Norwegian Supreme Court reinforces procedure for pursuing direct action claims against P&I Clubs

| Insight

The Norwegian Supreme Court confirmed in a decision 24 June 2020 that Norwegian courts have wide jurisdiction to hear direct action claims against Norwegian P&I Clubs. That the assured / the Club's Member is insolvent is not a prerequisite for establishing jurisdiction, but will be tested as part of the material questions at the hearing. This may also open the door for establishing jurisdiction against the assured in Norway.

The Lugano Convention Article 11 no. 2 governs jurisdiction for «actions brought by the injured party directly against the insurer», but only applies «where such direct actions are permitted». The question before the Supreme Court was to what extent, if any, the Norwegian courts would have to consider the substance of the direct action claim in order for it to be governed by Article 11 no. 2. The specific issue of dispute was whether a pay to be paid clause, in the insurance agreement between the insurer and the insured, could be relied upon between the insurer and the injured party to say that the direct action was not «permitted» as long as the insured was solvent. The injured party claimed that it was sufficient that Norwegian law generally permitted direct actions, which it clearly does, and the direct action suit would not be dismissed on procedural rules.

The Norwegian Supreme court ruled that Article 11 no. 2 was to be understood so that direct actions in general was lawful under Norwegian. Norwegian courts were not to consider whether the specific direct action would fail or succeed in the particular case, and it was therefore not necessary to consider whether the insured was involvent in order for Norwegian courts to have jurisdiction. Hence, the Court of Appeal decision was based on an incorrect understanding of Article 11 no. 2 and was quashed.

Link to the Supreme Court decision