Insurance industry wins major legal battle against unregistered foreign brokering concerns
The Civil Appellate High Court of Colombo has ruled against J B Boda, a Singapore based brokering Company in what insurance industry watchers see as a landmark judgment. JB Boda asserted in Court that it was entitled to function as a broker in Sri Lanka though not duly registered as a brokering concern, as required by law.
The Civil Appellate High Court Bench ruled against the foreign broker and the Judgement effectively makes operative the District Court interim injunction issued in 2018, preventing this Company from functioning as a broker in the Insurance industry in Sri Lanka. It effectively bars the Singapore based concern from holding out as a broker, or engaging in any broking activities in the insurance industry in this country — and consequently from participating in any bids for local tenders.
In the original lawsuit filed in 2018, the District Court had earlier issued an enjoining order on 17th January 2018 restraining J B Boda or its agents from acting, holding out and/or carrying out any activity as an Insurance Broker in Sri Lanka, pending the hearing and determination of the application for Interim Injunctions. The original lawsuit was instituted on the basis that “the defendant company (i.e. JB Boda) is not a Company registered in terms of the provisions of the Insurance Industry Act No 43 of 2000 (as amended)” and was not registered as a broker under the said Act.
After the inquiry, on 26th February 2018, the District Court granted two the Interim Injunctions preventing the company from operating as a broker in Sri Lanka.
Thereupon, the defendant company appealed to the Civil Appellate High Court. The stay order obtained by the company there, which stayed the operation of the interim injunctions is no longer in operation, with effect from yesterday, as the Civil Appellate High Court judgment dismissed JB Boda’s appeal against those orders.
This High Court judgement now effectively prevents flyby-night foreign brokering companies from holding out as brokers, thereby qualifying for local bids, or being awarded State tenders.
Insurance expert Ramal Jasinghe said of the defendants: “The High Court ruling shows that engaging in reinsurance business is no excuse for a foreign broker unregistered in this country from holding out as a broker.” The District Court also upheldthis position when it issued the Interim Injunctions initially. The Civil Appellate High Court has now effectively affirmed this position, by the dismissal of the appeal by JB Boda.
Industry sources meanwhile applauded the High Court judgement, in the context of an unambiguous policy and regulatory framework. “It is clear that the Court judgement recognizes that the law provides no loopholes,” an Insurance Regulatory Authority of Sri Lanka spokesperson said, adding “The Judgement gives us the moral authority to act swiftly to apprehend nefarious and illegal foreign brokers.’
The judgment effectively confirms that every person who acts as a broker for reinsurance also, should register with the Insurance Regulatory Commission of Sri Lanka under terms of the Act, a recognized Brokers Association, and be incorporated as a company under the Companies Act of Sri Lanka. The submissions of JB Boda that the above requirements are not required to be met by foreign entities providing reinsurance related brokering services has not been accepted by the court.