Applicable law

Insurance cases

Choice of law rules for insurance contracts are labyrinthine in their complexity. Two entirely separate regimes are in operation. Where the risk is situated within the EEA, the applicable law is determined by the Second Non-Life Insurance Directive (Council Directive 88/357/EEC) and the Second Life Insurance Directive (Council Directive 90/232/EEC). The rules in those Directives were intended to produce a harmonised system within the EEA, the main effect of which was to confer upon a policyholder the benefit of his domestic law. The Directives were implemented in the UK by sched 3A to the Insurance Companies Act 1982. That schedule has now been repealed and replaced with minor changes by the Financial Services and Markets Act 2000 (Law Applicable to Contracts of Insurance) Regulations 2001 (SI 2001 No 2635). By contrast, if the risk is situated outside the EEA, the applicable law is determined by the rules in the Rome Convention 1980, as implemented in the UK by the Contracts (Applicable Law) Act 1990. The rules in the 2001 Regulations and in the Rome Convention are quite different, and much will depend upon the definition of the situation of the risk. In American Motorists Insurance Co v Cellstar Corporation [ 2003] EWCA Civ 206, [2003] Lloyd’s Rep IR 295 the Court of Appeal has attempted to get to grips with this issue and at the same time to express views on the meaning of various provisions of the choice of law rules. The case was decided under sched 3A to the 1982 Act rather than under the 2001 Regulations, and the judgment of the Court of Appeal was delivered by Mance LJ.