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The author of this post is Franz Kaps, Lawyer at DL Piper, Frankfurt am Main.

To stop the spread of the COVID-19 (Coronavirus) pandemic governments closed ports and “non-essential businesses”, restricted travel and imposed “lockdowns” or “stay-at-home” orders. In cases where the COVID-19 pandemic or government measures disrupt commercial contracts, it is necessary to carefully analyze the state of affairs to determine the appropriate remedy. A considerable number of articles have already been written on contracts affected by the COVID-19 pandemic, and now it is time to summarize the legal situation for commercial contracts in the most important jurisdictions in a nutshell. This post therefore presents remedies for commercial contracts affected by COVID-19, under the laws of the countries whose systems are most commonly chosen to be applied to commercial contracts, and the CISG.

UK, Hong Kong, Singapore Force Majeure

Force majeure is principally a matter of contract law in the common law jurisdictions England, Hong Kong and Singapore. Whether a force majeure clause is applicable in a particular situation and its consequences depends primarily on the wording of the force majeure clause. A clause modelled, for example, on the 2020 ICC force majeure clause (long form), presumes that an epidemic is a force majeure event; pandemics such as COVID-19 are not expressly mentioned, therefore it will be for the arbitral tribunals and courts to interpret the term “epidemic” under no. 3 (e) ICC to encompass pandemics.

The burden of proof is on the party invoking the force majeure clause as defense. Such a party has to demonstrate that a force majeure event occurred and that it had the stipulated effect on the contractual performance. If a party invokes a force majeure clause in a commercial contract, it releases the party from its contractual obligations when circumstances beyond its control have prevented, hindered or delayed its performance.

In case the COVID-19 pandemic falls within the scope of the force majeure clause, parties should carefully examine whether there are other relevant contractual terms affecting the application of the clause – in particular, whether there are any requirements to notify the other party before invoking the clause.

Frustration

Besides force majeure clauses, the main common law doctrine with potential relevance to the discharge of obligations in the light of unforeseen events – like the COVID-19 pandemic – is frustration. According to it, a contract may be discharged upon the occurrence of an unforeseeable event that either renders the contractual obligation impossible or radically changes the basis upon which the contract was reached. However, it should be noted that the doctrine of frustration has a very limited scope.

Germany Impossibility

Pursuant to Section 275 German Civil Code (BGB) a party is not required to perform its obligations to the extent that performance is impossible. Section 275 German Civil Code applies not only if performance of the obligation is technically or legally impossible, but also in cases where performance is still technically and legally possible, but would require expenses and efforts which, considering the subject matter of the obligation and the requirements of good faith, would be grossly disproportionate to the creditor’s interest of performance. In addition, Section 275 German Civil Code governs temporary impediments, i. e. a claim for performance is excluded as long as performance is impossible. However, German courts respect the legal principle pacta sunt servanda and hence apply Section 275 German Civil Code narrowly, in order not to undermine the agreed contractual obligations.

Frustration of Purpose

The doctrine of “frustration of purpose” (German Störung der Geschäftsgrundlage) can be invoked in cases affected by the COVID-19 pandemic. Frustration of purpose under Section 313 German Civil Code will apply where the balance between performance and counter-performance of a contract is significantly changed in a way that was not foreseeable by the parties when the contract was concluded. Such a “frustrated contract” entitles the disadvantaged party to request the amendment of the contract. If an amendment of the contract is not possible or unreasonable, the disadvantaged party may rescind or terminate the contract. According to case law the principle of “contractual loyalty” requires a strict interpretation of Section 313 German Civil Code.

France Force Majeure

Article 1218 French Civil Code addresses the concept of force majeure. According to its Article 1218 , the debtor’s performance is prevented by a force majeure event if three cumulative criteria are met:

1. The event must be beyond the control of the debtor;
2. It must be an event which could not reasonably have been foreseen at the time of the conclusion of the contract; and
3. The effects of the event could not be avoided by appropriate measures.

The legal consequence of Article 1218 French Civil Code is that if performance of the obligation is temporarily prevented, it is suspended unless the delay justifies termination of the contract. In the event of permanent prevention, the contract is terminated by operation of law and the parties are discharged from their obligations.

Hardship

The recently introduced Article 1195 French Civil Code requires renegotiation of a contract if circumstances which were unforeseeable at the time of conclusion of the contract render performance excessively onerous for a party which had not accepted to bear that risk. If renegotiations fail, the parties may agree to terminate the contract, or request a court to revise or terminate the contract.

Switzerland

Swiss law has no statutory provision for force majeure events. In the absence of a force majeure clause in a contract, the applicable legal regime depends on whether the performance of the contract is impossible.

Pursuant to Article 119, 62 Swiss Code of Obligations, the impossibility to perform a contract – due to circumstances not attributable to the debtor – releases both parties from their obligations to perform and leads to the unwinding of the contract according to the rules of unjust enrichment.

In case the impossibility to perform the obligation lasts only for a limited time, the default provisions of Article 107 to 109 Swiss Code of Obligations apply. They provide that if one party is in default, the other party may set an appropriate time limit for the performance. If no performance is rendered during such a time limit, the other party may terminate the contract.

When the performance of a contract is not entirely impossible, but has become extremely onerous, a party may rely on the legal doctrine clausula rebus sic stantibus. It must be a situation which is not only extremely onerous but was also unforeseeable when the contract was concluded. In such circumstances, the parties may agree to amend or terminate the contract. Should one party insist that the contract remains unchanged, the other party may refer the matter before a court. If the requirement of clausula rebus sic stantibus are fulfilled, the court may order an amendment or the termination of the contract.

United States

U.S. contract law is ordinarily a matter of state law. I will focus on New York law, as it is the most commonly chosen by commercial parties to govern their contracts.

Contractual Force Majeure Clauses

Force majeure clauses are contractual provisions that may excuse a party’s non-performance when circumstances beyond the control of a party prevent performance. New York courts have held that force majeure clauses are to be interpreted in a narrow sense and that performance under a contract is ordinarily excused only if the event preventing performance is explicitly mentioned in the force majeure clause.

Subsidiary Solutions

In the absence of a force majeure clause, the common law doctrines of impossibility, impracticability and “frustration of purpose” may excuse performance.

The doctrine of impossibility excuses a party’s performance only when the destruction of the subject matter of the contract or the means of performance makes performance objectively impossible. The impossibility must be produced by an unanticipated event that could not have been foreseen or guarded against in the contract. Impossibility is therefore a narrow legal doctrine.

The doctrine of impracticability is similar to the doctrine of impossibility, but it is more flexible in its application. According to the doctrine of impracticability, a failure to perform contractual obligations is excused, if a party’s performance is made impracticable without its fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made. Courts have generally applied the doctrine of impracticability conservatively.

Frustration of purpose is a common law doctrine that excuses a party’s performance under a contract when an unforeseen event renders the contract “virtually worthless” to the affected party. Although a literal performance under the contract is still technically possible, the frustrated purpose must be so completely the basis of the contract that, as both parties understood, without it, the transaction would have made little sense. The threshold of the doctrine of frustration of purpose is high, because performance of the contract must be economically impossible.

United Nations Convention on Contracts for the International Sale of Goods (CISG)

The CISG is applicable to contracts for the sale of goods between parties who have their place of business in different states, if these states are contracting states or if the rules of private international law lead to the application of the law of a contracting state and the CISG was not expressly excluded in the contract.

Strict Liability

Contracts for the supply of goods under the CISG are governed by the strict liability of the debtor. It is therefore irrelevant for the liability of the debtor whether they are responsible for the improper performance or the non-performance of their contractual obligation.

Exemption of Liability

In order to mitigate the strict liability of the debtor, Article 79 CISG provides for an exemption from the debtor’s liability if the failure to perform any of their obligations is due to an impediment beyond their control. It is additionally required that they could not reasonably be expected to have taken the impediment into account at the time of conclusion of the contract or to have avoided or overcome the impediment or its consequences. Article 79 CISG is advantageous to the seller. If the non-performance of an obligation to deliver is based on a force majeure event, the seller is released from the obligation to perform the contract for the period of the impediment. Also, the seller is not obliged to pay damages, because the performance is prevented by the force majeure event. However, pursuant to Article 79 para. 4 CISG the seller must inform the buyer of the impediment and its effects on their ability to perform within a reasonable period of time after they have or should have become aware of the impediment. Otherwise, they are liable for damages resulting from such non-receipt. The burden of proof that a contractual obligation was not performed or was delayed as a result of the COVID-19 pandemic lies with the debtor.

International practice accepts epidemics as being beyond the debtor’s typical sphere of control. Consequently, the COVID-19 pandemic could constitute a minore ad maius an impediment beyond control according to Article 79 CISG. Whether the COVID-19 virus exempts debtors from their obligation to perform the commercial contract depends on the individual case, since it requires a causal link between the impediment and non-performance.

Takeaway

The impact the COVID-19 pandemic will have on the parties’ commercial contracts depends primary on the wording of their force majeure clause. In case of a force majeure event, the arbitral tribunals and the courts grant the terms of a commercial contract precedence over the applicable law. If a commercial contract does not contain a force majeure clause, or if does not cover pandemics, the applicable laws determine the available remedies. The remedies and requirements under the applicable law for commercial contracts affected by the COVID-19 pandemic differ. National laws have in common that legal doctrines which amend or terminate contractual agreements are narrowly construed. The underlying consideration is that arbitral tribunals and courts are only exceptionally authorized to “rewrite” the contractual obligations of the parties. It is therefore decisive whether the contractual provisions comprise a force majeure clause covering the COVID-19 pandemic. Against this backdrop parties should commercial evaluate – based on the facts of each case – their options to invoke a force majeure defense or to perform, amend, or terminate their commercial contracts.

In light of the high thresholds for a force majeure defense under the applicable law, it is essential to ensure legal certainty by including a force majeure clause in commercial contracts which clearly encompasses epidemics and pandemics. In particular, the party that would be affected by an epidemic or pandemic in the performance of its contractual obligations should assure that such events are expressly referred to in their force majeure clause, to ensure a balanced distribution of risks. Whether the situation is one of an epidemic or a pandemic should be determine by an objective criterion: a declaration by the World Health Organization would be useful to decide when the events under examination trigger the force majeure consequences.

Good starting point for future “tailor-made” force majeure clauses in commercial contracts is the balanced 2020 ICC force majeure proposal. Moreover, as in our globalized world, the next epidemic or pandemic will spread sooner or later, a lege artis force majeure clause must cover epidemics and pandemics.

Conventions & Instruments

On 2 November 2020, Jamaica deposited its instrument of accession to the HCCH 1961 Apostille Convention. It now has 119 Contracting Parties and will enter into force for Jamaica on 3 July 2021. More information is available here.

On 4 November, the Permanent Bureau was informed that on 26 October 2020, Saint Kitts & Nevis deposited its instrument of accession to the HCCH 1993 Adoption Convention. It now has 103 Contracting Parties and will enter into force for Saint Kitts & Nevis on 1 February 2021. More information is available here.

Meetings & Events

From 12 to 13 November 2020, the HCCH, together with the UNIDROIT and UNCITRAL, co-hosted the 2020 International Conference of the Judicial Policy Research Institute (Rep. of Korea) on International Commercial Litigation. A full recording of the event is available here.

From 16 to 19 November 2020, the Experts’ Group on Jurisdiction met for the fourth time, via videoconference. The meeting focused on the elements to be included on a possible future instrument on direct jurisdiction and parallel proceedings. More information is available here.

Following last month’s Roundtable on the 2019 Judgments Convention co-hosted by the HCCH and the University of Bonn (a pre-cursor to the September 2021 Conference), a full recording of the event is available here.

Publications & Documentation

On 24 November 2020, the Permanent Bureau launched the post-event publication of the inaugural edition of HCCH a|Bridged, of which the focus was the Service Convention in the Era of Electronic and Information Technology. The publication is now available for download in English only. More information is available here.

These monthly updates are published by the Permanent Bureau of the Hague Conference on Private International Law (HCCH), providing an overview of the latest developments. More information and materials are available on the HCCH website.

On 29 October 2o20, the University of Bonn and the HCCH co-hosted a video roundtable on the HCCH 2019 Judgments Convention.This video roundtable explored the prospects of the Convention from a particular perspective, and this was the perspective of the relations between the EU and third states: neighbouring states, trade partners in particular, but also other states. The organisors were very happy to have received a large number of registrations from all over the world and from all areas of interest. The event was also meant to prepare the “main conference” of the organisors on the Convention, which is planned to be taking place at the University of Bonn on site on 13 and 14 September 2021. The recording of the pre-conference video roundtable is now available on the HCCH’s youtube channel as well as here.

For those of us who read German: Jayme and Hausmann have just published the 20th edition of their collection of PIL norms on German national, EU and international level. The book has grown considerably in volume over the decades and has particularly done so for its latest edition – from 1441 to now 1537 pages. An indispensable working tool – even in times of the internet.

This book is devoted to the applicable law to contractual and non-contractual obligations in the European Union as applied before the Courts. It should be a valuable resource for practitioners, the judiciary, and academics who are interested in understanding how EU law is applied on national level. The Rome I and II Regulations are meant to provide for uniform conflict-of-laws rules. In theory, all national courts of EU Member States (excluding Denmark) apply the same rules determining the applicable law. Rome I and Rome II in Practice examines whether the theory has been put into practice and assesses the difficulties that may have arisen in the interpretation and application of these Regulations. The book contains a general report by the editor and a number of national reports.

 

This book is an article-by-article ‘German-style’ commentary on the Rome I, II and III Regulations on European Union (EU) conflict of laws. It describes and systematically explains black letter law as applied by the Court of Justice of the EU (CJEU) and the Member State courts.

Access to justice is not a new topic. Since Mauro Cappelletti and Bryant Garth’s survey of different methods to promote access to justice was published (Access to Justice. A World Survey (Giueffre SIJTHOFF 1978), making access to justice cheaper and effective has become a legal policy (see for instance The Right Honourable the Lord Woolf report on Access to Justice, 1996). One of Cappelletti and Garth’s ideas was that there were three waves of access to justice. The third wave, called ‘The Access to Justice Approach’, stated that arbitration would play a significant role in fomenting access to justice. The idea was that people would seek alternatives to the regular court system.  Arbitration has grown exponentially since the publication of Cappelletti and Garth’s work, reaching disputes that were traditionally only decided by courts. The guarantee of adequate access to justice is now generating questions about the impact of this expansion. For purely commercial arbitration, such as one between two multinational companies represented by multinational law firms, waiving some rights of access to justice might not create a problem to the fairness in the arbitral procedure. However, in a dispute in which the inequality of bargaining power is evident, for arbitration to be fair and a trustworthy sustainable dispute resolution method, waiving rights to access to justice might not be the best way forward.

With the above ideas in mind, this book aims at presenting a collection of studies about access to justice in arbitration to present, for the first time, in one single title, an analysis of the role access to justice plays in arbitration. The book makes a unique contribution to the current international research and practice of arbitration as it looks at the conceptual contribution to the notion of access to justice in arbitration; and it provides a picture of how access to justice works in various types of arbitration. In five parts, the book will show the concerns about access to justice in arbitration, how they are materialised in a practical scenario and finally, how it is applied in arbitral institutions.

The book’s first part brings a conceptual contribution to the notion of access to justice in arbitration and deals with theoretical and conceptual gaps in this area. Leonardo V.P. de Oliveira starts with a conceptual analysis of access to justice and how it should be applied in arbitration. Clotilde Fortier looks at consent as the central part of arbitration and how it relates to access to justice. Joao Ilhão Moreira examines if arbitration can provide a fair, independent and accessible dispute resolution mechanism outside large contractual disputes and Ramona Elisabeta Cirlig assesses the interaction between courts and arbitral tribunals as a guarantor of access to justice.

The second part of the book discusses two specific points in investment disputes. Berk Dermikol looks at the possibility of bringing an autonomous claim based on the NYC in investment treaty arbitration as a form of access to justice. Crina Baltag evaluates the issue of access to justice and non-disputing parties – amici curiae– in investment law and arbitration.

In the third part, access to justice in specific types of disputes submitted to arbitration is scrutinised. Carolina Morandi presents a case study of access to justice in labour and employment arbitration in light of the Brazilian and the US experiences. Ian Blackshaw looks at how sports disputes submitted to CAS have been dealing with the question of access to justice. Johanna Hoekstra and Aysem Diker Vanberg examine access to justice with regards to competition law in the EU with a view to determine whether arbitration can lower barriers. Lastly, Youseph Farah addresses the use of unilaterally binding arbitration as a mechanism to improve access to justice in business-related human rights violations.

Part four reports on two aspects of technology and access to justice. Mirèze Philippe looks at ODR as a method to guarantee access to justice whilst Sara Hourani investigates how Blockchain-based arbitration can be used to improve access to justice.

Lastly, the book presents the view of how two arbitral institutions deal with the question of costs and access to justice, and how the rules of one arbitral institution provide access to justice guarantees. Aislinn O’Connell assesses access to justice under WIPO’s Arbitration Rules whilst Christine Sim examines costs at SIAC and Duarte Henriques and Avani Agarwal do the same in relation to ICSID.

The University of Lyon (EDIEC-CREDIP) hosted a webinar (in French) under the title Situations in Motion : Debate on the Method, now available for online viewing.

Jean-Sylvestre Bergé (University of Côte d’Azur and French University Institute, IUF) presented his research project on Situations in motion and the Law, soon to be published in Q1 2021 (Dalloz). The webinar was co-chaired by Ludovic Pailler (University of Lyon) and Cyril Nourissat (University of Lyon) and organised by Marie Brossard and Véronique Gervasoni.

More details here.

I am a bit late with a post as a follow-up to my Tweet, below, re the Supreme Court’s judgment in Highbury Poultry Farm Produce Ltd, R (on the application of) v Crown Prosecution Service [2020] UKSC 39. Thankfully, the judgment is of more than fleeting relevance. It is also a good example of the structured approach to legal argument, its discussion in scholarship and its engagement with the parties’ legal arguments which will be missed post Brexit.

A poultry slaughterhouse was being accused of breaching Regulation 1099/2009 on the protection of animals at the time of killing – the same Regulation at stake in the CJEU Shechita proceedings.

Core issue in the case is whether the EU law at issue implies a requirement for mens rea (criminal intent) in the ability for Member States to discipline its breach. If no means rea is required, the law is one of strict liability.

At 14 Lord Burrows makes the point that the Regulation at issue left it to the Member States to determine the sanctions rolled-out by national law to ensure compliance with the Regulation. Had a Member State decided to deploy civil sanctions only, that would have been fine: criminal law enforcement was not necessary. What follows is a good summary of the authority on means of UK and EU statutory interpretation, with in the case at issue particular emphasis on the impact of recitals: at 51: an unclear recital does not override a clear article.

Conclusion after consideration of the Regulation (the only stain on the analysis being the lack of linguistic input (a fleeting reference at 32 only), given the CILFIT authority on equal authenticity)): that all animals which have been stunned must be bled by incising at least one of the carotid arteries or the vessels from which they arise, is formulated by the Regulation as an obligation of strict liability under EU law. Hence its effet utile requires that Member States that opt for enforcing it via criminal law, employ strict liability in that enforcement.

Reference to the CJEU was neither sought nor seriously contemplated.

Geert.

 

UKSC upholds strict liability
No means rea required, for infringement of EU animal welfare provision Reg 1099/2009, a classic in cases involving stunning of animals
Important observations on requirement of effet utile when imposing criminal sanctions
No CJEU reference: acte clair https://t.co/zydLZUeYop

— Geert Van Calster (@GAVClaw) October 16, 2020

On 8 December 2020 (11am – 2 pm EST), the ABA will host an online seminar on the principles of treaty interpretation, a core skill of every international lawyer.

Leading experts will discuss the goals, principles and challenges of treaty interpretation in a plenary session. Participants will then have the opportunity in a smaller working group to tackle interpretation in one of several pressing areas:

• human rights and the challenges of diplomatic immunity;
• private international law; and
• national security exceptions in trade and investment agreements.

For more information, including registration, click here.

By a judgment of 18 November 2020 in the case Ryanair v DelayFix, the CJEU has ruled that an assignee is not bound to a jurisdiction clause in the contract from which the assigned claim arose. While the ruling concerned the compensation claim of a passenger for a cancelled flight, it is cast in very general terms. It will therefore have far-reaching repercussions for all other cases of assignment of individual claims.

Facts

DelayFix, formerly Passenger Right, is a collection agency for the defence of air passenger rights. It started legal proceedings against Ryanair in Warsaw on the basis of compensation rights assigned to it by a Polish passenger after a cancelled flight. Ryanair contested the Warsaw court’s jurisdiction, relying on a choice-of-forum clause in its general terms and conditions in favour of Irish courts.

In the course of the proceedings, the Regional Court Warsaw submitted to the CJEU the question whether the jurisdiction clause is binding under Art 25 of the Brussels I bis Regulation or whether it is invalid under the Unfair Terms Directive.

Legal Issues

The CJEU split the question in two different issues: (1) Is the collection agency bound by the jurisdiction clause contained in the airline’s standard terms under the Brussels I bis Regulation? (2) Is the jurisdiction clause in the airline’s standard terms unfair within the meaning of the Unfair Terms Directive?

Third-party Effects of Jurisdiction Clauses

With regard to the first question, the CJEU issued a resounding “NO”. It stated at para 46 that

a jurisdiction clause incorporated in the contract of carriage between a passenger and that airline cannot, in principle, be enforced by the latter against a collection agency to which the passenger has assigned the claim.

An exception would exist only where the collection agency is the successor to all the initial contracting party’s rights and obligations (para 47). A case in point is the take-over of a contract, which is however not to be confounded with an ordinary assignment. The CJEU left it for the referring court to determine whether this exception applied in the present case.

The holding was to some extent predictable from earlier case law, see in particular the CJEU judgment in CDC Hydrogen Peroxide or in Refcomp. In these cases, the CJEU had stressed the relative effect of jurisdiction clauses and the freedom to agree on the competent court. The court had ruled that a third party who did not agree to the jurisdiction clause was bound to the latter only if it had succeeded to the original contracting party’s rights and obligations.

Nevertheless, the CJEU case law had identified several situations in which a third party is bound as a legal successor to a jurisdiction clause to which it had not agreed. It was ruled that such a binding effect would exist where a jurisdiction clause is included in the articles of association of a company (see the CJEU judgment in Powell Duffryn), in the prospectus of a bond (see the CJEU judgment in Profit Investment) or in a bill of lading (see e.g. the CJEU judgments in Russ and Coreck).

The literature had assumed that a legal succession would also exist in the event of an assignment and that the jurisdiction clause would therefore also extend to an assignee of a claim (see e.g. Magnus in Magnus and Mankowski (eds) ECPIL Art. 25 Brussels Ibis Regulation para 161; Stadler in Musielak and Voit (eds) ZPO Art. 25 Brussels Ibis Regulation para 4a). The CJEU now takes the opposite position: The assignee of a claim is not bound to a jurisdiction clause in the contract from which or in the context of which the claim arises.

Negative Effects for Agreements on the Jurisdiction of EU Member State Courts

The ramifications of this ruling are significant. For the first time, the CJEU has held that an assignee is not bound by a choice-of-forum agreement between the assignor and the debtor. As a result, the binding effect of jurisdiction clauses will be weakened. It suffices for a creditor to assign a claim to avoid an unpleasant jurisdiction clause in a contract. This behaviour cannot be excluded by a contractual prohibition of assignment because the latter is not always allowed. The ruling thus opens up manifold possibilities to circumvent jurisdiction agreements.

In this context, it must be remembered that the CJEU judgment covers only agreements on the jurisdiction of a Member State court. Jurisdiction agreements in favour of courts of third countries, such as the UK or Switzerland, will be governed by national law, which often considers the assignee to be bound. Arbitration clauses, which are considered binding on the assignee under most national laws, will also remain untouched. In sum, the CJEU has done a great disservice to EU Member State courts. It has given an incentive to choose third state courts and arbitral tribunals in their stead.

Unfairness of Jurisdiction Clauses

With regard to the second question, the CJEU referred to the national court to assess whether the jurisdiction clause in favour of Irish courts was unfair to the Polish passenger. This is understandable given that the Directive needs national transposition and national courts are competent apply the transposing legislation.

There are nevertheless two important takeaways from the CJEU’s judgment with regard to the assessment of unfairness.

First, the Court of Justice did not consider DelayFix – a business enterprise – as being precluded from invoking the unfairness of the clause under the Unfair Terms Directive, although the latter only covers contracts with consumers. The CJEU stresses that the scope of the Directive does not depend on the identity of the parties to the dispute but on the capacity of the parties to the agreement (para 53). Hence the validity of the clause must also be assessed in a subsequent proceeding between two businesses.

Second, the CJEU did not see the consumer protection provisions of the Brussels Ibis Regulation as an obstacle to a finding that the clause were unfair. One could have considered the protection under the Unfair Terms Directive superfluous given that the consumer is anyway protected by the jurisdiction of the courts at its domicile under Art 17 et seq. of the Brussels Ibis Regulation. That is however not the position of the CJEU. Instead, it asks the national court to assess the invalidity of the jurisdiction clause in an abstract manner, independently of the Brussels Ibis Regulation.

As a result, the Unfair Terms Directive may potentially apply to jurisdiction clause in a business-to-business relation. The protection afforded by the CJEU to the assignee seems unwarranted in light of the purpose of unfair terms control, which is targeted to consumers. The second part of the ruling will further weaken the binding force of jurisdiction clauses in B2B relations.

The latest edition (October 2020) of the Thessaloniki Bar Review (Armenopoulos) includes a section devoted to the application of the Rome I Regulation in Greece. The judgments reported examined issues regarding the law applicable to insurance and sales contracts, as well as a post-contract choice of law relating to multiple sales contracts.

Applicable Law in Insurance Contracts

In a lawsuit against a UK insurance company concerning a claim for compensation arising out of a freight insurance contract signed in 2014, the Thessaloniki Court of Appeal (judgment No 770/2019) resorted to Article 25 of the Greek Civil Code, i.e. the domestic conflict-of-laws provision for contractual obligations, and stated that the 1980 Rome Convention was not applicable to the case pursuant to Article 1(3) thereof (‘The rules of this Convention do not apply to contracts of insurance which cover risks situated in the territories of the Member States of the European Economic Community. In order to determine whether a risk is situated in those territories the court shall apply its internal law’). No reference was made to the Rome I Regulation.

The Court noted that the insurance contract expressly referred to the law to which the parties had submitted their contractual relationship and concluded that the dispute was governed by the English Maritime Insurance Act, common law and English practice (Institute Cargo Clauses) for boat insurance.

The court failed to examine the matter in accordance with the proper law, which was Article 7 of the Rome I Regulation, read in light of Article 1(2)(j).

Applicable Law to a Contract for the Sales of Goods

In a lawsuit brought by a Greek company against a Liberian company in connection with a contract for the sale of marine fuel between by the former and the latter, represented by its Greek agent, the Court of Appeal of Piraeus (ruling No 276/2019) applied Greek law to the sales contract on the ground that no choice had been made by the parties, and that the seller had its habitual residence in Greece. With respect to the representation of the defendant company for the purposes of the conclusion of the contract, the Court observed that the agency is excluded from the scope of Rome I Regulation. The Court relied on Greek conflict-of-laws rules to state that Greek law applied to agency, this being the law of the state where the agent had acted. 

Applicable Law in Multiple Sales Contracts

In proceedings brought by a Greek company against a company registered in the Marshall Islands, the Piraeus Court of first instance (ruling No 5326/2018) applied Greek law to a series of connected sales contracts, pursuant to Article 4(1) and (4) of the Rome I Regulation. The former was self-explanatory (seat of the seller in Greece), and the latter was founded on the fact that the contract was signed at the seller’s registered office. Finally, the court mentioned an additional reason for applying domestic law: It stated that a tacit post-contractual determination of applicable law may be deduced by the defendant’s default of appearance.

Report prepared by Onyoja Momoh, Post-Doctoral Researcher at the University of Aberdeen.

 

On Thursday 5th of November 2020, the Nigerian Group on Private International Law (“NGPIL”) held its first committee meeting by virtual platform. In attendance at the meeting and forming the Committee of NGPIL were: Dr Onyoja Momoh (English Barrister at 5 Pump Court; Research Fellow at University of Aberdeen), Dr Pontian Okoli (Lecturer at University of Stirling), Dr Abubakri Yekini (Lecturer at Lagos State University) Dr Chukwuma Okoli (Post-Doctoral Researcher at T.M.C Asser Instituut), and Dr Chukwudi Ojiegbe (Contracts Manager at ACE Winches). This new initiative will bring together a unique group of experts with an important ethos: the promotion of private international law in Nigeria.

The NGPIL unanimously agreed that its aims are (1) to improve the law in Nigeria in matters relating to private international law (“PIL”) (2) to persuade the Nigerian government to accede to the Hague Conventions on PIL (3) to liaise with other experts, groups, and research centres on PIL on a global level (4) to nurture, guide and develop the legal mechanism and framework for PIL in Nigeria (5) to be the collective voice of PIL experts for the Nigerian government, the judiciary, lawyers and other relevant stakeholders and, (6) to improve the links and communication between PIL experts in Africa.

NGPIL’s activities will be far-reaching, from research projects to academic writings, dissemination events (conferences, seminars, workshops) and creating a platform for consultation and advisory work to the Nigerian government and other relevant stakeholders. A key aim is to build PIL recognition within the legal and judicial community, one that may lead to identifying a Hague Network Judge or Judges for Nigeria.

The Committee discussed plans for an inaugural event open to the public. There was a general consensus that the event will be hosted on a virtual platform given the uncertain climate, to take place in the Spring/Summer of 2021. Holding a virtual event would have huge benefits, especially the ease of engagement and participation for our main target audience across Nigeria and beyond. The proposal is to work in collaboration with the Nigerian Bar Association and academics at the Nigerian Institute of Advance Legal Studies, drawing together academics and practitioners alike, and extending invitations to the Nigerian government and other relevant organisations.

The next meeting of the NGPIL will take place in January 2021.

Thank you Jan Jakob Bornheim for alerting me to Hebei Huaneng v Deming Shi_B [2020] NZHC 2992, which dismissed the defendant’s application for summary judgment and discusses the notion of a ‘court’ , required to recognise its ‘judgments’ internationally. Readers will recognise the discussion ia from the CJEU case-law in judgments such as Pula Parking.

Hebei Huaneng had obtained judgment against Mr Shi at the Higher People’s Court of Hebei Province. The amount remained unsatisfied. Hebei Huaneng then found out that Mr Shi has assets in New Zealand – an inner-city apartment in Auckland and shares in a New Zealand company.  Mr Shi objects to New Zealand hearing this case on the basis that China does not have true courts and that Hebei Huaneng should first enforce its securities in China.

At 78-79 Bell J holds briefly that questions of real and substantial connection with New Zealand and appropriate forum are not much in issue. The two main arguments raised at this stage lie elsewhere.

Given the lack of treaty on the issue between NZ and PRC, he summarises the NZ common law on recognition at 16:  the common law regards a judgment of a foreign court as creating an obligation enforceable under New Zealand law if the judgment is given by a court, the judgment is final and conclusive, the judgment is for a definite sum, the parties are the same or privies, and the court had jurisdiction under New Zealand’s jurisdiction recognition rules. No merits review will be undertaken however refusal of enforcing a ‘money judgment’ is possible if obtained in breach of New Zealand standards of natural justice, enforcing the judgment would be contrary to public policy,
the judgment was obtained by fraud, the judgment was for a revenue debt, or the judgment involves the enforcement of a foreign penal law. Lack of reciprocal recognition by the other State is no objection.

On the issue of the notion of court, he notes at 29 that complaints that a foreign legal system is so defective that its courts cannot be trusted to do substantial justice may arise in two contexts: in forum non cases, where the analysis is prospective seeing as the case may not even be pending abroad; and in recognition cases, where the analysis is retrospective. At 28 Bell J already points out that style of writing etc. particularly also given the civil law background of China must not confuse. At 35 he notes to core issues viz the concept of court: (a) whether the bodies carrying out judicial functions are distinct from those with legislative and administrative function; and (b) whether the bodies carrying out judicial functions are subject to improper interference. Then follows lengthy-ish consideration of expert evidence to conclude at 60 that the good arguable case of the Chinese courts being independent, is satisfied.

The question of the ‘property security first’ principle’ which would mean satisfaction would first have to be sought against the Chinese secured assets, is discussed mostly in the context of Chinese law, against the backdrop of the common law principle of a party’s freedom to chose asset enforcement. The lex causae for that discussion I imagine will be further discussed at the merits stage.

A good case for the comparative conflicts binder.

Geert.

 

On the notion of 'court' and judicial independence re Chinese courts
Hebei Huaneng v Deming Shi_B [2020] NZHC 2992https://t.co/HwdiuYUnta https://t.co/wfsOjB2SLC

— Geert Van Calster (@GAVClaw) November 19, 2020

The fourth issue of the Journal du droit international for 2020 includes only one article on a topic of private international law.

It is authored by Jean-Charles Jaïs, Claudia Cavicchioli and Anne de Mazières (Linklaters Paris) and discusses the important topic of the law governing the confidentiality of international correspondence between attorneys and in-house counsels (La confidentialité des correspondances internationales des avocats et juristes en entreprise – la question du droit applicable).

The English abstract reads:

The rules applicable to the confidentiality of correspondence of lawyers and in-house counsel vary significantly from one country to the other. A French judge seized of an international dispute will thus have to confront these varying rules and determine which, amongst the competing norms, should be applied to the confidentiality of the correspondence at issue. The present article looks at the method which the seized judge should implement to determine the applicable law, and offers a reflexion on potential connecting factors. The solutions proposed differ according to whether one looks at correspondence exchanged between lawyers, between a lawyer and his/her client, or between an in-house counsel and his/her “internal client”.

The issue also includes several case notes of cases which address private international law questions. The full table of contents can be found here.

In today’s Opinion delivered in the case Obala i lucice, C-307/19, Advocate General Bobek revisits the line of case law built upon the judgment in Pula Parking, C-551/15, pertaining to the enforcement of unpaid public parking tickets by means of a writ of execution issued by a Croatian notary. This time both the Brussels I bis Regulation and the Service Regulation are at stake.

Factual context

A car is leased from NLB Leasing d.o.o., a company that provides financing for the use of vehicles, equipment and real estate in Slovenia and is – as it may be inferred from point 1 of the Opinion – based in that Member State.

On 30 June 2012, the car is parked on a public street in Zadar (Croatia). The street is defined parking zone with designated parking spaces. Obala i lucice d.o.o., entity based in Croatia, is charged with the management and maintenance of public areas for parking of motor vehicles. As the car does not have a parking ticket on display, that entity issues a daily parking ticket.

On 1 July 2013, Croatia joins the EU. Four years later, in 2017, the parking management entity commences enforcement proceedings for recovery of the parking ticket debt with a notary, by making an application for enforcement on the basis of an ‘authentic document’. That document is an extract from the accounts of Obala i lucice d.o.o., which recorded the debt relating to the unpaid ticket.

The notary issues a writ of execution on the basis of the ‘authentic document’, which is subsequently served to NLB Leasing d.o.o. in Slovenia. The latter challenges the writ before Croatian courts.

A commercial court in Pazin rules that it lacks jurisdiction and refers the case to the commercial court in Zadar. The latter also considers that it lacks jurisdiction and refers the case to the high commercial court, which decides to seize the Court of Justice with a series of preliminary questions.

Opinion of AG

It has to be mentioned at the outset that the Opinion is not addressing all the questions referred to the Court of Justice for a preliminary ruling. As the Opinion clarifies at its point 25, the Court asked its AG to elaborate only on some of the questions. The Opinion constitutes therefore the so-called ‘conclusions ciblées’.

At point 34, AG establishes the need to rearrange these questions and lists the legal inquiries analyzed in the Opinion, namely, firstly, whether the enforcement of a debt relating to the unpaid public parking ticket is a dispute relating to ‘civil and commercial matters’ within the meaning of the Brussels I bis and Service Regulations; secondly, whether the notaries in Croatia may themselves effect service (under the Service Regulation) of writs of execution drawn up on the basis of an ‘authentic document’ and thirdly, whether any of the special grounds of jurisdiction of the Brussels I bis Regulation confer jurisdiction on the courts of a Member State other than the domicile of the defendant.

As a consequence, the Opinion is not addressing the questions concerning, in particular, the law applicable under the Rome I and Rome II Regulations (Questions 8 and 9). It is yet to be seen how they will be answered in the judgment of the Court. It is worth noticing, however, that the facts underlying the case pending before the national courts predate the accession of Croatia to the EU.

 

Notion of ‘civil and commercial matters’

At points 39 to 54, a reminder of the case law leads AG Bobek to distinguishing two approaches adopted by the Court in order to establish whether the Regulations on ‘civil and commercial matters’ are applicable. He defines them as ‘subject matter’ and ‘legal relationship’ approaches (‘perspectives’).

Pronouncing himself in favour of ‘legal relationship’ approach at point 59, AG Bobek concludes that:

‘The concept of “civil and commercial matters”, as laid down in Article 1(1) of [the Brussels I bis Regulation] and Article 1(1) of [the Service Regulation], must be interpreted as requiring the legal relationship which characterises the underlying dispute, assessed against the framework generally applicable to private parties in such situations, not to be characterised by a unilateral exercise of public powers by one of the parties to the dispute.

While it falls to the national court to determine whether those conditions are satisfied, the circumstances of the present case do not appear subject to such an exercise of public powers.’

 

Service of writs of execution

At points 88 et seq., the Opinion addresses the question whether, under the Service Regulation, the notaries in Croatia may themselves effect service of writs of execution drawn up on the basis of an ‘authentic document’. At point 105, AG concludes:

‘[The Service Regulation] must be interpreted as meaning that, in order for a writ of execution based on an “authentic document” to qualify as a “judicial document” within the meaning of Article 1(1) of that regulation, the issuing entity must be a judicial body of a Member State forming part of its judicial system.

Articles 2 and 16 of [the Service Regulation] must be interpreted as meaning that, where a Member State has failed to designate notaries as “transmitting agencies” within the meaning of Article 2(1) of that regulation, those notaries cannot transmit “extrajudicial documents” for service to another Member State under the provisions of that regulation.’

 

Special grounds of jurisdiction

At points 106 et seq., the Opinion goes on to establish whether special grounds of jurisdiction of the Brussels I bis Regulation confer jurisdiction on the courts of a Member State other than the domicile of the defendant. Three possibilities are addressed within this part of the Opinion.

Firstly, at point 109, AG Bobek excludes the applicability of Article 7(2) of the Brussels I bis Regulation. He seems to argue, in essence, that the dispute pertaining to the unpaid public parking ticket is contractual in nature.

Next, at point 111, the applicability of the ground of exclusive jurisdiction provided for in Article 24(1) of the Regulation is excluded. Here, it is argued that ‘[o]n the basis of the facts present in the court file, there is no indication that either possession or other rights ‘in rem’ in the parking space were transferred to the defendant upon parking there (or that they are, in fact, at issue). Moreover, the article’s raison d’être militates against such an interpretation.’.

Finally, at point 112, the Opinion comes to the conclusion that Article 7(1) of the Brussels I bis Regulation is applicable and contends:

‘Article 7(1) of Regulation No 1215/2012 must be interpreted as meaning that parking a car in a designated parking space on a public road can, under the legal system of a Member State in which the issuing of parking tickets and the collection of parking fees is entrusted to a private entity, constitute a “matter relating to a contract”, as referred to in that provision.’

The Opinion can be consulted here. The request for a preliminary ruling is accessible here.

I attended recently a discussion among scholars about the notion of periculum in mora for the purposes of Article 7 of the Regulation 655/2014. In this context, attention was drawn to the decision of the Tribunal da Relação de Guimarães of 10 September 2020, which held (among other) that

IV. The preservation order requires proof of the requirements for the adoption of preventive measures: urgency, “fumus boni iuris” and “periculum in mora”.

V. The mere impossibility of collecting the claim, namely in an enforcement action instituted for that purpose, without being associated with any other element, is not enough to demonstrate the periculum in mora.

Looking at the text of the Regulation, the Portuguese court can hardly be criticised. According to Article 7(1),

The court shall issue the Preservation Order when the creditor has submitted sufficient evidence to satisfy the court that there is an urgent need for a protective measure in the form of a Preservation Order because there is a real risk that, without such a measure, the subsequent enforcement of the creditor’s claim against the debtor will be impeded or made substantially more difficult.

The provision shall be read together with Recital 14:

The conditions for issuing the Preservation Order should strike an appropriate balance between the interest of the creditor in obtaining an Order and the interest of the debtor in preventing abuse of the Order.

Consequently, when the creditor applies for a Preservation Order prior to obtaining a judgment, the court with which the application is lodged should have to be satisfied on the basis of the evidence submitted by the creditor that the creditor is likely to succeed on the substance of his claim against the debtor.

Furthermore, the creditor should be required in all situations, including when he has already obtained a judgment, to demonstrate to the satisfaction of the court that his claim is in urgent need of judicial protection and that, without the Order, the enforcement of the existing or a future judgment may be impeded or made substantially more difficult because there is a real risk that, by the time the creditor is able to have the existing or a future judgment enforced, the debtor may have dissipated, concealed or destroyed his assets or have disposed of them under value, to an unusual extent or through unusual action.

The court should assess the evidence submitted by the creditor to support the existence of such a risk. This could relate, for instance, to the debtor’s conduct in respect of the creditor’s claim or in a previous dispute between the parties, to the debtor’s credit history, to the nature of the debtor’s assets and to any recent action taken by the debtor with regard to his assets. In assessing the evidence, the court may consider that withdrawals from accounts and instances of expenditure by the debtor to sustain the normal course of his business or recurrent family expenses are not, in themselves, unusual. The mere non-payment or contesting of the claim or the mere fact that the debtor has more than one creditor should not, in themselves, be considered sufficient evidence to justify the issuing of an Order. Nor should the mere fact that the financial circumstances of the debtor are poor or deteriorating, in itself, constitute a sufficient ground for the issuing of an Order. However, the court may take these factors into account in the overall assessment of the existence of the risk.

It should be noted, though – and it has been highlighted in the abovementioned exchange of views – that the national court actually makes a very restrictive interpretation of the periculum in mora, even when a judgment has already been delivered favoring the creditor. It is not enough that the enforcement cannot be carried out in Portugal due to lack of assets there; nor that the debtor resides in another country (Spain, in the case at hand). The creditor has to prove that there is an intention on the part of the debtor to dissipate his assets, and the link between such intention and the risk of not recovering the moneys.

The ‘subjective’ element seems to be a feature common to other Member States’ interpretation of Article 7 (such as Lithuania or Germany – see LG Bremen, ruling of 7 January 2020 – 3 O 2166/19), but not to all (Spain being, for instance, one with a much more lenient understanding of the requirement: apparently, the mere impossibility of enforcement in Spain suffices for the judicial clerk, who is the one in charge at this stage, to grant the order). Moreover, and somehow funnily, the Portuguese court reaches its conclusion arguing on the basis of the similarities between the provision of the Regulation, and Article 391 of the national Code of Civil Procedure. The trend appears to be shared by other Member States, like, again, Germany and Lithuania.

In the light of the foregoing, a request for interpretation to the CJUE would not be a surprise. Unfortunately, it will hardly address any longer the policy issue of whether it makes sense to subject the cross-border preservation order to the periculum in mora requirement in spite of having obtained a decision  (see against B. Hess, ‘Article 7 Regulation 655/2014’, in Scholsser/Hess, Europäisches Zivilprozessrecht, 5th ed., para 2, forthcoming).

NoA: Note that urgency is not mentioned under Article 35 of the Brussels I bis regulation, and that measures which, because they are urgent, are ordered without the defendant being summoned to appear, are not to be recognised and enforced under the Regulation unless the judgment containing the measure is served on the defendant prior to enforcement.

Many thanks to Carlos Santaló (MPI Luxembourg) for the information on the topic as well as feedback.

Jonathan Fitchen who is recognised as a leading scholar on the conflict of laws aspect of authentic instruments has just published a book titled “The Private International Law of Authentic Instruments” under the Hart Studies in Private International Law.

The abstract reads as follows:

This helpful book will equip the lawyer – whether notary, barrister or solicitor – with the legal information necessary to understand what an authentic instrument is (and what it is not), what it can (and what it cannot) be used to do in the course of contentious or noncontentions legal proceedings.
The book takes a two part approach. Part one focuses on an explanation of the nature of the foreign legal concept of an authentic instrument, setting out the modes of creation, typical domestic evidentiary effects and the typical domestic options to challenge such authentic instruments. Part two then examines and analyses authentic instruments under specific European Union private international law regulations, focusing on the different cross-border legal effects allowed and procedures that apply to each such.
Rigorous, authoritative and comprehensive, this will be an invaluable tool to all practitioners in the field.

More information on the book can be found here

The Court of Justice (Grand Chamber) delivered on 24 November 2020 its judgment in case C‑59/19 (Wikingerhof GmbH & Co. KG v Booking.com BV), which is about an action seeking an injunction against commercial practices considered to be contrary to competition law:

“Point 2 of Article 7 of Regulation (EU) No 1215/2012 […] must be interpreted as applying to an action seeking an injunction against certain practices implemented in the context of the contractual relationship between the applicant and the defendant, based on an allegation of abuse of a dominant position by the latter in breach of competition law”.

Source: http://curia.europa.eu/juris/document/document.jsf;jsessionid=0B3C35184AED407DFB5B8CDCFD47AD38?text=&docid=234206&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1&cid=15723679

Join us on 15 December 2020 at 12 noon (The Hague) for the launch of the Elgar Companion to the Hague Conference on Private International Law, edited by Thomas John, Rishi Gulati and Ben Köhler.

 

 

The book will be launched by Christophe Bernasconi, Secretary General of the HCCH, and is followed by a conversation and Q&A on a key theme that emerged in the Companion: the importance of private international law to providing access to justice. The speakers are:

• Professor Xandra Kramer, Erasmus University, and Deputy Judge, District Court, Rotterdam, NL
• Justin Gleeson SC, Barrister and Arbitrator, Banco Chambers, Sydney, AUS

Register here: https://lnkd.in/d7cyVF4. 

The Companion is a unique guide to the HCCH. 35 leading international experts contributed to this work. Their contributions offer a unique critical assessment of, and reflection on, past and possible future contributions of the HCCH to the further development and unification of private international law.

For more information on the book, including endorsements by Lord Collins, Professor Basedow, Professor Silberman, Justice de Nardi, Professor Neels and Professor Reyes, click here.