Case law Developments in PIL

‘Large Risks’ Insurance Contracts: CJEU Rules on the Enforceability of a Choice-of-Court Clause

On 27 February 2020 the Court of Justice of the European Union (CJEU) gave its ruling in BALTA, a case concerning the enforceability of choice-of-court clauses in insurance contracts (an English translation of the judgment was not available at the time of publishing this post).

The Court had addressed a similar issue in 2005, in the case of Société financière et industrielle du Peloux. It held then that a jurisdiction clause in an insurance contract cannot be relied upon against an insured who has not expressly subscribed to that clause and is domiciled in a State other than that of the policy-holder and the insurer.

BALTA concerned an insurance contract covering ‘large risks’ within the meaning of the Solvency II Directive. In principle, the provisions in the Brussels I bis Regulation aimed to protect the weaker party, including the provisions that restrict the enforceability of choice-of-court agreements, do not apply to such disputes as relate to those contracts (see Article 15(5) and Article 16(5) of the Regulation).

The Court of Justice ruled that this leeway shall not be permitted where the insured is not the policyholder and is not a qualified professional in the insurance sector.


The case concerned a dispute between a Latvian insurance company and a Lithuanian security company. The latter had sued the insurance company in Lithuania for compensation under a ‘large risks’ insurance contract that the defendant had concluded with a Latvian company holding the shares of the security company. The insurance company challenged the jurisdiction of the seised court on the basis of a clause in the insurance contract which conferred jurisdiction on the courts of Latvia.

As regards matters of insurance, the Brussels I bis Regulation provides for a special exception for disputes concerning contracts covering ‘large risks’. It is assumed that the parties to a ‘large risks’ insurance contract have significant and equivalent economic power and do not need the protection that is normally afforded by the Regulation to the weaker parties, including the insured. Prorogation of jurisdiction agreed upon by the parties to settle disputes is, accordingly, then fully allowed. However, in the present case, the insured was not the policyholder and had not expressly subscribed to the clause (which the Court reworded as not having agreed with the clause: see para. 25).

The Issue at stake and the Court’s answer

The Lithuanian court asked the Court whether, in the described circumstances, the insured is entitled to claim the protection provided for under the Brussels I bis Regulation. The Court answered in the affirmative, on the ground that the insured was not a qualified insurance professional. Accordingly, the choice of court was not enforceable against him.

The court’s Reasoning

The Court elaborated in its reasoning on the specific protection granted to insured parties, beside that of policyholders, under the Brussels I bis Regulation, especially pursuant to Article 11(1)(b). The Court observed that derogation for ‘large risks’ insurance contracts should be limited to policyholders, when the insured has not expressly subscribed to the clause. Although the latter statement had already emerged in the Court’s case law (notably in Société financière et industrielle du Peloux), the exact scope of the ‘large risks’ derogation remained uncertain. How should the significance of a third party insured bargaining power be evaluated? The question is critical as it is on that single basis that Article 16(5) of Brussels I bis Regulation may be set aside.

According to the Court, the ‘large risks’ derogation only apply to contracting parties and shall not be extended, in principle, to any insured third party (para. 41 of the judgment). While refusing a case-by-case analysis, the Court stated that the protective provisions in matters relating to insurance should be restricted to parties in need of protection. This would not be the case, in particular, of professionals in the insurance sector.

It is however not clear what other situations could be relevant. According to the Court, the security company may benefit from the protective provisions of the Brussels I bis Regulation in matters relating to insurance. Surprisingly, the Court does not take into consideration the legal relationship between the policyholder (i.e., the mother company in the case at issue) and the insured (i.e., its subsidiary) to assess the applicability of the ‘large risks’ derogation. This will not be without operational implications for European undertakings with activities in multiple markets.

Marion is law professor at Artois University (France)

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