Motor insurance following the UK’s exit from the EU
Following the election of the Government with a substantial majority and the subsequent passing of the Withdrawal Agreement Bill in the House of Commons it is now clear that the UK will exit the EU on 31 January 2020...
Such certainty means it is possible to understand in more detail what the framework of UK Motor Insurance will look like after this date and the expiry of the transition period, currently scheduled for 31 December 2020.
That framework will look very different depending on whether a “deal” is agreed or a “no deal” scenario is reached by the end of the transition period.
With this in mind we set out the implications of these two scenarios.
The Revised Political Declaration of 17 October 2019 sets out the framework for the future relationship between the EU and the UK.
Under “Road Transport”, paragraph 60 of the Declaration states: “In addition the Parties should consider complementary arrangements to allow travel by private motorists”.
This signals at the very least an intention to agree reciprocal insurance arrangements for private motorists driving in the UK and the 27 EU Member States on the UK exiting the EU.
European (Withdrawal Agreement) Bill 2019-20
The Committee Stage of the Bill commenced on 7 January 2020 and ended on 9 January 2020. The objective is to create legally binding statute for the UK’s withdrawal from the European Union on 31 January 2020.
Once the UK has formally withdrawn as a Member State of the EU the transition period will convene until the current expiry date of 31 December 2020.
During this period of transition all EU legislation, rules and court decisions will continue to apply to and in the UK as if it were a Member State. Any changes to EU legislation or rules will also apply automatically to the UK during this period.
This means that the 4th Motor Insurance Directive 2006/26/EC and the Motor Directive 2009/103/EU will continue to apply until the expiry of the transition period.
The Directives which provide Protection of Visitors for EU residents when they are victims of a road traffic accident in another EU Member State will remain in place during this period as will the right to bring civil proceedings for accident compensation in their country of residence or domicile rather than in the jurisdiction where the accident occurred.
Both Directives effectively mirror the Green Card system for the protection of a victim of a road traffic accident caused by the driver of a foreign registered vehicle.
Essentially during the period of transition there will be no change to the current position. The MIB will continue to fulfil its role as a compensation body and information centre in the event that the foreign insurer has no appointed representative to handle the claim or the driver was uninsured or untraced.
Deal or No Deal
Whether a “deal” is agreed with the EU or not after the UK’s withdrawal, the Directives will no longer apply to the UK unless all EU Member States are in agreement.
This is unlikely as the Directives are based on reciprocal agreements and provisions in the national laws of the individual Member States.
However the Green Card Scheme, which effectively allows vehicles free movement across the borders of all 48 subscribing countries, will remain.
There remains a lack of awareness in the UK of the requirement to present a hard copy of a Green Card in the event of a “no deal Brexit”. Any driver not in possession of a Green Card in any country in scope, including subscribing EU Member States, may be driving without insurance and a Green Card may be required for any motor vehicle and for all forms of motor insurance including private, commercial, motor trade and motor fleet policies.
Individual EU Member States Bi-Lateral Agreements
The EU has complete authority regarding matters of recognition and enforcement of judgments in its Member States and as such it is arguable that the UK cannot conclude individual bi-lateral agreements with Member States who in fact are precluded from entering into such agreements by an opinion set out in The Lugano Convention.
Notwithstanding this position, the MIB has negotiated Bilateral Protection of Visitors Agreements with individual EU Member States in the event of no deal after withdrawal and the expiry of the transition period. There are two agreements covering victims of both insured and uninsured drivers. So far 21 EU Member States have signed agreements including Germany.
The second agreement covering victims of uninsured/untraced drivers includes reciprocal clauses committing guaranteed funds to compensate victims of a road traffic accident who are resident in the other country.
In addition, although agreements have not been signed, 10 further EU Member States have confirmed guaranteed funds in order to continue to compensate UK road traffic accident victims including Italy, Netherlands, Portugal and Spain.
The “missing” country remains France which is an important entry point to the EU with some 2.5 million UK vehicles travelling to the EU annually with the majority entering via France. Therefore any accident claim arising from a road traffic accident in a non-signatory such as France would have to be brought under French jurisdiction and substantive and procedural law.
Further if the driver was uninsured/untraced, a UK victim will not be able to claim compensation in the event of a road traffic accident involving such an uninsured or untraced driver in the EU Member State where the accident occurred. In this scenario the MIB has suggested that it would follow suit and not reciprocate where the fault driver was a UK national who was either uninsured or untraced in an accident in the UK.
Motor Vehicles Insurance EU Exit Regulations 2019
This Regulation will look to rectify issues arising in the UK’s compulsory motor insurance framework in the event of a “no deal” Brexit. It will remove the obligation of the MIB to act as a compensator for UK road traffic victims injured in an EU Member State and will also remove the right for the UK victim to bring a compensation claim in the UK courts even though the accident happened in the EU.
Where an individual agreement does not exist the requirement for the foreign insurer to have a claims representative in the UK will cease. Were it not for the Regulation, the MIB as the compensating body would have to handle these claims, passing the cost onto its levy insurers who may then choose to load insurance premiums for the consumer as a consequence.
A consequence of the UK’s exit is that more UK nationals may have to bring civil claims in the foreign jurisdiction and conversely there may be an increase in claims in UK courts from EU nationals injured in non-fault road traffic accidents in the UK. Claims frequency will need to be closely monitored.
Claimant lawyers may look to commence court proceedings before the UK exits the EU to retain the ability for the claim to go through the UK courts. This will involve at least the issue of a claim form before the exit date and not merely delivering the same to the court for issue. Once issued, proceedings do not need to be served within six months before the exit date as the jurisdiction will be setonce the claim form has been issued.
Enforcement of Judgments
A judgment made by an EU Member State (including the UK until the expiry of the transition period) can be enforced in the court of another EU Member State under the Recast Brussels Regulation (Regulation (EU) No.1215/2012).
A judgment creditor can apply for the full range of remedies available in the EU Member State so in the UK this would include charging orders, attachments of earnings or a third party debt order.
After the EU exit date the position will be more complex. If the judgment was obtained on or before the exit date then the Recast Brussels Regulation would still apply. After exit day the Recast Brussels Regulation will not apply as it will be repealed by the Civil Jurisdiction and Judgments (Amendment) (EU Exit) Regulations 2019.
The process for enforcement will then be decided on whether the judgment is covered by The Hague Convention.
In a “no deal” scenario the UK will need to apply to re-join The Hague Convention in its own right.
Where the parties in dispute have entered into an exclusive jurisdiction agreement then the “Contracting States” (including the UK and the 27 EU Member States) are required to enforce any judgment made by the specified court. If the judgment is made by the court of an EU Member State it can be enforced in the UK courts under the Civil Procedure Rules and The Hague Convention sets out the documents and procedure required to achieve this. The position is the same for a judgment made by a UK court to be enforced in an EU Member State. The prerequisite for either, however, is that the parties must have entered into an exclusive jurisdiction agreement.
If the parties have not entered into an exclusive jurisdiction agreement then The Hague Convention will not apply. Enforcement of a judgment of an EU Member State could not be enforced in a UK court and the same applies for a UK judgment to be enforced in the court of an EU Member State. Instead new court proceedings would have to be commenced in the relevant court as a debt claim relying on the foreign judgment. This will make the process more difficult, time consuming and expensive.
Victims of road traffic accidents will not be subject to such jurisdictional agreements but from a reputational position if nothing else, it is unlikely that a foreign insurer would not discharge an unsatisfied judgment relying on the complexity of enforcing the same against its policyholder.
Although we have at last have some certainty over the UK’s exit from the European Union there some motor insurance issues and implications which remain unresolved and untested.
The volume of bi-lateral Protection of Visitors Agreements that have been reached either formally or informally is encouraging but the requirement for the road traffic accident compensation claim to be pursued in the jurisdiction where the accident occurred may be a deterrent to some claimant lawyers who do not have partnerships with foreign jurisdiction law firms.
Claimants are already issuing Claims Forms whatever the readiness of the injury claim in order to ensure the claim will progress through a UK court and frequency needs to be carefully monitored - especially as there could be a six month delay in presenting the issued claim to insurers.
Insurers are likely to experience a rise in compensation claims from road traffic accidents from nationals of EU Member States.
UK nationals who have already issued and commenced court proceedings will continue with these claims against the Compensation Body in the UK.
There remains uncertainty where a bi-lateral agreement or an informal guarantee arrangement has not been agreed with EU Member States as to how claims will be viewed in a “no deal” Brexit scenario.
Enforcement of judgments may be more complex, costly and time-consuming in a “no deal” scenario and the position needs to be kept under review by the Government and the MIB.
Now that the General Election “lock down” is over we will hopefully see further updates from the Government and the MIB around any additional bi-lateral agreements and the final preparations for UK motor insurance in the scenarios of a “deal or no deal” exit from the European Union.