Worldwide: Protected Cell Company Structure Cited In Employment Case

Last Updated: 4 January 2017
Article by Nigel Feetham

Scott v EC Maritime PCC Ltd (Debarred) [2016] UKEAT 0032_16_1010 was an appeal against a Judgment of the Southampton Employment Tribunal. The Claimant appealed from that ruling on two grounds, but for the purposes of this article it is the first ground of appeal that is of interest to the present writer, namely, whether the Employment Tribunal erred in concluding that the Respondent's failure to look for alternative work in other protected cells of the Protected Cell Company of the Respondent did not render the dismissal unfair.

A copy of the judgment can be found here:

Whilst the case does not provide any important judicial insight into PCCs, it is one of very few cases anywhere in the world where a dispute concerning a PCC has come before a foreign court.

The background to the protected cell company structure is set out in the Appeal Tribunal judgment and is quoted below:

"3. The Claimant [upon leaving his former employment] made a career in the security industry; specifically, from 2011, working as a Maritime Security Officer ("MSO").  Initially he had worked for an organisation [the named organisation] and was deployed on various clients' ships, essentially as an armed guard.

4. Towards the end of 2011, [the named organisation] transferred its MSOs - including the Claimant - to the Respondent, a Guernsey-registered company structured on a protected cell basis.  A protected cell company has a central hub or core and a number of separate cells into which the company can segregate its assets whilst remaining one single legal entity (see paragraph 10 of the ET's Decision in this regard).  The Respondent thus contracted to provide MSOs to [the named organisation] but also to other companies working in the maritime security industry.  The Claimant's employment duly transferred to the Respondent, and he was employed on a rolling fixed-term contract from 1 February to 31 January each year, the last such contract effective from 1 February 2014 and then due to expire on 31 January 2015."

The judgment sets out the facts and dispute in question. Suffice it to say for present purposes that by his Employment Tribunal claim the Claimant pursued complaints of unfair dismissal and breach of contract.  Importantly, the Employment Tribunal rejected the Respondent's contention that it did not have territorial jurisdiction to determine the Claimant's unfair dismissal complaint and further found that the Claimant had sufficient continuity of service to enable him to pursue that claim.

What was the Claimant's submission with regards to the cell company structure? Again this can be surmised from the judgment:

"14. On behalf of the Claimant it is submitted that the ET erred in refusing to make a finding on the main plank of the Respondent's defence, its assertion that it was illegal as a matter of Guernsey law for a search for alternative work to be conducted elsewhere within the other cells.  Such material as the Respondent had adduced in this regard did not prove its point, as the ET would have been bound to find had it investigated that question.  That in turn would have meant the ET would have been bound to find that the failure to look for alternative work rendered the dismissal unfair."

The Appeal Tribunal, however, found:

"18. On the specific issue of alternative work, I am not persuaded that the ET necessarily erred in declining to investigate further the precise legal position of the protected cell company.  I do not read its conclusion as dependent upon an acceptance of the Respondent's position in that regard.  Although it apparently considered it relevant that the Respondent as a matter of practice - even if not as required by law - did not look to see if alternative work was available in other cells of the company, that was not the determining factor in the ET's assessment of fairness, hence the use of the word "however" at the start of paragraph 70.

19. It is, moreover, paragraph 70 that explains the ET's crucial finding: that there simply was no evidence of alternative work being available.  It was that, coupled with the Respondent's cell structure, that meant the failure to look for alternatives did not render the dismissal unfair."

The appeal was nevertheless allowed on the second ground of appeal and the matter was therefore remitted to a freshly constituted Employment Tribunal for re-hearing. It is of note that the judgment states "Having failed to enter a Respondent's Answer or to respond to the EAT's correspondence, the Respondent was debarred from participating in the appeal." No information is given as to why this was so.

We can make several general observations from the perspective of the cell company regime and cell captives specifically:

(1). Here it is interesting to see that a Protected Cell Company (incorporated in Guernsey) is used outside the traditional areas of insurance and structured finance. The company appears to be an offshore employer within the maritime security industry, providing security officers to a number of maritime security companies. The offshore nature of the commercial arrangements were clearly not a bar to the English Employment Tribunal assuming territorial jurisdiction. This is a salutary example of the fact that the authors' mantra in my co-authored book of 'keep everything generally within the PCC jurisdiction' is not always possible and may not therefore prevent proceedings in a foreign jurisdiction.

(2). English law does not currently have Protected Cell Company legislation in the Guernsey sense  and it is always a concern that a foreign court unfamiliar with the cell company regime might view it with a degree of caution (essentially as a statutory creature of 'some offshore island'). In this case, from my reading of the law report, neither the Employment Tribunal nor the Appeal Tribunal had difficulty in accepting the cell company structure. It evidences that the concept has now gone mainstream, so to speak. Indeed, it is no coincidence that the UK itself is now proposing to implement PCC legislation for ILS insurance business.

(3). There is no information in the judgment on what assets would be available to satisfy a potential claim against the relevant cell or indeed whether any such claim could be discharged from the assets of the core (depending, of course, on the underlying manner of contracting). Nor whether any assets are situated in the UK (or solely in Guernsey). In the case of a captive insurance cell structure, the parties to the contractual arrangements are, typically, corporate entities (as insured/policyholders), and the affairs of the company are managed locally, typically, by a captive manager. As such, the Protected Cell Company will usually have no employees and where it does these employees are usually (if not exclusively) based in the jurisdiction where the captive is incorporated (consequently, any employment dispute would be heard and determined locally).

(4). A Protected Cell Company (whereby a promoter provides services to different legally segregated economic interests within a single legal entity) should, in my opinion, consider litigation as a distinct risk (within its risk register) facing the cell structure, and consequently, its mitigation. Litigation risk includes, in relation to a particular cell, the risk that the cell might (for whatever reason) not defend legal proceedings. This could have serious consequences for the Protected Cell Company as a whole since undefended legal action may result in a judgment being obtained against it, and in extreme cases, the winding-up of the company (subject to local legislation). In a cell captive, aside from risk mitigation clauses ordinarily inserted into all contracts with third parties, regulators would generally expect the 'core' to fund any litigation expense to protect the integrity of the Protected Cell Company (as a legal entity) if, for example, assets are not available within the relevant cell to allow the company to do so. Given the level of regulatory capital an insurer is required to maintain within the company, this is less of a risk for a cell captive PCC than it might be for other kinds of unregulated trading activities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions