1.          Relationship to the PICC

C1        Article 1.1.3 is modelled on Article 1.5 PICC.

C2        The main difference between Article 1.1.3 and Article 1.5 PICC lies in the fact that there is no exception to the non-binding character of the PRICL. Notwithstanding this principle, individual rules contained in the PRICL may bear a mandatory element following from the content and purpose of the rule. For example, parties will not be allowed to exclude the application of the duty to observe utmost good faith. They may, however, modify particular aspects of it in appropriate situations, such as modify a particular duty resulting from an application of utmost good faith. This is similar to the PICC (see Article 1.5 Comment 3 PICC).

C3        Moreover, the model wording of Article 1.5 PICC has been changed slightly in Article 1.1.3 to reflect the fact that an exclusion of the whole body of rules is not a realistic option where the PRICL is concerned. Since the PRICL will only be applicable upon a positive choice (“opting in”) by the parties, there will be no need for and no case of an entire exclusion. Parties who have opted into the PRICL may wish to exclude or modify some of its provisions, but they will not exclude the application of the PRICL as a whole.

2.          The PRICL provides a set of non-mandatory rules

C4        If parties opt in favour of the PRICL in accordance with Article 1.1.2, they do not have to accept the rules provided by the PRICL as they stand; they may derogate from or alter them by agreement. This is due to the non-mandatory nature of the PRICL which provides for no more than gap filling rules in case parties to a reinsurance transaction have not specifically settled a contractual issue in their contract.

C5        The non-mandatory nature of the PRICL is justified, because there are no policy reasons for restricting the parties’ freedom of contract in reinsurance transactions. Parties negotiate the contract on an equal footing and, thus, there is no room for mandatory rules in favour of one of them. At the same time, there are no public interest concerns requiring protection by mandatory reinsurance rules.

3.          Limitations on freedom of contract under the PICC will also apply to reinsurance transactions

C6        While basic principles of law, such as the prohibition of fraudulent behaviour or compliance with principles of utmost good faith (“uberrima fides”), may be considered mandatory and not at the discretion of the parties, the mandatory nature of such general principles is already safeguarded by Article 1.5 PICC:

The parties may exclude the application of these Principles or derogate from or vary the effect of any of their provisions, except as otherwise provided in the Principles (emphasis added).

C7        With a view to the very few mandatory rules within the PICC, Article 1.5 Comment 3 PICC states:

A few provisions of the Principles are of a mandatory character, i.e. their importance in the system of the Principles is such that parties should not be permitted to exclude or to derogate from them as they wish. It is true that given the particular nature of the Principles the non-observance of this precept may have no consequences. On the other hand, it should be noted that the provisions in question reflect principles and standards of behaviour which are of a mandatory character under most domestic laws also.

Those provisions of the Principles which are mandatory are normally expressly indicated as such. This is the case with Article 1.7 on good faith and fair dealing, with the provisions of Chapter 3 on substantive validity, except in so far as they relate or apply to mistake and to initial impossibility (see Article 3.1.4), with Article 5.1.7(2) on price determination, with Article 7.4.13(2) on agreed payment for non-performance and Article 10.3(2) on prescription periods. Exceptionally, the mandatory character of a provision is only implicit and follows from the content and purpose of the provision itself (see, e.g., Articles 1.8 and 7.1.6).

C8        These general limitations on freedom of contract will also suffice in the specific context of reinsurance.

4.          Exclusion or modification of the PRICL may be express or implied

C9        Any contractual exclusion or modification of the rules provided by the PRICL may be either express or implied. As has been stated with regard to the equivalent rule in Article 1.5 Comment 2 PICC,

[t]here is an implied exclusion or modification when the parties expressly agree on contract terms which are inconsistent with provisions of the Principles and it is in this context irrelevant whether the terms in question have been negotiated individually or form part of standard terms incorporated by the parties in their contract.

C10     The same applies to an implied exclusion or modification of the rules provided by the PRICL.

C11     Parties may exclude certain parts of the PRICL simply by choosing or incorporating into the contract only some specific, but not all parts of the PRICL. In such case, it will be presumed that parties want the chosen chapters of the PRICL to be applied together with the general provisions (Articles 1.1.1–1.2.1; see also Article 1.5 Comment 2 PICC).