Bermuda. The legal battle involving insolvent EMLICO (Electric Mutual Liability Insurance Co., Ltd.) is to be heard by the Privy Council next month.

But an EMLICO reinsurer has now filed another action in the Bermuda Supreme Court, again seeking to quash the local regulatory approvals that allowed the insurer to purportedly come to Bermuda in 1995. The fresh legal challenge by Kemper Reinsurance Co. is predicated on the January 5, 1998 ruling in Massachusetts of the Supreme Judicial Court (SJC) that EMLICO never left the state and remains a Massachusetts insurer. The SJC had determined, in an apparently irreversible ruling, that Massachusetts insurance commissioner Linda Ruthardt had no authority to authorise EMLICO to move, or redomesticate, to Bermuda. Bermudian officials had depended on the commissioner's regulatory oversight and authority to approve the redomestication. But with the SJC decision, EMLICO became a company in limbo, effectively domiciled simultaneously in two jurisdictions. Both jurisdictions have applied laws that require authorities to maintain custody of insolvent insurers. At the instigation of the Minister of Finance, the Bermuda court has requested, and a US federal court has suggested, that EMLICO's Bermuda liquidators and the commissioner of insurance meet to determine a protocol for the protection of interests for all concerned. The request was sent from Bermuda's Chief Justice to a federal court judge. Those discussions are in a preliminary stage, at present, with apparent reluctance on the part of the commissioner's office. Ms Ruthardt is seeking to take control of the assets of EMLICO, which is under a Bermuda court's winding up order. She is required by law to take full control of insolvent Massachusetts insurers. Kemper has now filed new papers with the Bermuda Supreme Court on the basis of which it will apply to the court for leave to commence new judicial review proceedings, to have the redomestication overturned on the basis of the ruling by the SJC. Kemper's view is that if the company never left Massachusetts, it never could arrive in Bermuda. Kemper's lawyers are Lovell White Durrant. Christopher Grierson, in their London office, points to section 132 (e) of the Companies Act 1981. He said, "It makes it plain that no new company is incorporated when a company redomesticates. It therefore follows that a company has to be able to leave, and must actually leave, its domicile of origin, in order to get into Bermuda.

"It's like having a train at station A on its way to station B. It can't arrive at station B unless it actually leaves station A.'' Kemper's view is that Bermuda authorities needed the express authority of the commissioner, in signing off on EMLICO, before they could approve its move here. Because of the SJC's January ruling, Kemper argues that the legal requirements for redomestication were never fulfilled. Kemper is also seeking an extension of time for this hearing, because the time period under which they could seek judicial review of the Bermuda approvals elapsed in December 1995. Kemper had previously sought judicial review based on their allegations that EMLICO and General Electric Co. (GE), its founder and now sole creditor, committed fraud by hiding EMLICO's insolvency until four months after arriving in Bermuda. The fraud allegations have been hotly denied by GE and EMLICO. Issues relating to that challenge are the basis upon which Kemper is before the Privy Court in London next month in proceedings against the Minister of Finance and the Registrar of Companies. Kemper has been concerned that the EMLICO move to Bermuda was designed to seek more favourable conditions for the company's liquidation, at the reinsurers' expense. EMLICO and GE say that concern is unfounded. The joint liquidators are David E.W. Lines and Peter C.B. Mitchell of Coopers & Lybrand Bermuda and their UK partner Christopher Hughes. Their spokesman said that the latest effort by Kemper was misconceived and is a further attempt to drag the process out. William C. Bodie of the US communications firm, Robinson Lerer & Montgomery, said, "The joint liquidators are working according to the letter from the Supreme Court of Bermuda and the request from the federal judge in Massachusetts to affect a practical solution to this matter, which would be in the interest of all parties.'' EMLICO issue goes to Privy Council GE called the latest Kemper lawsuit "frivolous'' and a further attempt to avoid its debts to EMLICO.

GE said the reinsurer raised no new issues, is ignoring the public directives of the Bermuda Government, and is refusing to acknowledge that their claims have been rejected by courts in both jurisdictions. A spokesman said, "Although over 80 pages long, Kemper does not attempt to explain why, in light of the Chief Justice's request to the US court, this lawsuit is necessary.

"Kemper completely ignores the Minister of Finance's position taken in the last month that EMLICO is a Bermuda company subject to Bermuda laws. It ignores the ruling by the Massachusetts Supreme Judicial Court that EMLICO's status as a Bermuda corporation is subject to Bermuda law.''