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)
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