UK and US offices join in pay-out fight

Lovell White Durrant's Chicago and London offices combined to help a reinsurance client win the first round of a mammoth battle with the liquidators of General Electric's insurance company, Emlico.

Emlico, set up by General Electric solely to handle GE's insurance, moved from Massachusetts to Bermuda in 1995 shortly before it went into liquidation owing $500m.

Emlico's 400 reinsurers, which may have to make good some of GE's losses, allege that Emlico knew it was about to collapse and moved deliberately to Bermuda because reinsurers there are forced to pay out more.

Lovell's client, German reinsurer Hannover Re, is seeking to force Emlico to arbitration in Massachusetts over whether Emlico moved fraudulently to Bermuda.

Emlico's liquidators could not stop the arbitration in Bermuda because Hannover Re has no office there.

Instead it persuaded the Bermudan court to request the UK Companies Court to issue an injunction under UK insolvency law. The Companies Court refused and Emlico's liquidators took the case to the Court of Appeal, which ruled last week that the Companies Court was right.

"This establishes that the English court will not grant an injunction merely because the Bermuda court has asked it to," said Lovells partner Christopher Grierson.

"The liquidators are desperate to stop the arbitration. If they don't win leave to appeal to the House of Lords, it will go ahead unless the US courts issue an injunction."

He said he suspected the liquidators would not want to request an injunction in the US because of tough disclosure requirements there.

The long-running Emlico litigation is a major fee-earner for Lovells' Chicago niche reinsurance practice.