UPC Court of Appeal: ATE insurance can eliminate the need for security for costs

On 18 February 2026, the UPC Court of Appeal set aside an order for security for costs of €2 million, holding that the Munich Local Division (Munich LD) had wrongly exercised its discretion by failing to take into account the claimant's After The Event (ATE) insurance when assessing whether security for costs was necessary (Syntorr LP v Arthrex Inc. and others, UPC_CoA_890/2025).

Background

Syntorr, a Cypriot entity, brought patent infringement proceedings against the Arthrex companies before the Munich LD in respect of EP 2 670 898. Arthrex applied for security for costs under R. 158.1 RoP and, on 11 August 2025, the judge-rapporteur ordered Syntorr to provide €2 million in security by way of a bank guarantee or cash deposit. The panel of the Munich LD upheld the order on 29 September 2025.

Syntorr sought discretionary review by the Court of Appeal, arguing that the Munich LD had failed to consider its existing ATE insurance – obtained from an EU-based (Maltese) insurer with a €4 million limit of indemnity and an anti-avoidance endorsement (AAE) – which it said provided adequate protection to Arthrex, removing any need for further security. Arthrex argued that r. 158.1 RoP limited the permissible forms of security to bank guarantees and deposits, and raised concerns about the validity of the insurance policy, the solvency of the Maltese insurer, and the insurer's right to terminate the policy unilaterally.

The Court of Appeal's reasoning

The Court of Appeal reiterated the established test: when exercising its discretion under r. 158.1 RoP, the court must determine whether the claimant's financial position gives rise to a legitimate and real concern that a possible costs order may not be recoverable, or may be enforceable only in an unduly burdensome way. The Munich LD had erred by finding that Syntorr "did not dispute the obligation to provide security", when in fact Syntorr had specifically argued that its ATE insurance rendered further security unnecessary.

Critically, the Court of Appeal held that the ATE insurance formed part of Syntorr's "financial position" and the Munich LD should have taken careful consideration of its terms. The AAE provided that the policy was non-voidable and non-cancellable, that its terms were intended to benefit Arthrex directly, and that Arthrex could enforce the policy through a straightforward claims mechanism. The Court dismissed Arthrex's objections, finding that: (i) Syntorr had sufficiently substantiated the validity of the policy; (ii) the insurer's right of termination was adequately addressed by the AAE's 60-day moratorium, during which Arthrex could apply for further security or a stay; and (iii) concerns about the Maltese insurer's solvency were baseless given its obligations under the EU Solvency II Directive.

Having found the insurance adequate, the Court of Appeal noted that the question of whether insurance could be ordered as a form of security under the second sentence of r. 158.1 RoP was irrelevant – and left that point open.

Practical significance

This is a significant decision for the users of the UPC, particularly SMEs and litigation-funded entities. It confirms that an ATE insurance policy with robust terms (including an AAE conferring direct rights on the defendant) can be sufficient to address security for costs concerns, removing the need for a bank guarantee or cash deposit. However, the Court of Appeal's analysis was closely tied to the specific features of this policy: the AAE's non-voidable and non-cancellable protections, the direct enforceability by the defendant, the moratorium period, and the insurer's EU regulatory compliance. Going forward, the UPC would likely take into account, amongst others, these features of an insurance policy being relied upon by a claimant.