Conflictoflaws

Earlier today, the Court of Justice held that, under certain circumstances, special jurisdiction for an actio pauliana can be based on Art. 7(1) Brussels Ia (Case C-337/17 Feniks).

The actio pauliana is an instrument provided by the national laws of several EU member states that allows the creditor to challenge fraudulent acts by their debtor that have been committed to the creditor’s detriment. The ECJ already had several opportunities to decide on the availability of individual grounds of special jurisdiction for such an action, but has reliably denied their availability. In today’s decision however, the Court confirmed the availability of special jurisdiction for matters relating to contract, contrary to the proposition of AG Bobek (Opinion delivered on 21 June 2018).

Previous Decisions

Many readers of this blog will be aware of the Court of Justice’s earlier decisions on the availability of special or exclusive jurisdiction for a creditor’s actio pauliana.

In Case C-115/88 Reichert I, the question was referred to the Court in the context of a transfer of immovable property from Mr and Mrs Reichert to their son, which had been challenged in the French courts by their creditor, a German bank. The Court held that the actio pauliana did not fall under the head of exclusive jurisdiction for actions concerning rights in rem; accordingly, the French courts did not have jurisdiction based on what is now Art 24(1) Brussels Ia.

Still in the context of this transfer of property, the ECJ held in Case C-261/90 Reichert II that the heads of jurisdiction in what are now Art 7(2) (matters relating to tort, delict or quasi-delict), Art 24(5) (proceedings concerned with the enforcement of judgments) and Art 35 (provisional, including protective, measures) Brussels Ia would be equally unavailable.

The Court has never explicitly excluded the availability of the ground of jurisdiction for matters relating to contract in what is now Art 7(1) Brussels Ia. In his Opinion on Case C-339/07 Deko Marty Belgium, AG Ruiz-Jarabo Colombo still appears to understand the decisions in Reichert I and II as leading to the conclusion that within the framework of the Brussels Ia Regulation, jurisdiction for an actio pauliana ‘lies [only] with the courts in the defendant’s State of domicile.’ (ibid, [32]).

The Decision in Feniks

The case underlying today’s decision involved two Polish companies, Feniks and Coliseum, who were in a contractual relationship relating to a development project. When Coliseum was unable to pay some of its subcontractors, Feniks had to pay them instead (pursuant to Polish law), thus becoming the creditor of Coliseum. Coliseum subsequently sold some immovable property to a Spanish company, a transaction which Feniks now challenges in the Polish courts, relying on the provisions of the Polish Civil Code that provide for the actio pauliana.

While the Court considered the action to be ultimately based on the contract between Feniks and Coliseum (see below), it is not immediately clear to what extent the situation differs from the one in Reichert. Still, it is true that the question of whether such an action could be based on the head of special jurisdiction for contract was raised in neither of the two orders for reference. AG Bobek had nonetheless offered several important arguments for why this head of jurisdiction should not be available. In particular, he had argued that there was no ‘obligation freely assumed’ by the defendant towards the claimant (Opinion, [68]) and the contractual relationships between the claimant and their debtor and between the debtor and the defendant were ‘too tenuous and remote’ or too ‘detached’, respectively, to be considered for the purpose of establishing jurisdiction (Opinion, [65], [67]). More fundamentally, the Advocate General considered the ‘chameleon-like nature’ of the actio pauliana, which allows a creditor to challenge a wide range of legal acts, to prevent it from falling within the scope of any head of special jurisdiction (Opinion, [76]–[87]).

In today’s decision, the Court very much rejects these arguments. After having established the applicability of the Brussels Ia Regulation – the action not falling into the scope of Regulation No 1346/2000, which would exclude them from the Brussels Ia Regulation (see Art 1(2)(b) Brussels Ia; Case C-339/07 Deko Marty Belgium, [19]) – the ECJ reiterates that the decisive criterion for jurisdiction to be based on Art 7(1) Brussels Ia is the existence of a legal obligation freely entered into by one person towards another on which the claimant’s action is based (Feniks, [39]; see also Joined Cases C-359/14 and C-475/14, ERGO Insurance, [44]); the claimant does not necessarily have to be party to the contract, though (Feniks, [48]; see also Joined Cases C-274/16, C-447/16 and C-448/16 flightright, [61]). According to the Court,

[42] … both the security that Feniks has over the debtor’s estate and the present action regarding the ineffectiveness of the sale concluded by the debtor with a third party originate in the obligations freely consented to by Coliseum with regard to Feniks upon the conclusion of their contract relating to those construction works. [own emphasis]

In such a case, the creditor’s action is based on the breach of a contractual obligation (ibid, [43]).

[44] It follows that the actio pauliana, once it is brought on the basis of the creditor’s rights created upon the conclusion of a contract, falls within ‘matters relating to a contract’ … .

Accordingly, the contract between Feniks and Coliseum being for construction works to be carried out in Poland, the Polish courts would have jurisdiction under Art 7(1)(b) Brussels Ia (ibid, [46]).

Special Jurisdiction under the Brussels Ia Regulation

One of several interesting details of today’s decision is the degree to which the Court’s approach to the grounds for special jurisdiction differs from the Advocate General’s opinion. According to AG Bobek, the actio pauliana might be

[97] … one of the rare examples that only allows for the applicability of the general rule and an equally rare confirmation of the fact that ‘… there is no obvious foundation for the idea that there should always or even often be an alternative to the courts of the defendant’s domicile’.

Importantly, for AG Bobek, requiring the claimant to rely on the general ground of jurisdiction provided in Art. 4(1) Brussels Ia would not be a problem because

[93] … the defendant’s domicile is precisely the key connecting factor for the purpose of application of Regulation No 1215/2012.

– an argument that seems to echo the Court of Justice’s considerations in Case C-256/00 Besix, [50]–[54].

Besides, allowing for special jurisdiction to be based on Art 7(1) Brussels Ia because the defendant must be aware of the fraudulent nature of the transaction for the action to succeed would amount to

[94] … effectively presuming the existence of the awareness of the fraud on the part of the transferee.

Put differently, if the Court could justify the unavailability of special jurisdiction for matters relating to contract for claims brought by a sub-buyer against the manufacturer in Case C-26/91 Jakob Handte by the fact that such jurisdiction would be unforeseeable and ‘therefore incompatible with the principle of legal certainty’ (ibid, [19]), does the mere allegation that the buyer of a plot of land has been aware of the fraudulent character of the transaction really justify its application?

The Court of Justice seems to believe it does. Indeed, it appears to have remained rather unimpressed by the above considerations when arguing that if the claim could not be based on Art 7(1) Brussels Ia, then

[45] … the creditor would be forced to bring proceedings before the court of the place where the defendant is domiciled, that forum, as prescribed by [Art 4(1) Brussels Ia], possibly having no link to the place of performance of the obligations of the debtor with regard to his creditor.

In April 2018  the European Commission presented a proposal for a directive amending Directive 2017/1132 relating to certain aspects of company law as regards cross-border conversions, mergers and divisions (COM(2018) 241 final).

In July 2018 a group of professors of the Universitat Autònoma de Barcelona (Autonomous University of Barcelona) drew up a document to comment on some aspects of the proposal.

The paper was presented at a public hearing organised by the European Economic and Social Committee (EESC) on 10 September 2018, in Thessaloniki (Greece), in the context of the discussion within the EESC leading to the adoption of an opinion on the said proposal.

The paper, in English, can be found here.

On 25 October 2018, the University of Nice will host a seminar titled Space of Flows and the Law.

The event, part of a series of doctoral workshops on Multidisciplinary and Comparative Approaches to Globalization Phenomena, aims to discuss the idea of “flow space” and its possible relevance to the understanding of complex phenomena relating to globalization and transnational movement.

The main speakers are Benjamin Bowling (King’s College London), who will present his research on Global Policing, and Jean-Sylvestre Bergé (University of Nice), who will speak of his research on Full Movement Beyond Control and the Law.

Guillemine Taupiac-Nouvel (Uinversity of Pau-Bayonne) will moderate the discussion.

See here for further information.

The result of the 2016 Brexit referendum was not only a political shock, but also and foremost a symbolic turning point in the history of the EU. The United Kingdom’s foreseen withdrawal from the Union has given rise to many political, legal, economic and social debates.

The University of Milan-Bicocca will host the conference “Waiting for Brexit: open issues in the internal market and in the AFSJ” which will take place on 19 October 2018 with the aim of contributing to the analysis of the impact and possible effects of Brexit on both EU Law and Italian law in practice.

After a short overview of the main institutional aspects, national and international experts from various background (scholars, public officials, legal practitioners, industry representatives) will offer the audience with an insight into the changes that the withdrawal from the EU of a Member State will have on specific socio-economic areas.

In particular, the first part of the morning session, chaired by Prof Antonio Tizzano, will be devoted to some general overviews on the impact of Brexit on the European Union (Jacques Ziller), on the current state of the EU-UK negotiations (Carlo Curti Gialdino) and the role of the Court of Justice after the UK withdrawal (Kieran Bradley). The second part of the morning will then focus on the possible effects of Brexit on specific sectors, notably the transfer of personal data outside the EU taking into account the new GDPR (Bruno Gencarelli), as well as judicial cooperation in criminal matters in light of the recent case-law of the CJEU.

The afternoon session, chaired by Prof Fausto Pocar, will follow on and be dedicated to the likely effects of Brexit on banking and investment law (Giovanni Sabatini), competition law (Gabriella Muscolo), intellectual property law (Paul Torremans), company law (Rafael Arenas García), and the Dublin asylum system (Michael Wilderspin).

The conference is organised by Costanza Honorati (Full Professor of EU Law and Private International Law, University of Milan-Bicocca), Serena Crespi (Aggregate Professor of EU Law, University of Milan-Bicocca) and Paolo Iannuccelli (Référandaire at the Court of Justice of the European Union) within the framework of the Jean Monnet Module held at the University of Milan-Bicocca.

More information is available here.

On 16 and 17 November 2018, the University of Innsbruck will host a conference on the Regulations on matrimonial property and on the property consequences of registered partnerships which will enter into force on 29 January 2019. The conference, organised by Stefan Arnold (University of Münster) and Simon Laimer (University of Innsbruck), aims to discuss the new rules and their implications for the further development of the law.

The conference will be held in German. Participation is free of charge, but prior registration is required. The flyer can be found here.

The call as posted last week contained an error – the deadline for submission of the poster is not 1 October, but 1 November. My apologies. Find the correct text below.

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The conference Challenge Accepted! Exploring Pathways to Civil Justice in Europe will take place at Erasmus School of Law on 19-20 November. You are invited to join us and young researchers are reminded to send in their poster. The deadline is 1 November 2018

Young researchers will have the possibility to present and discuss their work during the poster on 20 November. Posters should focus on the topics of the conference, and show originality. We invite PhD researchers or young academics to present their research in a poster format. The three best posters will be awarded a prize during the closing drinks.

More information on submitting a poster proposal can be found here.

This conference is organised by Erasmus School of Law at Rotterdam University under the ERC project ‘Building EU Civil Justice’ (www.euciviljustice.eu).

For more information, do not hesitate to contact us at hoevenaars@law.eur.nl (Jos) or biard@law.eur.nl (Alexandre).

The conference Challenge Accepted! Exploring Pathways to Civil Justice in Europe will take place at Erasmus School of Law on 19-20 November. You are invited to join us and young researchers are reminded to send in their poster. The deadline is 1 October.

Young researchers will have the possibility to present and discuss their work during the poster on 20 November. Posters should focus on the topics of the conference, and show originality. We invite PhD researchers or young academics to present their research in a poster format. The three best posters will be awarded a prize during the closing drinks.

More information on submitting a poster proposal can be found here.

This conference is organised by Erasmus School of Law at Rotterdam University under the ERC project ‘Building EU Civil Justice’ (www.euciviljustice.eu).

For more information, do not hesitate to contact us at hoevenaars@law.eur.nl (Jos) or biard@law.eur.nl (Alexandre).

The Centre for the Study of European Contract Law of the University of Amsterdam is offering a PhD position in the field of private law (including private international law). Interested parties can formulate their own research proposal which has to be submitted before 1 October 2018. More information can be found here.

Previous posts on this blog have described the emerging international commercial and business courts in various Member States. While the primary aim is and should be improving the dispute resolution system for businesses, the establishment of these courts also points to the increase of competitive activities by certain Member States that try to attract international commercial litigation. Triggered by the need to facilitate business, prospects of financial gain, and more recently also by the supposed vacuum that Brexit will create, France, Germany, the Netherlands, and Belgium in particular have been busy establishing outlets for international commercial litigants. One of the previous posts by the present authors dedicated to these developments asked who will be next to enter the competition game started by these countries. In another post, Giesela Rühl suggested that the EU could be the next.

A recently published study of the European Parliament’s Committee on Legal Affairs (JURI Committee) on Building Competence in Commercial Law in the Member States, authored by Giesela Rühl, focuses on the setting up of commercial courts in the Member States and at the EU level with the purpose of enhancing the enforcement of commercial contracts and keeping up with the judicial competition in and outside Europe. This interesting study draws the complex environment in which cross-border commercial contracts operate in Europe. From existing surveys it is clear that the laws and the courts of England and Switzerland are selected more often than those of other (Member) States. While the popularity of these jurisdictions is not problematic as such, there may be a mismatch between the parties’ preferences and their best available option. In other words, while parties have clear ideas on what court they should choose, in reality they are not able to make this choice due to practical difficulties, including a lack of information or the costs involved. The study recommends reforming the Rome I and Rome II Regulations to improve parties’ freedom to choose the applicable law. In addition, a European expedited procedure for cross-border commercial cases can be introduced, which would simplify and unify the settlement of international commercial disputes. The next step, would be to introduce specialised courts or chambers for cross-border commercial cases in each Member State. In addition to these, the study recommends the setting up of a European Commercial Court equipped with experienced judges from different Member States, offering neutrality and expertise in cross-border commercial cases.

This study takes on a difficult and complicated issue with important legal, economic, and political implications. From a pure legal perspective, expanding – the  already very broad – party autonomy to choose the law and forum (e.g. including choosing a non-state law and the possibility to choose foreign law in purely domestic disputes) seems viable but will likely not contribute significantly to business needs. The economic and political implications are challenging, as the example of the Netherlands and Germany show. In the Netherlands, the proposal for the Netherlands Commercial Court (NCC) is still pending in the Senate, despite our optimistic expectations (see our previous post) after the adoption by the House of Representatives in March of this year. The most important issue is the relatively high court fee and the fear for a two-tiered justice system. The expected impact of Brexit and the gains this may bring for the other EU Member States should perhaps also be tempered, considering the findings in empirical research mentioned in the present study, on why the English court is often chosen. A recently published book, Civil Justice System Competition in the EU, authored by Erlis Themeli,  concludes on the basis of a theoretical analysis and a survey conducted for that research that indeed lawyers base their choice of court not always on the quality of the court as such, but also on habits and trade usage. England’s dominant position derives not so much from its presence in the EU, but from other sources.

The idea of a European Commercial Court that has been put forward in recent years and is promoted by the present study, is interesting and could contribute to bundling expertise on commercial law and commercial dispute resolution. However, it is questionable whether there is a political interest from the Member States considering other pressing issues in the EU, the investments made by some Member States in setting up their own international commercial courts, and the interest in maintaining local expertise and keeping interesting cases within the local court system. Considering the dominance of arbitration, the existing well-functioning courts in business centres in Europe and elsewhere and the establishment of the new international commercial courts, one may also wonder whether a further multiplicity of courts and the concentration of disputes at the EU level is what businesses want.

That this topic has a lot of attention from practitioners, businesses, and academics was evident at a very well attended seminar (Rotterdam, 10 July 2018) dedicated to the emerging international commercial courts in Europe, organized by Erasmus University Rotterdam, the MPI Luxembourg, and Utrecht University. For those interested, in 2019, the papers presented at this seminar and additional selected papers will be published in an issue of the Erasmus Law Review, while also a book that takes a European and global approach to the emerging international business courts in being prepared (more info here). At the European Law Institute’s Annual Conference (Riga, 5-7 September 2018) an interesting meeting with vivid discussions of the Special Interest Group on Dispute Resolution, led by Thomas Pfeiffer, was dedicated to this topic. An upcoming conference “Exploring Pathways to Civil Justice in Europe” (Rotterdam, 19-20 November 2018) offers yet another opportunity to discuss court specialisation and international business courts, along with other topics of dispute resolution.

The UNCITRAL has published the Report from the 51st session. Annexes to the report contain the proposed United Nations convention on international settlement agreements resulting from mediation, the UNCITRAL Model Law on International Commercial Mediation and International Settlement Agreements Resulting from Mediation, and the UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments.

The latest issue of the „Praxis des Internationalen Privat- und Verfahrensrechts (IPRax)“ features the following articles:

S.H. Elsing/A. Shchavelev: The new DIS Arbitration Rules 2018

On 1/3/2018, the new arbitration rules of the German Arbitration Institute (Deutsche Institution für Schiedsgerichtsbarkeit e.V. – DIS) came into force. The revision process took almost two years and resulted in a comprehensive overhaul of the former arbitration rules which date back to the year 1998. The new rules combine well-tried elements of the former regime with much-anticipated improvements which will help the DIS and the arbitration practice in Germany in general to keep up with the changes and developments in domestic and international arbitration. Notably, the DIS now has two authentic versions of its arbitration rules: a German and an English one. The most relevant amendments include (1) several provisions aimed at enhancing the efficiency of the proceedings and promotion of early settlements; (2) the foundation of a new body, the Arbitration Council, which will now decide, inter alia, on the challenge and removal of arbitrators, the arbitrators’ fees and the amount in dispute; and (3) new comprehensive provisions on consolidation, multi-party and multi-contract proceedings and the joinder of additional parties. In addition, the DIS will now be more closely involved in the administration of the arbitration after the constitution of the arbitral tribunal. With these amendments, the new arbitration rules will arguably become more accessible and thus more appealing to foreign users and will help the DIS to expand its position beyond the German speaking countries towards a truly international arbitral institution.

E. Jayme: Draft of a German statute against the validity of polygamous marriages celebrated abroad – critical remarks

The draft of a German statute against polygamous marriages does not take into account the bilateral treaty on social security between Germany and the Kingdom of Morocco, which presupposes the validity of polygamous marriages: both widows share the social security benefits. In view of current court practice there is no need for a German statute, which in situations in which both spouses have their habitual residence in Germany, provides for court action in order to declare the second marriage null and void. The general clause of public policy (art. 6 of the Introductory Act to the German Civil Code [EGBGB]) seems to be sufficient for dealing with polygamous marriages.

A. Wolf: Jurisdiction of German Courts for cartelists’ recovery claims due to a joint and several liability

In its decision, the Higher Regional Court Hamm determined under § 36 Sec. 1 No. 3 ZPO on the so-called „Schienenkartell“ that the German District Court Dortmund has international jurisdiction for recovery claims between jointly and severally liable cartelists from Germany, Austria and the Czech Republic. Therefor it applied Art. 8 No. 1 Brussels I recast together with German rules on subject matter jurisdiction and interpreted § 32 ZPO following the Court of Justice in its CDC-judgment with regard to Art. 7 No. 2 Brussels I recast.

W. Wurmnest/M. Gömann: Shaping the conflict of law rules on unfair competition and trademark infringements: The “Buddy-Bots” decision of the German Federal Supreme Court

On 12 January 2017 the German Federal Supreme Court (Bundesgerichtshof) rendered its judgment on the unlawful distribution of supporting gaming software – so-called “Buddy-Bots” – for the multiplayer online role-playing game “World of Warcraft”. This article takes a closer look at the application of Art. 6 and Art. 8 Rome II Regulation by the Supreme Court. The authors argue that the principle of uniform interpretation could be threatened by the Court’s tendency to align its reading of European conflict of law rules with the interpretation of the “old” German law now superseded by the Rome II Regulation, especially with regard to the market effects principle under Art. 6(1) Rome II Regulation.

O.L. Knöfel: Delegated Enforcement vs. Direct Enforcement under the EU Maintenance Regulation No. 4/2009 – The Role of Central Authorities

The article reviews a decision of the European Court of Justice (Case C-283/16), dealing with questions of international judicial assistance arising in enforcement procedures under the European Maintenance Regulation No. 4/2009. The Court held that a maintenance creditor is entitled to seek cross-border enforcement directly in a court, without having to proceed through the Central Authorities of the Member States involved. National regulations such as the Civil Jurisdiction and Judgments (Maintenance) Regulations 2011, demanding applications to be submitted to the Central Authority of the requested Member State, must be interpreted in the light of the European Maintenance Regulation. The author analyses the relevant issues of cross-border recovery of maintenance and explores the decision’s background in European Union law.

R.A. Schütze: Cautio iudicatum solvi in case of uncertainty of seat of companies

110 German Code of Civil Procedure requires plaintiffs with an ordinary residence or seat (if a company or other legal entity) outside the European Union or the European Economic Area (EWR) to provide – on request of the defendant – a cautio iudicatum solvi. In two judgments – commented below – the Bundesgerichtshof and the Oberlandesgericht Düsseldorf have decided on the ratio of security for costs under German law and on important issues of proof in case that the seat of the plaintiff (inside or outside EU or EWR) is contested. The Oberlandesgericht Düsseldorf qualifies the right of the defendant to demand security of cost from the plaintiff as an exceptio for which the burden of proof lies with the defendant. But as the plaintiff is more familiar with its organization and activities it has a secondary burden of asserting relevant facts (sekundäre Vortragslast). However, this does not change the burden of proof.

L. Kopcznyski: Confusion about the reciprocity requirement

According to domestic German law, the recognition and enforcement of foreign judgments is dependent on the requirement of reciprocity (sec. 328 (1) no. 5 of the German Code of Civil Procedure). It is, however, not an easy task to assess whether a foreign state would recognise a German judgment in similar circumstances. Courts regularly struggle to apply correctly the specific prerequisites which have to be met in this regard. A recent judgment of the Regional Court in Wiesbaden demonstrates that. In its decision, the court refused to enforce a Russian judgment because it set the bar for reciprocity far too high.

M. Gebauer: Compulsory recognition procedure according to Section 107 FamFG in order to determine the validity of a divorce registered at a foreign consulate located in Germany

German law requires that foreign decisions (originating beyond the EU) affecting the status of a marriage, e.g. divorce judgements, are subject to a compulsory recognition procedure (Anerkennungsverfahren), according to paragraph 107 of the Act on Proceedings in Family Matters and in Matters of Non-Contentious Jurisdiction (FamFG). This requires a free-standing application by an interested party to the relevant state authority which is responsible for determining the application. The decision, rendered by the Court of Appeal (Oberlandesgericht) in Nuremberg, reinforced long-standing judicial reasoning, albeit made with reference to a previous similarly worded statute, that the recognition procedure is also required where a foreign diplomatic mission situated in Germany is responsible for an official act potentially affecting the parties’ marriage in Germany. The Court of Appeal in Nuremberg correctly reasoned by way of analogy that while the paragraph does not specifically deal with circumstances where a divorce is registered by a foreign diplomatic mission situated in Germany, the legislator had not intended for the previous judicial approach to be reviewed. Thus, courts should continue to treat divorces in which a foreign diplomatic mission situated in Germany has been involved in the same way as judgements issued in foreign countries. This meant that the local court had no jurisdiction to determine the validity of a divorce registered at the Thai consulate located in Frankfurt. An application to the relevant state authority in terms of the compulsory recognition procedure must first be disposed of before matters can be considered by the local court

K. Siehr: „Wrongful Retention“ of a Child According to Article 3 of the Hague Abduction Convention of 1980

A couple habitually resident in South Africa had two children living with them. The couple separated but had joint custody for the children. The mother travelled to Senegal with the children but did not return them until January 3, 2016. In August 2016 mother and children took refuge in Germany. On January 2, 2017 the father in South Africa asked German authorities to return the wrongfully retained children to South Africa. The court of first instance (Amtsgericht Pankow-Weißensee) refused to do so because the children were not wrongfully retained because Senegal is no State Party of the Hague Abduction Convention of 1980. The Court of Appeal in Berlin (Kammergericht) reversed the decision of first instance and correctly interpreted Art. 3 Hague Abduction Convention as not requiring abduction wrongfully committed in a State Party. According to Art. 4 Hague Abduction Convention, the abducted or retained child must have had his/her habitual residence in a State Party immediately before the removal or retention. Art. 3 and 4 Hague Abduction Convention are discussed and analyzed, also with respect to the more restricted wording of Art. 2 No. 11 Hague Custody Convention of 1996. Finally, it is stressed that it does not matter whether the wrongfully abducted child spent some time in States not being State Parties to the Hague Abduction Convention as soon as the one year time limit for the application of return (Art. 12 sec. 1 Hague Abduction Convention) has been met.

A. Piekenbrock: Jurisdiction for damage claims regarding forum shopping in European Insolvency Law: commentaries on Court of Cassation, Social Chamber, 10.1.2017

The paper deals with a decision delivered by the French Court of Cassation regarding damage claims within the context of the initiation of English administration proceedings for all EU companies of the Canadian Nortel Networks Group including the French Nortel Networks SA in January 2009. The Social Chamber has come to the conclusion that English Courts have exclusive jurisdiction regarding damage claims of a former employee of the French company based on alleged falsehood by the opening of the main insolvency proceedings in England. The decision emphasises correctly the binding force of the English opening decision. Yet, the reasoning seems erroneous insofar as the claim is not directed against the insolvent company itself or its liquidator, but rather against another company of the same group (the British Nortel Networks UK Limited) and the insolvency practitioners involved (Ernst & Young). At least the Court of Cassation as a court of last resort should have referred the case to the C.J.E.U. pursuant to Art. 267(3) TFEU.

K. Lilleholt: Norwegian Supreme Court: The Law of the Assignor’s Home Country is Applicable to Third-Party Effects of Assignments of Claims

In its judgment of 28/6/2017, the Norwegian Supreme Court held that the effects in relation to the assignor’s creditors of an assignment of claims by way of security was governed by the law of the assignor’s home country under Norwegian choice of law rules. This issue has not been dealt with in Norwegian legislation, and earlier case law is sparse and rather unclear. Application of the law of the assignor’s home country has been recommended by legal scholars, but these views are not unanimously held. The Supreme Court’s decision is in line with the later proposal for an EU regulation on the law applicable to the third-party effects of assignments of claims. The proposed regulation will not be binding on Norway, as it will not form part of the EEA agreement. This is also the case for other EU instruments regarding private international law, like the Rome I and Rome II Regulations and the Insolvency Regulation. In several recent judgments, however, the Supreme Court has stated that EU law should provide guidance where no firm solution can be found in Norwegian choice of law rules (IV.). The case also raised a jurisdiction issue. The Supreme Court found that the insolvency exception in the Lugano Convention Art. 1(2)(b) applied and that Norwegian courts had jurisdiction because the insolvency proceedings were opened in Norway. This article will record the facts of the case (II.) and present the jurisdiction issue (III.) before the Supreme Court’s discussion of the choice of law rule is presented and commented upon (IV.).

K. Thorn/M. Nickel: The Protection of Structurally Weaker Parties in Arbitral Proceedings

In its judgment, the Austrian Supreme Court of Justice (OGH) ruled on the legal validity of an arbitration agreement between an employer based in New York and a commercial agent based in Vienna acquiring contracts in the sea freight business. The court held that the arbitration agreement was invalid and violated public policy due to an obvious infringement of overriding mandatory provisions during the pending arbitral proceedings in New York. The authors support the outcome of the decision but criticize the OGH’s reasoning that failed to address key elements of the case. In the light of the above, the article discusses whether the commercial agent’s compensation claim relied on by the court constitutes an overriding mandatory provision although the EU Commercial Agents Directive does not cover the sea freight. Further, the article identifies the legal basis for a public policy review of arbitration agreements and elaborates on the prerequisites for a violation of public policy. In this regard, the authors argue that arbitration agreements can only be invalidated due to a violation of substantive public policy if a prognosis shows that it is overwhelmingly likely and close to certain that the arbitral tribunal will neglect applicable overriding mandatory provisions.

Roxana Banu of Western University has published Nineteenth-Century Perspectives on Private International Law, a new book in the Oxford University Press series on the history and theory of international law.  Information from the publisher can be found here.  From the website:

Private International Law is often criticized for failing to curb private power in the transnational realm. The field appears disinterested or powerless in addressing global economic and social inequality. Scholars have frequently blamed this failure on the separation between private and public international law at the end of the nineteenth century and on private international law’s increasing alignment with private law.

Through a contextual historical analysis, Roxana Banu questions these premises. By reviewing a broad range of scholarship from six jurisdictions (the United States, France, Germany, the United Kingdom, Italy, and the Netherlands) she shows that far from injecting an impetus for social justice, the alignment between private and public international law introduced much of private international law’s formalism and neutrality. She also uncovers various nineteenth century private law theories that portrayed a social, relationally constituted image of the transnational agent, thus contesting both individualistic and state-centric premises for regulating cross-border inter-personal relations.

Overall, this study argues that the inherited shortcomings of contemporary private international law stem more from the incorporation of nineteenth century theories of sovereignty and state rights than from theoretical premises of private law. In turn, by reconsidering the relational premises of the nineteenth century private law perspectives discussed in this book, Banu contends that private international law could take centre stage in efforts to increase social and economic equality by fostering individual agency and social responsibility in the transnational realm.

The Journal of Private International Law is inviting abstracts for its 8th conference to be held at the Ludwig-Maximilians-University Munich from 12-14 September 2019. Abstracts of up to 500 words from scholars, at any stage of their career, should be sent to jprivintl2019@lmu.de by Monday 7 January 2019.

The Journal has held very successful conferences in Aberdeen (2005), Birmingham (2007), New York (2009), Milan (2011), Madrid (2013), Cambridge (2015) and Rio de Janeiro (2017). Its biennial conferences provide a unique forum for scholars from all over the world to meet and advance the discipline of private international law.

Speakers will not be required to pay a registration fee but must cover their own travel and accommodation costs. It is expected that speakers will, before the end of 2019, submit the final version of their papers to be considered for publication in the Journal in the first instance.

Further details can be found in volume 14(2) of the Journal or on the University’s website.

Thanks go to Michael Douglas for alerting me to the call for papers.

Applications for the 2019 Nygh Hague Conference Internship Award close at the end of this month. The award contributes towards the costs of a student or graduate, of an Australian law school, working for up to six months at the Secretariat of the Hague Conference on Private International Law in the Netherlands.

The internship aims to foster Australian involvement in the work of the Hague Conference and is established in memory of the late Hon. Dr. Peter Nygh AM. The Australian Institute of International Affairs and the Australian Branch of the International Law Association sponsor the award.

The successful candidate is expected to start the internship in The Hague on 14 January 2019. Further details and information on how to apply is available here.

The Institute of German and International Procedural Law at the University of Bonn is looking for research fellows (Wissenschaftliche Mitarbeiterin / Wissenschaftlicher Mitarbeiter) at the Chair of Prof. Dr. Matthias Weller on a part-time basis (50% and 25%).

Your task will include supporting the chair in research and teaching, especially in the areas of conflict of laws, international civil procedure, private law and cultural property law.

A candidate should hold a first law degree (i.e. the German First State Exam) above average (at least “vollbefriedigend”). A very good command of German is required, further language skills will be an asset.

The positions will be paid according to the salary scale E 13 TV-L. The contract period will be limited to 3 years (with a possibility of renewal). Supervision of a PhD in the research fields of the chair will be offered.

The University of Bonn aims at increasing the number of women in academia. Therefore, applications of qualified women are particularly welcome. Candidates with disabilities will be given preference in case of equal qualification.

If you are interested, please send your application per email to: Prof. Dr. Matthias Weller (weller@jura.uni-bonn.de).

For further information see here.

On Thursday 11 October 2018, the Maastricht Private Law Lecture, which is hosted by the Maastricht Department of Private Law, will take place at Maastricht University (Faculty of Law). This lecture will be delivered by Prof. dr. Symeon C. Symeonides and is entitled “The ‘Private’ in Private International Law”. An interactive seminar with PhD researchers will follow the next day. This event is open to everyone but registration is required and is free of charge. More information is available here.

Interested persons may also wish to read Prof. Symeonides’ excellent General Course given at the Hague Academy, which deals with this subject matter in greater depth: Symeon C. Symeonides, Private International Law: Idealism, Pragmatism, Eclecticism (General Course on Private International Law), Recueil des cours, tome 384, Brill/Nijhoff, Leiden/Boston, 2016 (see in particular Chapter IV pp. 100-130).

Registration for the XLI Seminar organised by the Mexican Academy of Private International and Comparative Law (AMEDIP) is now open, please click here. For background information, please see my previous post here.

By the Permanent Bureau of the Hague Conference on Private International Law

During the solemn ceremony celebrating its 125th Anniversary, the Hague Conference on Private International Law (HCCH) launched a new video “HCCH: Connecting. Protecting. Co-operating.”  In a visually appealing way, the video explains the work of the HCCH and the importance of the Organisation in a globalised world.

Yesterday, the UK government published new paper on the future of judicial cooperation in civil matters. It sets out the UK’s vision for the handling of civil legal cases if no Brexit deal can be reached.

The full paper is available here.

On 10 July 2018, the United States Court of Appeals for the District of Columbia Circuit rendered its judgment in the matter of Alan Philipps et al. v. the Federal Republic of Germany and the Stiftung Preussischer Kulturbesitz.

This case involves a claim by heirs of Holocaust victims for restitution of the „Welfenschatz“ (Guelph Treasure), a collection of medieval relics and devotional art housed for generations in the Cathedral of Braunschweig (Brunswick), Germany. This treasure is now on display at the Kunstgewerbemuseum Berlin (Museum of Decorative Arts) which is run by the Stiftung Preussischer Kulturbesitz. The value of the treasure is estimated to amount to USD 250 million (according to the claim for damages raised in the proceedings).

The appeal judgment deals with, inter alia, the question whether there is state immunity for Germany and the Stiftung respectively. Under the US Federal Sovereign Immunities Act, foreign sovereigns and their agencies enjoy immunity from suit in US courts unless an expressly specified exception applies, 28 U.S.C. § 1604.

One particularly relevant exception in Holocaust litigations relating to works of art is the „expropriation exception”, § 1605(a)(3). This exception has two requirements. Firstly, rights in property taken in violation of international law must be in issue. Secondly, there must be an adequate commercial nexus between the United States and the defendant:

„A foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case in which rights in property taken in violation of international law are in issue and that property or any property exchanged for such property is present in the United States in connection with a commercial activity carried on in the United States by the foreign state; or that property or any property exchanged for such property is owned or operated by an agency or instrumentality of the foreign state and that agency or instrumentality is engaged in a commercial activity in the United States.“

According to the Court‘s recent judgment in Holocaust litigation against Hungary (Simon v. Republic of Hungary, 812 F.3d 127, D.C. Cir. 2016), intrastate expropriations in principle do not affect international law but are internal affairs of the acting state vis-à-vis its citizens. However, if the intrastate taking amounts to the commission of genocide, such a taking subjects a foreign sovereign and its instrumentalities to jurisdiction of US courts (Simon v Hungary, op.cit.).

This leads to the question of what exactly is „genocide“ in this sense. The Court in Simon adopted the definition of genocide set forth in Article II lit. c of the Convention on the Prevention of the Crime of Genocide of 9 December 1948, 78 U.N.T.S. 277, (signed by the USA on 11 December 1948, ratified on 25 November 1988), i.e. „[d]eliberately inflicting“ on “a national, ethnical, racial or religious group … conditions of life calculated to bring about its physical destruction in whole or in part“. Thus, the Court in Philipps, as it observed, was „asked for the first time whether seizures of art may constitute ‘takings of property that are themselves genocide‘ “. “The answer is yes“ (Philipps v. Germany, op.cit.).

The Court prepared this step in Simon v. Hungary:

„The Holocaust proceeded in a series of steps. The Nazis achieved [the “Final Solution“] by first isolating [the Jews], then expropriating the Jews’ property, then ghettoizing them, then deporting them to the camps, and finally, murdering the Jews and in many instances cremating their bodies“.

Therefore, actions taken on the level of first steps towards genocide are themselves genocide if later steps result in genocide even if these first measures as such, without later steps, would not amount to genocide. To put it differently, this definition of genocide includes expropriations that later were escalated into genocide if already these expropriations were „deliberately inflicted“ „to bring about … physical destruction in whole or in part“ (see again Art. II lit. c Prevention of Genocide Convention).

It will be a crucial question what the measures and means of proof for such an intent should be. In this stage of the current proceedings, namely on the level of appeal against the decision of first instance not to grant immunity, the Philipps Court explained, in its very first sentence of the judgment, that the claimants‘ submissions of facts have to be laid down as the basis for review:

„Because this appeal comes to us from the district court’s ruling on a motion to dismiss, we must accept as true all material allegations of the complaint, drawing all reasonable inferences from those allegations in plaintiffs’ favor.”

However, the position of the US Congress on the point is clear: As the Philipps Court explains,

“[i]n the Holocaust Expropriated Art Recovery Act (HEAR Act 2016), which extended statutes of limitation for Nazi art-looting claims, Congress ‘f[ound]’ that ‘the Nazis confiscated or otherwise misappropriated hundreds of thousands of works of art and other property throughout Europe as part of their genocidal campaign against the Jewish people and other persecuted groups’, see Holocaust Expropriated Art Recovery Act of 2016, Pub. L. No. 114-308, § 2, 130 Stat. 1524, 1524.”

It will be another crucial question, what „expropriation“ exactly means in the context of the Holocaust. It is common ground that the unlawful taking of property from persecuted persons not only took place by direct taking but also and structurally through all sorts of transactions under duress. However, the exact understanding of what constitutes such “forced sales“ – and thereby “expropriation“ – seems to differ substantially. Some argue that even a sale of art works at an auction in a safe third state after emigrating to that state constitutes a forced sale due to the causal link between persecution, emigration and sale for making money in the exile. Under Art. 3 of the US Military Law No. 59 of 10 November 1947 on the Restitution of Identifiable Property in Germany, there was a „presumption of confiscation“ for all transfers of property by a person individually persecuted or by a person that belonged to class of persecuted persons such as in particular all Jews. This presumption could be rebutted by submission of evidence that the transferor received a fair purchase price and that the transferor could freely dispose of the price. It is not clear whether this standard or a comparable standard or another standard applies in the case at hand. Irrespective of this legal issue, the claimants submit on the level of facts that the purchase price was only 35% of the fair market value in 1935. This submission was made in the following context:

Three Jewish art dealers from Frankfurt am Main, ancestors to the claimants, acquired the Guelph Treasure in October 1929 from the dynasty of Brunswick-Lüneburg shortly before the economic crisis of that year. The agreed price was 7.5 million Reichsmark (the German currency of the time). The estimations of the value prior to the acquisition seem to have ranged between 6 and 42 million Reichsmark. The sales contract was signed by the art dealers „J.S. Goldschmidt“, „I. Rosenbaum“ und „Z.M. Hackenbroch“. These dealers and others formed a “consortium“ with further dealers to be able to raise the money (the whereabouts of the contract for this consortium and thus the precise structure of this joint-venture is unknown up to now).

According to the sales contract, the buyers were obliged to resell the Treasure and share profits with the seller if these profits go beyond a certain limit. The contract expressly excluded the possibility for the buyers to keep the Treasure or parts of it. Rather, the buyers were to take „every effort” to achieve a resale.

In the following years, the consortium undertook many steps to sell the Treasure in Germany and in the USA. However, according to the German Advisory Commission on the return of cultural property seized as a result of Nazi persecution, especially Jewish property (i.e. the alternative dispute resolution body established by the German government in order to implement the non-binding Washington Principles on Nazi Confiscated Art of 3 December 1998, on which 44 states, including Germany and the USA agreed), it was common ground that the economic crisis reduced means and willingness of potential buyers significantly. In 1930/1931, the dealers managed to sell 40 pieces for around 2.7 million Reichsmark in total. After displaying for sale in the USA, the remaining 42 items were stored in Amsterdam. In 1934, the Dresdner Bank showed interest as a buyer, acting on behalf of the State of Prussia. The bank apparently did not disclose this fact. In April of 1935, the consortium made a binding offer for 5 million Reichsmark, the bank offered 3.7 million, the parties ultimately agreed upon 4.25 million, to be paid partly in cash (3.37 million), partly by swap with other works of art to be sold abroad in order to react to foreign currency exchange restrictions. The sales contract was signed on 14 June 1935 by the dealers and the bank, acting on behalf of the State of Prussia whose Prime Minister was Hermann Göring at the time. In July 1935, (almost) the full price was paid (100.000 Reichsmark were kept as commission). The 42 objects were transferred to Berlin. The consortium seemed to have been able to freely dispose of the money that they received at that time and pay it out to the members of the consortium. Later, all but one of the dealers had to emigrate, the one remaining in Germany came to death later (apparently under dubious circumstances, as is submitted by the claimants).

On the merits, the courts will have to take a decision on the central point of this case whether these facts, as amended/modified in the further proceedings, amount to “expropriation” and, if so, whether this expropriation was intended to „deliberately inflict … conditions of life calculated to bring about … physical destruction in whole or in part” (see once more Article II lit. c of the Convention on the Prevention of the Crime of Genocide).

On a principal level, the Federal Republic of Germany argued that allowing this suit to go forward will “dramatically enlarge U.S. courts’ jurisdiction over foreign countries’ domestic affairs” by stripping sovereigns of their immunity for any litigation involving a “transaction from 1933–45 between” a Nazi-allied government and “an individual from a group that suffered Nazi persecution.” In addition to that, the principal line of argument would certainly apply to other cases of genocide and preparatory takings of property. The Court was not impressed:

“Our conclusion rests not on the simple proposition that this case involves a 1935 transaction between the German government and Jewish art dealers, but instead on the heirs’ specific—and unchallenged—allegations that the Nazis took the art in this case from these Jewish collectors as part of their effort to drive [Jewish people] out of their ability to make a living.”

Even then, the enlargement of jurisdiction over foreign states by widening the exceptions to state immunity under the concept of genocide by expropriation appears to be in contrast to the recent efforts by US courts to narrow down jurisdiction in foreign-cubed human rights litigations under the ATS and in general.

However, the Federal Republic of Germany does no longer need to worry: The Court held that the second requirement of the expropriation exception is not fulfilled because the Guelph Treasure is not present in the United States in connection with a commercial activity carried on by the foreign state in the United States. In fact, it is not present in the USA at all but still in Berlin.

Yet, in respect to the Stiftung Preussischer Kulturbesitz, the suit will continue: For a state agency it seems sufficient that the property in question is owned or operated by that agency or instrumentality of the foreign state if that agency or instrumentality is engaged in a commercial activity (not necessarily in connection with the property in question) in the United States. The ratio of this rule is difficult to understand for outsiders and appears not to be in line with the overall developments of (personal) jurisdictional law in the USA, and if at the end of the day there is a judgment against the Stiftung to return the Treasure there will of course be the issue of recognition and enforcement of that judgment in Germany – including all political implications and considerations of public policy.

The parties may want to think about arbitration at some point. That was the way out from lengthy court proceedings and delicate questions on all sorts of conflicts of laws in the famous case of Maria Altmann v. Republic of Austria that likewise turned, inter alia, on issues of state immunity for foreign states and their agencies or instrumentalities. In general, it seems that arbitration could play a larger role in art-related disputes (see e.g. the German Institution for Arbitration’s Autumn Conference on 26 September 2018 in Berlin).