Lloyd’s syndicates appeal ruling on Petrofac bribery defence costs

A group of Lloyd’s syndicates has appealed to the Court of Appeal against a ruling that requires them to continue providing legal defence funding for two former Petrofac executives. The insurers are seeking to overturn a High Court decision that blocked their attempt to withdraw £45m in coverage for Marwan Chedid and George Salibi, who are currently facing criminal bribery charges. The appeal was heard on Thursday, with several underwriting firms challenging the earlier judgment that mandated ongoing financial support unless the bribery allegations are proven in court.

The dispute centres on directors’ and officers’ insurance policies that Chedid and Salibi rely upon to cover their legal expenses. The Lloyd’s underwriters originally filed a claim in the High Court in August, arguing that the alleged fraud violated the terms of the policy. However, Mr Justice Jacobs ruled in September that the insurers could not withhold funding. The costs in question are covered under a primary and first excess policy, which was nearly exhausted, prompting reinsurers to provide a second layer of coverage with a limit of £45m. Of the nine insurance firms listed in the appeal, only four have formally challenged the ruling, including Lloyd’s syndicates Samford Underwriting and Gracechurch UTG, as well as resinsurance firms MS Amlin and MSI.

The Serious Fraud Office brought criminal charges against the two former executives in February 2024. They are accused of offering and paying agents over $30m to influence the awarding of contracts worth approximately $3.3bn in Petrofac’s favour. These contracts relate to oil facilities in the United Arab Emirates, including the Upper Zakum Field Development Project. Both Chedid and Salibi have pleaded not guilty to the charges. The trial, which was initially scheduled to begin on 2 November, is now set to start on 23 November at Southwark Crown Court. Petrofac itself pleaded guilty in October 2021 to seven counts of failing to prevent bribery under the UK Bribery Act.

Legal experts have noted the significance of the case for the insurance industry and white-collar criminal defendants. Lorna Emson, a partner at Macfarlanes, stated that the Court of Appeal’s decision would be significant given the increasing criminalisation of the boardroom. The SFO confirmed it is not a party to these insurance proceedings and is continuing with trial preparation. Liberty Managing Agency, one of the claimants, confirmed it was not appealing the ruling. Representatives for Petrofac, the executives, and the insurers were contacted for comment.