AXA General Insurance Limited and others (Appellants)

v The Lord Advocate and others (Respondents) [2011] UKSC 46

A group of leading insurance companies have failed in their attempt to challenge the lawfulness of the Damages (Asbestos-Related Conditions) Scotland Act 2009 ("the 2009 Act"). In their highly significant judgment published today, the UK Supreme Court has voted unanimously to uphold the 2009 Act. The judgments provide important discussions about the Scottish Parliament's legislative competence, and its subjection to judicial review.

The 2009 Act allows the payment of damages to sufferers of pleural plaques, a scarring of the lungs caused by exposure to asbestos. Following a challenge by insurers, in January 2010 the Court of Session accepted that as pleural plaques could lead to an increased risk of developing mesothelioma (a tumour covering the lining of the lung), sufferers could seek compensation (see our January 2010 e-update).

Following that decision, the insurers appealed to the Inner House of the Court of Session. However, the Court dismissed the appeal and upheld the previous decision (see our April 2011 e-update). Estimating that the 2009 Act could lead to payouts to employees who have been exposed to asbestos totalling hundreds of millions, if not billions, of pounds, the insurers appealed to the Supreme Court.

The Supreme Court has rejected the insurers' arguments that the 2009 Act was unlawful, clearly stating that the 2009 Act was not outside the legislative competence of the Scottish Parliament.

In issues of social policy, the Supreme Court held that they should respect the judgment of the elected body as to what is in the public interest, unless that judgment is manifestly without reasonable foundation. The Court accepted that the 2009 Act is pursuing a legitimate aim and is reasonably proportionate to the aim pursued.

The Supreme Court found that, in principle, Acts of the Scottish Parliament are subject to judicial review but not on the grounds of irrationality, unreasonableness or arbitrariness. The Court stated that the rule of law must be respected by legislation that the Parliament enacts. It would be wrong for judges to substitute their views for the considered judgment of the democratically elected legislature.

The Scottish Government hopes that outstanding compensation claims will now be settled by insurers.