Assignment, law, arbitration and amendments to Rules - Rule 90: Governing law

The legal relationship between the Association and the Member shall be governed by these Rules and Norwegian law, but the provisions of the Insurance Contracts Act of 16th June 1989 shall not apply unless mandatory.

(A) The legal relationship between the Association and the Member… (Rule 90) The legal relationship that exists between the Association and the Member under the contract of insurance is separate and distinct from the legal relationship that exists between the Member and third parties. The Association provides cover for voyages that are performed by Ships worldwide and the claims that arise out of the operation of such Ships will usually be governed by a variety of laws and regulations. Therefore, in most circumstances, the laws and regulations that apply to claims that are made by third parties against the Member will be different from the law that governs the Member’s rights to claim compensation from the Association.

(B) …shall be governed by these Rules and Norwegian law… (Rule 90) Rule 90 stipulates firstly that the legal relationship between the Association and the Member is to be governed by the Rules. Therefore, the Rules are incorporated into the contract of insurance and are made an integral part of that contract. All the Rules will be so incorporated unless particular Rules are specifically excluded, limited or otherwise varied pursuant to any special terms of entry that may be agreed between the Association and the individual Member.

Rule 90 also establishes that the legal relationship between the Association and the Member is to be governed by Norwegian law. There are two aspects to this statement. Firstly, the Rules are governed by Norwegian law in the sense that they are to be interpreted in accordance with Norwegian law. Secondly, the contract of insurance between the Association and the Member is governed by Norwegian law and all applicable provisions of Norwegian law, including those that govern contracts generally, will apply to the legal relationship between the Association and each Member, unless otherwise follows from the contract of insurance (see (C) below).

When considering legal issues that arise under a contract of insurance, Norwegian courts will consider applicable written and customary law, , the preparatory works (NO: forarbeider) to relevant legal acts, case law, , as well as legal literature and articles. With respect to the interpretation of marine insurance contracts, Norwegian courts are likely to be guided by how similar issues have been treated in the Nordic Marine Insurance Plan and its Commentary, in particular where the Rules use expressions that are defined in the Plan, but which do not have a clearly established meaning under general law.

(C) …the Insurance Contract Act…shall not apply unless mandatory. (Rule 90) The Norwegian Insurance Contracts Act 1989 (ICA) regulates both personal and non-life insurance. Where the ICA applies, it will render the conditions of insurance contract that are less favourable to the insured than its own provisions null and void.

Pursuant to Rule 90, any provision in the ICA which does not apply mandatorily is excluded from application in the contracts of insurance incorporating the Rules. The Association has utilised its possibility to exclude the ICA from application to the maximum extent in order to enable the Association to align the Rules to the provisions of the Pooling Agreement of the International Group of P&I Clubs which is the regulatory foundation of the reinsurance that the Association requires to protect the interests of the membership.

For the most part, the ICA does not apply mandatorily to ‘large risks’ insurance contracts. ‘Large risks’ are defined in the Norwegian Regulation to the Insurance Contract Act (NO: forsikringsavtaleforskriften (FOR-2022-03-04-323)), and most of the insurances written by the Association will fall within this definition. However, some provisions of the ICA apply mandatorily also to ‘large risks’ insurances, and the parties to an insurance contract subject to Norwegian law may not exclude such provisions, for instance Section 7-8, which enables a third party to bring a direct action against the insurer when the assured is insolvent, applies mandatorily. Conversely, where the Member is not insolvent, subject to bankruptcy proceedings, or seeking protection from his creditors in some other way, the ’pay to be paid‘-principle¹ also applies under Norwegian law.

For insurance products which are not ‘large risks’ insurance products, the ICA will to a large extent apply mandatorily.