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

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

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

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

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

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

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

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

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

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

Difference Between Jurisdictional Immunity And Enforcement Immunity Under The UNCJIS

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

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

Curious Framing Of The Question By The DHC

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

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

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

Diplomatic Immunity or Sovereign Immunity: Which One Would Apply? 

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

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

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

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

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

Conclusion

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

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

 

In June 2021, the Committee on Legal Affairs of the European Parliament issued a Draft Report with recommendations to the Commission on Responsible private funding of litigation.

The Report was accompanied by a Study on Responsible private funding of litigation of the European Added Value Unit (authors: Jérôme Saulnier with Ivona Koronthalyova and Klaus Müller) of the European Parliament, issued in February 2021. Such studies are mandatory for proposals made by the European Parliament under Art. 225 TFEU.

The opinion of the Parliament is that, while Directive (EU) 2020/1828 on representative actions for the protection of the collective interests of consumers identifies certain safeguards relating to litigation funding, they are limited to representative actions on behalf of consumers taken under that Directive, and therefore exclude many other types of action or categories of claimants. The Parliament proposes to establish effective safeguards to all types of claims.

Regulatory Scheme

The Parliament proposes first to regulate the activities of litigation funders within the EU by establishing an authorisation system by supervisory autorities. Individual Member States could decide that funding litigation would be prohibited for proceedings in their Member State, or “for the benefit of claimants or intended beneficiaries resident within their Member State”.

Funders should conduct business from a registered office in a Member State, from which they would have to seek the authorisation.

Funding agreements entered into by unauthorised funders would be invalid.

Rules Governing Third Party Funding Agreements

The Parliament then proposes to adopt rules governing the content of third party agreements and disclosure obligations.

In particular, the following mandatory rules would apply:

• Any clause in third party funding agreements granting a litigation funder the power to take or influence decisions in relation to proceedings would have no legal effect.
• Agreements in which a litigation funder is guaranteed to receive a minimum return on its investment before a claimant or intended beneficiary can receive their share, would have no legal effect.
• Absent exceptional circumstances, where a litigation funding agreement would entitle a litigation funder to a share of any award that would dilute the share available to the claimant and the intended beneficiaries to 60% or below of the total award (including all damages amounts, costs, fees and others expenses), such an agreement should have no legal effect.
• Provisions that purport to limit a litigation funder’s liability for costs should have no legal effect.

Applicable Law

While the proposed directive does not include express choice of law rules, it provides that funders would commit to submit funding agreements to the law of the Member State of the intended proceedings “or , if different, of the Member State of the claimant or intended beneficiaries”.

Article 5(1) of the proposed Directive reads:

Member States shall ensure that supervisory authorities only grant or maintain authorisations, whether for domestic or cross-border litigation or other proceedings, to litigation funders who comply with the provisions of this Directive, and who meet, in addition to any suitability or other criteria as may be set out in national law, at least the following criteria: 

(b) they commit to concluding third-party funding agreements subject to the laws of
the Member State of any intended proceedings, or, if different, of the Member
State of the claimant or intended beneficiaries;

So, it seems that the law of the claimant (or intended beneficiaries) should always apply. Since the competence to allow the activity is attributed to the State where the claimant would be resident (see above), it seems that the intent of the drafters of Art. 5(1)(b) was to designate the law of the residence of the claimant (or intended beneficiaries).

The obvious problem with this rule is that there could be several claimant, and that the text expressly contemplates the possibility that there would be intended beneficiaries, who could also have their residence in a different State.

Another problem is that the rule seems to exclude claimants based outside of the EU (would at least a branch in the EU suffice?).

Finally, it would quite remarkable that a Member State prohibits third party funding, but then would have to accept it for claimant based in more permissive States, under the law of those other States.

Overall assessment on choice of law: peut mieux faire.

bpost
DFON
L’avocat général Bobek propose une approche uniforme de la protection de la charte des droits fondamentaux de l’Union européenne contre la double incrimination (non bis in idem)

Commission / Conseil (Accord avec l’Arménie)
Droit institutionnel
La Cour annule les décisions du Conseil concernant l’application de l’accord de partenariat avec l’Arménie

EPSU / Commission
SOPO
Pourvoi EPSU : la Commission n’est pas tenue de donner suite à la demande de partenaires sociaux visant à mettre en œuvre, au niveau de l’Union, l’accord qu’ils ont conclu

Irish Ferries
Transport
La Cour clarifie un certain nombre de dispositions du règlement concernant les droits des passagers voyageant par mer ou par voie de navigation intérieure

Ja zum Nürburgring / Commission
Aide d'État
La Commission doit réexaminer si la vente du Nürburgring en 2014 impliquait l’octroi d’une aide d’État

INPS (Allocations de naissance et de maternité pour les titulaires de permis unique)
Sécurité sociale des travailleurs migrants
Les ressortissants de pays tiers titulaires d’un permis unique de travail obtenu en vertu de la législation italienne transposant une directive de l’Union ont le droit de bénéficier d’une allocation de naissance et d’une allocation de maternité telles que prévues par la réglementation italienne

État belge (Droit de séjour en cas de violence domestique)
Citoyenneté européenne
Selon la Cour, le ressortissant d’un pays tiers victime d’actes de violence domestique commis par son conjoint, citoyen de l’Union, ne se trouve pas dans une situation comparable à celle du ressortissant d’un pays tiers, victime d’actes de violence domestique commis par son conjoint, ressortissant d’un pays tiers

Commission / Portugal (Taxe sur les véhicules)
Fiscalité
Les modalités de calcul de la taxe d’immatriculation des véhicules d’occasion importés au Portugal portent atteinte au principe de la libre circulation des marchandises

Vodafone
Rapprochement des législations
Des options à « tarif nul » sont contraires au règlement sur l’accès à un Internet ouvert

OTP Jelzálogbank e.a.
Rapprochement des législations
La législation hongroise interdisant l’annulation d’un contrat de prêt libellé en devise étrangère au motif qu’il comporte une clause abusive relative à l’écart de change paraît être compatible avec le droit de l’Union

In September 2021 the Court of Justice of the European Union will deliver several decisions on PIL issues.

The first one, on 9 September, concerns case C-277/20, UM. The request for a preliminary ruling, from the Oberster Gerichtshof (Austria), focuses on the interpretation of Articles 3(1)(b) and 83(2) of Regulation No 650/2012 (the Succession Regulation).

In the case at hand UM, a German national, contests the rejection by the Austrian authorities of his application for inscription in the land Registry of the property right to immovable property located in Austria, which he intends to enforce in the context of an inheritance procedure initiated in Germany on the basis of a donation contract mortis causa. The questions read as follows :

1. Is Article 3(1)(b) of [the Succession Regulation] to be interpreted as meaning that a contract of donation mortis causa entered into between two German nationals habitually resident in Germany in respect of real estate located in Austria, granting the donee a right having the character of an obligation against the estate to registration of his title after the donor’s death pursuant to that contract and the donor’s death certificate, that is without the intervention of the probate court, is an agreement as to succession within the meaning of that provision?
2. If the answer to the above question is in the affirmative: Is Article 83(2) of [The Succession Regulation] to be interpreted as meaning that it also regulates the effect of a choice of applicable law made before 17 August 2015 for a contract of donation mortis causa that is to be qualified as an agreement as to succession within the meaning of Article 3(1)(b) of [the Succession Regulation]?

AG J. Richard de la Tour has suggested to answer that Article 3(1)(b) of the Succession Regulation “must be interpreted in the sense that the concept of ‘succession agreement’ includes donation contracts inter vivos, by virtue of which the transfer in favor of the donee of the ownership of one or several assets integrated, although only partially, in the hereditary estate of the donor will, not take place until the death of the latter” (translation by author – the opinion is still unavailable in English).

The decision will be taken by judges J.C. Bonichot, L. Bay Larsen, M. Safjan, N. Jääskinen and C. Toader (reporting judge).

Two further judgments will be published on the same day. Case C-422/20, RK, addresses again the Successions Regulation. Here, the Oberlandesgericht Köln (Higher Regional Court, Cologne, Germany) is asking these questions :

1. Is it necessary, for a declaration of lack of jurisdiction by the court previously seised, as provided for in Article 7(a) of [the Succession Regulation], that that court should expressly decline jurisdiction, or may even a non-express declaration suffice if it supports the inference, through interpretation, that that court has declined jurisdiction?
2. Is the court of the Member State whose jurisdiction is intended to follow from a declaration of lack of jurisdiction by the court previously seised in the other Member State competent to examine whether the conditions governing a decision by the court previously seised, as provided for in Articles 6(a) and 7(a) of [the Succession Regulation], were met? To what extent is the decision of the court previously seised binding? In particular:

(a)  Is the court of the Member State whose jurisdiction is intended to follow from a declaration of lack of jurisdiction by the court previously seised in the other Member State competent to examine whether the deceased validly chose the law of the Member State in accordance with Article 22 of [the Succession Regulation]?

(b) Is the court of the Member State whose jurisdiction is intended to follow from a declaration of lack of jurisdiction by the court first seised in the other Member State competent to examine whether a request for a declaration of lack of jurisdiction, as provided for in Article 6(a) of [the Succession Regulation], has been brought by one of the parties to the proceedings before the court previously seised?

(c) Is the court of the Member State whose jurisdiction is intended to follow from a declaration of lack of jurisdiction by the court first seised in the other Member State competent to examine whether the court previously seised rightly assumed that the courts of the Member State of the chosen law are better placed to rule on the succession?

3. Are Articles 6(a) and 7(a) of [the Succession Regulation], which presuppose a choice of law ‘pursuant to Article 22’, applicable even where the deceased has made no express or implied choice of law in a testamentary disposition made before 17 August 2015, but the law applicable to the succession is capable of being inferred only from Article 83(4) of Regulation No 650/2012?

Last July, AG Szpunar had proposed to answer as follows:

Article 6(a) and Article 7(a) of [the Succession Regulation] must be interpreted as meaning that the jurisdiction of the Member State whose jurisdiction is deemed to result from an objection to the jurisdiction of the court previously seised is not empowered to verify, firstly, whether the court previously seised has, rightly, considered that the law of that Member State has been chosen or is deemed have been chosen to govern the succession ; secondly, if one of the parties to the proceedings has submitted a request under Article 6 (a) of that regulation before the court previously seised and ; thirdly, if the court previously seized has, and rightly so, considered that the courts of that Member State are better placed to rule on the succession, when these three conditions have been verified by the court previously seised » (once again, my translation).

The decision corresponds to judges L. Bay Larsen, N. Jääskinen and C. Toader (reporting judge).

The third decision of 9 September 2021 concerns joined cases C-208/20, Toplofikatsia Sofia e.a., and C-256/20, Toplofikatsia Sofia, on the interpretation of Article 20(2)(a) TFEU, Article 1(1)(a) of Regulation No 1206/2001 (the Evidence Regulation) and Article 5(1) of Regulation No 1215/2012 (Brussels I bis) in relation to (Case C 208/10) civil cases in where the respective opposing party is not yet able to acquire the status of party to the proceedings, because it is impossible to serve judicial documents on the defendants personally, and where their neighbours or relatives have stated that they live in other Member States of the European Union ; and (C 256/20) an order for payment procedure in which it is impossible to serve an order for payment on a debtor whose neighbour states that she lives in another Member State of the European Union.

The questions referred by the Sofiyski rayonen sad (Bulgaria) in C-208/20 are :

1. Must Article 20(2)(a) of the Treaty on the Functioning of the European Union, in conjunction with the second paragraph of Article 47 of the Charter of Fundamental Rights, the principles of non-discrimination and the equivalence of procedural measures in national judicial proceedings and Article 1[(1)](a) of [the Evidence Regulation] be interpreted as meaning that, where the national law of the court seised provides that the latter is to obtain, of its own motion, information regarding the defendant’s address in its own State and it is established that the defendant is in another State of the European Union, the national court seised is obliged to obtain information regarding the defendant’s address from the competent authorities of the State in which he resides?
2. Must Article 5(1) of [the Brussels I bis Regulation], in conjunction with the principle that the national court must guarantee procedural rights for the effective protection of rights arising from EU law, be interpreted as meaning that, when determining the habitual residence of a debtor as a condition required under national law for the conduct of unilateral formal proceedings in which evidence is not taken, such as order for payment procedures, the national court is obliged to interpret any reasonable suspicion that the debtor is habitually resident in another State of the European Union as a lack of a legal basis for issuing an order for payment or as a basis for the order for payment not acquiring the force of res judicata?
3. Must Article 5(1) of [the Brussels I bis Regulation], in conjunction with the principle that the national court must guarantee procedural rights for the effective protection of rights deriving from EU law, be interpreted as meaning that a national court, which, after having issued an order for payment against a particular debtor, has established that that debtor is unlikely to be habitually resident in the State of the court and, provided that this constitutes an obstacle to the issuing of an order for payment against such a debtor under national law, is obliged to annul, of its own motion, the order for payment issued, despite the absence of an express statutory provision to that effect?
4. If the third question is answered in the negative, are the provisions referred to in that question to be interpreted as obliging the national court to annul the order for payment issued where it has carried out a check and established with certainty that the debtor is not habitually resident in the State of the court seised?

Questions 2 to 4 are common to case C 256/20.

The Court required no AG’s opinion . The decision will be taken by a chamber of three judges – L. Bay Larsen, M. Safjan and R. Silva de Lapuerta, the latter as reporting judge.

The same day (i.e., Thursday 9th September), AG Rantos will deliver his opinion in C-581/20, TOTO. This request for a preliminary ruling from the Varhoven kasatsionen sad (Bulgaria) requires the interpretation of Article 31 of the Brussels I bis Regulation :

1. 1. Is Article 1 of [the Brussels I bis Regulation] to be interpreted as meaning that a case such as that described in this order for reference must be regarded in whole or in part as a civil or commercial matter within the meaning of Article 1(1) of that regulation?
   2.  After the right to make an application for provisional/protective measures has been exercised and the court having jurisdiction as to the substance of the matter has already ruled on that application, is the court seised of an application for interim relief on the same basis and under Article 35 of [the Brussels I bis Regulation] to be regarded as not having jurisdiction from the point at which evidence is produced that the court having jurisdiction as to the substance of the matter has given a ruling on that application?
   3. If it follows from the answers to the first two questions referred that the court seised of an application under Article 35 of [the Brussels I bis Regulation] has jurisdiction, must the conditions for the ordering of protective measures under Article 35 of [the Brussels I bis Regulation] be interpreted independently? Should a provision which does not allow a protective measure to be ordered against a public body in a case such as the present one be disapplied?

The appointed judges are J.C. Bonichot, L. Bay Larsen, M. Safjan, N. Jääskinen and C. Toader, with judge Toader reporting.

AG Saugmandsgaard Øe’s opinion on C-242/20, HRVATSKE ŠUME, is to be delivered the same day. The reference for a preliminary ruling comes from Visoki trgovački sud Republike Hrvatske (Croatia), based on doubts regarding (still) Regulation No 44/2001 (Brussels I)

1. 1. Do actions for recovery of sums unduly paid by way of unjust enrichment fall within the basic jurisdiction established in [the Brussels I  Regulation] in respect of ‘quasi-delicts’, since Article 5(3) thereof provides inter alia: ‘A person domiciled in a Member State may, in another Member State, be sued … in matters relating to … quasi-delict, in the courts for the place where the harmful event occurred or may occur’?
   2. Since there is a time limit on seeking recovery of sums unduly paid in the same judicial enforcement proceedings, do civil proceedings which have been initiated fall within exclusive jurisdiction under Article 22(5) of [the Brussels I Regulation] which provides that in proceedings concerned with the enforcement of judgments, the courts of the Member State in which the judgment has been or is to be enforced is to have exclusive jurisdiction, regardless of domicile?

Judges M. Vilaras, N. Piçarra, D. Šváby, S. Rodin and K. Jürimäe (reporting), will decide.

AG Campos Sánchez-Bordona’s opinion on C-296/20, Commerzbank, is expected as well on 9 September 2021. The Bundesgerichtshof (Germany) referred two questions to the Court of Justice on the interpretation of the Lugano Convention 2007:

1. 1. Is Article 15(1)(c) of the Lugano Convention to be interpreted as meaning that the ‘pursuit’ of a professional or commercial activity in the State bound by the Convention and in which the consumer is domiciled presupposes that the other party was already engaged in cross-border activity at the time when the contract was initiated and concluded or does that provision also apply for the purpose of determining the court having jurisdiction to hear proceedings where the parties were domiciled within the meaning of Articles 59 and 60 of the Lugano Convention in the same State bound by the Convention at the time when the contract was concluded and a foreign element to the legal relationship arose only subsequently because the consumer relocated at a later date to another State bound by the Convention?
   2. If cross-border activity at the time when the contract was concluded is not necessary: Does Article 15(1)(c) of the Lugano Convention, read in conjunction with Article 16(2) thereof, generally preclude determination of the court having jurisdiction in accordance with Article 5(1) of the Lugano Convention in the case where the consumer relocated to another State bound by the Convention between the time when the contract was concluded and the time when the proceedings were brought, or is it also necessary for the professional or commercial activities of the other party to be pursued in or directed to the new State of domicile and for the contract to come within the scope of such activities?

The deciding chamber will be composed by judges L. Bay Larsen, M. Safjan and C. Toader (reporting). Their interpretation will of course be relevant as well for Regulation n.º 1215/2012. Reciprocally, it is to be expected that the questions are answered, at least partially, in light of the mBank decision of September 3, 2020 (Case C-98/20).

No other PIL-related opinion will be delivered until Thursday 16 September.

AG Hogans’ on C-251/20, Gtflix Tv, will then be published upon request for a preliminary ruling from the Cour of Cassation (France). Once again Article 7(2) of the Brussels I bis regulation is at stake. The case having been allocated to the Grand Chamber it seems worth recalling the facts as well.

According to the judgment under appeal (the Lyon [Court of Appeal]), the Czech company Gtflix Tv, engaged in the production and broadcasting of adult content, in particular via its website, complained that DR — a director, producer and distributor of pornographic films offered on websites hosted in Hungary, where he carries on his business and is domiciled — had disseminated derogatory comments on a number of websites and forums. After giving DR formal notice to remove those comments, Gtflix Tv brought proceedings for interim measures before the President of the tribunal de grande instance de Lyon (Lyon Regional Court) seeking an order requiring DR, on pain of a penalty, to cease all derogatory acts towards Gtflix Tv and the website ‘legalporno’ and to publish a legal statement in French and English on each of the forums concerned. Gtflix Tv also sought permission to post its own comments on the forums in question and, lastly, a symbolic award of compensation in the amount of EUR 1 for material damage and EUR 1 for non-material damage.

DR argued that the French courts lacked jurisdiction. On appeal, Gtflix Tv restated its requests for removal and rectification and raised its application for damages to the provisional sum of EUR 10 000 in respect of material and non-material damage sustained in France.

The question asked reads :

Must Article 7(2) of [he Brussels I bis Regulation] be interpreted as meaning that a person who, considering  that his or her rights have been infringed by the dissemination of derogatory comments on the internet, brings proceedings not only for the rectification of information and the removal of content but also for compensation for the resulting non-material and material damage, may claim, before the courts of each Member State in the territory of which content published online is or was accessible, compensation for the damage caused in the territory of that Member State, in accordance with the judgment in eDate Advertising (paragraphs 51 and 52), or whether, pursuant to the judgment in Svensk Handel (paragraph 48), that person must make the application for compensation before the court with jurisdiction to order rectification of the information and removal of the derogatory comments?

M. Safjian will act as reporting judge.

The month will end (for PIL purposes) with the hearing, also on 16 September, in case C-501/20, M P A, from the Provincial Court of Barcelona (Spain). The referring court has several doubts regarding Regulation No 2201/2003 (Brussels II bis) and Regulation No 4/2009 (the Maintenance Regulation):

1. 1. How is the term “habitual residence” in Article 3 of [the Brussels II bis Regulation] and Article 3 of [the Maintenance Regulation] to be interpreted in the case of the nationals of a Member State who are staying in a non-Member State by reason of the duties conferred on them as members of the contract staff of the European Union and who, in the non-Member State, are recognised as members of the diplomatic staff of the European Union, when their stay in that State is linked to the performance of their duties for the European Union?
   2. If, for the purposes of Article 3 [the Brussels II bis Regulation] and Article 3 of [the Maintenance Regulation], the determination of the habitual residence of the spouses depended on their status as EU contract staff in a non-Member State, how would this affect the determination of the habitual residence of the minor children in accordance with Article 8 of Regulation No 2201/2003?
   3. In the event that the children are not regarded as habitually resident in the non-Member State, can the connecting factor of the mother’s nationality, her residence in Spain prior to the marriage, the Spanish nationality of the minor children and their birth in Spain be taken into account for the purposes of determining habitual residence in accordance with Article 8 of [the Brussels II bis Regulation]?
   4. If it is established that the parents and children are not habitually resident in a Member State, given that, under [the Brussels II bis Regulation] there is no other Member State with jurisdiction to decide on the applications, does the fact that the defendant is a national of a Member State preclude the application of the residual clause contained in Articles 7 and 14 of [the Brussels II bis Regulation]?
   5. If it is established that the parents and children are not habitually resident in a Member State for the purpose of determining child maintenance, how is the forum necessitatis in Article 7 of [the Maintenance Regulation] to be interpreted and, in particular, what are the requirements for considering that proceedings cannot reasonably be brought or enforced or prove impossible in a non-Member State with which the dispute is closely connected (in this case, Togo)? Must the party have initiated or attempted to initiate proceedings in that State with a negative result and does the nationality of one of the parties to the dispute constitute a sufficient connection with the Member State?
   6. In a case like this, where the spouses have strong links with Member States (nationality, former residence), is it contrary to Article 47 of the Charter of Fundamental Rights if no Member State is considered to have jurisdiction under the provisions of the Regulations?

M. Szpunar’s opinion has been asked. The decision is to be taken by A. Prechal, N. Wahl, F. Biltgen, J. Passer and L.S. Rossi, the latter as reporting judge.

NoA : Just for the record, the hearing in C-319/20, Facebook Ireland, on the GDPR, takes place one week later. The question referrered to the Court by the Bundesgerichtshof (Federal Court of Justice, Germany) is:

Do the rules in Chapter VIII, in particular in Article 80(1) and (2) and Article 84(1), of Regulation (EU) 2016/679 preclude national rules which – alongside the powers of intervention of the supervisory authorities responsible for monitoring and enforcing the Regulation and the options for legal redress for data subjects – empower, on the one hand, competitors and, on the other, associations, entities and chambers entitled under national law, to bring proceedings for breaches of Regulation (EU) 2016/679, independently of the infringement of specific rights of individual data subjects and without being mandated to do so by a data subject, against the infringer before the civil courts on the basis of the prohibition of unfair commercial practices or breach of a consumer protection law or the prohibition of the use of invalid general terms and conditions?

The Journal of Law, Market & Innovation (JLMI) is a new initiative of the Turin Observatory on Economic Law and Innovation. The JLMI is an open access journal of the University of Turin that aims at fostering research with respect to the regulatory challenges posed by markets and innovation in our times. The JLMI relies on an interdisciplinary methodology. More information at https://www.ojs.unito.it/index.php/JLMI.

In its yearly Special Issue, which is a joint initiative with the Master in International Trade Law and to which this call for papers is addressed, it focuses on international and comparative approaches to trade law with the goal of offering to the readers challenging ideas, critical insights and new perspectives.

This Call concerns the first Special Issue to be published in Spring 2022 on The interplay of physical and digital trade law. The Call aims at gathering contributions that question to what extent technology and digital trust are changing global trade law, and discuss the implications, for the regulation of global trade, of the interplay of physical trade and the digitalization of the economy.

The editors of the issue are University of Turin’s dr Lorenza Mola, Professor of International Law and 2020-2021 scientific director of the Master, dr Cristina Poncibò, Professor of Comparative Private Law and member of the Scientific Committee of the Master, and dr Elena D’Alessandro, Professor of Civil Procedure and member of the Scientific Committee of the Master.

The following topics and perspectives may be taken into considerations, among others: Trade, Digital Trust and Human Trust; Contract Digitalization and B2B platforms; Trade, DLTs, Blockchain; E-customs; Digital Justice and Trade; Perspectives from China and the Global South. The editors invite submissions addressing the legal aspects underpinning questions such as: Are the main drivers of physical trade challenged?; Trade and essential infrastructures: what lessons learned from the Suez Channel case?; Does digitalization really change trade?; Is global trade really going digital?; How to adapt dispute settlement mechanisms to digital trade? How is the Belt and Road Initiative shaping the physical/digital interplay in global trade? What is the impact of COVID-19 on such interplay?

Authors are invited to address questions and issues arising from the specific area of law relating to their topic. All types of legal approaches will be considered for publication. However, please note that any analysis solely limited to a national legal system will fall outside the scope of the Journal. An international, supranational or transnational legal dimension is imperative. The Board of Editors will select articles based on quality of research and writing, diversity, and relevance of topic. The contributions from the Alumni of the Master programme are particularly welcomed. The novelty of the academic contribution is also an essential requirement.

Prospective articles should be submitted in the form of abstract (around 800 words) or draft articles (see below) to submissions.jlmi@iuse.it within August 31, 2021. Accepted authors will be notified within September 10, 2021. Final articles shall be delivered within December 10, 2021 and should conform to the journal style guide that is based on OSCOLA. Typically, the JLMI accepts contributions within the range of 10.000 to 15.000 words, including footnotes, but both shorter and longer articles will be considered. Pre-selected articles will be subject to single-blind peer review. For further information, or for consultation on a potential submission, you can contact us by email at editors.jlmi@iuse.it.

Homoki / Commission
Droit institutionnel
Le Tribunal annule la décision de l’OLAF de ne pas donner un accès partiel au rapport final de son enquête relative aux projets d’éclairage public réalisés par la société Élios en Hongrie avec participation financière de l’Union

Jurisdiction over branches (Article 7(5) of the Brussels I bis Regulation) is shrouded in a cloud of mystery. A judgment dated 16 March 2021 by the German Federal Court (Bundesgerichtshof) provides some helpful clarification in this regard.

Facts

The claimant had booked a first-class flight with Air France from San Francisco to London, with a connecting flight through Paris, for the cut-throat price of 582,97 Euro (!). The booking was made through a webpage with a German domain name (“airfrance.de”). The contact information on the website referred, besides the main seat in Paris, to an “Air France Direktion” (department) with a physical address in Frankfurt am Main (Germany). The actual department located at this place had mainly marketing functions and was not involved in the administration of the webpage “airfrance.de”. The ticket showed the abbreviation “DIR WEB Allemagne, FRANKFURT AM MAIN”.

Air France cancelled the ticket alleging an error in its issuances. The claimant then brought an action before a court in Frankfurt, seeking damages for more than 10.000 Euro. The defendant disputed the jurisdiction of the German court.

Legal Issue

The main question of the case was whether the defendant can be sued on the basis of an establishment in Germany under Article 7(5) of the Brussels I bis Regulation. The heads of jurisdiction for consumer contracts were not at issue because of the exception for transport contracts in Article 17(3) of the Regulation.

Holding

The Federal Court ruled that the Frankfurt office qualified as an establishment and that the dispute arose out of the operations of the Frankfurt office, despite the fact that the office’s employees were not managing the webpage and were not involved in the booking process. The decisive factor was not the internal business processes, but the way in which the establishment appears in business dealings with third parties.

Rationale

The Federal Court referred to the case law of the CJEU, which requires a branch, agency, or other establishment to have a management and material equipment to negotiate business with third parties, a centre of operations and an “appearance of permanency” (see CJEU, Case C-464/18, ZX v Ryanair, para 33; Case C‑804/19, BU v Markt24, para 47).

In determining whether the dispute arose out of the operations of this branch, the German Federal Court specifically highlighted that the Frankfurt office of Air France develops special offerings for business passengers and travel agencies based in Germany and the managing director for Germany is based at this very branch. Importantly, the Federal Court emphasised that the internal organisation of the company is less of relevance than its appearance towards the outside world (Federal Court, para 23, with reference to CJEU, Case C-218/86, SAR Schotte GmbH, para 14 et seq.). It ruled that the contact information on the webpage, which indicated an establishment in Germany, was of special importance.

The court attributed this to the fact that the information on the website was mandatory by law and that the purpose of this obligation was to ensure a minimum level of transparency and information for the user of a website about the person operating the website. According to the legislator’s intention, this information should also serve as a starting point in the event of a legal dispute. The information on the website would imply that the establishment mentioned is offering the service and issues or accepts the relevant contractual declarations.

The customer must be able to rely, in the Federal Court’s words (para 33), on this establishment’s appearance.

The latter would be further corroborated by the use of the German top-level domain (“.de”), the use of the German language and the mention of “Frankfurt” as the place where the ticket was issued. Against this background, if an existing establishment is referred to as “Air France in Germany”, a customer may understand this to mean that this establishment is the entity offering the bookings.

The fact that the website also mentioned the main seat of Air France in Paris would not offset this impression, as this would only serve to comply with the legal requirement to identify the contractual counterparty of the customer. Nor would the fact that the officers of the establishment in Frankfurt were not involved in the management of the website change the analysis, as this would merely relate to the internal organisation of the defendant. Equally unimportant was the use of the suffix “.fr” in the email addresses mentioned on the website, as the customer may rationally have attributed this to the need for uniformity within the company.

Assessment

The Federal Court’s judgment is very customer-friendly. Under the ruling, the existence and the role of an establishment is first and foremost to be assessed from the perspective of the customer. The judgment, however, stretches the concept of a “branch, agency or establishment” to its limits. The CJEU had at least required that the branch, agency or establishment is “materially equipped to negotiate business with third parties” (CJEU, Case 33/78, Somafer, para 12). This restriction is not sufficiently reflected in the decision Federal Court, which seems to be primarily inspired by the wish to protect the supposedly weaker party outside the scope of Article 17 et seq. of the Brussels I bis Regulation. This may create the danger that offices with merely clerical functions may be used by claimants as a launching pad for legal action. In the end, this could lead to a backlash: Companies may decide to centralise all of their operations within one country to avoid creating jurisdictional bases under Article 7(5) of the Brussels I bis Regulation. This would not be in the interest of the customers nor of the Single Market.

— Amy Held, Verena Wodniansky-Wildenfeld and Felix Krysa have contributed to this post.

In 2015, the United Nations formulated 17 ambitious goals towards transforming our world – the Sustainable Development Goals (SDG 2030). Their relation to public international law has been studied, but private law has received less attention in this context and private international law none at all. Now renowned and upcoming scholars from multiple countries and disciplines analyze, for each of the 17 SDGs, what role private international law actually plays towards these goals and how private international law could, or should, be reformed to help achieve them. The resulting findings will be published in an open access volume with Intersentia  and presented in the framework of a Conference to be held on 9 to 11 September 2021 at the Max Planck Institute for Comparative and International Private Law in Hamburg.

The Conference will take place in a hybrid format, i.e. both at the Max Planck Institute for Comparative and International Private Law in Hamburg and virtually via Zoom. English-Spanish and Spanish-English simultaneous translation for the Conference will be provided by professional interpreters.

The Conference Program and further information can be found via this LINK.

Please register for participation at the Conference via Zoom HERE.

 

 

 

 

 

Conventions & Instruments

On 23 July 2021, New Zealand deposited its instrument of ratification of the HCCH 2007 Child Support Convention. With the ratification of New Zealand, 42 states and the European Union are bound by the Child Support Convention. It will enter into force for New Zealand on 1 November 2021. More information is available here.

On 1 August 2021, the HCCH 1996 Child Protection Convention entered into force for Costa Rica. It currently has 53 Contracting Parties. More information is available here.

Meetings & Events

As of 3 August 2021, registration for the 12th International Forum on the electronic Apostille Programme (e-APP) is open to the general public. The event will be hosted online on 4 October 2021. The deadline for registration is Friday, 10 September 2021, 5.00 p.m. CEST. More information is available here.

On 9 August 2021, the HCCH and the Inter-American Commission on Human Rights of the Organization of American States co-hosted a webinar on international child abduction.

On 19 August 2021, the HCCH, the Council of ASEAN Chief Justices and the Malaysian Judiciary co-hosted a virtual HCCH-ASEAN Masterclass. More information is available here.

Other

Vacancy: Applications are now open for three- to six-month legal internships from January to June 2022. The deadline for the submission of applications is 24 September 2021 (18:00 CEST). More information is available here.

Reminder: Submissions for the HCCH|Approach Essay Competition and the HCCH|Approach Media and Design Competition are due on 1 October 2021. The competitions are organised as part of the Advancing and Promoting the Protection of All Children (Approach) Initiative, launched in celebration of the 25th anniversary of the HCCH 1996 Child Protection Convention. More information is available here.

 

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

 The second issue of 2021 of the Rivista di diritto internazionale privato e processuale (RDIPP, published by CEDAM) has been released. It features:

Christian Kohler, Honorary Professor at the University of Saarland, Limiting European Integration through Constitutional Law? Recent Decisions of the German Bundesverfassungsgericht and their Impact on Private International Law (in English)

• On May 5, 2020 the Federal Constitutional Court (Bundesverfassungsgericht – BVerfG) in Germany ruled that the Public Sector Purchase Programme (“PSPP”) of the European Central Bank (ECB) as well as the judgment of the Court of Justice of the European Union (CJEU) in case C-493/17 were “ultra vires” because they exceeded the competences conferred on these institutions. Both the PSPP and the CJEU’s judgments were thus without effect in Germany. In order to assess the judgment of the BVerfG and to measure the ensuing conflict, a look at its case-law in matters of European integration is indispensable. In seminal judgments relating to the ratification of the Maastricht treaty (1993) and the treaty of Lisbon (2009), the Constitutional Court had previously explained its approach toward the European Union as being a confederation sui generis of sovereign states governed by the principle of conferral, and that any action of the German institutions relating to the European integration has to respect a twofold limitation: it has to remain within the limits of the competences conferred by the treaties, and it has to safeguard Germany’s “constitutional identity” as enshrined in the Basic Law. Any act taken in violation of these limits may be declared void by the Constitutional Court. The control exercised by the BVerfG has been further extended by a ruling of February 13, 2020: the Court held that the German law authorizing the ratification of the Agreement on a Unified Patent Court (UPC) was void as it had not been adopted by a majority of two thirds by the Bundestag and the Bundesrat as required by the Basic Law. This implies that from now on the Court will control not only the material but also the formal validity of an act relating to the European integration. Both the “Lisbon” judgment and the UPC ruling have implications for European private international law. Whereas these implications are well defined in the “Lisbon” judgment they are less visible but nevertheless present in the ruling of February 13, 2020.

Fabrizio Marongiu Buonaiuti, Professor at the University of Macerata, Il rinvio della legge italiana di riforma del diritto internazionale privato alle convenzioni internazionali, tra adeguamento al mutato contesto normativo e strumentalita` alla tutela dei valori ispiratori (The Reference to International Conventions Made in the Law Reforming the Italian System of Private International Law: Between Adaptation to the Changed Normative Context and Instrumentality to the Protection of the Underlying Principles)

• A salient feature of the law providing for the reform of the Italian system of private international law (Law No. 218 of 31 May 1995) consists of the references it embodies to some private international law conventions for the purposes of relying on their rules in order to regulate issues not falling within their scope of application, consistently with the regime contained in the relevant convention. This article discusses the fate of those references, as a consequence of the fact that most of the conventions referred to have in the meantime been replaced by EU regulations, when not by subsequent conventions. While just one of the said references, that embodied under Article 45 of the said law, concerning the law applicable to maintenance obligations, has been updated so far by the Italian legislature, the author proposes that, as a matter of consistent interpretation, the other references made by the same law should be held as directed to the new instruments having replaced the conventions existing at the time the law was passed. As argued in the final part of the article, the proposed solution is also conducive to a more effective achievement of the objectives pursued already by the conventions initially referred to.

Zeno Crespi Reghizzi, Professor at the University of Milan, La “presa in considerazione” di norme straniere di applicazione necessaria nel regolamento Roma I (‘Considering’ Foreign Overriding Mandatory Provisions under the Rome I Regulation)

• In its Nikiforidis judgment of 2016, the Court of Justice of the European Union ruled that the limits set by Article 9(3) of the Rome I Regulation to the effects of foreign rules of mandatory application concern only their ‘application’ in the international private law sense, not also their ‘taking into account’ by substantive rules of the lex contractus. The present article discusses the reasons for this interpretative solution and highlights the need to specify its scope in order to preserve the Regulation’s systemic coherence.

The following comment is also featured:

Rebekka Monico, Research fellow at the University of Insubria, La disciplina europea sul Geo-blocking e il diritto internazionale privato e processuale (The EU Geo-Blocking Regulation and Private International and Procedural Law)

• This article analyses the relationship between Regulation (EU) No 2018/302 on the prohibition of geo-blocking practices which are not justified on objective grounds and the rules of private international law contained in the Brussels I-bis, the Rome I and the Rome II Regulations. In this respect, Article 1(6) of Regulation (EU) 2018/302 contains, in addition to a safeguard clause of the Union law concerning judicial cooperation in civil matters, the clarification that the mere fact that the trader complies with the prohibitions imposed by the Geo-blocking Regulation does not imply that he intentionally directs his activity towards the Member State of the consumer pursuant to Articles 17(1)(c) and 6(1)(b) of the Brussels I-bis and the Rome I Regulations, respectively. Although this clarification is consistent with the Pammer, Mühlleitner, Emrek and Hobohm judgments, the Author endorses a new interpretation of the directed-activity criterion by the Court of Justice of the European Union which would protect consumers and, at the same time, provide greater legal certainty for traders.

In addition to the foregoing, this issue features the following book review by Cristina M. Mariottini, Senior Research Fellow at the Max Planck Institute Luxembourg: Julia HÖRNLE, Internet Jurisdiction: Law and Practice, Oxford University Press, New York, 2021, pp. vii-485.