Update: Bulgarian Supreme Court says Euroins Romania license was unlawfully revoked
Update: Reacting to the ruling, the judicial liquidator of Euroins Romania, CITR, said that the decision of the Supreme Court in Bulgaria confirms the absence of procedural flaws in the arbitration, without analyzing the substance of the contract or its effects.
The procedure in Bulgaria took place in two stages, the liquidator noted. “The first was initiated by the reinsurer in May 2024, through which it requested the arbitral tribunal to establish that the reinsurance contract in question had been concluded in accordance with Bulgarian law. The arbitral tribunal acknowledged this aspect; however, its analysis was strictly formal and limited, without examining the real purpose of the contract, its impact on creditors, or the existence of any potential fraud,” the company highlighted. Moreover, the tribunal rejected the claim that the contract had been concluded in accordance with industry practices and did not address issues related to insolvency law.
CITR then filed an action for annulment before the Supreme Court of Cassation in Bulgaria, the only court competent to examine the procedural issues raised. The Supreme Court of Cassation was vested exclusively with an action to annul the arbitral decision, and its jurisdiction was limited to verifying potential procedural flaws. According to CITR, the Court did not examine the substance of the reinsurance contract, its impact on creditors, the good faith of the parties, or the financial situation of Euroins Romania.
“Any claim that this decision confirms the substantive legality of the contract or validates the conduct of the parties is inaccurate and may mislead the public,” the liquidator said.
Moreover, CITR points to an action it initiated before the Bucharest Tribunal as early as August 2023, seeking the annulment of the reinsurance contract because it was concluded in fraud of creditors. The case has a different subject matter from the procedure in Bulgaria and is governed by Romanian insolvency law.
“The decision issued in Bulgaria does not affect this process. The Romanian court will directly examine, on the merits, the legality of the transaction,” CITR said. The company also noted that the court fees related to the procedure in Bulgaria pertain only to Euroins Romania, through its judicial liquidator, and not to CITR as a separate entity.
Initial story: The Supreme Court of Cassation in Sofia, Bulgaria's highest court of appeal, rejected the request of Romanian liquidator CITR to annul the July 2024 decision of the International Court of Arbitration (namely the International Arbitration Tribunal in Sofia), which had confirmed the legality and validity of the reinsurance contract signed by Euroins Romania and EIG one and a half months before the revocation of its license.
On March 17, 2023, the Financial Supervisory Authority (ASF) in Romania revoked the operating license of Euroins Romania, the leader of the motor insurance market at the time. Without its license, the insurer was bankrupted by June of the same year.
In the report on the causes of the Euroins bankruptcy, finalized in April 2024, CITR identified a series of operational and fund management problems that led to the bankruptcy, including “the conclusion of the contract with EIG Re, through which financial assets consisting of securities, reinsurance receivables, and cash on hand, totaling over RON 1.5 billion, were transferred from the company.”
In the latest ruling, Bulgaria’s Supreme Court of Cassation essentially rejected all claims of CITR formulated in the initial request, through which the judicial liquidator sought the annulment of this arbitral decision and the declaration of nullity of the reinsurance contract.
Bulgaria’s Supreme Court of Cassation found no grounds for nullity or defects in the decision of the Sofia arbitration tribunal regarding the reinsurance contract between Euroins Romania and EIG Re. In addition, the Supreme Court of Cassation rejected the liquidator’s objections regarding irregularities in the composition of the arbitral tribunal and the conduct of the proceedings, as well as the allegations casting doubt on the independence, competence, integrity, and impartiality of the arbitrators, Eurohold said.
Furthermore, the Court of Cassation categorically rejected the claims of the liquidator of Euroins Romania regarding the simulation of the reinsurance contract and an attempt to ‘drain’ assets through it. Instead, it found the reinsurance mechanism was genuinely operational and provided financial support to Euroins Romania in accordance with European directives.
The Supreme Court of Cassation is the highest court in Bulgaria. It exercises supreme judicial oversight over the accurate and uniform application of the law by all courts in the country, and hears applications for setting aside of arbitral awards under the International Commercial Arbitration Act. The decisions of the SCC in these proceedings are final and not subject to further appeal.
As a result, EIG Re retains the guarantee deposited by Euroins Romania under this contract, and CITR loses the right to request the return of funds under this contract before the Bulgarian courts. The liquidator will have to pay a huge court fee of EUR 12.7 million, not including fees and remuneration.
Bulgarian insurance group Euroins (EIG), the parent company of Euroins Romania, maintains that the ruling is proof that the company had sufficient liquidity and capital adequacy at the time of the revocation. Back then, Euroins was a leader in the RCA insurance sector, with over 2.5 million policyholders, and the revocation caused a shock in the Romanian insurance market. The company filed two lawsuits against the Romanian state at the International Centre for Settlement of Investment Disputes (ICSID), with a total value of over EUR 1 billion.
(Photo source: Inquam Photos/Octav Ganea)
