1.          Relationship to the PICC

C1        Paragraph (1) replicates Article 1.9(1) PICC.

C2        Paragraph (2) is a stand-alone provision not modelled on any sample provision. Although it differs significantly from Article 1.9(2) PICC, it is in line with Article 4.3(f) PICC. This provision provides that in interpreting contracts regard shall be had to, inter alia, usages.

2.          Paragraph (1): Practices established between the parties

C3        The practices established between the parties have binding force in line with Article 1.9 PICC and will continue to do so as long as parties have not derogated from them by contractual agreement. In line with Article 1.9 Comment 2 PICC, it may be said that the question of

[w]hether a particular practice can be deemed to be ‘established’ between the parties will naturally depend on the circumstances of the case, but behaviour on the occasion of only one previous transaction between the parties will not normally suffice

(see also the illustration presented in that Comment).

3.          Paragraph (1): Usages chosen by the parties

C4        Following the principle of freedom of contract, parties may agree on the application of any particular usage. Such usage will apply to the contract irrespective of whether it complies with the PRICL or not.

4.          Paragraph (2): Other usages

C5        Where parties do not agree on the application of a particular usage, the question arises as to whether such usage shall prevail over the PRICL. In paragraph (2), it is made clear that such usage may only be considered if it is “regularly known to and observed by parties to a contract of reinsurance”. Yet even then, such usage will only be taken into account for the purpose of contract interpretation, which is in line with Article 4.3(f) PICC. Thus, the PRICL does not give precedence to usages in general. In this point, the PRICL differs substantially from the PICC (see Article 1.9 Comment 6 PICC). The reason for this is that the PRICL is intended to be a restatement of international reinsurance usage and to provide parties with an alternative to the usages found in the reinsurance markets. In contrast, the PICC has codified general principles of law, not trade usages. Within the scope of the PICC, it therefore makes sense to give precedence to trade usages.

C6        As with Article 4.3(f) PICC, under Article 1.1.4(2) a court or arbitral tribunal, as the case may be, will have a considerable amount of discretion as to the extent to which it should draw upon particular usages in spite of the parties’ choice in favour of the PRICL. In using this discretion, ensuring uniform application of the PRICL must be weighed against the need to allow for continuing development of the law of reinsurance.