Conflictoflaws

By Gaurav Chaliya and Nishtha Ojha. The authors are third year students at the National Law University, Jodhpur, India.

Introduction

In 2018, around 47 entities forming the part of corporate groups were reported to be in debt which reflects the necessity of having an effective cross-border legal framework. The flexibility in the framework of cross border insolvency helps in overcoming the hurdles encountered in cross border disputes. This framework essentially girdles around the principle of coordination and cooperation and in consonance with these principles the National Company Law Appellate Tribunal [“NCLAT”] in Jet Airways case has extended these principles by providing sufficient rights to Dutch trustee and observed that–

 “as per law, he (Dutch Trustee) has a right to attend the meeting of the Committee of Creditors”

However, despite effective coordination and cooperation, the proceedings against one entity is questioned to be extended to others as first, the elemental issue concerned is that each entity is managed by its own interests and such extension may be prejudicial to the interest of other entities and second, the legal conundrum associated in determining the Centre of Main Interest [“COMI”] of an entity. With regards to the first question, it is imperative that extension of insolvency proceeding is not prejudicial to the interests of the other entities as it is only extended in case of existence of reasonable nexus between entities in terms of financial and commercial relationship which makes them interdependent on each other. The authors would elaborate upon the second question in the subsequent section.´

Deficient Regulatory Framework

Section 234 and 235 of the Insolvency and Bankruptcy Code, 2016 [“IBC”] governs the cross border disputes in India. Section 234 empowers the government to enter into bilateral agreements with another country and Section 235 provides that Adjudicating Authority can issue a letter of request, to a country with which bilateral agreement has been entered into, to deal with assets situated thereto.

As is evident, the impediments associated with this regulatory framework are: first, it does not provide for a legal framework for foreign representatives to apply to the Indian courts and most importantly these sections are not notified yet and second, the current legal framework under IBC provides for entering into bilateral treaties which is uncertain and in addition is a long term negotiation process. For instance, in Australia the regulatory framework therein was not sufficient to deal with the complexities associated with cross-border insolvencies as bilateral treaties can provide some solution but they are not easy to negotiate and have intrinsic intricacies. Consequently, it passed the Cross Border Insolvency Act, 2008 which provides adoption and enactment of the United Nations Commission on International Trade Law [“Model law”]. In light of same, India should also consider the enactment of the Model law though with modifications, one of which is suggested and dealt in the next section.

Resolving the Complications

Complications in the field of International Insolvency are never-ending primarily due to the lack of a comprehensive legal framework. The Model Law seeks to alleviate these complications by providing a pragmatic legal framework. As asserted earlier, Jet Airways case acknowledges and applies the principles enshrined under the Model Law. The Model Law, unlike any treaty or convention, is a model form of legislation which is adopted by 46 nations till date.

The Model Law sets out the principle of Centre of Main Interest [“COMI”] for determining the jurisdiction of the proceedings. Interestingly, it does not define the COMI and therefore, determining COMI possesses the greatest challenge. Also, the principal concern that remains is that the debtor can escape its liability by changing its COMI according to its favourable outcome. However, the Model law safeguards the rights of the creditor by providing that first, as per Article 16 of the Model Law, COMI corresponds to the place where debtor has its registered office and second, COMI is dependent on many other factors viz. seat of an entity having major stake in terms of control over assets and its significant operations, which is basically dependent upon the transparent assessment by the third parties. Consequently, the debtor cannot escape its liability by changing COMI as determination of the same is dependent upon assessment by third parties. Hence, the Model Law addresses the prime issues which are present in the current regulatory framework. 

In India, the Report of Insolvency Law Committee [“ILC”] was constituted to examine the issues related to IBC, which recommended the impending need to adopt the Model Law. However, the proposed draft disregards the objective of coordination and cooperation among all nations by mandating the requirement of reciprocity. The authors subscribe to the view, that, until the Model Law has been adopted to a significant extent by other counties, the absolute requirement of reciprocity as postulated under the draft should be done away with and courts should be given the discretion on case to case basis. As such an absolute requirement of reciprocity i.e. entering into a treaty with other countries take us back to the present legal framework in India by limiting adjudicating authority’s power to only 46 countries. For instance, in case the corporate debtor has COMI in country A, which has adopted the Model Law, whereas his assets are located in country B, which has not adopted the Model Law. In such a situation, if the requirement of reciprocity is imposed then the administration of assets in country B would become difficult, as an entity in country B would always be reluctant to become a part of the insolvency proceedings relying on probable defences such as of lex situs and absence of bilateral agreements.

In essence, this whole process would be detrimental to the interest of the creditor as it would hamper the maximization of the value of assets. Moreover, in Rubin v. Eurofinance, the Supreme Court of U.K. has observed that the court is allowed to use the discretion provided to it by the system. Hence, by this approach courts are allowed to cooperate and coordinate with those countries that are acquiescent to return the favour. It is pertinent to clarify that by granting discretion to court, the authors do not concede to the practice of Gibb’s principle. Rather the said principle is inherently flawed as it does not recognise the foreign insolvency process preceding over English law per contra courts generally expects other jurisdictions to accept their judgements.

Concluding Remarks

After a careful analysis of present cross border legal framework in India, it can be ascertained that current system is highly ineffective and in light of instances provided, the adoption of the Model Law with modifications seems to be a better alternative. The Model Law provides an orderly mechanism as it recognises the interest of the enforcing country by taking into account its public policy and national interest. The Appellate Tribunal in Jet Airways case has attempted to extend the principles of the Model Law into domestic case laws therefore it is optimal time that India adopts such legislation. Though with regards to the problem of reciprocity as pointed earlier, the absolute requirement or non-requirement of the reciprocity would not solve the problem and according to Rubin’s case, discretion should be given to the courts which would widen the scope of the application of the law, thereby, being in consonance with the objectives of the principles i.e. of effective cooperation and coordination among all nations. Hence, the Model law contains enough of the measures to prevent any misuse of the process and adopting it with modifications would resolve the problem associated.

By Gaurav Chaliya and Nishtha Ojha. The authors are third year students at the National Law University, Jodhpur, India.

Introduction

In 2018, around 47 entities forming the part of corporate groups were reported to be in debt which reflects the necessity of having an effective cross-border legal framework. The flexibility in the framework of cross border insolvency helps in overcoming the hurdles encountered in cross border disputes. This framework essentially girdles around the principle of coordination and cooperation and in consonance with these principles the National Company Law Appellate Tribunal [“NCLAT”] in Jet Airways case has extended these principles by providing sufficient rights to Dutch trustee and observed that–

 “as per law, he (Dutch Trustee) has a right to attend the meeting of the Committee of Creditors”

However, despite effective coordination and cooperation, the proceedings against one entity is questioned to be extended to others as first, the elemental issue concerned is that each entity is managed by its own interests and such extension may be prejudicial to the interest of other entities and second, the legal conundrum associated in determining the Centre of Main Interest [“COMI”] of an entity. With regards to the first question, it is imperative that extension of insolvency proceeding is not prejudicial to the interests of the other entities as it is only extended in case of existence of reasonable nexus between entities in terms of financial and commercial relationship which makes them interdependent on each other. The authors would elaborate upon the second question in the subsequent section.´

Deficient Regulatory Framework

Section 234 and 235 of the Insolvency and Bankruptcy Code, 2016 [“IBC”] governs the cross border disputes in India. Section 234 empowers the government to enter into bilateral agreements with another country and Section 235 provides that Adjudicating Authority can issue a letter of request, to a country with which bilateral agreement has been entered into, to deal with assets situated thereto.

As is evident, the impediments associated with this regulatory framework are: first, it does not provide for a legal framework for foreign representatives to apply to the Indian courts and most importantly these sections are not notified yet and second, the current legal framework under IBC provides for entering into bilateral treaties which is uncertain and in addition is a long term negotiation process. For instance, in Australia the regulatory framework therein was not sufficient to deal with the complexities associated with cross-border insolvencies as bilateral treaties can provide some solution but they are not easy to negotiate and have intrinsic intricacies. Consequently, it passed the Cross Border Insolvency Act, 2008 which provides adoption and enactment of the United Nations Commission on International Trade Law [“Model law”]. In light of same, India should also consider the enactment of the Model law though with modifications, one of which is suggested and dealt in the next section.

Resolving the Complications

Complications in the field of International Insolvency are never-ending primarily due to the lack of a comprehensive legal framework. The Model Law seeks to alleviate these complications by providing a pragmatic legal framework. As asserted earlier, Jet Airways case acknowledges and applies the principles enshrined under the Model Law. The Model Law, unlike any treaty or convention, is a model form of legislation which is adopted by 46 nations till date.

The Model Law sets out the principle of Centre of Main Interest [“COMI”] for determining the jurisdiction of the proceedings. Interestingly, it does not define the COMI and therefore, determining COMI possesses the greatest challenge. Also, the principal concern that remains is that the debtor can escape its liability by changing its COMI according to its favourable outcome. However, the Model law safeguards the rights of the creditor by providing that first, as per Article 16 of the Model Law, COMI corresponds to the place where debtor has its registered office and second, COMI is dependent on many other factors viz. seat of an entity having major stake in terms of control over assets and its significant operations, which is basically dependent upon the transparent assessment by the third parties. Consequently, the debtor cannot escape its liability by changing COMI as determination of the same is dependent upon assessment by third parties. Hence, the Model Law addresses the prime issues which are present in the current regulatory framework. 

In India, the Report of Insolvency Law Committee [“ILC”] was constituted to examine the issues related to IBC, which recommended the impending need to adopt the Model Law. However, the proposed draft disregards the objective of coordination and cooperation among all nations by mandating the requirement of reciprocity. The authors subscribe to the view, that, until the Model Law has been adopted to a significant extent by other counties, the absolute requirement of reciprocity as postulated under the draft should be done away with and courts should be given the discretion on case to case basis. As such an absolute requirement of reciprocity i.e. entering into a treaty with other countries take us back to the present legal framework in India by limiting adjudicating authority’s power to only 46 countries. For instance, in case the corporate debtor has COMI in country A, which has adopted the Model Law, whereas his assets are located in country B, which has not adopted the Model Law. In such a situation, if the requirement of reciprocity is imposed then the administration of assets in country B would become difficult, as an entity in country B would always be reluctant to become a part of the insolvency proceedings relying on probable defences such as of lex situs and absence of bilateral agreements.

In essence, this whole process would be detrimental to the interest of the creditor as it would hamper the maximization of the value of assets. Moreover, in Rubin v. Eurofinance, the Supreme Court of U.K. has observed that the court is allowed to use the discretion provided to it by the system. Hence, by this approach courts are allowed to cooperate and coordinate with those countries that are acquiescent to return the favour. It is pertinent to clarify that by granting discretion to court, the authors do not concede to the practice of Gibb’s principle. Rather the said principle is inherently flawed as it does not recognise the foreign insolvency process preceding over English law per contra courts generally expects other jurisdictions to accept their judgements.

Concluding Remarks

After a careful analysis of present cross border legal framework in India, it can be ascertained that current system is highly ineffective and in light of instances provided, the adoption of the Model Law with modifications seems to be a better alternative. The Model Law provides an orderly mechanism as it recognises the interest of the enforcing country by taking into account its public policy and national interest. The Appellate Tribunal in Jet Airways case has attempted to extend the principles of the Model Law into domestic case laws therefore it is optimal time that India adopts such legislation. Though with regards to the problem of reciprocity as pointed earlier, the absolute requirement or non-requirement of the reciprocity would not solve the problem and according to Rubin’s case, discretion should be given to the courts which would widen the scope of the application of the law, thereby, being in consonance with the objectives of the principles i.e. of effective cooperation and coordination among all nations. Hence, the Model law contains enough of the measures to prevent any misuse of the process and adopting it with modifications would resolve the problem associated.

In February, the Federal Court of Australia delivered its judgment on the first contested enforcement of International Centre for Settlement of Investment Disputes (ICSID) awards in Australia. In Eiser Infrastructure Ltd v Kingdom of Spain [2020] FCA 157, the Court enforced two ICSID awards—award of 4 May 2017 in Case No. ARB/13/36, and award of 15 June 2018 as rectified by the award dated 29 January 2019 in Case No. ARB/13/31—against the Kingdom of Spain. The two cases were brought by different applicants but were heard and decided together.

The judgment concerns the interaction of two instruments at the intersection of public and private international law. Firstly, it concerns the Foreign States Immunities Act 1985 (Cth), which gives effect to a restrictive theory of state immunity. Secondly, the judgment concerns the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, opened for signature 18 March 1965, 575 UNTS 159 (entered into force 14 October 1966) (Investment Convention), which is given the force of law in Australia by s 32 of the International Arbitration Act 1974 (Cth).

Stewart J framed the issue for consideration as follows (at [2]):

[I]s a foreign state immune from the recognition and enforcement of an arbitral award made under the Investment Convention notwithstanding that the Investment Convention inherently envisages arbitration awards being made against foreign states and it provides that such awards “shall” be recognised and enforced by Australian courts?

The judgment also contains useful consideration of the distinctions between recognition, enforcement and execution in the context of a common law system.

Background

The underlying dispute was triggered by a change in Spain’s position on subsidies and regulation concerning renewable energy, and the applicant companies’ investments in renewable energy projects in Spain before that change. The changes caused substantial harm to the value of the investments of the applicants, which are incorporated in England & Wales, Luxembourg and the Netherlands.

Before ICSID tribunals the applicants argued that Spain failed to accord fair and equitable treatment to their investments in breach of Art 10(1) of The Energy Charter Treaty (ECT), opened for signature 17 December 1994, 2080 UNTS 95 (entered into force 16 April 1998). They were successful. Spain was ordered to pay hundreds of millions of Euros across two awards.

Spain then made applications for the annulment of the awards, which included stays of enforcement. For a time, each award was stayed. (In Australia, this resulted in a temporary stay of enforcement proceedings: see Infrastructure Services Luxembourg S.A.R.L v Kingdom of Spain [2019] FCA 1220). The stays were then discontinued, allowing enforcement action to proceed in Australia. At the time of writing, Spain had not complied with the awards in whole or in part.

Enforcement of the ICSID awards in Australia

The Commonwealth of Australia is a generally arbitration-friendly jurisdiction. Part IV of the International Arbitration Act 1974 (Cth) deals with the Investment Convention. Section 33(1) provides the basic proposition ‘that [a]n award is binding on a party to the investment dispute to which the award relates’, while s 35 provides that awards may be enforced through the Federal Court of Australia.

How, then, could Spain challenge enforcement of the ICSID awards? It asserted immunity under s 9 of the Foreign States Immunities Act 1985 (Cth), which provides foreign States with general immunity from the jurisdiction of Australian courts. An exception to the general position is provided in s 10(1) for proceedings in respect of which a foreign State has submitted.

The applicant companies argued that the Investment Convention excludes any claim for foreign state immunity in proceedings for the recognition and enforcement of an award. The Court was thus asked to consider whether, ‘by being a Contracting Party to the ECT and a Contracting State to the Investment Convention, Spain submitted to the arbitrations under the Investment Convention which produced the awards they seek to enforce’: [179]. The Court held that Spain had submitted. There was no inconsistency between the Foreign States Immunities Act 1985 (Cth) and the enforcement of the Investment Convention via the International Arbitration Act 1974 (Cth).

The Court thus recognised each of the awards. Spain was ordered to pay the applicant companies hundreds of millions of Euros, plus interest, and costs—the scope of which are still to be determined.

Comments on recognition, enforcement and execution

According to Stewart J, ‘[t]he distinction between recognition and enforcement, on the one hand, and execution on the other, is central to [the] reasons’: [6]. The judgment contains dicta that will be useful for teaching private international law in Australia. There is a helpful passage at [89] ff:

Recognition is a distinct and necessarily prior step to enforcement, but recognition and enforcement are closely linked: Briggs A, The Conflict of Laws (3rd ed, Oxford University Press, Clarendon Series, 2013) 140-141; Clarke v Fennoscandia Ltd [2007] UKHL 56; 2008 SC (HL) 122 at [18]-[23].  An award may be recognised without being “enforced” by a court: TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia [2013] HCA 5; 251 CLR 533 at [23].  Examples would be where an award is recognised as giving rise to res judicata, issue estoppel, cause of action estoppel or set-off, or as a claim in an insolvent estate.  See Associated Electric and Gas Insurance Services Ltd v European Reinsurance Co of Zurich [2003] UKPC 11; [2003] 1 WLR 1041 at [15] as an example of recognition by estoppel.

An arbitral award is enforced through the means of the entering of a judgment on the award, either in the form of a money judgment for the amount of an award or for damages for failing to honour an award.  That form of enforcement by a court is an exercise of judicial power: TCL at [32].  There is some debate in the authorities as to whether an award can be enforced by means of a court making a declaration.  See Tridon Australia Pty Ltd v ACD Tridon Inc [2004] NSWCA 146 and AED Oil Ltd v Puffin FPSO Ltd [2010] VSCA 37; 27 VR 22 at [18]-[20].  It is not necessary to enter upon that debate for present purposes because Art 54(3) of the Investment Convention requires the enforcement of only the pecuniary obligations of an award.  That would seem to exclude declaratory awards, injunctions and orders for specific performance.

An award cannot, however, be executed, in the sense of executed against the property of an award debtor, without first being converted into a judgment of a court: Uganda Telecom Ltd v Hi-Tech Telecom Pty Ltd (No 2) [2011] FCA 206; 277 ALR 441 at [12]-[13].  Nevertheless, it is not a strain of language to refer to an award being enforced by way of execution.

Thus, depending on the context, reference to the enforcement of an arbitral award can be used to mean the entering of a judgment on the award to the exclusion of execution or it can mean execution, or it can encompass both.

Recognition and enforcement by judgment on the award is equivalent to what is referred to in civilian jurisdictions as exequatur (see Firebird at [47]-[48] and Briggs A, The Conflict of Laws (3rd ed, Oxford University Press, Clarendon Series, 2013), 139).

Comment

Eiser Infrastructure Ltd v Kingdom of Spain provides plenty to think about for those interested in private international law, public international law, and international arbitration. It confirms the intuition that ICSID awards should be easily enforced in Australia.

However, it begs the question, why Australia? Stewart J speculated that the CJEU’s decision in Slovak Republic v Achmea BV [2018] 4 WLR 87, [60] may have made Australia a more attractive forum for enforcement proceedings in these cases. However, should Spain have any assets in Australia, it may be difficult for the successful companies to get access to them. The High Court of Australia takes a foreign-State-friendly approach to immunity of execution over foreign States’ property. It will be interesting to see what happens next in this dispute.

In February, the Federal Court of Australia delivered its judgment on the first contested enforcement of International Centre for Settlement of Investment Disputes (ICSID) awards in Australia. In Eiser Infrastructure Ltd v Kingdom of Spain [2020] FCA 157, the Court enforced two ICSID awards—award of 4 May 2017 in Case No. ARB/13/36, and award of 15 June 2018 as rectified by the award dated 29 January 2019 in Case No. ARB/13/31—against the Kingdom of Spain. The two cases were brought by different applicants but were heard and decided together.

The judgment concerns the interaction of two instruments at the intersection of public and private international law. Firstly, it concerns the Foreign States Immunities Act 1985 (Cth), which gives effect to a restrictive theory of state immunity. Secondly, the judgment concerns the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, opened for signature 18 March 1965, 575 UNTS 159 (entered into force 14 October 1966) (Investment Convention), which is given the force of law in Australia by s 32 of the International Arbitration Act 1974 (Cth).

Stewart J framed the issue for consideration as follows (at [2]):

[I]s a foreign state immune from the recognition and enforcement of an arbitral award made under the Investment Convention notwithstanding that the Investment Convention inherently envisages arbitration awards being made against foreign states and it provides that such awards “shall” be recognised and enforced by Australian courts?

The judgment also contains useful consideration of the distinctions between recognition, enforcement and execution in the context of a common law system.

Background

The underlying dispute was triggered by a change in Spain’s position on subsidies and regulation concerning renewable energy, and the applicant companies’ investments in renewable energy projects in Spain before that change. The changes caused substantial harm to the value of the investments of the applicants, which are incorporated in England & Wales, Luxembourg and the Netherlands.

Before ICSID tribunals the applicants argued that Spain failed to accord fair and equitable treatment to their investments in breach of Art 10(1) of The Energy Charter Treaty (ECT), opened for signature 17 December 1994, 2080 UNTS 95 (entered into force 16 April 1998). They were successful. Spain was ordered to pay hundreds of millions of Euros across two awards.

Spain then made applications for the annulment of the awards, which included stays of enforcement. For a time, each award was stayed. (In Australia, this resulted in a temporary stay of enforcement proceedings: see Infrastructure Services Luxembourg S.A.R.L v Kingdom of Spain [2019] FCA 1220). The stays were then discontinued, allowing enforcement action to proceed in Australia. At the time of writing, Spain had not complied with the awards in whole or in part.

Enforcement of the ICSID awards in Australia

The Commonwealth of Australia is a generally arbitration-friendly jurisdiction. Part IV of the International Arbitration Act 1974 (Cth) deals with the Investment Convention. Section 33(1) provides the basic proposition ‘that [a]n award is binding on a party to the investment dispute to which the award relates’, while s 35 provides that awards may be enforced through the Federal Court of Australia.

How, then, could Spain challenge enforcement of the ICSID awards? It asserted immunity under s 9 of the Foreign States Immunities Act 1985 (Cth), which provides foreign States with general immunity from the jurisdiction of Australian courts. An exception to the general position is provided in s 10(1) for proceedings in respect of which a foreign State has submitted.

The applicant companies argued that the Investment Convention excludes any claim for foreign state immunity in proceedings for the recognition and enforcement of an award. The Court was thus asked to consider whether, ‘by being a Contracting Party to the ECT and a Contracting State to the Investment Convention, Spain submitted to the arbitrations under the Investment Convention which produced the awards they seek to enforce’: [179]. The Court held that Spain had submitted. There was no inconsistency between the Foreign States Immunities Act 1985 (Cth) and the enforcement of the Investment Convention via the International Arbitration Act 1974 (Cth).

The Court thus recognised each of the awards. Spain was ordered to pay the applicant companies hundreds of millions of Euros, plus interest, and costs—the scope of which are still to be determined.

Comments on recognition, enforcement and execution

According to Stewart J, ‘[t]he distinction between recognition and enforcement, on the one hand, and execution on the other, is central to [the] reasons’: [6]. The judgment contains dicta that will be useful for teaching private international law in Australia. There is a helpful passage at [89] ff:

Recognition is a distinct and necessarily prior step to enforcement, but recognition and enforcement are closely linked: Briggs A, The Conflict of Laws (3rd ed, Oxford University Press, Clarendon Series, 2013) 140-141; Clarke v Fennoscandia Ltd [2007] UKHL 56; 2008 SC (HL) 122 at [18]-[23].  An award may be recognised without being “enforced” by a court: TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia [2013] HCA 5; 251 CLR 533 at [23].  Examples would be where an award is recognised as giving rise to res judicata, issue estoppel, cause of action estoppel or set-off, or as a claim in an insolvent estate.  See Associated Electric and Gas Insurance Services Ltd v European Reinsurance Co of Zurich [2003] UKPC 11; [2003] 1 WLR 1041 at [15] as an example of recognition by estoppel.

An arbitral award is enforced through the means of the entering of a judgment on the award, either in the form of a money judgment for the amount of an award or for damages for failing to honour an award.  That form of enforcement by a court is an exercise of judicial power: TCL at [32].  There is some debate in the authorities as to whether an award can be enforced by means of a court making a declaration.  See Tridon Australia Pty Ltd v ACD Tridon Inc [2004] NSWCA 146 and AED Oil Ltd v Puffin FPSO Ltd [2010] VSCA 37; 27 VR 22 at [18]-[20].  It is not necessary to enter upon that debate for present purposes because Art 54(3) of the Investment Convention requires the enforcement of only the pecuniary obligations of an award.  That would seem to exclude declaratory awards, injunctions and orders for specific performance.

An award cannot, however, be executed, in the sense of executed against the property of an award debtor, without first being converted into a judgment of a court: Uganda Telecom Ltd v Hi-Tech Telecom Pty Ltd (No 2) [2011] FCA 206; 277 ALR 441 at [12]-[13].  Nevertheless, it is not a strain of language to refer to an award being enforced by way of execution.

Thus, depending on the context, reference to the enforcement of an arbitral award can be used to mean the entering of a judgment on the award to the exclusion of execution or it can mean execution, or it can encompass both.

Recognition and enforcement by judgment on the award is equivalent to what is referred to in civilian jurisdictions as exequatur (see Firebird at [47]-[48] and Briggs A, The Conflict of Laws (3rd ed, Oxford University Press, Clarendon Series, 2013), 139).

Comment

Eiser Infrastructure Ltd v Kingdom of Spain provides plenty to think about for those interested in private international law, public international law, and international arbitration. It confirms the intuition that ICSID awards should be easily enforced in Australia.

However, it begs the question, why Australia? Stewart J speculated that the CJEU’s decision in Slovak Republic v Achmea BV [2018] 4 WLR 87, [60] may have made Australia a more attractive forum for enforcement proceedings in these cases. However, should Spain have any assets in Australia, it may be difficult for the successful companies to get access to them. The High Court of Australia takes a foreign-State-friendly approach to immunity of execution over foreign States’ property. It will be interesting to see what happens next in this dispute.

By Stephen G.A. Pitel, Faculty of Law, Western University

Eritrean mine workers who fled from that country to British Columbia sued the mine’s owner, Nevsun Resources Ltd. They sought damages for various torts including battery, false imprisonment and negligence. They also sought damages for breaches of customary international law. Their core allegation was that as conscripted labourers in Eritrea’s National Service Program, they were forced to work in the mine in intolerable conditions and Nevsun was actively involved in this arrangement.

Nevsun moved to strike out all of the claims on the basis of the act of state doctrine. It also moved to strike out the proceedings based on violations of customary international law because they were bound to fail as a matter of law.

In its decision in Nevsun Resources Ltd v Araya, 2020 SCC 5, the Supreme Court of Canada has held (by a 7-2 decision) that the act of state doctrine is not part of Canadian law (para. 59) and so does not preclude any of the claims. It has also held (by a 5-4 decision) that the claims based on customary international law are not bound to fail (para. 132) and so can proceed.

Act of State Doctrine

Justice Abella, writing for five of the court’s nine judges, noted that the act of state doctrine had been heavily criticized in England and Australia and had played no role in Canadian law (para 28). Instead, the principles that underlie the doctrine were subsumed within the jurisprudence on “conflict of laws and judicial restraint” (para 44).

In dissent, Justice Cote, joined by Justice Moldaver, held that the act of state doctrine is not subsumed by choice of law and judicial restraint jurisprudence (para. 275). It is part of Canadian law. She applied the doctrine of justiciability to the claims, finding them not justiciable because they require the determination that the state of Eritrea has committed an internationally wrongful act (para. 273).

This division raises some concerns about nomenclature. How different is “judicial restraint” from “non-justiciability”? Is justiciability an aspect of an act of state doctrine or is it a more general doctrine (see para. 276)? Put differently, it appears that the same considerations could be deployed by the court either under an act of state doctrine or without one.

The real division on this point is that Justice Cote concluded that the court “should not entertain a claim, even one between private parties, if a central issue is whether a foreign state has violated its obligations under international law” (para. 286). She noted that the cases Justice Abella relied on in which Canadian courts have examined and criticized the acts of foreign states are ones in which that analysis was required to ensure that Canada comply with its own obligations as a state (para. 304). In contrast, in this case no conduct by Canada is being called into question.

In Justice Abella’s view, a Canadian court can indeed end up determining, as part of a private civil dispute, that Eritrea has engaged in human rights violations. She did not, however, respond to Justice Cote’s point that her authorities were primarily if not all drawn from the extradition and deportation contexts, both involving conduct by Canada as a state. She did not squarely explain why the issue of Eritrea’s conduct was justiciable or not covered by judicial restraint in this particular case. Having held that the act of state doctrine was not part of Canadian law appears to have been sufficient to resolve the issue (para. 59).

Claims Based on Violations of Customary International Law

The more significant split relates to the claims based on violations of customary international law. The majority concluded that under the “doctrine of adoption”, peremptory norms of customary international law are automatically adopted into Canadian domestic law (para. 86). So Canadian law precludes forced labour, slavery and crimes against humanity (paras. 100-102). Beyond that conclusion, the majority fell back on the hurdle for striking out claims, namely that they have to be bound (“plain and obvious”) to fail. If they have a prospect of success, they should not be struck out. The majority found it an open question whether these peremptory norms bind corporations (para. 113) and can lead to a common law remedy of damages in a civil proceeding (para. 122). As a result the claims were allowed to proceed.

Four of the judges dissented on this point, in reasons written by Brown and Rowe JJ and supported by Cote and Moldaver JJ. These judges were critical of the majority’s failure to actually decide the legal questions raised by the case, instead leaving them to a subsequent trial (paras. 145-147). In their view, the majority’s approach “will encourage parties to draft pleadings in a vague and underspecified manner” which is “likely not to facilitate access to justice, but to frustrate it” (para. 261). The dissent was prepared to decide the legal questions and held that the claims based on violations of customary international law could not succeed (para. 148).

In the dissent’s view, the adoption into Canadian law of rules prohibiting slavery, forced labour and crimes against humanity did not equate to mandating that victims have a civil claim for damages in response to such conduct (para. 172). The prohibitions, in themselves, simply did not include such a remedy (para. 153). The right to a remedy, the dissent pointed out, “does not necessarily mean a right to a particular form, or kind of remedy” (para. 214).

Further, as to whether these rules can be directly enforced against corporations, the dissent was critical of the complete lack of support for the majority’s position: “[i]t cites no cases where a corporation has been held civilly liable for breaches of customary international law anywhere in the world” (para. 188). As Justice Cote added, the “widespread, representative and consistent state practice and opinio juris required to establish a customary rule do not presently exist to support the proposition that international human rights norms have horizontal application between individuals and corporations” (para. 269).

On this issue, one might wonder how much of a victory the plaintiffs have achieved. While the claims can now go forward, only a very brave trial judge would hold that a corporation can be sued for a violation of customary international law given the comments of the dissenting judges as to the lack of support for that position. As Justices Brown and Rowe put it, the sole authority relied on by the majority “is a single law review essay” (para. 188). Slender foundations indeed.

The case concerns the question whether the Lithuanian courts have jurisdiction under the Brussels I bis Regulation to deal with a case involving an insurance payment claimed by a company established in Lithuania and covered by a civil liability insurance contract concluded between the policyholder and the insurer, both of whom are established in Latvia.

The insurance contract in question contained a clause providing that any dispute relating to this contract should be brought before the Latvian courts. Following the wording of the preliminary question, the claimant is a ‘person insured under that contract who has not expressly subscribed to that clause’.

Similarly to the preliminary question referred in Case C-112/03, Société financière and industrielle du Peloux, the referring court seeks to establish whether the choice-of-court clause contained in the insurance contract may be invoked against the insured who has not expressly subscribed to that clause and who is established in a Member State other than that of the policyholder and the insurer.

The particularity of the present case stems from the fact the insurance contract covered a ‘large risk’ referred to in Articles 15(5) and 16(5) of the Brussels I bis Regulation. Following the wording of these Articles, concerning the large-risk insurances, the rules on jurisdiction in matters relating to insurance may be departed from by an agreement with no further conditions. It was the impact of Articles 15(5) and 16 of the Brussels I bis Regulation on the opposability of the choice-of-court clause against the insured that inspired the referring court to request for a preliminary ruling.

In its Judgment delivered today without Advocate General’s Opinion, the Court ruled that the choice-of-court clause contained in a large-risk insurance cannot be invoked against an insured who has not subscribed to that clause and who is established in a Member State other than that of the policyholder and the insurer.

At the outset the Court observed that when contrasted with Article 15(3) and (4) of the Brussels I bis Regulation, the wording of Article 15(5) of the Regulation may suggest that a choice-of-court clause contained in a large-risk insurance contract could be invoked not only against the parties to the contract but also against an insured. In fact, Article 15(3) and (4) of the Regulation refers to the policyholder and to the insurer as the parties to the choice-of-court clause. No such reference is to be found in Article 15(5) (paragraph 33 of the Judgment).

However, after having presented a series of arguments with respect to the history of this provision, the scheme of the rules on jurisdiction in matters relating to insurance and their objectives (paragraphs 34 to 36 of the Judgment), the Court held, on the one hand, that the prorogation of jurisdiction is strictly circumscribed by the aim of protecting the economically weaker party and it cannot be inferred from the nature of large-risk insurance that an insured (not being a party to this contract) is not a ‘weaker party’ (paragraphs 37 to 41 of the Judgment). On the other hand, the application of the special rules of jurisdiction in matters relating to insurance is not to be extended to persons for whom that protection is not justified. No special protection is justified where the parties concerned are professionals in the insurance sector (paragraphs 44 and 45 of the Judgment).

The Court rejected a case-by-case assessment of the question whether an insured covered by a large-risk insurance may be regarded as a ‘weaker party’/professional in the insurance sector (paragraph 43 of the Judgment). This interpretation is of course in line with the pre-existing case-law, in particular the judgments in Cases C-340/16, MMA IARD, paragraph 34 and C-106/17, Hofsoe, paragraph 45. It seems that a similar approach was also followed in paragraph 109 of the judgment in Case Aspen Underwriting v Credit Europe [2018] EWCA 2590 Civ, where the Court of Appeal held in relation to large-risk insurance that while the case-law of the CJEU excludes an individual factual assessment of the strength of the economic position, it is still possible to decide on the application of the protective rules on jurisdiction in matters relating to insurance by having regard to the class of business conducted by the party in question.

It is, as Court clarifies, common ground that the insured acting as a claimant in the procedure before the national courts is not considered as a professional in the insurance sector (paragraph 45 of the Judgment). It follows that the choice-of-court clause cannot be invoked against the insured who has not subscribed to that clause and who is established in a Member State other than that of the policyholder and the insurer.

The Judgment can be found here (no English version yet). For those wishing to study the case more extensively, the request for a preliminary ruling is available here.

On a side note…

It might be interesting to note a few points that may be inspirational for the discussion on EU private international law in contexts other than those of the present request for a preliminary ruling and in relation to the issues not covered by this request:

• Article 15(5) of the Brussels I bis Regulation allows to deviate from the protective rules on jurisdiction by a choice-of-court clause in relation to insurance contracts covering one or more of the risks set out in Article 16 of this Regulation, including those referred to in Article 16(5) as ‘large risks’. As the Court observes in its Judgment, even the large-risk insurances alone encompass the contracts covering risks of varied nature. Some risks are deemed large due to the subject of insurance cover (i.e. marine and aviation risks), while other have to meet the specific criteria that relate to the policyholder in order to be considered as large. It may be interesting to see in the future developments whether, in different contexts relating to the contracts that are considered as large-risk insurances solely due to the subject of insurance cover (the reference to various conditions in paragraph 43 of the Judgment seems to hint the fact that this was not the case here), the nature of risk is equally irrelevant and, if so, whether the nature of risk may be for instance used by national courts as an indication that the insured parties are professionals in the insurance sector.

• The insured acting as the claimant in the proceedings before the Lithuanian courts is a company which shares are held exclusively by the policyholder (paragraph 15 of the Judgment). In the national proceedings that led to the request for a preliminary ruling, the first instance court considered that, due to the fact that the insured is a company owned by the policyholder, this insured must have consented, even if only indirectly, to the choice-of-court clause (paragraph 18 of the Judgment). In its Judgment, the Court held in particular that the choice-of-court clause cannot be invoked against an insured who has not subscribed to that clause, without further distinction between express and implicit consent (‘la personne assurée par ce contrat […] qui n’a pas consenti à cette clause’). It is to be noted that the wording of the preliminary question refers solely to an insured who has not expressly subscribed to that clause. The referring court seemingly did not consider it necessary to inquire the Court on this particular aspect of the case. If anything, it is yet to be seen whether any definitive conclusion in relation to the aforementioned aspect (that the Court was not directly asked to address) may be inferred from the Judgment.

• The large-risk insurance contract in question did not only contain a clause conferring jurisdiction to the Latvian courts but apparently also a choice-of-law clause in favour of the laws in force in this Member State (paragraph 16 of the Judgment). It can be argued that in the context of choice-of-law clauses made in relation to insurance contracts in general (and not solely large-risk insurances), the Rome I Regulation approaches the protection of the ‘weaker parties’ in a different manner than the Brussels I bis Regulation. Having in mind the concept of consistency between these Regulations, it is likewise yet to be seen whether the solution adopted in relation to the Brussels I bis Regulation may be transposed to the realm of conflict of laws.

In today’s Opinion, Advocate General Bobek analyses whether the courts of a Member State in which a maintenance decision delivered by the courts of another Member State is enforced have jurisdiction to rule on an application opposing the enforcement.

More specifically, the reference for a preliminary ruling originates in a dispute between a maintenance debtor residing in Germany and a maintenance creditor residing in Poland. The latter lodged with the referring court an application requesting the recognition of a Polish maintenance decision and a declaration of its enforceability in Germany in accordance with Maintenance Regulation. The referring court delivered an order for enforcement in respect of the Polish maintenance decision. On the basis of that order, the defendant sought the enforcement of this decision against the debtor in Germany. The maintenance debtor opposed the enforcement based on Paragraph 767 of the German Code of Civil Procedure (the ZPO) and argued that the claim underlying the maintenance decision has been settled by payment.

Before deciding on the merits, it was for the referring court to decide whether it has jurisdiction to rule on the application opposing the enforcement. As the Opinion explains, at point 29:

In a nutshell, it seems that the referring court understands that there are two mutually exclusive possibilities. If [the Maintenance Regulation] were applicable, that would mean that the referring court lacks jurisdiction under Article 3 of that regulation. It is only if [the Maintenance Regulation] cannot be applied that it would be possible to base jurisdiction on Article 24(5) of [the Brussels I bis Regulation], according to which the courts of the Member State of enforcement have jurisdiction in proceedings concerned with such enforcement.

Against this background, the Opinion confirms, at points 32 et 33, that while the Brussels I bis Regulation contains, in Article 24(5), an explicit rule granting exclusive jurisdiction in proceedings concerned with the enforcement of judgments to the courts of the Member State in which the judgment has been or is to be enforced, the Maintenance Regulation does not contain any explicit rule on jurisdiction regarding the enforcement of decisions in matters relating to maintenance.

Disagreeing with the referring court’s understanding of the issue of jurisdiction, at point 42, the Opinion states, however, that the rules on jurisdiction provided for in the Chapter II of the Maintenance Regulation establish jurisdiction with regard to the main procedure on the merits, but not with regard to the enforcement of such decisions.

Moreover, at points 43 et seq., the Opinion explains that a rule according to which enforcement belongs to the courts of the Member State where enforcement is sought is inherent in the system of the Maintenance Regulation and is an expression of what could be considered a general principle of international law:

43. […] even though Chapter IV of [the Maintenance Regulation] does not contain any explicit jurisdictional rule with regard to enforcement, that rule can be considered inherent in the system of that regulation.

44. In general terms, international jurisdiction for enforcement belongs to the courts of the Member State where enforcement is sought. As the Polish Government points out, that rule is an expression of what could be considered a general principle of international law connected with State sovereignty: it is only the authorities of the State of enforcement that are empowered to rule on the execution of decisions, as enforcement measures can only be carried out by the authorities of the Member State(s) where the assets or persons against which enforcement is sought are situated. That rule is valid, a fortiori, where a decision has already been recognised as enforceable in the Member State where enforcement is sought.

45. Therefore, it is not necessary to have recourse to Article 24(5) of [the Brussels I bis Regulation] as a supplementary provision in order to be able to establish that the courts of the Member State of enforcement also have jurisdiction with regard to the enforcement of maintenance decisions within the scope of [the Maintenance Regulation]. Indeed, that article can be considered as an expression of the general principle just mentioned. 

Next, at points 50 et seq., the Opinion addresses the question whether an application seeking to oppose enforcement based on the discharge of the debt is to be considered as appertaining, for the purposes of jurisdiction, to enforcement proceedings. The extensive analysis is followed by a summary, at point 85:

85. For those reasons, it is my view that jurisdiction to adjudicate on an action opposing enforcement based on the discharge of debt falls to the courts of the Member State where the enforcement is sought. For the sake of completeness, I wish to stress two points in lieu of a conclusion. First, the discussion in the present Opinion and the conclusion reached concerned only the ground of opposition based on the discharge of the debt. Second, beyond that specific ground, no position is taken on the overall compatibility of Paragraph 767 of the ZPO with EU law.

The Advocate General concluded, at point 86:

86. [The Maintenance Regulation] and, in particular, Article 41(1) thereof, should be interpreted as meaning that the courts of the Member State where the enforcement of a maintenance decision given in another Member State is sought have jurisdiction to adjudicate on an application opposing enforcement, in so far as it is intrinsically connected with enforcement proceedings, it does not seek the modification or review of the maintenance decision, and it is based on grounds that could not have been raised before the court that issued the maintenance decision. Those conditions appear to be fulfilled by the application of opposition to enforcement based on the discharge of the debt at issue in the present case, which is nonetheless ultimately for the referring court to verify.

The Opinion can be found here.

On February 25, 2020, the U.S. Supreme Court affirmed the opinion of the U.S. Court of Appeals for the Sixth Circuit, which concluded that Italy was the habitual residence of an infant that was brought from Italy to Ohio by her mother in 2015, shortly after the child was born. This opinion resolved a circuit split over the definition of habitual residence. The 1980 Hague Child Abduction Convention is the private international law instrument that seeks to secure the prompt return of a child removed from or retained out of its habitual residence. It is not a child custody or jurisdictional determination, and not a means of enforcing existing custody orders. Instead it is designed to restore some type of status quo so that the child’s parents can pursue a custody order from the court in the appropriate jurisdiction. It discourages forum shopping and gives the child some consistency during the parents’ custody litigation. The threshold question that a court must resolve in determining whether to return a child is that child’s habitual residence, with the treaty being premised on the fact that a child cannot be returned to a location that is not her habitual residence. The U.S. circuits have had a long-standing split on the definition of this undefined treaty term, used in numerous Hague family law conventions.

In the Monasky v. Taglieri case, the U.S. Supreme Court unanimously concluded that a child’s habitual residence is a flexible fact-based determination that should focus on “[t]he place where a child is at home, at the time of removal or retention…”. This standard gives a trial judge significant deference, with a caution to be informed by “common sense” in reviewing the unique circumstances of the case in front of her. The Supreme Court gave little guidance on how best to weigh the different facts that will be presented to the trial judge but left that to the discretion of the judge, with the view that “[n]o single fact … is dispositive across all cases.” The Court further rejected Ms. Monasky’s argument that habitual residence requires the parents to have an actual agreement, which she, and amici curiae argued is necessary for any child born into a situation of domestic violence. In rejecting that argument, Justice Ginsburg wrote both that the 1980 Convention has mechanisms to help children who would be subjected to a grave risk of harm if returned to situations where domestic violence is an issue, and that the domestic violence itself should be more fully examined in the custody case after the child is returned. She further expressed concern that this argument would leave children, many who are vulnerable, without the ability to use the 1980 Convention because a parent could easily manipulate the facts to argue that the parents lacked an agreement.

The Court also held that the question of a child’s habitual residence is a mixed question of law and fact, but only “barely so,” and with the legal standard now clear, with the trial judge reviewing a totality of the circumstances when determining a child’s habitual residence, the court is left with a completely factual analysis in determining “[w]as the child at home in a particular country at issue?” Therefore, on appeal, the appropriate standard of review is clear-error.

The fourth issue of 2019 of the Rivista di diritto internazionale privato e processuale (RDIPP, published by CEDAM) was just released. It features:

Costanza Honorati, Professor at the University Milan-Bicocca, La tutela dei minori migranti e il diritto internazionale privato: quali rapporti tra Dublino III e Bruxelles II-bis? (The Protection of Migrant Minors and Private International Law: Which Relationship between the Dublin III and Brussels IIa Regulations?; in Italian)

• Few studies have investigated the relation between Migration Law and PIL. Even less have focused on the interaction between Brussels IIa and Dublin III Regulations. The present study, moving from the often declared assumption that ‘a migrant minor is first of all a minor’ focuses on the coordination between the two Regulations and the possible application of Brussels IIa to migrant minors in order to adopt protection measures to be eventually recognized in all EU Member States or to possibly place a minor in another EU Member State.

Francesca C. Villata, Professor at the University of Milan, Predictability First! Fraus Legis, Overriding Mandatory Rules and Ordre Public under EU Regulation 650/2012 on Succession Matters (in English)

• This paper aims at investigating: (i) how fraus legis, overriding mandatory rules and ordre public exceptions position themselves within the system of the Succession Regulation; (ii) whether they are meant to perform their traditional function or to pursue any alternative or additional objective; and (iii) which limits are imposed on Member States in the application of said exceptions and to what extent Member States can avail themselves of the same to preserve, if not to enforce, their respective legal traditions in this area, as acknowledged in Recital 6 of Regulation No 650/2012. The assumption here submitted is that the traditional notions to which those exceptions refer have been reshaped or, rather, adjusted to the specific needs of Regulation No 650/2012 and of the entire EU private international law system, which increasingly identifies in predictability the ultimate policy goal to pursue.

In addition to the foregoing, the following comments are featured:

Michele Grassi, Research Fellow at the University of Milan, Sul riconoscimento dei matrimoni contratti all’estero tra persone dello stesso sesso: il caso Coman (On the Recognition of Same-Sex Marriages Entered into Abroad: The Coman Case; in Italian)

• With its judgment in the Coman case, the Court of Justice of the European Union has extended the scope of application of the principle of mutual recognition to the field of family law and, in particular, to same-sex marriages. In that decision the Court has ruled that the refusal by the authorities of a Member State to recognise (for the sole purpose of granting a derived right of residence) the marriage of a third-country national to a Union citizen of the same sex, concluded in accordance with the law of another Member State, during the period of their residence in that State, is incompatible with the EU freedom of movement of persons. The purpose of this paper is to analyse the private-international-law implications of the Coman decision and, more specifically, to assess the possible impact of the duty to recognise same-sex marriages on the European and Italian systems.

Francesco Pesce, Associate Professor at the University of Genoa, La nozione di «matrimonio»: diritto internazionale privato e diritto materiale a confronto (The Notion of ‘Marriage’: Private International Law and Substantive Law in Comparison; in Italian)

• This paper tackles the topical and much debated issue of the notions of ‘marriage’ and ‘spouse’ under EU substantive and private international law. Taking the stand from the different coexisting models of family relationships and from the fragmented normative approaches developed at the domestic level, this paper (while aware of the ongoing evolutionary trends in this field) focuses on whether it is possible, at present, to infer an autonomous notion of ‘marriage’ from EU law, either in general or from some specific areas thereof. The response to this question bears significant consequences in terms of defining the scope of application of the uniform rules on the free movement of persons, on the cross-border recognition of family statuses and on the ensuing patrimonial regimes. With specific regard to the current Italian legal framework, this paper examines to which extent characterization issues are still relevant.

Carlo De Stefano, PhD, Corporate Nationality in International Investment Law: Substance over Formality (in English)

• Since incorporation is usually codified in IIAs as sole criteria for the definition of protected corporate ‘investors’, arbitral tribunals have traditionally interpreted and applied such provisions without requiring any thresholds of substantive bond between putatively covered investors and their alleged home State. By taking issue with the current status of international investment law and arbitration, the Author’s main proposition is that States revise treaty provisions dealing with the determination of corporate nationality so as to insert real seat and (ultimate) control prongs in coexistence with the conventional test of incorporation. This proposal, which seems to be fostered in the recent state practice, is advocated on the grounds of legal and policy arguments with the aim to combat questionable phenomena of investors’ ‘treaty shopping’, including ‘round tripping’, and, consequently, to strengthen the legitimacy of investor-State dispute settlement.

Ferdinando Emanuele, Lawyer in Rome, Milo Molfa, Lawyer in London, and Rebekka Monico, LL.M. Candidate, The Impact of Brexit on International Arbitration (in English)

• This article considers the effects of the United Kingdom’s withdrawal from the EU on international arbitration. In principle, Brexit will not have a significant impact on commercial arbitration, with the exception of the re-expansion of anti-suit injunctions, given that the West Tankers judgment will no longer be binding. With respect to investment arbitration, because the BITs between the United Kingdom and EU Member States will become extra-EU BITs, the Achmea judgment will no longer be applicable following Brexit. Furthermore, English courts will enforce intra-EU BIT arbitration awards pursuant to the 1958 New York Convention. Investment treaties between the EU and third countries will not be applicable to the United Kingdom.

Finally, the issue features the following case notes:

Cinzia Peraro, Research Fellow at the University of Verona, Legittimazione ad agire di un’associazione a tutela dei consumatori e diritto alla protezione dei dati personali a margine della sentenza Fashion ID (A Consumer-Protection Association’s Legal Standing to Bring Proceedings and Protection of Personal Data in the Aftermath of the Fashion ID Judgment; in Italian)

Gaetano Vitellino, Research Fellow at Università Cattaneo LIUC of Castellanza, Litispendenza e accordi confliggenti di scelta del foro nel caso BNP Paribas c. Trattamento Rifiuti Metropolitani (Lis Pendens and Conflicting Choice of Court Agreements in BNP Paribas v. Trattamento Rifiuti Metropolitani; in Italian)

Gaetano Vitellino, Research Fellow at Università Cattaneo LIUC of Castellanza, Note a margine di una pronuncia del Tribunale di Torino in materia societaria (Remarks on a Decision of the Turin Tribunal on Corporate Matters; in Italian)

Last week the German parliament approved a reform of the German adoption law. The reform was triggered by a decision of the Constitutional Court (Bundesverfassungsgericht – BVerfG) declaring provisions unconstitutional that did not allow a stepchild adoption for non-marital couples (English translation of the decision here).

The legislator took the opportunity to adapt the conflict of law provisions. The relevant rule, article 22 Introductory Act to the Civil Code (EGBGB) only applies to adoptions in Germany and those abroad that were not established by a foreign court or authority. In the latter case the rules on recognition of court decisions apply. Furthermore, the Hague Convention of 29 May 1993 on Protection of Children and Co-operation in Respect of Intercountry Adoption prevails. The new rule, thus, mainly determines the law applicable on the acceptance of an adoption by private agreement that occurred abroad.

The former relevant provision, Article 22 para 1 EGBGB stated, cited after the translation made by Juliana Mörsdorf for the Federal Office of Justice:

Article 22 Adoption

(1) The adoption of a child is governed by the law of the country of which the adopter is a national at the time of the adoption. The adoption by one or both spouses is governed by the law which applies to the general effects of the marriage under article 14 subarticle 1. The adoption by a life partner is governed by the law which applies to the general effects of the life partnership under article 17b subarticle 1 sentence 1.

[…]

The new Article 22 para. 1 states that

“the adoption of a child in Germany is governed by German law. In all other cases the adoption is governed by the law of the country in which the adoptee has his habitual residence at the time of the adoption.“ [my translation – German federal law in general is not very aware of the use of a gender neutral wording. Of course, also female and non-binary adoptees and their habitual residences are included.]

Due to the Constitutional Court’s ruling, all references to an adoption by somebody living in a marriage or registered civil partnership were eliminated. Furthermore, the rule is a good example for some general general shifts in the German International Family law system regarding connecting factors:

• First, in the name of procedural efficiency (according to the travaux préparatoires, BT-Drs. 19/15618, p. 8, 16), there is the tendency to distinguish between legal situations occurring in Germany or abroad and use conflict of laws more often to accept legal situations established abroad. Adoptions in Germany are always governed by German law and always require a court proceeding (sec 1752 German Civil Code for minors and sec 1767 para. 2 for adults). With the new provision, the legislative confirmed that an adoption that occurred abroad will be accepted in German according to the so-called method of “recognition by conflict of laws”, as article 22 para 1 phrase 2 exclusively provides a rule for adoptions that took place outside of Germany.

• Second, by determining the law applicable, the German rule no longer focuses on the adopter(s) but the adoptee. This change is in accordance with the general awareness to put the child’s best interest in the centre of attention in cases involving fundamental changes to a child. While, of course, there can be adoptions of adults, the adoption of a minor is the most common (see also the travaux préparatoires, BT-Drs. 19/15618, p. 16).

• Third, the rule also includes a temporal connecting factor. Traditionally, German conflict of laws rules do not state the temporal connection factor, thus, the rules always refer to the moment of the closure of the court hearing. This can create uncertainty as it allows a change of connecting factors over time and even in the course of a proceeding.

• Last but not least, and maybe even more interesting, the main connecting factor changed from nationality to habitual residence. Traditionally in German International Family Law, nationality was the central connecting factor, as it is still in article 13 (law governing the conclusion of a marriage). In article 22, instead, connecting factor is the habitual residence (of the adoptee). This shows a general tendency in German conflict of laws which was mainly triggered by the harmonization of conflict of laws in the EU. Last year the central rule regarding international marriage law (article 14, losing the importance to the latest EU regulations, though) changed the “rungs” of its famous “Kegel’s ladder”: Traditionally, the first “rung” of said ladder was the spouses shared nationality or last shared nationality during marriage. Only in case there was neither, applicable was the law of the spouses’ habitual residence. Since January 2019, main connecting factor (“first rung”) is the spouses’ habitual residence, the second the spouses’ habitual residence during the marriage if one spouse has maintained that habitual residence. Only the third step refers to the shared nationality.

The new law will come into force 31 March 2020. The new provisions apply to international adoptions that were not completed before that date (article 229 § 51 EGBGB).

Today (25 February 2020), the US Supreme Court delivered its Opinion in the case Monasky v. Taglieri. This decision is available here.

Two of the main takeaways are:

• A child’s habitual residence depends on the totality of the circumstances specific to the case, not on categorical requirements such as an actual agreement between the parents.
• A first-instance habitual-residence determination is subject to deferential appellate review for clear error.

This would appear to be in line with the case law of other Contracting Parties. We expect to post a more detailed comment shortly. In the meantime, see our previous posts here –  #1, #2 and #3.

Report written by Tine Van Hof, researcher at the University of Antwerp

On the 13th and 14th of February 2020, the Academy of European Law (ERA) organized a conference on ‘Recent ECtHR Case Law in Family Matters’. This conference was held in Strasbourg and brought together forty participants coming from twenty-one different countries. This report will set out some of the issues addressed at the conference.

The presentation, made by Ksenija Turkovi?, Judge at the European Court of Human Rights, focused on children on the move and more specifically on minors in the context of migration. On this topic the European Court of Human Rights (ECtHR) has developed a child-specific human rights approach. This approach implies taking into account three particular concepts: vulnerability, best interests and autonomy. Judge Turkovi? pointed to the interesting discussion on whether vulnerability could only apply to young migrant children. On this discussion, there is now agreement that the vulnerability applies to all children under the age of 18 and regardless whether they are accompanied by adults. The ECtHR made very clear in its case law that migrant children are especially vulnerable and that this vulnerability is a decisive factor that takes precedence over the children’s migrant status. This vulnerability also plays a role in the cases on the detention of children. The more vulnerable a person is, the lower the threshold for a situation of detention to fall within the scope of Article 3 of the European Convention on Human Rights (ECHR), encompassing the prohibition of torture.

Family unification and the free movement of family status was the second topic of the day. Michael Hellner, professor at Stockholm University, discussed several cases of the ECtHR (Ejimson v Germany) and the Court of Justice of the EU (CJEU) (K.A. v Belgium, Coman and S.M.). He concluded that family life does not automatically create a right of residence but it can create such a right in certain circumstances. In the Coman case for example, the CJEU decided that Romania had to recognize the marriage between the two men for the purpose of enabling such persons to exercise the rights they enjoy under EU law (i.e. free movement). Professor Hellner noted that it seems to be quite easy to circumvent national law in the future if one looks at the Coman case. He considered it positive if the consequence was that same-sex marriages and surrogacy arrangements created abroad were recognized. However, he made the interesting observation that it might be a very different story if one thinks about child marriages and the recognition thereof.

Maria-Andriani Kostopoulou, consultant in family law for the Council of Europe, thereafter shared her insights on parental rights, pre-adoption foster care and adoption. She discussed i.a. the evolution in the case law of the ECtHR on the representation of the child before the Court. In the Strand-Lobben case, the Court stated that the issue of representation does not require a restrictive or technical approach and thus made clear that a certain level of flexibility is necessary. In the Paradisio and Campanelli case, the ECtHR provided three criteria that should be taken into account for assessing the representation of the child: the link between the child and the representative, the subject-matter of the case and any potential conflict of interests between the interests of the child and those of the representative. The latest case, A. and B. against Croatia, introduced a security safeguard. In this case, the ECtHR asked the Croatian Bar Association to appoint a legal representative for the child for the procedure before the ECtHR since the Court was not sure that there were no conflict of interests between the child and the mother, who proposed to be the representative.

To end the first conference day, Dmytro Tretyakov, lawyer at the Registry of the ECtHR, enlightened us about the misconceptions and best practices of submitting a case to the Court. His most important tips for a submission to the Court are the following:

• Use the current application form and not an old one;
• Submit well in time and certainly within the six-month period;
• Summarize the facts of the case on the three pages provided. This summary has to be clear, readable (for those that do it in handwriting) and comprehensible;
• To state claims, refer to the relevant Article from the ECHR (do not cite it) and explain what the specific problem is with regard to that Article;
• Support each claim with documents; and
• Sign the form in the correct boxes and carefully look where the signature of the applicant and where the signature of the representative is required.

The second day of the conference started with the presentation of Nadia Rusinova, attorney-at-law and lecturer at the Hague University of Applied Science, on international child abduction. She discussed i.a. the issue of domestic violence in child abduction cases. Several questions can be raised in this regard, for example: what constitutes domestic violence? When should a court accept the domestic violence to be established? What is adequate protection in light of the Hague Convention on International Child Abduction (1980) and who decides on this? In the case O.C.I. and others v Romania, one of the questions was whether there is such a thing as light violence that does not amount to a grave risk in the sense of Article 13(1)(b) of the Hague Convention. The ECtHR approached this issue very critically and stated that no form of corporal punishment is acceptable. Regarding the adequate measures, the Court stated that domestic authorities have a discretion to decide what is adequate but the measures should be in place before ordering the return of the child. Another point raised by Ms. Rusinova is the time factor that is required. If one looks at Article 11(2) of the Hague Convention and at Article 11(3) of the Brussels IIbis Regulation together, six weeks is the required time period for the return proceedings. The Brussels IIbis Recast clarified that the procedure should take no more than six weeks per instance. However, according to Ms. Rusinova it is hardly possible to do the procedures in six weeks; it will only work when the proceeding is not turned into an adversarial proceeding in which all kinds of claims of both parents are dealt with.  

Samuel Fulli-Lemaire, professor at the University of Strasbourg, addressed the interesting evolution of reproductive rights and surrogacy. In the case of C. and E. v France, the French Court of Cassation asked the ECtHR for an advisory opinion on the question whether the current state of the case law in France was compatible with the obligations under Article 8 ECHR (the right to respect for private and family life). The status of the French case law was that the genetic parent was fully accepted but the other intended parent was required to adopt the child if he or she wished to establish parentage links. The ECtHR replied that the obligation under Article 8 entailed that there must be a possibility of recognition of the parent-child relationship but that it is up to the States to decide how to do this. Adoption is a sufficient method of recognizing such relationship, provided that it is quick and effective enough. The Court also refers to the possibility of transcription of the birth certificate as an alternative to adoption. However, professor Fulli-Lemaire pointed out that there is a misconception on what transcription means under French law. The mere transcription of the birth certificate does not establish legal parentage in France. The fact that the ECtHR says that an intended parent can adopt or transcribe the birth certificate is therefore tricky because under French law the effects of the two methods are not at all the same.

The very last presentation of the conference was given by Gabriela Lünsmann, attorney-at-law and member of the Executive Board of the Lesbian and Gay Federation in Germany. She spoke about LGBTQI rights as human rights and hereby focused i.a. on transsexuals’ gender identity and the case of X. v North-Macedonia. The question raised in that case is whether the state must provide for a procedure to recognize a different gender. The applicant had tried to change their gender but North-Macedonia did not offer any possibility to undergo an operation or to have medical treatment in that regard. The applicant then went abroad for treatment. Back in North-Macedonia, he had his name changed but it was not possible to change his officially registered gender. The applicant claimed that this amounted to a violation of Article 8 ECHR and specially referred to the obligation of the state to respect a person’s physical and psychological integrity. The Court found that there was indeed a violation. What is as yet unclear, and is thus an interesting point for reflection, is whether states are under an obligation to provide for a procedure for the recognition of a change of gender without the person having had an operation.

The author would like to thank ERA for the excellent organization of the conference and for the interesting range of topics discussed.

This week the Hague Conference on Private International Law (HCCH) announced that there are two Legal Officer vacancies and noted that their “duties will include general assistance in various areas of the work programme of the HCCH as determined by the Council on General Affairs and Policy (CGAP). Areas of priority include international commercial litigation / civil procedure and child support (maintenance) matters.”

The deadline for applications is Wednesday 25 March 2020 (12.00 a.m. CET).

More information is available here.

The Permanent Bureau of the Hague Conference on Private International Law (HCCH, head office in The Hague, the Netherlands) is seeking legal interns for the period July to December 2020. Applications are now open!

The deadline for applications is Friday 27 March 2020 (18:00 CET).

More information is available here.

The era of globalization is characterized by the dynamic movement of people across borders and migration in various parts of the world. The juxtaposition and coexistence of different ethnic, cultural or religious groups within society poses the challenge of accommodating divergent legal, religious and customary norms. Of key concern is how far the fundamental values of the receiving state ought to be imposed on all persons on the soil, and to what extent the customs, beliefs and the cultural identity of individuals belonging to minority groups should be respected. This challenge arguably requires reconsidering and reevaluating the conventional methods of private international law that are grounded in the territorial “localization” of legal relationships. Against this background, Yuko Nishitani (Professor at Kyoto University, Japan) envisaged studying various conflict of laws issues from the viewpoint of cultural identity in private international family law and delivered a lecture at the Hague Academy of International Law on “Identité culturelle en droit international privé de la famille”, which has been published in Recueil des cours, Vol. 401 (2019), pp. 127-450.

In her lecture, Nishitani first analyzes the notion and meaning of cultural identity in private international law, after comparatively delineating legal developments in major legal systems (Chapter I). The author posits that, while the notion of cultural identity should not be understood as its own legal category, it serves as a guiding principle and theoretical foundation in justifying certain solutions in private international law (Chapter II).

In multiethnic and multicultural societies, the belonging of individuals to states, regions, communities or other groups is gradually relativised and redefined. In light of the recent effects of globalization, the author contemplates the appropriate methods for determining the personal law to cater for the cultural identity of individuals, overcoming the conventional dichotomy between the principle of nationality and the principle of habitual residence (Chapter III). Considering the multiplication of relevant legal and social norms, the author also considers the interaction between state law and customary, religious or cultural non-state norms to seek solutions for “conflict of norms” in a broader sense (Chapter IV).

On the other hand, for the sake of coherence and security of the legal system, the state exercises control, where necessary, to preclude effects of foreign legal institutions. It is essential to define the functioning of public policy and fundamental rights so as to set limits to respect for cultural identity (Chapter V). Finally, the author reflects on alternative conflict of laws methods geared toward administrative and judicial cooperation between sovereign states, with a view to accommodating the cultural identity of individuals (Chapter VI).

At the end of her lecture, the author highlights the importance of constructive dialogue between different cultures, given that humanity has a long history of success in mutually developing, exchanging and enriching its diverse cultures.

More information about the author and the book are available here (in French).

Professor Ron Brand has just published a new article in the Journal of Dispute Resolution that arose from his presentation at the 2019 Annual Meeting of the American Society of Comparative Law. In it, he applies comparative method to international litigation from the perspective of a U.S.-trained lawyer, and particularly one who has been involved for over 25 years in the negotiations that produced both the 2005 Hague Convention on Choice of Court Agreements and the 2019 Hague Convention on the Recognition and Enforcement of Judgments in Civil or Commercial Matters.

The article is available here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3532035

It took quite some time but the news is finally here: North Macedonia has an entirely new Private International Law Act.

The Act was adopted by the Assembly on February 4th 2020 and it was just published in the Official Gazette of the Republic of North Macedonia No. 32, on 10 February 2020. The Act is not available online yet but we will make sure to share it here as soon as it or an English translation is available.

The first draft of the Act was completed in 2015 and was much welcomed by experts and scholars in the region as it ensured compatibility with all relevant EU Regulations, including Rome I, Rome II, Rome III, Brussels I bis, Brussels II bis, Succession Regulation etc. Since then, the Draft Law had been waiting for discussion and adoption by the Assembly until recently. The wait was worth it since the law has been passed without any amendments which is even more groundbreaking given that the new Act is quite a departure from the previous PIL Act in force.

Until now, the Republic of North Macedonia had been applying the PIL Act enacted in 2007 (Official Gazette of Republic of Macedonia No 87/2007). An amendment of this act was made in 2010 specifically to provisions on choice of law (Official Gazette of the Republic of Macedonia, No. 87/2007, 156/2010). While the rules on choice of law in contractual and non-contractual matters were updated to match the EU Conventions (and later Regulations), the Act of 2007 had stayed quite true to its predecessor – the Yugoslav PIL Act of 1982.

This new PIL Act of 2020 makes North Macedonia now the bearer of the most modern PIL Act in the Region of the Western Balkans. The last adopted PIL Act in this region was the Act of Montenegro, in force since 2014. Although other reforms of PIL Acts are underway in Serbia (since 2014) and Kosovo (since 2018) these countries and Bosnia and Herzegovina continue applying the Yugoslav PIL Act of 1982, while Albania’s PIL Act in force is that of 2011.

A more detailed report of the PIL developments in the region of the Western Balkans will be posted soon.

For queries about the Act, please contact Prof. Toni Deskoski at t.deskoski@pf.ukim.edu.mk, or Prof. Vangel Dokovski at v.dokovski@pf.ukim.edu.mk, or me at donike.qerimi@uni-pr.edu.

A spectre is haunting Europe – the spectre of human rights lawsuits. Striking human rights cases have always enjoyed high media attention. But lately, they appear in a new dimension in Europe. The headline-grabbing “KiK” trial before the Regional Court of Dortmund and the current discussion about the adoption of a German Supply Chain Law are proof of this: It has long ceased to be a mere thought that German companies could be held liable in Germany for damage that occurred somewhere in their global supply or value chain. But are civil courts and arbitral tribunals suited at all for enforcing international human rights obligations of business enterprises, which are already highly controversial under substantive law?

On 4 May 2020, the Munich Center of Dispute Resolution (MuCDR) will host a conference that will be dedicated to this phenomenon. It will shed light on fundamental theoretical and dogmatic questions of civil human rights lawsuits as well as their consequences for the legal system, the legal profession, the German economy as well as for potential plaintiffs.

The full conference programme is available  here (in German).

Date: Monday, 4 May 2020

Registration: Participation in the conference is free of charge. Registration is required. Please find the registration form online.

 Venue: Ludwig Maximilians University, Main Building, Senatssaal E 106, Geschwister-Scholl-Platz 1, 80539 Munich, Germany

Conference language: German

Written by Anna Wysocka-Bar, Senior Lecturer at Jagiellonian University (Poland)

On 2 December 2019 Supreme Administrative Court of Poland (Naczelny S?d Administracyjny) adopted a resolution of seven judges (signature: II OPS 1/19), in which it stated that it is not possible – due to public policy – to transcribe into the domestic register of civil status a foreign birth certificate indicating two persons of the same sex as parents. The Ombudsman joined arguing that the refusal of transcription infringes the child’s right to nationality and identity, and as a result may lead to infringement of the right to protection of health, the right to education, the right to personal security and the right to free movement and choice of place of residence. Interestingly, the Ombudsman for Children and public prosecutor suggested non-transcription. The background of the case concerns a child whose birth certificate indicated two women of Polish nationality as parents, a biological mother and her partner to a de facto union. Parents applied for such transcription in order to apply subsequently for the issuance of the passport for the child. 

The Supreme Administrative Court stated that in accordance with the law on civil status register, the transcription must be refused if contrary to ordre public in Poland. The public policy clause protects the domestic legal order against its violation. Such violation would result from the “recognition” of a birth certificate irreconcilable with fundamental principles of public policy. It was underlined that in accordance with Article 18 of the Constitution of Poland marriage is understood as a union between a man and a woman; family, motherhood and parenthood are under protection and guardianship of the State. In accordance with those principles and the whole system of family law, only one mother and one father might be treated as parents of a child. Any other category of “parent” is unknown. The Court underlined, at the same time, that transcription of the birth certificate into the domestic register should not be indispensable for a child to obtain a passport, as the child has, by operation of law, already acquired Polish nationality as inherited from the mother. However, in practical terms this would require challenging administrative authorities’ approach (requesting domestic birth certificate) in another court procedure. 

It should be explained here that the resolution was taken on the request of the panel of judges of the Supreme Administrative Court reviewing the cassation appeal brought by the parents, and therefore, in this particular case is binding. In other, similar cases panels of judges should, in general, follow the standpoint presented in such resolution. If the panel of judges is of a different view, it should request another resolution, instead of presenting a view contrary to the previous one. As a result, it might happen that there are two resolutions of seven judges presenting different views. Given the above, it can be said that the question of transcription is not as definitively answered as might seem at first glance. 

A similar justification based on the public policy clause in conjunction with Article 18 of the Constitution has already been presented before in other cases, for example one concerning children born in the US out of surrogacy arrangements with a married woman, whose birth certificates indicated two men as parents, a (biological) father and his partner (identical judgments of 6 May 2015, signature: II OSK 2372/13 and II OSK 2419/13). The implications of these judgments were quite different as the Court refused to confirm that children acquired Polish nationality by birth from their father. In the eyes of the Court and according to fundamental principles of Polish family law, children born out of surrogacy (which is not regulated in Poland) by operation of law have filiation links only with the (biological, surrogate) mother and her husband. The paternity of the biological father (only) might be (at least theoretically) established, once the paternity of the surrogate mother’s husband is successfully disavowed in a court proceeding. 

Here it should be added that opposite views were presented by the Supreme Administrative Court in other judgments. One of the cases concerned transcription of the birth certificate of a child born in India out of surrogacy arrangement. Such birth certificate indicates only the father (in this case a biological father) and do not contain any information about the (surrogate) mother. This was perceived as contrary to public policy by the administrative authorities, which underlined that in the Polish legal order establishing paternity is always dependent on the establishment of maternity. As a result, the lack of information about the mother raises doubts as to paternity of the man indicated on the birth certificate as father. Interestingly, based on the same birth certificate the acquisition of Polish nationality of the child was earlier confirmed by administrative authorities. In its judgment of 29 August 2018 (signature: II OSK 2129/16), Supreme Administrative Court criticized the way the public policy clause was so far understood. The Court (which hears the case after the refusal of administrative authorities of two instances and administrative court of the first instance – just as in all of the mentioned cases) underlined that this clause must be interpreted having regard to a broader context of the legal issue at hand, in particular it should take into account constitutional values (always prevailing best interest of a child) and international standards on protection of children’s rights and human rights. This allows for the transcription of the birth certificate into civil status records in Poland. 

Another interesting case concerned again the question of confirmation that the children acquired Polish nationality by birth after their father (four identical judgments of 30 October 2018, signatures: II OSK 1868/16, II OSK 1869/16, II OSK 1870/16, II OSK 1871/16). Four girls were born in US through surrogacy. The US birth certificates indicated two men as parents, one of them being a Polish national. The Supreme Administrative Court underlined that for the legal status of a child, including the possibility of confirming acquisition of Polish nationality, it should not matter that the child was born to a surrogate mother. What should matter is that a human being with inherent and inalienable dignity was born and this human being has a right to Polish nationality, as long as one of the parents is a Polish national.  

The above mentioned cases, where the Supreme Administrative Court presented a conservative approach and approved the refusal of the confirmation that children born out of surrogacy acquired Polish nationality by birth is now pending before European Court of Human Rights (Schlittner-Hay v. Poland). The applications raise violation by Poland of Article 8 (respect for private and family life) and Article 14 (discrimination on grounds of parents’ sexual orientation) of the European Convention on Human Rights. 

This shows that practical implications for children to same-sex parents and from surrogacy arrangements are of growing interest and importance also in Poland. The approaches of domestic authorities and courts seems to be evolving, but are still quite divergent. The view on the issue from the European Court of Human Rights is awaited.  

Following an earlier post, here’s a reminder of the First Edition of the Milan Investment Arbitration Pre-Moot.

Albert Henke prepared for this reason the following announcement:

On February, 14 and 15, 2020 will take place in Milan the First Edition of the Milan Investment Arbitration Pre-Moot, an event jointly organized by the Law Firm DLA Piper, Milan, Università degli Studi of Milan and the European Court of Arbitration (Italian section). The Pre-Moot will be a chance for ten University teams from all around the world to test their advocacy skills in moot arbitration hearings, in preparation for the Frankfurt International Arbitration Moot Competition, the oldest and most prestigious student competition in the area of investment protection law, scheduled for the beginning of March 2020 in Frankfurt (https://www.investmentmoot.org/news-2-2/). The Pre-Moot will be introduced by a Conference hosted by Università degli Studi on the topic: “Outstanding issues and recent developments in international investment arbitration”. All the information in the attached flyer.