Droit international général

Sarah Laval, Le tiers et le contrat – Étude de conflit de lois, Larcier, 2016, pp. 458, ISBN: 9782804491000, EUR 110.

En droit international privé, le principe d’autonomie désigne la possibilité pour les parties à un contrat international de choisir la loi applicable. Reconnu par une immense majorité d’États, de règlements et de conventions internationales, ce principe répond aux objectifs de prévisibilité, de souplesse et de sécurité propres au droit du commerce international. S’il satisfait les prévisions et les intérêts des parties, le principe d’autonomie risque cependant de heurter les prévisions des tiers intéressés au contrat. Les créanciers ou débiteurs des parties, leurs ayants cause, les titulaires de droits concurrents, se trouvent tributaires d’un choix auquel ils sont étrangers et qui risque de leur porter préjudice. La lecture des principaux instruments conventionnels et règlementaires relatifs aux solutions du conflit de lois en matière contractuelle témoigne d’une absence de prise en considération des intérêts des tiers au contrat. Pourtant, la multiplication des contentieux liés aux mécanismes tripartites, comme les cessions de créances, les groupes de contrats, ou encore les sûretés réelles et personnelles, révèle l’importance des intérêts des tiers et la nécessité corrélative de les intégrer dans les solutions du conflit de lois en matière contractuelle. C’est à cette problématique que la présente thèse se consacre. En s’appuyant sur les outils traditionnels du droit international privé, comme la distinction des règles de conflit de lois générale et spéciale, la qualification des questions de droit ou, encore, la méthode des lois de police, elle propose non seulement d’opérer une distinction entre les différents types de contrats selon la nature de leurs liens avec les tiers, mais encore, et plus essentiellement, de modifier les solutions du conflit de lois applicables aux contrats qui intéressent par nature les tiers en remettant en cause le principe d’autonomie. Pour les autres contrats, elle suggère d’adapter les solutions du conflit de lois par le recours à des correctifs.

Thank you Bob Wessels for alerting me to ADO Den Haag v United Vansen (of China). ADO Den Haag NV (the corporate vehicle of a Dutch Premier League club) domiciled at The Hague, sue United Vansen International Sports Co. Ltd, domiciled at Beijing, essentially for the latter to pay a deposit on the premium due for the shares it acquired in the club. Vansen did not appear.

First of all, were Vansen properly summoned in accordance with the Hague Service Abroad Convention (which both China and The Netherlands have ratified)? The court holds that it cannot yet decide that this has actually happened (relevant steps taken via the Dutch judicial authorities only recently having taken place) however it applies Article 15(3)’s provisions for extreme urgency: ‘Notwithstanding the provisions of the preceding paragraphs the judge may order, in case of urgency, any provisional or protective measures.‘

Next up: do the Dutch courts have jurisdiction? Given the defendant’s domicile outside of the EU and the non-applicability of any of Brussel I’s rules where domicile is irrelevant, the Court applied Dutch residual rules of private international law. These grant it jurisdiction essentially in respect of urgent proceedings of attachment.

Of more interest to this blog is the court’s consideration of applicable law, which the Court conducts with reference to Rome I. The share purchase agreement seemingly did not contain choice of law, either implicit or explicit: at 2.15, the court suffices with a mere observation of the absence of choice of law. None of the standard contracts of Article 4(1) Rome I applies [there is some discussion in scholarship whether share purchase is covered by Article 4(1)a’s ‘contract for the sale of goods’], hence the relevance of Article 4(2)’s ‘characteristic performance’ test. Here, the Court declared unequivocally (and most probably correctly) that the characteristic performance is the  transfer of the share premium. The habitual residence of the party required to carry out that performance is the relevant connecting factor. In casu therefore, Chinese law in principle is the applicable law.

However the Dutch court finally settles for Dutch law after all, employing Article 4(3)’s escape clause. It holds that all circumstances of the case indicate that Dutch law is more closely connected: at 2.15: the agreement originated in The Netherlands; the performance has to be carried in The Netherlands (transfer of the sums into a Dutch bank account), and the transfer of the premium will benefit a Dutch company. Although the judgment does not give much detail on the contract, its origins etc., it would seem that in finally opting for Dutch law, the court does make proper application of the rather strict conditions of Article 4(3).

A good illustration of Article 4’s waterfall /cascade.

Geert.

(Handbook of) European private international law, 2nd ed. 2016, Chapter 3, Heading 3.2.6.

This report has been prepared by Martina Mantovani, research fellow at the MPI Luxembourg.

On 1st and 2nd December 2016, the Academy of European Law (ERA) hosted, in Trier, the conference “Freezing Bank Accounts Across Europe (and Beyond)”, bringing together a wide range of academics and practitioners to discuss the new scenarios opened by the prospective implementation of the new European Account Preservation Order, which will apply from 18 January 2017.

This post provides an overview of the presentations and of the discussions on the issues raised.

LOOKING ACROSS EU BORDERS

Freezing of assets (by foreign parties) in Swiss banks – Prof. Dr. Daniel Staehelin provided valuable insights on the current situation in Switzerland. With its 276 banks, this country is still one the largest managers of offshore wealth, thus being an appealing target in the eyes of foreign creditors who seek to recover their monetary claims. Special attention was given to the procedural requirements for obtaining a Swiss freezing order and to the possible difficulties arising from the interaction with the bank secrecy regime. Pursuant to the 1889 Debt Enforcement and Bankruptcy Act, in fact, the claimant shall prove, inter alia, that the debtor is the client of a specific bank. In this respect, it is worth stressing that the relative weakening of the bank secrecy regime, brought along by the Treaties concluded by Switzerland over the last few years, solely concerns the requests coming from authorities of the contracting States for tax recovery claims. Conversely, in civil and commercial matters, banks can – and generally will – still invoke the professional secret against requests coming from private persons engaged in debt collection activities.

THE EUROPEAN ACCOUNT PRESERVATION ORDER (EAPO) 

Scope and procedure for obtaining an EAPO, including jurisdiction and service of documents – In this second presentation, Prof. Pietro Franzina led us through the procedural steps set forth by the EAPO Regulation for the granting of a European freezing order. These latter play, in fact, a pivotal role in the overall architecture of the EAPO Regulation, as its “added value” vis-à-vis other European instruments (namely, the Brussels I bis and the Maintenance Regulations) lies precisely in the harmonized procedural framework established therein. In addition to some common rules on jurisdiction and on the substantive requirements for issuing a account preservation order, the Regulation sets forth specific rules governing enforcement by national courts and enforcement authorities. The remedies available to the debtor and the appellate stage of the proceedings are, as well, specifically considered by the Regulation. The underlying intent is to sidestep – at least in theory – most of the practical difficulties arising out of the interaction with domestic procedural regimes, which are thus relegated to a minor gap-filling role.

Practical issues for banks operating in the Member States – The presentation by Sarah Garvey and Joseph Delhaye identified four major operational issues for the bank required to implement the order. At the outset, the identification of the assets which can be preserved through an EAPO may prove particularly challenging in the case of joint and nominee accounts. Since, pursuant to Article 30, these accounts may be preserved only to the extent permitted under the law of the Member State of enforcement, there will be significant discrepancies in the practices followed in the several Member States. Another operational difficulty arising out of the interplay between uniform and domestic regulation consists in the determination of the exempted amounts and of the legal regime governing the bank’s potential liability. Pursuant to, respectively, Article 31 and Article 26 of the EAPO Regulation, both shall in fact be determined under the national law of the Member State of enforcement. Again, these provisions will generate significant divergences from State to State. Last but not least, completing the form provided for by Annex IV may raise practical issues which find no express answer in the Regulation (eg. the treatment of pledged accounts, finding a balance between the ex-parte nature of the order and the duty of care and prompt information generally owed by banks to their clients). In light of the above, the banks of the participating States will likely be unable to develop a uniform approach to the EAPO.

What are the risks for claimants? – The position of the claimant vis-à-vis the EAPO has been analysed by Philippe-Emmanuel Partsch and Clara Mara-Marhuenda, who identified four major risks arising in connection with an EAPO application. Firstly, the claimant has to take into account the possibility of having to provide a security, if the court considers it appropriate in the circumstances of the case. Secondly, he may be held liable for any damage caused to the debtor by the Preservation Order due to his fault. Although, generally speaking, the burden of proof shall lie with the debtor, the claimant might have to actively prove the lack of fault on his part in order to reverse the presumption set out by Article 13 (2) of the EAPO Regulation. The third risk is connected with the ranking of the EAPO: as it has the same rank as an “equivalent national order” of the State of enforcement, other domestic measure may hypothetically have priority over the European freezing order, if so provided by national law. Finally, the claimant shall consider that the defendant may challenge the EAPO (Article 33), or oppose to its enforcement (Article 34). If the defendant is successful, the EAPO can be, respectively, revoked (or modified) and terminated (or limited).

WORKSHOP: Freezing monies in bank accounts across Europe – During this workshop, participants were confronted with a comprehensive “freezing of bank account scenario” devised by Prof. Gilles Cuniberti. The analysis of the case brought to light many uncertainties relating to the practical functioning of the EAPO Regulation. The proper interpretation of some concepts used – but not defined – by the Regulation, the interplay with the Service Regulation, compliance with the time-frame set forth by the EU legislator, the standard of due diligence required of the bank were perceived by the participants as the most problematic aspects of the EAPO Regulation.

ROUND TABLE (Partsch, Delhaye, Raffelsieper, Weil): Maintaining surprise vs protecting the debtor – As of January 2017, the EAPO Regulation will provide creditors with the possibility of obtaining an ex parte freezing order easily enforceable throughout the EU. This measure evidently purports to overcome the practical limitations arising out of the case Denilauer, where the ECJ held that the respect of the rights of the defence necessarily implies the prior hearing of the defendant. In this round-table, the speakers and participants brought attention to the downside of this case-law, insofar as it undermines the effectiveness of the protection of creditors’ interests. The discussion focused on the system of procedural safeguards set in place by the EAPO Regulation. The speakers agreed on the fact that the Regulation provides for an adequate balance between the interests all the parties involved, while limiting, at the same time, the risk of procedural abuses.

WORLDWIDE FREEZING ORDERS

US freezing orders in practice: a primer – In his presentation, Brandon O’Neil provided some useful insights on the system (or, rather, on the lack thereof) governing the attachment of assets in the US. The lack of a uniform Federal approach to the matter results into a piecemeal legal framework, where attachment of assets is generally seen as an extraordinary remedy whose legal regime differs from State to State. Although several “Model laws” have been proposed over the years, the State legislatures have been strenuously reluctant to give up their restrictive and specific national regimes.  As a result, obtaining a freezing order in the US may require the filing of multiple actions in several States. The speaker provided for positive examples of this legal diversification, by giving a brief account of some “domestic peculiarities” – ie Columbia’s ex parte procedure, Delaware’s business-friendly regime and Florida’s standard of the “fraudulent intents”. In the second part of the presentation, Mr. O’Neil  focused on the standards and procedure set forth by the law of the State of New York.

English freezing orders: the weapon of choice for claimants? – Ms. Sarah Garvey described the substantive and procedural requirements for the granting of English freezing orders, also known as Mareva injunctions. The speaker especially focused on the duty of full and frank disclosure owed by the applicant’s solicitors, which factually ensures the adequate protection of the defendant’s interests within the framework of an ex parte procedure. Some relatively recent trends of the English practice were as well investigated, such as the possibility of combining freezing injunctions with “search orders”, in order to identify and freeze the relevant assets in one go.  According to Ms. Garvey, English freezing injunctions may be an appealing alternative to the EAPO. They present, in fact, considerable “competitive advantages” over the European Instrument, namely: (i) their broader scope as to the kinds of assets covered by the measure; (ii) their potential worldwide reach; (iii) the swift and informal nature of the procedure (iv) the tough sanctions for non-compliance with the order.

ROUND TABLE (Hess, Franzina, Garvey, O’Neil): EAPO vs freezing orders – Which path to take? The discussion focused on the legal treatment reserved by the EAPO Regulation to the domiciliaries of non- Participating Member States, who cannot avail themselves of an EAPO but may nevertheless be affected by such a measure if their bank account is held in a Participating State. The concern has been voiced that the exercised of a legal prerogative of some Member States (the right of opting in/opting out) de facto results, in this case, in a discriminatory treatment of their domiciliaries, in particular when these latter apply for an EAPO as maintenance creditors. The speakers expressed diverging opinion on this point.

The concluding remarks were made by Prof. Gilles Cuniberti, who expressed cautious optimism as to the prospects of success of this new European instrument.

Andrea Lista, International Commercial Sales: The Sale of Goods on Shipment Terms, Routledge, 2017, ISBN: 9780415702829, pp. 528, GBP 220.

This book comprehensively examines the entire legal process of the international sale of goods, beginning with the creation of the contract and continuing through to either the fulfilment of the sale, or the termination of the contract. Every day goods are globally traded between sellers and buyers in different countries and different jurisdictions. The distances between the parties involved in such transactions, and the relative risks related to that, are a key issue in international commercial sales. Sales of goods carried by sea, thus, differ quite drastically from domestic sales; the goods will be normally shipped at a port very distant from the buyer, preventing his physical presence at the port of loading. Further, the goods will travel in the custody of a carrier, a party normally quite independent from either trader. Finally, transactions concluded on shipment terms are normally irreversible, in the sense that shipping the goods back to the seller represents an unlikely option for the buyer. Traders around the world very frequently choose English law to govern their contracts, with disputes to be resolved through London arbitration or litigation. The basis of that law is to be found in the English Sale of Goods Act 1979, and the book consequently also includes an examination of the fundamental principles of that Act, as well as considering use of the Vienna Convention on the International Sale of Goods.

This is a shameless plug for my new book. It is available for pre-order on the Oxford University Press website and on Amazon.com. I was fortunate enough to co-author this work with my friend and colleague Luke Sobota from Three Crowns.

This book is intended to be a modern update of Bin Cheng’s seminal book on general principles from 1953–identifying, summarizing and analyzing the core general principles of law and norms of international due process, with a particular focus on developments since Cheng’s writing. The aim is to collect and distill these principles and norms in a single volume as a practical resource for international law jurists, advocates, and scholars. The book includes a Foreward by Judge Stephen M. Schwebel.

We’ve been fortunate to receive some wonderful praise thus far. Judge Schwebel has called it “a signal contribution to the progressive development of international law, . . . [done] with scholarship, insight, and panache.” Pierre Marie Dupuy has deemed it a “most useful study on the place and role of general principles of law in contemporary international arbitration,” while Judge James Crawford expects it to become a “work that will benefit both scholars and practitioners.”

The Permanent Bureau of the Hague Conference on Private International Law seeks a temporary legal assistant to work in the areas of international family law and child protection. The vacancy is advertised here. 

Il Permanent Bureau della Conferenza dell’Aja di diritto internazionale privato intende assumere un collaboratore giuridico a tempo determinato che lavori nel settore della famiglia e della protezione dei minori. Maggiori dettagli a questo indirizzo.

Constance Castres Saint-Martin, Les conflits d’intérêts en arbitrage commercial international, L’Harmattan, 2016, ISBN: 9782343101965, pp. 454, EUR 45.

Le conflit d’intérêts est un sujet passionnant notamment en raison de son omniprésence dans l’actualité. Cette expression s’est récemment diffusée en France dans le monde des affaires et au sein du jargon médiatique. Néanmoins, il n’existe en l’état actuel du droit positif français aucune réglementation spécifique de ces conflits d’intérêts. L’auteur s’interroge donc sur la définition et la valeur opératoire de cette notion et le régime juridique qui pourrait lui être réservé.

The EUPILLAR Database, one of the outputs of the EUPILLAR Project funded by the European Union within the scope of the European Commission Civil Justice Programme (JUST/2013/JCIV/AG/4635) and led by the Centre for Private International Law at the University of Aberdeen, is now live. The Database contains summaries in English of over 2300 judgments that were rendered between 1 March 2002 and 31 December 2015 concerning the Brussels I (Brussels I Recast), Brussels IIa, Maintenance, Rome I and Rome II Regulations and the Hague Maintenance Protocol in the Court of Justice of the European Union and in Belgium, Germany, England and Wales, Italy, Poland, Scotland and Spain.

The EUPILLAR Database, established and maintained by the University of Aberdeen, is available at https://w3.abdn.ac.uk/clsm/eupillar/#/home.

In the flurry of judgments issued by the European Court of Justice on Super Wednesday, 21 December, spare a read for C-618/15 Concurrence /Samsumg /Amazon: Cybercrime, which dealt with jurisdiction for tort under the Brussels I Recast Regulation and the location of locus damni in the event of online sales. The foreign suffix of the website was deemed irrelevant.

To fully appreciate the facts of the case and the Court’s reasoning, undoubtedly it would be best to read Wathelet AG’s Opinion alongside the Court’s judgment.

Concurrence is active in the retail of consumer electronics, trading through a shop located in Paris (France) and on its online sales website ‘concurrence.fr’. It concluded with Samsung a selective distribution agreement (covering France) for high-end Samsung products, namely the ELITE range. That agreement included, in particular, a provision prohibiting the sale of the products in question on the internet. Exact parties to the dispute are Concurrence SARL, established in France, Samsung SAS, also established in France, and Amazon Services Europe Sàrl, established in Luxembourg. Amazon offered the product range on a variety of its websites,  Amazon.fr, Amazon.de, Amazon.co.uk, Amazon.es and Amazon.it.

Concurrence sue variously for a lift of the ban on internet sales (claiming the ban was illegal) and alternatively, an end to the  offering for sale of the elite products via Amazon. The French courts suggest they lack jurisdiction over the foreign Amazon websites (excluding amazon.fr) because the latter are not directed at the French public. Concurrence suggest there is such jurisdiction, for the products offered for sale on those foreign sites are dispatched not only within the website’s country of origin but also in other European countries, in particular France, in which case jurisdiction, they suggest,  legitimately lies with the French courts.

Pinckney figures repeatedly in Opinion and Judgment alike. Amazon submit that the accessibility theory for jurisdiction should not be accepted, since it encourages forum shopping, which, given the specific nature of national legal systems, might lead to ‘law shopping’ by contamination. Amazon seek support in Jaaskinen’s Opinion in Pinckney. Wathelet AG first of all notes (at 67 of his Opinion) that this argument of his colleague was not accepted by the CJEU. Moreover, he finds it exaggerated: the national court can award damages only for loss occasioned in the territory of the Member State in which it occurs: this limitation serves as an important break on plaintiffs simply suing in a State per the locus damni criterion ‘just because they can’.

The Court agrees (at 32 ff) but in a more succinct manner (one may need therefore the comfort of the Opinion for context):

• The infringement of the prohibition on resale outside a selective distribution network is given effect by the law of the Member State of the court seised, so that a natural link exists between that jurisdiction and the dispute in the main proceedings, justifying jurisdiction for the latter.  It is on the territory of that Member State that the alleged damage occurs.
• Indeed, in the event of infringement, by means of a website, of the conditions of a selective distribution network, the damage which the distributor may claim is the reduction in the volume of its sales resulting from the sales made in breach of the conditions of the network and the ensuing loss of profits.
• The fact that the websites on which the offer of the products covered by the selective distribution right appears operate in Member States other than that of the court seised is irrelevant, as long as the events which occurred in those Member States resulted in or may result in the alleged damage in the jurisdiction of the court seised, which it is for the national court to ascertain.

With this judgment national courts are slowly given a complete cover of eventualities in the context of jurisdiction and the internet.

Geert.

(Handbook of) European private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.11.2

Something to digest quietly, to start this new year: in Gaz de France v STS the French Conseil d’Etat annuled an arbitral award for breach of ordre public. The Conseil objected in particular to the panel’s denial of mandatory French (administrative) law. Reed Smith have analysis here, including of the issue on jurisdiction (Conseil d’Etat or Court de Cassation).

Upon reading the judgment, my question is this (just putting it in the group, as it were): does the Conseil have terminology right where it seems to classify breach of mandatory law as a violation of ordre public (it is the latter only which justifies annulment under the New York Convention)? Incidentally (at 5) it also refers to the possibility of mandatory EU law being part of this interpretation of ordre public. This structure is clearly inspired by the Rome I Regulation where, as I have noted before, the presence of mandatory law, overriding mandatory law, and ordre public, is causing confusion.

Happy New Year, happy reading, Geert.

Dear readers, my apologies for the puzzling title of this post, but I take the opportunity to bring the following three unrelated publications to youR attention before this year ends. HAPPY 2017!

A few months ago the book eAccess to Justice was published (eds. Karim Benyekhlef, Jane Bailey, Jacquelyn Burkell, Fabien Gélinas; University of Ottawa Press 2016), including a few papers on cross-border litigation. More information is available here. The blurb reads:

Part I of this work focuses on the ways in which digitization projects can affect fundamental justice principles. It examines claims that technology will improve justice system efficiency and offers a model for evaluating e-justice systems that incorporates a broader range of justice system values. The emphasis is on the complicated relationship between privacy and transparency in making court records and decisions available online. Part II examines the implementation of technologies in the justice system and the challenges it comes with, focusing on four different technologies: online court information systems, e-filing, videoconferencing, and tablets for presentation and review of evidence by jurors. The authors share a measuring enthusiasm for technological advances in the courts, emphasizing that these technologies should be implemented with care to ensure the best possible outcome for access to a fair and effective justice system. Finally, Part III adopts the standpoints of sociology, political theory and legal theory to explore the complex web of values, norms, and practices that support our systems of justice, the reasons for their well-established resistance to change, and the avenues and prospects of eAccess. The chapters in this section provide a unique and valuable framework for thinking with the required sophistication about legal change.

Csongor István Nagy (University of Szeged) has published The Lesson of a Short-Lived Mutiny: The Rise and Fall of Hungary’s Controversial Arbitration Regime in Cases Involving National Assets (27 The American Review of International Arbitration 2 2016, 239-246), available on SSRN. The blurb reads:

This paper presents and analyzes Hungary’s recent legislative efforts and failure to exclude arbitration in matters involving (Hungarian) national assets, demonstrating the difficulties a country faces if it attempts to defy the prevailing pattern of dispute settlement in international trade. The lesson of the Hungarian saga is that, unsurprisingly, arbitration is not only a ‘take it or leave it’ but even a ‘take it or leave’ rule of the club of international economic relations.

Last October, INT-AR Paper 6, authored by Veerle Van Den Eeckhout (University of Antwerp), was published and is entitled “Toepasselijk arbeidsrecht bij langdurige detachering volgens het wijzigingsvoorstel voor de Detacheringsrichtlijn. Enkele beschouwingen vanuit ipr-perspectief” (in English: “The draft proposal to amend the Posting of Workers Directive assessed from the private international law perspective”). The paper is written in Dutch and is downloadable here and on SSRN.

Geneva Internet Dispute Resolution Policies (GIDRP) is a project of the University of Geneva, which looks into selected legal topics relating to internet disputes and puts forward policy proposals. So far, their expert team has developed the GIDRP 1.0 where one of the topics is particularly relevant for this blog readers (Topic 1: Which national courts shall have jurisdiction in internet-related disputes?). The website is inviting online endorsements and comments. Besides, interested experts are welcome to join the project in the development of the GIDRP 2.0. They may be contacted by e-mail: gidpr@unige.ch.

The relating document is available here.

Rome I Regulation – Commentary, edited by / a cura di Ulrich Magnus, perte Mankowski, Otto Schmidt Verlag, 2017, ISBN 9783504080068, pp. 928, EUR 229.

One of the great steps towards a European Private International Law and for the facilitation of transborder trade is the Rome I Regulation which europeanised the applicable law for international contracts throughout the Union (though except Denmark). This Regulation has to be applied since the end of 2009. It has moderately reformed and replaced the former Rome Convention which had already proven its practical value for over two decades as many national decisions and also judgments of the European Court of Justice evidence. It is therefore high time for a truly pan-European Commentary on the Rome I Regulation which takes account of the European nature of this instrument. This is reflected by the team of contributors that originates from all over Europe assembling first experts in their countries. The editors are Ulrich Magnus and Peter Mankowski who have already edited the well-received pan-European Commentaries on the Brussels I Regulation and the Brussels IIbis Regulation. The Commentary (in English) provides a thorough article-by-article analysis which intensely uses the rich case law and doctrine and suggests clear and practical solutions for disputed issues. It gives a comprehensive and actual account of the present state of the European international contract law. For international lawyers, practitioners as well as academics, it is an indispensable must.

Authors include: Andrea Bonomi, Alfonso-Luis Calvo Caravaca, Javier Carrascosa Gonzalez, Richard G. Fentiman, Franco Ferrari, Francisco Garcimartín Alférez, Helmut Heiss, Luís Pietro Rocha de Lima Pinheiro, Ulrich Magnus, Peter Mankowski, Guillermo Palao Moreno, Ilaria Queirolo, Bea Verschraegen, Michael Wilderspin, M.H. (Mathijs) ten Wolde.

Our children often hug me goodnight while I am working away at a brief or sitting next to a huge pile of exam papers, waiting to be marked. And especially in the latter case, I confess this is often accompanied by a pint of ale. My youngest daughter the other day told me she had had a dream that night in which I had found a cure for all cancers.

This was the modus operandi: I had spilt said beer (in said daughter’s dream) over the exam papers and by some interaction between beer and paper, the cure had come to me. Eureka! Somehow I have always known beer will save the world…

A warming thought for this chilly season. And one to lift our spirits, hoping for a less challenging 2017.

Enjoy your undoubtedly deserved breaks. Geert.

Prof. Massimo Benedetelli (Professor of International Law, University ‘Aldo Moro’, Bari. ARBLIT, Milan, partner) has just drawn my attention to this piece of his, published in the Journal of International Arbitration 33, no. 6 (2016), pp. 653–686. The abstract reads as follows:

The International Institute for the Unification of Private Law, which recently celebrated its 90th anniversary, published in 1994 the Principles of International Commercial Contracts. Since then the UNIDROIT Principles have been more and more often referred to by arbitral tribunals when settling contractual disputes. As a non-binding instrument of soft law, however, the UNIDROIT Principles may play a very different function depending on whether they are used as “rules of law” for the regulation of a contractual relationship, are incorporated as terms of a contract governed by a state contract law, or are means to interpret and supplement the applicable contract law or the 1980 United Nations Convention on Contracts for the International Sale of Goods. Moreover, they can be applied pursuant to an express or implied choice made by the parties, either in the contract or after the dispute has arisen, or when the arbitral tribunal so decides by its own motion. In all such different scenarios different problems may arise for the coordination of the UNIDROIT Principles with sources of state law that have title to regulate the contractual relationship in dispute. Understanding such problems and finding a solution to them is essential in order to avoid the risk that the award may be later challenged or refused recognition. Such understanding could also foster the legitimacy of requests made by a party, or decisions taken by the arbitral tribunal, to apply the UNIDROIT Principles. It is submitted that private international law, taken as a technique for the coordination of legal systems, may offer a useful know-how to parties, counsel, arbitrators and courts for mastering such problems in a reasoned and sound way. This may result in enhancing the effectiveness of the UNIDROIT Principles, while balancing party autonomy with the sovereign interest of states in regulating international business.

The Court held in C-102/15 Siemens just before mine and their summer break. It had escaped my attention. At issue was whether debt arising from the unjustified repayment of a fine for infringement of competition law falls within the scope of application of the Brussels I Recast. It does not. The Court distinguished flyLAL: while private actions brought to ensure compliance with competition law fall within the scope of the Regulation, a penalty imposed by an administrative authority in the exercise of the regulatory powers conferred upon it under national legislation comes within the concept of ‘administrative matters’, excluded from the scope of Regulation No 44/2001 in accordance with Article 1(1) thereof.(at 35).

An action in unjust enrichment related to the interest due, following to and fro, imposition and rescinding, ending finally in confirmation of the fine, is intimately bound up with that fine and therefore follows it in the exclusion.

A judgment of note for those who wish to keep complete overview.

Geert.

(Handbook of) European private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.2.2 ff.

By Baiba Rudevska

On 23 October 2014 the European Court of Justice (hereinafter referred to as the “ECJ”) delivered its judgment in the case “flyLAL Lithuanian Airlines AS v. Starptautiska lidosta Riga VAS (Riga International Airport)” (C-302/13). The request for a preliminary ruling was made by the Supreme Court of Latvia (Latvijas Republikas Augstaka tiesa) in proceedings concerning recognition and enforcement of a Lithuanian court’s judgment (ordering provisional and protective measures) in the territory of Latvia. This request concerned the interpretation of Articles 1, 22(2), 34(1) and 35(1) of the Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I Regulation).

The ECJ answered the questions in the following way:

• Article 1(1) of the Brussels I Regulation must be interpreted as meaning that an action seeking legal redress for damage resulting from alleged infringements for EU competition law, comes within the notion of “civil and commercial matters”;
• Article 22(1) must be interpreted as meaning that an action seeking legal redress for damage resulting from alleged infringements of EU competition law, does not constitute proceedings having as their object the validity of the decisions of organs of companies within the meaning of that provision;
• Article 34(1) must be interpreted as meaning that neither the detailed rules for determining the amount of the sums which are the subject of the provisional and protective measures granted by a judgment in respect of which recognition and enforcement are requested, nor the mere invocation of serious economic consequences constitute grounds for refusal of recognition and enforcement of a judgment based on public policy of the Member State in which recognition is sought.

On 20 October 2015 the Supreme Court of Latvia delivered its decision (which is final) in this case (No SKC 5/2015) deciding neither to recognise nor to enforce the judgment of the Lithuanian court in Latvia (two lower courts of Latvia had previously decided to recognise and to enforce the judgment). The legal ground for the non-recognition was the public policy clause of Article 34(1) of the Regulation.

Let us look at the main reasoning of the Supreme Court of Latvia in this case.

Reasoning No 1 (Article 1 of the Constitution of the Republic of Latvia): State security. The defendant, “Starptautiska lidosta Riga” (“Riga International Airport”), also owns a property which is necessary for the purpose of the Latvian state security. If the judgment of the Lithuanian court is recognised and enforced in Latvia, then the preventive attachment order regarding this property will probably be enforced. From Article 1 of the Constitution of the Republic of Latvia it follows that property which is necessary for the state security interests cannot be transferred or subject to a private law burden that might, even hypothetically, hinder, weaken or otherwise threaten the fulfilment of the State functions in guaranteeing the security of the State and the society.

Reasoning No 2 (Article 91 and 105 of the Constitution of the Republic of Latvia): the insolvent Lithuanian company. The Lithuanian company “flyLAL Lithuanian Airlines” is an insolvent company which has lodged a claim for an amount of EUR 58,003,824. This company has no property or assets to compensate the defendant’s possible losses in the case if the claim later appears to be unsubstantiated. This creates an important disproportion of rights and of the provisional and protective measures applied in the case. Such possible damages sustained by the defendant may seriously endanger not only its economic activities but even its existence as a company.

Additional reasoning (Article 91 and 105 of the Constitution of the Republic of Latvia): the length of the main proceedings before the Lithuanian court. The Lithuanian court had issued an order for sequestration, on a provisional and protective basis, of the movable/immovable assets and property rights of “Air Baltic” and “Starptautiska lidosta Riga” (“Riga International Airport”) seven years ago; until now the case has not yet been resolved and there is no further information about when this case could be resolved. For the provisional and protective measures this period of time is too long and might aggravate the violation of the defendant’s property rights in this case. As the Lithuanian company is insolvent, there cannot be an adequate protective measure to secure the payment of damages. It can be considered as a potentially disproportionate interference with the defendant’s property rights within the meaning of Articles 91 and 105 of the Latvian Constitution

In this case, the Supreme Court of Latvia has established that, firstly, state security constitutes one of the most important elements of the public policy of Latvia (Article 1 of the Constitution); secondly, fundamental rights laid down in the Constitution of the Republic of Latvia also is a part of the Latvian public policy. In this case these were the equal rights of the parties before the law and the courts (Articles 91 and 105 of the Constitution). For this reason such a judgment of the Lithuanian court is manifestly contrary to the Latvian public policy. Therefore the recognition and enforcement of the Lithuanian judgment in Latvia must be denied on the basis of Article 34(1) of the Brussels I Regulation.

For information:

Constitution of the Republic of Latvia:

Article 1 – “Latvia is an independent democratic republic”.

Article 91 – “All human beings in Latvia shall be equal before the law and the courts. Human rights shall be realised without discrimination of any kind”.

Article 105 – “Everyone has the right to own property. Property shall not be used contrary to the interests of the public. Property rights may be restricted only in accordance with law. Expropriation of property for public purposes shall be allowed only in exceptional cases on the basis of a specific law and in return for fair compensation”.

Anyone with an interest in mutual recognition, risk and trade, and the exhaustive effect of EU food law should consult the Opinion of Advocate General Bobek in Case C-672/15 Noria Distribution, which was released last week.

Noria Distribution SARL (‘Noria’) is being prosecuted for having sold in France food supplements containing vitamins and minerals in quantities exceeding maxima set under French law. Noria does not deny doing so. However, it argues in response that those maxima are not valid because they were set in breach of EU law. Noria adds that it produces and sells the same products lawfully in other Member States.

The Advocate General suggests EU law on the issue is not exhaustive. Member States can set their own limits. An issue under discussion in the national proceeding is the origin (national or international) of the science underpinning the limits. The AG justifiably advises that the origin of the data is irrelevant. EU law concern is not about the details of bibliographies. It is rather that restrictions be justified on the basis of solid science demonstrating real risk or at least the inability to exclude risk: whether this is the case is for the national court to determine. The precautionary principle can be invoked by the Member States in setting their limits.

The AG’s approach is very sensible. Without losing himself in lengthy discussion, he reminds the national courts and authorities of the benchmarks for risk management.

Geert.

Ulrich G. Schroeter, Professor of Law at the University of Mannheim (Germany) and Heinrich Nemeczek, Research Fellow at the University of Mannheim (Germany) and an Academic Visitor at the Law Faculty of the University of Oxford, have authored an article on “’The (Uncertain) Impact of Brexit on the United Kingdom’s Membership in the European Economic Area”. Published in issue 7 [2016] of Kluwer’s European Business Law Review, pp. 921–958, the authors analyze how the UK’s withdrawal from the EU will affect the UK’s status as Contracting Party to the EEA Agreement.

The authors have kindly provided us with the following abstract:

Until recently, most legal analyses of Brexit have assumed that the UK’s EEA membership will be terminated ipso iure should the UK decide to withdraw from the EU. According to this view, the UK subsequently could (re-)apply for EEA membership should its government so choose – an option commonly referred to as the ‘Norway option’.

Our article challenges the assumption that the UK’s withdrawal from the EU will automatically result in its withdrawal from the EEA. In short, we reach the conclusion that the UK’s EEA membership will continue despite of Brexit unless the UK government chooses to also unilaterally withdraw from the EEA in accordance with Article 127(1) of the EEA Agreement – a step it is not obliged to take. Its continuing EEA membership would mean that many rules of EU law would continue to apply in form of EEA law, including (subject to certain conditions) the much-discussed rules about the ‘European passport’ for UK financial institutions. In contrast, the Court of Justice of the EU would have no jurisdiction over the interpretation of EEA law in the UK. At the same time, the rules governing the free movement of workers are more flexible under EEA law than under EU law, potentially allowing the UK to limit this freedom by way of unilaterally imposed ‘safeguard measures’.

In summary, ‘Brexit’ and ‘rEEAmain’ are in no way irreconcilable. The result may affect the negotiation positions during the upcoming Brexit negotiations in accordance with Article 50 of the TEU, as a continuing EEA membership could be viewed as an attractive alternative to a ‘hard Brexit’, for both businesses in the UK and the rest of the EEA.

The EEA Agreement as a ‘mixed agreement’

It is an important feature of the EEA Agreement that, on the ‘EU side’, it neither comprises only the EU nor only its Member States as Contracting Parties, but rather the EU and each of its individual Member States, including the UK. The UK is, therefore, not merely an EEA Member because of its membership in the EU, but because the EEA Agreement’s Preamble explicitly lists the UK as a separate Contracting Party. Any modification or termination of this Contracting Party status would require a basis in treaty law.

In this regard, a source of uncertainty is that the EEA Agreement does not contain any specific provision addressing the effect, if any, of a EU Member State leaving the EU. Article 50 of the TEU fails to indicate that a withdrawal from the EU would have any consequence for the withdrawing State’s membership in the EEA. As we demonstrate in detail in our article, a ‘Brexit’ notification in accordance with Article 50 of the TEU can also not be interpreted as also resulting in a withdrawal from the EEA, inter alia because such a result would affect treaty rights of the three EFTA States within the EEA – Iceland, Liechtenstein and Norway – that are not parties to the TEU.

As far as some provisions in the EEA Agreement only refer to ‘EC Member States’ and/or ‘EFTA States’, we argue in some detail that these terms are to be interpreted as referring to EU States and non-EU States within the EEA in accordance with both the EEA Agreement’s purpose and past treaty practice under the Agreement.

No Right of Other EEA Contracting Parties to Suspend Operation or Terminate the EEA Agreement in Relation to the UK

The UK’s withdrawal from the EU does not entitle other EEA Contracting Parties to suspend operation or terminate the EEA Agreement in relation UK, neither under the EEA Agreement nor under customary public international law. Under customary treaty law as codified in the 1969 Vienna Convention on the Law of Treaties (VCLT), the UK for once has committed no ‘material breach’ of the EEA Agreement (Article 60 of the VCLT), as Brexit is merely the use of a right explicitly granted to the UK by a different treaty, namely Article 50 of the TEU. Also, Brexit does not constitute a fundamental change according to the clausula rebus sic stantibus doctrine enshrined in Article 62 of the VCLT as the EEA Agreement’s core elements can still be performed. Although the UK’s withdrawal from the EU will create certain difficulties because the country’s representation in organs like the EFTA Court or the EFTA Surveillance Authority requires clarification, these changes neither radically modify the obligations still to be performed under the EEA Agreement nor imperil the existence or vital development of other EEA Contracting Parties.

Post-Brexit situation (‘rEEAmain’)

In our article, we further outline the consequences that Brexit would have for the future application of the EEA Agreement. Because the UK’s Contracting Party status would remain unaffected, UK companies would still have access to the EEA internal market. Inter alia, the legal capacity of UK companies with their ‘real seat’ elsewhere within the EEA would continue to be recognised in all other EEA States under the EEA Agreement’s freedom of establishment. The same would, of course, apply in the ‘opposite direction’, giving continued freedom of establishment in the UK for companies from elsewhere in the EEA.

The freedom of movement for workers under Article 28 of the EEA Agreement may be unilaterally limited by the UK by way of appropriate safeguard measures in accordance with Article 112 of the EEA Agreement (e.g. a quota system), if ‘serious economic, societal or environmental difficulties’ are arising – a possibility that does not exist under EU law. (It is foreseeable that the interpretation of the legal prerequisites will give rise to disputes.) In any case, safeguard measures taken by the UK may come at a price, as other EEA Contracting Parties would be authorized to take proportionate ‘rebalancing measures’ in order to remedy any imbalance between rights and obligations under the EEA Agreement created by the safeguard measures.

Our interpretation should not be misunderstood as indicating that no difficulties would arise under a ‘rEEAmain’ scenario. Such difficulties would indeed appear, primarily because certain institutional arrangements in the EEA Agreement and related agreements do not explicitly envisage an EEA Contracting Party that is neither a member state of the EU nor of the EFTA. If the UK does not accede to the EFTA Agreement and the Surveillance and Court Agreement, EEA law within the UK would have to be supervised and interpreted solely by British domestic courts and authorities. Also, the issue of financial contributions by the UK would arguably necessitate a renegotiation of protocols to the EEA Agreement: After Brexit, the UK will no longer contribute to the EU budget, but neither Article 116 of the EEA Agreement nor Protocols 38–38c explicitly provide for an obligation of the UK to contribute to the EEA Financial Mechanism. As it is difficult to argue that the UK would profit from its continuing EEA membership without contributing to the connected Financial Mechanism, the exact amount of the UK’s contribution would need to be fixed through an adjustment of the Protocols 38–38c.

Do the newly negotiated EU rules on endocrine disruptors illustrate regulatory chill /the ‘freezing effect’ of international trade law?

The new European Commission proposals on endoctrine disruptors are, of course’ ‘science based’. It has been reported (EurActiv, 12 December 2016 and last consulted by me on 13 December) that publication of the proposals was followed by a closed door meeting (minutes of which were released only after a freedom of information request) between the EC and a select number of countries (US, Canada, Argentina, Brazil and Uruguay on 13 July this year). Discussion centered around the potential WTO incompatibility of parts of the EC proposal, particularly those surrounding the tolerance levels for endocrine disruptors present in imported substances (food and feed in particularly). The EC reportedly are prepared to replace “negligible exposure” with “negligible risk from exposure”. The EC defend the latter, arguing it might even ban more, rather than less imported substances: for even if there is only negligible exposure, that exposure may still be a risk. Opponents suggest that the insertion of a risk approach has sacrified precaution on the altar of science.

A few comments.

Firstly, the report (and potentially even the EC itself) repeats the misleading assertion that the debate concerns either science or precaution. Precaution is NOT unscientific. The very trigger of the precautionary approach is science.

Next, the case is reported at a time a lot of people are getting jittery about the regulatory co-operation mechanisms in free trade agreements such as CETA and TTIP. The meeting and the subsequent EC reaction to our trading partners’ comments, would then represent an example of the ‘freezing effect’ in international trade: with our trading partners flying the flag of WTO incompatibility, the EU would then have caved in to threats of litigation in Geneva. Yet in reality WTO input by fellow WTO Members is at least as old as the WTO itself, indeed it predates it. The 1978 Tokyo Standards Code already obliged the then GATT Contracting Parties to notify their draft standards to the GATT Secretariat. The very point of notification and transparency is that the issues raised are being discussed and may indeed lead to the draft standard being adopted. Changes made to REACH, to name but one example, reflected concerns of fellow WTO Members and REACH can hardly be said to pander to industry’s demands.

However there needs to be one core appreciation in this process: just as notification serves transparency (anyone can consult the TBT notification gateway to review draft measures that have been notified), so too should the process of review after reception of the comments, be conducted in a transparent manner. This clearly has not happened here. By conducting these meetings in private, and by refusing to release the minutes until prompted to do so, EC services have given the impression that there is more than meets the eye. In times where even CETA has not yet been ratified, that is most definitely the wrong approach.

Geert.