Conflictoflaws

As previously announced, the Journal of Private International Law-Singapore Management University Virtual Conference on Conflicts of Jurisdiction will be held online on 23 to 24 June 2022 (6.00 pm to 10.20 pm Singapore time, 11.00 am to 3.20 pm British Summer Time on each day). The event is supported by the Hague Conference on Private International Law (HCCH). Complimentary registration for academics, government and international organisation officials, JPrivIntL Advisory Board members and students will close on 22 June 2022. More information on the conference and the link to register can be found here.

This morning, the CJEU has pronounced on the interplay between the Brussels I bis Regulation and arbitration, this time in the context of the recognition in the UK of a judgment given by a Spanish court.

I. Facts

This case C-700/20 results from the event taking place two decades ago. Some of you may recall that in November 2002, the Greek-owned and Bahamas-operated oil tanker Prestige encountered a storm in the seas close to Galicia coast in Spain. Being damaged, the tanker eventually sunk leaving oil spill and causing significant damage to northern coast of Spain and the western coast of France.

The Spanish state and some other parties sought damage compensation, in the context of the criminal proceedings before the Audiencia Provincial de A Coruña commenced against the master, owners, and the London P&I Club, the liability insurer of both the vessel and its owners, in 2003. In 2012, the London P&I Club commenced arbitration proceedings in London seeking a declaration that, pursuant to the arbitration clause in the insurance contract concluded with the owners of the Prestige, the Spanish state was required to pursue its claims in the arbitration proceedings, and that it could not be liable to the Spain in respect of those claims due to the ‘pay to be paid’ clause.

The arbitration was quicker and the award was made in 2013, upheld the claims also limiting the the London P&I Club’s liability up to USD 1 billion. The P&I Club applied to the High Court of Justice (England & Wales), Queen’s Bench Division (Commercial Court), under Section 66 (1) and (2) of the Arbitration Act 1996, for leave to enforce the arbitral award in that jurisdiction in the same manner as a judgment or order and for a judgment to be entered in the terms of that award. The leave was granted in 2013 along with a judgment in the terms of the award.

The Spanish proceedings ended in 2018 by the judgment of the Tribunal Supremo whereby it confirmed that the master, ship owners and the P&I Club were liable to over 200 parties, including the Spanish state, subject, in the case of the P&I Club, to the contractual limit of liability of USD 1 billion. In 2019, the Audiencia Provincial de A Coruña issued an order setting out the amounts that each of the claimants was entitled to obtain from the respective defendants, entitling the Spanish State to be paid approximately EUR 2.3 billion, subject in the case of the P&I Club to the limit of EUR 855 million. Soon after, the Spanish state made an application to the High Court of Justice (England & Wales), Queen’s Bench Division, on the basis of Article 33 of the Brussels I Regulation, for recognition of the latter enforcement order. Slightly prior to the expiration of the Brexit transition period, the UK court made a reference for preliminary ruling concerning the Brussels I Regulation, Article 1(2)(d) – exclusion of arbitration, and Article 34(1) and (3) – grounds for refusal of recognition and/or enforcement.

II. The Issues

At issue was whether that recognition or enforcement could be refused on the basis of the existence, in the UK, of a judgment entered in the terms of an arbitral award and the effects of which are irreconcilable with those of the abovementioned judicial ruling (first and second question). And, if not, whether recognition or enforcement may be refused as being contrary to public policy on the ground that it would disregard the force of res judicata acquired by the judgment entered in the terms of an arbitral award (third question).

III. Decision and Reasoning

Not following the opinion of AG Collins delivered in May this year, the CJEU held that a judgment entered by a court of a MS (in this case, UK) in the terms of an arbitral award cannot prevent the recognition there of a judgment given in another MS (in this case, Spain) where a judicial decision resulting in an outcome equivalent to the outcome of that award could not have been adopted by a court of the first MS without infringing the provisions and the fundamental objectives of the Brussels I Regulation. In the case at hand, this means that the Spanish judgment could have been refused recognition and enforcement only if the UK judgment entered by the UK court in the terms of an arbitral award could have been adopted by a UK court without infringing the provisions and the fundamental objectives of that Regulation.
However, the CJEU went on to explain that such fundamental objectives include the principles of free movement of judgments in civil matters, predictability as to the courts having jurisdiction and therefore legal certainty for litigants, sound administration of justice, minimisation of the risk of concurrent proceedings, and mutual trust in the administration of justice (para. 56). It added another requirement –that such judgment should not violate the right to an effective remedy guaranteed in Article 47 of the EU Charter of Fundamental Rights (para. 58).

Turning to the facts of the case, the CJEU concludes that the respective UK judgment could not have been rendered on the basis of the Brussels I Regulation without infringing two fundamental rules of the Regulation: first, the rule on the relative effect of an arbitration clause included in an insurance contract which does not extend to claims against a victim of insured damage who bring a direct action against the insurer, in tort, delict or quasi-delict, before the courts for the place where the harmful event occurred or before the courts for the place where the victim is domiciled and, second, the rule on lis pendens which coordinates parallel proceedings based on the priority principle favouring the court first seised.

In answering the third question, the CJEU has relied on the opinion of the AG Collins, who stated the EU legislature intended to regulate exhaustively the issue of the force of res judicata acquired by a judgment given previously and, in particular, the question of the irreconcilability of the judgment to be recognised with that earlier judgment by means of Article 34(3) and (4) of the Brussels I Regulation, thereby excluding the possibility that recourse be had, in that context, to the public-policy exception set out in Article 34(1) of that Regulation. Therefore, res judicata cannot be contained in the notion of public policy for the purpose of recognition and enforcement of judgments under Article 34 of the Brussels I Regulation.

Undoubtedly, this judgment will provoke different reactions, but one thing is certain this is a one-hit wonder in UK given that UK is no longer bound by the Brussels regime.

The CJEU judgment has been made availalbe online yet, but the CJEU issued the Press Release.

First Instance where a Mainland China Civil Mediation Decision has been Recognized and Enforced in New South Wales, Australia

 

I Introduction

 

Bank of China Limited v Chen [2022] NSWSC 749 (‘Bank of China v Chen’), decided on the 7 June 2022, is the first instance where the New South Wales Supreme Court (‘NSWSC’) has recognised and enforced a Chinese civil mediation decision (i.e.,?????).

 

II Background

 

This case concerned the enforcement of two civil mediation decisions obtained from the People’s Court of District Jimo, Qingdao Shi, Shandong Province China (which arose out of a financial loan dispute) in Australia.[1]

 

A foreign judgement may be enforced in Australia either at common law or pursuant to the Foreign Judgements Act 1991(Cth).[2] As the People’s Republic of China is not designated as a jurisdiction of substantial reciprocity under the Foreign Judgements Regulation 1992 (Cth) schedule 1, the judgements of Chinese courts may only be enforced at common law.[3]

 

For a foreign judgement to be enforced at common law, four requirements must be met:[4] (1) the foreign court must have exercised jurisdiction in the international sense; (2) the foreign judgement must be final and conclusive; (3) there must be identity of parties between the judgement debtor(s) and the defendant(s) in any enforcement action; and (4) the judgement must be for a fixed, liquidated sum. The onus rests on the party seeking to enforce the foreign judgement.[5]

 

Bank of China Ltd (‘plaintiff’) served the originating process on Ying Chen (‘defendant’) pursuant to r 11.4 and Schedule 6(m) of the Uniform Civil Procedure Rules 2005 (NSW) (‘UCPR’) which provides that an originating process may be served outside of Australia without leave of the court to recognise or enforce any ‘judgement’.[6] Central to this dispute was whether a civil mediation decision constituted a ‘judgement’ within the meaning of schedule 6(m).

 

III Parties’ Submission

 

A Defendant’s Submission

 

The defendant filed a notice of motion seeking for (1) the originating process to be set aside pursuant to rr 11.6 and 12.11 of the UCPR, (2) service of the originating process on the defendant to be set aside pursuant to r 12.11 of the UCPR and (3) a declaration that the originating process had not been duly served on the defendant pursuant to r 12.11 of the UCPR.[7]

 

The defendant argued that the civil mediation decisions are not ‘judgements’ within the meaning of UCPR Schedule 6(m).[8] Moreover, the enforcement of foreign judgment at common law pre-supposes the existence of a foreign judgement which is absent in this case.[9]

 

The defendant submitted that the question that must be asked in this case is whether the civil mediation decisions were judgements as a matter of Chinese law which is a question of fact.[10] This was a separate question to whether, as a matter of domestic law, the foreign judgements ought to be recognised at common law.[11]

 

B Plaintiff’s Submission

 

In response, the plaintiff submitted that all four common law requirements were satisfied in this case.[12] Firstly, there was jurisdiction in the international sense as the defendant appeared before the Chinese Court by her authorised legal representative.[13] The authorised legal representative made no objection to the civil mediation decisions.[14] Secondly, the judgement was final and conclusive as it was binding on the parties, unappealable and can be enforced without further order.[15] Thirdly, there was an identity of parties as Ying Chen was the defendant in both the civil mediation decisions and the enforcement proceedings.[16] Fourthly, the judgement was for a fixed, liquidated sum as the civil mediation decisions provided a fixed amount for principal and interest.[17]

 

In relation to the defendant’s notice of motion, the plaintiff argued that the question for the court was whether the civil mediation decisions fell within the meaning of ‘judgement’ in the UCPR, that is, according to New South Wales law, not Chinese law (as the defendant submitted).[18] On this question, there was no controversy.[19] While the UCPR does not define ‘judgement’, the elements of a ‘judgement’ are well settled according to Australian common law and Chinese law expert evidence supports the view that civil mediation decisions have those essential elements required by Australian law.[20]

 

Under common law, a judgement is an order of Court which gives rise to res judicata and takes effect through the authority of the court.[21] The plaintiff relied on Chinese law expert evidence which indicated that a civil mediation decision possesses those characteristics, namely by establishing res judicata and having mandatory enforceability and coercive authority.[22] The expert evidence noted that a civil mediation decision is a type of consent judgement resulting from mediation which becomes effective once all parties have acknowledged receipt by affixing their signature to the Certificate of Service.[23] The Certificate of Service in respect of the civil mediation decisions in this case had been signed by the legal representatives of the parties on the day that the civil mediation decisions were made.[24] While a civil mediation decision is distinct to a civil judgement (i.e., ?????),[25] a civil mediation decision nonetheless has the same binding force as a legally effective civil judgement and can be enforced in the same manner.[26]

 

The expert evidence further noted that Mainland China civil mediation decisions have been recognised and enforced as foreign judgements in the Courts of British Columbia, Hong Kong and New Zealand.[27] The factors which characterise a ‘judgement’ under those jurisdictions are the same factors which characterise a ‘judgement’ under Australian law.[28]This supports the view that the same recognition should be afforded under the laws of New South Wales.[29]Accordingly, the plaintiff submitted the a civil mediation decision possesses all the necessary characteristics of a ‘judgement’ under Australian law such that service could be effected without leave under schedule 6(m).[30]

 

IV Resolution

 

Harrison AsJ noted that the judgements of Chinese courts may be enforceable at common law and found that all four requirements was satisfied in this case.[31] There was jurisdiction in the international sense as the defendant’s authorised legal representative appeared before the People’s Court on her behalf, the parties had agreed to mediation, the representatives of the parties came to an agreement during the mediation, and this was recorded in a transcript.[32] The parties’ representatives further signed the transcript and a civil mediation decision had been issued by the people’s courts.[33] Moreover, the civil mediation decision was final and binding as it had been signed by the parties.[34] The third and fourth requirements were also clearly satisfied in this case.[35]

 

In relation to the central question of whether the civil mediation decisions constituted  ‘judgements’ in the relevant sense, Harrison AsJ found in favour of the plaintiff.[36] Harrison AsJ first noted that this question should not be decided on the arbitrary basis of which of the many possible translations of ????? should be preferred.[37] Moreover, the evidence of the enforcement of civil mediation decisions as judgements in the jurisdictions of British Columbia, Hong Kong and New Zealand was helpful, though also not determinative.[38]

 

Rather, this question must be determined by reference to whether civil mediation decisions constituted judgements under Australian law as opposed to Chinese law, accepting the plaintiff’s submission.[39] The civil mediation decisions were enforceable against the defendant immediately according to their terms in China without the need for further order or judgement of the People’s Court.[40] The parties could not vary or cancel the civil mediation decisions without the permission of the Jimo District Court.[41] The civil mediation decisions also had the same legal effects as a civil judgement.[42] Therefore, Harrison AsJ concluded that the civil mediation decisions were judgements for the purposes of Australian law as they established res judicata and were mandatorily enforceable and had coercive authority.[43] It then followed that the civil mediation decisions fell within the scope of UCPR schedule 6(m) and did not require leave to be served.[44]

 

V Orders

 

In light of the analysis above, Harrison AsJ held that the Chinese civil mediation decisions were enforceable and dismissed the defendant’s motion.[45] Costs were further awarded in favour of the plaintiff.[46]

 

 

 

Author: Hao Yang Joshua Mok, LLB Student at the University of Sydney Law School

Supervised by Associate Professor Jeanne Huang, Sydney Law School

 

References:

[1]

This is a guest post by Izaak Weaver-Herrera, JD student at the University of Pittsburgh School of Law

Third-party discovery in the United States pursuant to 28 U.S.C. § 1782 has often represented a pragmatic, if contentious, tool for international counsel. However, in a decision this week, the U.S. Supreme Court held that § 1782 discovery may be ordered only if the assembled “foreign or international tribunal” is a body which has been conferred governmental or intergovernmental authority. There has already been a wealth of reaction to this decision, including on this site. This post will offer a few additional perspectives.

As a bit of background, ZF Automotive arrived on the Court’s docket as a consolidation of two cases: ZF Automotive US, Inc., et al. v. Luxshare, Ltd. and Alixpartners, LLP, et al., v. the Fund for Protection of Investor’s Rights in Foreign States. Both cases questioned an open aspect of § 1782’s use: whether the phrase “foreign or international tribunal” included private commercial arbitrations between parties of different States and whether it included arbitral panels assembled pursuant to bilateral investment treaties. The Court ruled that since neither panel was conferred governmental authority, § 1782 discovery would be inappropriate in both instances.

Justice Barrett, writing for a unanimous Court, adopted a textual approach to the question. In other words, this was less of a decision on international policy, and more a reflection of what Congress said and meant. The Court paid particular attention to the use of “foreign” and “international” as modifiers to the word “tribunal.” The latter was more critical than the former. The term “[t]ribunal” has peculiar governmental or sovereign connotations, the Court said, “so ‘foreign tribunal’ more naturally refers to a body belonging to a foreign nation than to a tribunal that is simply located in a foreign nation.” Similarly, the Court found that “international tribunal” under the statute more naturally referred to tribunals between nations, rather than arbitral panels composed of or adjudicating issues between nationals of different States.

The Court also reasoned that this understanding of the statute more uniformly aligned with principles underlying both § 1782’s origin and the Federal Arbitration Act. The express purpose of § 1782 was to foster international comity. An overly broad application of § 1782, the Court’s view, would permit the use of district court resources in furtherance of “purely private bodies adjudicating purely private disputes abroad,” positioning the U.S. court system as a persistent presence in potentially limitless international disputes. The Court’s opinion also recognized the tension such a reading would create between the discovery permitted under the FAA. While the FAA restricts discovery to the discretion of arbitration panels, § 1782 permits both the tribunal itself and any “interested person” to submit requests for discovery. Thus, the Court reasoned, a narrower reading of § 1782 also serves to harmonize the scope of arbitration in the United States.

With these observations, the private arbitral tribunal in ZF Automotive was not a “foreign or international tribunal” under § 1782. This was deemed “straightforward.” The Court found the arbitration panel in the Alixpartners dispute more complicated, but ultimately reached the same conclusion. The opinion noted the BIT “simply references the set of rules that govern the panel’s formation and procedure if an investor chooses that forum,” and therefore did not confer permanent sovereign authority on the ad hoc tribunal. Rather, Lithuania simply consented to an arbitration much in the same way two private entities might. Thus, although the Alixpartners tribunal could render a judgment against Lithuania based on its consent in a treaty, it had not been conferred permanent sovereign authority and could not be considered a “foreign or international tribunal.”

The Court did not “foreclose[] the possibility that sovereigns might imbue an ad hoc arbitration panel with official authority.” So although Mixed Claims Commissions of years’ past didn’t quit analogize to modern BIT tribunals, the Court acknowledged that the former may indeed fall on the permissible side of the Court’s new bright line. As international tribunals keep specializing and proliferating (think of the proposed Multilateral Investment Court, or bodies entrusted to handle international criminal law), future questions as to whether a body is “imbued with governmental authority” will for sure arise—but, of course, private commercial arbitration is clearly outside the bounds of section 1782.

Written by Mayela Celis, UNED

Yesterday (15 June 2022) the US Supreme Court rendered its Opinion in the case of Golan v. Saada regarding the HCCH Child Abduction Convention. The decision was written by Justice Sotomayor, click here. For our previous analysis of the case, click here.

This case dealt with the following question: whether upon finding that return to the country of habitual residence places a child at grave risk, a district court is required to consider ameliorative measures that would facilitate the return of the child notwithstanding the grave risk finding. (our emphasis)

In a nutshell, the US Supreme Court answered this question in the negative. The syllabus of the judgment says: “A court is not categorically required to examine all possible ameliorative measures [also known as undertakings] before denying a Hague Convention petition for return of a child to a foreign country once the court has found that return would expose the child to a grave risk of harm.” The Court has also wisely concluded that “Nothing in the Convention’s text either forbids or requires consideration of ameliorative measures in exercising this discretion” (however, this is different in the European Union context where a EU regulation complements the Child Abduction Convention).

While admittedly not everyone will be satisfied with this Opinion, it is a good and well-thought through decision that will make a great impact on how child abduction cases are decided in the USA; and more broadly, on the way we perceive what the ultimate goal of the treaty is and how to strike a right balance between the different interests at stake and the need to act expeditiously.

In particular, the Court stresses that the Convention “does not pursue return exclusively or at all costs”. And while the Court does not make a human rights analysis, it could be argued that this Opinion is in perfect harmony with the current approaches taken in human rights law.

In my view, this is a good decision and is in line with our detailed analysis of the case in our previous post. In contrast to other decisions (see recent post from Matthias Lehmann), for Child Abduction – and human rights law in general – this is definitely good news from Capitol Hill.

Below I include a few excerpts of the decision (our emphasis, we omit footnotes):

“In addition, the court’s consideration of ameliorative measures must be guided by the legal principles and other requirements set forth in the Convention and ICARA. The Second Circuit’s rule, by instructing district courts to order return “if at all possible,” improperly elevated return above the Convention’s other objectives. Blondin I, 189 F. 3d, at 248. The Convention does not pursue return exclusively or at all costs. Rather, the Convention “is designed to protect the interests of children and their parents,” Lozano, 572 U. S., at 19 (ALITO , J., concurring), and children’s interests may point against return in some circumstances. Courts must remain conscious of this purpose, as well as the Convention’s other objectives and requirements, which constrain courts’ discretion to consider ameliorative measures
in at least three ways.

“First, any consideration of ameliorative measures must prioritize the child’s physical and psychological safety. The Convention explicitly recognizes that the child’s interest in avoiding physical or psychological harm, in addition to other interests, “may overcome the return remedy.” Id., at 16 (majority opinion) (cataloging interests). A court may therefore decline to consider imposing ameliorative measures where it is clear that they would not work because the risk is so grave. Sexual abuse of a child is one example of an intolerable situation. See 51 Fed. Reg. 10510. Other physical or psychological abuse, serious neglect, and domestic violence in the home may also constitute an obvious grave risk to the child’s safety that could not readily be ameliorated. A court may also decline to consider imposing ameliorative measures where it reasonably expects that they will not be followed. See, e.g., Walsh v. Walsh, 221 F. 3d 204, 221 (CA1 2000) (providing example of parent with history of violating court orders).

“Second, consideration of ameliorative measures should abide by the Convention’s requirement that courts addressing return petitions do not usurp the role of the court that will adjudicate the underlying custody dispute. The Convention and ICARA prohibit courts from resolving any underlying custody dispute in adjudicating a return petition. See Art. 16, Treaty Doc., at 10; 22 U. S. C. §9001(b)(4). Accordingly, a court ordering ameliorative measures in making a return determination should limit those measures in time and scope to conditions that would permit safe return, without purporting to decide subsequent custody matters or weighing in on permanent arrangements.

“Third, any consideration of ameliorative measures must accord with the Convention’s requirement that courts “act expeditiously in proceedings for the return of children.” Art. 11, Treaty Doc., at 9. Timely resolution of return petitions is important in part because return is a “provisional” remedy to enable final custody determinations to proceed. Monasky, 589 U. S., at ___ (slip op., at 3) (internal quotation marks omitted). The Convention also prioritizes expeditious determinations as being in the best interests of the child because “[e]xpedition will help minimize the extent to which uncertainty adds to the challenges confronting both parents and child.” Chafin v. Chafin, 568 U. S. 165, 180 (2013). A requirement to “examine the full range of options that might make possible the safe return of a child,” Blondin II, 238 F. 3d, at 163, n. 11, is in tension with this focus on expeditious resolution. In this case, for example, it took the District Court nine months to comply with the Second Circuit’s directive on remand. Remember, the Convention requires courts to resolve return petitions “us[ing] the most expeditious procedures available,” Art. 2, Treaty Doc., at 7, and to provide parties that request it with an explanation if proceedings extend longer than six weeks, Art. 11, id., at 9. Courts should structure return proceedings with these instructions in mind. Consideration of ameliorative measures should not cause undue delay in resolution of return petitions.

“To summarize, although nothing in the Convention prohibits a district court from considering ameliorative measures, and such consideration often may be appropriate, a district court reasonably may decline to consider ameliorative measures that have not been raised by the parties, are unworkable, draw the court into determinations properly resolved in custodial proceedings, or risk overly prolonging return proceedings. The court may also find the grave risk so unequivocal, or the potential harm so severe, that ameliorative measures would be inappropriate. Ultimately, a district court must exercise its discretion to consider ameliorative measures in a manner consistent with its general obligation to address the parties’ substantive arguments and its specific obligations under the Convention. A district court’s compliance with these requirements is subject to review under an ordinary abuse-of-discretion standard.”

The conference Sense and Sensibility in Cross-Border Cases: Couples’ Property will gather line of academic and expert speakers from several countries who will present the results of the research carried out so far under the EU Justice project EU-FamPro dedicated to the EU Twin Regulations (2016/1103 and 2016/1104) in addition to some national topics. Please check the conference programme for details.

The conference will take place on 30 June 2022 in a beautiful venue of the Jean Monnet Inter-University Centre in Opatija (Croatia) and online. The conference is open access without charging any fees, but registration for both onsite and online attendance is required here by 20 June 2022.

The conference is organised by the University of Rijeka, Faculty of Law and the Croatian Comparative Law Association in cooperation with the University of Camerino, the University of Ljubljana, the University of Almeria and the Lithuanian Law Institute.

Written by Catherine Shen, ABLI

Following a successful collaboration last year, the Asian Business Law Institute (ABLI) and the Permanent Bureau of the Hague Conference on Private International Law (HCCH) are joining hands again for a second joint webinar this year on Wednesday 27 July between 3 to 6pm (Singapore time).

Titled Cross-border Commercial Dispute Resolution – HCCH 2005 Choice of Court and 2019 Judgments Conventions, the webinar will comprise two sessions, each devoted to one of the conventions. Attendees have the option of attending one or both sessions.

Invited speakers Sara Chisholm-Batten (Partner, Michelmores LLP), the Honourable Justice David Goddard (Court of Appeal, New Zealand), Justice Anselmo Reyes, (International Judge, Singapore International Commercial Court), Nish Shetty (Partner, Clifford Chance LLP) and Dr Ning Zhao Senior Legal Officer, HCCH) are expected to talk about the practical operations of the Choice of Court Agreements and Judgments Conventions, how they complement each other and whether the recent debate on the Choice of Court Agreements Convention is justified.

For more information or to register, click here. Early bird discount is available till 26 June. Queries about the webinar can be directed to Catherine at info@abli.asia.

The Mexican Academy of Private International and Comparative Law (AMEDIP) is holding a webinar on 16 June 2022 at 3:00 pm (Mexico City time – CDT), 10:00 pm (CEST time). The topic of the webinar is The need for a PIL law for Ecuador and will be presented by Professor Jaime Vintimilla Saldaña (in Spanish).

The details of the webinar are:

Link: https://us02web.zoom.us/j/89189611809?pwd=RXhDeE5Gdlkwd2prWnREeVhVelBudz09

Meeting ID: 891 8961 1809

Password: BMAAMEDIP

Participation is free of charge.

This event will also be streamed live: https://www.facebook.com/AmedipMX

The most recent issue of the German Journal of Comparative Law (Zeitschrift für Vergleichende Rechtswissenschaft) has just been published. The editors mourn the loss of Professor Peter Mankowski (1966–2022), who served as an editor of the ZVglRWiss from 2009 to his untimely death. This issue contains an obituary written by his academic pupil, Professor Oliver L. Knöfel (Viadrina). In addition, this issue offers several presentations made at the conference “Access – Lessons from Africa” that was held at the University of Bayreuth as well as articles on international tort and corporate law. Here are the abstracts:

 

Eghosa O. Ekhator: Multinational Corporations, Accountability and Environmental Justice: The move towards subregional litigation in Africa

In the absence of an explicit international framework on the regulation of the crossborder activities of multinational corporations (MNCs), coupled with the barriers to accessing environmental justice through litigation in domestic courts, many victims of environmental injustice now institute cases in foreign jurisdictions especially the home states of the MNCs because they believe they will get justice in those courts. On the other hand, there is plethora of sub-regional institutions that have been relied upon by victims of environmental injustices arising from activities of MNCs in Africa. This article focuses on the reliance on sub-regional judiciaries in Africa by different stakeholders including oil producing communities, individuals, and other relevant stakeholders amongst others. The Economic Community of West African States (ECOWAS) Court of Justice (ECCJ) is used as the case-study in this article. Nongovernmental organisations (NGOs) in Nigeria have also relied on the Economic Community of West African States (ECOWAS) Court of Justice (ECCJ) to seek redress for victims of environmental injustice in Nigeria.

 

Claudia Maria Hofmann: Linkages between access to information and access to health care

Information plays a crucial role when it comes to health care. This article elaborates its enabling function with regard to strengthening the position of patients. To this end, reference is made to the human right to health, which is widely acknowledged in both international and regional human rights instruments. In this article, the interpretation provided by the United Nations Committee on Economic, Social and Cultural Rights in its general comment no. 14 on the right to the highest attainable standard of health serves as a basis for identifying the key elements state and non-state actors should take into account when providing health-related information to the public.

 

Victoria Miyandazi: Inequality and Access to Justice: A Focus on the Adjudication of Socio-Economic Rights in Kenya

Kenya’s 2010 Constitution establishes the necessary legal framework for tackling inequalities in the country. The multiple provisions on equality, non-discrimination and socio-economic rights create the impetus for rights-based litigation. Now society wants to claim these rights but there are still many hurdles to do so. Many special interest groups do not have access to lawyers nor the skills to access courts on their own. The growing concern is, therefore, that despite the progressive nature of constitutional provisions that seek to tackle inequalities in the country, they are not by themselves the panacea to the problem of access to justice in the country. Aside from the prohibitive cost of legal representation being a major concern, there are other access to justice challenges that inhibit the poor and marginalised in Kenya from instituting claims in court, and which also affect their chances of succeeding in their claims. This article discusses how an equality-sensitive approach to adjudicating socio-economic rights can help avoid reinforcing inequality and promote equality. It argues that failure to apply such an approach can exacerbate the inequality and access to justice challenges that vulnerable groups already face, especially in times of a crisis like the COVID-19 pandemic.

 

Justin Monsenepwo: Decolonial Comparative Law and Legal Transplants in Africa

On the occasion of a communication made in the aftermath of independence, many African scholars wondered whether African law would continue to be influenced by French law. More than five decades after, the mark of the considerable influence European law has in African former colonies is still perceptible. Yet, in a decolonized context, it should not be implied that European nations rank higher than African nations and that the laws of the former colonizers provide better solutions to African problems. To decolonize legal thinking in Africa, this contribution suggests improving the training of African lawyers and rediscovering customary law to take it into account in the development of legal rules in Africa. This would offer several practical benefits; however, the chief benefit is that it would remarkably boost the ability of lawyers and lawmakers in Africa to innovate.

 

Aron Johanson, Andreas Rapp and Anna Vatter: Mosaiktheorie ad absurdum – Örtliche Zuständigkeit im Rahmen des Art. 7 Nr. 2 EuGVVO bei Persönlichkeitsrechtsverletzungen

The article deals with the case law developed by the ECJ on the question of jurisdiction according to article 7(2) of the Brussels Ia Regulation in cases of infringement of personality rights. In particular, the so-called “mosaic approach“ is examined, which the ECJ has consistently applied to solve the problem of such multiple locality cases. The article pays particular attention to the hitherto little-discussed problem of local jurisdiction. It is first shown that the predominant German legal practice in this regard is regularly incompatible with article 7(2) of the Brussels Ia Regulation. At the same time, the consistent application of the mosaic approach in the area of local jurisdiction also leads to completely absurd and thus equally unacceptable results. Therefore, the article is rounded off with brief considerations on how local jurisdiction can be determined sensibly and in conformity with European law.

 

Luca Della Tommasina: Genossenschaften und nachrangige Mitgliederdarlehen

The essay deals with Italian cooperative companies and the possibility to extend some sort of equitable subordination rule to the loans granted by their members. The article 2467 of the Italian civil code provides that the loans granted to limited liability companies (società a responsabilità limitata – „S.r.l.”) by any member shall be subordinated to the other creditors of the company if at the time the loan is advanced: (i) there is an excessive imbalance between the company’s indebtedness and the net assets; (ii) or the company’s financial situation would require an equity contribution instead of a loan. In the cooperative companies’ field the problem arises from the convergence of two circumstances. On the one hand the argument that article 2467 is compatible with cooperative firms has been rejected in the Italian case law. On the other hand, in 2017 a reform of cooperative law has excluded the subordination (and more precisely the subordination according to the article 2467) for the amounts that a cooperative company receives from its members as “prestito sociale”. The essay is intended to demonstrate that: (i) the (equitable) subordination is consistent with cooperative firms; (ii) the 2017 reform must therefore be interpreted in a restrictive way. The need to find balanced solutions to the problem seems to be confirmed by the recent developments of the German legal framework.

 

The Zeitschrift für Vergleichende Rechtswissenschaft was founded in 1878 and is Germany’s oldest continuously published periodical on comparative and private international law. Its current editor-in-chief is Professor Dörte Poelzig, M.jur. (Oxon), University of Hamburg. Content is available online either through the website of the Deutscher Fachverlag or via beck online.

 

Written by Matthias Lehmann, University of Vienna (Austria)

On 13 June 2022, the U.S. Supreme Court ruled that U.S. courts may not help arbitral tribunals sitting abroad in the taking of evidence. This is because in the opinion of the Court, such an arbitral tribunal is not a „foreign or international tribunal“ in the sense of 28 U.S.C. § 1782, which allows federal district courts to order the production of evidence for use in proceedings before such tribunals.

The decision concerned an institutional and an ad-hoc arbitration. The first, ZF v. Luxshare, was a commercial arbitration between two companies under the rules of the German Arbitration Institution (DIS). The second, AlixPartners v. Fund for Protection of Investors’ Rights in Foreign States, was an investment arbitration involving a disgruntled Russian investor and a failed Lithuanian bank; it was conducted under the UNCITRAL Arbitration Rules.

The opinion, written by Amy Coney Barrett, rejects assistance by U.S. courts in both cases, whether in the pre-arbitration phase or in the main arbitration proceedings. It was unanimously adopted by the Court.

The Supreme Court first relies on a dubious literal interpretation of § 1782. While it does not dispute that arbitral tribunals may be “tribunals”, this would change by the addition of the adjectives “foreign or international”, as this would require that one or several nations have imbued the tribunal with governmental authority. Alas, the drafters of the New York Convention on recognition and enforcement of “foreign” arbitral awards were wrong, and so apparently were the signatories – among them the U.S. As for the term “international”, numerous treatises on “international commercial arbitration” will now supposedly have to be rewritten or newly titled.

The opinion further argues that the “animating purpose” of § 1782 would be “comity” with other nations, and that it would be “difficult to see how enlisting district courts to help private bodies would help that end”. Yet other nations also have an interest in efficient arbitration proceedings, as evidenced by the New York Convention. This is even particularly clear for investment arbitration because of the involvement of a state party, but it is also true in commercial arbitration. What is decisive from the point of view of many countries is that arbitration as a dispute resolution method is equivalent to litigation, and should not be treated less favourably.

The Supreme Court further argues that if § 1782 were to be extended to commercial arbitral “panels”, it would cover everything, including even a university’s student disciplinary tribunal. Yet the absurdity of this argumentum ad absurdum lies not in the inclusion of arbitration in § 1782 but in the extension made by the Court, which was only asked about the former and not about the latter. If need be, it would have been easy to distinguish commercial and investment arbitral tribunals established under national or international rules and covered by international agreements such as the New York Convention from student disciplinary “tribunals” (rather: panels).

Finally, the Court notes that allowing district courts to proffer evidence to a foreign arbitral tribunal would create a mismatch with the Federal Arbitration Act (FAA), which does not foresee such assistance for domestic arbitral tribunals. Yet the solution of this mismatch should have better been left to the legislator, who could either extend the  FAA to discovery or exclude foreign and international arbitral tribunals from the scope of § 1782. At any rate, the worse situation of domestic arbitral tribunals does not seem a sufficient justification to also deprive arbitral tribunals abroad, who may have particular difficulties in gathering evidence in the U.S., of assistance by U.S. courts.

All in all, this is disappointing news from Capitol Hill for international arbitration. Whether on arbitration or abortion, the current Supreme Court seems to be willing to upend legal precedent and to question customary legal terminology. At least for arbitration, the consequences will not be life-threatening, because the practice will be able to adapt. But one can already see the next questions coming to the Supreme Court. How about this one: Are ICSID tribunals imbued with governmental authority?

Private International Law Festival

16 to 17 May 2022

Edinburgh, United Kingdom

by Michael Cremer and Samuel Zeh*

After two years of living through a global pandemic, the very first Private International Law Festival from 16 to 17 May 2022, held in Edinburgh, was the first opportunity for many to finally meet other scholars and exchange ideas in person again. The event was hosted by the University of Edinburgh in cooperation with the Max Planck Institute for Comparative and International Private Law (Hamburg) and organized primarily by Verónica Ruiz Abou-Nigm (Edinburgh).

As its name implies, the Festival was meant as an opportunity for scholars from all around the world to celebrate the many facets of the discipline. This was reflected in the broad range of presentations, which featured both traditional and novel approaches to Private International Law (PIL). The two-day Festival included seven panels, the Forum Conveniens Annual Lecture at Edinburgh Law School and a book launch. Thematically, it encompassed not only sustainable development, decolonial theory and migration governance, but also Private International Law in Scotland, same-sex relationships and many other topics.

After a welcome by the host Verónica Ruiz Abou-Nigm who emphasized the overarching goal to celebrate the discipline, the first cluster of the event focused on Private International Law and Sustainable Development. Hans van Loon (Institut de Droit International) gave an overview of the relationship between Private International Law and the UN Sustainable Development Goals 2030. He outlined the challenge of reconciling economic development with sustainability and the contribution PIL can make towards this goal. In the previous year, he had, together with Ralf Michaels and Verónica Ruiz Abou-Nigm, worked on the project “The Private Side of Transforming our World – UN Sustainable Development Goals 2030 and the Role of Private International Law” which culminated in a Conference and an open-access book publication. As the coordinator of that project, Samuel Zeh (Max Planck Institute for Comparative and International Private Law, Hamburg) elaborated on the lessons learned and insights gained in the process. Afterwards, María Mercedes Albornoz (MacCormick Fellow, Edinburgh Law School / CIDE, México) offered a Global South perspective on Sustainable Development and Private International Law. The first thematic panel concluded with Ralf Michaels discussing whether facilitation and regulation as key objectives of PIL can be reconciled with the quest for sustainability.

Ralf Michaels then switched to chair the second panel of the day on Decolonising Law and Private International Law. It was started off by Roxana Banu (Queen Mary University of London) with Reflections on Private International Law’s Colonial History. She made the case for expanding the intellectual history of Private International Law both geographically and in terms of actors, while at the same time situating PIL theories and techniques in a colonial context. Subsequently, Nicole Štýbnarová (University of Helsinki / University of Oxford) elaborated on how Private International Law has transitioned from arguing about transnational marriages from relativist arguments in the 19th century to universalist language and how this transition was sparked by the changing imperial economy. María Julia Ochoa Jiménez (Universidad de Antioquia) addressed PIL in Latin America and explained its neo-colonial character by tracing its historical development. Finally, Sandrine Brachotte (Sciences Po Paris) laid out a method for decolonizing PIL with non-secular worldviews. She suggested a pragmatic approach that goes from specific cases to theory, thereby altering the concepts of Private International Law.

After the lunch break, two panels – chaired by Gerry Maher (University of Edinburgh) and Verónica Ruiz Abou-Nigm – were dedicated to Private International Law in Scotland in accordance with the location of the Festival. Scholars from several Scottish universities gave an overview of their respective Private International Law curricula and their current topics of research. This included Paul Beaumont and Jayne Holliday (University of Stirling), Justin Borg-Barthet and Patricia Živkovi? (University of Aberdeen), Verónica Ruiz Abou-Nigm (Edinburgh Law School), Janeen Carruthers and Bobby Lindsay (University of Glasgow). Additionally, Kirsty Hood (The Faculty of Advocates) and Michael Clancy (Law Society of Scotland) emphasized the importance of Private International Law for legal practitioners in Scotland.

Like every grand festival the Private International Law Festival also took place on different stages: The main stage in the Usha Kasera Lecture Theatre at Edinburgh Law School was reserved for the Forum Conveniens Annual Lecture. It was delivered by Máire Ní Shúilleabháin (University College Dublin) on Same-Sex Couples in the Cross-Border Context: Closing the Gaps in the Conflict of Laws. Living up to this title the lecture was a true tour de force as it covered virtually all aspects of the topic. It brought together common law perspectives from Irish, Canadian and UK law with the European regulations and requirements of negative integration and cross-border recognition as established by the judgments of the CJEU. Thus, the lecture sparked an animated debate which was chaired by Carlos Esplugues Mota (Universitat de València) and continued well into the subsequent Forum Conveniens Reception.

The second day of the Festival opened with a cluster on a new project that the panelists are working on: Private International Law and Sustainable Migration Governance. Verónica Ruiz Abou-Nigm, Jinske Verhellen (Ghent University), Gülüm Özçelik (Bilkent University), Laura Carballo Piñeiro (University of Vigo), Ulla Liukkunen (University of Helsinki) and Hans van Loon presented their findings up until now and future plans for this project. This includes issues such as migrants’ right to legal identity, access to social security schemes in a cross-border context and circular migration.

The topic of migration was also a focus of the second panel of the day, which was chaired by Kasey McCall-Smith (Edinburgh Law School) and offered Interdisciplinary Latin American Perspectives on Coloniality and Migration. Isadora Dutra Badra Bellati (Max Planck Institute for Comparative and International Private Law, Hamburg) analyzed a Brazilian Supreme Court decision on the legality of the outsourcing of labor through the lens of decolonial theory. This was followed by Valentina Rioseco (University of Edinburgh) discussing whether the obligation of states to allow entry and stay in international and inter-American human rights law can pave pathways for regular migration. Afterwards, Gabriela García García (University of Aberdeen) spoke about The Latin American Landscape of Migrant Integration and Inclusion and proposed a baseline framework for domains and indicators of integration in Latin America. Next, Nuni Vieira Jorgensen (Queen Mary University of London) shed light on the effects that the closure of land borders has on transnational family arrangements and family reunifications: “protected borders” tend to interrupt care arrangements to the detriment of transborder families. As last speaker on the panel, Marilda Rosado (Universidade do Estado do Rio de Janeiro) gave an overview of initiatives that support migrants in Brazil and foster cooperation.

The next highlight of the Festival was the book launch of the much awaited “Guide to Global Private International Law” (Hart Publishing). The editors, Paul Beaumont and Jayne Holliday, presented the book, which not only provides an overview of PIL from a global perspective, but also offers many suggestions for its further unification. They were joined by multiple contributors, some in the room and some connected virtually, who gave short insights into their chapters and their workflow. Keeping in the spirit of the Festival, this was a true celebration of the hard work and dedication that have gone into compiling this guide.

The last panel of the Festival was chaired by Alex Mills (University College London) and covered New Horizons for Private International Law. First, Nicolas Rennuy (University of York) analyzed the Law of Social Security Coordination and showed how there are multiple links between the field and Private International Law, including the type of conflict rules, the connecting factors, the scope of the rules and conceptions of indirect choice of law. Afterwards, Michael Cremer (Max Planck Institute for Comparative and International Private Law, Hamburg) made the case for Private International Law perspectives in patent law, illustrating this through a conflict of laws reconstruction of the right of priority stemming from the 1883 Paris Convention on the Protection of Industrial Property. Next, Rosario Espinosa (Universitat de València) presented her work on Sorority, Equality and Private International Law explaining how Private International Law can be used as a tool to promote equality and solidarity between women. The last contribution was made by Toni Marzal (University of Glasgow) who proposed A Relations-First Approach to Choice of Law and criticized the established positivist perspective that dominates the current understanding of PIL.

Sadly, every celebration must come to an end. The last words of the Festival belonged to the driving force behind it: Verónica Ruiz Abou-Nigm. It was not before a big applause for her work and effort in organizing the event so quickly and perfectly, that everybody bid farewell.

The Private International Law Festival in Edinburgh was a resounding success. It was itself the perfect example of the multiple facets of Private International Law, that it set out to celebrate. The presentations not only covered an extensive number of different topics, but also displayed both traditional and novel methodologies. They put new topics on the agenda of the discipline, while also shedding new light on existing debates. In addition, the Festival combined truly global projects like the launch of the Guide to Global PIL with the focus on the Scottish perspectives on PIL. At the same time, it also provided the opportunity for intergenerational exchange, with many younger researchers presenting their work and joining the debate.

For many it was the first in person meeting with fellow scholars after the pandemic. The Festival provided a worthy setting for this return. Hopefully, it will become a regular event.

 

* Michael Cremer and Samuel Zeh are both research associates and PhD studens under Ralf Michaels at the Max Planck Institute for Comparative and International Private Law, Hamburg

The Organization of American States (OAS) has issued a call for applications for the XLVII Course on International Law, which will take place from 1 to 12 August 2022 in Rio de Janeiro, Brazil at Universidade Federal do Rio de Janeiro –  in Spanish and English (no interpretation services will be offered).

As indicated in the convocation: “For over forty years, the Course on International Law has offered attorneys and internationalists from around the Americas the opportunity to promote analysis, exchange ideas and generate an open discussion on relevant topics of international law in general and of the Inter-American System in particular. This, in addition to, an opportunity to expand their professional networks, develop their abilities in an inclusive, diverse, and multicultural environment.  Students may interact in an academic setting with the most prestigious jurists from the Americas and Europe, counting among them judges of international courts, members of the Inter-American Juridical Committee, professors of public and private international law from the Americas and Europe, diplomats, as well as officials of various international organizations.”

The deadline for applications is 17 June 2022 (at 5:00 pm U.S. Eastern Standard Time). The selected students will be notified at the end of June. Space is limited. Enrollment in the course and study materials are free of charge but students will be responsible for paying their transportation, food expenses and lodging costs. For more information, click here.

The current draft program includes speakers such as the president of UNIDROIT Governing Council Maria Chiara Malaguti and Vicepresident of the Inter-American Juridical Committee José Moreno Rodríguez. A draft program is available here.

EU Cross-Border Succession Law, edited by Stefania Bariatti, Ilaria Viarengo and Francesca C. Villata, was just released. Providing a comprehensive and dedicated analysis of the EU law on cross-border successions and benefitting from the insight of internationally renowned scholars, this volume is a welcome addition to the already thriving ‘Elgar European Law and Practice series’.

The abstract reads as follows:

With cross-border successions becoming increasingly common in the context of the European Union, this timely volume offers a systematic practical analysis of how cross-border successions should be treated, including an examination of which courts may establish jurisdiction over succession disputes and which law governs such disputes. Studying cross-border successions in the context of estate planning and in the opening and liquidation of a succession, the volume examines the specificities of the European Certificate of Succession, contextualising it within its interface with the national laws and practices of EU Member States.

Key Features:

• Practical analysis of the provisions of the EU Succession Regulation
• Consideration of issues at the intersection between cross-border successions and taxation
• Analysis of the specificities of the European Certificate of Succession and its interface with national laws
• Study of cross-border successions in the context of both estate planning and the opening and liquidation of a succession
• Contextualization of the EU Succession Regulation in the framework of the national law and practice of several EU Member States

A comprehensive study of EU cross-border succession law with global reach, this volume is an invaluable source of reference and guidance for practitioners specialising in estate planning, family law and property law, including judges, notaries, tax specialists and lawyers. Scholars of European succession law and conflict of laws will also find this volume’s critical analysis an instrumental tool in their research.

EU Cross-Border Succession Law, Stefania Bariatti, Ilaria Viarengo and Francesca C. Villata (eds), Elgar European Law and Practice series (2022) 576 pp.

Benedetta Cappiello from the University of Milan has recently published a book on European private international law and non-contractual liability for AI systems (AI Systems and Non-contractual Liability: A European Private International Law Analysis, Giappichelli 2022: https://www.giappichelli.it/media/catalog/product/excerpt/9788892143289.pdf). She has kindly provided us with the following abstract:

The advent of AI-systems has fundamentally altered the whole of society and is about to change our daily lives as well as relationships between private parties.

The current challenge for the legislator is to determine a clear legal framework able to firstly, guarantee continued technological development and secondly, to be integrated with already binding sources of law. Whether the said framework will correspond to an already existing one, adapted to AI-systems, or whether it will be an ad hoc framework is still to be scrutinized. What is certain is that the challenge to determine a legal framework assumes a cross-border connotation: only common and shared choices at the supranational level will guarantee the definition of a coherent and effective discipline.

Within the said framework, the present book focuses on the non-contractual obligations which arise within the European Union out of the development and use of AI-systems; more precisely, as for the civil liability regime the advent of AI is about to lead to a paradigm shift in the allocation of liability throughout the “production chain”. Namely, the question has become how to ascertain who is liable for what; the opacity of AI-systems – especially those engaging with machine learning techniques – can make it extremely difficult to identify who is in control and therefore responsible.

Both EU substantive and private international law (“PIL”) provisions on civil liability, in general, and on product liability in particular, are scrutinized, following an approach de lege lata and de lege ferenda.

The concluding remarks integrates the results reached in the analysis and ethical considerations. Both substantive and PIL provisions should be ethically oriented and abide, and ensure, the protection of fundamental rights; private international law shall be an effective instrument for reaching the results pursued by the corresponding substantive provisions. Accordingly, this book will conclude suggesting anew direction of European private international law provisions; as per AI-systems field, it might be time the European legislator accepts connecting factors oriented more towards human rights protection.

Written by Christian Rüsing, University of Münster

From 2 to 4 June 2022, the founding conference of the European Association of Private International Law (EAPIL) took place in Aarhus. After the idea of founding the association had emerged at a conference in 2018 and its incorporation in 2019, it offered an opportunity to discuss fundamental issues of private international law in Europe with about 150 participants.

In his keynote speech at the kick-off event on Thursday, Peter Arnt Nielsen (Copenhagen Business School) outlined the development of the institutional framework and its significance for European conflict of laws. Andreas Stein (European Commission) addressed current legislative projects in his report from Brussels. Particularly, he highlighted the recently published Directive proposal on “Strategic lawsuits against public participation” (SLAPPs). Subsequently, drawing inspiration from AG Maciej Szpunar’s report from Luxembourg on current fundamental rights issues in private international law, the conference especially discussed the significance of the EU Charter of Fundamental Rights with great enthusiasm, including SLAPPs and the recognition of foreign judgments.

On Friday morning, the presentations and discussions concentrated on digitalisation, with particular attention to platforms, blockchains, the transfer of digital assets and the digital resolution of cross-border disputes. Several speakers and participants addressed the challenging question of the extent to which new technologies require special treatment in private (international) law. In the afternoon, the focus was on the phenomenon of fragmentation in European private international law, which led to a lively debate on the need for a coherent general instrument or codification of EU conflict of laws. After the speakers had expressed themselves rather neutrally or even partly positively on the phenomenon, several participants in the discussion spoke rather in favour of stronger coordination.

The questions of fragmentation and need for reforms also arose on Saturday, when issues of international family law, succession law and property law were dealt with. Now, however, it was more a question of concrete issues of demarcation, such as those that can arise between matrimonial property law and property law. With regard to international family law, the role of religious laws in private international law and parental responsibility in cross-border cases was discussed as well.

At the general assembly, the association’s past and future activities and participation opportunities for members in seminars, working groups and a Young Researchers Network were presented. The Secretary General, Giesela Rühl (Humboldt-University of Berlin), was happy to announce that the association already had 389 members from 63 countries. Since practitioners can also become members, the association fosters the exchange between science and practice, which was clearly seen at the conference in several contributions to the discussion on the user-friendliness of European legal acts. Further information on the EAPIL can be found here.

All in all, the conference offered – also thanks to the organisation by Morten M. Fogt (University of Aarhus) and his team – an excellent opportunity for academic exchange, which so many participants missed in recent years. The full program of the conference and an overview of the speakers are available here.

On 2 June 2022, the ECJ delivered its judgment in the case of T.N. et al. ./. E.G., C-617/20, on the interpretation of the ESR in relation to cross-border declarations of waiver of succession (on the facts of the case and AG Maciej Szpunar’s Opinion in this case see our previous post).

The Court followed the AG’s Opinion and concluded (para. 51) that

“Articles 13 and 28 of Regulation No 650/2012 must be interpreted as meaning that a declaration concerning the waiver of succession made by an heir before a court of the Member State of his or her habitual residence is regarded as valid as to form in the case where the formal requirements applicable before that court have been complied with, without it being necessary, for the purposes of that validity, for that declaration to meet the formal requirements of the law applicable to the succession”.

This conclusion was based on a EU-law specific approach rather than by discussing, let alone resorting to, fundamental concepts of private international law (compare Question 1 by the referring national court, the Higher Regional Court of Bremen, Germany, on a potential application of the concept of substitution; compare the AG’s considerations on characterisation of the issue as “substance” or “form”, see Opinion, paras. 34 et seq.). Rather, the Court reformulates the question functionally (para. 32):

“The present reference for a preliminary ruling concerns the conditions which must be satisfied in order for a declaration concerning the waiver of succession, within the meaning of Articles 13 and 28 of Regulation No 650/2012, made before the court of the State of the habitual residence of the party waiving succession, to be regarded as valid. In that regard, the referring court asks, in particular, whether and, if so, when and how such a declaration must be notified to the court having jurisdiction to rule on the succession”.

Textual as well as systematic arguments (Article 13 as part of Chapter II, Article 28 as part of Chapter III of the ESR), paras. 36 et seq., supported by Recital 32 (simplification of procedures), para. 41, as well as the general effet utile of the ESR in light of Recital 7, para. 42, lead the Court to the result that

“as the Advocate General stated in point 64 of his Opinion, compliance with the objective of Regulation No 650/2012, which is to enable heirs to make declarations concerning the waiver of succession in the Member State of their habitual residence, implies that those heirs are not required to take further formal actions before the courts of other Member States other than those provided for by the law of the Member State in which such a declaration is made, in order for such declarations to be regarded as valid”.

Whether this result occurs, technically speaking, as a substitution – and thus by a kind of “recognition”, or as a matter of characterisation of the issue as “form”, is not directly spelled out, but based on the general approval of the AG’s approach, the latter is certainly more likely than the former.

Additionally, in furthering the effet utile, the Court adds on the issue of communication of and time limits for a waiver declared according to the conditions of the law of the habitual residence (paras. 49 et seq.) that compliance with “formal requirements” before the court of the habitual residence must suffice as long as the court seised with the succession “has become aware of the existence of that declaration”. And the threshold for this awareness seems to be very low, but “in the absence of a uniform system in EU law providing for the communication of declarations” of the kind in question here, must be brought about by the declaring person (para. 48). As a further element of effet utile, this person is not bound by any formal requirements under the lex successionis, para. 48: “if those steps [by the declaring person] are not taken within the time limit prescribed by the law applicable to the succession, the validity of such a declaration cannot be called into question” (emphasis added). The only factual time limit therefore is that the court becomes aware before it takes its decision. Appeal, therefore, cannot be grounded directly on the fact that the court was not made aware in time, even though the declaration had existed before the court’s decision. Appeal may be available on other grounds and then the declaration may be introduced as a novum, if the lex fori processualis allows it.

Speaking of the lex fori processualis: As there is now an autonomous time limit, the question became irrelevant whether making the court aware of the declaration of waiver depends on any language requirements. In the concrete case, the persons declaring the waiver before a Dutch court, obviously in Dutch language, informed the German court first by submitting Dutch documents and only later with translations, but at any rate before the court’s decision. Principally speaking, however, if the court’s language is e.g. German, any kind of communication must be conducted in that language (see section 184 German Gerichtsverfassungsgesetz). In addition, according to the Court’s decision, only  “formal requirements of the law applicable to the succession” are irrelevant. The need for translations, however, is a matter of the lex fori processualis. It will be an interesting question of “language law” within the EU whether the effet utile of the ESR (and comparable regulations in other instruments) might overcome principal language requirements according to the lex fori processualis. And on a general level it may be allowed to state the obvious: questions of characterisation (and others of general PIL methodology) will never disappear.

This post is an abridged adaptation of my recent article, Private International Law and Substantive Liability Issues in Tort Litigation against Multinational Companies in the English Courts: Recent UK Supreme Court Decisions and Post-Brexit Implications in the Journal of Private International Law. The article can be accessed at no cost by anyone, anywhere on the journal’s website. The wider post-Brexit implications for private international law in England are considered at length in my recent OUP monograph, Brexit and the Future of Private International Law in English Courts.

According to a foundational precept of company law, companies have separate legal personality and limited liability. Lord Templeman referred to the principle in Salomon v Salomon & co Ltd [1896] UKHL 1, as the ‘unyielding rock’ on which company law is constructed. (See Lord Templeman, ‘Forty Years On’ (1990) 11 Company Lawyer 10) The distinct legal personality and limited liability of each entity within a corporate group is also recognized. In Adams v Cape Industries plc [1990] Ch 433 the court rejected the single economic unit argument made in the DHN Ltd v Tower Hamlets LBC [1976] 1 WLR 852 decision, and also the approach that the court will pierce the corporate veil if it is necessary to achieve justice. In taking the same approach as the one taken in Salomon v Salomon & co Ltd [1896] UKHL 1, the court powerfully reasserted the application of limited liability and the separate legal entity doctrine in regard to corporate groups, leaving hundreds of current and future victims uncompensated, whilst assisting those who seek to minimize their losses and liabilities through manipulation of the corporate form, particularly in relation to groups of companies. A parent company is normally not liable for the legal infractions and unpaid debts of its subsidiaries. However, the direct imposition of duty of care on parent companies for torts committed by foreign subsidiaries has emerged as an exception to the bedrock company law principles of separate legal personality and limited liability. In Chandler v Cape plc [2012] EWCA Civ 525, [69], Arden LJ ‘……emphatically reject[ed] any suggestion that this court [was] in any way concerned with what is usually referred to as piercing the corporate veil.’

Arguments drawn from private international law’s largely untapped global governance function inform the analysis in the article and the methodological pluralism manifested in the jurisdictional and choice of law solutions proposed. It is through the postulation of territoriality as a governing principle that private international law has been complicit in thwarting the ascendance of transnational corporate social responsibility. (See H Muir-Watt, ‘Private International Law Beyond the Schism’ (2011) 2 Transnational Legal Theory 347, 386) Private international law has kept corporate liability within the limits of local law through forum non conveniens and the lex loci delicti commissi. It is only recently that a challenge of territoriality has emerged in connection with corporate social responsibility.

Extraterritoriality is employed in this context as a method of framing a private international law problem rather than as an expression of outer limits. Therefore, there is nothing pejorative about regulating companies at the place of their seat, and there is no reason why the state where a corporate group is based should not (and indeed should not be obliged to) sanction that group’s international industrial misconduct on the same terms as similar domestic misconduct, in tort claims for harm suffered by third parties or stakeholders. (Muir-Watt (ibid) 386)

The idea of methodological pluralism, driven by the demands of global governance, can result in jurisdictional and choice of law rules that adapt to the needs of disadvantaged litigants from developing countries, and hold multinational companies to account. The tort-based parental duty of care approach has been utilized by English courts for holding a parent company accountable for the actions of its subsidiary. The limited liability and separate legal entity principles, as applied to corporate groups, are circumvented by the imposition of direct tortious liability on the parent company.

The UK Supreme Court’s landmark decisions in Vedanta v Lungowe [2019] UKSC 20 and Okpabi v Shell [2021] UKSC 3 have granted jurisdiction and allowed such claims to proceed on the merits in English courts. The decisions facilitate victims of corporate human rights and environmental abuse by providing clarity on significant issues. Parent companies may assume a duty of care for the actions of their subsidiaries by issuing group-wide policies. Formal control is not necessarily the determining factor for liability, and any entity that is involved with the management of a particular function risks being held responsible for any damage flowing from the performance of that function. When evaluating whether a claimant can access substantial justice in another forum, English courts may consider the claimants lack of financial and litigation strength. The UK Supreme Court decisions are in alignment with the ethos of the UN Guiding Principles on Business and Human Rights (“Ruggie Principles”), particularly the pillar focusing on greater access by victims to an effective remedy. (The United Nations Guiding Principles on Business and Human Rights, UN Doc. A/HRC/17/31 (2011))

Post-Brexit, the broader availability of the doctrine of forum non conveniens may help the English courts to ward off jurisdictional challenges against parent companies for damage caused by their subsidiaries at the outset. However, in exceptional cases, the claimant’s lack of financial and litigation strength in the natural forum may be considered under the interests of justice limb of The Spiliada test, which motivate an English court not to stay proceedings. (Spiliada Maritime Corpn v Cansulex Ltd (The Spiliada) [1987] AC 460) It has been argued that if the Australian “clearly inappropriate forum” test for forum non conveniens is adopted, (Voth v Manildra Flour Mills Pty Ltd (1991) 65 A.L.J.R. 83 (HC); Regie National des Usines Renault SA v Zhang [2002] HCA 10 (HC)) it is unlikely that a foreign claimant seeking compensation from a parent company in an English court would see the case dismissed on forum non conveniens grounds. As a result, it is more likely that a disadvantaged foreign litigant will succeed in overcoming the jurisdictional hurdle when suing the parent company. From a comparative law standpoint, the adoption of the Australian common law variant of forum non conveniens will effectively synthesize The Spiliada’s wide-ranging evaluative enquiry with the certainty and efficiency inherent in the mandatory rules of direct jurisdiction of the Brussels-Lugano regime.

In relation to choice of law for cross-border torts, the UK has wisely decided to adopt the Rome II Regulation as retained EU law. (See The Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc.) (EU Exit) Regulations 2019) Article 4(1) of the Rome II Regulation will continue to lead to the application of the law of the country where the damage occurred. Post-Brexit, it remains to be seen whether the English courts would be more willing to displace the applicable law under Article 4(1) by applying Article 4(3) of Rome II more flexibly. The territorial limitations of the lex loci damni might be overcome by applying the principle of closest connection to select a more favorable law. The result-selectivism inherent in the idea of a favorable law is reminiscent of the regulatory approach of governmental interest analysis. (See SC Symeonides, Codifying Choice of Law Around the World (OUP 2014) 287) Article 7 of the Rome II Regulation provides the claimant in an environmental damage claim a choice of applicable law either pursuant to Article 4(1) or the law of the country in which the event giving rise to the damage occurred. Alternatively, any regulatory provisions in English law may be classified as overriding mandatory provisions of the law of the forum under Article 16 of the Rome II Regulation. The Rome II Regulation, under the guise of retained EU law, constitutes a unique category of law that is neither EU law nor English law per se. The interpretation of retained EU law will give rise to its own set of challenges. Ultimately, fidelity to EU law will have to be balanced with the ability of UK appellate courts to depart from retained EU law and develop their own jurisprudence.

Any future amendments to EU private international law will not affect the course of international civil litigation before English courts. (Cf A Dickinson, ‘Walking Solo – A New Path for the Conflict of Laws in England’ Conflictoflaws.net, suggests engagement with the EU’s reviews of the Rome I and II Regulations will provide a useful trigger for the UK to re-assess its own choice of law rules with a view to making appropriate changes) However, recent developments in the UK and Europe are a testament to the realization that the avenue for access to justice for aggrieved litigants may lead to parent companies that are now subject to greater accountability and due diligence.

The first issue of the Journal of Private International law for 2022 was released yesterday. It features the following articles:

 

M Lehmann, “A new piece in the puzzle of locating financial loss: the ruling in VEB v BP on jurisdiction for collective actions based on deficient investor information”

For the first time, the CJEU has ruled in VEB v BP on the court competent for deciding liability suits regarding misinformation on the secondary securities market. Surprisingly, the Court localises the damage resulting from misinformation on the secondary financial markets at a single place, that where the financial instruments in question were listed. This raises the question of how the decision can be squared with earlier cases like Kolassa or Löber and other precedent. It is also unclear how the new ruling applies to special cases like dual listings or electronic trading venues. Furthermore, the judgment is of utmost importance for the jurisdiction over collective actions by postulating that they should not be treated any differently than individual actions, without clarifying what this means in practice. This contribution analyses these questions, puts the judgment in larger context, and discusses its repercussions for future cases.

 

F Rielaender, “Financial torts and EU private international law: will the search for the place of “financial damage” ever come to an end?”

The determination of jurisdiction and the applicable law concerning violations of financial law remains one of the most controversial subjects in EU private international law. Departing from its previously wayward case law regarding jurisdiction in disputes concerning purely financial losses, the Court of Justice of the European Union (CJEU) has finally taken a more principled approach in its Verenigeng van Effectenbezitters (VEB) decision, concentrating jurisdiction for actions based on issuer liability for inaccurate disclosures in the courts of the Member States where the issuer “has complied, for the purposes of its listing on the stock exchange, with the statutory reporting obligations”. While the judgment marks a necessary step forward, this paper argues that a market-oriented rule, which the CJEU has thus far not fully embraced, for conferring jurisdiction in disputes concerning infringements of securities law needs to be further developed and consistently applied in determining the applicable law. M Ahmed, “Private international law and substantive liability issues in tort litigation against multinational companies in the English courts: recent UK Supreme Court decisions and post-Brexit implications” This article examines the private international law and substantive liability issues in tort claims against UK based parent companies for the actions of their foreign subsidiaries. Arguments drawn from private international law’s largely untapped global governance function inform the analysis and the methodological pluralism manifested in the jurisdictional and choice of law solutions proposed. The direct imposition of duty of care on parent companies for torts committed by foreign subsidiaries is examined as an exception to the bedrock company law principles of separate legal personality and limited liability. In this regard, the UK Supreme Court’s recent landmark decisions in Vedanta v Lungowe and Okpabi v Shell have granted jurisdiction and allowed such claims to proceed on the merits in the English courts. This article assesses these decisions and their significance for transnational corporate accountability. The post-Brexit private international law regime and its implications for the viability of tort claims against parent companies are examined. N Brannigan, “Resolving conflicts: establishing forum non conveniens in a new Hague jurisdiction convention” In 1992, the Hague Conference on Private International Law (HCCH) commenced the Judgments Project with the aim of delivering a convention harmonising rules of jurisdiction and recognition and enforcement of judgments. Despite the ambition and promise the project held, the first major attempt at delivering a convention, the 2001 Interim Text, was unsuccessful after it failed to gain consensus among the Conference’s Member States. The HCCH scaled back the Judgments Project to focus work on the 2005 Convention on Choice of Court Agreements and the 2019 Convention on the Recognition and Enforcement of Foreign Judgments. However, the issue of jurisdiction has not been forgotten, with the Hague having recently established a Working Group to begin drafting provisions for a fresh attempt at the subject which hopefully will succeed where the Interim Text did not. The aim of this article is to explore the issue of how the proposed convention shall address conflicts of jurisdiction in international litigation. A conflict of jurisdiction will typically arise where the same proceedings, or related ones, come before the courts of several fora, or in one forum which considers another forum to be better placed to adjudicate the dispute. One solution to such conflicts is the, originally Scottish, doctrine of forum non conveniens, which allows a court discretion to decline to exercise jurisdiction on the basis that the appropriate forum for the trial is abroad or the local forum is inappropriate. This article argues for the inclusion of a version of forum non conveniens in the proposed jurisdiction convention to settle these conflicts when they arise. However, as there are many interpretations of what makes one forum more or less appropriate to hear a case than another, this article tackles the issue of how such a principle could be drafted to achieve consensus at the Hague Conference. Much of this analysis is based on the original 2001 Interim Text, and upon more modern cross-border agreements which utilise forum non conveniens. J Huang, “Substituted service in Australia: problem, tension, and proposed solution” Substituted service is an important and frequently used method to bring judicial documents to a defendant’s attention when service of process in the manner otherwise required by the civil procedure rule is impracticable. Between substituted service and the Hague Service Convention 1965 exists a tension: as the scope of substituted service expands, the application of the Convention shrinks. The tension predated the pandemic but has become increasingly acute as Australian courts have frequently been called upon to address when substituted service may be ordered to replace service under the Convention. Addressing this tension is significant but complex as it involves Australia’s international obligation to follow the Convention, a plaintiff’s legitimate expectation to quickly effect service of process, and a defendant’s fundamental right to due process. This paper is a digest of Australian private international law on substituted service. It provides timely proposals both at the domestic and international dimensions to address this tension. AA Kostin & MA Pesnya, “The recognition of foreign judgments on personal status under Russian law (Historical aspects and current issues)” The Article provides an insight into the development of the Russian rules of law concerning recognition of foreign judgments on personal status. The analysis reveals that initially the Russian (formerly Soviet) law did not include any specific provisions relating to recognition of foreign judgments on personal status. In this regard such judgments were recognised on the basis of the conflict of laws’ provisions of the Family and Civil Codes. In turn the current Article 415 of the Civil Procedure Code of the Russian Federation addressing the recognition of foreign judgments on personal status and foreign divorces should be considered as a borrowing from the legislation of the former Socialist countries. The authors argue that the concept of “personal status” in Article 415 covers both foreign judgments affecting capacity and regarding filiation (kinship). Therefore, these foreign judgments shall be recognised in Russia in absence of an international treaty and without exequatur proceedings.

Update from the organizers:

“Thanks to the generosity of our sponsors we are able to offer a limited number of participants a partial waiver of the conference. If you work in the not-for-profit sector (academia, ngo’s, judiciary or other government institutions) you can contact the conference bureau (conference@uva.nl) to check for eligibility. The reduced fee will be the same as the one for students and PhD fellows.”

 

For all those interested in the various aspects of collective redress, including cross border issues (in securities and competition cases), the 4th International Class Action Conference held as an on-site conference in Amsterdam provides an excellent opportunity to discuss current issues and share your own experiences. The international conference is co-organized, inter alia, by the University of Amsterdam (The Netherlands), University of Haifa (Israel) and Tilburg University (The Netherlands) and described as follows:

”

4th International
Class Action Conference

Amsterdam, 30 June – 1 July 2022

 

On 30 June and 1 July 2022 the University of Amsterdam will host the 4th international class action conference. The conference is organized by a team from the University of Haifa, the University of Tilburg and the University of Amsterdam, in collaboration with several renowned institutions. The theme of this year’s conference is ‘From Class Actions to Collective Redress: Access to Justice in the 21st century’.

The Conference will bring together a diverse range of international expertise in collective redress. The conference is intended to act as a forum for the sharing of experiences and knowledge. In an increasingly interconnected world, such opportunities for international scholars and practitioners to come together and compare notes on the development of collective redress in their jurisdictions, are more relevant than ever.

For details on the programme and a full list of collaborators, please see 4th International Class Action Conference – Home (aanmelder.nl).”

 

There are different registration fees for commercial participants (500 EUR) and academics/judges/NGOs (300 EUR) as well as a reduced charge for (PhD) students (75 EUR).

(authored by Chen Zhi, Wangjing & GH Law Firm, PhD Candidate at the University of Macau)

It is axiomatic that an arbitration agreement is generally not binding on a non-signatory unless some exceptional conditions are satisfied or appear, while it could even be more controversial in cases relating to guarantee where a non-signatory third person provides guarantee to the master agreement in which an arbitration clause has been incorporated. Due to the close connection between guarantee contract and master agreement in their contents, parties or even some legal practitioners may take it for granted that the arbitration agreement in master agreement can be automatically extended to the guarantor albeit it is not a signatory, which can be a grave misunderstanding from judicial perspective and results in great loss thereby.

As a prime example, courts in China have long been denying the applicability of arbitration agreements to a non-signatory guarantor with rare exceptions based on specific circumstances as could be observed in individual cases, nonetheless, the recent legal documents have provided possibilities that may point to the opposite side. This short essay looks into this issue.

1. The Basic Stance in China: Severability of the Guarantee Contract

Statutes in China provide limited grounds for extension of arbitration agreement to a non-signatory. As set out in Articles 9 & 10 of the Interpretation of the Supreme People’s Court’s (hereinafter, SPC) on Certain Issues Related to the Application of the Arbitration Law?which was issued on 23 August 2006?, this may occur only under the following circumstances:

“(1) An arbitration clause is binding on the non-signatory who is the successor of a signed-party by means of merge, spilt-up of an entity and decease of a natural person or;

(2) where the rights and obligations are assigned or transferred wholly or partially to a non-signatory, unless parties have otherwise consented”.

Current laws are silent on the issue where there is a guarantee relationship. Due to the paucity of direct instructions, some creditors seeking for tribunal’s seizure of jurisdiction over a non-signatory guarantor would tend to invoke Article 129 of the SPC’s Interpretation on Certain Issues Related to Application of Warranty Law (superseded by SPC’s Interpretation on Warranty Chapter of Civil Code since 2021 with no material changes being made), which stipulates that the guarantee contract shall be subject to the choice of court clause as set out in the main agreement, albeit the creditor and guarantor have otherwise consent on dispute resolution. Nevertheless, courts in China are reluctant to apply Article 129 to an arbitration clause by way of mutatis mutandis. In the landmark case of Huizhou Weitong Real Estate Co., Ltd v. Prefectural People’s Government of Huizhou,[1] the SPC explicitly ruled that the Guarantee Letter entered into between creditor and guarantor had created an independent civil relationship which shall be distinguished from the main agreement and thereby the arbitration clause should not be binding on the guarantor and the court seized with the case could take the case accordingly. In a nutshell, due to the independence of the guarantee contract from the main contract, where there is no clear arbitration agreement in the guarantee contract, the arbitration agreement in the main contract cannot be extended to be applicable to the guarantor.

The jurisprudence of Weitong has been subsequently followed and acknowledged as the mainstream opinion for the issue. In SPC’s reply to Guangxi Provincial High Court regarding enforcement of a foreign-related arbitral award rendered by CIETAC on 13 September 2006?Dongxun?,[2] where a local government had both issued a guarantee letter and signed the main agreement, the SPC opined that as there was no term of guarantee provided in the text of main agreement, the issuance of guarantee letter and signature of main agreement was not sufficient to make the government a party to the arbitration clause. In light of this, SPC agreed with the Guangxi Court’s stance that the dispositive section regarding execution of guarantee obligation as set out in the disputed arbitral award had exceeded the tribunal’s power and thus shall be rejected to be enforced. In the same vein, in its reply on 20 March 2013 to Guangdong Provincial High Court regarding the annulment of an arbitral award[3], the SPC held that the disputed arbitral award shall be partially vacated for the arbitral tribunal’s lack of jurisdiction over the guarantee for which the guarantor was a natural person. Hence, it can be drawn that whether the guarantor is a governmental institution or other entity for public interest is not the determining factor to be considered for this type of cases.

2. Controversies and Exceptions

Theoretically, it is correct for the SPC to unfold the autonomous nature of arbitration jurisdiction, which shall be distinguished from that of litigation. Parties’ autonomy to designate arbitration as a method of dispute resolution and the existence of an arbitration agreement are key elements for a tribunal to be able to obtain the jurisdiction. By this logic, the mere issuance of guarantee letter or signature of a standing-alone guarantee is not sufficient to prove parties’ consent to arbitration as expressed in the main contract. The SPC is not alone in this respect. Actually, one of the much-debated cases by foreign courts is the decision made by the Swiss Supreme Court in 2008 which opined that a guarantor providing guarantee by virtue of a standing-alone letter was not bound by the arbitration clause as provided in the main agreement to which the guarantee letter has been referred, except there was an assumption of contractual rights or obligations, or a clear reference to the said arbitration clause. [4]

All that being said, the SPC’s proposition has given rise to some controversies for the sacrifice of efficiency through a dogmatic understanding of arbitration. Moreover, the segregation of the main contract and guarantee contract may produce risks of parallel proceedings and conflicting legally-effective results. As some commentators have indicated, albeit the severability of guarantee contract in its formality, its content is tight with the main agreement. In the light of the tight connection,[5] the High Court of England ruled in Stellar that it was predictably expectable for a rational businessman to agree on a common method of dispute resolution as set out in the main contract, where the term of guarantor’s endorsement was involved, based on the close connection between the two contracts.[6]

A like but nuanced approach, however, has been developed through individual cases in China, to the author’s best knowledge, one of the prime cases is Li v. Yu decided by Hangzhou Intermediate Court on 30 March 2018  concerning an annulment of an award handed down via arbitration proceedings.[7] The case concerns a main agreement entered into by the creditor, the debtor and the guarantor (who was also the legal representative of the debtor), which had set out a general guarantee term but did not provide detailed obligations. The guarantor subsequently issued a guarantee letter without any clear reference to arbitration clause as stated in main agreement. After the dispute arose, the creditor lodged arbitration requests against both the debtor and the guarantor, the tribunal ruled in creditor’s favor after tribunal proceedings started. The guarantor then applied for annulment of the arbitral award on the basis that there was no valid arbitration agreement between the guarantor and the creditor, contending tribunal’s lack of jurisdiction over the guarantor. The court, however, opined that the guarantor’s signature in the main agreement, in combination of the general guarantee clause incorporated therein, was sufficient to prove the existence of arbitration agreement between the creditor and the guarantor and the guarantor’s consent thereby. Therefore, the annulment application was dismissed by the court.

Admittedly, the opinion as set out in Li is sporadic and cannot provide certainty, largely relying on specific circumstances drawn from individual cases, hence it is difficult to produce a new principle hereby. However, the case does have some novelties by providing a new track for extension of arbitration agreement to a guarantor who is not clearly set out as one of the parties in main agreement. In other words, the presumption of severability of guarantee relationship is not absolute and thus rebuttable. To reach that end, creditors shall furnish proof that the guarantor shall be well aware of the details of the main contract (including arbitration clause) and has shown inclination to be bound thereby.

3. New Rules That Shed New Light

On 31 December 2021, the SPC released Meeting Note of the National Symposium on Foreign-related Commercial and Maritime Trials, which covers judicial review issues on arbitration agreements. Article 97 of the Meeting Note provides systematical approach in reviewing arbitration agreement where an affiliated agreement?generally refers to guarantee contract or other kinds of collateral contract?is concerned, which can be divided into two facets:

First, where the guarantee contract provides otherwise dispute resolution, such consent is binding on the guarantor and thus shall be enforceable. As a corollary, the arbitration agreement in main agreement is not extensible to the guarantor.

Secondly, while the guarantee contract is silent on the issue of dispute resolution, the arbitration agreement as set forth in the main agreement is not automatically binding on the guarantor unless the parties to the guarantee contract is the same as that of main agreement.

In summary, the Meeting Note has sustained the basic stance while providing an exception where the main agreement and the guarantee contract are entered into by the same parties. As indicated by one commentator, the Meeting Note is not a judicial interpretation which can be adopted by the courts to decide cases directly but it to a large extent reflects consensus of judges among China, [8] and hence will produce impact on judicial practice across the whole country.

Nevertheless, some uncertainties may still arise, for instance, whether a mere signature in the main contract by the guarantor is sufficient to furnish the proof about “the same parties”, or shall be in combination with the scenario where an endorsement term of guarantor is incorporated in the main contract. On the contrary, it is also unclear whether a mere existence of term of guarantee is sufficient to make a non-signatory guarantor a party to the main contract.

Another more arbitration-friendly method can be observed from the draft for Revision of Arbitration Law that has been released for public consultation since 30th July of 2021, Article 24 of which provides that the arbitration clause as set out in the main agreement shall prevail over that in the guarantee contract where there is a discrepancy; where the guarantee contract is silent on dispute resolution, any dispute connected thereto shall be subject to the arbitration agreement as set out in main agreement. This article is a bold one which will largely overturn the SPC’s current stance and makes guarantee relationship an exception. A piece of more exciting news comes from the newly-released law-making schedule of 2022 by the Standing Committee of the National People’s Congress,[9] according to which the revision of Arbitration Law is listed as one of the top priorities in 2022 whilst it is still to be seen whether Article 24 in the draft can be retained after scrutiny of the legislature.

4. Concluding Remarks

It is not uncommon that a guarantee for certain debts is provided by virtue of a standing-alone document which is separated from the main contract, whether it is a guarantee contract or a unilaterally-issued guarantee letter. It shall be borne in mind that the close connection between the guarantee document and main contract alone is not sufficient to extend the arbitration agreement as set out in main agreement to a non-signatory guarantor per the consistent legal practice in China over the past 20 years. While the new rules have provided more arbitration-friendly approaches, uncertainties and ambiguities will probably still exist.

From a lawyer’s perspective, as the mainstream opinion in judicial remains unchanged currently, it is necessary to attach higher importance while reviewing a standing-alone guarantee contract which is separated from a master agreement in its formality. In the light of avoiding prospective parallel proceedings incurred thereby, the author advances two options in this respect:

The first option is to insert an article endorsing guarantee’s obligation into the master agreement, and require the guarantor to sign the master agreement, which resembles the scenario in Stellar and Li. Whereas this approach may be less feasible in the post-negotiation phase of master agreement when all terms and conditions are fixed and endorsed, the option mentioned below can be served as an alternative.

The second option is to incorporate into guarantee document a clause which unequivocally refers to the arbitration agreement as set out in master agreement, in lieu of any revision to the master agreement. This approach is in line with Article 11 SPC on Certain Issues Related to the Application of the Arbitration Law which provides that parties can reach an arbitration agreement by reference to dispute resolution clauses as set out in other contracts or documents. While it is noteworthy that from judicial practice in China, such reference shall be specific and clear, otherwise the courts may be reluctant to acknowledge the existence of such arbitration agreement.

 

[1] Case No: 2001 Min Er Zhong No. 177.

[2] Case No: 2006 Min Si Ta No. 24.

[3] Case No: 2013 Min Si Ta No. 9.

[4] Case No. 4A_128/2008,decided on August 19, 2008, decided by Tribunal federal(Supreme Court) of Swiss, as cited in Extension of arbitration clause to non-signatories (case of a guarantor) – Arbitration clause by reference to the main contract (deemed too general and therefore not admitted), available at https://www.swissarbitrationdecisions.com/extension-of-arbitration-clause-to-non-signatories-case-of-a-gua.

[5] See Yifei Lin: Is Arbitration Agreement in Master Agreement Applicable to Guarantee Agreement? Available at http://www.360doc.com/content/16/0124/11/30208892_530188388.shtml.

[6] Stellar Shipping Co Llc v Hudson Shipping Lines [2010] EWHC 2985 (Comm) (18 November 2010).

[7] Case No: 2018 Zhe 01 Min Te No. 23.

[8] Lianjun Li et al?China issues judicial guidance on foreign related matters, Reed Smith In-depth?25 April 2022??available at https://www.reedsmith.com/de/perspectives/2022/04/china-issues-judicial-guidance-on-foreign-related-matters.

[9] For more details, please see the news post available at https://m.thepaper.cn/baijiahao_18072465. Moreover, per the news report released in late May of 2022, The National Committee of Chinese People‘s Political Consultative Conference had discussed the revision of Arbitration Law in its biweekly symposium held on 30 May 2022, where the attendees had stressed the significance of party autonomy in commercial arbitration, available at: http://www.icppcc.cn/newsDetail_1092041.