Is alternative dispute resolution well established in your jurisdictions?
Insurance & Reinsurance (3rd edition)
ADR has been expanding in Brazil, and dispute resolution mechanisms are improving. The main reasons for the expansion are:
- the Judiciary is overwhelmed with work;
- judges often lack the proper technique and means to solve complex disputes; and
- jurisdiction is no longer the exclusive prerogative of the State, nor is the judicial process the only way to resolve disputes.
It is indisputable that arbitration is increasingly used to resolve complex cases, with an emphasis on corporate and construction disputes, and, at the same time, there is an increasing incentive for consensual forms of dispute resolution, especially conciliation and mediation. With regard to consensual means of dispute resolution, the New Code of Civil Procedure has as one of its fundamental norms the need to foster conciliation and mediation, and for the latter a legislative apparatus has been created to encourage its use.
In this context, insurance disputes, especially those involving large risks, are fertile ground for the use of ADR, notably due to the specialist nature of the matter, the efficiency of extrajudicial procedures and the need to reduce transaction costs.
Moreover, in the arbitration context, Brazilian courts and especially the Superior Court of Justice fully uphold the principle of party autonomy enshrined in Brazilian legislation, so that parties have broad freedom to choose the manner and the procedure by which their dispute is to be resolved. The position of the Superior Court of Justice on this is very clear from its rulings in applications to recognise foreign awards and on applications to set aside domestic awards.
Parties to arbitration proceedings are free to establish the procedure that best suits them, provided they comply with the requirements of due legal process and its corollaries (Law of Arbitration, article 21, paragraph 2). Brazilian courts apply the principle of kompetenz-kompetenz and, once an arbitral tribunal has been constituted, the parties can only resort to the courts after the arbitral award has been issued, other than in circumstances in which they need to enforce interim relief or another coercive measure granted by the tribunal during the course of the proceedings. Furthermore, the arbitral award is considered to be an enforceable title, on a par with a court order (Law of Arbitration, article 31), but which can only be enforced by a court.
Parties to arbitration may apply to the courts for an order to vacate (set aside) the arbitral award if the award featured serious procedural defects. Courts are not allowed to review the merits of the award. Therefore, the challenges to arbitral awards only succeed in proved cases of serious procedural defects, which are rare in practice.
In addition to litigation or arbitration, parties could settle the dispute via negotiation or mediation throughout the whole procedures of litigation and arbitration. PRC Courts also encourage parties to mediate.
Since 2012, the Supreme People’s Court has cooperated with CBIRC in exploring alternation dispute resolution of insurance disputes. According to data of the Supreme People’s Court, China has established over 166 specialized alternative insurance dispute resolution institutions around the country and has solved over 126 thousand disputes.
In the meantime, arbitration is always a choice for the insurance disputes resolution in China.
The use of arbitration is well established in Denmark as an alternative to litigation, and due to a frequent use of arbitration clauses in commercial insurance policies, many coverage disputes are referred to arbitration rather than to the courts.
The relevant law governing arbitration is contained in the Arbitration Act.
Mediation and court-based mediation are not used to a significant extent in Denmark, and it is rare that insurance disputes are mediated in Denmark.
In principle, ADR techniques i.e. arbitration and mediation are well established in Switzerland. Most reinsurance contracts and a considerable number of (industrial) direct insurance contracts governed by Swiss law contain arbitration clauses. However, reinsurance disputes are often settled amicably in Switzerland before arbitration even starts. Thus, the number of arbitration proceedings may be smaller than it appears to be in other industry sectors. We expect, however, that arbitration and other ADR techniques will become more important for the insurance sector within the next years.
Consumers have the possibility to assert their complaints against an insurance company – free of charge – with the Swiss Insurance Ombudsman (Versicherungsombudsmann). The Swiss Ombudsman of Insurance is a Foundation established by the Swiss Insurance Association in 1972. The main function of the Ombudsman is
- to receive communications in respect of complaints, disputes and claims in connection with or arising out of private insurance contracts;
- to provide guidance and advice to insurance customers;
- to facilitate the settlement of claims and the resolution of disputes by recommendations.
However, the Ombudsman is not entitled to make any binding settlement decisions.
Arbitration is the main alternative dispute resolution mechanism used in South Korea to settle large and complex disputes. Parties commonly assign arbitration institutions applying their rules including those rules of the International Chamber of Commerce, Singapore International Arbitration Centre, the Hong Kong International Arbitration Centre as well as the Korean Commercial Arbitration Board which has gained recognition as another option for arbitration by contracting parties while selecting the venues in the respective countries. South Korea is a party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (“New York Convention”) enabling an arbitral award to be recognised and enforced in South Korea and other countries that are parties to the New York Convention.
Consumers of financial products may also mediate a claim with the FSS through its FDMC where they may seek remedies and damages against financial institutions (e.g., insurers, banks, securities firms, and asset management companies) that are subject to supervision by the FSC and the FSS. The FDMC will review and issue a Mediation Order which the parties may accept or reject. By 2017, an estimated 23,000 cases were in mediation with the FDMC.
Yes. The insured is entitled to submit the dispute before a judicial court, without prejudice to his or her right to agree with the insurer the submission of the claim to arbitration, or to any other ADR mechanism, even once the loss has occurred.
Likewise, the parties are free to agree the submission of the disputes arising from an insurance contract to arbitration, provided that the damages or losses claimed equal or are greater than 20 UIT (£19,359.48 approximately).
Without prejudice of the arbitration, Peruvian law also includes other mechanisms such as mediation and conciliation.
Alternative dispute resolution is well-established in France, whether in the guise of arbitration, mediation or conciliation, and it is increasingly promoted by the French legislator and the provisions of the French Civil Procedure Code.
The world of (re)insurance moreover possesses industry-specific ADR avenues and forums, such as the Insurance Ombudsman, that was recently created by the French Federation of Insurance, who may assist the parties regarding insurance disputes, or the French Reinsurance and Insurance Arbitration Center (CEFAREA), which has significant expertise in relation to (re)insurance arbitration and mediation.
Reinsurance disputes are habitually dealt with by way of arbitration proceedings (usually ad hoc arbitration proceedings), rather than proceedings before French Courts, as reinsurance treaties systematically contain arbitration clauses.
Arbitration clauses in insurance and reinsurance agreements are generally enforceable, and Germany has become a more and more significant venue for international arbitration proceedings. As reinsurance disputes tend to be settled in private, the majority of reinsurance contracts contain arbitration clauses. In direct insurance contracts, arbitration clauses remain the exception but are, for example, frequently used in W&I polices, sometimes in D&O policies and in a few other lines of business. While most agreements so far provide for ad hoc arbitration, parties increasingly use institutional rules. The German Arbitration Institute (DIS) is an experienced and highly respected institution which just recently published its updated 2018 Arbitration Rules.
In business reinsurance and insurance, the arbitration agreement must generally be in writing. However, the form requirements under German law are far more lenient than those under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the UNCITRAL Model Law. The arbitration agreement may not only be derived from a document signed by the parties but also from an exchange of letters, faxes or other means of telecommunication which provide a record of the agreement. Further, the form requirement is deemed to have been complied with if the arbitration agreement is contained in a document transmitted from one party to the other party or by a third party to both parties and – if no objection was raised in good time – the contents of such document are considered to be part of the contract in accordance with common usage. Moreover, reference in a contract complying with the written form requirements to a document (e.g. standard insurance terms and conditions), containing an arbitration clause also constitutes an arbitration agreement provided that the reference is such as to make that clause part of the contract.
Alternative dispute resolutions are well established in Israel. More so according to the procedural law, all cases must be referred to A.D.R. at their first stage, and only if the A.D.R process fails, they will be reverted to the court.
There is currently no comprehensive or uniform legislative framework for the operation of alternative dispute resolution (ADR) in Australia, although ADR processes are well established in the various Australian jurisdictions. Many different laws govern the operation of ADR in the different Australian jurisdictions and the laws generally require parties to litigation take 'genuine' or 'reasonable' steps to resolve disputes.
For example, the Civil Dispute Resolution Act 2011 (Cth) applies to proceedings in the Federal Court of Australia and requires an applicant to file a genuine steps statement at the time of filing the application.
Section 43 of the ICA renders any clause attempting to enforce an arbitration clause void, and under this legislation, parties cannot be compelled to arbitrate their dispute. However, where the insured and insurer agree that the dispute will be resolved through arbitration after the dispute has arisen, that agreement will be enforceable under section 43(2) of the ICA.
Additionally almost all Courts will order mediation before a matter can proceed to trial.
In Italy ADR have become a pre-litigation requirements, including insurance disputes in an attempt to deflate the Judge backlog. Typified ADR are the “assisted negotiations” and the “mediation”, in particular this last one is important ifor the insurance markets.
In fact, article 5 of the Legislative Decree No. 28 of 4 March 2010, imposes compulsory mediation for some specific and listed class of civil and commercial controversies, there including controversies related to: (i) insurance contracts; (ii) medical malpractice; (iii) directors’ and officers’ liabilities; and (iv) banking and financial disputes. Notwithstanding that, compulsory ADRs are rarely successful as the parties consider them just a precondition to litigate rather than real and serious instruments to resolve the dispute.
A financial ADR system introduced in 2010 to encourage fast, simple and flexible dispute resolutions. ADR institutions have been established with the designation and supervision of the FSA. Mediators in the ADR institutions are selected from the professionals in the financial sectors. A financial ADR system obligates insurance companies to cooperate the dispute resolution, wherein insurance companies are required to appear at hearing and provide certain information requested by the mediators unless reasonable grounds. As such, a financial ADR system is advantageous to customers compared to lawsuits in the courts. The number of ADRs handled through financial ADR systems remains stable in recent years.
Alternative dispute resolution in Poland has developed quite well in recent years. In the case of a dispute with an insurer the customer may seek assistance out of court in a number of ways.
Firstly, the customer may submit a complaint directly to the insurer with respect to a service it provides or a product it offers. The insurer is obliged to reply to the complaint without undue delay but not later than within 30 days from the receipt of the complaint or, in particularly complicated cases, within a deadline not exceeding 60 days from the receipt of the complaint.
Secondly, advice on disputes with a financial service provider such as an insurer can be obtained from the Financial Ombudsman and municipal or district consumer ombudsmen or non-governmental consumer organisations such as the Consumer Federation and the Polish Consumer Association. They provide advice free of charge, offer legal information on consumer protection, intervene on behalf of consumers and/or help them take legal action.
The Financial Ombudsman handles complaints and individual submissions in the case of complaints dismissed by a financial service provider, and may take legal action on behalf of a consumer.
There is also an Arbitration Court at the KNF to which the parties (if both agree to this) may submit their dispute regarding an insurance service or product for resolution.
There are no alternative dispute resolution (ADR) systems for insurance covered by the law.
The parties to a reinsurance contract can freely agree the terms and condition by which they will be bound.
Insurance claims may be resolved before CONDUSEF, before competent Courts or in arbitration. Other alternative dispute resolution mechanism, such as mediation or conciliation are available in Mexico and recognized by Mexican law.
CONDUSEF may be appointed by the parties as mediator in disputes whose quantum does not exceed 6 million Mexican investment units (approximately 37.6 million pesos). If the parties don’t reach a settlement in the mediation and they agree to submit their dispute to arbitration, the parties may request CONDUSEF to act as arbitrator or appoint a third party as arbitrator.
Reinsurance claims can be resolved in judicial proceedings before competent courts or through arbitration. Other forms, such as mediation or conciliation can be used.
The Mexican Insurance and Bonding Law Association (Asociación Mexicana de Derecho de Seguros y Fianzas) (AMEDESEF), in its capacity as the Mexican Chapter of AIDA (Association Internationale de Droit des Assurances) established the Mexican Chapter of the Insurance and Reinsurance Arbitration Society (ARIAS Mexico), in a joint venture with CAM (Centro de Arbitraje de México), a well-known private institution specialised in the administration of arbitration proceedings. Jointly, they promote arbitration to resolve insurance and reinsurance disputes managed by CAM, with the technical assistance of AMEDESEF.
London Market insurers are some of the greatest users of alternative dispute resolution.
The UK is a signatory of the New York Convention. The use of both arbitration and mediation is well established. In England and Wales, the relevant law governing arbitration is contained in the Arbitration Act 1996 and any arbitration must be conducted within the framework of this Act. There are limited opportunities to appeal the decision of an arbitral tribunal.
The Indian law recognizes arbitration, mediation and conciliation as means of alternative dispute resolution. Arbitration clauses are enforceable and most courts will enforce the arbitration clause or agreement unless the existence of the arbitration clause or agreement is in itself disputed. The Supreme Court of India has also carved out 7 categories of dispute which are considered non-arbitrable. In addition, disputes involving serious allegations of fraud are also considered to be non-arbitrable.
The Indian Arbitration and Conciliation Act 1996 (ACA) is based on the UNCITRAL model law. The ACA preserves party autonomy in relation to most aspects of arbitration, such as the freedom to agree upon the qualification, nationality, number of arbitrators, the place of arbitration and the procedure to be followed by the Tribunal. The principle of party autonomy has been consistently confirmed by the Supreme Court in various decisions, including the Constitutional Bench decision in Bharat Aluminium Co v Kaiser (2012).
An arbitration agreement, as per the ACA, needs to be in writing and should be signed by the parties to reflect the intention of the parties to submit their dispute(s) to arbitration. There is no prescribed form required for the purpose of an arbitration agreement. An arbitration agreement can also come into existence if it is contained in a subsequent exchange of letters, telex, telegrams or other means of telecommunication, including communication through electronic means which provide a record of the agreement. An arbitration agreement can also be incorporated by reference. The ACA contemplates arbitration not only between parties who are signatories to the arbitration agreement, but also those ‘claiming through or under’ the signatories to the arbitration agreement.
Furthermore, in relation to domestic arbitration, the ACA bars intervention by the courts except for some specific instances where the courts are allowed to intervene – for example,
(a) for interim relief,
(b) reference to arbitration when an action has been instituted before the court,
(c) for the appointment of arbitrators, where parties have failed to nominate arbitrators within the stipulated time frame and
(d) providing assistance in recording of evidence before the arbitral tribunal.
As far as foreign seated arbitration is concerned, the Indian Courts subsequent to the judgment of the Constitutional Bench of the Supreme Court of India in Bharat Aluminium Co. v Kaiser have consistently declined to intervene. The ACA was amended in the year 2015 and the scope for the Indian Courts to intervene in foreign seated arbitrations stands curtailed save in cases where a party seeks interim relief or in the appointment of arbitrators.
In recent times there has been an attempt to encourage institutional arbitration and the government has proposed changes to the ACA including establishment of a corporate body being the Arbitration Council of India to promote institutional arbitration in the country. These amendments have still to come in force.
Methods of alternative dispute resolution have been well established and utilised in the UAE for many years. Mediation is a voluntary process and as such, parties can opt to mediate disputes with several centres offering mediation services within the UAE such as the Abu Dhabi Commercial Conciliation and Arbitration Centre, and the Centre for Amicable Settlement of Disputes in Dubai.
The 2014 Law prohibits the inclusion of arbitration clauses in contracts of insurance. However, the King – through Royal Decree - may provide for numerous exceptions to this rule. In practice, arbitration clauses are valid for numerous classes of insurance business.
Furthermore, Belgium has various out-of-court dispute resolution procedures.
Consumers can submit a complaint with the Insurance Ombudsman service which will usually intervene to mediate between the consumer and the insurance undertaking.
In addition, parties can settle the dispute on their own initiative. If they reach an agreement, the parties can ask the court to record the settlement. The court’s order has the same value as a judgment and is thus enforceable.
The court can order a judicial mediation if the parties so request or on the initiative of the court and with the agreement of the parties. If the parties agree on the choice, the mediator will be appointed. In other cases, the court will appoint an accredited mediator.
In class action procedures, the court will always order negotiation. Once again, the parties must agree on the appointment of a mediator before the court will do so.
Alternative dispute resolution is well-established in most states. Arbitration clauses, where permissible under state law, are frequently found in policies. As a general rule, courts favor arbitration, and any doubt as to whether a dispute is arbitrable is generally resolved by courts in favor of arbitration. Courts will rarely interfere with an ongoing arbitration proceeding, and it is very difficult in most states to overturn an arbitration award.
In addition, courts often encourage parties to mediate their disputes. Many courts have discretionary authority to compel the parties to mediate and/or have mandatory mediation programs for certain cases based on the type of case or the monetary amount. In some jurisdictions, courts will impose adverse cost sanctions on parties who unreasonably refuse to comply with mandatory mediation procedures.
However, a number of states have laws prohibiting or limiting the enforceability of mandatory arbitration clauses in certain types of insurance policies. Many, but not all courts, have upheld these laws and ordered insurers to litigate rather than arbitrate coverage disputes with their policyholders.
Law 30 of 1999 on Arbitration and Alternative Dispute Resolution (Law 30/1999) provides for several forms of alternative dispute resolution, including arbitration, mediation, consultation, negotiation, conciliation and expert evaluation.
Commercial agreements between Indonesian parties commonly provide for negotiation in the early stages of dispute resolution. Further, mediation is required as an initial step in civil court proceedings, as regulated under Supreme Court Regulation 1 of 2016 on Court-Sanctioned Mediation Procedures.
In relation to the financial sector, OJK Regulation 1/POJK.07/2014 on Alternative Dispute Resolution in the Financial Services Sector provides for internal and external dispute resolution procedures. Internal dispute resolution procedures deal with customer complaints, in which the relevant financial services company must attempt to settle the dispute by reaching consensus. Upon failure to reach consensus, the parties may settle a dispute through external dispute resolution (e.g., the Civil Court, the Pension Fund Mediation Agency, the Capital Markets Arbitration Board, the Alternative Dispute Institution for Indonesian Banking, the Bank Indonesia Mediation Team, or the Insurance Mediation and Arbitration Institution (Badan Mediasi dan Arbitrase Asuransi Indonesia or BMAI).
Thailand is a signatory to the New York Convention and alternative dispute resolution (including mediation and arbitration) is well-established in Thailand. With respect to insurance related issues, the use of the OIC’s arbitration system has been established since 1998. It is also worth noting that Thai insurance law requires all insurance policies (except marine hull and marine cargo policies) to have a provision entitling the insured to submit its claim to arbitration before the OIC. The arbitration proceedings would be conducted by an officer of the OIC and the parties are entitled to enforce or challenge the award under the provisions of the Thai Arbitration Act.
Austria has a long-standing tradition as an arbitration hub for Central and Eastern Europe. Already in 1895, Austria first enacted legislation on arbitral proceedings. In 2006, the new Austrian Arbitration Law, which is based on the UNCITRAL Model Law, entered into force. There are also specific rules in place for mediation proceedings in civil matters.
The establishment of the Vienna International Arbitral Centre (VIAC) in 1975 furthered Austria’s position as the preferred place for the settlement of east-west disputes. VIAC has administered over 1,600 proceedings since its inception and its caseload increases continuously. It administers both mediation and arbitration proceedings but is particularly renowned for its arbitration rules, the Vienna Rules. VIAC only deals with international cases involving at least one party with its place of business or normal residence outside of Austria or cases concerning disputes with an international character.
In 2016, the Austrian Branch of ARIAS (AIDA Reinsurance and Insurance Arbitration Society) was founded. However, with regards to insurance or reinsurance disputes, arbitration still lacks behind court proceedings as the preferred method for resolving disputes.
Mediation is now the most common form of dispute resolution in Ireland and since the introduction of the Mediation Act 2017 (the “Mediation Act”) on 1 January 2018, solicitors are required to advise their clients of the merits of mediation as an alternative dispute resolution (“ADR”) method in advance of issuing court proceedings. The Mediation Act requires the solicitor to swear a statutory declaration confirming that such advice has been provided and this declaration must now be filed with the originating document in the relevant court office when issuing proceedings.
The courts cannot compel the parties to mediate disputes; however, in the High Court and Circuit Court, a judge may adjourn legal proceedings on application by either party to the action, or of its own initiate, to allow the pretties to engage in an ADR process. When the parties decide to use the ADR process, the court rules provide that the courts may extend the time for compliance with any provision of the rules. A party failing to mediate following a direction of the court can be penalised as to costs.
Since 8 June 2010, the Arbitration Act 2010 (the “Arbitration Act”) has applied the United Nations Commission on International Trade Law (“UNCITRAL”) Model Law to all Irish arbitrations. The Arbitration Act reduced the scope for court intervention or oversight and provided a more limited basis for appealing awards and decisions than was previously available.
The High Court has powers for granting interim measures of protection and assistance in the taking of evidence, although most interim measures may now also be granted by the arbitral tribunal under the Arbitration Act. Once an arbitrator is appointed and the parties agree to refer their dispute for the arbitrator's decision, then the jurisdiction for the dispute effectively passes from the court to the arbitrator.
A contract that does not contain a written arbitration agreement is not arbitrable and is specifically excluded from the application of the Arbitration Act. The arbitration agreement must be in writing whether by way of a clause in the substantive contract or by way of separate agreement. While Section 2(2) of the Arbitration Act stipulates that such clauses should be in writing, this provision has been given a broad interpretation to include an agreement concluded orally or by conduct as long as its content has been recorded in writing.
Article 34 of the Arbitration Act deals with applications to the court for setting aside an award. The grounds on which a court can set aside an award are extremely limited and correspond with those contained in Article V of the New York Convention, which requires the party making the application to furnish proof that:
(a) a party to the arbitration agreement was under some incapacity or the agreement itself was invalid;
(b) the party making the application was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his or her case;
(c) the award deals with a dispute not falling within the ambit of the arbitration agreement; and
(d) the award is in conflict with the public policy of the state.
Alternative dispute resolution is well established in Norway. Arbitration and mediation, as well as court-sponsored mediation, are frequently used as alternatives to ordinary litigation.
In addition, the Conciliation Board is in some circumstances the venue of first instance instead of the District Courts. The Conciliation Board consists of lay judges who facilitate discussions aimed at achieving settlement. Cases must be commenced in the Conciliation Boards in claims valued at less than NOK 125,000 or if one of the parties is not represented by a Norwegian lawyer (irrespective of the value of the claim).
Insurance disputes may also be referred to the Financial Complaints Board, which is a quasi-judicial body with highly specialised members and which offers a low-cost alternative to proceedings in the Norwegian courts. Decisions of the Financial Complaints Board are not binding. However, the parties will normally accept the Board's findings.