Droit international général

The post below was written by Adrian Briggs QC, who is Professor of Private International Law at the University of Oxford. It is the second contribution to the EAPIL online symposium on the ruling of the Court of Justice in the case of Wikingerhof v. Booking (the first one, by Matthias Lehmann, appeared earlier today and can be found here).

Other contributions will follow in the coming days. Readers are encouraged to share their views by making comments to the posts. Those wishing to submit longer contributions for publication are invited to get in touch with the managing editor of the blog, Pietro Franzina, at pietro.franzina@unicatt.it.

The late, great, F A Mann was sometime heard to refer, in a wry way which one could never quite interpret, to ‘common law pragmatism’. It has served us well; and it provides a vantage point for an assessment of the decision in C-59/19 Wikingerhof GmbH & Co KG v Booking.com BV EU:C:2020:950. Those looking for theory will, no doubt, find it elsewhere. The observations sketched out below simply seek to explain why the decision of the Grand Chamber is, as a matter of practical law, a disaster.

Where a claim is raised between parties who have chosen to place themselves within the ties of a voluntary relationship, and something goes wrong, the claim which results may be seen as an incident of that relationship which should be subject to jurisdictional rules designed for disputes arising within that relationship. Though in the Brussels/Lugano context this is seen and understood most clearly in the context of insurance, and consumer and employment contracts, it was also understood, with brilliant clarity by Darmon A-G in 189/87 Kalfelis. Spurning his advice, the Court in that case preferred to describe a virtual line between claims treated as contractual and those allocated to the special jurisdiction for tort and delict. This might have meant that a non-contractual claim could, in principle at least, be raised between contracting parties; and the seeds of trouble were thereby sown. A narrow question mesmerised the English, argued endlessly about what to do about claims based on unjust enrichment; but the deeper question was when a claim based on an obligation owed by one contracting party to another might be held, for the purpose of special jurisdiction, not to be a matter relating to a contract. A serviceable answer, and perhaps the only sensible answer, was eventually given by the decision in C-548/12 Brogsitter, which in material part observed that

It is apparent from the order for reference that the parties to the main proceedings are bound by a contract. However, the mere fact that one contracting party brings a civil liability claim against the other is not sufficient to consider that the claim concerns ‘matters relating to a contract’ within the meaning of Article 5(1)(a) of Regulation No 44/2001. That is the case only where the conduct complained of may be considered a breach of contract, which may be established by taking into account the purpose of the contract. That will a priori be the case where the interpretation of the contract which links the defendant to the applicant is indispensable to establish the lawful or, on the contrary, unlawful nature of the conduct complained of against the former by the latter. It is therefore for the referring court to determine whether the purpose of the claims brought by the applicant in the case in the main proceedings is to seek damages, the legal basis for which can reasonably be regarded as a breach of the rights and obligations set out in the contract which binds the parties in the main proceedings, which would make its taking into account indispensable in deciding the action. (italics added)

In other words, if the substance of the complaint could be said to have broken the contract to which the parties had bound themselves, special jurisdiction in the matter was contractual. It was a clear rule even though, as it now seems, the casual, justificatory, reference to the contract as indispensable gave dissenters something to make mischief with. In the meantime, the Court in C-47/14 Holterman simply copied this part of Brogsitter into a judgment principally concerned to maintain the integrity of Section 5 of Title/Chapter II. As well it might: the opportunity for an unscrupulous employer to strip the employee of the protection provided to him by accusing him of being a tortfeasor/thief rather than a contract-breaker, all the while denying that the employment contract needed to be referred to for anything other than data, was plain and obvious and quite, quite wrong. At this point we might have hoped for a period of stability; it was not to be. An unduly judgmental Opinion in C-603/17 Bosworth seemed unhappy with the idea that powerful office holders accused of fraud could derive any benefit from Section 5, but the idea that an employee might be deprived of his shield by a bare accusation of fraud was not underwritten by the Court which otherwise left the issue well alone.

But after another regrettable Opinion, and the calamitous judgment which this time swallowed it whole, the clear rule in Brogsitter, and the foundation of Kalfelis, has been stood on its head. It now appears to be the law that if the complaint may be framed or pleaded as a tort, it may by this means be excluded from the special jurisdiction rule for matters relating to a contract. According to the Court in C-59/19 Wickingerhof (and lightly editing the judgment for ease of reading):

Where the applicant relies on rules of liability in tort, delict or quasi-delict, namely breach of an obligation imposed by law, and where it does not appear indispensable to examine the content of the contract concluded with the defendant in order to assess whether the conduct of which the latter is accused is lawful or unlawful, since that obligation applies to the defendant independently of that contract, the cause of the action is a matter relating to tort, delict or quasi-delict. Wikingerhof relies on an infringement of German competition law, which lays down a general prohibition of abuse of a dominant position, independently of any contract or other voluntary commitment. Specifically, Wikingerhof takes the view that it had no choice but to conclude the contract at issue and to suffer the effect of subsequent amendments to Booking.com’s general terms and conditions by reason of the latter’s strong position on the relevant market, even though certain of Booking.com’s practices are unfair. Thus, the legal issue at the heart of the case in the main proceedings is whether Booking.com committed an abuse of a dominant position within the meaning of German competition law. As the Advocate General stated in points 122 and 123 of his Opinion, in order to determine whether the practices complained of against Booking.com are lawful or unlawful in the light of that law, it is not indispensable to interpret the contract between the parties to the main proceedings, such interpretation being necessary, at most, in order to establish that those practices actually occur.

Those who look to the jurisprudence of the Court for answers rather than distracted theorising will rightly despair at this bouleversement. Even if one leaves aside the damage which this new approach would do were it allowed to infect Sections 3, 4 and 5 of Title/Chapter II, how is it supposed to work in common or garden cases of civil liability in which – as in Brogsitter – the claim may plausibly be pleaded by reference to contractual as well as by other-than-contractual duties ? From an English perspective, a number of cases come quickly to mind. Consider (1) the electrician who rewires a piece of equipment consigned to him for repair so negligently that it electrocutes me when I plug it in; (2) the banker, who provides a credit reference on a party with whom I am proposing to deal, who has not checked his records and so gives me bad advice; (3) the consultant who works with me to develop a new commercial opportunity but who purloins my confidential information to exploit it on his own account and at my expense; (4) the solicitor who abstracts funds which he held on my account; (5) the Uber driver who injures his passenger when he jumps a red light; (6) the doctor in private practice who molests his patient when she is on the examination table; (7) the fraudster who by deceit induces another to enter into a contract and that other, rather than rescind, sues for damages which have the same economic effect as rescission would have; (8) the person who by negligent misrepresentation induces another to enter a contract, with the same consequences as in (7); (9) the individual who by duress, or the unconscionable exercise of undue influence, causes the victim to conclude a contract with him or with another; and (10) any defendant who pleads in defence to a claim framed in tort that the parties made a contractual promise that the claim would not be brought. How many of these complaints are matters not relating to a contract ?

It might be said that in each case the wrong done was committed by a person who, in doing what he did or failed to do, broke the contract to which he had bound himself. It may also be said that (1) if my son had been the first to use the equipment he would be entitled to complain of the electrician’s negligence; (2) that if the applicant had not paid for the credit reference he would still be entitled to sue the banker for breach of the duty of care; (3) the misuse of confidential information is an equitable wrong, no matter how one comes by it; (4) fraud is fraud and theft is theft and though employment is the context it is not the cause of action; cases (5) and (6) speak for themselves; as to (7) and (8), the synergy of contract, tort, and equity as a means of dealing with pre-contractual misrepresentation means that they cannot now be pulled apart; in (9) the contract will be voidable, with an alternative claim for compensation being only doubtful; and (10) would appear to be the tip of an iceberg, for it happens all over the place. Are we now supposed to say that none of these falls within the special jurisdiction for matters relating to a contract because the duties owed and broken by the defendant arise from the general law and the contractual setting is no more than that ? That the contract is the stage but not the play ? Or is the answer – surely worse – that some do, or – surely worst – that it all depends on how the self-serving claimant chooses to plead out his claim ? This last possibility would be surprising. The Court’s jurisprudence on the place where financial loss occurs (C-375/13 Kolassa, C-12/15 Universal Music, C-304/17 Löber, C-343/19 Volkswagen, among others) has been haunted by the fear, slightly unreal, that if it is routinely held to occur at the place of the bank account out of which payment is made, a claimant, possessed of several bank accounts and uncannily impressive foresight, might pave the way to a favourable special jurisdiction. It now seems that the Court has allowed itself to be lured into the very trap it had seemed to be so concerned to avoid, or – perhaps – into an even bigger one.

One turns to examine the proposition that it is different if it is ‘indispensable’ to look to the contract. It is hard to see that this has any sensible meaning. Contracts contain all sorts of things in addition to the express promises each side makes to the other. They may make provision for the implication of terms. They may try to prevent the implication of terms: entire agreement clauses, no oral modification clauses, and so on. They may define performance obligations directly, or by the subtle chiaroscuro of express promise and exclusion clause: if liability for X is wholly excluded, there can hardly be said to be a duty to do X in the first place. They may limit the liability which would otherwise arise, or restrict the circumstances in which, or grounds upon which, a complaint may be made. They may incorporate terms from another instrument, or exclude certain statutory effects which might otherwise apply. They may provide for acts to be permitted if payment is made, such as the early termination of an agency. They may provide that a claim will not be brought in tort but that, for example, a claimant will accept a payment by way of compensation or compromise: in short, they may do all manner of things. The answer to the question whether it is indispensable to look into the contract is, surely, that it is always necessary: the contract may not add to the facts and matters in dispute, but save in the cases in which it is admitted before the writ is served, this cannot be known until one has looked. Contracts, and their interpretation, can be very complex and it is absurd to say that there is no need to look into the contract before one has looked into it. Stand, if only for an unhappy moment, in the shoes of the lawyer who advised the client that she had a case in tort and who, when asked whether he had looked into the contract to see what it might have said, says that he didn’t think there was any need to.

Granted, in Wikingerhof, it would have been a surprise to find an express term excluding any liability for abuse by Booking.com of its dominant position in the market. It may have felt odd to suggest that it was advisable, still less indispensable, to read through the contract to check; but one never knows, and this provides no basis for sound conclusion; and in any event, abuse of a dominant position is only a particular version of economic duress or undue influence, both of which lie right in the middle of the contractual mainstream. If Wikingerhof GmbH had been asked whether it considered Booking.com to have or not to have broken the contract, or unlawfully coerced the surrender or contractual rights, it could only have answered in the affirmative, albeit that it may have preferred not to say so. The defendant had, by the very conduct complained of, broken or wrongfully interfered with its contract with the claimant, yet the matter was not one relating to a contract. No matter how hard one rubs one’s eyes, this still looks wrong.

It may be asked whether the unspoken aim of the judgment in Wikingerhof was to assist the German claimant by finding a way for it to sue in the place in which it felt most comfortable; to ‘protect’ the weaker party, the vulnerable victim of a dominant abuser, as it were. One hopes that no such thought was present in the curial mind, for accusations of abuse, of fraud, are only ever accusations, and findings of abuse were many months away. And there is no little irony in the fact that the decision actually improves the jurisdictional position of the company which is in a position to abuse its dominant position. When it gets wind of the fact that a victim is about to launch proceedings, the dominant abuser will be able to rely on Wikingerhof and on C-133/11 Folien Fischer to bring proceedings, in the place of the event giving rise to the alleged loss, for a declaration that it committed no wrong. Worse, unscrupulous employers (we have no need to name names), already immune to the discipline of anti-suit injunctions, will have a new spring in their step. It is not easy to understand why this should be the way the law works.

The question framed by the judgment in Brogsitter was easy to understand and to answer: has anyone teaching the subject ever found that his or her students struggled with it ? Has anyone advising a client needed to spend anxious hours in wrestling with it ? One hopes not. What is proposed to replace it – has replaced it, if we have to accept that the damage has been done – will require us to go back over the vast range of overlapping claims and unclaims, of complaints which are, as a matter of analysis, ‘not only a simple breach of contract, but also of another obligation’ cases, and develop the science which will tell is when reference to a contract is ‘indispensable’ in order to settle the question of special jurisdiction. Brexit, Covid, and now Wikingerhof. What a wretched year. We are only one horse short of an Apocalypse.

First Part https://fb.watch/2a8DGPRMtc/ (HCCH); https://fb.watch/2a8XU-EuX6/  (ASADIP)

Second Part https://fb.watch/2a8Bmy347e/ (HCCH); https://fb.watch/2a8VDZCcPL/ (ASADIP)

 

The EAPIL blog hosts an online symposium on the ruling of the Court of Justice in the case of Wikingerhof v. Booking.com. The first contribution to the symposium, which is found below, is by Matthias Lehmann, who is Professor of Private International Law at the University of Vienna (as well as an editor of this blog).

Other contributions will follow (the next one will be out later today). Readers are encouraged to share their views by making comments to the posts. Those wishing to submit longer contributions for publication are invited to get in touch with the managing editor of the blog, Pietro Franzina, at pietro.franzina@unicatt.it.

In its judgment dated 24 November 2020 in Wikingerhof, the CJEU has recalibrated the relation between the heads of jurisdiction for contracts (Article 7(1) Brussels I bis Regulation) and for torts / delicts (Article 7(2)).

Facts

A hotel sued booking.com in Germany for abuse of a dominant position. The hotel alleged having been strong-armed by the booking platform into an unfavourable contract.

Booking.com denied the German court’s jurisdiction over the claim, citing a choice-of-forum clause in the contract in favour of a Dutch court. This clause was however held to be invalid by the referring German Federal Court.

If the case fell under the head of jurisdiction for torts/delicts in Art. 7(2) Brussels Ibis, German courts could have jurisdiction given that the harmful event could be said to have occurred in Germany. In contrast, if the case concerned a contractual claim in the sense of Art. 7(1) Brussels Ibis, the jurisdiction of the German courts would have been more doubtful, as it was not sure that the contract between Wikingerhof and booking.com was to be performed in Germany.

Issue

The legal issue was therefore whether an alleged abuse of a dominant position that consists in forcing another person into an unfavorable contract is tortious/delictual or contractual in nature.

Holding and Rationale

The CJEU held the claim concerned a tort/delict matter. It cites its previous case law on the relation between the jurisdiction for contractual and tort claims, in particular the Kalfelis and the Brogistter case. In Kalfelis, the court had ruled that both heads of jurisdiction were mutually exclusive. In Brogsitter, the CJEU had held that a case is contractual in nature “where the interpretation of the contract … is indispensable to establish the lawful or, on the contrary, unlawful nature of the conduct complained of” (Brogsitter, para 25).

According to the CJEU in Wikingerhof, the interpretation of the contract was not indispensable to establish the unlawful nature of booking.com’s behaviour. True, the abuse of a dominant position resulted from the unfavourable clauses of the contract. Yet the CJEU highlights that the interpretation of the clauses was necessary only to establish the existence of an abuse. In other words, the contract is needed as factual evidence, not as a legal standard. The Advocate General basically states the same when he calls the interpretation of the contract a “preliminary question” (Wikingerhof, para 124).

Assessment

After the CJEU judgment in Brogsitter, one could have feared that the head of jurisdiction for contracts would be dominated by that for torts. The new decision in Wikingerhof reestablishes the equilibrium between the two. It clarifies that Article 7(2) Brussels I bis applies in cases of abuse of a dominant position, even those made by the conclusion of an unfavourable contract.

Indeed, violations of competition law are typical torts. It would be ill-advised to force the victim of such uncompetitive behaviour to sue at the place of performance foreseen in the contract because it is precisely this contract about which the victim complaints. The fact that the victim only pleads an abuse does not mean that one could disregard its complaint: For the purpose of establishing jurisdiction, the standard of proof has never been the same as that which applies for the merits of the case. It is for the court at the alleged place of abuse to find out whether the complaint is justified or not.

The new judgment in Wikingerhof does not break with the Brogsitter ruling, but is actually compatible with the latter. According to Brogsitter, a case is contractual in nature where the contractual provisions determine the outcome of the claim. Wikingerhof adds that this is only true where the contractual provisions are used as a normative standard, and not as factual proof of competitive misbehaviour. The delineation may be difficult to understand, but it is nonetheless necessary and reasonable.

The Italian publisher ESI has recently published a book titled EU Regulations 650/2012, 1103 and 1104/2016: Cross-Border Families, International Successions, Mediation Issues and New Financial Assets, edited by Sara Landini (University of Florence).

The papers, written in English, Italian, Portuguese and Spanish, address various issues relating to the Succession Regulation, the Matrimonial Property Regimes Regulation and the Regulation on the Property Consequences of Registered Partnership, notably as regards agreements between spouses and partners, agreements as to succession, forced heirship, succession to cryptocurrencies and mediation in cross-border succession and marital property cases.

The purpose of the book is to disseminate the results of the Goineu Plus project (Integration, migration, transnational relationships. Governing inheritance statutes after the entry into force of EU succession regulation), funded by the European Union.

The table of contents of the book can be found here. For more information, see here.

December 2020 will be quiet at the Court (regarding private international law cases).

The judgment in C-774/19 Personal Exchange International will be delivered (6th Chamber: Bay Larsen, Safjan, Jääskinen; no opinion, no hearing) on Thursday 10. The question was referred on September 5, 2019, by the Vrhovno sodišče Republike Slovenije (Slovenia):

Must Article 15(1) of Regulation No 44/2001 be interpreted as meaning that an online poker playing contract, concluded remotely over the internet by an individual with a foreign operator of online games and subject to that operator’s general terms and conditions, can also be classified as a contract concluded by a consumer for a purpose which can be regarded as being outside his trade or profession, where that individual has, for several years, lived on the income thus obtained or the winnings from playing poker, even though he has no formal registration for that type of activity and in any event does not offer that activity to third parties on the market as a paid service?

On Thursday 17, AG Campos Sánchez-Bordona’s opinion on C-709/19 Vereniging van Effectenbezitters, will be published. The Hoge Raad (the Netherlands) asked the Court to interpret once more Article 7(2) Brussels I bis in a case of patrimonial damage. The preliminary reference was lodged September 25, 2019; a hearing had been scheduled for last September, rescheduled, and eventually replaced by questions for written answer.

1.(a)  Should Article 7(2) of [the Brussels Ia 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 referred to [in paragraph 7 below] 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 (Burgerlijk Wetboek: Netherlands Civil Code) 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?

3. If courts in the Netherlands have jurisdiction on the basis of Article 7(2) of the Brussels Ia Regulation to hear the claim brought under Article 3:305a of the BW, do those courts then, on the basis of Article 7(2) of the Brussels Ia Regulation, also have international and internal territorial jurisdiction to hear all subsequent individual claims for compensation brought by investors who have suffered damage as referred to in Question 1?

4. If courts in the Netherlands as referred to in Question 3 above have international, but not internal, territorial jurisdiction to hear all individual claims for compensation brought by investors who have suffered damage as referred to in Question 1, will the internal territorial jurisdiction be determined on the basis of the place of domicile of the misled investor, the place of establishment of the bank in which that investor holds his or her personal bank account or the place of establishment of the bank in which the investment account is held, or on the basis of some other connecting factor?

The hearing in C-30/20 Volvo e.a., also on Article 7(2) of the Brussels I bis Regulation, will be held on the same day. The preliminary reference, from a commercial court in Madrid (Spain), was lodged on January 22, 2020. It will be decided by the 1st Chamber (Bonichot, Bay Larsen, Toader, Safjan, Jääskinen, with M. Safjian as reporting judge), with the opinion of the French AG, M. Richard de la Tour. At first sight, the question looks like a simple one:

Should Article 7(2) of [the Brussels I bis Regulation] be interpreted as establishing only the international jurisdiction of the courts of the Member State for the aforesaid place, meaning that the national court with territorial jurisdiction within that State is to be determined by reference to domestic rules of procedure, or should it be interpreted as a combined rule which, therefore, directly determines both international jurisdiction and national territorial jurisdiction, without any need to refer to domestic regulation?

That the reference has been allocated to a chamber of five judges, together with the fact that the AG’s view has been requested, certainly means that the decision will go beyond choosing one or the other alternative interpretations.

Directive (EU) 2020/1828 of the European Parliament and of the Council of 25 November 2020 on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC has been published today at the OJEU.

The text is attached to this post.

collective-redress-directiveDownload

Vanessa Barbé (University of Valenciennes) and Christina Koumpli (University of Avignon) are inviting abstracts on The Impact of Brexit on Fundamental Rights and Freedoms for a Virtual Symposium on 27 and 28 May 2021, followed by a publication funded by the Centre for Interdisciplinary Research in Social Sciences and Humanities (CRISS, University of Valenciennes).

Some aspects of the call for papers dealing with rights resulting from the European Civil Justice and the rights of British litigants may be of particular interest for the readers of our blog.

Brexit is a political and legal earthquake with multiple consequences: on the European institutions, on the Member States and their budgets, on international trade, on British administrations and companies, but also on individuals, British or European nationals. The exit of the United Kingdom from the European Union has got a major impact on the fundamental rights and freedoms of individuals. The aim of this symposium is to identify the rights and freedoms which are called into question and to understand the potential and proven upheavals affecting their protection.

The impact of Brexit on rights and freedoms of European originis obvious: theoretically, the United Kingdom isn’t supposed to respect European citizens’ rights, workers’ rights, social rights, European environmental rights…. any longer. Admittedly, the country was already benefiting from an adaptation of its European obligations thanks to the policy selection mechanism (opt-out). But still the United Kingdom was a full member of the Union, applying the free movement of goods, persons, services and capital, and taking part in the Union’s founding policies on the environment or education, for instance. To some extent, the UK has pledged not to wipe out all the rights and freedoms formerly created, but their upholding cannot be total, as this would mean denying Brexit itself. Therefore, it would seem that several categories of rights and freedoms may be identified: those that risk to disappear completely (in relation to citizenship, for example), those that could be maintained because they are protected by other sources (international sources, regional sources such as the European Convention on Human Rights, or British legal sources such as common law), and those the future of which is uncertain, but which might be preserved by virtue of a ‘ratchet effect’ or of the principle of non-regression of rights.

The impact of Brexit on each of the four freedoms of movement might be considered, as well as on the categories of rights resulting from the implementation of the Union’s major policies in the fields of labour law, environmental law, health, education, justice and security in particular. Proposals are expected on the right to security related to the European arrest warrant, the right to privacy with regard to the protection of personal data, the right to non-discrimination in labour law, the right to a healthy environment, the right to asylum, etc… Cross-cutting categories of rights may be identified too, such as the rights of litigants, which can be considered by studying the remedies available to British litigants before domestic courts and European institutions after Brexit. The application of the Charter of Fundamental Rights in the United Kingdom’s legal order after Brexit is also a potential source of litigation, as the Court of Justice of the Union has recognised its applicability to a certain extent despite the opt-out declaration issued by the country.

In addition to rights and freedoms of European origin, British rights and freedoms are going to be affected too. Brexit, as a victory for the opponents of Europe in the broadest sense, might be, to some extent, a new opportunity to challenge the Human Rights Act 1998, the Act transposing the European Convention on Human Rights into British law. The future of that Act is uncertain after Brexit, since its repeal is being thought about, and the United Kingdom’s participation in the Council of Europe is being deeply questioned as well.

The political rights of the British citizens are also at the heart of the exit process. It took more than three and a half years after the referendum of June 23rd, 2016 for Brexit to be legally implemented by the British Parliament. Several ad hoc laws have been passed to delimit the powers of the Government and Parliament. The Supreme Court has been asked twice to rule on constitutional disputes arising from clashes between public authorities, and has been able consequently to assert itself as the third constitutional actor in Brexit. The powers and role of the British citizen/litigant may be usefully studied.

Finally, the territorial structure of the Kingdom is under threat. The border between Northern Ireland and the Republic of Ireland is at the heart of tensions between Europe and the United Kingdom, and with it, the question of the protection of the rights and freedoms of nationals of both States. In the same way, due to Scotland’s opposition to the exit procedure, the issue of the region’s independence is once again on the agenda. The Scottish First Minister Nicola Sturgeon is strongly advocating a new referendum on the independence of the region, which Boris Johnson formally ruled out in a letter of January 14th, 2020, since any (national or local) referendum must be authorised by Westminster. Furthermore, the political rights of the Scots, and their other constitutional rights could be disrupted as well, if the relationship between the region and the rest of the Kingdom was changed.

In conclusion, the symposium aims at exploring the multiple legal consequences, for the British and for European nationals, arising from the exit of the United Kingdom from the European Union.

Proposals for contribution (qualities of the author and short CV, summary of the communication of about one page) may relate to European law, British law, but also Private/ Public International law or the national laws of the Member States of the Union, as far as their relationships with the United Kingdom are considered.

The deadline for submissions is 15 January 2021.

Proposals are expected at the following address: Vanessa.Barbe@uphf.fr.

The new Evidence and Services Regulations were published at the OJEU of 2 December 2020:

__ Regulation (EU) 2020/1783 of the European Parliament and of the Council of 25 November 2020 on cooperation between the courts of the Member States in the taking of evidence in civil or commercial matters (taking of evidence) (recast)

__ Regulation (EU) 2020/1784 of the European Parliament and of the Council of 25 November 2020 on the service in the Member States of judicial and extrajudicial documents in civil or commercial matters (service of documents) (recast)

They are attached to this post.

evidence-regulation-bisDownload service-regulation-terDownload

The European Commission adopted yesterday (2 December) “a package of initiatives to modernise the EU justice systems. The two main pillars of the new package are the Communication on the digitalisation of justice in the EU, and the new Strategy on European judicial training. This digital justice toolbox aims at further supporting Member States to move ahead their national justice systems towards the digital era and at improving EU cross-border judicial cooperation between competent authorities. As regards European judicial training, the Commission equips judges, prosecutors and justice professionals for the challenges of the 21st century, such as digitalisation. It further aims at promoting a common European judicial culture, based on the rule of law, fundamental rights and mutual trust”.

Extracts of the press release:

__ “Communication on the Digitalisation of Justice in the EU provides a toolbox to promote the use of digital tools by Member States […]:

Making digital the default option in cross-border judicial cooperation: To date, many judicial proceedings, including those that transcend borders, still take place with paper and by post. The European Commission will work on a legislative proposal to digitalise cross-border judicial cooperation procedures in civil, commercial and criminal matters. Adoption is planned for the end of 2021.

[…]

Better access to information: Electronic databases are easy to consult, they minimise costs for users and are resilient to crises. Therefore, Member States should strive to digitalise their registers and work towards their interconnections.

IT tools for cross-border cooperation: e-CODEX (e-Justice Communication via Online Data Exchange) is the main tool for secure cooperation in civil, commercial and criminal law proceedings across borders. To date, only some Member States use e-CODEX. With the adoption of today’s legislative proposal, the Commission aims to make e-CODEX the gold standard for secure digital communication in cross-border judicial proceedings in all Member States. As of 1 July 2023, the Commission entrusts this system to the Agency eu-LISA. Another digital tool is eEDES (e-evidence digital exchange system), which some Member States use to swiftly and securely exchange European Investigation Orders, mutual legal assistance requests and associated evidence in digital format instead of by post. With the legislative proposal adopted today, the Commission encourages all Member States to connect to eEDES. These IT tools will modernise EU justice systems and generate real European added-value”.

__ “EU Strategy on Judicial Training […]: by 2024, 65% of judges and prosecutors and 15% of lawyers shall be trained yearly on EU law. The strategy also supports justice professionals in the Western Balkans and in other EU partner countries, in Africa and Latin America. In addition, justice professionals will be able to look for training courses on EU law via the European Training Platform, launched today for a first test phase and planned to be fully operational in the course of 2021”.

Source: https://ec.europa.eu/commission/presscorner/detail/en/IP_20_2246

(with further documents)

On 2 December 2020, following a lengthy procedure, the Recast Service Regulation (Regulation (EU) 2020/1784 of 25 November 2020 on the service in the Member States of judicial and extrajudicial documents in civil or commercial matters) was finally published in the Official Journal of the European Union (the Position of the Council at first reading in view of the adoption of the Recast had appeared a few days earlier: see it here).

The contents of the Regulation were known, in substance, since an agreement was reached, in June 2020, between the Council and the European Parliament as a result of the trilogue consultations.

Previous posts in this blog illustrated the envisaged innovations and the challenges posed by the recast, and discussed some of the issues raised by the current rules.

The Recast will apply from 1 July 2022.

A book titled International Commercial Arbitration in the European Union, by Chukwudi Ojiegbe, has recently been published by Edward Elgar.

The blurb reads as follows:

This illuminating book contributes to knowledge on the impact of Brexit on international commercial arbitration in the EU. Entering the fray at a critical watershed in the EU’s history, Chukwudi Ojiegbe turns to the interaction of court litigation and international commercial arbitration, offering crucial insights into the future of EU law in these fields. Ojiegbe reviews a plethora of key aspects of the law that will encounter the aftermath Brexit, focusing on the implications of the mutual trust principle and the consequences for the EU exclusive competence in aspects of international commercial arbitration. He explores the principles of anti-suit injunction and other mechanisms that may be deployed by national courts and arbitral tribunals to prevent parallel court and arbitration proceedings. Advancing academic debate on the EU arbitration/litigation interface, this book suggests innovative solutions to alleviate this longstanding and seemingly intractable issue. Arriving at a time of legal uncertainty, this book offers crucial guidance for policymakers and lawyers dealing with the interaction of court litigation and international commercial arbitration in the EU, as well as academics and researchers studying contemporary EU and commercial law.

More information available here.

By Dr Sarah McKibbin

In the recent decision of RCD Holdings Ltd v LT Game International (Australia) Ltd,[1] Davis J of the Supreme Court of Queensland dismissed proceedings brought in breach of an exclusive jurisdiction clause that had been expressed in ‘an arm’s length agreement reached between commercial entities’.[2] In deciding whether to exercise his discretion not to stay or dismiss proceedings, Davis J examined whether procedural disadvantages and ‘inconvenience’ in the jurisdiction nominated in the clause were relevant considerations.

In 2013, the parties entered a contract setting up a scheme to promote a computer betting game at casinos in Melbourne, Nevada and Melbourne.[3] The contract, which was signed and to be partially performed in Australia, included a clause entitled ‘Governing Law’ by which the parties agreed that:[4]

any dispute or issue arising hereunder, including an alleged breach by any party, shall be heard, determined and resolved by an action commenced in Macau. The English language will be used in all documents.

A dispute arose and, notwithstanding the clause, the plaintiffs commenced proceedings in Queensland alleging breaches of the contract in connection with the scheme’s implementation at Crown Casino in Melbourne. The defendant, LT, entered a conditional appearance seeking to strike out the claim or, alternatively, have it stayed based on the exclusive jurisdiction clause. The plaintiffs’ submissions focused on the inconvenience of having to litigate in Macau and the perceived procedural advantages secured by LT in doing so.[5] The plaintiffs further submitted that the COVID-19 pandemic prevented them from commencing proceedings in Macau.[6]

The decision reinforces that ‘strong reasons’[7] are required to enliven the court’s discretion not to grant a stay of proceedings brought in breach of an exclusive jurisdiction clause. This reflects a fundamental policy consideration that ‘“parties who have made a contract should be kept to it”’.[8] Here, the parties differed on the circumstances relevant to the exercise of this discretion.[9] The plaintiffs relied upon the list of circumstances identified by Brandon J in The Eleftheria, which included ‘the relative convenience and expense of the trial’ and ‘[w]hether the plaintiffs would be prejudiced by having to sue in the foreign court’.[10]  As Davis J marked, subsequent English and Australian decisions have questioned the role of procedural disadvantages and inconvenience in the nominated jurisdiction, ‘at least when they are factors which should have been known at the time the exclusive jurisdiction clause was agreed.’[11]

In that respect, Davis J followed the judgment of Bell P in the recent New South Wales Court of Appeal decision of Australian Health & Nutrition Association Ltd v Hive Marketing Group,[12] which endorsed the critical observations of Allsop J in Incitec Ltd v Alkimos Shipping Corp[13] and Waller J in British Aerospace plc v Dee Howard Co.[14] In Incitec, Allsop J perceived ‘financial and forensic inconvenience’ to the party bound by the clause to be the direct consequence of the bargain entered.[15] In a similar vein, Waller J in British Aerospace considered that these factors ‘would have been eminently foreseeable at the time that [the parties] entered into the contract’.[16]

Setting issues of ‘inconvenience’ to one side, however, Davis J attached greater significance to the fact that the parties upon contracting presumably ‘considered the commercial wisdom of agreeing’ to the inclusion of the clause.[17] The factors relied upon by the plaintiffs were in existence and could have been taken into account by the parties at the time of contracting.[18] Indeed, evidence demonstrated that the courts of Macau: (1) could deal with the claim; (2) could provide the remedy sought by the plaintiffs; and (3) would accept court documents in the English language.[19] Issues of inconvenience ‘can hardly be weighty in the exercise of discretion where one party seeks to deny the other the benefit of the covenant.’[20] Finally, Davis J observed that ‘there is little, if any, evidence at all as to the impact of the pandemic upon any litigation in Macau’.[21] Yet, ‘if the pandemic developed so as to effectively prevent, or unduly frustrate’ litigation in Macau, this discretionary consideration would be taken into account together with ‘any other relevant considerations’ in a subsequent application.[22]

[1] [2020] QSC 318.

[2] Ibid, [56].

[3] Davis J observes that ‘[t]he scheme is clearly to be targeted at casinos throughout the world’: at para [7].

[4] RCD Holdings (n 1) [8].

[5] Ibid, [54].

[6] Ibid, [33].

[7] Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197, 259 (Gaudron J). Akai Pty Ltd v People’s Insurance Co Ltd (1996) 188 CLR 418, 429 (Dawson and McHugh JJ), 445 (Toohey, Gaudron and Gummow JJ).

[8] Ibid, quoted in RCD Holdings (n 1) [57].

[9] Ibid, [58].

[10] Ibid.

[11] See, eg, British Aerospace plc v Dee Howard Co [1993] 1 Lloyd’s Rep 368; Incitec Ltd v Alkimos Shipping Corp (2004) 138 FCR 496, 506; Australian Health & Nutrition Association Ltd v Hive Marketing Group Pty Ltd (2019) 99 NSWLR 419.

[12] Australian Health & Nutrition (n 7).

[13] (2004) 138 FCR 496, 506 [49].

[14] [1993] 1 Lloyd’s Rep 368, 376.

[15] Incitec Ltd v Alkimos Shipping Corp (n 11) 506 [49].

[16] British Aerospace plc v Dee Howard Co (n 12) 376.

[17] RCD Holdings (n 1), [65].

[18] Ibid.

[19] Ibid, [32].

[20] Ibid, [65].

[21] Ibid, [70].

[22] Ibid.

Guest post by Ulla Liukkunen, Professor of Labour Law and Private International Law at the University of Helsinki and Director of the Finnish Center of Chinese Law and Chinese Legal Culture

The International Academy of Comparative Law launched a new open access publication in November 2020. Volume no 1 on the use of comparative law methodology in international arbitration contains articles by Emmanuel Gaillard, Sebastián Partida, Charles-Maurice Mazuy, S.I. Strong, Johannes Landbrecht, Morad El Kadmiri, Marco Torsello, Ulla Liukkunen, Alyssa King, Alexander Ferguson, Dorothée Goertz and Luis Bergolla as well as introductory remarks on the topic by the Secretary-General of the Academy, Diego P. Fernández Arroyo.

The volume no 1 is available on aidc-iacl.org/journal.

 

The article “Chinese context and complexities — comparative law and private international law facing new normativities in international commercial arbitration” was written by Ulla Liukkunen, Professor of Labour Law and Private International Law at the University of Helsinki and Director of the Finnish Center of Chinese Law and Chinese Legal Culture.

 

Professor Liukkunen examines international commercial arbitration from the perspective of Chinese developments, noting that, in global terms, the organization of cross-border dispute resolution is changing as a part of the Belt and Road Initiative (BRI) development. With the BRI, Chinese interest in international commercial arbitration has gained a new dimension as BRI promotes the expansion of Chinese dispute resolution institutions and their international competitiveness.

 

According to Liukkunen, these developments challenge the current narrative of international arbitration. She explores private international law as a framework for unfolding noteworthy characteristics of the Chinese legal system and legal culture that are present in international commercial arbitration and can be linked to an assessment of the role of the BRI in shaping the arbitration regime. A rethink of comparative methodology is proposed in order to promote an understanding of Chinese law in the arbitration process.

 

Moreover, Liukkunen argues that considerations of the Chinese private international law and arbitration regime speak for a broader comparative research perspective towards international commercial arbitration. In the international commercial arbitration frame under scrutiny, we can see the conception of party autonomy placed in a Chinese context where the state is shaping the still relatively young private international law frame for exercise of that freedom and certain institutional structures are advocated where party autonomy is placed. Chinese development underlines the connection between the legal regime of arbitration and endeavours by the state, thereby requiring assessment of party autonomy from the perspective of the regulatory framework of private international law that expresses the complex dichotomy between private and public interests.

 

 

 

 

After the successful first four online seminars on Brussels IIter last week (see previous post on Brussels IIter seminars), we have decided to add a seventh seminar to our series: Child Participation: past research results and the new rules of Brussels IIter, 17 December 2020, 14.00 – 15.15 (after the seminar on provisional measures, transfer and lis pendens, which will end at 13.45). Chair person: Laura Carpaneto, University of Genoa Francesca Maoli, University of Genoa, in collaboration with Tine Van Hof, University of Antwerp Robert Fucik, Austrian Central Authority. Please enrol if you are interested and then we will send the link for the zoom meeting. Persons who have already enrolled for any of the other six sessions can join without having to enrol again.

The facts of the 2021 Pax Moot is available (see https://paxmoot.com/the-case/)! Teams can start registering.

The 2021 Round is named after Arthur von Mehren, a giant of international procedure across the Atlantic.  2021 will mark the 15th year after his passing away. After the adoption of the 2019 Hague Convention (which might prove relevant for the case ;-)) the organisers thought it appropriate to celebrate him in this way.

The pleadings will take pace in April 2021 (the timeline and further information are available on the Pax webpage).

Following a lecture delivered in September 2020 at the Max Planck Institute for Comparative and Private International Law in Hamburg, Giesela Rühl (Humboldt University of Berlin) published a paper on SSRN – Towards a German Supply Chain Act? Comments from a Choice of Law and Comparative Perspective – analysing the project for a legislative proposal expected to shape Germany’s legislation in the field of corporate responsibility.

The project for a Supply Chain Act (Lieferkettengesetz) comes as a response to a second national survey published in July which analysed the implementation of the National Action Plan on Business and Human Rights (NAP). According to the results presented by the Federal Labour Minister Hubertus Heil and Federal International Development Minister Gerd Müller only a few companies are voluntarily taking responsibility to ensure that human rights are respected in their supply chain. Consequently, the coalition considered that the idea of a national supply chain law needs to be pursued. A hearing by the Committee for Human Rights and Humanitarian Aid of the German Bundestag that took place on 28 October 2020 under the leadership of Gyde Jensen (FDP) showed that many experts in Germany are in favour of a Supply Chain Law. Experts from business, politics and society predominantly supported the federal government’s plan for such a law, which is intended to improve compliance with human rights and environmental standards in the global environment.

As the subject remains a hot topic for the German legislator and it will have consequences beyond the German territory, Prof. Rühl’s addresses some of these relevant aspects from a private international law and comparative perspective. The abstract of the paper reads as follow:

The protection of human rights in global supply chains has become one of the most hotly debated issues in public and private (international) law. In a number of countries, including the United Kingdom, France and the Netherlands, these debates have led to the introduction of domestic human rights legislation. In other countries reform plans are under way. In Germany, for example, the federal government recently announced plans to adopt a German Supply Chain Act, which, if passed as suggested, will introduce both mandatory human rights due diligence obligations and mandatory corporate liability pro-visions. The following article takes this announcement as an opportunity to look at the idea of a German Supply Chain Act from both a choice of law and from a comparative perspective. It argues that that any such Act will necessarily be limited in both its spatial and in its substantive reach and, therefore, recommends that Germany refrains from passing national legislation – and supports the adoption of a European instrument instead.

Probably precisely because it would have been obvious, Bobek AG did not refer in the opening lines of his Opinion in C-307/19 Obala v NLB to Groundhog Day, which, following Pula Parking, this case certainly is. He did at 2 summarise why the issue, essentially on the notion of ‘civil and commercial’ under Brussels Ia and the Service Regulation 1393/2007 keeps on coming before the CJEU (this time in no less than 9 long questions):

The crux of the problem appears to be a certain double privatisation carried out by the Croatian legislature at both management and enforcement level. A matter commonly perceived in other Member States to be administrative in nature is entrusted to private entities. The subsequent enforcement of such a claim is also not designed to be a matter for the courts, but rather, at least at first instance, for notaries.

The EC had objected to quite a few questions on the basis that they engaged too much the substance of the case, which the AG disagrees with: at 31 he suggest that inevitably in conflict of laws jurisdictional advice, ‘telescopic analysis of the substance’ is needed.

On the issue of ‘civil and commercial’, Germany and Slovenia submit the origin of the power under which the contract was concluded and which is enforced in this respect that is determinant.  The applicant, the Croatian Government and the Commission take the opposite view: to them, it is not the origin of the power but rather the modalities of its exercise which represent the determinative element for identifying ‘civil and commercial matters’. It is quite extraordinary that we should still not have consensus on this after to many cases, however as I noted in my review of Buak, the divergent emphasis by different chambers of  the Court has not helped.

At 42 ff Bobek summarily revisits the case-law under BIa (he concedes at 53-54 that case-law on other instruments does not add much), concluding at 52 that the CJEU has used both the ‘subject matter’ approach and the ‘legal relationship’ approach, without expressing a preference for either.

At 59 the Advocate-General opts for the ‘legal relationship’ approach, arguing that path ‘most reliably performs the function of the figurative railroad switch point guiding the dispute from one procedural track to another in search of the ‘right’ institutional path in a Member State at the preliminary stage of jurisdiction’. That path is also the one which as I point out in my review of Buak, was followed by the Second (which includes President Lenaerts, the chair of conflict of laws at Leuven prior to my immediate predecessor, Hans van Houtte) and not the First Chamber:

The Second chamber (K. Lenaerts, A. Prechal, Toader, Rosas and Ilešič in Buak, focus on Sapir which was issued by the third Chamber, comprising at the time Toader (Rapporteur), Ilešič, Jarašiūnas, Ó Caoimh,  Fernlund. Toader and Ilešič are the common denominator with judment in BUAK. Sapir has focus also firstly on the legal relationship between the parties to the dispute, but secondly the basis and the detailed rules governing the bringing of the action (not: the to my knowledge never applied Eurocontrol criterion of ‘subject matter’ of the action).

At 66 the AG offers ‘pointers’ within the ‘nature of the legal relationship’ approach which he believes may be of assistance to any public power assessment:

‘(i) start with the legal relationship which characterises the dispute; (ii) assess it against the framework generally applicable to private parties; and (iii) establish whether the dispute arises from a unilateral exercise of public powers outside that normal private ‘reference framework’.’

which applied to the case at issue, he concludes at 87, leads to a finding of there not appearing to be an exercise of public powers.

I conclude my overview of ‘civil and commercial’ at para 2.65 of the third ed of the Handbook (forthcoming February 2021) with

the acte clair doctrine (meaning that national courts need not refer to the CJEU when the interpretation of EU law is sufficiently clear either by virtue of that law itself or following CJEU interpretation in case-law) implies that national courts by now ought to have been given plenty of markers when applying this condition of application of the Brussels I and Recast Regulation. Except of course the acte might not be that clair at all, as the above overview shows.

Bobek AG seems to have a similar end in mind: at 65: there is no unicorn, a truly autonomous interpretation of ‘civil and commercial’.

The Opinion continues with the classic themes of whether notaries are courts, and a firm opinion that leaving your car in a public parking space provokes contractual relations.

Geert.

European Private International Law, 3rd ed. 2021, paras 2.28 ff concluding at 2.65.

Groundhog day? Bobek AG this morning seems to think so: on the notion of 'civil and commercial' (and 'contract') in Brussels Ia, jurisdictional matters relating to a parking ticket enforced by notaries in Croatia. Again.
Obala v NLB https://t.co/N5aDJgTWfs pic.twitter.com/tEHROvHr4V

— Geert Van Calster (@GAVClaw) November 26, 2020

The author of this post is Franz Kaps, Lawyer at DL Piper, Frankfurt am Main.

To stop the spread of the COVID-19 (Coronavirus) pandemic governments closed ports and “non-essential businesses”, restricted travel and imposed “lockdowns” or “stay-at-home” orders. In cases where the COVID-19 pandemic or government measures disrupt commercial contracts, it is necessary to carefully analyze the state of affairs to determine the appropriate remedy. A considerable number of articles have already been written on contracts affected by the COVID-19 pandemic, and now it is time to summarize the legal situation for commercial contracts in the most important jurisdictions in a nutshell. This post therefore presents remedies for commercial contracts affected by COVID-19, under the laws of the countries whose systems are most commonly chosen to be applied to commercial contracts, and the CISG.

UK, Hong Kong, Singapore Force Majeure

Force majeure is principally a matter of contract law in the common law jurisdictions England, Hong Kong and Singapore. Whether a force majeure clause is applicable in a particular situation and its consequences depends primarily on the wording of the force majeure clause. A clause modelled, for example, on the 2020 ICC force majeure clause (long form), presumes that an epidemic is a force majeure event; pandemics such as COVID-19 are not expressly mentioned, therefore it will be for the arbitral tribunals and courts to interpret the term “epidemic” under no. 3 (e) ICC to encompass pandemics.

The burden of proof is on the party invoking the force majeure clause as defense. Such a party has to demonstrate that a force majeure event occurred and that it had the stipulated effect on the contractual performance. If a party invokes a force majeure clause in a commercial contract, it releases the party from its contractual obligations when circumstances beyond its control have prevented, hindered or delayed its performance.

In case the COVID-19 pandemic falls within the scope of the force majeure clause, parties should carefully examine whether there are other relevant contractual terms affecting the application of the clause – in particular, whether there are any requirements to notify the other party before invoking the clause.

Frustration

Besides force majeure clauses, the main common law doctrine with potential relevance to the discharge of obligations in the light of unforeseen events – like the COVID-19 pandemic – is frustration. According to it, a contract may be discharged upon the occurrence of an unforeseeable event that either renders the contractual obligation impossible or radically changes the basis upon which the contract was reached. However, it should be noted that the doctrine of frustration has a very limited scope.

Germany Impossibility

Pursuant to Section 275 German Civil Code (BGB) a party is not required to perform its obligations to the extent that performance is impossible. Section 275 German Civil Code applies not only if performance of the obligation is technically or legally impossible, but also in cases where performance is still technically and legally possible, but would require expenses and efforts which, considering the subject matter of the obligation and the requirements of good faith, would be grossly disproportionate to the creditor’s interest of performance. In addition, Section 275 German Civil Code governs temporary impediments, i. e. a claim for performance is excluded as long as performance is impossible. However, German courts respect the legal principle pacta sunt servanda and hence apply Section 275 German Civil Code narrowly, in order not to undermine the agreed contractual obligations.

Frustration of Purpose

The doctrine of “frustration of purpose” (German Störung der Geschäftsgrundlage) can be invoked in cases affected by the COVID-19 pandemic. Frustration of purpose under Section 313 German Civil Code will apply where the balance between performance and counter-performance of a contract is significantly changed in a way that was not foreseeable by the parties when the contract was concluded. Such a “frustrated contract” entitles the disadvantaged party to request the amendment of the contract. If an amendment of the contract is not possible or unreasonable, the disadvantaged party may rescind or terminate the contract. According to case law the principle of “contractual loyalty” requires a strict interpretation of Section 313 German Civil Code.

France Force Majeure

Article 1218 French Civil Code addresses the concept of force majeure. According to its Article 1218 , the debtor’s performance is prevented by a force majeure event if three cumulative criteria are met:

1. The event must be beyond the control of the debtor;
2. It must be an event which could not reasonably have been foreseen at the time of the conclusion of the contract; and
3. The effects of the event could not be avoided by appropriate measures.

The legal consequence of Article 1218 French Civil Code is that if performance of the obligation is temporarily prevented, it is suspended unless the delay justifies termination of the contract. In the event of permanent prevention, the contract is terminated by operation of law and the parties are discharged from their obligations.

Hardship

The recently introduced Article 1195 French Civil Code requires renegotiation of a contract if circumstances which were unforeseeable at the time of conclusion of the contract render performance excessively onerous for a party which had not accepted to bear that risk. If renegotiations fail, the parties may agree to terminate the contract, or request a court to revise or terminate the contract.

Switzerland

Swiss law has no statutory provision for force majeure events. In the absence of a force majeure clause in a contract, the applicable legal regime depends on whether the performance of the contract is impossible.

Pursuant to Article 119, 62 Swiss Code of Obligations, the impossibility to perform a contract – due to circumstances not attributable to the debtor – releases both parties from their obligations to perform and leads to the unwinding of the contract according to the rules of unjust enrichment.

In case the impossibility to perform the obligation lasts only for a limited time, the default provisions of Article 107 to 109 Swiss Code of Obligations apply. They provide that if one party is in default, the other party may set an appropriate time limit for the performance. If no performance is rendered during such a time limit, the other party may terminate the contract.

When the performance of a contract is not entirely impossible, but has become extremely onerous, a party may rely on the legal doctrine clausula rebus sic stantibus. It must be a situation which is not only extremely onerous but was also unforeseeable when the contract was concluded. In such circumstances, the parties may agree to amend or terminate the contract. Should one party insist that the contract remains unchanged, the other party may refer the matter before a court. If the requirement of clausula rebus sic stantibus are fulfilled, the court may order an amendment or the termination of the contract.

United States

U.S. contract law is ordinarily a matter of state law. I will focus on New York law, as it is the most commonly chosen by commercial parties to govern their contracts.

Contractual Force Majeure Clauses

Force majeure clauses are contractual provisions that may excuse a party’s non-performance when circumstances beyond the control of a party prevent performance. New York courts have held that force majeure clauses are to be interpreted in a narrow sense and that performance under a contract is ordinarily excused only if the event preventing performance is explicitly mentioned in the force majeure clause.

Subsidiary Solutions

In the absence of a force majeure clause, the common law doctrines of impossibility, impracticability and “frustration of purpose” may excuse performance.

The doctrine of impossibility excuses a party’s performance only when the destruction of the subject matter of the contract or the means of performance makes performance objectively impossible. The impossibility must be produced by an unanticipated event that could not have been foreseen or guarded against in the contract. Impossibility is therefore a narrow legal doctrine.

The doctrine of impracticability is similar to the doctrine of impossibility, but it is more flexible in its application. According to the doctrine of impracticability, a failure to perform contractual obligations is excused, if a party’s performance is made impracticable without its fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made. Courts have generally applied the doctrine of impracticability conservatively.

Frustration of purpose is a common law doctrine that excuses a party’s performance under a contract when an unforeseen event renders the contract “virtually worthless” to the affected party. Although a literal performance under the contract is still technically possible, the frustrated purpose must be so completely the basis of the contract that, as both parties understood, without it, the transaction would have made little sense. The threshold of the doctrine of frustration of purpose is high, because performance of the contract must be economically impossible.

United Nations Convention on Contracts for the International Sale of Goods (CISG)

The CISG is applicable to contracts for the sale of goods between parties who have their place of business in different states, if these states are contracting states or if the rules of private international law lead to the application of the law of a contracting state and the CISG was not expressly excluded in the contract.

Strict Liability

Contracts for the supply of goods under the CISG are governed by the strict liability of the debtor. It is therefore irrelevant for the liability of the debtor whether they are responsible for the improper performance or the non-performance of their contractual obligation.

Exemption of Liability

In order to mitigate the strict liability of the debtor, Article 79 CISG provides for an exemption from the debtor’s liability if the failure to perform any of their obligations is due to an impediment beyond their control. It is additionally required that they could not reasonably be expected to have taken the impediment into account at the time of conclusion of the contract or to have avoided or overcome the impediment or its consequences. Article 79 CISG is advantageous to the seller. If the non-performance of an obligation to deliver is based on a force majeure event, the seller is released from the obligation to perform the contract for the period of the impediment. Also, the seller is not obliged to pay damages, because the performance is prevented by the force majeure event. However, pursuant to Article 79 para. 4 CISG the seller must inform the buyer of the impediment and its effects on their ability to perform within a reasonable period of time after they have or should have become aware of the impediment. Otherwise, they are liable for damages resulting from such non-receipt. The burden of proof that a contractual obligation was not performed or was delayed as a result of the COVID-19 pandemic lies with the debtor.

International practice accepts epidemics as being beyond the debtor’s typical sphere of control. Consequently, the COVID-19 pandemic could constitute a minore ad maius an impediment beyond control according to Article 79 CISG. Whether the COVID-19 virus exempts debtors from their obligation to perform the commercial contract depends on the individual case, since it requires a causal link between the impediment and non-performance.

Takeaway

The impact the COVID-19 pandemic will have on the parties’ commercial contracts depends primary on the wording of their force majeure clause. In case of a force majeure event, the arbitral tribunals and the courts grant the terms of a commercial contract precedence over the applicable law. If a commercial contract does not contain a force majeure clause, or if does not cover pandemics, the applicable laws determine the available remedies. The remedies and requirements under the applicable law for commercial contracts affected by the COVID-19 pandemic differ. National laws have in common that legal doctrines which amend or terminate contractual agreements are narrowly construed. The underlying consideration is that arbitral tribunals and courts are only exceptionally authorized to “rewrite” the contractual obligations of the parties. It is therefore decisive whether the contractual provisions comprise a force majeure clause covering the COVID-19 pandemic. Against this backdrop parties should commercial evaluate – based on the facts of each case – their options to invoke a force majeure defense or to perform, amend, or terminate their commercial contracts.

In light of the high thresholds for a force majeure defense under the applicable law, it is essential to ensure legal certainty by including a force majeure clause in commercial contracts which clearly encompasses epidemics and pandemics. In particular, the party that would be affected by an epidemic or pandemic in the performance of its contractual obligations should assure that such events are expressly referred to in their force majeure clause, to ensure a balanced distribution of risks. Whether the situation is one of an epidemic or a pandemic should be determine by an objective criterion: a declaration by the World Health Organization would be useful to decide when the events under examination trigger the force majeure consequences.

Good starting point for future “tailor-made” force majeure clauses in commercial contracts is the balanced 2020 ICC force majeure proposal. Moreover, as in our globalized world, the next epidemic or pandemic will spread sooner or later, a lege artis force majeure clause must cover epidemics and pandemics.

Conventions & Instruments

On 2 November 2020, Jamaica deposited its instrument of accession to the HCCH 1961 Apostille Convention. It now has 119 Contracting Parties and will enter into force for Jamaica on 3 July 2021. More information is available here.

On 4 November, the Permanent Bureau was informed that on 26 October 2020, Saint Kitts & Nevis deposited its instrument of accession to the HCCH 1993 Adoption Convention. It now has 103 Contracting Parties and will enter into force for Saint Kitts & Nevis on 1 February 2021. More information is available here.

Meetings & Events

From 12 to 13 November 2020, the HCCH, together with the UNIDROIT and UNCITRAL, co-hosted the 2020 International Conference of the Judicial Policy Research Institute (Rep. of Korea) on International Commercial Litigation. A full recording of the event is available here.

From 16 to 19 November 2020, the Experts’ Group on Jurisdiction met for the fourth time, via videoconference. The meeting focused on the elements to be included on a possible future instrument on direct jurisdiction and parallel proceedings. More information is available here.

Following last month’s Roundtable on the 2019 Judgments Convention co-hosted by the HCCH and the University of Bonn (a pre-cursor to the September 2021 Conference), a full recording of the event is available here.

Publications & Documentation

On 24 November 2020, the Permanent Bureau launched the post-event publication of the inaugural edition of HCCH a|Bridged, of which the focus was the Service Convention in the Era of Electronic and Information Technology. The publication is now available for download in English only. 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.

On 29 October 2o20, the University of Bonn and the HCCH co-hosted a video roundtable on the HCCH 2019 Judgments Convention.This video roundtable explored the prospects of the Convention from a particular perspective, and this was the perspective of the relations between the EU and third states: neighbouring states, trade partners in particular, but also other states. The organisors were very happy to have received a large number of registrations from all over the world and from all areas of interest. The event was also meant to prepare the “main conference” of the organisors on the Convention, which is planned to be taking place at the University of Bonn on site on 13 and 14 September 2021. The recording of the pre-conference video roundtable is now available on the HCCH’s youtube channel as well as here.