In a surprise to many commentators, on 22 November 2015, the centre-right candidate Mauricio Macri won the second round ballot for the Presidency of Argentina; beating the preferred leftish successor of the incumbent Cristina Fernandez de Kirchner. Mr Macri was elected on a largely pro-business platform with a promise to balance the books and end Argentina's recent sense of isolation. Given the current political turmoil in Brazil fostered by the Petrobras corruption scandal, a shift in Argentina's perspective may have complications for Mercosur region (Brazil, Argentina, Bolivia, Paraguay, Uruguay and Venezuela).
Insurers must be aware that adhesion contracts will now be subject to more rigorous regulation preventing abusive terms, even when not in a consumer context.
Whatever the wider implications, it seems likely that Argentina will seek to take steps to open its recently closed markets. Significant challenges arise but it may mark the end of recent isolationist and protectionist moves such as making arbitration provisions subject to an automatic right of review by Argentine courts. Immediate changes to the insurance and reinsurance framework seem unlikely, however, given it was only on 1 August 2015 that a new Civil and Commercial Code (CCC) came into effect, introducing key modifications to the Argentine legal system. Although the Insurance Contract Law (ICL) remains in force, the new CCC will certainly influence insurance activities in Argentina, and will be relevant to all insurers, including FI and D&O insurers.
In terms of scope, it is notable that the CCC will apply to existing contractual relationships, and not just those entered into after the CCC is in force. Accordingly, ongoing insurance contracts will therefore be regulated by the CCC, although only in relation to mandatory provisions. Non- mandatory provisions will still be regulated by the previous code.
However, despite this express provision, it remains to be seen how the application of the CCC will be interpreted by the courts. In principle, Argentine laws should not have retrospective effect.
The new CCC introduces some significant changes, as follows:
The CCC recognises both adhesion and consumer-contracts. In adhesion contracts, only one party is in control of the drafting (in the case of insurance contracts this is the insurer). As the Argentine Superintendent of Insurance regulates insurance contracts, they can only be drafted as adhesion contracts. However, they will also be considered consumer contracts under the CCC if the insured procures the cover for his own benefit, or that of his family or social group.
Insurers must be aware that adhesion contracts will now be subject to more rigorous regulation preventing abusive terms, even when not in a consumer context. In effect, clauses that: refer to documents or information not provided to the insured; distort obligations of the insured; extend the rights of the insurer; or are simply not ‘predictable’, will be deemed unwritten and struck out.
In relation to consumer insurance contracts, the interpretation that is more favourable for the consumer will prevail wherever there is doubt. Accordingly, the Argentine Consumer Protection Act must be carefully analysed when writing insurance contracts.
The CCC provides that contractual and non-contractual civil liability claims will be subject to a three-year limitation period, leaving behind the traditional distinction (which applied different rules). Whilst a one-year special limitation period for insurance contracts under the ICL remains in force, the new three-year period will be relevant to inwards liability claims and potential subrogation.
The previous legislation established a ten-year limitation period for contractual claims. The CCC contains a transitional period, so that ongoing claims will be now time-barred after three years from the CCC’s effective date, unless the prior applicable term ends beforehand. Thus the limitation period for existing claims may be significantly shortened.
The new CCC introduces the application of compound interest, which was previously prohibited. Therefore, insurers may be best served to resolve claims much more quickly, to reduce exposure to higher payments. This is especially the case, given that the timescale for litigation in Argentina is often very long. Nevertheless, it is worth noting the CCC gives judges the power to reduce interest, if the average cost of similar transactions is disproportionally exceeded.
Another noticeable incorporation for professional liability insurers is that the concept of ‘loss of chance’ is now expressly mentioned amongst recoverable damages. Whilst this concept has been recognised by the courts for many years, it is now on a codified basis.
Foreign currency obligations will be considered to be obligations to deliver amounts of goods, instead of sums of money (as is currently the case). As a result, an obligation due in foreign currency may be payable in its equivalent in Argentine Pesos. Given the often fluctuating value of the Peso this can be a cause for concern.
In conclusion, whilst Argentina welcomes a new President, it must similarly embrace and adapt to this new legislation which, much like Mr Macri, represents a considerable change of perspective and a new era in the Argentine market. Indeed, given the magnitude of the changes the CCC introduces, and the discussions its application will generate, it will be crucial to pay attention to its further interpretation by the Argentine courts.