Re Phoenix Life Limited

The court was asked for prospective guidance on whether it had jurisdiction under the transitional provisions in the Financial Services (Miscellaneous) (Amendment) (EU Exit) Regulations 2019 (as amended) to sanction a Part VII insurance business transfer scheme under section 111 of the Financial Services and Markets Act 2000 where the sanction order would be made on or before 31 December 2022 but the scheme would take effect after that date. The central question was the proper construction of paragraph 2 of the Schedule to the 2019 Regulations whether the word "made" referred only to the making of the sanction order or also to the scheme becoming effective.

The judge gave provisional guidance that the natural meaning of paragraph 2 is that the relevant requirement is that the order under section 111 is "made" within the two year transitional period beginning with IP completion day. Section 111 and section 112 contemplate separate events (sanction order and the scheme taking effect / ancillary orders) and the statute and practice treat those events separately. The court therefore indicated it has jurisdiction to sanction a transitional scheme where the sanction order is pronounced on or before 31 December 2022 even if the scheme’s effective date is after that time, and that ancillary orders under section 112 may be made after that date, provided the section 111 order was made in time.

The court emphasised the provisional nature of this guidance, recognising policyholders retain the statutory right to attend and challenge at the sanction hearing; the guidance was given for case management and time-sensitive Brexit-related reasons.

This was an early procedural application in which Phoenix Life Limited and Reassure Life Limited (the applicants) sought a form of prospective guidance or declaratory relief on a discrete point of statutory construction. The applicants planned a Part VII insurance business transfer to an Irish subsidiary (Phoenix Life Assurance Europe DAC) to preserve the ability to service legacy EEA business after Brexit. The transfer required sanction under section 111 FSMA and relied on the transitional saving in the Schedule to the 2019 Regulations.

The application asked the court to confirm that a sanction order could be "made" on or before 31 December 2022 even if the scheme’s effective date was after that date and ancillary orders under section 112 could be made after that date. The timetable had shifted so that, while the applicants intended to obtain a sanction order before the expiry of the transitional period, the proposed effective date for the transfer was 1 January 2023 to align with operational and accounting requirements (notably IFRS 17) and to provide practical implementation time and a fallback quarter-end date.

The issues framed by the court were:

• whether paragraph 2 of the Schedule to the 2019 Regulations requires the sanctioning order to be made within the two year transitional period beginning with IP completion day, or additionally requires the scheme to become effective within that period; and
• whether orders under section 112 FSMA may be made after that period where a section 111 order was made in time.

The court analysed the statutory text and context. It concluded the ordinary meaning of "made" refers to the making of the sanction order and does not import a further requirement that the scheme take effect within the two year period. The judge relied on the statutory scheme (noting section 111(2)(b) contemplates the transferee having or obtaining authorisation "before the scheme takes effect"), the separate role of ancillary orders under section 112, practical experience of court-approved transactions, the absence of contrary legislative materials, and the regulators' (PRA and FCA) acceptance that the construction could be considered. The court therefore gave provisional guidance that the sanction order may be pronounced on or before 31 December 2022 even if the scheme becomes effective thereafter, and that section 112 orders may be made after that date, provided the section 111 order has been made earlier. The guidance was expressly provisional and without prejudice to any substantive objections policyholders may raise at the sanction hearing.

Prospective guidance given in favour of the applicants. The court provisionally concluded that paragraph 2 of the Schedule to the 2019 Regulations requires that an order under section 111 FSMA be "made" within the two year transitional period beginning with IP completion day, and that the making of the sanction order is a distinct event from the scheme taking effect. Accordingly, the court indicated it has jurisdiction to sanction a transitional insurance business transfer scheme where the sanction order is pronounced on or before 31 December 2022 even if the scheme takes effect after that date, and that ancillary orders under section 112 may be made after that date. The guidance was given on a provisional basis to assist case management and did not preclude policyholders from arguing otherwise at the sanction hearing.