Law of Export Credit Insurance and Guarantees

Description

Examining the law of export credit insurance and export credit guarantees, this book clarifies the legal nature of ECI and ECGs as insurance and guarantees respectively by comparing their legal characteristics regarding contract formation process, terms and conditions, duty of fair presentation, claim handling process and subrogation and recoveries. It further explores why some export credit agencies provide export credit guarantees in addition to export credit insurance, notwithstanding that an ECG is a more client-friendly product and easier than ECI for banks to use. Analysing the legal principles applicable to export credit insurance and export credit guarantees reflected by English case authorities and statutory law, the book is a doctrinal study informed by substantive empirical research. It studies a large number of export credit insurance and export credit guarantee contractual terms, to propose several model clauses and scrutinise the influences of the Insurance Act 2015 on ECI. This book is an important reference for students, academics and practitioners in the field of commercial and insurance law. In particular, it seeks to provide guidelines for all potential parties who wish to arrange an ECI/ECG transaction, including export credit agencies, private credit insurers, brokers, banks, exporters and buyers, to correctly identify and choose the suitable cover. Cover Half Title Title Page Copyright Page Table of Contents Preface Acknowledgements Author biography List of Abbreviations Table of Cases Table of statutes and statutory instruments Chapter 1 Introduction References Chapter 2 How are ECI and ECGs used in the industry? General distinctions between insurance and guarantees Confusion in English ECI and ECG cases The similarities and differences between general contracts of insurance and guarantee The elements to distinguish a general contract of insurance from guarantees The different types of ECI and ECG products An overview of ECI and ECG products around the world The main ECI products in the UK What is insured under ECI: political risks and commercial risks Basic ECI cover Supplier credit insurance Buyer credit insurance The main ECG products in the UK Supplier credit guarantees Buyer credit guarantees The formation process of ECI How to obtain an ECI cover from the ECA? The application process Situations where a single transaction should be insured by more than one ECA The ECA’s liability for “bad advice”? How to obtain an ECI cover from private credit insurers? The early attempt to introduce ECI business at Lloyd’s Today’s ECI business at Lloyd’s The leading underwriters’ role under ECI The relationship between leading and following underwriters under ECI ECI business in the company market The broker’s role under ECI Market protocols Legal principles Broking political and credit risks in the marine cargo market? The causal connection between the broker’s breach and the assured’s losses The quantum issue regarding the broker’s liability The broker’s duty of care to the intended assignee of ECI The role of sub-brokers under ECI Summary: is the formation process of ECI similar to that of general insurance contracts? The formation process of ECGs How to conclude an ECG contract with the ECA? Is the formation process of ECGs similar to that of general guarantee contracts? Are there any potential problems within the formation of ECI and ECGs? The potential issue within the formation of supplier credit insurance Is the formation process of ECGs as problematic as that of ECI? References Chapter 3 Terms and conditions of ECI and ECGs The peculiar terms of ECI The insuring and indemnity clause The UKEF’s insuring and indemnity clause Lloyd’s definition of “Credit Risk” and “Contract Frustration” Treating protracted payment default and insolvency of the buyer as separate risks insured Inserting a credit risk clause into a marine cargo policy? The wording of the “transaction premium clause” The construction of the TPC: textualism, contextualism, factual matrix and commercial consequences Rectification and an estoppel by convention? Identifying the subject matter insured and drafting an appropriate insuring clause The measure of indemnity under ECI The maximum liability clause The credit limit clause Distinguishing an insuring clause from a measure of indemnity clause The exclusion clause Exclusion clause: general Exclusion of documentation risk Specific exclusions under Lloyd’s ECI policies Conditions and warranties under ECI before and after the IA 2015 ECI conditions before the IA 2015: the effects of the breach of conditions precedent to liability ECI conditions after the IA 2015: risk-defining or risk-mitigating? Clause 6 of the “Export Insurance Policy”: is it a condition precedent to liability? How to determine whether a term is risk-defining or risk-mitigating? Is Clause 6 subject to s 11 of the IA 2015? ECI warranties after the IA 2015 Clause 11 of the “Export Insurance Policy” Does Clause 11 conflict with ss 10 and 11 of the IA 2015? Did the UKEF intend to contract out of ss 10 and 11 of the IA 2015? An example of an anonymous Berne Union member’s policy that is compliant with the IA 2015 Alteration of the ECI policy Summary: the legal nature of ECI reflected by its terms and conditions Terms and conditions of ECGs The ECG Contract The guarantee clause: general The guarantee clause must mirror the terms of the underlying contract of sale The guarantee clause covers genuine underlying transactions only The exclusion on the documentation risk? The bank’s rights and obligations under ECGs The ECA-exporter contract Core clauses on the exporter’s obligations The UKEF’s remedies for the exporter’s breach Summary: the legal nature of ECGs reflected by its terms and conditions Conclusion References Chapter 4 The duty of fair presentation under ECI and ECGs? The duty of fair presentation under ECI The materiality test Material facts: general Facts that make the risk attractive to the insurer A “new raft” of disclosure where ECI is provided as an add-on cover? The inducement test Non-disclosure of the existence and purpose of specific policy clauses? The non-disclosure of the Transaction Premium Clause and the Non-avoidance Clause The “comprehensive” effect of the NAC The non-disclosure of the TPC and NAC in light of the IA 2015? Misrepresentation as the foundation for an estoppel to circumvent the application of the NAC? Waiver Waiver of the assured’s duty to disclosure: the “frame of reference” formulation Waiver of the right to avoid the contract: the “legal advice” presumption The UKEF’s questionnaire in the ECI cover proposal form Contractual clauses in relation to the duty of fair presentation Stipulating the duty of fair presentation as a condition precedent to liability? Non-avoidance clause Is the creditor under ECG subject to the duty of fair presentation? The creditor is under no duty of disclosure: Credit Lyonnais General rules on misrepresentation and non-disclosure in the law of guarantee The rationale for the creditor’s limited duty of disclosure: does it apply to ECGs? A tendency that the ECA is importing the duty of fair presentation into ECG business? Express contractual provisions on the duty of full disclosure? Detailed questionnaires for the exporter and the bank to complete Proposal: a unification of English law on the duty of fair presentation in ECI and ECGs What is the current law? Insurance law and ECI contracts: before and after the IA 2015 Law of guarantees and ECG contracts What should the law be? What steps can the UKEF take? Miscellaneous The assured’s post-contractual duty of disclosure under ECI: the “common interest” test and the legal professional privilege The insurer’s duty of utmost good faith under ECI The ECA’s vicarious liability for its employee’s fraud? The bank’s duty to investigate the genuineness of the underlying transaction? References Chapter 5 The claim handling process under ECI and ECGs The peculiar preconditions which could prolong the claim handling process under ECI The waiting period clause Time of loss under ECI policies? The rationale behind the waiting period clause Claiming the interest that accrues during the waiting period? The proposal for a fairer waiting period clause for the assured The “arbitration award/judgment” clause The controversies of the “arbitration award/judgment” clause The rationale behind the “arbitration award/judgment” clause: a prerequisite of indemnification and subrogation Should the ECA make indemnification straight away after the assured has obtained an arbitration award or a judgment? Mitigating the harsh consequences of the “arbitration award/judgment” clause The claim provisions in ECI that are common in other types of insurance policies The general claim handling clause The acceleration clause ECI as “back-to-back indemnity” with the underlying loan agreement The acceleration clause in the underlying loan agreement The acceleration provision in the ECI policy The notification and mitigation clause The UKEF’s sample clause The duty to provide a “duly completed” notification of loss? The fraudulent claim clause Summary: the claim handling process of ECI and its legal nature The claim provisions in ECGs Do ECGs include a waiting period clause and an “arbitration award/judgment” clause? Do ECGs contain a waiting period clause? Do ECGs contain an “arbitration award/judgment” clause? The claim handling process in ECGs is not likely to be prolonged The general claim handling clause The refund of payment clause The notification and mitigation clause Summary: the claim provisions in ECGs and the legal nature of ECGs A common framework for ECA-supported buyer credit transactions: LMA’s Export Finance Buyer Credit Agreement Background to the LMA project Assumptions Terms of payment Down payment ECA premium Repayment date Calculation of interest Interest rate Default interest Events of default Political and commercial events The acceleration clause The Isabella clause The interrelationship between the Loan Agreement and the ECI/ECG contract Conclusion References Chapter 6 Subrogation and recoveries under ECI and ECGs Subrogation and recoveries under ECI The juridical basis of the subrogation right in the context of ECI The ECA’s pre-indemnity right and the control of proceedings under ECI Established principles in English insurance law The ECA’s right to control the assured’s proceedings prior to indemnification? Stipulating a clear and precise control of proceedings clause in the ECI policy The collection of recoveries under ECI The subrogation protection clause: general The subrogation protection clause in contractor–subcontractor transactions The intergovernmental debt rescheduling clause The subrogation protection clause in the underlying export contract/loan agreement The allocation of recoveries under ECI Established principles in English insurance law Circumstances where the assured effects the recoveries Circumstances where the ECA effects the recoveries The allocation of recoveries clause in ECI policies The allocation of recoveries clause and the waiting period clause Assignment under ECI as the alternative to subrogation The potential advantages of assignment over subrogation Contractual assignment and equitable assignment Assignment and set-off Assignment and the jurisdiction clause of the underlying transaction Summary Subrogation and recoveries under ECGs The legal basis of the subrogation right in the context of guarantees The subrogation provisions under ECGs The subrogation protection clause The collection of recoveries clause The allocation of recoveries clause What should the law be regarding subrogation and recoveries issues in ECG contracts? Conclusion References Chapter 7 Why ECAs provide ECGs in addition to ECI The legal nature of ECI and ECGs as revealed in Chapters 2–6 Why do ECGs remain a less popular product? ECI works well in most circumstances The costs for ECGs are higher than ECI The processing time for underwriting an ECG cover is longer than ECI The division of the global market by ECAs and private credit insurers Why are ECGs still significant? In supplier credit transactions: how is an ECG used as a “top-up” facility together with ECI? In buyer credit transactions: how is an ECG used as a standalone and tailored product to support transactions of a larger amount and a longer credit period? Concluding thoughts References Appendix 1: Special acknowledgements Appendix 2: How are ECI and ECGs used by the Berne Union members? – full list Appendix 3: The Berne Union members’ standard ECI and ECG contracts available online Appendix 4: Questionnaires in the proposal forms for ECI and ECGs Index