Finance Minister Grant Gibbons. He suggests the two work together for a resolution. David Fox reports. A Bermuda-led initiative that could resolve a jurisdictional dispute over controversial insolvent insurer EMLICO (Electric Mutual Liability Insurance Co.) remained in limbo yesterday, after a federal judge in Massachusetts on Tuesday suggested that Bermuda liquidators and the state insurance regulators get together for formal discussions. The talks, if held, would be at the centre of a cross border protocol proposed by Finance Minister Grant Gibbons in a letter to the liquidators. Dr. Gibbons' suggestion was raised before the Bermuda court, which led to its recommendation in a letter to the federal court by Bermuda's Chief Justice Austin Ward. But this week, US District Court Judge Douglass P. Woodlock stopped short of the Chief Justice's request to "direct'' the commissioner of insurance Linda Ruthardt to negotiate with the liquidators, but offered it as a suggestion. A spokesman for the Bermuda liquidators, William Bodie, said the judge indicated that it was highly unlikely that he would remand the issue of receivership back to the state court. He accepted the Chief Justice's framework for resolving the jurisdictional conflict as very reasonable and urged the two sides to decide a plan within the next 30 days on how they could work together. Calling the heavily litigated EMLICO matter "a case that only lawyers could love'', Judge Woodlock sought from Ms Ruthardt's lawyers a reason why they opposed the receivership being heard in federal court. EMLICO came to Bermuda in 1995 and declared insolvency four months later. General Electric Co. (GE) is the sole policyholder and creditor. GE selected, and the Bermuda court approved, Coopers & Lybrand for the liquidation. The joint liquidators are David E.W.

Lines and Peter C.B. Mitchell of Coopers Bermuda office and their UK partner Christopher Hughes. Some of EMLICO's reinsurers have claimed fraud, alleging the company won regulatory approval in Massachusetts and Bermuda for the move by hiding their insolvency until after the move, knowing insolvent companies were prohibited from leaving the state. Yesterday, special assistant attorney general in Massachusetts David Leslie, who represents the commissioner, conceded that no decision had yet been made by the commissioner's office on the cross-border protocol and the proposed collaborative talks with the Bermuda liquidators. On January 5, a state court had ruled against a "cross border accord'' previously proposed by the commissioner, that would have established a US receivership to the Bermuda liquidation of EMLICO. The court instead determined that the commissioner never had the authority in 1995 to approve EMLICO's move to Bermuda in the first place. In a surprise ruling, the court said that EMLICO had never actually left Massachusetts and remained a state insurer. Days later, the liquidators sought and obtained from the Bermuda court, an order affirming EMLICO to be an insolvent Bermuda insurer and confirming their status as its liquidators. Suddenly, two domiciles were claiming jurisdiction and regulatory control over the same company. The Massachusetts ruling had meant that Ms Ruthardt was required to return to state court to seek a receivership over the insolvent Massachusetts company and liquidate it herself. But liquidators for the company had the case remanded from state court to federal court, and she has sought to have it returned. The liquidators have also filed to have the receivership petition dismissed. The commissioner's office has until February 20 to respond in writing to that motion. But Mr. Leslie said yesterday, "Right now, we are really evaluating how best to deal with the suggestions that the court made.

We will come to some resolution over the next day or so. "The commissioner is, of course, mindful of the court's admonitions and will be cooperative.

Where the court left it yesterday, is that the various submissions made by the parties will be reviewed, submissions relating to the motion to remand and the dismissal. A hearing will be held in 30 days. "In the meantime, he is encouraging the commissioner and the joint liquidators to talk to see if there is some way to resolve this. I'm certain we will have some discussions with them. But how we are going to deal with it, I don't know. "We negotiated one international protocol already, and the state court refused to approve it. Now we are in federal court and we are being encouraged to negotiate another international protocol.'' Meanwhile, the Finance Minister said yesterday, that it would not be productive for Bermuda and the US to fight over control of EMLICO. The two jurisdictions, he said, each have their own rules and regulations and it would be better if the two worked together toward a resolution. He said, "We have been working quietly and within due process to try to bring a resolution that respects all the parties involved. Once EMLICO became a company incorporated in Bermuda, it was very clear that there would be sovereignty issues, as well. "We are trying to work our way through this, understanding that the commissioner has responsibilities, and that there is a Bermuda company that we also have responsibilities to. We are trying to move it ahead, as opposed to saying that it is only a Massachusetts problem or only a Bermuda problem. A cross border protocol recognises that there should be a structure for the groups to use to work together to solve the problem and maintain the rights of the various parties, and to reduce the extensive litigation.'' Dr. Gibbons said the protocol is concerned with establishing a framework for communication, an effort to get the two jurisdictions to work cooperatively and provide some harmonisation toward a common goal.

SEEKING UNITY -- Finance Minister Grant Gibbons who wants Bermuda and the US to work together towards a resolution over the EMLICO controversy. He said Bermuda had been working quietly and "within due process'' to bring on a settlement agreeable to both sides.

COURTS CTS