Global Reinsurance Corp. v. Equitas Ltd., No. 53 (NY Ct. App. 2012), addresses the sufficiency and, more pertinent for our purposes, the extra-territorial reach of antitrust claims under New York's antitrust statute, the Donnelly Act (NY Gen Bus. Law sec. 340, et seq.). In doing so, the High Court interpreted as well federal antitrust jurisprudence on extra-territoriality, a subject we have posted on as a matter of signficance to the international practitioner (e.g., here).
Equitas arose from the Reconstruction and Renewal plan by the Names (the insurance underwriters) at Lloyd's of London in 1996. Its job was to reinsure otherwise uninsurable non-life obligations that Lloyd's syndicates had taken as retrocessionary reinsurers. The antitrust claims against Equitas alleged that Equitas's goal was not to pay just reinsurance claims but to stall, take a "hard-nosed" approach, etc.
The Court of Appeals of New York found the operative pleading against Equitas deficient for failute to allege "any anticompetitive effect attributable to the posited conspiracy beyond the Lloyd's marketplace". But the Court went further and held that, even if the pleading could be amended to allege market power, "there would remain as an immovable obstacle to the action's maintenance, the circumstance that the Donnelly Act cannot be understood to extend to the foreign conspiracy plaintiff purports to describe".
To arrive at that conclusion, the Court of Appeals was prepared to extend the reach of the Donnelly Act to nearly the same lengths as federal antitrust statutes can reach. In describing the reach of federal antitrust extra-territoriality, the Court cited the Foreign Trade Antitrust Improvements Act to observe that "conduct involving [non-import] trade or commerce . . . with foreign nations" is actionable in the U.S. only where the conduct has a "direct, substantial, and reasonably forseeable effect" on domestic commerce. Describing the pleading before it, the Court of Appeals states:
The complaint alleges, essentially, that a German reinsurer through its New York branch purchased retrocessional coverage in a London marketplace and consequently sustained economic injury when retrocessional claims management services were by agreement within that London marketplace consolidated so as to eliminate competition over their delivery. Injury so inflicted, attributable primarily to foreign, government approved transactions having no particular New York orientation and occasioning injury here only by reason of the circumstance that plaintiff's purchasing branch happens to be situated here, is not redressable under New York State's antitrust statute. That this is so, is demonstrable when the Donnelly Act is considered in the context of federal antitrust law.
The Court was not willing to extend the reach of the Donnelly Act because the business of insurance was involved. Indeed, it was not willing to extent the Donnelly Act as far as the federal antitrust laws, stating instead that:
For a Donnelly Act claim to reach a purely extra-territorial conspiracy, there would, we think, have to be a very close nexus between the conspiracy and injury to competition in this State.
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