Nick Bradley, partner and head of law firm Pinsent Masons insurance team, and Roger Phillips, legal director of the company’s Qatar office, discuss the move towards creating a market-focused dispute resolution scheme for Qatar – and why, in light of the country’s prosperity, it is so important.
Qatar has recently posted healthy economic figures again. Its budget surplus has reached a record QR54 billion for the fiscal year 2011/12. This is four times higher than the previous year, according to official government statistics. It also represents 12 consecutive years of surpluses and is testament to the country’s impressive economic expansion.
Hydrocarbon revenues account for 70 percent of Qatar state income but other revenues have also grown significantly by 79 percent compared to the previous year. This is part of the government's plans to fully finance the 2020 budget from these other diversified areas of the economy.
With a positive fiscal outlook for 2012 and beyond, continuing demands to support the energy sector, and an estimated QR130 billion worth of infrastructure projects planned before 2020, the insurance sector is well-placed to support and benefit /DISPUTE RESOLUTION Qatar
from the activity and market growth. All of the country’s domestic insurers reported profits in the first half of 2012 and premiums for the sector have grown by 12 percent annually since 2006.
Significantly, Qatar Holding, one of the investment vehicles of the country's sovereign wealth fund, is currently looking to increase its stake in Qatar Insurance Company, the country's largest insurer, from its current level of 12 percent. This is no doubt in anticipation of the insurance growth potential.
From an international perspective, insurers and reinsurers operating from Qatar's stable environment are well-located to support developments in the Far East and Asia Pacific, where IT research and capabilities continue to expand and communication networks are excellent. Looking forward, there is considerable scope to grow the insurance sector in Qatar and wider Middle East as a whole.
Penetration rates are still below industry norms – and in Qatar, new regulation is set to significantly impact the market over the next two years and further stimulate business and competition. Hence there are many reasons for the insurance sector to look on Qatar with enthusiasm.
Addressing the system
There is however, continuing frustration around the management and resolution of contentious areas and insurance disputes. This is not particular to Qatar or the wider Middle East, but of growing international concern. Costs, delays and uncertainty over outcomes are the perennial and all-too-common messages of frustration from senior claims executives in the insurance market.
These fundamental problems are now inhibiting insurers and reinsurers that are increasingly looking for a better resolution model they can use to build more predictability and efficiency into their businesses and ongoing reserving.
With globalisation it’s not getting easier. There is an increasing need to find improvements, as those involved are more and more underwriting and managing risk in remote locations far away from the domicile of the ultimate policyholder.
Thankfully, the insurance industry continues to be resilient and innovative in its solutions offering. More confidence and predictability around disputes in the relevant markets can also have a critical impact in reducing dispute resolution or litigation risk factors that can negatively affect reinsurance rates.
When looking for the best model, it would be wrong to look at the challenges for dispute resolution as simply a geographical or regional issue. In the insurance market as a whole there is continuing interest in a more innovative solution, with a demand for confidence and a dispute resolution system that suits insurance market participants.
Addressing the above is through a mix of both people and process. It means having the most expert adjudicators and arbitrators available, within an efficient system that serves the needs of those using it – with particular regard to cost and speed of resolution. The optimal model can serve both local and international participants that recognise its fundamental strengths as a new scheme.
Setting the precedent
Qatar has been at the forefront of efforts to uphold the rule of law and in developing opportunities to improve its legal education and judicial and arbitration systems with investment and wide-ranging initiatives.
Nick Bradley/partner and head of law firm Pinsent Masons insurance team
Alongside its initiative to put in place a special construction dispute scheme 'Q Construct', the Qatar International Court and Dispute Resolution Centre (QICDRC), with the support of the insurance practice of the international law firm Pinsent Masons, has embarked on a new project to assess the potential for, and design of, a specialist and best-inclass resolution scheme for insurance and reinsurance disputes.
It comes at a time of unprecedented and substantial investment/activity in Qatar. This is notably in the energy and infrastructure sectors, when schemes such as these will be particularly valuable.
The project is now gathering feedback from the market and is in its early stages.
Preliminary proposals have been put to key stakeholders (both local and global), including insurers, reinsurers, brokers, regulators and lawyers, through a series of meetings and roundtables that were initiated in September of this year. The roundtables featured some of the leading figures of the international insurance and legal industries.
These are planned to continue through to November with interested market participants in Qatar, Dubai, Bahrain and London. If support for the initial proposals is found, then work will start on completing the detailed design of the groundbreaking scheme. Input from these roundtables will ensure that the scheme meets current and future international industry needs.
Ewen J. McRobbie, CEO of Qatarbased reinsurance company, Q-Re, was part of the initial roundtables. As he commented, “The GCC has experienced significant and rapid growth these past couple of decades, which has led to gaps forming in the fabric of commercial best practice. These gaps could lead inadvertently to unnecessary stresses on company balance sheets. The dispute resolution initiative, if implemented, will go a long way to filling those gaps in the commercial risk universe. Our hope is that the initiative will gain traction with direct policyholders (especially government and quasi-government) as well as contractors and insurers/reinsurers to facilitate swift and assured remedies.”
As Robert Musgrove, chief executive of Qatar International Court and Dispute Resolution Centre (QICDRC) adds, “For many insurance firms, arbitration is the preferred option for resolving disputes.
However, existing arbitration bodies are now affected by the same problems of cost, delay, uncertainty, and lack of expertise as the court systems they were designed to replace. This project allows us to start with a clean slate and build a dispute resolution process driven by the requirements of the insurance industry, based on its own particular needs.”
There have already been some interesting and innovative recommendations from market participants, on areas where the scheme would be unique and provide considerable value. These ideas are all being fed into the review and for design. Key features of the scheme are likely to include access to the highest quality of judiciary and a pool of specialist arbitrators, (in October, Lord Phillips of Worth Matravers, the current president of the UK Supreme Court takes over from Lord Woolf, as the QICDRC’s chief justice), and a range of optional dispute resolution techniques/ procedures depending on the nature of the dispute and the election of the parties.
Practical considerations
It is recognised that to be attractive to insurance businesses, the scheme needs to be cost-effective and cost transparent.
The process needs to be clear to the parties involved, judgements must be binding (and critically enforceable in other jurisdictions) and the institution and judiciary must be demonstrably independent. The project will also encompass cutting edge technology, where appropriate, such as electronic filing, document portals, video link-ups and other such channels.
If approved, the scheme will be the first of its kind in the Middle East and demonstrate Qatar's leadership in its efforts to develop market-leading dispute resolution schemes. It will also secure Qatar’s status as a key hub in the region’s fast-growing insurance market.
The Middle East insurance market is estimated to be worth US$15 billion, with huge growth potential in the infrastructure, energy and personal lines sectors. A dispute resolution scheme will provide the required certainty in dispute resolution that will accelerate the development of the insurance and reinsurance industry in Qatar.
As Musgrove coments, “If the feasibility of the project is approved, the specialist insurance dispute resolution scheme will be established at the QICDRC where we provide access to independent, impartial, international judiciary of the highest standard and state of the art facilities. The scheme will not only cater for specific regional requirements but also position Qatar as a global hub for the insurance industry. “As was generally agreed, the availability of an effective, high quality and accessible dispute resolution mechanism is an essential ingredient in the development of an expanding and successful insurance and reinsurance market. The QICDRC scheme will be a key attraction to global insurers and reinsurers looking to conduct business there.”
John Cashin/general counsel Middle East and Africa, Zurich Insurance Company
John R. Cashin, general counsel Middle East and Africa, Zurich Insurance Company, who was involved in the roundtable, said at the end of September’s preliminary talks, “I think this is a welcome initiative for insurance dispute resolution in the MENA Region. All fair minded parties in the industry are looking for an independent, reliable and informed forum that can be trusted to deliver cost effective and enforceable decisions.”
The development of the scheme is supported by Pinsent Masons, through their Qatar, Dubai and London offices.
Robert Musgrove, chief executive of Qatar International Court and Dispute Resolution Centre (QICDRC), explains the role of the organisation in solving disputes within the insurance industry.
WORDS/Robert Musgrove, chief executive of Qatar International Court and Dispute Resolution Centre (QICDRC),
“The QICDRC is focused on developing effective dispute resolution solutions, tailored to the key commercial sectors of economic growth in Qatar. We develop schemes that best fit the needs of businesses and the lawyers who advise them.
“Our partnership with Pinsent Masons and other leading international law firms allows us to work with recognised legal sector leaders, using their experience and expertise to design relevant and marketleading products.
“The cost of disputes within the insurance and re-insurance sectors is very high, and speed and certainty in resolution is paramount. Members of the industry are highly informed consumers of legal services and acutely aware of the cost of disputes that are not resolved promptly and efficiently. Our aim is to design a dispute resolution vehicle that will meet their needs.”
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