such provisional enforcement in some cases or only grant it following provision of security. The arbitral tribunal decides on challenges to its jurisdiction. 5.2
As of the date of the writ of summons, certain courts apply a reduced general statutory rate. 4.9
What are the standard rules regarding costs? Are there any potential costs advantages in making an offer to settle prior to trial?
The court will generally order the losing party to bear the costs of the litigation. The order will award the costs of the writ of summons and a lump sum intended to compensate the winning party for costs incurred in defending the claim. The court fixes the sum by reference to minimum and maximum amounts set by Royal Decree. In practice, the award will often fall far short of the costs actually incurred. When setting the amount of the award, the court may take into account the behaviour of the parties, for example if there has been a genuine attempt to settle prior to a hearing. When the claim is settled before the introductory hearing, the award for costs can be substantially reduced. A registration fee, proportional to the amount of the judgment, is due and is generally borne by the losing party.
5 Arbitration 5.1
What approach do the courts take in relation to arbitration and how far is the principle of party autonomy adopted by the courts? Are the courts able to intervene in the conduct of an arbitration? If so, on what grounds and does this happen in many cases?
Subject to any mandatory rules that may be applicable, the parties are free to organise the arbitral proceedings as they deem fit, including: the method for selecting the arbitrator(s); the place of the arbitration; the procedural rules (including the choice of language, the amount of the legal costs to be borne by the losing party, confidentiality, the right to appeal and the period of time set for the proceedings); whether the arbitral tribunal may proceed as a mediator (amiable compositeur); and the applicable substantive law, failing which the arbitral tribunal will decide. The court may intervene in various circumstances including: in the event of the failure of the parties and/or of the persons appointed to agree on the appointment of the arbitrator/the arbitral tribunal, the President of the Court of First Instance may do so. The President’s decision is binding on the parties;
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Is it necessary for a form of words to be put into contract of (re)insurance to ensure that an arbitration clause will be enforceable? If so, what form of words is required?
The agreement to arbitrate must be evidenced in writing, either as a clause in a contract, in a separate agreement dealing solely with the question of arbitration, or even in an exchange of letters showing the parties’ consent to arbitration. No formal wording is required. 5.3
Notwithstanding the inclusion of an express arbitration clause, is there any possibility that the courts will refuse to enforce such a clause?
A court may refuse to enforce a clause in specified circumstances, including the following: When the parties have waived application of the arbitration clause, for instance by failing to raise the arbitration clause as a plea before presenting other arguments. When the arbitration clause or agreement has expired or is invalid, for example when the arbitration clause confers an advantage on one of the parties or with regard to the appointment of the arbitrator(s), or when the dispute concerns a matter that was not a matter that could be arbitrated. In insurance, the general rule is that arbitration clauses are prohibited. The 1992 Law (Article 36, 1) provides that a clause in which the parties to the contract undertake in advance to submit to arbitrators disputes arising out of the contract is deemed null and void. There are two exceptions. Firstly, the parties may resort to arbitration once a dispute has arisen – arbitration clauses are forbidden, not a subsequent agreement to arbitrate. Secondly, arbitration for disputes arising out of certain classes of insurance may be permitted: a Royal Decree provides that contracts of insurance for most classes may include arbitration clauses. The classes which may not include arbitration clauses comprise: motor liability; fire (“simple” risks as defined); personal liability; accidental injury on an individual basis; assistance; legal expenses; and life. In practice, unless in one of the prohibited classes, arbitration clauses are regularly included in insurance contracts, including in classes not covered by the 1992 Law. Case law has, for example, held: (i) an arbitration agreement binding on a third-party beneficiary, where another insurer had already been allowed to intervene in the arbitration proceedings through subrogation; and (ii) in circumstances where a prohibition on arbitration applied, such prohibition did not extend to an agreement providing for an “arbitrator expert” (expert arbitre) to record the facts and nature of responsibilities without, however, being authorised to decide the dispute.
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The courts retain jurisdiction to order interim or provisional measures, which include conservatory measures for the preservation of assets or evidence. See question 4.6 above. Such measures may be ordered by the court until such time as the arbitral tribunal is fully constituted. Thereafter, an application for such measures would normally be made to the arbitral tribunal, although the courts in principle retain jurisdiction to order measures which the arbitral tribunal is not in a position to enforce, for instance:
Is there any right of appeal to the courts from the decision of an arbitral tribunal? If so, in what circumstances does the right arise?
Unless the parties have agreed otherwise, the award is final and binding and not subject to appeal. If the parties have reserved the right to appeal but failed to specify a period for bringing the appeal, the period is one month. Appeal against an award may only be brought before another arbitral body. The courts do not have jurisdiction. The award can, however, be annulled by the court, upon application by one of the parties, in any of the following circumstances:
seizure orders, including any conservatory seizure measures;
the award is contrary to ordre public;
questions of alleged forgery of documents; and
the dispute concerns a matter that was not capable of arbitration;
compulsory appearance of witnesses when the arbitral tribunal has decided to hear witnesses. Regarding such measures, the arbitral tribunal may order the parties to the arbitration to pay a daily penalty for failure to comply with any order it may issue. This penalty can however only be enforced and recovered in the context of a final award issued by the arbitral tribunal. The arbitral tribunal may order and organise the holding of an expert investigation, on-site investigations, and the appearance of parties before the arbitral tribunal as well as the taking of statements under oath. As the parties are generally free to determine the rules of proceedings, Anglo-American discovery procedures may be applied by an arbitral tribunal sitting in Belgium if expressly provided for in the arbitration clause. In that case, the arbitral tribunal may ask a court to grant orders requiring such disclosure. 5.5
5.6
Is the arbitral tribunal legally bound to give detailed reasons for its award? If not, can the parties agree (in the arbitration clause or subsequently) that a reasoned award is required?
Unless otherwise agreed by the parties, the arbitral tribunal has no power to decide on purely equitable, rather than legal, grounds. It is not a mediator (amiable compositeur). The award must be reasoned and reasons must be set out in the award, failing which the award can be annulled by the court, upon application by one of the parties. The annulment is full or partial if the award is divisible. Legal commentaries are, however, uncertain as to the adequacy of the reasoning required. The Judicial Code does not grant power to the court to remit the matter back to the arbitral tribunal so that the reasons for an award can then be given. However, if the arbitral tribunal has failed to answer all parts of the claim, the parties, or to some extent the court, may remit the matter back to the arbitral tribunal to complete its award.
Belgium
5.4
Belgium
there is no valid arbitration agreement, provided the applicant was not aware of this during the arbitration proceedings; the arbitral tribunal has exceeded its powers, provided the applicant was not aware of this during the arbitration proceedings; the arbitral tribunal has omitted to rule on an issue and the issue in question cannot be separated from the other issues dealt with by the award, provided the applicant was not aware of this during the arbitration proceedings; the award has been rendered by an arbitral tribunal that was not properly constituted, provided the applicant was not aware of this during the arbitration proceedings; the parties have not been given a proper opportunity to present their case or the arbitral tribunal has failed to apply a mandatory procedural rule, provided that the failure to apply such rule has affected the outcome of the award; the award has not been set down in writing and properly signed by the arbitrators; the award does not set out the reasons for the decision; and the award contains contradictory considerations. In addition, other, strictly limited grounds for annulment exist, including fraud. Any application for annulment must be based on one or more of the grounds listed or implied above. As a general rule, it must be introduced within three months of the date of notification of the award to the parties. The decision granting the exequatur may be challenged before the full court generally within one month of its notification. Finally, whether a third party may challenge an arbitral award is uncertain, notwithstanding Supreme Court support for such challenge where the third party has been victim of a fraud.
Acknowledgment The author gratefully acknowledges the assistance of Quentin de Bournonville, Lex Litis, in the preparation of this chapter.
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Philip Woolfson
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Steptoe & Johnson LLP 489 Avenue Louise 1050 Brussels Belgium
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Mr Woolfson is a partner in the Brussels office of Steptoe & Johnson LLP and a member of the firm’s Insurance Group. He practices European Union (EU) law of financial services, with a particular focus on insurance, and in related areas of French and Belgian law. He heads the Brussels office financial services team and is well-known for his experience and knowledge in crossborder insurance regulation and operations. He is a regular speaker at conferences on financial services and a frequent contributor to European and international legal journals. Recent assignments include: advising on State aid and restructuring operations in the insurance sector; advising a multinational group on its European insurance authorisation, change of control and governance requirements; representing the Association of International Life Offices on EU cross-border regulatory and tax matters; and developing multi-jurisdictional programmes for insurance contract and distribution compliance.
Steptoe & Johnson LLP is an international law firm widely recognised for vigorous representation of clients before governmental agencies, successful advocacy in complex litigation and arbitration, and creative and practical advice in guiding business transactions. The firm has more than 500 lawyers and other professionals in offices in Beijing, Brussels, Century City, Chicago, London, Los Angeles, New York, Phoenix and Washington. For more information, visit www.steptoe.com.
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