1.          Relationship to the PICC

C1        Paragraph (1) is modelled on Article 1.6(1) PICC. An addition has been made to reflect one of the PRICL’s goals, namely to facilitate the observance of good faith and fair dealing in the reinsurance sector.

C2        Paragraph (2) replicates Article 1.6(2) PICC. The latter emulates the first alternative in Article 7(2) the United Nations Convention on Contracts for the International Sale of Goods (1980) (CISG).

2.          Scope

C3        Article 1.1.6 provides guidance with regard to the interpretation of the rules provided by the PRICL as opposed to the reinsurance agreement as such. The Principles do not prescribe special rules on contract interpretation except for Article 1.1.4(2) which is in line with Article 4.3(f) PICC. Thus, Chapter 4, Articles 4.1–4.8 PICC, will be applicable in this respect.

3.          Paragraph (1): Interpretation

C4        The PRICL can only contribute to legal certainty in the field of reinsurance contract law if it is applied uniformly. Thus, the primary aim behind paragraph (1) is to introduce common rules of interpretation to ensure uniform application of the PRICL. By referring to the “international character” of the PRICL, courts or arbitral tribunals, as the case may be, will be obligated to use methods of comparative law for the sake of uniform application of the PRICL in practice. This is made particularly clear in the last part of paragraph (1) which highlights the “uniformity of application” of the PRICL as a major criterion for interpretation of its rules.

C5        At the same time, the aim of paragraph (1) is to set out criteria of interpretation which meet the needs of reinsurance. Thus, reference is made to a promotion of good faith and fair dealing in the reinsurance sector.

4.          Paragraph (2): Gaps in the PRICL

C6        Internal gaps in the PRICL are dealt with in paragraph (2). These are issues not specifically governed by the PRICL even though they fall within the scope of the Principles. This criterion distinguishes internal gaps from external gaps (cf. Article 1.1.2 including Comments).

C7        The aim behind paragraph (2) is to provide a method of determining issues not settled by the PRICL, but falling within its scope of application. Pursuant to paragraph (2), such issues should be settled in accordance with the PRICL’s underlying principles. This may be achieved by analogous application of explicit rules found in the PRICL. If the issue cannot be solved by a mere extension of specific provisions dealing with analogous cases, the underlying principles have to be extracted from specific provisions. In order to do so, the specific provisions may be examined with regard to their potential to be considered an expression of a more general principle. As such, these provisions are capable of also being applied to cases different from those specifically addressed in the PRICL (see also Article 1.6 Comment 4 PICC).

C8        Confronted with an external gap, paragraph (2) does not help. The question of how to fill an external gap is a matter of determining the applicable default law. Under Article 1.1.2, issues not settled by the PRICL shall be settled in accordance with the PICC. As a consequence, the PICC forms a set of general contract law rules that will govern reinsurance transactions where there are no special rules available in the PRICL. Rules in the PICC that do not require modification in order to be applied to contracts of reinsurance will, thus, not be repeated within the PRICL (cf. Article 1.1.2).

Illustration

I1.         Reinsured A and Reinsurer B negotiate a contract of reinsurance. Reinsured A and Reinsurer B disagree as to whether the contract was formed. The PRICL does not contain general rules on contract formation. As the formation of a contract is not specific to reinsurance, the issue does not fall within the scope of the PRICL. When confronted with an external gap, recourse is to be had to Articles 2.1.1 et seq. PICC (Article 1.1.2 PRICL).