Cross-Border Litigation Against Lloyd’s Syndicates: A Comparative Analysis of the UK, US and China

In the international insurance market, a Syndicate is a Lloyd’s market-oriented business unit backed by capital from one or more Lloyd’s members and managed on a daily basis by a dedicated managing agent, who is the real insurer under the corresponding policy.

Section 8(1) of the Lloyd’s Act 1982 provides:

“A member engaged in underwriting business may be a party to an insurance contract underwritten at Lloyd’s only if: the contract must be underwritten with several liability, i.e. each member engaged in underwriting business is liable only for his own part and not for others; in addition, the liability of each member engaged in underwriting business is limited to his own share of risk.”[1]

Subject to the foregoing, each underwriting member is solely liable for any risk insured by the Syndicate according to their own share. Under traditional English law, the Syndicate itself does not have legal personality and cannot, in principle, be the subject of litigation. Litigation arising from Lloyd’s Syndicates has therefore developed different resolution paths across jurisdictions in relation to the “litigation subject qualification”.

1. Legal Practice in the United Kingdom and the United States

Under English law, if a dispute arises concerning an insurance contract underwritten by a syndicate, the syndicate members—not the syndicate itself—should in principle be the parties to litigation. In practice, one member is usually appointed to participate in the litigation on behalf of themselves and the other members.

This approach was demonstrated in Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co [1989] 1 Lloyd’s Rep 568. In that case, the plaintiff insurance company commenced proceedings on behalf of itself and other syndicate members. The defendant argued that the plaintiff was not entitled to sue as a representative, but the English Court of Appeal rejected this submission.

In Lloyd v Google LLC [2022] 2 All ER 209, the UK Supreme Court (Lord Leggatt) cited Pan Atlantic and concluded that “in insurance cases underwritten by Lloyd’s syndicates, since syndicates are not separate legal entities, it is standard practice to designate a single member of the syndicate (usually the lead insurer) to act on behalf of the plaintiff or on behalf of the defendant to bring or respond to an action on its own behalf and on behalf of all other members”. In such proceedings, “there is no difficulty in awarding damages to the representative or awarding damages against the representative, because the calculation of any damages that syndicate members are collectively entitled to recover or are liable to pay does not depend on how the risk is distributed among the syndicate members.”[2]

This position has likewise been supported in other common law jurisdictions, including the United States.

For example, in Roby v Corp. of Lloyd’s 796 F Supp 103 (S.D.N.Y. 1992), investors brought proceedings against multiple defendants, including Lloyd’s and part of a Lloyd’s Syndicate.

The syndicate defendants argued that the syndicate was not a suable legal entity and sought dismissal of the claims. The court found that syndicates had no “legal existence” under either English law or New York law and accordingly dismissed the claims against the syndicate.

However, there are a small number of English precedents in which syndicates have been permitted to litigate in their own name, such as Engelhart CTP (US) LLC v Lloyd’s Syndicate 1221 for the 2014 Year of Account and Others [2018] EWHC 900 (Comm).

2. Syndicate Responses to Litigation in Chinese Courts

Chinese law does not provide for the organisational form of a “syndicate”. Accordingly, there is no clear statutory provision under Chinese law on whether a syndicate can be a qualified defendant, nor a defined rule for determining the appropriate litigant in insurance contract disputes involving syndicate underwriting. Chinese courts have not yet formed a unified judicial practice.

Based on preliminary research, three approaches have been adopted by Chinese courts:

1. Individual syndicate members participate directly in the litigation, e.g. (2015) Da Hai Shang Chu Zi No. 376;

2. The syndicate itself participates in litigation as a party, e.g. (2017) Hu 72 Min Chu No. 3448 and (2020) Hu 0115 Min Chu No. 4842;

3. The syndicate’s managing agent responds to the lawsuit on the syndicate’s behalf, e.g. (2017) Liao 72 Min Chu No. 585.

Accordingly, if litigation involving a Lloyd’s Syndicate arises in China, the parties to the action must be determined on a case-by-case basis.

In the first approach, Lloyd’s generally does not disclose specific syndicate membership in the UK insurance market. Therefore, if suing individual members directly, a party may first send a disclosure request to the syndicate’s managing agent and commence proceedings once the membership information is obtained.

In the second approach, although a Lloyd’s Syndicate lacks litigant status under common law, there is a legal basis under Chinese law for allowing a syndicate to be named directly as a party.

Article 51 of the Civil Procedure Law of the People’s Republic of China provides that civil litigants must fall within “citizens, legal persons, and other organisations”. Article 52 of the Judicial Interpretation of the Civil Procedure Law clarifies that “other organisations” must be legally established, possess certain organisational structure and assets, but need not have legal personality. This includes, among others:

(1) sole proprietorships registered and licensed in accordance with the law;

(2) partnerships registered and licensed in accordance with the law;

(3) Sino-foreign cooperative enterprises and foreign-funded enterprises registered in China in accordance with the law;

(4) branches and representative offices of lawfully established social organisations;

(5) branches of legal persons with business licences;

(6) branches of commercial banks, policy banks, and non-bank financial institutions with business licences;

(7) township and street enterprises registered and licensed in accordance with the law;

(8) other organisations that meet the conditions stipulated in this article.

Although a Lloyd’s Syndicate is not a legal person, as an underwriter legally conducting business under Lloyd’s it has an organisational structure and assets, thereby meeting the substantive requirements of “other organisations” under Article 52. It may therefore fall within category (8) as “other organisations that meet the conditions stipulated in this article”.

Additionally, if a dispute with a syndicate arises and litigation is required in China, the claimant may also consider suing the syndicate and its managing agent as co-defendants. However, there is currently no judicial precedent for this approach, and it remains uncertain whether Chinese courts would accept it.

As Chinese insurers continue to expand their international operations, litigation involving Lloyd’s entities is likely to increase. Such cases often involve complex issues including cross-border litigant qualification, recognition of foreign judgments, and enforcement. Continued attention, analysis, and engagement with the development of rules and practical judicial exploration in this field will be essential.

Footnotes

[1] Original text: “An underwriting member shall be a party to a contract of insurance underwritten at Lloyd’s only if it is underwritten with several liability, each underwriting member for his own part and not one for another, and if the liability of each underwriting member is accepted solely for his own account.”

[2] Original text: “[I]n the case of insurance underwritten by Lloyd’s syndicates, which are not separate legal entities, it is standard practice for a single member of the syndicate (usually the leading underwriter) to be named as a representative claimant or defendant suing, or being sued, for themselves and all the other members. There is no difficulty in awarding damages for or against the representative in such proceedings, as the calculation of any damages which the members of the syndicate are collectively entitled to recover or liable to pay does not depend on how the risk is divided among the members of the syndicate.”

Anjie Broad, China, a Transatlantic Law International Affiliated Firm.  

For further information or for any assistance please contact china@transatlanticlaw.com

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