Are the courts adept at handling complex commercial claims?
Insurance & Reinsurance (3rd edition)
Courts have improved in recent years regarding the interpretation of complex insurance contract. Some major disputes occur today and the referral given by the Judiciary has been quite technical and adequate. The Superior Court of Justice ever more defines precedents in its most varied areas of insurance law. An important example is the recent Court ruling on D&O insurance, published on February 14th, 2017, which deals with the policyholder's obligation to declare risk, also denying insurance coverage in case of intentional action by the insured (Special Appeal 1.601.555/SP). It is important to note that several relevant judicial and arbitration cases will be litigated in 2017, mainly in the D&O, engineering and surety areas.
Moreover, commercial insurance disputes are decided by the court of the insured’s domicile. Small claims courts are available for matters involving up to 40 times the minimum wage (i.e. up to approximately £8,000). Regarding the procedural timeline, in the State Court of São Paulo, for example, a case takes on average a total of 3.3 years to be judged by a civil court and a court of appeal. If the case then goes to the Superior Court of Justice or to the Federal Supreme Court, this timeframe can increase by another 1.1 years. In the State Court of São Paulo there are 25,366,780 cases – commercial and others – pending before 2,607 judges, which gives a ratio of one judge to 9,730 cases. One of the main initiatives of the new Brazilian Civil Procedure Code, enacted on 2015, was to speed up the trial timeline with the introduction of a more flexible system whereby the parties are allowed to enter into procedural agreements to define the number of submissions/pleadings, the deadlines and the type of evidence to be produced.
For the territorial jurisdiction, an insurance dispute will fall under the jurisdiction of the people’s court where the domicile of the defendant or the insured object is located. For the subject matter jurisdiction, the primary court will act as the first instance court in most insurance cases. If the amount in dispute of a case reaches a certain level or if the case is very influential for society, the intermediate courts or even the high courts shall have the jurisdiction to hear the case. It is rare for the Supreme People’s Court to hear a case in the first instance.
In some provinces, the insurance disputes will be collectively heard by special courts. For instance, the Shanghai Financial Court established in April 2018 shall exercise jurisdiction over the first-instance insurance disputes within the jurisdiction of Shanghai Municipality that shall be accepted by intermediate people's courts. And the maritime courts shall hear cases regarding marine insurance claims and related subrogation litigations.
Generally, a higher-level courts or courts that collectively hear the insurance disputes are more experienced in the complex commercial claims.
Disputes adjudicated before the Danish courts do to a significant extent include com-plex commercial claims. Consequently, the courts are generally adept at handling com-plex commercial claims, which is particularly true for the Maritime and Commercial Court, The High Courts and the Supreme Court.
The Maritime and Commercial Court´s competence has been extended successively since its formation in 1862, and today the court hears cases concerning the Danish Trade Marks Act, the Design Act, the Marketing Practices Act, the Competition Act, cases concerning international trade conditions as well as other commercial matters.
The 24 district courts, among these especially the district courts placed in parts of Denmark with most commercial activities, are also adept at handling complex commer-cial claims. However, the adeptness may vary depending on how much knowledge the individual judges in the district courts has regarding commercial issues. In district court cases one judge normally participates. In more complicated matters, a party may how-ever request for the participation of three judges at the main hearing.
The Swiss court system is both experienced and adept at handling even complex commercial claims. In four Cantons (Zurich, Aargau, Berne and St. Gallen) there are even specialised commercial courts having jurisdiction as sole cantonal court in commercial matters. According to Article 6 (2) of the Swiss Civil Procedure Code a commercial dispute is to be qualified as commercial matter if it concerns the commercial activity of at least one party and if the parties are registered in the Swiss Commercial Register or in an equivalent foreign commercial register, Additionally, the value of dispute exceeds CHF 30’000.00. If only the defendant is registered in the Swiss Commercial Register or in an equivalent foreign register, but all the other conditions are met, the plaintiff may choose between the Commercial Court and the ordinary court.
Many large commercial disputes including those involving complex claims coverage disputes are brought before the civil courts in South Korea including those involving foreign parties. The District Court is the court of first instance involving a trial on the facts and law. High Courts are empowered to review appeals on a de novo basis and any subsequent appeals can be raised to the Supreme Court.
The South Korean judges are experienced in and have handled many insurance disputes involving complex commercial claims and there is a fair amount of South Korean jurisprudence on insurance claims disputes. Also, South Korean judges are occasionally guided by Japanese and German jurisprudence in some disputes since the IBA is based on Japanese and German insurance law, as well as case laws from the United Kingdom and the United States as needed. Litigation in South Korean courts will generally be fair and equitable with decisions handed down within 6 to 9 months for standard coverage disputes; however, some disputes may take longer due to the complexity of the coverage issues, a foreign party requiring translation/interpretation, necessity of witness testimony, as well as appraisal of damages proceedings.
Peruvian courts are currently undergoing an innovation process that includes the training of all its agents. To this extent, we consider that the courts will become more specialized as the said process moves forward.
Notwithstanding the foregoing, there are ADR mechanisms that allow complex commercial claims to be settled by agents out of the local courts, e.g., arbitration. Arbitration is highly developed in Peru and has such a level of sophistication allowing the submission of complex controversies to the decision of a specialized Arbitral Panel.
French courts are adept at handling complex commercial matters.
Depending on a number of variables (such as the identity of the parties or possible jurisdiction clauses), commercial disputes can either be heard before commercial courts, which are staffed by non-professional judges who are usually weathered business people, or before civil courts, which are staffed with professional judges. Both types of courts are familiar with complex commercial cases.
French courts have an important degree of specialization and sophistication as a result of the way jurisdictions are organised. Indeed, the civil courts of major cities have specialized sections that concentrate on particular types of disputes and areas of the law (i.e. insurance, construction, finance etc.).
French jurisdictions are used to handling complex international matters (whether French law or foreign laws apply) and French courts increasingly have specialized international sections (where evidence and testimonies can be given in foreign languages and certain aspects of common law procedure may be introduced), such as the international section of the Paris Commercial Court, or the international section of the Paris Court of appeal, which was created on 7 February 2018. France’s ability to deal with complex international matters is not, moreover, limited to state courts, as Paris has long been one of the world’s preeminent centres for international arbitration.
In broad terms, there are four courts in which civil disputes of a commercial nature may be heard. These are: the Local Courts (Amtsgerichte); the Regional Courts (Landgerichte); the Higher Regional Courts (Oberlandesgerichte) and the Federal Court of Justice (Bundesgerichtshof).
Each Regional Court in Germany also operates a Specialist Commercial Chamber. The Commercial Chambers allow for the appointment of lay judges alongside the presiding judge. These lay justices are not lawyers, but experienced merchants. For a case to be heard in the Commercial Chamber, the plaintiff must make a motion requesting this in his Statement of Claim. The defendant may also make such a motion later on and apply for the transfer of the action from the “ordinary” civil court to a Commercial Chamber.
Further, some Regional Courts (usually those situated in larger cities) have the option of setting up additional specialist chambers, which hear cases that may benefit from specific judicial expertise such as, for example, construction, banking, insurance or professional liability disputes of lawyers, tax advisors and certified public accountants.
German judges decide independently and irrespective of the parties’ backgrounds. Corruption of judges is unknown. Judges have a thorough legal education and a high standard of professionalism. Most cases are decided in a timely and cost efficient manner and only very complex cases may result in lengthy litigation proceedings.
The courts in Israel are fully qualified to handle complex commercial claims.
The Australian courts have well-developed case management processes for handling complex commercial claims in an efficient and expeditious manner, including those arising from insurance and reinsurance disputes in Australia.
In 2016, the Federal Court of Australia established an Insurance List within the commercial and corporations national practice area for short matters which concern policy interpretation or questions of law regarding the operation of insurance legislation.
Yes, all Italian court, being made by professional judges, are able to handle complex commercial claims, including the most complicated reinsurance litigations.
There are no special courts for resolving commercial insurance disputes. Commercial insurance disputes are generally resolved in district courts or summary courts depending on the value of the dispute. In general, Japanese courts are adept at handling commercial claims even they are complex.
The courts in Poland are generally well-equipped to handle complex commercial disputes, although this much depends on the individual profile of the judge and the case management technique he/she decides to adopt.
The parties involved should bear in mind that:
- all evidence should be filed together with the statement of claim/statement of defence; the judge may be unwilling to accept evidence filed at a later stage of the proceedings (unless it was not possible or necessary to file it earlier);
- there are no written witness statements - witnesses must testify orally;
- typically, hearings are split into several sessions at intervals ranging from a few to several months;
- there are separate court divisions for commercial disputes; and
- in order to rule on any technical or non-legal aspects of a dispute, judges typically appoint an independent expert or experts.
There is discussion on this matter. At great risk there is a kind of obligatory arbitration; in consumer matters the law gives the insured the option of action before an arbitrator or before the ordinary courts. In the latter case, it is discussed whether this ordinary (common) justice is the ordinary courts with civil or commercial jurisdiction or the so-called local police court (special judiciary).
Insurance and reinsurance disputes are regulated by the Code of Commerce. If one of the parties breaches a contract, the non-defaulting party can initiate ordinary commercial proceedings before federal or local courts. This judicial process has four basic stages: (i) the filing of the claim by the plaintiff and response from the defendant; (ii) the submission and presentation of evidence of any kind; (iii) the pleadings; and (iv) an award.
The parties can appeal any ruling to a higher tribunal, unless the aggregate amount is less than approximately $600,000 pesos.
Each party pays its own litigation costs and the losing party might be required to indemnify the winning party, including for attorneys’ fees, subject to certain established thresholds and the decision of the court.
As a general rule, federal courts are prepared to handle complex commercial claims; however, they lack experience in handling insurance and reinsurance cases. In the case of local courts, there is uncertainty on whether a local judge will have the resources and ability to handle complex commercial cases.
The commercial court in the High Court of Justice has a long history of dealing with complex insurance claims; the experience and quality of the judiciary that will hear international insurance claims is unrivalled. The English judiciary are widely regarded as impartial and expert in commercial disputes – frequently dealing with international parties. The extensive guidance provided by judicial precedent provides parties with a degree of certainty as to the outcome of commercial disputes.
There has been a recent shift in the handling of insurance claims arising out of policies written in the UAE. Previously, the Court of First Instance was the default court for bringing claims arising out of an insurance dispute. However, the IA now has a mandate to form specialised dispute resolution committees to settle disputes arising out of insurance contracts (as per 110(2) of Federal Law No. 6 of 2007 on Establishing the Insurance Authority and the Regulation of its Operations as amended by Federal Law No. 3 of 2018).
The IA has granted extensive powers to the new dispute resolution committees, including the power to compel the production of documentation where necessary, to seek the assistance of experts and witnesses and to adopt any alternative measures required for the settlement of disputes. As the IA has recently issued its final consultation with the Ministry of Justice and local courts to establish said committee, we envisage that the specialised committee will launch in the coming months.
The introduction of the new insurance disputes committee means that the handling of complex claims will be dealt with by specialists for the sole purpose of advising on insurance disputes.
Yes. Insurance claims are usually handled by the Court of First Instance or the Commercial Court (recently re-named as the “Enterprise Tribunal”); both Courts have specialised chambers. Appeals are brought before the Court of Appeal. Appeal on points of law lies to the Court of Cassation (Belgium’s Supreme Court in civil and commercial matters).
Belgian courts decide independently and irrespective of the parties’ backgrounds. Corruption of judges is unknown. Judges have a thorough legal education and a high standard of professionalism. That said, different trends in case law can emerge depending on the regional jurisdiction of the Court in question.
Cases are decided in a cost-efficient manner. Court duties are low in comparison with other EU jurisdictions and awards for costs are reasonable, predictable and determined by law. The Belgian Revenue does, however, levy a duty on the amount awarded in disputes. The rate is 3% (for awards exceeding €12,500).
Belgian justice is often criticised for its lack of resources and insufficient staffing, which results in lengthy litigation.
Insurance coverage lawsuits may be brought in state or federal courts in the U.S. Federal courts, however, may preside over insurance disputes only in certain circumstances, including, for instance, where the amount in controversy is $75,000 or more and there is a complete diversity of citizenship between the parties to the lawsuit. Courts’ knowledge and experience in handling insurance coverage disputes varies by state and locality within a state. Courts in states with larger commercial centers, such as New York, California, and Illinois typically have numerous insurance coverage disputes pending on their dockets.
Some states have established courts to handle complex commercial cases, including insurance coverage cases that exceed various minimum amounts in dispute. The period of time it takes for coverage cases to be resolved depends on the jurisdiction in which a case is brought as well as the type and number of issues and parties involved. The length of time may also depend upon the individual judge assigned to preside over the case.
The Civil Court system (commencing in the relevant District Court) is authorised to administer both simple and complex commercial claims. However, judges’ experience in handling complex commercial cases may be quite limited, especially in rural areas of Indonesia.
Indonesian judges have broad discretion in the management of court proceedings and in choosing the relevant matters, including evidence, on which to base their judgments. As with most other civil law jurisdictions, Indonesia does not apply the doctrine of binding precedent, although judgments of the High Court and the Supreme Court can be used as evidence in proceedings, with the evidentiary weight to be determined at the judges’ discretion. Accordingly, Indonesian judgments, even at the highest level, can be inconsistent with each other.
Indian litigation is slow and time consuming. This is attributed to the number of reported pending cases in courts across in India, which is presently close to 30 million. Attempts to clear the backlog have not yielded the desired results and litigation in India continues to be a slow and expensive process.
The Commercial Courts, Commercial Division & Commercial Appellate Division of High Courts Act 2015 (‘Commercial Courts Act’), was introduced to carve out special benches in all existing civil courts which will adjudicate commercial matters exclusively. There are fixed timelines that all commercial civil disputes need to follow and the legislation is meant to speed up the adjudication process. The Commercial Courts originally had a jurisdiction over disputes having a value of circa US$144,012.. Commercial Courts hear complex matters including insurance and reinsurance disputes on a routine basis.
The Commercial Courts Act was subsequently amended in 2018 with the aim of expanding the jurisdiction of the commercial courts in India. The amended Commercial Courts Act inter alia, widened the pecuniary jurisdiction by lowering it to circa US$4230 from the earlier USD$144012 and has made provisions for constitution of commercial courts at the District level and below the District level. This mechanism is proposed to ensure that complex commercial claims of a low pecuniary value can be heard and expeditiously decided at the District level itself. In addition, the amended Act prescribes mandatory mediation prior to the institution of a commercial suit.
The Civil Courts have a three-tier hierarchy. The hierarchy structure of the Courts is usually as follows (in ascending order): District, State, and National which comprises circa 600 District Courts, 24 High Courts and the Supreme Court of India (the highest court in India). Among the 24 High Courts, four are termed charter High Courts (i.e. Delhi, Bombay, Madras and Calcutta High Court) which have original jurisdiction to accept and hear matters which fall above certain pecuniary thresholds, exempting the District Courts from hearing these matters due to higher pecuniary limits. The rest of the District Courts have unlimited pecuniary jurisdiction, so do the competent courts of first instance to hear any insurance dispute falling under the territorial jurisdiction.
Yes, the Thai Court is experienced in dealing with complex commercial claims.
Austria has a very well-functioning and reliable judiciary and the courts are adept at dealing with complex factual and legal matters. The average length of court proceedings is reasonable and the quality of decisions is usually high.
In first instance, claims will either be handled by the district courts or the regional courts, depending on the amount in dispute. Whereas claims for less than EUR 15,000 are, as a general rule, dealt with by the district courts, claims above that threshold are dealt with by regional courts. Appeals are made either to higher regional courts, when appealing a judgment issued by the regional courts, or to the regional courts, when appealing a judgment issued by the district courts. The third and final instance is the Austrian Supreme Court.
In addition, Austria has specialised commercial courts. These commercial courts are particularly fit to handle complex commercial claims and inter alia competent to hear (re-)insurance disputes.
The High Court in this jurisdiction has a specialist court, the Commercial Court, which deals exclusively with commercial disputes. Proceedings are case-managed and tend to move at a much quicker pace than general High Court cases. The time from entry into the list to full hearing varies between 1 week to 4 months depending on the time required for hearing. Entry to the list is at the discretion of the judge and may be refused if there has been any delay. Insurance and reinsurance disputes can be heard in the Commercial Court if:
The value of the claim or counterclaim exceeds €1,000,000; and
The court considers that the dispute is inherently commercial in nature.
The Commercial Court judges place a strong emphasis on mediation and the Commercial Court Rules provide for up to a four-week stay of proceedings to allow the parties to consider mediation.