The European Court of Justice (ECJ) has found in a judgment of May 2020 that the right of a legal assistance insured person to freely choose his or her lawyer applies not only to proceedings before a court or an administrative body, but also to stages in a dispute that may lead to such proceedings before a court.
In this specific case, the ECJ ruled that this right applies to Belgian forms of mediation. With this ruling, the ECJ continues the trend in which it expands the limits of the right to free choice of one’s lawyer. I also discuss this judgment in my recent publication in the Dutch legal journal Jurisprudentie Burgerlijk Procesrecht (JBPr 2020/73).
Right to free choice of lawyer
The right to free choice of lawyer is the right of the legal assistance insured person to choose a lawyer himself/herself. This choice may benefit this person, for example, in the event of conflicts of interests, such as when the opposing party has taken out liability insurance with the same insurer.
In the Netherlands, unlike in most other EU Member States, in many types of proceedings it is possible to litigate without a lawyer. Partly for that reason, many people have taken out in-kind insurance, under which – unlike a cost insurance policy – the insurer provides legal assistance in kind. European case law on the right to free choice of lawyer therefore has the potential to influence many legal assistance insurance policies in the Netherlands. This legal assistance is often provided by a lawyer of the insurer itself or by a legal entity chosen by the insurer.
This right to free choice of lawyer is provided in article 201(1)(a) (the “Provision”) of the European Directive 2009/138/EC on the taking up and pursuit of the business of Insurance and Reinsurance (Solvency II): “Any contract of legal expenses insurance shall expressly provide that (…) where recourse is had to a lawyer or other person appropriately qualified according to national law in order to defend, represent or serve the interests of the insured person in any inquiry or proceedings, that insured person shall be free to choose such lawyer or other person” For an overview of ECJ case law on the right of free choice of lawyer, please refer to my aforementioned publication (paragraph 3). The Provision has been implemented in article 4:67(1)(a) of the Dutch Financial Supervision Act (Wft).
Background of the case
In the present case, the Belgian bar associations had requested that a new law be set aside. Although this law extended the right to free choice of lawyer, meaning the right would also apply to arbitration proceedings, they believed that this extension should also apply to mediation. The Constitutional Court of Belgium asked the ECJ whether the Belgian types of mediation also fall under “proceedings” within the meaning of the Provision, and thus within the scope of the right to free choice of lawyer.
The ECJ ruled that the Belgian types of mediation indeed fall within the scope of the Provision. The court’s main argument for this seems to be that the Solvency II Directive aims to protect insured persons as adequately as possible, and therefore the Provision must be interpreted broadly. According to the court, “any stage, even a preliminary stage, which is capable of leading to proceedings before a judicial body must be regarded as falling within the meaning of [the Provision]” (no. 31).
With this judgment, the Court seems to declare the right to free choice of lawyer not only applicable to the phase in which proceedings are pending before a court, but also to other (earlier) phases in a dispute, if those phases can lead to proceedings before a court. The judgment does not elaborate on which preliminary phase(s) are involved or what criteria such a phase must meet.
It is likely that the Provision is also applicable to mediation in the Netherlands, and possibly also to binding opinions, and evidence-gathering procedures. Based on this judgment it can be argued that even negotiations with counterparties fall within the scope of the Provision.
The ECJ seems to have considerably expanded the right to free choice of lawyer. This poses the question whether insured persons will ultimately benefit from this. Insurers will run greater risks, because they may be obliged to reimburse the costs of an external lawyer in more cases. Their options to mitigate these risks are limited. Insurers may incorporate these higher risks in their insurance premiums, or limit the cover provided on other subjects of the insurance. The risk that legal assistance insurance will become unaffordable for those policyholders who most require such insurance does not seem to have been taken into account by the court.
A random sample of legal assistance insurer policy conditions shows that several policy conditions are not yet in line with the ECJ’s view on the right to free choice of lawyer. Some conditions do not include the possibility to claim the costs of a lawyer of the insured person’s choice for mediation at all, and some others only allow this if the insurer agrees that mediation is necessary. The discrepancies between these conditions and the ECJ’s judgment might lead to disputes between policyholders and insurers about the right to free choice of lawyer. It may therefore be advisable for insurers to obtain advice in this regard, for example on the legal validity of their policy conditions.