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Cour d'assises

In December 2020, we reported about the Opinion presented by Advocate Generale Campos Sánchez-Bordona in the case Vereniging van Effectenbezitters, C-709/19. Today, the Court delivered its judgment in this case.

In brief, the request for a preliminary ruling arose out of the proceedings pertaining to a collective action for a declaratory judgment brought by an association against an oil and gas company on behalf of investors who bought, held or sold the ordinary shares through an investment account in the Netherlands. The association argued that this internationally listed company acted unlawfully towards its shareholders inasmuch as it made incorrect, incomplete and misleading statements about the circumstances pertaining to, inter alia, an explosion resulting in an oil spill. It is in this context that the referring court requested the Court of Justice to interpret Article 7(2) of the Brussels I bis Regulation.

At the request of the Court, in his Opinion of last December, AG Campos Sánchez-Bordona addressed two first preliminary questions. Thus, the third and fourth preliminary questions on international and internal territorial jurisdiction to hear subsequent individual claims of the investors were not addressed in the Opinion.

Ultimately, the third and fourth questions do not receive a definitive answer in the judgment either. The Court held that these questions are inadmissible as they are of hypothetical nature – in the proceedings pending before the referring court, no subsequent individual claim is concerned (paragraphs 38 and 39).

As to the first and second preliminary questions, these are worded as follows:

(1) (a)      Should Article 7(2) of [the Brussels I bis Regulation] be interpreted as meaning that the direct occurrence of purely financial damage to an investment account in the Netherlands or to an investment account of a bank and/or investment firm established in the Netherlands, damage which is the result of investment decisions influenced by globally distributed but incorrect, incomplete and misleading information from an international listed company, constitutes a sufficient connecting factor for the international jurisdiction of the Netherlands courts by virtue of the location of the occurrence of the damage (“Erfolgsort”)?

(b)      If not, are additional circumstances required to justify the jurisdiction of the Netherlands courts and what are those circumstances? Are the additional circumstances [namely, the fact that the international listed company focuses on global investment public, including the investors in the Netherlands, and the association represents a considerable number of investors in this Member State, the fact that the settlement reached by the international listed company with a number of shareholders in the United States of America was not proposed to the investors represented by the association and, lastly, the fact that the shareholders for whom this association is acting include consumers to whom the Brussels I bis Regulation affords special legal protection] sufficient to found the jurisdiction of the Netherlands courts?

(2)      Would the answer to Question 1 be different in the case of a claim brought under Article 3:305a of the BW by an association the purpose of which is to defend, in its own right, the collective interests of investors who have suffered damage as referred to in Question 1, which means, among other things, that neither the places of domicile of the aforementioned investors, nor the special circumstances of individual purchase transactions or of individual decisions not to sell shares which were already held, have been established?

 

In its judgment, the Court answered together this questions (paragraph 22) and held that Article 7(2) of the Brussels I bis Regulation must be interpreted to the effect that the direct occurrence, in an investment account, of purely financial damage resulting from investment decisions made on the basis of information which was readily available worldwide, but which was incorrect, incomplete and misleading and emanated from an international listed company, does not allow the international jurisdiction of the court of the Member State in which the bank or investment firm that holds that account is established to be founded on a connection with the place where the damage occurred, where that company was not subject to statutory reporting obligations in that Member State (paragraph 37).

The judgment can be consulted here (the English version is not yet available).

Luxembourg / Commission
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Electronic commerce: past, present and future

The UNCITRAL National Coordination Committee for Australia (UNCCA) invites you to attend its Seventh Annual May Seminar, to be held online as a webinar. This year we celebrate the 25th anniversary of the UNCITRAL Model Law on Electronic Commerce 1996, and the 20th Anniversary of the UNCITRAL Model Law on Electronic Signatures 2001.

Both of these Model Laws and the subsequent United Nations Convention on Electronic Communications in International Contracts 2005 have had a profound effect on the regulation of electronic commerce globally. In Australia, all of these developments have been incorporated in the Electronic Transactions Acts passed by the Commonwealth and all States and Territories. During 2020 the relevance of these enactments came to the fore as a result of the COVID pandemic.

In this live, interactive webinar, expert commentators from UNCITRAL and Australia will review the history of these developments in ecommerce, the current state of the law, as well as issues that are being considered for future work nationally and globally.

For more information, see here.

This post was contributed by Dr Nicolas Kyriakides, who is a practising lawyer in Cyprus and an Adjunct Faculty at the University of Nicosia, and Ms Yomna Zentani (LLM, Cantab – Cambridge Trust scholar), who is a future Trainee Solicitor at Clifford Chance LLP.

On 21 April 2021, the English High examined the interplay between the Brussels Recast Regulation (BRR) and the principle of ‘modified universalism’ in international insolvency proceedings in WWRT Ltd v Tyshchenko & Anor ([2021] EWHC 939 (Ch)). It particularly addressed whether proceedings can be stayed on the grounds of modified universalism, despite jurisdiction having been established by Article 4 of the BRR (see also the previous report of G. van Calster).

Background

The claimant, WWRT, brought proceedings against the defendants, Mr Serhiy Tyshchenko and his ex-wife Mrs Olena Tyschchenko on the grounds that they had both carried out extensive fraud on the Ukrainian Bank, JSC Fortuna Bank which was owned by Mr Tyschenko between the years 2011 and 2014. The fraud consisted of the granting of numerous loans to companies with limited commercial activity who had no intention of repaying these loans. This then led to the bank declaring insolvency and being liquidated by which a package of assets consisting of also the disputed loans, was sold to Star Investment One LLC, a Ukrainian Company. The package, along with the rights to them were sold to WWRT in March 2020. WWRT argued that it had now acquired the rights to bring the claim relied upon in the present proceedings and obtained ex parte a worldwide freezing order. Mr and Mrs Tyschenko were both served in England within the court’s jurisdiction.

One of the main arguments centred around Mr Tyschenko’s objection to the court’s jurisdiction. He argued that WWRT’s claims should be stayed under common law so as to prevent WWRT from circumventing the Ukrainian insolvency proceedings opened on 9 December. He submitted that under Ukrainian law, claims such as the one contested in this case should only be adjudicated within the proceedings opened in December and thus must be stayed on the principle of “modified universalism.” The discussion surrounding this principle is of particular interest in this case.

Modified Universalism and Owusu

As potentially one of the final cases concerning the Brussels Regulation in England and Wales, we are reminded of the importance of the CJEU judgment in the case of Owusu v Jackson which set out that a finding of jurisdiction under Article 4 would exclude any challenge on forum non conveniens grounds.

Mr Tyschenko was found to be domiciled in England for the purposes of Article 4, however, a further argument was advanced on whether the court may stay these proceedings on the principle of modified universalism. Whilst accepting that Article 4 jurisdiction could not be challenged, a further argument was made by Mr Tyschenko’s legal representation, stating that the court in Owusu did not address the question of whether “…a domestic court could nevertheless stay its proceedings in favour of insolvency proceedings that had already commenced in another Member State.” He went on to state (at [52]) that the principle at work in such a case was not one of forum non conveniens but rather the common law principle of modified universalism, which carries with it the requirement to provide assistance to foreign insolvency proceedings. As stated by Lord Sumption in Singularis Holdings v PriceWaterhouseCoopers [2015], the principle is founded on

the public interest in the ability of foreign courts exercising insolvency jurisdiction in the place of the company’s incorporation to conduct an orderly winding up of its affairs on a worldwide basis, notwithstanding the territorial limits of their jurisdiction.

It was undisputed that a stay on this principle is conceptually different from a stay on forum non conveniens grounds. However, the question that the court had to address was whether this particular distinction could allow the present situation to be distinguished from the rule set out in Owusu and thus allowing a stay of proceedings, despite jurisdiction being founded on Article 4 (formerly Article 2 when Owusu was decided). In other words, whether the particular nature of insolvency proceedings require a different approach to the rule.

The decision on Owusu was reached out of respect for the principle of legal certainty, which the BRR (formerly the Brussels Convention) was built upon and the mandatory nature of Article 4. Allowing a deviation of this rule on the basis of forum non conveniens would have greatly undermined the predictability of the rules of jurisdiction as laid down by the Convention.

Further, insolvency proceedings and their peculiarities were taken out of the scope of the BRR altogether and reflected in other legislation, namely the Recast Insolvency Regulation and the UNICTRAL Model Law on cross-border insolvency. As such, the court reaffirmed the significance of Article 4 and held that a stay could not be granted on the basis of modified universalism. The court subsequently upheld the worldwide freezing injunction.

Analogous Application of Article 34 BRR?

In the alternative, the defendant suggested that a stay could be granted by the reflexive or analogous application of Article 34 of the BRR. This Article provides that:

1. Where jurisdiction is based on Article 4 … and an action is pending before a court of a third State at the time when a court in a Member State is seized of an action which is related to the action in the court of the third State, the court of the Member State may stay the proceedings if:

(a)  it is expedient to hear and determine the related actions together to avoid the risk of irreconcilable judgments resulting from separate proceedings;

(b)  it is expected that the court of the third State will give a judgment capable of recognition and, where applicable, of enforcement in that Member State; and

(c)  the court of the Member State is satisfied that a stay is necessary for the proper administration of justice.

The defendant accepted that “[…] the bankruptcy exclusion in Article 1 of the BRR precludes the express application of Article 34 if the pending action in the third State is in the nature of bankruptcy or insolvency proceedings.” However, he nevertheless contented that the Article could be applied by analogy to this case similarly to how Article 28 of the Lugano Convention was applied by analogy or reflexively to pending proceedings in JSC, Commercial Bank v Kolomoisky [2019] EWCA Civ 1708 §§159-181.

However, the court was not satisfied that the present proceedings were in anyway related to the pending insolvency proceedings in Ukraine (those opened on the 9th of December), to the effect that they would create a risk of irreconcilable judgments. Distinguishing Kolomoisky, the court stated that Article 28 was only given reflexive or analogous effect to the pending proceedings in Ukraine in that particular case in order to “[…] address the problem of the lacuna that would otherwise have arisen from the fact that Article 28 expressly applies only to related actions pending in the courts of different States bound by the Convention.” (at [91])

The reflexive application in Kolomoisky would not subvert the objectives of the Convention but would further its purposes by achieving legal certainty and ensuring that the risk of inconsistent judgments is avoided.

In the current case, the court held that the problem that was trying to be avoided in Kolomoisky when applying Article 28 reflexively, did not arise in this instance. This is because Article 34 of the BRR now specifically addresses proceedings in third States. The defendant’s argument thus attempted to advance a different proposition, distinct from what was advanced in Kolomoisky. The court held that the defendant’s apparent extension of Article 34, namely that it should be applied to proceedings which the defendant accepts as expressly excluded from the scope of the BRR, is not a proper one. The court continued that even in the event Article 34 could be applied by analogy or reflexively, it was not satisfied that the pending insolvency proceedings in Kyiv were related to the extent that they could create a risk of irreconcilable judgments.

Consequently, the proceedings were not stayed on the basis of this argument and the court subsequently upheld the worldwide freezing injunction.

Peines correctionnelles