Regulatory Changes for Insurance Disputes in the United Arab Emirates and the existing Insurance Dispute Committee in the Kingdom of Saudi Arabia
BSA are often instructed by the London market for coverage advice pending disputes between cedant and reinsurers. Many of those treaty terms will be governed by the laws of various Middle East jurisdictions where the risk is located. Many treaty terms will also be the subject of local jurisdictional forums and in some cases, they may reference multiple jurisdictional forums in respect of dealing with disputes. Yet, it is often clear that many reinsurers do not consider the implications of agreeing and accepting such local jurisdictional forums and the inherent risks associated with those dispute forums.
By way of illustration, we often see reference to very widely drafted jurisdictional clauses that are then contradicted, perhaps in a later endorsement (i.e. London Market Wordings (LMW)) with reference to a different jurisdictional forum. This creates conflicts of laws and will open elected dispute forums to challenge by the local courts. Consideration must therefore be given to understanding the requirements of those local jurisdictional forums.
In this article we address and look at the relatively new Insurance Dispute Committee formed by the United Arab Emirates Insurance Authority (UAE IDC) and the slightly more mature Kingdom of Saudi Arabian's Secretariat General of Committees for Resolution of Insurance Disputes and Violations (KSA IDC).
Resolution No 190 dated 9/5/1435H, the Working Rules and Procedures of Insurance Disputes and Violations Settlement Committee for KSA 1 deals with all insurance and reinsurance related disputes, allowing a dispute forum for insureds, (re)insurers, third parties and other related insurance operations. The Committee was set up in 2014 under the Secretariat General of Committees for Resolution of Insurance Disputes and Violations and comprises of a three (3) member panel, headed by a legal expert and two insurance experts. The KSA IDC provides a degree of flexibility with how the dispute can be handled, allowing, inter alia foreign jurisdictional legal concepts (comparative jurisprudence) to be presented and argued, recover of legal expenses, limitation periods and a wide discretion on how evidence can be presented. The KSA IDC also has an Appeals Committee layer, where appeals can be lodged from the KSA IDC. All of this provides a very helpful backdrop for reinsurers wishing to accept risk from cedant KSA companies. While it was uncertain for a period of time whether alternative dispute forums could be accepted and used in KSA for (re)insurers, it is now relatively clear that the forum of arbitration can be used pursuant to the KSA's Law of Arbitration, Royal Decree No. M/34 Dated 24/5/1433H - 16/4/2012 2. Any arbitration clause under the KSA Law of Arbitration must be in writing, the parties must agree the same and have authority to enter into the arbitration (see Articles 9(2) and 10(1)). The KSA IDC will involve themselves in limited circumstances with jurisdictional issues if for example, an arbitration clause is disputed by one party where they will give a determination and the Appeals Committee will normally make a final ruling on the issue. BSA have had experience with a recent case in KSA involving the London market, where this issue arose and was finally resolved by the Appeals Committee.
Turning to the United Arab Emirates and the new insurance dispute forum.
The United Arab Emirates (UAE) has adopted Decision No. 33 of 2019, relating to the regulation of Insurance Disputes Resolution Committees following the promulgation of Federal Law No. 3 of 2018 amending Law No. 6 of 2007, the original insurance law. Decision No.33 regulates disputed insurance claims in terms of the formation and constitution of a dedicated insurance dispute committee at the Insurance Authority, the insurance regulator of the UAE. The Committees is made up of three (3) persons, a chairperson and two (2) or more members of the Insurance Authority. The Committee members will be specialised in insurance related disputes and the Chairperson is likely to be from a judicial background. Like KSA IDC, the UAE IDC will have a wide discretion in terms of process and procedures including hearing witnesses and experts. It is not known at this stage whether and to what extent the UAE IDC will allow comparative jurisprudence like the KSA IDC and how far their jurisdiction will apply i.e. whether, like KSA IDC they can deal with jurisdictional issues related to arbitration clauses and agreements. The UAE IDC does not have jurisdiction over arbitration proceedings if there is a valid arbitration agreement in place as per the requirements of UAE law (see below).
The impact of the Decision No.33 follows consideration of the following:
- Dispute provisions in the policy terms and conditions;
- The requirement to have the policy terms and conditions officially translated into the Arabic language (often this is not done in the UAE despite legal requirements to do so);
- Conduct risk of the parties including the reinsurer's role, if any (reinsurers will want to consider how their cedant companies deal with claims/disputes in terms of any "Claims Cooperation Clauses" in the treaty terms);
- Training and education of underwriting and claims teams including external loss adjusters;
- Insurance technical experts and reporting techniques including presentations in the Arabic language; and
- Risk mitigation with choosing the correct dispute forum i.e. whether local UAE courts, DIFC Courts or Arbitration.
The UAE Civil Transactions Code (Civil Code) provides that in order to allow arbitration of insurance disputes in the UAE a separate arbitration must be agreed outside the terms of the policy conditions (see Article 1028). Arbitration clauses contained within the policy terms and conditions, absent any separate arbitration, shall be void and invalid.
In the absence of any arbitration agreement to deal with disputes, Insurers (and Reinsurers) need to build the new legal dispute forum into their existing complaints systems. Indeed, it would be wise for insurers to adopt explicit wordings in their documentation providing notification to policyholders of their rights or whether they have opted out under the new dispute forum i.e. arbitration.
It is not clear, whether and to what extent Decision No. 33 applies to reinsurance disputes, but we believe it may apply.
This is a welcome change in terms of the insurance claims environment, which in most cases are litigated in the UAE courts. The disputes forum will hopefully fish out vexatious claims.
In summary, reinsurers need to fully consider dispute forum clauses in their treaty terms and evaluate the risks when taking on ceded risk in the Middle East. Often, these critical provisions are overlooked, and it is only when a large loss appears that these issues are picked up on during coverage reviews by specialist (re)insurance lawyers.
1. Resolution No 190 dated 9/5/1435H Approval of the Working Rules and Procedures of the Insurance Disputes and Violations Settlement Committees https://www.idc.gov.sa/en-us/RulesandRegulations1/Working%20Rules%20and%20Procedures%20of%20the%20Insurance%20Disputes%20and%20Violations%20Settlement%20Committees.pdf
2. Royal Decree No. M/34 Dated 24/5/1433H https://www.wipo.int/edocs/lexdocs/laws/en/sa/sa057en.pdf
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.