Letter from America

January 2008

United States Supreme Court Limits

Shareholder "Scheme Liability" Lawsuits

• Decision limits scope for shareholders' lawsuits against firms doing business with share issuers accused of fraud
  
• Potential impact on international firms doing business in the US influenced the Court's decision
  
• Forthcoming decision in litigation by Enron shareholders may be affected

The United States Supreme Court has limited the ability of shareholders to bring proceedings against third-party defendants in cases concerning losses arising from alleged fraud.  These lawsuits are often referred to as "scheme liability". This decision could have had a dramatic impact on international firms doing business in the United States, with the prospect of opening the floodgates to proceedings against businesses working with public companies accused of fraud.  The Court's decision in Stoneridge Investment Partners LLC v Scientific-Atlanta Inc. (No. 06-43), however, continues the business-friendly trend of the current Supreme Court.

Reinsurance E-Alert

January 2008 

London v New York: where to challenge an arbitration award under the Bermuda Form?

The Court of Appeal (CA) was recently given the opportunity to consider the Bermuda Form for the first time. The CA had to consider whether the choice of London as the seat of arbitration in the Bermuda Form operates to grant the English courts exclusive jurisdiction on the validity of arbitration awards, even though the Bermuda Form is governed by the laws of New York.

Background

The Claimant was a New Jersey Company which obtained liability insurance from the Defendant, a US insurer, on the basis of a policy written on the Bermuda Form (the "Policy"). A number of claims were made to the Claimant who had to pay a substantial amount of damages. The Claimant made demands for indemnification under the Policy for the full policy limit of US$100 million.

The Defendant declined to pay, and in May 2005 the Claimant initiated arbitration proceedings in London. The tribunal granted an award in favour of the Claimant, following which the Defendant threatened to apply to a New York court to challenge the award on the ground that the tribunal's findings constituted a "manifest disregard of New York law". The Claimant sought and obtained an anti-suit injunction from the English court, which gave rise to the first instance decision in this matter (to see our E-Alert concerning this first decision, click on the following link: reinsurance_e-alert_-_curial_law_will_reign_152023.pdf

December 2007

Solvency II aims to introduce a risk-based capital assessment and supervisory regime for European insurers and reinsurers. In this briefing the key proposals in the Directive are examined and the process of implementation outlined.

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Winter 2007

The latest legal news on Insurance and Reinsurance

• A spiral by any other name;
• Broker's covering fax gives reinsurer right to avoid;
• Reinsurance Directive;
• Conduct of business;
• Claims management;
• The global village;
• First transfer of German run-off business to UK under Reinsurance Directive.

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14 December 2007

AIG Europe (Ireland) Limited V Faraday Capital Limited

Court of Appeal (LJs Longmore, Dyson and Thomas) - 22 November 2007.

On 22 November 2007 the Court of Appeal reversed a decision of the Commercial Court on the proper construction of a claims co-operation clause in the context of a D&O policy. 

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7 December 2007

The English Court of Appeal gives its first decision on arbitration under the Bermuda Form

This case was the first time the Court of Appeal had been asked to construe the Bermuda Form arbitration provision. It had to decide whether, by choosing London as the seat of an arbitration, the parties were taken to have agreed that proceedings on an award (including any challenges to that award) should be only those permitted by English law.

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