Conflictoflaws

Last week Costa Rica signed the HCCH Convention of 2 July 2019 on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (2019 HCCH Judgments Convention). The HCCH news item is available here.

It should be noted that in order to consent to be bound by the treaty, Costa Rica would need to deposit an instrument of ratification, acceptance or approval. In the meantime, a signatory State has the obligation not to defeat the object and purpose of a treaty prior to its entry into force (article 18 of the UN Vienna Convention on the Law of Treaties).

Costa Rica made the following declaration: “in accordance with article 14, paragraph 3, of the Convention, the Republic of Costa Rica declares that it shall not apply Article 14, paragraph 1, of the Convention.”

Article 14(1) of  the HCCH 2019 Judgments Convention states the following:  “No  security,  bond  or  deposit,  however  described,  shall  be  required  from  a  party  who  in  one Contracting State applies for enforcement of a judgment given by a court of another Contracting State on the sole ground that such party is a foreign national or is not domiciled or resident in the State in which enforcement is sought.” Article 14(3) of the HCCH 2019 Judgments Convention allows States to file a declaration stating that they will not apply Article 14(1).

In this regard, it should be noted that many HCCH Conventions contain a similar provision. This is particularly the case of the  HCCH 1980 Access to Justice Convention, whose objective is precisely, as its name suggests, to promote access to justice by ensuring that “the mere status as an alien or the absence of residence or domicile in a State are not grounds for discrimination with regard to access to justice in that State” (HCCH outline of this Convention).

The HCCH 1980 Access to Justice Convention strikes the right balance by eliminating such a requirement and at the same time allowing the enforceability of orders for costs (Chapter II, arts 14-17). The latter is somewhat similar to Article 14(2) of the HCCH 2019 Judgments Convention and undoubtedly was a source of inspiration during the negotiations.

The interesting fact is that Costa Rica is a party to the HCCH 1980 Access to Justice Convention. Thus, Costa Rica is not allowed to impose any security, bond or deposit on the basis of a person being a foreign national or of not having his or her domicile or residence in Costa Rica if the conditions of Article 14 of the HCCH 1980 Access to Justice Convention are met, at least in its relations with the Contracting States to the said Convention.

Nevertheless, the declaration of Costa Rica underlines the fact that some States continue to impose such a requirement (although admittedly this requirement is fading away in some regions of the world). And thus the promotion of the HCCH 1980 Access to Justice Convention and all other HCCH Conventions that promote the principle of non-discrimination continue to be all the more relevant.

***

The HCCH 2019 Judgments Convention is not yet in force. In accordance with its article 28: “This Convention shall enter into force on the first day of the month following the expiration of the period during which a notification may be made in accordance with Article 29(2) with respect to the second State that has deposited its instrument of ratification, acceptance, approval or accession referred to in Article 24.”

There are currently four signatory States: Costa Rica, Israel, Uruguay and Ukraine. The act of signing a treaty does not count towards the timeline specified in article 28 of the HCCH 2019 Judgments Convention as it is not an instrument of ratification, acceptance, approval or accession.

Further to CoL’s posts on recent case law of the ECJ last week, we allow ourselves to draw CoL readers’ attention to the judgment of the ECJ of 9 September 2021, C-422/20 – RK ./. CR, on the interpretation of jurisdictional provisions of the European Succession Regulation (ESR), upon reference by the Higher Regional Court (Oberlandesgericht) of Cologne, Germany. Neither the ECJ’s judgment, nor AG Maciej Szpunar’s Opinion of 8 July 2021 is yet available in English translation. The following summary draws on the original German texts.

The referring national court asked (1) whether it is required, for a declaration of lack of jurisdiction by the court previously seised as provided for in Article 7(a) ESR, that the latter court expressly declines jurisdiction, or whether an implicit declaration suffices if it is clear by interpretation that that court has in fact declined jurisdiction? The national court further asked (2) whether the court of a Member State whose jurisdiction is to emerge from a declaration of lack of jurisdiction by another Member State court is entitled to examine whether the conditions for such a declaration were in fact fulfilled. In particular, the referring court asked (a) whether the second court may examine whether the testator validly chose the applicable law in accordance with Article 22 ESR, whether (b) a request for a declaration of lack of jurisdiction, as required by Article 6(a) ESR has been brought by one of the parties in the first proceedings, and (c) whether the first court correctly assessed that the courts of the Member State of the chosen law are better placed to rule on the succession. In a last question, the referring court asked (3) whether Articles 6(a) and 7(a) ESR are applicable if the testator has not made an express or implied choice of law in a testamentary disposition before 17 August 2015 but the law applicable to the succession may be inferred from Article 83(4) ESR.

The ECJ held that (1) no express declaration of lack of jurisdiction is required under Article 6(a) ESR, as long as the first court’s intention can be clearly inferred from its decision, that (2) the second court has no competence to review the first court’s declaration of lack of jurisdiction and (3) that Articles 6(a) and 7(a) ESR remain applicable if the applicable law may only be inferred from Article 83(4) ESR.

As to the first question, the Court made clear that certain differences in the Spanish language version of the ESR in Article 6(a) – “abstenerse de conocer” (in translation something like: “abstain from assuming jurisdiction”) – on which the Spanish first court had relied – are of no relevance for the autonomous interpretation of the ESR, to be exercised acccording to general and well established principles in light of all of its language versions and its objectives (para. 30). These do not require any particular form for a declaration under Article 6(a), and requiring such a form would jeopardize the objective of the ESR as laid down in Recital 27 Sentence 1, i.e. “to ensure that the authority dealing with the succession will, in most situations, be applying its own law”.

In relation the second question, the Court made reference to AG Spzunar’s Opinion (para. 39) and confirmed the latter’s finding that no second review may take place of the first court’s decision under Article 6(a) ESR (paras. 40 et seq.), not least because such as decision is a “decision” in the sense of Article 3(1) (g) ESR that falls within the scope of Chapter IV of the ESR on the recognition of decisions of the courts of other Member States (para. 42). The Court concludes that the first court’s decision under Article 6(a) ESR is binding for the second court both in its result – declaration of lack of jurisdiction – as well as in relation to its underlying findings about the conditions that Article 6(a) ESR requires. In the latter respect the Court made expressly reference to its earlier judgment of 15 November 2012, C-456/11 – Gothaer Versicherung, which means that its notion of a European res iudicata developed there is to be extended to the type of conditions found fulfilled by the first court here: “Any other interpretation would jeopardize the principles of mutual recognition and mutual trust on which the system of the ESR grounds” (para. 45, translation is my one).

For answering the third question the Court explained that Article 83(4) ESR contains a presumption of a choice of law by the testator that is to be attributed the same effects as a choice of law directly undertaken under the ESR (para. 53).

Written by Alexander A. Kostin, Senior Research Fellow at the Private Law Research Centre (Moscow, Russia) and counsel atAvangard law firm

and Valeria Rzyanina, junior associate, Avangard Law Firm

The Decree of the Arbitrazh (Commercial) Court of the Volga District of December 23, 2019 N F06-55840 / 2019 docket numberN A12-20691 / 2019, addresses service of process on the Russian party by the Cypriot court by e-mail and thus the possibility of further recognition of a foreign judgment.

1. Factual background

1.1. Within the framework of the court proceedings, the Russian party (the defendant in the Cypriot proceedings) was notified by the Cypriot court by sending a writ of service of process to the known e-mail addresses of the defendant. In order to substantiate the manner of service, the Cypriot court referred to Art. 9 of Decree 5 of the Rules of Civil Procedure (Cyprus), according to which “In any case, when the court considers that, for any reason, the service provided for in Rule 2 of this Decree will not be timely or effective, the court may order a substitute for personal service, or other service, or substitute for a notice of service in any way that will be found to be fair and correct in accordance with the circumstances”.

1.2. After the default judgment of the Cypriot court was rendered, an application for its recognition was lodged with the Arbitrazh Court of the Volgograd Region. In addressing the issue of compliance with the notification rules, the Russian court referred to paragraph 2 of Art. 24 of the Treaty on Legal Assistance of the USSR-Cyprus 1984 on civil and family matters, according to which judgments are recognized and enforced if the party against whom the judgment was made, who did not appear and did not take part in the proceedings, was promptly and duly notified under the laws of the Contracting Party in the territory of which the judgment was made. The foreign judgment in question was recognized and enforced by the Russian court based on the fact that the proper manner of the notification was confirmed by the opinion of experts under Cypriot law. The Ruling of the Supreme Court of the Russian Federation of March 27, 2020 N 306-ES20-2957 in case N A12-20691 / 2019 left the acts of the lower courts unchanged.

2. Analysis of the Decree of the Arbitration Court of the Volga District of December 23, 2019 N F06-55840 / 2019 in the case N A12-20691 / 2019

2.1. At first glance the logic of the Supreme Court and lower courts appears to be flawless. Nevertheless we find it important to correlate the provisions of paragraph 2 of Art. 24 of the 1984 Legal Aid Treaty with the provisions of Art. 8 of the Treaty. Article 8 requires that: “the requested institution carries out the service of documents in accordance with the rules of service in force in its state, if the documents to be served are drawn up in its language or provided with a certified translation into this language. In cases where the documents are not drawn up in in the language of the requested Contracting Party and are not provided with a translation, they are handed over to the recipient if only he agrees to accept them. ”

2.2. In this regard, it should be taken into account that when using the wording “notified under the laws of a Contracting Party,” the Treaty States simultaneously tried to resolve the following situations:

1) where the parties were in the state of the court proceedings at the time of the consideration of the case. In this case, the national (“domestic”) law of the State in which the dispute was resolved shall apply;

2) where the parties were in different states at the time of the consideration of the case. In this case, the provisions of the relevant international treaty shall apply, since the judicial notice is [a] subject to service in a foreign state and, therefore, it affects its sovereignty.

2.3. In this regard, attention should be paid to the fact that under the doctrine and case law of the countries of continental law, the delivery of a judicial notice is considered as an interference with the sovereignty of the respective state. The following are excerpts from case law. Excerpts from legal literature are provided for reference purposes:

1. a) “The negotiating delegations in The Hague faced two major controversies: first, some civil law countries, including Germany, view the formal service of court documents as an official act of government; accordingly, they view any attempt by a foreign plaintiff to serve documents within their borders as an infringement on their sovereignty ” – Volkswagen Aktiengesellschaft v. Schlunk, 486 U.S. 694 (1988);
2. b) “The exclusive competence to carry out acts of state power on its own territory follows from the sovereignty of states. As a rule, a state cannot perform actions of this kind within the borders of another state without violating its sovereignty and, therefore, without violating international law. An act is compatible with this right only if it is permitted by a specific international regulation, for example, if it is agreed in a treaty concluded between the states concerned, or if it is unilaterally accepted by the state in which it is carried out. When the notification is given abroad without permission under international law, this notification is invalid under Swiss domestic law due to its supremacy – Decision of the Swiss Federal Court of 01.07.2008 in case No. BGer 4A_161 / 2008.
3. c) “According to the traditional German law approach, delivery is considered to be an act of sovereignty.”- Rasmussen-Bonne H-E., The pendulum swings back: the cooperative approach of German courts to international service of process P. 240;
4. d) “From prospective of the Japanese state, certain judicial acts of foreign courts, such as the service of court notices and the receipt of evidence, are considered as a manifestation of sovereignty.”- Keisuke Takeshita, “Sovereignty and National Civil Procedure: An Analysis of State Practice in Japan,” Journal of East Asia and International Law 9, no. 2 (Autumn 016): 361-378

2.4. In light of the above, the interpretation of the Treaty on Legal Assistance of the USSR-Cyprus 1984, according to which a party located in the territory of Russia is subject to notification in accordance with Art. 8 of the Treaty, seems to be preferable.

We welcome further discussion on this intricate matter.

Written by Alexander A. Kostin, Senior Research Fellow at the Private Law Research Centre (Moscow, Russia) and counsel atAvangard law firm

and Valeria Rzyanina, junior associate, Avangard Law Firm

(This is a synopsis of an article published  in the Herald of Civil Procedure Law Journal N 1/2021 in Russian)

 Issues concerning cross-border insolvency rarely arise in Russian case law. For this reason, the Decree of the Arbitrazh Court of the Moscow District dated 22.11.2018 docket number N A40-39791 / 2018 is of particular interest to both practitioners and academics.

1. The factual background of case No. ?40-39791 / 2018

A bankruptcy procedure had been introduced at a German court against the Russian individual having the status of an individual entrepreneur under German law. After the opening of this procedure in Germany, the Russian debtor donated an apartment in Moscow to her daughter.

As a consequence of the said acts the bankruptcy trustee of the Russian debtor brought an action before the Moscow Arbitrazh (Commercial) Court, requesting the following relief: 1) to recognize the judgment of the German court opening the bankruptcy proceedings; 2) to set aside the agreement for donation of the apartment; 3) to enforce the judgment of the German court by prohibiting the alienation of this immovable property upon the completion of the bankruptcy procedure in Germany; 4) to attach the said immovable property in Russia.

On 01.10.2018 the Moscow Arbitrazh (Commercial) Court (First instance) dismissed the claim relating to the setting aside of the agreement of donation on the ground that that application was not heard by the German court and consequently it could not be resolved within the framework of the procedure for recognition of the German  judgment. The court of First instance specifically held that the question relating to the validity of the agreement of donation should be resolved in separate proceedings to be brought before the Russian courts.

In further proceedings the Moscow Arbitrazh (Commercial) Court (First instance) recognized the judgment of the German court on the opening of the bankruptcy proceedings (decision of 07.12.2018). With reference to Art. 343 of the German Bankruptcy Ordinance and the Russian case Law (docket number No. A56-22667 / 2007), the Russian court acknowledged the existence of reciprocity in relation to the recognition of Russian court judgments in Germany as prescribed by the German Federal Law “On insolvency (bankruptcy)”. The Russian court made an express finding that the foreign court order did not violate the exclusive jurisdiction  over bankruptcy matters, because the debtor’s activities as an individual entrepreneur are regulated by the law of the Federal Republic of Germany (Article 1201 of the Civil Code of the Russian Federation – “The law applicable to determination of the ability an individual to engage in entrepreneurial activity”).

However, the Moscow Arbitrazh (Commercial) Court (1-st instance) rejected the part of the foreign insolvency judgment relating to the prohibition of the debtor to dispose of immovable property until the completion of the insolvency proceedings. In the court’s opinion, in this  respect the exclusive competence of the Russian courts and the public order of the Russian Federation had been violated (Article 248 of the Arbitrazh [Commercial] Procedure Code of the Russian Federation). At the same time, the court of first instance also noted that the bankruptcy trustee is entitled to institute separate bankruptcy proceedings against the debtor in order to set aside the agreement for donation of the apartment before the Russian courts.

2. Analysis of case ?40-39791 / 2018

The key question in this situation concerns the correct procedure for setting aside the transaction for the transfer of the immovable property as the restitution of the proper value is dependent on the said action. In turn  the success of the said action depends on the following issues: 1) procedural capacity of a bankruptcy trustee, including the issue whether the recognition of a foreign judgment is a prerequisite for granting procedural capacity to a foreign bankruptcy trustee; 2) the law applicable to avoidance of the donation agreement.

2.1.          Procedural capacity of a foreign bankruptcy trustee.

In view of the fact that the foreign bankruptcy trustee is regarded as the legal representative of the debtor, his/her powers (including the power to bring an action) are recognized if the corresponding limitation of the capacity of the debtor is recognized in its turn.

Under Art. 1197 of the Civil Code of the Russian Federation, the legal capacity of an individual is governed by his personal law (lex personalis).The personal law of an individual refers to the law of the country of his/her nationality (clause 1 of article 1195 of the Civil Code of the Russian Federation). Consequently, the personal law of a Russian national is the law of the Russian Federation.

In the present situation, the legal capacity of the Russian debtor had been limited by a foreign judgment. In this case, the legal effect of the  foreign judgment on limitation of capacity  did not fall within the scope of the applicable substantive law since the judgment was not rendered by the country of his/her nationality. For that reason, the bankruptcy trustee’s legal capacity (including procedural capacity) could not be recognized by virtue of the Russian national conflict of laws rule.

In its turn the possibility of recognition of the foreign judgment on the opening of bankruptcy proceedings is questionable for the following reasons. Although in the present matter the Moscow Arbitrazh (Commercial) Court argues that the capacity of the debtor shall be governed by the German law as the law of the country where the defendant was doing business (Art. 1201 of the Russian Civil Code) it needs to be noted that the capacity of the person to conduct business-related  activities  arises from  general civil legal capacity (Art. 1195-1197 of the Civil Code of the Russian Federation). Taking into account the above, the said judgment on the opening of the insolvency proceedings appears to be in  conflict with the Russian public order.

2.2.          Law applicable to avoidance of the donation agreement.

In order to establish that the agreement for donation of the apartment is void the bankruptcy trustee referred to the fact that the apartment forms an integral part of the bankruptcy estate pursuant to paragraph 1 of Art. 35 of the German Insolvency Ordinance, as well as under clause 1 of Art. 213.25 of the  Federal Law “On Insolvency (Bankruptcy)”. With reference to the fact that the agreement for donation of the apartment was concluded after the  commencement of  foreign bankruptcy proceedings against the Russian debtor, the trustee argued that the transaction should be deemed void under Art. 61.2. of The Federal Law “On Insolvency (Bankruptcy)” as  a “suspicious transaction”.

In our view application of Art. 61.2. of The Federal Law “On Insolvency (Bankruptcy)” to invalidate the debtor’s agreements within the framework of a foreign insolvency does not seem to be entirely justified due to the following. Due to the fact that the bankruptcy procedure against the Russian debtor had been opened by a German court, the legal consequences of this procedure should also be determined by German law. Another question is whether these legal consequences are recognized in the Russian Federation). In this case, the fact of initiation of bankruptcy proceedings against a Russian national at a foreign court does not provide grounds for the application of Russian bankruptcy law.

In our view the following ways to set aside the agreement within the framework of the foreign insolvency exist.

Primarily, it appears that the donation agreement entered into after the commencement of foreign insolvency proceedings may be regarded as a void transaction under the Russian law due to the fact that it was intended to defraud  creditors (Articles 10 and 168 of the Civil Code of the Russian Federation).

Secondly, it could be argued that the recognition of a foreign bankruptcy entails that the effects of that foreign bankruptcy also apply to all actions that took place in the territory of Russia, including the possibility to apply foreign bankruptcy grounds to avoid contracts. However, this line of argument may not be entirely in line with the provisions of the Russian Civil Code under which Russian law applies to contracts in relation to land plots, subsoil plots and other real estate located in the territory of the Russian Federation (paragraph 2 of Art. 1213 of the Civil Code of the Russian Federation).

Conclusion

The Decree of the Arbitrazh (Commercial) Court of the Moscow District dated 22.11.2018 docket number N A40-39791 / 2018 as well as other court findings represent an interesting interplay between the legal provisions relating to the recognition of foreign insolvency and the application of Russian law for avoidance of the debtor’s transactions. In the present matter the Russian court clearly ruled in favor territoriality of foreign insolvency proceedings. However, we remain hopeful that one day the approach will change and the Russian courts will uphold the principle of universality of foreign insolvency.

On Thursday 14 October 2021 an online M-EPLI roundtable will take place on private international law issues relating to the recognition and enforcement of foreign (mostly US) punitive damages judgments in countries outside of Europe.

The event is organised by Lotte Meurkens and Cedric Vanleenhove and the Maastricht European Private Law Institute.

On Friday, 24 September 2021, the Max Planck Institute Luxembourg for Procedural Law will host the EFFORTS National Exchange Seminar for France and Luxembourg (online).

This Seminar is organised in the framework of the EFFORTS project (Towards more effective enforcement of claims in civil and commercial matters within the EU), which tackles the Brussels I-bis Regulation and the Regulations on the European Enforcement Order, the European Small Claims Procedure, the European Payment Order, and the European Account Preservation Order. The Project investigates, in particular, the implementation of these Regulations in the national procedural law of Belgium, Croatia, France, Germany, Italy, Lithuania, and Luxembourg, and is conducted by a consortium comprising the Max Planck Institute Luxembourg, the Universities of Milan (coord.), Heidelberg, Zagreb, Vilnius, and the Free University of Brussels.

The programme of the Seminar is available here.

Participants are kindly requested to pre-register by sending an email including their full name, title and affiliation to secretariat-prof.hess@mpi.lu at the latest by Sunday, 19 September 2021.

More information on EFFORTS and its research outputs are available via the project website and in various newsletters previously posted here, here, and here.

On the EFFORTS German Exchange Seminar, see the previous announcement here.

This Project was funded by the European Union’s Justice Programme (2014-2020). The content of this study represents the views of the authors only and is their sole responsibility. The European Commission does not accept any responsibility for use that may be made of the information it contains.

Project JUST-JCOO-AG-2019-881802
With financial support from the Civil Justice Programme of the European Union

This post was written by Harshal Morwale, an India-qualified international arbitration lawyer working as an associate with a premier Indian law firm in New Delhi; LLM from the MIDS Geneva Program (2019-2020); alumnus of the Hague Academy of International Law. 

Recently, the issue of foreign sovereign immunity became a hot topic in India due to the new judgment of the Delhi High Court (“DHC”) in the case of (KLA Const Tech v. Afghanistan Embassy). The previous part of the blog post analyzed the decision of the DHC.  Further, the post focused on the relevance of the United Nations Convention on Jurisdictional Immunities of States and Their Property. The post also explored the interplay between state immunity and diplomatic immunity.

This part focuses on two further issues which emanate from the decision of the DHC. Firstly, the post deals with the impact of the consent to arbitrate on immunity from enforcement. Then, the post explores the issue of attachment of state’s property for satisfying the commercial arbitral award against a diplomatic mission.

Consent to Arbitrate: Waiver Of Immunity From Enforcement?

As highlighted in the last post, one of the main arguments of the KLA Const Technologies (“claimant”) was that the Embassy of the Islamic Republic of Afghanistan’s (“respondent”, “Embassy”) consent to arbitrate resulted in the waiver of the sovereign immunity. The DHC accepted the argument and ruled that a separate waiver of immunity is not necessary to enforce an arbitral award in India as long as there is consent to arbitrate. The DHC also stated that this position is in consonance with the growing International Law principle of restrictive immunity while referring to the landmark English case (Trendtex Trading Corp. v. Central Bank of Nigeria).

However, there’s more to the issue than what catches the eye. First of all, the Trendtex case was decided before the English Sovereign Immunity Act (“UKSIA”) came into effect. Therefore, the DHC could have examined the relevant provisions under UKSIA and the more recent cases to track the jurisprudential trend on sovereign immunity under English law. For example, Section 13(2) of the UKSIA recognizes the difference between jurisdictional immunity and immunity from enforcement and requires an express waiver of immunity from enforcement. Even the ICJ has noted the requirement of an express waiver of immunity from enforcement in the Jurisdictional Immunities case. (para 118).

Furthermore, there was an opportunity to undertake a more detailed cross-jurisdictional analysis on the issue.  In fact, the issue of arbitral consent as a waiver of immunity from enforcement was dealt with by the Hong Kong Courts in FG Hemisphere v. Democratic Republic Of The Congo. Reyes J, sitting in the Court of First Instance, ruled that consent of the state to arbitrate does not in itself imply the waiver of immunity from enforcement. The ruling on the issue was confirmed by the majority decision of the Court of Final Appeal. The position has also been confirmed by scholars.

However, this position is not the settled one. The DHC’s decision is in line with the approaches adopted in France (Creighton v. Qatar), Switzerland (United Arab Republic v. Mrs. X) that no separate waiver of immunity from enforcement would be required in the existence of an arbitration agreement.

However, the decision made no reference to the reasoning of the cases from these jurisdictions. Regardless of the conclusion, the DHC’s decision could have benefited from this comparative analysis, and there would have been a clearer answer as to the possible judicial approaches to the issue in India.

 Attachment of State’s Property for Satisfying an Award Against A Diplomatic Mission

In the current case, the DHC ordered the respondent to declare not only its assets and bank accounts in India but also all its commercial ventures, state-owned airlines, companies, and undertakings in India, as well as the commercial transactions entered into by the respondent and its state-owned entities with the Indian companies.

It is not entirely clear whether the Islamic Republic of Afghanistan’s (“Afghanistan”) properties and commercial debts owed by private Indian companies to the state-entities of Afghanistan would be amenable to the attachment for satisfying the award against the Embassy. To resolve the issue of attaching Afghanistan’s property to fulfill the liability of the Embassy, a critical question needs to be considered – while entering into the contract with the claimant, was the respondent (Embassy) acting in a commercial capacity or as an agent of the state of Afghanistan?

The contract between the claimant and the respondent was for the rehabilitation of the Afghanistan Embassy. The DHC found that the respondent was acting in a commercial capacity akin to a private individual. Additionally, there’s no indication through the facts elaborated in the judgment that the contract was ordered by, or was for the benefit of, or was being paid for by the state of Afghanistan. In line with these findings, it can be concluded that the contract would not be a sovereign act but a diplomatic yet purely commercial act, independent from the state of Afghanistan. Consequently, it is doubtful how the properties of state/state-entities of Afghanistan can be attached for fulfilling the award against the Embassy.

The attachment of the state’s property to fulfill the liability of the Embassy would break the privity of contract between the claimant and the respondent (Embassy). According to the privity of contract, a third party cannot be burdened with liability arising out of a contract between the two parties. Therefore, the liability of the Embassy cannot be imposed on the state/state-entities of Afghanistan because they would be strangers to the contract between the claimant and the respondent.

That said, there are a few well-known exceptions to the principle of privity of contract such as agency, third party beneficiary, and assignment. However, none of these exceptions apply to the case at hand. It is accepted that an embassy is the agent of a foreign state in a receiving state. However, in this case, the contract was entered into by the Embassy, in its commercial capacity, not on behalf of the state but in the exercise of its diplomatic yet commercial function. Afghanistan is also not a third-party beneficiary of the contract as the direct benefits of the contract for the rehabilitation of the Afghanistan Embassy are being reaped by the Embassy itself. Additionally, there is no indication from the facts of the case as to the assignment of a contract between the state of Afghanistan and the Embassy. Therefore, the privity of contract cannot be broken, and the liability of the Embassy will remain confined to its own commercial accounts and ventures.

In addition to the above, there also lacks guidance on the issues such as mixed accounts under Indian law. Regardless, the approach of the DHC remains to be seen when the claimant can identify attachable properties of the respondent. It also remains to be seen if the respondent appears before the DHC and mounts any sort of defence.

Conclusion

There remains room for growth for Indian jurisprudence in terms of dealing with issues such as immunity from the enforcement of arbitral awards. An excellent way to create a more conducive ecosystem for this would be to introduce stand-alone legislation on the topic as recommended by the Law Commission of India in its 176th report. Additionally, the issues such as the use of state’s properties to satisfy the commercial liability of diplomatic missions deserve attention not only under Indian law but also internationally.

(The views expressed by the author are personal and do not represent the views of the organizations he is affiliated with. The author is grateful to Dr. Silvana Çinari for her feedback on an earlier draft.)

Originally posted today on NGPIL website

The Nigeria Group on Private International Law “(NGPIL”) invites submissions for next year’s NGPIL Conflict of Law’s Competition. The winner will be awarded for the best essay on any aspect of Nigerian conflict of laws. Entries will be accepted from the following: an undergraduate and/or postgraduate scholar studying in Nigeria, or any Nigerian lawyer five years call or below practicing and residing in Nigeria. The essay should be unpublished at the time of submission. Submitted essays should be in the English language. Submitted essays should also be within five to ten thousand words. Competitors may be citizens of any nation, age or gender but must be an undergraduate and/or postgraduate scholar studying in Nigeria, or any lawyer below five years post-call experience practicing and residing in Nigeria. They need not be Members, or on the Participant’s list of NGPIL.

The prize is 300 GBP, and the winner of the competition will be encouraged to publish the paper in any high-quality peer reviewed journal on private international law (conflict of laws). The prize is sponsored by and will be awarded by NGPIL based upon the assessment of NGPIL.

Submissions to the Prize Committee must be received no later than January 10, 2022. Entries should be submitted by email in Word or pdf format. The winner will be announced no later than 2 months after the deadline. Decisions of the NGPIL on the winning essay and on any conditions relating to this prize are final. Submissions and any queries should be addressed by email to ngpilaw@gmail.com. All submissions will be acknowledged by e-mail.

The second thematic volume in the series Studies in Private International Law – Asia looks into direct jurisdiction, that is, the situations in which the courts of 15 key Asian states (Mainland China, Hong Kong, Taiwan, Japan, South Korea, Malaysia, Singapore, Thailand, Vietnam, Cambodia, Myanmar, the Philippines, Indonesia, Sri Lanka, and India) are prepared to hear a case involving cross-border elements. For instance, where parties are habitually resident abroad and a dispute has only some, little or no connection with an Asian state, will the courts of that state accept jurisdiction and hear the case and (if so) on what conditions? More specifically, the book’s chapters explore the circumstances in which different Asian states assume or decline jurisdiction not just in commercial matters, but also in other types of action (such as family, consumer and employment disputes).

The Introduction defines terminology and identifies similarities in the approaches to direct jurisdiction taken by the 15 Asian states in civil and commercial litigation. Taking its cue from this, the Conclusion assesses whether there should be a multilateral convention or soft law instrument articulating principles of direct jurisdiction for Asia. The Conclusion also discusses possible trajectories that Asian states may be taking in respect of direct jurisdiction in light of the COVID-19 pandemic and the political tensions currently besetting the world. The book suggests that enacting suitable rules of direct jurisdiction requires an Asian state to strike a delicate balance between affording certainty and protecting its nationals. At heart, direct jurisdiction involves sometimes difficult policy considerations and is not just about drawing up lists of jurisdictional grounds and exceptions to them.

For further information please visit: https://www.bloomsbury.com/uk/direct-jurisdiction-9781509936427/

This Thursday, the Court of Justice delivered its judgment in the case UM, C-277/20, where it clarifies whether a donation mortis causa may fall within the scope of the notion of “agreement as to succession” in the sense of the Succession Regulation.

The request for a preliminary ruling in this case arises out of proceedings in Austria on the inscription in the land registry of the property right to real estate situated in that Member State. The requested inscription is supposed to be made on the basis of a contract of donation mortis causa in respect to that real estate, entered into between two German nationals habitually resident in Germany. Prior to the request for the inscription, the succession proceedings have been opened before a German court for the last place of residence of the donor.

Before the Austrian courts, the request for the inscription of the propriety right have been already rejected by two instances and ultimately the Oberster Gerichtshof referred to the Court the preliminary questions that read as follows:

Is Article 3(1)(b) of [the Succession Regulation] to be interpreted as meaning that a contract of donation mortis causa entered into between two German nationals habitually resident in Germany in respect of real estate located in Austria, granting the donee a right having the character of an obligation against the estate to registration of his title after the donor’s death pursuant to that contract and the donor’s death certificate, that is without the intervention of the probate court, is an agreement as to succession within the meaning of that provision?

If the answer to the above question is in the affirmative: Is Article 83(2) of [The Succession Regulation] to be interpreted as meaning that it also regulates the effect of a choice of applicable law made before 17 August 2015 for a contract of donation mortis causa that is to be qualified as an agreement as to succession within the meaning of Article 3(1)(b) of [the Succession Regulation]?

In his Opinion presented this July, AG Richard de la Tour considered that Article 3(1)(b) of the Succession Regulation must be interpreted to the effect that the notion of “agreement as to succession” includes donation contracts inter vivos, by which, in favor of the donee, the transfer of the ownership of one or several assets even only partially accounting for the hereditary estate of the donor does not take place until the death of the donor.

In its judgments, the Court also pronounces itself in favour of the interpretation according to which a contract of donation mortis causa is to be qualified as an “agreement as to succession”.

The reasoning of the Court commences with the juxtaposition of exclusion from the scope of the application of the Succession Regulation provided for in its Article 1(2)(g) [“shall be excluded (…) property rights (…) created or transferred otherwise than by succession, for instance by way of gifts”], on the one hand, and definition of the notion of “agreement as to succession” in the sense of Article 3(1)(b) of the Succession Regulation [“an agreement resulting from mutual wills, which, with or without consideration, creates, modifies or terminates rights to the future estate or estates (…)], on the other hand (paragraph 27).

The Court stresses then the importance of autonomous and uniform interpretation of the notions of the Succession Regulation (paragraph 29) and contends that the very wording of the definition of the notion of “agreement as to succession” indicates that this notion covers also transfers relating to future estates (paragraph 30).

By contrast, the second preliminary question is answered in the negative. For the Court, as nothing indicates that a choice of law applicable have been made to succession as a whole, Article 83(2) of the Succession Regulation is not applicable to the case at hand. As such, the choice made solely with regards to the agreement as to succession is not governed by Article 83(2) (paragraph 39).

The judgment can be found here (in German and French so far).

AG Saugmandsgaard Øe observes in his Opinion presented today in the case HRVATSKE ŠUME, C-242/20, the Court of Justice has already faced requests for a preliminary ruling where arose a question on qualification of an action for unjust enrichment for the purposes of the Brussels I Regulation. He notes that no conclusive finding has been made so far as to its qualification as a “matter relating to tort, delict or quasi-delict” in the sense of Article 5(3) of the Regulation (point 4). By contrast, the present case is supposed to create an opportunity to provide a definitive conclusion to the jurisprudential saga in question.

It is noteworthy that the case itself presents a nuance: the unjust enrichment is said to have occurred in enforcement proceedings which were carried out, although they should not have been, and now reimbursement of the amount which was unjustly levied in enforcement proceeding is being sought before the Croatian courts. The nuance is addressed in the second preliminary question.

At the request of the Court, the Opinion does, however, elaborate only on the first preliminary question that reads as follows:

Do actions for recovery of sums unduly paid by way of unjust enrichment fall within the basic jurisdiction established in the [Brussels I Regulation] in respect of “quasi-delicts” since Article 5(3) thereof provides inter alia: “A person domiciled in a Member State may, in another Member State, be sued … in matters relating to … quasi-delict, in the courts for the place where the harmful event occurred or may occur”?

In his Opinion, AG Saugmandsgaard Øe proposes to take a step back and view the preliminary question in a broader perspective. For him, it is necessary to determine, in the first place, whether an action for unjust enrichment falls within the scope of Article 5(1) of the Brussels I Regulation and, only in the negative, in the second place, whether it fall within the scope of Article 5(3) of the Regulation (point 26). He established therefore an order of preference when it comes to the contract/tort distinction under the Regulation.

Having adopted that approach, he concludes that an action for unjust enrichment is not a “matter relating to a contract” in the sense of Article 5(1) of the Brussels I Regulation, save where it is closely connected with a preexisting (or alleged to exist) contractual relationship (points 44-52). Nor it is a “matter relating to tort, delict or quasi-delict” within the meaning of Article 5(3) of the Regulation (point 79).

The Opinion contains an in-depth discussion on the parallels with the Rome I/Rome II Regulations and, in this regard, the outcome of the reasoning followed by AG Saugmandsgaard Øe may bring to mind the one that AG Bobek proposed in the context of actio pauliana in his Opinion delivered in the case Feniks, C-337/17.

The Opinion of AG Saugmandsgaard Øe is available here (no English version so far).

At least from the perspective of private international law, this Thursday can easily go down in history as one of the busiest days in the Court of Justice agenda. Its complete outline can be found here, due to courtesy of Marta Requejo Isidro. Stay tuned also for our next updates on the cases of this morning.

The present post concerns the Opinion presented by AG Rantos in the case TOTO, C-581/20. At the request of the Court, the analysis provided for in the Opinion is limited to the second preliminary question on the interpretation of Article 35 of the Brussels I bis Regulation. The second question reads as follows:

After the right to make an application for provisional/protective measures has been exercised and the court having jurisdiction as to the substance of the matter has already ruled on that application, is the court seised of an application for interim relief on the same basis and under Article 35 of [the Brussels I bis Regulation] to be regarded as not having jurisdiction from the point at which evidence is produced that the court having jurisdiction as to the substance of the matter has given a ruling on that application?

In essence, the question seeks to establish whether a Bulgarian court not having jurisdiction as to the substance of the matter is precluded from pronouncing provisional/protective measures under Article 35 of the Brussels I bis Regulation in a situation where a Polish court having jurisdiction as to the substance of the matter has already given a ruling on an application for identical provisional/protective measures and rejected the application.

In brief, AG Rantos argues that in a situation described in the preliminary question the court not having jurisdiction as to the substance of the matter should not pronounce the provisional/protective measures.

In general terms, the Opinion contends that the rules on litispendence provided for in Article 29 of the Brussels I bis Regulation do apply in the context of proceedings for provisional/protective measures. Such finding of a general nature seems to suggest that the court subsequently seized under Article 35 of the Regulation with an identical application for provisional/protective measures should not give a ruling on that application (point 50).

The Opinion then goes on to elaborate on the more specific elements of the case at hand which seemed to inspire the second preliminary question: firstly, the impact of the choice of court clause in favour of the Polish courts on the applicability of Article 35 of the Regulation (in other terms: whether the Polish courts have exclusive jurisdiction also as to the provisional/protective measures); secondly, the actual connection between the measures sought and the territory of Bulgaria (the question being left open for the referring court to asses, point 74); thirdly, the relevance, before the Bulgarian court, of the Polish court decision refusing the provisional/protective measures (point 54).

Concerning the last element, AG Rantos observes that it is not clear whether the ruling of a Polish court refusing to grant provisional/protective measures is final or not (point 76). Thus, he elaborates on these two different hypothesis. In essence, according to the Opinion, the court subsequently seized should not give ruling on the application for provisional/protective measures [either because in a mutual trust oriented manner it should refrain from doing so because such ruling would be irreconcilable with a previous definitive ruling handed down by a Polish court (point 79) or – in the absence of such definitive ruling – because the rules on litispendence require the court subsequently seized to decline jurisdiction in favour of court previously seized (point 88)].

The Opinion is available here (no English version so far).

On Friday 17 September 2021, the Institute for Comparative Law, Conflict of Laws and International Business Law of Heidelberg University (Prof. Dr. Dr. h.c. Thomas Pfeiffer) will host the EFFORTS German Exchange Seminar. This half-day online conference is held within the framework of the project “EFFORTS – Towards more effective enforcement of claims in civil and commercial matters within the EU”, funded by the European Commission and conducted by the University of Milan (coord.), the Max Planck Institute Luxembourg for Procedural Law, Heidelberg University, the Free University of Brussels, the University of Zagreb, and the University of Vilnius.

The program for the German Exchange Seminar is available here (PDF, in German). Participation is free of charge. Participants are kindly requested to pre-register by sending an email to sekretariat.pfeiffer@ipr.uni-heidelberg.de.

The EFFORTS-project tackles in particular the European Enforcement Order Regulation, the European Payment Order Regulation, the European Small Claims Regulations and the European Account Preservation Order Regulation. Ultimately, it aims to assess the functioning and the effectiveness of cross-border enforcement within the EU. More information on EFFORTS and its research outputs can be found on the project website and in various newsletters previously posted on conflictoflaws.net here, here, and here.

This project was funded by the European Union’s Justice Programme (2014-2020). The content of this study represents the views of the authors only and is their sole responsibility. The European Commission does not accept any responsibility for use that may be made of the information it contains.

Project JUST-JCOO-AG-2019-881802
With financial support from the Civil Justice Programme of the European Union

The Faculty of Law at Ozyegin University is organizing its first online Private International Law Symposium on the theme of “Current Issues in Private International Law – MENA & EU”.

The symposium aims to bring together MENA and EU scholars working in the field of private international law field. The symposium is to be held on 19 November 2021.

The organizers are pleased to invite interested persons to submit abstracts of papers relating to the themes of the symposium by 20 September 2021.

All necessary details about the event can be found here: https://events.ozyegin.edu.tr/tr?myozu=1#/0/detail/17152/current-issues-in-private-international-law-mena-eu-call-for-papers

Any inquiries should be directed to Mrs. Jocelyne Alayan at jocelyne.alayan@ozyegin.edu.trseminar_pil@ub.ac.id.

The Mexican Academy of Private International and Comparative Law (AMEDIP) is holding a webinar on 9 September 2021 at 5:00 pm (Mexico City time – CDT), 12:00 am (CEST time). The topic of the webinar is Rethinking Private International Law (a look through its sources and methods) and will be presented by Professors Luciana B. Scotti and Candela Villegas (in Spanish).

The details of the webinar are:

Link: https://us02web.zoom.us/j/83622646486?pwd=ZzZwbFJ2R1NLaHFxUGNNUnE0M2FHQT09

Meeting ID: 836 2264 6486

Password: BMAAMEDIP

Participation is free of charge.

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

On 16 and 17 September 2021 an online course on European Union and Third Countries. Issues on jurisdiction and recognition of foreign judgments will take place as a part of the activities of the European Family Law Module funded by the EU ErasmusPlus programme led by Professor Elisabetta Bergamini of the University of Udine, Italy.

Excellent group of lecturers from different EU Member States will be discussing EU Regulations on jurisdiction and recognition and enforcement when those issues arise in situations connected with third States. The course will offer an overview of different aspects to this issue, having regard to EU rules both on civil and commercial matters and on family and succession matters. The course will be either in Italian or in English. The details of the programme are available in Flyer_E2106_EU_and_Third_Countries.

Participation is free of charge, but registration is required by 13 September here.

This note briefly analyses the recent decision of the Nigerian Supreme Court in BCE Consulting Engineers v Nigerian National Petroleum Corporation[1]on the issue of a foreign company that is not registered in Nigeria having the capacity to sue in Nigeria.

Generally, Section 78 of the Companies and Allied Matters Act, 2020 requires that a foreign company must be registered in Nigeria before it can carry on business in Nigeria. This provision is a carryover of the former Section 54 of the Companies and Allied Matters Act, 1990, which contains a similar provision.

However, Section 84(b) of the Companies and Allied Matters Act 2020, makes express provisions for a foreign company to sue and be sued in its corporate name or that of its agent (despite the fact that it is not a registered or incorporated company in Nigeria for the purpose of carrying on business (under Section 78). The same provision previously enacted in Section 60(b) of the Company and Allied Matters Act 1990. Section 60(b) of the Company and Allied Matters Act 1990 has been applied by Nigerian courts in some cases prior to the enactment of the Companies and Allied Matters Act, 2020.

In Companhia Brasileira De Infraestrututira (INFAZ) v Companhia Brasileira De Entrepostos E Commercio (COBEC) (Nig) Ltd,[2] the plaintiff-appellant was a company allegedly registered in accordance with Brazilian law. The plaintiff-appellant was also a shareholder with some Nigerian persons, which constituted the defendant-respondent company. There was a change in the name of the plaintiff-appellant to Companhia Brasileira De Infraestutura Fazendaria, which was allegedly in accordance with Brazilian law. The plaintiff-appellant prayed for the winding-up of the defendant-respondent company. The application was dismissed by the trial court and the appeal to the Court of Appeal was dismissed as well.  One of the issues for consideration was whether the plaintiff-appellant was competent to sue and be sued in Nigeria.

The Court of Appeal held that by virtue of Section 60(b) of the Companies and Allied Matters Act 1990, a foreign company not registered in Nigeria can sue and be sued in Nigerian courts provided that said foreign company was duly incorporated according to the laws of a foreign state recognised in Nigeria. But, if there is a change in the name of that foreign company, evidence of compliance with the law of the land where it was incorporated must be given. In the instant case, the Court of Appeal held that there was no material evidence placed before the court to establish the change of name of the plaintiff-appellant company, and the resolution for change of name in Brazil that was provided before the court was deemed insufficient.[3]

In Edicomsa International Inc and Associates v CITEC International Estates Ltd,[4] the plaintiff-appellant was a foreign company incorporated in the United States of America. However, it was not registered in Nigeria. The plaintiff-appellant was engaged by the defendant-respondent to provide some services. Subsequently, there was a disagreement between the parties on payments due to the plaintiff-appellant, which led to the action before the court. The defendant-respondent, inter alia, challenged the jurisdiction of the trial court on the basis that the plaintiff-appellant was not registered in Nigeria. The trial court upheld the submission of the defendant-respondent. The plaintiff-appellant appealed to the Court of Appeal, which unanimously allowed the appeal. The majority of the Court of Appeal rightly applied Section 60(b) of the Companies and Allied Matters Act 1990 to the effect that the plaintiff-appellant, though not registered in Nigeria, could sue in Nigeria.[5]

In the recent case of BCE Consulting Engineers v Nigerian National Petroleum Corporation[6] the Nigerian Supreme Court did not consider Section 60(b) of the Companies and Allied Matters Act 1990 (now Section 84(b) of the Companies and Allied Matters Act 2020), though its final decision was correct. In that case, the claimant/1st appellant claimed that it entered into a consultancy service agreement with the defendant/respondent which the latter unlawfully terminated. The plaintiff/1st appellant therefore filed an action via originating summons in the Federal High Court, Lagos State Judicial Division, seeking declaratory reliefs to that effect. It further claimed the total value of outstanding claims on invoices submitted by it, special and general damages. One of the issues canvassed at the Supreme Court was whether the Court of Appeal was right when it held that the contract entered into by the claimant-1st appellant a foreign company without incorporation in Nigeria was illegal and unenforceable? The Supreme Court Justices unanimously agreed with Peter-Odilli JSC who held as follows in her leading judgment:

“I agree with learned counsel for the appellants that section 54 of the Companies and Allied Matters Act [Cap C20 LFN 2004][7] does not apply to the facts of this case because the situation before the court in this case is one of a firm registered in Nigeria and entering into contract with the respondent but subsequently to the execution of the contract incorporating itself outside Nigeria as a limited liability company”.[8]

It is submitted that the Supreme Court should also have had regard to Article 60(b) of the Companies and Allied Matters Act 1990 (now Section 84(b) of the Companies and Allied Matters Act, 2020) in holding that assuming the claimant-1st appellant was a foreign company that was not registered in Nigeria, it was capable of maintaining an action in Nigeria. This would have put to doubt any question as to the capacity of a foreign company that is not registered in Nigeria to sue or be sued in Nigeria. It would also have made the Supreme Court’s decision exhaustive in this regard.

[1] (2021) All FWLR (Pt. 1083)  359.

[2](2004) 13 NWLR 376.

[3]Companhia Brasileira De Infraestrututira v Cobec (Nig) Ltd (2004) 13 NWLR 376, 391, 395 (Aderemi JCA, as he then was) (overturned on another point in INFAZ v COBEC (Nig) Ltd (2018) 12 NWLR 127). See also Watanmal (Singapore) Pte Ltd v. Liz Olofin and Company Plc (1997) LPELR-6224(CA) 13 (Musdapher JCA as he then was); NU Metro Retail (Nig) Ltd v. Tradex S.R.L & Anotherr (2017) LPELR-42329(CA) 41-2 (Garba JCA as he then was).

[4](2006) 4 NWLR 114.

[5]Edicomsa International Inc and Associates v CITEC International Estates Ltd (2006) 4 NWLR 114, 125-26 (Rhodes-Vivour JCA, as he then was), 130 (Omage JCA).  See also B.C.N.N. Ltd. v. Backbone Tech. Net. Inc.  (2015) 14 NWLR (Pt. 1480) 511. Cf.  AG Butler (Nig) (Ltd) v The Sanko Steamship Co. Ltd (2020) LPELR -51141 (CA). Cf. Hung & Ors v. EC Investment Co. (Nig) Ltd (2016) LPELR -42125 (CA) (Tur JCA dissenting).

[6] (2021) All FWLR (Pt. 1083)  359

[7] “Subject to sections 56 to 59 of this Act, every foreign company which before or after the commencement of this Act was incorporated outside Nigeria, and having the intention of carrying on business in Nigeria, shall take all steps necessary to obtain incorporation as a separate entity in Nigeria for that purpose, but until so incorporated, the foreign company shall not carry on business in Nigeria or exercise any of the powers of a registered company and shall not have a place of business or an address for service of documents or processes in Nigeria for any purpose other than receipt of notices and other documents, as matters preliminary to incorporation under this Act.” This provision is now contained in Section 78 of the the Companies and Allied Matters Act, 2020.

[8] ibid, 396.

The Hague Academy of International Law has recently published its programmes for the Summer Courses in 2022. The part on public international law will take place from 11 to 29 July 2022, the part on private international law will follow from 1 to 19 August 2022.

This latter part will start with an inaugural lecture by Dominique Hascher, the general course will be given by Louis d’Avout, and special courses will be offered by Marco Frigessi di Rattalma, João Bosco Lee, Ulla Liukkunen, Kermit Roosevelt III, Tiong Min Yeo, and Arnaud Nuyts – a truly impressive global gathering of expertise – highly recommended! Opening of the registration period: November 1st, 2021. Further information can be found here.

A special feature of the 2022 programme will be a conference in memoriam of Emmanuel Gaillard who passed away last year, far too early (for a memorial note on CoL by Ralf Michaels see here). Contributors will be Yas Banifatemi, Diego P. Fernández Arroyo, Dominique Hascher, Horatia Muir Watt, Luca Radicati di Brozolo.

More and more participants decide to take part in both parts, which of course is the best of all choices, as the two branches of international law have much in common and the lines more and more blur (again). In addition, most of the global challenges of our time can only be dealt with adequately if tackled in an integrated approach. Therefore, it is with good reason that, following to the two parts on public and private international law courses, the Academy’s Centre for Studies and Research again addresses such a cross-over topic in its programme from 22 August to 9 September 2022: Climate Change and the Testing of International Law. For more information see here.

An important publication on the HCCH 2019 Judgments Convention has come out: Holger Jacob’s PhD thesis, “Das Haager Anerkennungs- und Vollstreckungsübereinkommen vom 2. Juli 2019“, supervised by our esteemed colleague Peter Huber, University of Mainz, Germany. The book is certainly the most comprehensive treatise on the subject matter in German language at this moment, and it is highly recommended: thorough analysis and precision invite anyone interested in the topic to study concepts and details of the new core element of the “Hague system” for judicial cooperation in civil matters.

This post was written by Harshal Morwale, in India-qualified international arbitration lawyer working as an associate with a premier Indian law firm in New Delhi; LLM from the MIDS Geneva Program (2019-2020); alumnus of the Hague Academy of International Law. 

Sovereign immunity from enforcement would undoubtedly be a topic of interest to all the commercial parties contracting with state or state entities. After all, an award is only worth something when you can enforce it. The topic received considerable attention in India recently, when the Delhi High Court (“DHC”) ruled on the question of immunity from enforcement in case of commercial transactions (KLA Const Tech v. Afghanistan Embassy). This ruling is noteworthy because India does not have a consolidated sovereign immunity law, and this ruling is one of the first attempts to examine immunity from enforcement.

This post is part I of the two-part blog post. This part examines the decision of the DHC and identifies issues emanating from it. The post also delves into the principles of international law of state immunity and deals with the relevance of diplomatic immunity in the current context. The second part (forthcoming) will explore the issue of consent to the arbitration being construed as a waiver of immunity from enforcement and deal with the problem of whether the state’s property can be attached to satisfy the commercial arbitral award against a diplomatic mission.

DHC: No Sovereign Immunity From Enforcement In Case Of Commercial Transactions

In the case of KLA Const Tech v. Afghanistan Embassy, KLA Const Technologies (“claimant”) and the Embassy of the Islamic Republic of Afghanistan in India (“respondent”) entered into a contract containing an arbitration clause for rehabilitation of the Afghanistan Embassy. During the course of the execution of works, a dispute arose between the parties. The claimant initiated the arbitration. An ex parte award was passed in favor of the claimant by the Sole Arbitrator. Since the respondent did not challenge the award, the claimant seeks its enforcement in India in line with Section 36(1) of the Arbitration & Conciliation Act 1996, whereby enforcement cannot be sought until the deadline to challenge the award has passed. In the enforcement proceedings, the DHC inter alia focused on immunity from enforcement of the arbitral award arising out of a commercial transaction.

The claimant argued that the respondent is not entitled to state immunity because, in its opinion, entering into an arbitration agreement constitutes “waiver of Sovereign Immunity.” Further, relying on Articles 10 and 19 of the United Nations Convention on Jurisdictional Immunities of States and Their Property (“UNCJIS”), the claimant argued that the states cannot claim immunity in case of commercial transactions and the UNCJIS expressly restricts a Foreign State from invoking sovereign immunity against post-judgment measures, such as attachment against the property of the State in case of international commercial arbitration.

After analyzing the claimant’s arguments and relevant case laws, the DHC reached the following decision:

1. In a contract arising out of a commercial transaction, a foreign state cannot seek sovereign immunity to stall the enforcement of an arbitral award rendered against it.
2. No separate consent for enforcement is necessary, and consent to arbitrate is sufficient to wave the immunity. The DHC opined that this ruling is in “consonance with the growing International Law principle of restrictive immunity.”

The DHC ordered the respondent to declare inter alia all its assets, bank accounts in India, etc., by a stipulated date. Since the respondent did not appear and did not make any declaration by that date, the DHC has granted time to the claimant to trace the attachable properties of the respondent.

The decision has been well received in the Indian legal community and has been lauded as a pro-arbitration decision as it promotes prompt enforcement of arbitral awards in India, regardless of the identity of the award-debtor. The decision is also one of the first attempts to define immunity from ‘enforcement’ in India. The existing law of sovereign immunity in India is limited to section 86 of the Indian Civil Procedure Code, which requires the permission of the Central Government in order to subject the sovereign state to civil proceedings in India. Therefore, the DHC’s decision is critical in the development of sovereign immunity jurisprudence in India.

Difference Between Jurisdictional Immunity And Enforcement Immunity Under The UNCJIS

It is worth noting that the DHC did not explicitly address the claimant’s argument regarding the UNCJIS. Regardless, it is submitted that the claimant’s argument relying on articles 10 and 19 of the UNCJIS is flimsy. This is particularly because the UNCJIS recognizes two different immunities – jurisdiction immunity and enforcement immunity. Article 10 of the UNCJIS, which provides for waiver of immunity in case of commercial transactions, is limited to immunity from jurisdiction and not from enforcement. Further, Article 20 of the UNCJIS clearly states that the state’s consent to be subjected to jurisdiction shall not imply consent to enforcement. As argued by the late Professor James Crawford, “waiver of immunity from jurisdiction does not per se entail waiver of immunity from execution.”

Notwithstanding the above, even the DHC itself refrained from appreciating the distinction between immunity from jurisdiction and immunity from enforcement. The distinction is critical not only under international law but also under domestic statutes like the English Sovereign Immunity Act (“UKSIA”). It is submitted that Indian jurisprudence, which lacks guidance on this issue, could have benefitted from a more intricate analysis featuring the rationale of different immunities, the standard of waivers, as well as the relevance of Article 20 of UNCJIS.

Curious Framing Of The Question By The DHC

In the current case, the DHC framed the question of sovereign immunity from enforcement as follows: Whether a Foreign State can claim Sovereign Immunity against enforcement of arbitral award arising out of a commercial transaction? On the face of it, the DHC decided a broad point that the award is enforceable as long as the underlying transaction is commercial. The real struggle for the claimants would be to determine and define which property would be immune from enforcement and which wouldn’t.

The framing of the issue is interesting because the sovereign state immunity from enforcement has generally been perceived as a material issue rather than a personal issue. In other words, the question of state immunity from enforcement has been framed as ‘what subject matter can be attached’ and not ‘whether a particular debtor can claim it in a sovereign capacity’. In one of the case laws analyzed by the DHC (Birch Shipping Corp. v. The Embassy of the United Republic of Tanzania), the defendant had argued that under the terms of the US Foreign Sovereign Immunities Act, its “property” was “immune from the attachment.” Further, in the operative part of the judgment, the US District Court stated, “the property at issue here is not immune from attachment.” Unlike the DHC’s approach, the question of immunity from enforcement in the Birch Shipping case was argued and ruled upon as a material issue rather than a personal one.

While the decision of the DHC could have a far-reaching impact, there is a degree of uncertainty around the decision. The DHC ruled that as long as the transaction subject to arbitration is commercial, the award is enforceable. There remains uncertainty on whether this ruling means that all properties of the sovereign state can be attached when the transaction is commercial. Would this also mean diplomatic property could be attached? The DHC still has the opportunity to clarify this as the specific properties of the respondent for the attachment are yet to be determined, and the claimant has been granted time to identify the attachable properties.

Diplomatic Immunity or Sovereign Immunity: Which One Would Apply? 

While state immunity and diplomatic immunity both provide protection against proceedings and enforcements in the foreign court or forum, the subjects of both immunities are different. While sovereign immunity aims to protect the sovereign states and their instrumentalities, diplomatic immunity specifically covers the diplomatic missions of the foreign states. The law and state practice on sovereign immunity are not uniform. On the other hand, the law of diplomatic immunity has been codified by the Vienna Convention on Diplomatic Relations (“VCDR”). Unlike the UNCJIS, the VCDR is in force and has been adopted by over 190 states, including India and Afghanistan.

Since the party to the contract, the arbitration, and the enforcement proceedings in the current case is an embassy, which is independently protected by the diplomatic immunity, the decision of the DHC could have featured analysis on the diplomatic immunity in addition to the state immunity. Like the UNCJIS, the VCDR recognizes the distinction between jurisdictional and enforcement immunities. Under Article 32(4) of the VCDR, the waiver from jurisdictional immunity does not imply consent to enforcement, for which a separate waiver shall be necessary.

Additionally, the DHC had an opportunity to objectively determine whether the act was sovereign or diplomatic. In Re P (Diplomatic Immunity: Jurisdiction), the English Court undertook an objective characterization of the entity’s actions to determine whether they were sovereign or diplomatic. The characterization is critical because it determines the kind of immunity the respondent is subject to.

In the current case, the contract for works entered into by the embassy appears to be an act undertaken in a diplomatic capacity. Hence, arguably, the primary analysis of the DHC should have revolved around diplomatic immunity. It is not to argue that the conclusion of the DHC would have been different if the focus was on diplomatic immunity. However, the analysis of diplomatic immunity, either independently or together with the sovereign immunity, would have substantially bolstered the significance of the decision considering that the interplay between sovereign and diplomatic immunities under Indian law deserves more clarity.

One might argue that perhaps the DHC did not deal with diplomatic immunity because it was raised neither by the claimant nor by the non-participating respondent. This raises the question – whether the courts must raise the issue of immunity proprio motu? The position of law on this is not entirely clear. While section 1(2) of the UKSIA prescribes a duty of the Court to raise the question of immunity proprio motu, the ICJ specifically rejected this approach in the Case Concerning Certain Questions of Mutual Assistance in Criminal Matters (Djibouti v. France) (para 196). Both of these approaches, however, relate to sovereign immunity, and there lacks clarity on the issue in the context of diplomatic immunity.

Conclusion

As noted above, despite being one of the first Indian decisions to deal with state immunity from an international law perspective, the decision leaves several questions open, such as the determination of attachable properties and the relevance of diplomatic immunity in the current context. It remains to be seen what approach the DHC takes to resolve some of these issues in the upcoming hearings.

The next part of the post explores the issue of consent to the arbitration being construed as a waiver of immunity from enforcement. The next part also deals with the problem – whether the state’s property can be attached to satisfy the commercial arbitral award against a diplomatic mission.