A US reinsurer of EMLICO (Electric Mutual Liability Insurance Co., Ltd.) this week has asked the Privy Council in London to decide EMLICO's legal status under Bermuda law.

The reinsurer, Kemper Re, is already before the Privy Council with an appeal of issues arising out of their application for judicial review which began in 1996. That case is scheduled to begin March 23.

The reinsurer is seeking to have Bermuda regulatory approvals of EMLICO's 1995 redomestication from Massachusetts to Bermuda quashed on the grounds of Kemper's allegation that the approvals were procured by fraud.

But on Tuesday, Kemper Re asked the Law Lords to decide whether Bermuda law permits a foreign company to be continued to Bermuda where: the foreign law of its incorporation does not permit it to redomesticate to Bermuda and become incorporated there; and, there is an authoritative ruling by the foreign court that the company in question never ceased being incorporated under the foreign law; and based on this ruling, to determine as a preliminary issue to the appeal that EMLICO Ltd. has no legal status under Bermuda law and therefore may not be a "competent respondent'' to the appeal.

If successful, Kemper Re may be able to proceed before the Privy Council on the original matter in the absence of representation from EMLICO's liquidators.

A spokesman for the joint liquidators responded yesterday that reinsurers don't have the standing to appeal directly to the Privy Council.

The Bermuda liquidators are David E.W. Lines and Peter C.B. Cooper of Coopers & Lybrand Bermuda, and their UK partner Christopher Hughes.

Their spokesman, William C. Bodie, senior vice president of New York communications firm Robinson Lerer & Montgomery, said, "The joint liquidators do not believe that the reinsurers have the standing to appeal directly to the Privy Council and circumvent the authority of the Bermuda Supreme Court in this matter.

"The Bermuda Supreme Court has spoken quite clearly about this. And to use a decision by a state court in the United States to intervene in a trans-national and international issue, which has been acknowledged by the federal court in Massachusetts, strikes us as somewhat strange and not supported by international law or any case law that we're aware of.'' EMLICO obtained permission from the Massachusetts commissioner of insurance, Linda Ruthardt, and from Bermudian authorities, to move to Bermuda in 1995.

But this January, in an apparently irreversible decision, the state's Supreme Judicial Court (SJC) ruled Ms Ruthardt had no authority to approve the move.

Reinsurers are relying on that January 5 ruling that: EMLICO was not permitted to move to Bermuda in the way it did; the order purportedly authorising it to do so was beyond the power of the commissioner; there was no lawful transfer of the company to Bermuda; and, EMLICO never ceased to be a Massachusetts insurer.

In filings this week to the Privy Council, Kemper Re argues that in accordance with principles of private international law, a Bermuda court must recognise and give effect to that decision.

The brief states: "It should be held as a matter of Bermuda law that EMLICO was never capable of moving to Bermuda, and... never became a Bermuda company. If...(it) never became a Bermuda company, it cannot be wound up as such under the Companies Act 1981.'' It was further argued that section 15 of the Companies Act does not protect EMLICO's claim to be Bermuda-domiciled. The Act states that "No defect in the formalities leading up to'' a redomestication shall affect its validity nor the validity of the certificate of continuance.

The reinsurer argues it does not apply to EMLICO because the company is not Bermudian. And the section is directed at curing formal defects, while the state court's decision could not be described as mere defects in formalities.

Following that January 5 state court decision, the liquidators went to the Bermuda Supreme Court and obtained an ex parte order in the winding up proceedings which affirmed EMLICO's status as a Bermuda company, affirmed the winding up petition and affirmed the joint liquidators as the only properly authorised representatives of the company.

Kemper Re has now told the Privy Council that order "plainly cannot be regarded as having settled the issues'' raised by the SJC, and that the declarations of the order were wrong and cannot in any event properly be made ex parte ; because the order was made ex parte without hearing any opposing argument and as such is provisional and is liable to be set aside...; it was apparently made on the basis of a confidential report from the liquidators, the contents of which they have refused to disclose; it is unclear to what extent argument was addressed to the Chief Justice or whether the full decision of the SJC was considered; and, neither the commissioner, nor Kemper Re (nor any other person) were given notice of the application to the Chief Justice.

The reinsurer also stated: "The consequences under Bermuda law of the SJC ruling are currently a matter of intense controversy in the federal court proceedings in Massachusetts on the commissioner's petition for her appointment as receiver of EMLICO.

"Proper resolution of the issues arising in the US proceedings plainly requires the US courts to have a proper ruling on the effect, as a matter of Bermuda law, of the SJC's ruling.

"On 13 February 1998, Kemper Re lodged papers with the Supreme Court of Bermuda for leave to apply for judicial review, based on the SJC ruling.

"However, Kemper Re has no expectation that those proceedings will result in a speedy decision of the substantive question raised.

"It is to be anticipated that (consistently with the attitude which they have adopted in relation to Kemper Re's first judicial review proceedings) Messrs Hughes, Lines and Mitchell will oppose leave and take every step open to them to avoid a decision on the substantive issues.'' COURTS CTS