The Minister of Finance had no authority under Bermuda law to allow EMLICO into Bermuda, a London Queen's Counsel has told a federal judge in Massachusetts.

And a Bermudian lawyer has told the same court that EMLICO's Bermuda liquidators failed to disclose to the Bermuda Supreme Court their prior involvement with EMLICO, and in fact, misled the court about that prior involvement.

These assertions came as EMLICO reinsurer, Kemper Reinsurance Co., applied to be represented in a US federal court hearing in which the Massachusetts commissioner of insurance is seeking to wrest control over the estate of EMLICO from Bermuda liquidators.

The reinsurer has sought, in filings before the United States District Court for the State of Massachusetts, to participate as amicus curiae or friend of the court.

And an affidavit in support of that petition, filed in the United States District Court (District of Massachusetts) by local lawyer John Cooper of Cox Hallet & Wilkinson, detailed how EMLICO was counselled by Coopers & Lybrand on a number of matters before the company ever came to Bermuda.

The joint liquidators are David E.W. Lines and Peter C.B. Mitchell of Coopers & Lybrand Bermuda and their UK partner, Christopher Hughes.

Mr. Cooper stated that Coopers misled the Bermuda court about their prior involvement with EMLICO.

An example of this, he said, is that in June 1996 Mr. Mitchell swore out a statement to the court that omitted Coopers "extensive prior involvement'' with EMLICO, but specifically mentioned the prior EMLICO involvement of certain other entities.

And in another affidavit filed in support of Kemper Re, British QC Lord Neill of Bladen, stated: "...the Minister has no power to consent to a continuance of a foreign corporation into Bermuda if the corporation had no authority to leave its place of incorporation.

"Therefore, if EMLICO had no authority to leave Massachusetts, the Minister had no power to consent to its continuance into Bermuda.'' "...the jurisdictional predicates for EMLICO's claimed Bermuda domicile are absent. Therefore, it stands to be held as a matter of Bermuda law that EMLICO never became a Bermuda corporation, just as the Supreme Judicial Court (the highest court of the jurisdiction in which EMLICO was incorporated) has held that EMLICO remains a Massachusetts company.'' Lord Neill discounted the Bermuda Supreme Court's January 9 ex parte order obtained by the liquidators affirming their authority over the EMLICO estate as only provisional, because affected third parties were given no chance to argue their case before the same judge.

He said fundamental principles of fairness required that the liquidators should have provided that opportunity.

His view is: "Given that the January 9, 1998 order by its terms purports to affect the rights of third parties and that breach of the order may be punishable as a contempt of court, it was wholly inappropriate and contrary to fundamental principles of fairness for the joint liquidators to seek such an order on an ex parte basis.'' He said he was surprised by the Bermuda Finance Minister's January 11 press statement which said the order "reinforces Government's obligation to ensure that (EMLICO's) liquidation continues in the form originally ordered'' by the court.

Lord Neill said the executive arm of government, under the constitutional doctrine of separation of powers, "has no role whatsoever in the liquidation process, and therefore no `obligation' to ensure that the liquidation of a company takes place in any particular jurisdiction or form.'' And he disagreed with the joint liquidators and the Minister that a direct jurisdictional conflict existed after the latest ruling of the Supreme Judicial Court.

His view is that had the liquidators given the relevant interested parties "proper notice'' of their application to the Bermuda court, "the Bermuda court would have recognised that EMLICO was never validly continued into Bermuda, and any appearance of a `jurisdictional conflict' would have been avoided.'' And the conclusive and inter partes Supreme Judicial Court of Massachusetts ruling that EMLICO remained a Massachusetts insurer and never left the state "has profound consequences for EMLICO's claimed status as a Bermuda corporation,'' he argued.

Lord Neill said, "If EMLICO never ceased to be a Massachusetts company, it cannot have become a Bermuda company. It is not possible under English law for a corporation to be incorporated (in) both...'' He also discounted the joint liquidators' view that section 15 of the Companies Act 1981 protected their claim to a Bermuda domicile. The section states that "no defect in the formalities'' leading up to a company's Bermuda incorporation or continuance shall affect the validity of the incorporation.

Lord Neill said the fact that the highest court in Massachusetts said EMLICO never left the state can hardly be described as mere defects in formalities.

He also belittled the liquidators' position that Bermuda now has the most real and substantial connection with EMLICO, providing a huge listing of the company's US connections.

COURTS CTS