8.6 Chapter 6: the settlement of the accident and the recourse relations

First, the recourse relations between the Bureaux and of the Bureau of the country of the accident in respect of the insurer providing coverage are discussed. While the legal basis for this recourse seems simple at first sight - the mandate of the guaranteeing Bureau under the Internal Regulations to handle the claim - it deserves some attention. In practice, if the liable vehicle is insured, the 'handling' Bureau will have recourse against the insurer directly. But under the Agreement between Member Bureaux of the Council of Bureaux, the insurer has not explicitly mandated the 'handling' Bureau, contrary to the Multilateral Agreement, since the former Agreement is not concluded also on behalf of the members of the Bureaux. While this recourse directly against the final debtor - the insurer - is efficient, my conclusion is that the legal basis for must be found elsewhere, for example in the articles of association of the guaranteeing Bureau.

The Bureaux have not included a 'choice of law clause' in their agreements. The consequence thereof is - in theory - that it will be necessary to decide in each separate dispute between two Bureaux which law applies to the dispute. That may lead to different decisions in similar disputes, a consequence that should not be regarded as desirable in the context of uniform agreements according to the model of the Internal Regulations, concluded by parties in the 45 countries participating in the Green Card System. This is one of the reasons the Bureaux have undertaken in their agreements to submit disputes to mediation and arbitration. The issue of the applicable law does therefore not arise in practice. The eminently practical nature of the green card system is clearly demonstrated here.

However, contracts cannot bind third parties. This gives rise to the question of the significance of the Agreements between the Bureaux for the injured third party. If proceedings instituted by an injured party against the 'handling' Bureau lead to a judgment that is contrary to the internal rules of the green card system, that judgment will prevail. The guaranteeing Bureau will have to reimburse the 'handling' Bureau - in spite of the internal agreements. At first sight, this arrangement may seem curious: for one could just as well argue that the internal rules prevail over the general law. But it can be explained by the position that a number of Bureaux have in the national system of compulsory liability insurance: as 'handling' Bureaux, they have no financial resources of their own. Damages caused by uninsured vehicles will be charged either to a guaranteeing Bureau or to the guarantee fund in its country. The guarantee fund will not be responsible for accidents caused by visiting uninsured vehicles normally based in other countries. The guarantee funds are not bound by agreements within the Council of Bureaux and relies for its obligations on general law.

The rules governing the recourse between the Bureaux deserve a more detailed analysis, since they also apply to the recourse that a 'handling' Bureau has against insurers providing cover. I first discuss the recourse of the 'handling' Bureau against the guaranteeing Bureau and the insurer providing cover, as this is the normai situation. I discuss the sums the 'handling' Bureau can reclaim (the amount of the compensation paid to the victim(s), external costs incurred by the 'handling' Bureau, which an insurer under similar circumstances would also have incurred and a handling fee, covering all other costs and expenses) and the formalities and procedures the 'handling' Bureau must comply with.

It is emphasised that the 'handling' Bureau is autonomous in interpreting the applicable law, also if that is the law of a country other than that of the accident. In doing so, the Bureau is obliged to act in the best interests of the guaranteeing Bureau. It is furthermore noted that the Bureau must first compensate the injured party, before it can ask for reimbursement. It is pointed out that the 'handling' Bureau has to inform the guaranteeing Bureau and the insurer (in advance) of its decisions and provide them with documentation regarding the claim settlement. Failure to fulfil these obligations does not in principle affect the obligation of the guaranteeing Bureau and the insurer to refuse or even postpone reimbursement. I also discuss the late payment interest clause.

The Guarantee Call, the 'escalation procedure' that can be applied by the 'handling' Bureaux if the insurer providing cover (or the guaranteeing Bureau) fails to reimburse the 'handling' Bureau in due time, is discussed.

The question of compensation payed under a system of first party insurance, damages caused outside of traffic and damages other than personal injury and damage to property and their recoverability under the green card system are discussed. First party payments cannot be reclaimed by a 'handling' under a decision of the Council of Bureaux of 1976, a decision that merits reconsidering in the light of the evolution of thought on compensation of loss in traffic. Damages not related to the use of the vehicle in road traffic and losses other than the classic personal injury and property damage, can be recovered - provided that the applicable law entails that the 'handling' Bureau must compensate the injured party.

In principle, the correspondent and the insurer are free to structure their relations-hips, but they must observe the fundamental principles of the green card system, including the principle that the correspondent - as representative of the 'handling' Bureau - is exclusively authorised to interpret the applicable law and the principle to 'compensate the injured party first, and recover it from the insurer thereafter'. I discuss the right of the correspondent to reclaim payments made by him via the 'handling' and the guaranteeing Bureau if the insurer does not fulfil its refund obligations (on time).

Financial sanctions may be imposed on the 'handling' Bureau if the correspondent fails to comply with the 'reasoned response procedure'. The agreements made in this regard by the Bureaux are briefly discussed.

I briefly address the recourse possibilities available to the 'handling' Bureau, if the insurer providing cover proves insolvent. I find that the insolvency of the insurer does not affect the recourse possibilities available to the 'handling' Bureau, as opposed tot the situation under the 4^th Directive. The agreement between the Bureaux with regard to the situation in which an insurer in freedom of services becomes insolvent is briefly explained as well.

The compensation bodies have regulated both their mutual relationships and those with the guarantee funds in a series of Agreements. These Agreements are inspired by the Agreements between the Bureaux, but are less detailed, because they are more recent and have hardly been tested yet in practice.

As regards the law that applies to such Agreements I find that, as do the Agreements between the Bureaux, they do not contain a choice of law clause and that they do contain an arbitration clause, which eliminates the most serious setbacks of the absence of a uniform applicable law.

The compensation body of the Member State of residence of the injured party is required ask 'instructions' of the compensation body of the Member State of the insurer (under Article 24 of the Directive) or of the guarantee fund of the Member State of the accident or of the Member State where the liable uninsured vehicle is normally based (if Article 25 applies), inter alia, with regard to the content of the applicable law. This is followed by a discussion of the sums to be recovered and the conditions under which refund can be requested.

Attention is paid to cases of insolvency of an insurer. I find that access of the injured party, in such cases, against the compensation body of the Member State of his residence depends on the answer on two questions: has the insurer given a motivated response? And has the injured party under the law of the Member State of the establishment of the insurer a claim against the guarantee fund in case of insolvency of an MTPL insurer? The Directive has for a consequence that injured parties will be treated differently depending on the Member State of establishment of the insurer. A second effect is that visiting victims (of accidents in Member States that do not give injured parties a claim against the guarantee fund in case of an insolvent insurer) enjoy better protection through the compensation body than 'national' victims, provided the insolvent insurer or its claims representative has not given a reasoned response on time. The Jatter must submit their claims in bankruptcy proceedings. All this is an additional argument to create an EU regime governing the consequences of insolvency of an MTPL insurer. In the context of the insolvency of an MTPL insurer that is active in the provision of services in another Member State, a number of guarantee funds have entered into an Agreement enabling a better protection of victims of accidents for which an insolvent insurer is liable.

The chapter concludes with a brief analysis of the rights of recourse of the Dutch Bureau and the Dutch Waarborgfonds Motorverkeer against the uninsured liable person.