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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).

Following the adoption of the Judgments Convention, on 2 July 2019, the Hague Conference on Private International Law has resumed its exploratory work on the possible elaboration of an instrument dealing with jurisdiction in civil and commercial matters (the Jurisdiction Project).

From 18 to 21 February 2020, the Experts’ Group set up for this purpose met in the Hague.

The Group was pleased with the progress made and concluded that matters relating to jurisdiction, including parallel proceedings, warrant further work and study.

The Experts’ Group has recommended to the Council on General Affairs and Policy, which will meet form 3 to 6 Mars 2020, that the Group continue its work.

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.

Triggered by recent events, notably the Dieselgate scandal, collective redress is now back on the EU civil justice agenda (see here). It is also the subject matter of requests for preliminary rulings addressed to the CJEU (see, concerning a situation with cross-border implications, the currently pending case C-709/19, Vereniging van Effectenbezitters).

A conference on the topic, organised by the Max Planck Institute Luxembourg for Procedural Law in cooperation with ERA – Academy of European Law, will take place on 16 and 17 April 2020 in Trier.

The conference will: introduce the proposed EU Directive on representative action; provide a platform for debate on topical issues of this key Directive; analyse major case law of the CJEU and national Supreme Courts on collective redress; look at the mismatch of EU law and collective redress; present the most recent hands-on experience with collective redress; debate funding issues, namely contingency fees and third-party funding.

The event is chiefly meant for legal practitioners specialised in the field of consumer law and policy, litigators involved in mass damage cases, representatives of business and consumer organisations, ministry officials, and academics.

For more information please see here.

In [2020] UKUT 0001 (TCC) Devon Waste Management, Biffa and Veolia v Inland Revenue, the tax and chancery chamber of the Upper Tribunal discussed the classification of ‘fluff’ as waste. The fluff at issue is not the type one may find in one’s pockets (or, dare I say, belly button). Rather, the “black bag” waste material that is disposed of at landfill sites and used by operators as a geomembrane liner and geotextile protection layer.

As Constantine Christofi at RPC reports, (see also UKUT at 22) the first tier tribunal – FTT had earlier found that that the use made of the material disposed of was only an indicator of whether there was an intention to discard the material, and that use was not conclusive in determining whether it was discarded. In the view of the FTT, the use of such material as a protective layer was not sufficient to negate an intention to discard it as it was destined for landfill in any event and because there was no physical difference between that material and the other general waste disposed of at the landfill sites. The FTT therefore held that the disposal of the waste was a taxable disposal by way of landfill: not everything that could be characterised as “use” was sufficient to negate an intention to discard.

The FTT had (UKUT does not at all) considered EU law precedent. UKUT relied on English authority and overturned the FTT’s finding on the basis of the FTT having fallen into the “once waste, always waste” trap (at 74). In deciding like this, UKUT itself in my view may have fallen into the alternative  ‘once someone’s waste not that of another’ trap. At 52: ‘An owner of material does not discard it, within the meaning of the statutory provisions, if he keeps and uses it for his own purposes’. Making use of materials for the site operator’s purposes connected with regulatory compliance, when they are deposited in the cell, is use that is necessarily inconsistent with an intention to discard the materials.

This arguably is the kind of single criterion test which when it comes to (EU and UK) waste law has been rejected.

Geert.

 

 

[2020] EWHC 93 (Fam) MM v NA is a great primer for family law conflict of laws. Roberts J discussed formal validity (subject under English PIL to lex loci celebrationis, as is the case in many jurisdictions); ‘material” aka ‘essential’ validity aka capacity (in the common law subject to lex domiciliae: the domiciliary laws of the individual parties at the time of the marriage. Note that in the civil law this is often subject instead to lex patriae); finally: recognition, which here was complicated for Somaliland is not a State recognised by the UK. Recognition was granted. Geert.

On 29 January 2020, the Rechtbank Rotterdam (a Dutch court of first instance) ruled on the law applicable to claims by investors against the Brazilian company Petrobas. The case concerns the long-disputed localisation of financial or economic loss under Article 4(1) of the Rome II Regulation on the law applicable to non-contractual obligations. The Dutch court has added a new piece to the puzzle by adopting a market-based approach.

Background

The claims of the investors are related to the so-called Petrolāo scandal (Portuguese for “big oil”, also known as “operation car wash” because it was first exposed by the owner of a car wash service with money exchange), which has shattered Latin America and involves well-known figures, such as the former Brazilian president Lula da Silva.

The allegations centre on money laundering and endemic corruption in Petrobas, which has led to a steep fall in its share price. The investors try to recoup their corresponding losses. The litigation has a global dimension given that Petrobas’ securities are listed around the world, including in Argentina, Germany, Luxembourg, Spain, and the United States (in the form of American Depository Receipts – ADR).

Procedure

The proceedings before the Rechtbank Rotterdam had been preceded by litigation in the US, where the District Court for the Southern District of New York threw out the claims of investors who had bought securities listed outside the United States as early as 2015. After that, a Dutch foundation (“stichting“) was created to pursue the claims of these investors in the Netherlands. No Petrobas shares were traded there: The choice of venue was entirely attributable to the favourable attitude of the Dutch legal system towards collective actions. By a decision of 19 September 2018, the Rechtbank Rotterdam accepted international jurisdiction over the foundation’s claim against Petrobas. Now it had to decide over the applicable law to the claims of the investors’ litigation vehicle.

Application of Dutch law

The facts underlying the claim stretched over a period of ten years (2004-2014). Due to the inapplicability of the Rome II Regulation to events before 12 January 2009 (see Articles 31 and 32 and the CJEU decision in Homawoo), these were submitted to the Dutch Private International Law, more precisely to the Dutch Act on Conflict of Laws for Torts (Wet Conflictenrecht Onrechtmatige Daad – WCOD).

As Article 3(1) of WCOD refers to the place where the unlawful conduct occurred, the Rotterdam court ruled that Brazilian law applies to the entirety of the facts occurring before 12 January 2009.

Application of the Rome II Regulation

Events occurring on or after 12 January 2009 are subject to the Rome II Regulation. To determine the applicable law, the Dutch court looked to Article 4 of Rome II, the first paragraph of which refers to the country in which the damage occurs. Thus, the court was facing the well-known problem of locating purely economic loss.

Case law of the CJEU (Kolassa and Universal Music)

The court reviewed two decisions of the CJEU in Kolassa and Universal Music (leaving aside Löber). These cases concerned jurisdiction under the Brussels I bis Regulation but had to be consulted as well under the Rome II Regulation under the paradigm of parallel interpretation (see Recital 7 of Rome II).

In Kolassa, the CJEU had to determine the place where the damage occurs in case of investments made on the basis of a misleading prospectus. The CJEU had ruled that the damage occurred at the place of establishment of the bank managing the account from which the investor has payed the securities.

However, the Rotterdam court saw the importance of Kolassa as being severely limited by the decision in Universal Music. In the latter case, the court had held that the Kolossa decision was made in the specific context which gave rise to that judgment and that purely financial damage which occurs directly in the applicant’s bank account cannot, in itself, be qualified as a relevant connecting factor (CJEU, Universal Music, margin nos 37 and 38).

Market-Based Approach

The Rotterdam court in Petrobas instead preferred a completely different approach. In its view, the closest connection of the claim is with the place where the securities acquired by the investors are listed and traded offered. In the opinion of the court, it was there that the investors suffered property damage because their assets were directly affected by an unlawful act. The application of the law in force at this place would also serve the dual objectives of certainty and predictability because the law so identified would be foreseeable for both the issuer and the investors of the securities.

This “market-based theory” has been discussed for quite some time and enjoys strong support in the literature (see e.g. T Arons, (2008) Nederlands Internationaal Privaatrecht 481, 486; H Kronke, (2000) 286 Recueil des cours 245, 308-12; F Garcimartín Alférez, (2011) Law and Financial Markets Review 449, 453; Sarah Sánchez Fernández, El folleto en las ofertas públicas de venta de valores negociables (OPV) y responsabilidad civil: ley aplicable (La Ley, Madrid: 2015, p. 330–339)).

Evaluation

The market theory’s advantage is that it concentrates the applicable law in one country or – in case of dual listings – in a few jurisdictions. This is especially important in case of collective actions, which would be utterly unmanageable if each claim were governed by the law of the place of the investor’s bank account. While the market-based approach is clearly preferable from a policy perspective, it is less clear whether it can be justified under Art 4(1) Rome II, at least in its current interpretation by the CJEU.

First, it is doubtful whether the investors really suffer direct loss at the place where the securities are listed or traded. Investors usually do not purchase their securities directly on the exchange, but through intermediaries. It is also not sure that the sell them at the exchange after suffering loss – they can equally decide to keep them. The connection to the market where the securities are traded is therefore a more abstract one.

Second, it seems that the Rechtbank Rotterdam overly restricts the importance of the Kolassa decision. After all, this judgment arose from a case of wrong capital markets disclosure, which is  much more similar to the subject matter of Petrobas than the fact pattern in Universal Music, which concerned a failed calculation in a precontractual negotiation. Moreover, in both Kolassa and Petrobas, the investors had voluntarily paid the price of the securities, which afterwards declined in value, while in Universal Music the wrong information tainted the payment by the victim (on this point, see Johannes Ungerer, 24 (2017) Maastricht Journal of European and Comparative Law 448, 452).

In Kolassa, the CJEU decided implicitly against the market-based theory by ruling in favour of the localisation of the invidividual investor’s loss. The reasoning in Universal Music is not different on that point. The Rotterdam Rechtbank would therefore have done well to submit a question for a preliminary ruling, rather than simply trust its own opinion. Such a reference would have helped clarify the authorities of the CJEU in this currently uncertain area of law.

Applying Article 4(1) of Rome II has the further downside that the exception of Article 4(2) of Rome II must be respected, which results in the application of a different law to the claims of those parties that are domiciled in the same country as the defendant (in the case at hand: Brazilian investors). This illogical result could have been avoided by adopting the market theory under the escape clause (Article 4(3) of Rome II). Such an approach would however have its own problems because it could be seen as contradicting the need for a restrictive interpretation of the escape clause.

Conclusion

Overall, the market-based solution suggested by the Rechtbank Rotterdam could be a useful innovation for locating purely economic loss under Rome II. It would have been interesting to see how the CJEU will position itself in this respect. Unfortunately, the court has missed the opportunity to submit a reference for a preliminary ruling. Perhaps a recent submission by the Hoge Raad in the case VEB v BP concerning investor claims under Article 7(2) of Brussels I bis will bring some clarification for the Rome II Regulation as well.

La CEDH condamne la France en raison de l’absence de motivation du rejet d’une demande de question préjudicielle à la CJUE : la formule utilisée par la Cour de cassation ne permet pas d’établir laquelle des trois hypothèses prévues par l’arrêt Cilfit fonde ce rejet, en violation de l’article 6, § 1, de la Convention européenne.

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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.

Thank you Huib Berendschot for alerting me to a CJEU judgment which had escaped me. In C-678/18 Procureur Generaal bij de Hoge Raad der Nederlanden (Re: Spin Master Ltd) at issue is Regulation 6/2002 on Community designs.

The Regulation provides among others (Article 81) that Community design courts (as appointed in the individual jurisdictions) have exclusive jurisdiction for infringement actions. At issue was whether Member States may extend the exclusivity to provisional measures (Article 90). The Netherlands had done so, however as Huib explains more extensively, the CJEU has now given speed at the level of provisional measures, priority over specialisation: at 41: ‘ whilst the pursuit of that objective of uniform interpretation is entirely justified in the case of court proceedings the substance of which concerns infringement or invalidity actions, the EU legislature also pointed out, in recital 29 of Regulation No 6/2002, that the exercise of the rights conferred by a design must be enforced in an efficient manner throughout the territory of the European Union. The EU legislature was therefore able to ensure that, in the case of requests for provisional measures, including protective measures, concerning infringement or invalidity, the requirements of proximity and efficiency should prevail over the objective of specialisation.’

A most interesting judgment.

Geert.