AXA General Insurance Limited and others v The Lord Advocate and others

Legislation of the Scottish Parliament is subject to the statutory limits on legislative competence and, exceptionally, to fundamental constraints derived from the rule of law. Its political and social judgments cannot ordinarily be reviewed for irrationality, unreasonableness or arbitrariness.

Retroactive remedial social legislation affecting insurers’ property rights is compatible with article 1 of Protocol 1 where it pursues a legitimate public interest and strikes a fair balance. A real risk that a class will bear the resulting financial burden is sufficient for victim status.

Standing in Scottish public-law judicial review depends on sufficient interest, assessed contextually. The private-law requirement of title founded on a legal relationship does not apply. A person whose statutory cause of action may be removed by the proceedings is directly affected and may enter the process.

AXA General Insurance Limited and others v The Lord Advocate and others concerned a challenge by employers’ liability insurers to the Damages (Asbestos-related Conditions) (Scotland) Act 2009. The Act treated asymptomatic pleural plaques and related conditions as actionable harm, with retrospective effect, thereby reversing in Scotland the common-law position stated in Rothwell v Chemical & Insulating Co Ltd.

The Lord Ordinary dismissed the insurers’ petition: [2010] CSOH 2. The Inner House substantially refused the insurers’ reclaiming motion but held that eight persons diagnosed with pleural plaques lacked title and interest to participate as respondents: [2011] CSIH 31.

The insurers appealed. The Lord Advocate cross-appealed on the insurers’ victim status, while the individual respondents cross-appealed on standing. The principal issues were compatibility with article 1 of Protocol 1, common-law review of devolved legislation, and the meaning of being directly affected under rule 58.8(2) of the Rules of the Court of Session.

1. Disposition. The Supreme Court unanimously dismissed the insurers’ appeal and allowed the individual respondents’ cross-appeal. Lord Hope and Lord Reed gave the principal reasons. Lord Kerr, Lord Clarke and Lord Dyson agreed with both judgments. Lord Brown and Lord Mance delivered concurring judgments and agreed in the result.

2. Article 1 of Protocol 1. The insurers had victim status. The Damages (Asbestos-related Conditions) (Scotland) Act 2009 was intended, as a practical matter, to impose substantial liabilities on employers’ liability insurers. A person need not await an individual measure of implementation where that person belongs to a class facing a real risk of being directly affected. The funds from which insurers would meet claims were possessions, and the new liabilities interfered with them.

3. The interference was lawful and pursued a legitimate aim. The Scottish Parliament was entitled to regard the consequences of Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39 as a social injustice affecting communities exposed to asbestos. In social and economic policy, the legislature’s judgment as to the public interest receives substantial weight and is rejected only where manifestly without reasonable justification.

4. The legislation also struck a fair balance. It altered existing liabilities retrospectively, but preserved every defence other than the non-actionability of the specified conditions and excluded settled claims and determined proceedings. When the relevant policies were written, the actionability of pleural plaques was unsettled. Insurers had also treated such claims as an insured risk for many years. In those circumstances, the legislation did not impose an individual and excessive burden. It was therefore within the Scottish Parliament’s legislative competence under section 29(2)(d) of the Scotland Act 1998.

5. Common-law review. Acts of the Scottish Parliament are in principle amenable to the Court of Session’s supervisory jurisdiction because the Parliament is a statutory, non-sovereign legislature. Its law-making powers are nevertheless plenary within the statutory limits. Political choices made within those limits are accountable to the electorate and cannot ordinarily be reviewed for irrationality, unreasonableness or arbitrariness. Lord Hope and Lord Reed further considered that the courts could intervene exceptionally against legislation abrogating fundamental rights or the rule of law. No such extreme case arose.

6. Standing. In public-law judicial review, standing depends on sufficient interest, assessed in context by reference to the purposes of judicial review. The private-law requirement of title and interest founded on a legal relationship has no place. The individual respondents faced the loss of causes of action created by the 2009 Act and were directly affected under rule 58.8(2). The Lord Ordinary’s order allowing them to participate was restored.

1. United Kingdom Supreme Court: By [2011] UKSC 46, dismissed the insurers’ appeal, affirmed the Inner House on the validity of the legislation, allowed the individual respondents’ cross-appeal and restored the Lord Ordinary’s decision permitting their participation.
2. Inner House of the Court of Session: By [2011] CSIH 31, substantially refused the insurers’ reclaiming motion but held that the individual respondents lacked title and interest to remain parties.
3. Outer House of the Court of Session: By [2010] CSOH 2, held that the insurers had standing, permitted the individual respondents to participate and dismissed the challenge to the Damages (Asbestos-related Conditions) (Scotland) Act 2009.