The applicant English insurance company sought approval of the court under Part VII of the Financial Services and Markets Act 2000 ("Part VII") for its proposed transfer of insurance business. In order to allow it to continue to service its existing business and to write new business across the UK and the rest of Europe after Brexit, it intended (with effect from 1 December 2018) to: (1) transfer the UK and non-EEA part of its business to a new English company, regulated by the FCA and PRA; and (2) transfer the EEA part of its business to a new Luxembourg company by an EU cross-border merger between the existing English company and the new Luxembourg company. The applicant would then cease to exist. The applicant intended to use a cross-border merger company because it was advised that this would maximise the prospect of recognition in overseas jurisdictions.

Snowden J has now approved the scheme. In so doing, he noted that the use of a Part VII scheme which involves an EU cross-border merger is novel and held as follows:

  1. He had jurisdiction to sanction a scheme where the transfer of insurance policies is to be achieved in part by an order under section 112 of the FSMA and in part by means of a cross-border merger under EU Directive 2017/1132 and the Cross-Border Mergers ("CBM") Regulations.
  2. Although there are no express provisions in the Directive or the CBM Regulations dealing with the continuity of legal proceedings in the event of a cross-border merger, the judge thought that such a result could be implied. In any event, he believed he could make an order under section 112 in relation to the continuation of proceedings and claims by and against the new Luxembourg company.
  3. The judge noted that the current situation regarding Brexit differs from previous applications to sanction a scheme: "The evidence of [the applicant] is that the uncertainty over the Brexit negotiations means that if it delayed further and did nothing, there is a real risk that substantial numbers of policyholders would be materially prejudiced in event of a "hard" Brexit by the loss of [the applicant]'s EU passporting rights, and a resultant inability of [the applicant] to continue to service policies through its overseas branches or even pay policyholders' claims in other EU jurisdictions. The concerns expressed by [the applicant] seem genuine and reasonable…" Furthermore, the judge said he had to balance the risk of prejudice to a large body of policyholders in the EEA if the scheme is not sanctioned against any potential risk of prejudice to individual policyholders.
  4. Taking into account the independent expert's reports and the views of the regulators and objecting policyholders, the judge concluded that the scheme "is entirely fair as regards the different groups of policyholders and does not cause them any material prejudice". There was no tangible material prejudice to policyholders arising from a loss of insurer identity. Furthermore, although the policyholders whose policies were transferred to the new Luxembourg company will lose access to the Financial Services Compensation Scheme, the judge concluded that "the prospect that [the new Luxembourg company] will default on its obligations so as to bring access to a compensation scheme into play is not a real risk, but is remote in the extreme".