reinsurer which alleged fraud against General Electric Co. (GE) and their insurer, Bermuda-based Electric Mutual Liability Insurance Co. (EMLICO), must pay legal costs for GE and EMLICO.

That is the legal opinion of manager of Appleby, Spurling & Kempe's litigation department, Kelvin Hastings-Smith, who declined to discuss the specific case.

But he said Puisne Judge Richard Ground may have gone further than any other Bermuda judge before him, by last Wednesday providing EMLICO liquidators an opportunity to recover significant court costs from its accuser, Kemper Reinsurance Co.

Mr. Justice Ground, in a written ruling, informed the Registrar of the Supreme Court of special circumstances that may be taken into account when considering what court costs Kemper Re should pay.

During a court petition to wind up EMLICO last July, Kemper Re, in an unusual turn of events as a debtor to EMLICO, appeared as neither creditor nor contributor, but was allowed to participate in the proceedings.

Kemper offered allegations that GE and EMLICO had conspired to deceive insurance regulators in Bermuda and the US about the status of their solvency.

Kemper claimed EMLICO was moved to the Island because Bermuda insolvency laws are more "creditor-friendly''.

GE and EMLICO deny any wrongdoing.

After a 12-day hearing for the winding up petition, which normally takes a matter of minutes, Mr. Justice Ground denied Kemper's intervention and ordered EMLICO's winding up, while noting that the accuser had an arguable case of fraud.

But Kemper then resisted any order for costs against them, and sought to have EMLICO pay its own costs. Mr. Justice Ground declined, ruling that the reinsurer sought to get involved in the court hearing to advance their own interests, and their unsuccessful attempt at intervention was why the matter lasted 12 days.

Kemper next unsuccessfully argued that EMLICO should pay some of its own costs because Justice Ground ruled that there was a serious issue to be tried regarding the fraud allegations.

Meanwhile, EMLICO sought to have the award include the cost for the three counsel in court on their behalf. GE sought costs for two counsel.

Justice Ground ruled last week that Kemper must pay EMLICO's costs, but including the cost of just two counsel.

He added: "I give no further directions to the Registrar, although I indicate that preparation and attendance by attorneys other than counsel, from AS&K (Appleby, Spurling & Kempe), Freshfields and Shearman & Sterling may be allowed as she thinks appropriate in the exercise of her discretion.

"GE is also to have its costs against Kemper on the same basis, but I do not certify their representation as fit for two counsel.'' And while he gave no further directions, he did express the general view that the matter involved "legal questions of considerable difficulty and novelty, and complex factual issues''.

Mr. Hastings-Smith said: "This judgment is unusual, but it is great news for those who may have previously been unwilling to litigate in Bermuda, because now there is a clear understanding that perhaps one could get more than just say, one third of the actual costs.

"Now you have a greater chance of getting a better cost order, and a better recovery of the cost order than you ever had before.

"Bermuda has many major, cross-border cases. The chances now of being able to recover something for the time spent on the case by foreign attorneys is far greater than what it has ever been before, because previously it was non-existent.'' In England, at present, all of a firm's costs would be covered normally, including counsel's fees and disbursements for any foreign lawyers who worked on the case.

But that has not generally been the case in Bermuda where one was not permitted to claim for foreign attorneys working on the case.

Mr. Hastings-Smith said it was his view too, that Mr. Justice Ground's ruling drew the Registrar's attention to the complexity of the case.

Mr. Justice Ground ruled: "It required considerable specialised knowledge and skill from counsel and the other attorneys involved. The documentation was extensive, although not all of it was required at trial.

"There was a pronounced international element, the company (EMLICO) having recently redomesticated to Bermuda from Massachusetts, and this was central to the factual issues involved.

"The matter was one of very great importance to the company, both because of the need to secure an orderly winding-up of its affairs, and because it involved allegations of serious misconduct.

"The sums involved in the liquidation will be very substantial, and although they do not have a direct bearing on what was at stake in the hearing, they can be used as an indication of the significance of the case.'' On another matter, Justice Ground wrote: "As to the costs of the two day hearing leading to this ruling, in view of the disposition of the various points raised, I propose to make no order. However, I will hear counsel on that when this is delivered, if they wish.

"There may be matters of detail which are left unresolved by this ruling, and I therefore give a general liberty to apply in respect of it.'' Puisne Judge Richard Ground BUSINESS BUC