This post was orginally posted on the UKHR blog and is reposted here with permission and thanks.

AXA General Insurance Ltd & Ors v Lord Advocate & Ors (Scotland) [2011] UKSC 46 (12 October 2011)

When you breathed in asbestos fibres from your dusty shipbuilding job on the River Clyde in the 1950s and 1960s, some of those fibres stuck around in the lungs. Some may cause the pleural plaques seen on my image, some may cause asbestosis, and some may lead to the highly malignant mesothelioma.

So your doctor (20+ years later when these diseases manifest themselves) would X-ray you and tell you what form of the disease you had. If he told you you had pleural plaques, you would, at first, breathe a huge sigh of relief that it was not mesothelioma. Because pleural plaques are almost invariably asymptomatic and harmless.

But on second thoughts, now you know you have indeed been exposed to asbestos such that you might develop mesothelioma – and you have seen colleagues die a miserable death from that disease. So, when you leave your chest physician’s room, you are worried, not about what you have, but about what you might get. Do you get damages for this? And anyway, where do the human rights in my title – those under Article 1 of Protocol 1 to ECHR, or the right to peaceful enjoyment of possessions – come into this story?

Ironically, given what pleural plaques are about, this Supreme Court case is all about insurers‘ human rights under A1P1. This is because views have changed over whether pleural plaques are actionable, i.e. whether they amount to damage for which damages can and should be payable. For 20 years or so in the 1980s and 1990s, claims were made, were litigated at first instance, and were settled – on the basis that employees could recover damages. Then insurers took a case, Rothwell, to the House of Lords, which decided in 2006 that there was no actionable damage. Yes, there were physical changes, and yes, there was anxiety caused by what might happen, but you could not aggregate the two and call it “damage” for which the law should give a remedy.

Various legislatures around the UK did not like this result. So they went about changing it. This case concerns the Scottish approach. The Holyrood Parliament passed a 2009 Act which reversed Rothwell. It did so by declaring that pleural plaques were a personal injury which is not negligible, and

“accordingly, they constitute actionable harm for the purposes of an action of damages for personal injuries.”

This was cunning. Instead of deciding that there should be a statutory compensation scheme backed by the state (as per a very limited English version) , the law decided that pleural plaques amounted to bodily injury. All employers have been compelled to have employer’s liability policies since the late 1960s, and those policies respond to claims in respect of “bodily injury” –  so when the claims under the 2009 Act came, the insurers would pay – or so the Scottish Parliament thought. The Act thus removed the Rothwell defence from existing claims, and stopped this defence being mounted to future claims.

Cue this litigation. Insurers said – hang on – the House of Lords said we were right in not compensating those with pleural plaques. We continue to insure employers for their admittedly not good industrial practices in the 1950s and 1960s. Many of them are insolvent or their companies dissolved. So there is no way we can recoup the premiums needed to pay these claims from our insureds – which claims, until you legislated, were not claims according to the House of Lords. So it comes out of our general funds, and that is a breach of our A1P1 rights.

In A1P1-speak, therefore, the insurers had a possession, namely their money, which they would lose to the extent that claims were made under the 2009 Act which would fail at common law. And the Supreme Court agreed with the insurers up to this stage of argument. It was not as simple as the typical A1P1 expropriation claim, where the claimant has an asset which the public authority takes away. Here the authority did not take any asset away, it just allowed others to make claims which in the future would take assets away. But the Supreme Court said that this did not matter. It relied upon cases such as Burden in which the Strasbourg Court said that two unmarried sisters had an A1P1 right because of the unfavourable inheritance tax treatment which one of them would bear in respect of their house when the other one died, as compared to married couples or those in civil partnerships (the Burden claim ultimately failed, 4-3, on the basis of no violation of this right).

The reasoning which led the Supreme Court to conclude that there was indeed an A1P1 right in play also led it to reject arguments that insurers were not victims for the purpose of Article 34 of the Convention.

So far, so good for the insurers. But now it got difficult for them, essentially because they were trying to reverse the effect of a statute passed by the Scottish Parliament to address what it regarded as a social injustice. Various important issues arose.

The first was under what circumstances could one impugn a statute? The straightforward route was for insurers to rely upon the statutory inability of the Scottish Parliament under s.29(2)(d) of the Scotland Act 1998 to enact any laws which were incompatible with Convention Rights. They did so, but they also challenged the making of the Act on common law judicial review grounds as being unreasonable, irrational and arbitrary – note that these grounds are not readily to be found within the scope of Convention Rights. In the end, after a sustained legal analysis of how and when one could challenge an Act of the Scottish Parliament, the SC decided that such Acts were not capable of judicial review on these common law grounds – principally because, as Lord Hope put it at [52]

“it would also be quite wrong for the judges to substitute their views on these issues for the considered judgment of a democratically elected legislature unless otherwise authorised to do so, as in the case of the Convention rights, by the constitutional framework laid down by the United Kingdom Parliament.”

The SC, in so ruling, touched on the theoretical circumstances in which an Act passed by Westminster, with its much-trumpeted parliamentary sovereignty, could be similarly attacked – in effect only when the measure attacked some fundamental principle of the rule of law such as abolishing judicial relief or similar [50]-[51], [147-152]. Plenty of material for the legal and political theorists here. The Scottish Parliament was in a slightly different position to the UK Parliament, as it is not sovereign, being the creature of an Act past by the UK Parliament and hence subject to any limitations within that Act.

So the outcome of all this was that either it had a good A1P1 challenge or it had no claim – here is the second main issue. And it did not have such a claim. The A1P1 claim failed, for reasons familar to most such A1P1 claims. The 2009 Act pursued a legitimate aim, that of addressing the social injustice caused to the affected former employees, and the burden it placed upon the insurers was reasonable proportionate to that aim.

The insurers’ strongest point was the fact that the Act was retrospective in its effect. Our employees breathed in their asbestos fibres, usually due to the negligence of the employers, many years ago. The House of Lords in Rothwell had said that such claims gave no right to damages; under legal theory, that ruling declares that the law was always thus (even though different courts did different things in the past), and the Act reversed this in respect of potential liabilities incurred many years ago, even though those liabilities had not yet given rise to claims. Their other point was that the method chosen by the Scottish Parliament placed an undue burden on insurers, by making sure that the form of the enactment fitted with the likely terms of the cover under their employers’ liability policies – there were other ways of achieving the same result, not least by enacting a scheme of statutory compensation.

But the justices were not persuaded by these points. The first matter which weighed with them is that when the policies were written many years before, there would have been no settled approach as to how they would respond to different kinds of lung “disease”.  As Lord Mance put it at [95], there was

“no suggestion that any insurer relied in any meaningful sense upon the common law position proving to be that which was eventually established in Rothwell.”

Lord Brown wondered at [78-79] why, if it was within the scope of the courts’ competence to change the law to accord with the judges’ perception of the contemporary demands of justice, why the same could not be done by Parliament. in such cases as Fairchild the House of Lords decided that causation should became easier for mesothelioma claimants to establish, what was the difference between that decision and the present? After all the effect was the same; claims which would have failed under the old law, would succeed under the common law as now declared in Fairchild.

For slightly different reasons, all the justices agreed that the legislation was legitimate and proportionate, and the challenge failed.

Various other interesting issues arose. As noted above the Act affected existing claims and future ones. The existing claims could potentially have given rise to a claim under Article 6 that the rules had been changed mid-claim, a claim which had been advanced at an earlier stage but not persisted with. As Lord Brown identified at [80],  to justify such a change, under Art.6 case law,  one needs to show “compelling grounds of public interest”, much stronger than the A1P1 requirement for a public interest which was “not manifestly without reasonable justification”. Hence his wry conclusion at [83] that

“Had the test been that of “compelling grounds of public interest” I should not have regarded it as satisfied. I am not however prepared to condemn this legislation as ‘manifestly without reasonable justification.’”

So had the claim been principally concerned with existing claims, he would not have thought the Act justified.

Much of the rest of the two leading judgments of the Scots judges, Lords Hope and Reed, concerns a further issue, namely a contention, successful in the court below, that certain pleural plaque claimants were not entitled to be joined as additional respondents in the litigation. Most English lawyers would have been more than a little surprised at this conclusion in a public law case, given that insurers were arguing that the law under which those claimants stood to benefit should struck down. The debate turned on the Scots concept of “title and interest”, and the Court below said that whilst they may have interest, they did not have “title”, The SC was having nothing of this. All that was needed was that the individuals had interests which were directly affected by the decision, and the SC found this to be contained in existing Scots law. This minimised the need to have any express regard to the position south of the Border – though Lord Hope touched upon this at [59] – where a much relaxed approach to standing and interest has prevailed over the last 20 years or so.