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This Thursday, the Court of Justice delivered its judgment in the case Oeltrans Befrachtungsgesellschaft, C-73/20, on the interpretation of the Insolvency Regulation and the law applicable to detrimental acts. This judgment, pertaining to Articles 4(2)(m) and 13 of the Regulation No 1346/2000, completes therefore the case law constituted most notably by the judgment in the case Vinyls Italia, C-54/16.

Despite the fact that the recent judgment concerns the Regulation No 1346/200, which has been repealed by Regulation 2015/848, it is and will remain of relevance: the latter Regulation contains provisions that are equivalent to the aforementioned Articles 4(2)(m) and 13.

 

Legal and factual context

Oeltrans Befrachtungsgesellschaft and Tankfracht GmbH are both established in Germany and belong to the same group of companies.

An inland waterway contract exists between Tankfracht and E.A. Frerichs, established in the Netherlands. Under this contract, Tankfracht owes a payment of a fixed amount to E.A. Frerichs.

By the end of 2010, Oeltrans Befrachtungsgesellschaft pays to E.A. Frerichs, ‘on the order of Tankfracht’, the sum owed by this company under the inland waterway contract.

Following the opening in Germany of the insolvency proceedings in relation to Oeltrans Befrachtungsgesellschaft, its liquidator brings an application for repayment on that amount with interests, on the ground that the transaction should be set aside by virtue of insolvency.

After a lapse of a certain amount of time, the regional court finds against E.A. Frerichs under German law, in accordance with the form of order sought by the liquidator. Next, deciding on appeal brought by E.A. Frerichs, the second instance court, also on the basis of German law, varies the decision of the regional court and dismisses the application on the basis of the plea that it was timebarred. Finally, by its appeal on a point of law (Revision), Oeltrans Befrachtungsgesellschaft seeks to have the decision of the regional court reinstated by the referring court.

 

Questions/issues raised by the request for a preliminary ruling

At the outset, the referring court explains that, under German insolvency law, the payment made by Oeltrans Befrachtungsgesellschaft is voidable.

However, under Article 13 of the Regulation No 1346/2000, its Article 4(2)(m) does not apply where the person who benefited from an act detrimental to all the creditors provides proof that the said act is subject to the law of a Member State other than that of the State of the opening of proceedings and that law does not allow any means of challenging that act in the relevant case.

Invoking that provision, E.A. Frerichs contends that the contested payment is to be assessed under Netherlands law. Under this law, the payment is said not to be voidable.

Faced with this contention, the referring court indicates that, under the Rome I Regulation, the inland waterway contract is governed by Netherlands law. For the referring court, the issue to be determined is thus whether the law applicable to a contract under this Regulation also governs, in the context of Article 13 of the Regulation No 1346/2000, the payment made by a third party in performance of a contracting party’s contractual payment obligation.

The referring court considers that it is facing a question on the scope of the lex contractus in the context of insolvency proceedings: under Article 12(1)(b) of the Rome I, the law applicable to the contract also governs the performance of the obligations laid down in that contract. The question remains whether this is still the case in the context of insolvency proceedings. If the creditor’s claim is satisfied not by the other party to the contract but, as in the present case, by a third party, the question arises all the more as to whether the lex contractus applies.

Additionally, the referring recognizes the existence of a doctrinal debate as to whether the law applicable to the performance of a contractual obligation is determined by reference to the contract or separately to the act of performance.

Ultimately, the referring court addresses a following question to the Court of Justice: are Article 13 the Regulation No 1346/2000 and Article 12(1)(b) of the Rome I Regulation to be interpreted as meaning that the law applicable to a contract under the latter Regulation also governs the payment made by a third party in performance of a contracting party’s contractual payment obligation?

 

The judgment and the reasoning of the Court

In this case, decided without an Opinion from the Advocate General, the Court answered in affirmative the question of the referring court.

To reach that answer, the Court referenced its case law according to which Articles 4 and 13 of the Regulation No 1346/2000 constitute a lex specialis in relation to the Rome I Regulation and must be interpreted in the light of the objectives pursued by the former Regulation (paragraphs 25, 26 and 30).

Having set such starting point for its reasoning, the Court proceeded to interpret the Regulation No 1346/2000 in order to address the question whether a payment made in performance of a contractual obligation is governed by the law applicable to that contract. At paragraphs 31 to 34, it based its finding according to which a payment made (also by a third party) in performance of a contracting party’s contractual obligations is governed by the lex contractus by the considerations on the (legitimate) expectations of the party to the contract having received the payment.

At paragraphs 35 to 38, the Court explained that this finding is corroborated by Article 12(1)(b) of the Rome I Regulation.

Ultimately, the Court ruled that the answer to the preliminary question is that Article 13 of the Regulation No 1346/2000 and Article 12(1)(b) of the Rome I Regulation must be interpreted to the effect that the law applicable to the contract on the basis of the latter Regulation governs also the payment made by a third party in performance of a contracting party’s contractual obligations where, in the context of insolvency proceedings, this payment is contested as an act detrimental to all the creditors.

A cursory first reading of the judgment might lead some to conclude that the Court drew a finding of a general nature from Article 12(1)(b) of the Rome I Regulation, according to which the performance of a contractual obligation is generally (and in EU private international law in particular) governed by the law applicable to the contract that constitutes the base of this obligation. Thus, the reference to Article 12(1)(b) of the Rome I Regulation in the Court’s answer would simply mirror the preliminary question, as formulated by the referring court (both Article 13 of the Regulation No 1346/2000 and Article 12(1)(b) of the Rome I Regulation being invoked in this question). Others may see this reference as implying that the conflict of laws rules of the latter Regulation are still of relevance in the context of insolvency proceedings. It is yet to be seen which alternative will be supported by a more refined lecture of the judgment.

The judgment can be consulted here.

Austrian Airlines
Transport
Le simple déroutement d’un vol vers un aéroport proche n’ouvre pas droit à une indemnisation forfaitaire

23 teams from al over the globe are participating in the Pax Moot that is currently ongoing (from 21 to 23 April). The case concerns private international law aspects of the race to a Covid vaccine. It involves the application of various EU and international instruments.

Spectators are welcome at the semifinals and finals on Friday 23 April. You can join by first logging into your own Zoom account and then clicking the link on the schedule to the relevant session. After the final round Ms Pia Lindholm of the European Commission will address the students. Then the winners of the written rounds, the oral rounds and the best pleader will be announced.

Guest Post by Diego A. Zambrano, Assistant Professor of Law, Stanford Law School

For years now, the concept of a “Brussels Effect” on global companies has become widely accepted. A simple version of the story goes as follows: the European Union sets global standards across a range of areas simply by virtue of its large market size and willingness to construct systematic regulatory regimes. That is true, for instance, in technology where European privacy regulations force American companies (including Facebook, Google, and Apple) to comply worldwide, lest they segment their markets. As Anu Bradford has expertly argued, it is also true in environmental protection, food safety, antitrust, and other areas. When companies decide to comply with European regulations across markets, the European Union effectively “exports” its regulatory regimes abroad, even to the United States.

In a forthcoming article, How Litigation Imports Foreign Regulation, I argue that foreign regulators not only shape the behavior of American companies—they also influence American litigation. From the French Ministry of Health to the Japanese Fair Trade Commission and the European Commission, I uncover how foreign agencies can have a profound impact on U.S. litigation. In this sense, the “Brussels Effect” is a subset of broader foreign regulatory influence on the American legal system.

The intersections are rich and varied. For instance, plaintiffs in dozens of pharmaceutical cases in U.S. court are requesting that multinational defendants disclose documents previously produced to foreign regulators. These plaintiffs base their legal cases around findings by, say, the French Ministry of Health rather than the American Food and Drug Administration (FDA). Similarly, plaintiffs in antitrust cases keep close tabs on enforcement actions by the European Commission, piggybacking on the work of foreign regulators, borrowing foreign theories and documents, and even arguing that foreign regulatory action should bolster cases in U.S. courts. And foreign regulators even submit letters to U.S. district courts, advocating for a particular outcome or objecting to the production of confidential documents.

Take a recent case, In re Zofran, involving allegations that GlaxoSmithKline (GSK) sold the drug Zofran while knowing it caused severe birth defects.  GSK argued that “plaintiffs could offer no evidence that the drug caused birth defects” and that “even the FDA had rejected similar claims.” Plaintiffs’ case was headed for an adverse summary judgment until a key piece of evidence emerged—documents that GSK had produced to the “Japanese Ministry of Health and Welfare, including a series of studies showing potential birth defects that defendants had ‘performed specifically to satisfy Japanese regulatory requirements.’”  These documents allowed plaintiffs to dodge FDA findings and defeat a motion for summary judgment.

Or take another example, antitrust cases that piggyback on the foreign agencies. In a recent case alleging a conspiracy by American and foreign banks to fix prices for European sovereign bonds, plaintiffs left no doubt that “they remained ignorant of the conspiracy’s existence until the European Commission’s Statement of Objections put them on notice.”  In other words, a European Commission report triggered a large antitrust case in U.S. court.

Sometimes, plaintiffs draw on foreign regulators precisely because those foreign agencies disagree with U.S. regulators. In one pharmaceutical case, plaintiffs blamed a company for failing to warn of cancer risks, “citing reports from Health Canada, which they argued uncovered ‘new safety information’ that the FDA failed to consider.”

I argue in my article that this phenomenon of private litigation that borrows foreign regulation is widespread and needs more attention. The trend comes, of course, with costs and benefits. On the one hand, drawing on foreign regulators can serve as a “failsafe” when domestic regulators are incompetent or captured. This could audit the work of our underperforming agencies, allowing litigators to compare the FDA with the Taiwanese health agency or the Environmental Protection Agency against European environmental regulators. Moreover, importing regulation can give litigants and courts access to increased expertise and information gathering. And it may even harmonize U.S. and foreign regulations, promoting coherence and regulatory convergence.

Recent litigation involving the Boeing 737 Max crashes demonstrates the promise of imported foreign regulation. Many sources have reported a cozy relationship between Boeing and the Federal Aviation Administration, suggesting a classic case of regulatory capture. Private plaintiffs suing Boeing may thus have difficulty relying on reports from the FAA to support their cases. But Boeing does not wield similar influence over the European Aviation Safety Agency. So, plaintiffs could rely on EASA investigations to establish basic facts against Boeing, allowing the court to leverage the work of a relatively unbiased regulator.

While these benefits seem clear, costs also abound. We may worry, for instance, about empowering foreign regulators that have their own political agendas. Europeans, for one, may be protectionist against American tech companies. This could promote inefficient overregulation of activity that U.S. regulators have deemed appropriate. Foreign regulation could also chill essential domestic innovation. What if the FDA approves a COVID vaccine but private plaintiffs sue the manufacturer based on adverse reports in Japan? In a nightmare scenario, companies in the United States would worry not only about complying with America’s sprawling regulations, but also about litigants trawling foreign countries for regulatory support.

Because it shows both promise but also risks, I recommend a better way to control the use of foreign regulations: Whenever a plaintiff proposes to use a foreign regulatory finding, courts should solicit the opinions of our domestic regulators. These opinions would help courts determine whether foreign regulations are compatible with America’s regulatory regimes. However, agency opinions would not bind courts. Indeed, judges should take these opinions with a grain of salt and be wary of domestic regulatory capture. Even if agencies are unwilling to offer opinions, asking plaintiffs to give notice of their intent to use a foreign regulatory finding would alert domestic regulators of areas where they may be underperforming.

As traditional channels of transnational coordination die out, private parties, courts, and regulators are searching for new ways to promote transnational convergence. Both the Brussels Effect and the phenomenon of regulatory importation are examples of where the legal international order is heading.

Chanel / EUIPO - Huawei Technologies (Représentation d'un cercle contenant deux courbes entrelacées)
Propriété intellectuelle et industrielle
Le Tribunal rejette le recours de Chanel contre l’enregistrement d’une marque de Huawei au motif que les marques figuratives en cause ne sont pas similaires