A Special Assistant Attorney General in the state of Massachusetts has urged a US federal judge to end federal interference in the case involving Electric Mutual Liability Insurance Co. (EMLICO).

And J. David Leslie, acting on behalf of the state's commissioner of insurance Linda Ruthardt, has used the May 5 ruling by the Privy Council in London to back that call.

The commissioner wants to come to Bermuda to address the issue of EMLICO's purported Bermuda incorporation and liquidation, once approved as EMLICO's receiver.

Mr. Leslie has written to the Hon. Douglas P. Woodlock of the US District Court to "address the significance of the judgment.'' The Privy Council recognised EMLICO as a Massachusetts company and said it remained open for argument in Bermuda courts as to whether it was a Bermuda company.

The Law Lords declined to rule on that because of their appellate nature, leaving the primary courts to first tangle with the issue.

But they agreed with EMLICO reinsurer, Kemper Re, that the Court of Appeal did have jurisdiction to hear Kemper's appeal against a Supreme Court decision.

Kemper had sought to challenge, through judicial review, the 1995 decisions of the Registrar of Companies and the Minister of Finance that purportedly allowed EMLICO into Bermuda. Four months after being given the green light to come here, the company declared itself insolvent to the Bermuda Supreme Court.

But after Kemper was initially granted Supreme Court permission to seek judicial review of the regulatory decisions that purportedly brought EMLICO here, Kemper had another court revoke that permission after an application by EMLICO's Bermuda liquidators.

Kemper sought to appeal that decision through the Court of Appeals, which ruled they had no authority to hear such an appeal. The Privy Council has now ruled that the Court of Appeals actually does have that authority.

In Massachusetts, the commissioner petitioned the Supreme Judicial Court (SJC) for Suffolk County for a US receivership of EMLICO in the wake of a January ruling by that state court that EMLICO remained a state insurer and had never left the country.

But the liquidators -- David E.W. Lines and Peter C.B. Mitchell of Coopers & Lybrand Bermuda, together with their London partner Christopher Hughes -- employed a legal manoeuvre to move the case to federal court.

The commissioner has been trying to get the matter returned to state court which has jurisdiction over insurance matters.

Mr. Leslie wrote in his letter to the federal judge: "The (Privy Council) judgment is consistent with and confirms the propriety of the commissioner's petition in two fundamental ways.'' He said it confirms the Bermuda courts will respect the SJC ruling that EMLICO remains a Massachusetts state reinsurer, regardless of its position under Bermuda law.

He said, "This court accordingly lacks jurisdiction, and the proceeding should be remanded to the county court so that court can enter a receivership order.'' Secondly, he said the Privy Council ruling confirms that the status of EMLICO as a Bermuda company (and thus the Bermuda winding up order) is unresolved.

EMLICO `interference' slammed "This court thus should not assume,'' Mr. Leslie stated, "that the Bermuda winding up proceeding is proper even as a matter of Bermuda law, or that the Massachusetts ruling is somehow less appropriate because it is more recent.

"The Bermuda July 26 judgment and winding up order acknowledge that the proceeding might be unwound based upon attacks on EMLICO Ltd.'s status in Bermuda, and litigation over those issues will now continue in Bermuda for quite some time.

"In these circumstances, the commissioner's plan -- once appointed receiver of EMLICO by the county court -- to proceed to Bermuda to seek a permanent stay of the winding up proceeding in favour of the Massachusetts receivership is particularly appropriate.

"The commissioner's plan (a) reflects the public policy of Massachusetts as articulated by the Supreme Judicial Court, which rejected the assumption that EMLICO should be liquidated in Bermuda; (b) accords comity to Bermuda; and (c) offers the best chance of moving liquidation forward in a single forum because a permanent stay of the winding up proceeding would likely moot the litigation over EMLICO Ltd.'s status in Bermuda.

"The commissioner's plan is sound, and this court should remand this proceeding so that the commissioner may proceed under the supervision of the county court (and without the jurisdictional clouds presented by any federal receivership).'' Kemper also wants EMLICO liquidated in the US, alleging the General Electric Co. (GE) company came to Bermuda by deceiving US regulators into believing they were solvent. The allegations are denied by EMLICO and GE.

If insurance regulators in Massachusetts believed EMLICO was insolvent in 1995, they would have been obligated to block its exit from the country and put it into receivership.

A Bermuda liquidation is desired by GE and EMLICO. A Bermuda liquidation would allow GE more control over the liquidation than a US liquidation, and force EMLICO's reinsurers to pay up earlier.