EAPIL blog

The Covid-19 pandemic is on everybody’s mind. Around the world, countermeasures limit public life and freedom of movement, especially cross-border traffic. This raises the question to which extent Private International Law is relevant and capable of handling this new situation. Here are some provisional thoughts on the potential impact of travel bans and other emergency measures under the Rome I and II Regulation.

Transport contracts

Some countries have restricted free movement from persons coming from areas affected by the Corona virus. Austria, for instance, does not allow people coming from Italy into its territory, while the US has just banned travel from Europe with the sole exception of the UK. As a result, flights, trains and bus trips have been cancelled.

For courts in the EU (with the exception of Denmark), the law governing these transport contracts is regulated by Article 5 of the Rome I Regulation. The determination of the applicable law is quite straight forward: The fallback rule is that the law of the habitual residence of the passenger applies (Article 5(2) Rome I). The trickier question, however, is which impact the local law at the place of destination might have on the contract.

The answer for EU courts is given by Article 9 of the Rome I Regulation. The prohibition to enter the territory of a Member State certainly qualifies as an overriding mandatory rule in the sense of paragraph 1 of the provision. Should the courts of that Member State decide over the case, they would apply this provision as part of their lex fori (see Article 9(2) Rome I). The result would certainly not be very different for courts outside the EU, which would apply such provisions as part of their public policy.

The court of another Member State, for instance those of the place of departure, may give effect to the overriding mandatory rules of the state of destination because the contract is to be performed there (see Article 9(3) Rome I). In case the latter has prohibited all travel, this would render the performance of the contract unlawful in the sense of the provision. Mind that the courts of the other states have discretion whether to give effect to the travel ban (see the word “may” in Article 9(3) Rome I).

Cancelled or Postponed Events

The virus has led to the cancellation of events around the world, from congresses to concerts and soccer matches. Usually, the tickets to these events will be subject to the local law where the event takes place.

However, this is not always the case. The parties may have chosen another law (Article 3 Rome I). The consumer protection rules do not interfere with this choice, when the event takes place in a state in which the consumer does not have its habitual residence (see Article 6(4)(a) Rome I). In the absence of a choice, the law at the habitual residence of the service provider applies (Article 4(1)(b) Rome I). If it is – as usual – a corporate entity, the law at the place of its central administration governs (Article 19(1) Rome I). These laws may be replaced by that of a branch that has concluded or executed the contract (Article 19(2) Rome I).

If as a result a foreign law governs the contract, the law of the place of the event may be applied as an overriding mandatory rule under the conditions set by Article 9 of the Rome I Regulation. Insofar, the same considerations as for transport contracts apply. Where the law of the event does not call for a full cancellation, but rather for some changes, such as a postponement or the shift to another place, this law may be considered as the law of the place of performance (lex loci solutionis) under Article 12(2) of the Rome I Regulation.

Cancelled or Delayed Deliveries

Where deliveries of goods were cancelled or postponed, the solution is much the same as for events. The law of the place of performance may apply either as an overriding mandatory provision under Article 9 of the Rome I Regulation or is to be taken into account as lex loci solutionis under Article 12(2) of the same Regulation.

An interesting extension of the concept of public policy rules can be observed in China: According to a recent post on Chinese law a Chinese authority is issuing so-called force majeure certificates pretending to absolve Chinese companies from the need to fulfill contracts with foreign parties. The author assumes that courts of the People’s Republic could consider these certificates as part of public policy even in the absence of compulsory government orders.

From an EU viewpoint, the assessment is quite different. European courts apply legal concepts independently of any measures by administrative authorities. And while compulsory restrictions certainly qualify as overriding mandatory rules, the same is not true for the doctrine of force majeure, which does not meet the requirements of Art 9(1) Rome I. European courts will therefore follow this concept only where it is part of the law governing the contract, and assess independently whether its conditions are met. They can merely take into account, as a matter of fact, mandatory provisions at the place of performance if the applicable substantive law so allows (see to this effect the ruling of the Court of Justice in Nikiforidis, para 51).

Infections

It is hard to identify the source of a Corona infection, but it may not be impossible. A victim may for instance sue the operator of a foreign airport, hospital or hotel for the failure to take appropriate precautions. If both parties are privy to a contract, the law applicable to that contract will decide over the necessary measures, including duties of information and warning in the pre-contractual phase (Article 12 Rome II).

It is also possible that the parties are not contractually bound to each other. Imagine for instance a passenger of a flight suing another passenger who has neglected her infection. Which law applies? EU courts will have to search for the solution in the Rome II Regulation.

A first idea that might spring to mind is to apply Article 7 of the Rome II Regulation, which deals with environmental damages. Yet Recital 24 of the Rome II Regulation defines ‘environmental damage’ as ‘adverse change in a natural resource, such as water, land or air, impairment of a function performed by that resource for the benefit of another natural resource or the public, or impairment of the variability among living organisms’. The virus is respiratory and travels by air, but arguably, it does not change this natural resource. Its main negative effects are on the health of other individuals. While one may debate this assessment, it seems more certain that Corona does not impair fauna’s variation.

Hence the general rule of Article 4 of the Rome II Regulation applies. The first, rather curious, result is that any claim is governed by the law of the common habitual residence of the sick and the infected person (Article 4(2) Rome II). The dispute between two Italian residents on a plane from Frankfurt to Moscow would thus be governed by Italian law, unless there is a manifestly closer connection (Article 4(3) Rome II).

If the parties to the dispute reside in different states, then the law of the place where the damage occurred applies (Article 4(1) Rome II). Airplanes are considered as being part of the territory of the country where they are registered. The suit of a Swedish passenger against a Swiss resident on a flight from Stockholm to Geneva in a plane registered in Ireland would thus be governed by Irish law.

Cross-border infections, for instance by sending contaminated goods or livestock, are also governed by the law of the place of damage (Article 4(1) Rome II) or by the common habitual residence of the parties (Article 4(2) Rome II). Mind you, however, that the rules of safety and conduct at the place where the tortfeasor acted have to be taken into account (Art 17 Rome II). Thus, when infected animals are sent from Rome to Paris, the sanitary restrictions of Italian law would have to be considered by a court. But this is only the case insofar as they “appropriate”.

These results can again be influenced by overriding mandatory rules of the forum (Article 16 Rome II). Whether the court can also apply foreign overriding mandatory rules under the Rome II Regulation is subject to dispute. This should however be allowed in analogy to the possibility provided under the Rome I Regulation (Article 9(3) Rome I).

Conclusion

These considerations only concern private international law and leave out interesting questions of substantive law, such as those relating to force majeure, frustration or impossibility, which may be decided differently in each Member State. Moreover, they are merely provisional thoughts. It remains to be seen in which exact shape and form conflict of laws issues will arise from Covid-19.

The author of this post is Giovanni Chiapponi, research fellow at the MPI Luxembourg. The post is based on a presentation given at the weekly meeting of researchers of Department 1 of the MPI Luxembourg on 11 March 2020.

As the Covid-19 (corona virus) spreads out, the Italian government has taken some important measures, which have a strong impact on the structure of the internal judicial system. Thus, the Decree-Law No 11/2020 of 8 March 2020 contains extraordinary and urgent measures on the management of the judicial workload and on the internal organization of the judiciary to contrast the negative effects of the virus on the functioning of judicial activities.

Indeed, even in a period of crisis, where there are many risks at stake for the health of the population, it is important to ensure a proper administration of justice. Hence, the rationale of the decree is to guarantee an effective and efficient functioning of the judicial system.

In this regard, the decree provides for the postponement of hearings and for the suspension of time limits in civil, criminal, fiscal and military proceedings.  Consequences follow in all these fields of law, however my remarks will only focus on the consequences affecting civil matters.

According to Article 1(1), most civil hearings scheduled between the day following the entry into force of the decree (9 March 2020) and 22 March 2020 will not take place due to a mandatory postponement.

In the same way, pursuant to Article 1(2), time limits for exercising judicial acts within civil proceedings are automatically suspended for the period 9 to 22 March 2020. Where a time limit would normally begin during the period of suspension, the starting point is delayed until the end of the latter period.

Despite the urgency of the situation, some exceptional rules are provided under Article 2 of the decree. Both the mandatory postponement of hearings and the suspension of time limits do not concern some categories of proceedings that deal with urgent issues. In this regard, Article 2(2)(g) lists the following exceptions: determinations as to the adoptability of children, matters relating unaccompanied minors, the removal of minors from their family and situations of serious prejudices; matters relating to maintenance obligations; provisional measures affecting fundamental rights; decisions regarding compulsory health treatments; matters in respect of the voluntary termination of pregnancy; measures of protection from domestic violence; measures of expulsion; decision on provisional enforceability of judgments before Courts of Appeal and the Court of Cassation; all matters entailing the risk of serious prejudice to the parties.

Furthermore, Article 2(1) provides that the presidents of individual courts may adopt technical and organisational measures aimed to respond to health concerns while ensuring, as far as practical, the proper administration of justice.

The following measures, among others, may be adopted for the above purposes: purely organisational measures such as limitations to the access to, or the opening hours of, courthouses; guidelines as regards the conduct of hearings; exceptions to the publicity of hearings in civil matters; the use of IT technologies in court hearings; the postponement of non urgent hearings.

Some comments

The decree impacts on some fundamental principles of civil procedure (e.g. the right of defense, the equality of arms, the reasonable length of the proceedings) enshrined in the Italian Constitution, the Charter of Fundamental rights of the European Union and the European Convention on Human rights. It aims at ensuring a balance between the right to health and health care (recognized at a constitutional and European level by the Charter of Fundamental rights and the European Convention on Human Rights) and the rights of the parties in the context of civil proceedings.

Despite the urgency and uncertainty of the situation, it is indeed important to ensure the respect of the fundamental procedural rights of the parties. In this regard, the decree suspends limitation periods to file a claim with the court and procedural time limits for the exercise of parties’ rights in order not to undermine parties’ prerogatives. The lapse of time is “locked” and in principle, this does not entail negative consequences for the parties in the proceedings.

However, some doubts on the interpretation of the text of the decree arise. In such a technical question as time limits, clear indications are needed as regards, in particular, the calculation of time limits.

Namely, the decree refers to “time limits … within the proceedings”. Which time limits are concerned, precisely? Does the suspension of time limits apply to all pending legal disputes (including the objections against injunctions and the appeal procedure) or does it apply only to those legal disputes in which hearings were fixed in the period 9 to 22 March 2020 and that have been postponed by the decree?

For instance, if no hearing is scheduled , but the deadline to submit an appeal before the Court of Appeal expires on 11 March, is the time to appeal suspended? Arguably, the first reading should be preferred, since it allows the parties to better safeguard and protect their rights.

If the first reading were adopted, another issue would arises: how should time limits be calculated retroactively if they expire within the period of suspension? For instance, if a time limit expires on 11 March, what would be the new expiry date? The expiry date, it is argued, should be 24 March (9+2/22+2), as the suspension period is to be applied.

In the meantime, the Government’s department for the relations with the Parliament in an explanatory note delivered on 11 March has indicated that the broad interpretation suspending time limits in all pending legal disputes should apply.

However, the note has no binding effect as such and does not bridge the existing legal gap. As required by the Italian Bar Council, the Italian legislator should intervene to guarantee certainty.

As the immediate conversion of the decree into law seems to be difficult, the government may provide for an authentic interpretation of the rules at stake. This would ensure that the parties’ legitimate expectations on the proper administration of justice are not undermined or frustrated.

The foreign proceedings, it is contended, should then prevail on the ground that they were brought first. The fact that the justice system in one EU Member State has come to a stand-still cannot entail that other Member States have to stop their systems, too. That would run counter the interest of the parties.

Finally, some considerations may be made on the implications of this emergency legislation for judicial cooperation at the European level. These uncertainties on time limits will inevitably entail uncertainty in cross-border cases. As Italian procedural law applies under the lex fori principle, the parties must act in accordance with Italian procedural time limits including these extraordinary rules provided by the law decree. As issues arise for parties in the context of national proceedings, in the same way they will spill over in cross-border settings.

In this respect, it is interesting to underline that some European instruments in the field of judicial cooperation in civil matters provide for strict time limits (e.g. Article 5(3) of the Small Claims Regulation or Article 18 of the Regulation on the European Account Preservation Order).

What happens to those time limits if the Italian law applies under the lex fori principle? Are they suspended in the period 9 to 22 March according to the Law decree? In order to safeguard the rights of the parties, which are even more at risk in cross-border cases, it would be reasonable to suspend also these time limits. However, the Italian legislator is not competent to suspend time limits laid down in EU Regulations. Should the European legislator intervene?

Another key issue, which may have negative consequences in cross border cases, concerns Article 32 of the Brussels I bis Regulation, which provides for an autonomous definition of the time in which a court is deemed to be seized of a dispute. May we consider that an Italian Court is seized of a dispute during the period 9 to 22 March? The same considerations pointed out above can be reiterated: the activity of Italian courts should, in principle, be suspended, but as we are dealing with a concept laid down in a European Regulation, the Italian lawmaker cannot provide for exceptional rules applying to the Brussels I bis Regulation. This is again an open question, which shines a light on the risk that the lis pendens rule may be frustrated.

To conclude, as Covid-19 spreads out throughout the EU, the exceptional situation may lead other Member States to adopt urgent measures to contain the spread of the virus. As the system of judicial cooperation in civil matters is based on mutual trust and the application of provisions under the law of the Member State of origin, the question arises how the EU procedural law system may react to the introduction of extraordinary measures.

Judicial cooperation in civil matters, indeed, is based on the assumption that there is no state of emergency. Thus, if Member States start to introduce exceptional procedural rules in their own systems, there is the high risk that the EU procedural system would not be ready to face emergency measures. The EU should arguably allow Member States a certain degree of flexibility at least to provide exceptional rules for the urgent circumstances at stake.

Olivier Cachard and Paul Klötgen (both University of Nancy) have published a new edition of their manual of private international law.

The book is primarily a teaching tool. It is a textbook but it also includes numerous abstracts of cases, legislation and articles, as well as a glossary.

The book covers the traditional topics of jurisdiction, choice of law and foreign judgments. The focus is on French private international law, but the book often refers to sources from other jurisdictions.

More details can be found here.

The author of this post is Marlene Brosch, senior research fellow at the MPI Luxembourg.

The first advisory opinion of the European Court of Human Rights (ECtHR) under Protocol 16 to the European Convention on Human Rights (ECHR), rendered on 19 April 2019, tackled no less than the highly sensitive and controversial topic of surrogacy motherhood in the well-known Mennesson case – in particular, the recognition of the intended, non-biological mother’s legal parenthood.

The opinion from Strasbourg and the subsequent judgment of the French Court of Cassation have already triggered numerous comments and reactions (notably on this blog; see also here and here). This post aims to raise some procedural aspects of overarching interest.

From hierarchy to cooperation: the change of procedural perspective

The kick-off Mennesson case illustrates the structural change envisaged by Protocol 16 to implement human rights compliance in the Contracting States. The hierarchical approach through the condemnation of France in 2014 shifted to the cooperative, dialogical approach initiated by the Cour de Cassation through the advisory opinion request.

It should be reminded that the judicial dialogue would not have been possible in this first case if the French legislator had not paved the way, in 2016, for the re-opening of proceedings on personal status matters following a judgment of the ECtHR affirming a violation of the Convention.

In this respect, it is worth considering whether domestic rules for the re-examination of a final decision could also be interpreted as applying to advisory opinions. Could the non-binding, yet factual authority of advisory opinions lead to a review of a final domestic judgment rendered previously on the issue in question?

The role of the advisory opinion procedure within the adjudicative function of the ECtHR

The amended Rules of Procedure of the ECtHR do not explicitly clarify the processing order between individual applications under Article 34 ECHR, on the one hand, and requests for an advisory opinion under Protocol 16, on the other. However, given the nature of the questions referred (“questions of principle”), Rule 93 (2) specifies that “requests for advisory opinions shall be processed as a matter of priority […]”.

This priority is indeed crucial. The domestic proceedings are usually stayed during the advisory opinion procedure, and, in light of the fundamental rights issues involved, delays before the ECtHR may have severe impacts on the domestic case.

This priority order was precisely put into practice within the first advisory opinion procedure. A few months before the Cour de Cassation filed the request for an advisory opinion, two individual applications were lodged against France under Article 34 ECHR concerning the very same issue, i.e., the recognition of the legal parenthood of the intended, non-biological mother. The Grand Chamber delivered the advisory opinion within a record-breaking period of only six months after the Cour de Cassation had filed the request.

About half a year later, in November 2019, the joint judgment concerning the individual applications was rendered in line with the advisory opinion. This timing seems to indicate that the ECtHR includes advisory opinions in its case-law with a “leading function” to decide on identical or similar individual complaints expeditiously.

Outlook towards Luxembourg

Incidentally, the issue of parental rights and surrogacy is also occupying the CJEU. In the pending Merly case (T-505/19), a staff member of the European Parliament (EP) seeks the annulment of an EP decision refusing to grant him adequate special leave to take care of his twin children newly born via surrogacy. In C.D. (C-167/12) the ECJ tackled a similar situation concerning maternity leave for the intended mother, which was denied under EU employment directives.

However, in the pending case before the General Court, the applicant directly claims a violation of the right to respect his family life under Article 8 ECHR in conjunction with Article 14 ECHR.

Thus, further implications of the recent developments in Strasbourg remain to be seen.

In a judgment delivered on 4 March 2020, the French supreme court for private and criminal matters (Cour de cassation) accepted to apply the doctrine of renvoi in a parenthood dispute.

The proceedings were initiated by a man who claimed that he was the father of a girl born from a married woman and demanded a DNA test to establish it. The spouses opposed it.

While the married couple resided with the child in France, the mother was a German national couple and the husband was an Italian and an Australian national. The child was born in Germany.

Article 311-14 of the French civil code provides that filiation is governed by the law of the nationality of the mother. The claim of the alleged lover was thus, in principle, governed by German law. The spouses argued that, under German law, the claim was inadmissible, unless the plaintiff could challenge that the girl was raised as the child of the spouses.

French courts, however, found that Articles 20, 19 et 14, § 1 of the German Introductory law to the Civil Code (EGBGB) provided that, under German private international law, filiation was governed by the law of the residence of the child and the law of the effects of marriage which was the law of the common domicile of the spouses if they were of different nationalities.

Indeed, Article 20 EGBGB provides that a challenge to filiation will be admitted if the action meets the requirements of either the law of the residence of the child or the law governing the effects of marriage. In the present case, Article 20 designated French law on each ground.

From the perspective of France, there was thus a renvoi from German law.

Substance blind choice of law rule

It is the first time that the court applies the doctrine of renvoi in the field of parenthood. While the doctrine is of general application in France (and more widely in many civil law jurisdictions), there was a doubt for parenthood because many choice of law rules in the field are not substance blind. They favour one outcome, for instance by providing that one way of establishing parenthood is valid if it is accepted by one of several laws.

Article 311-14 of the French civil code is a traditional choice of law rule, using a single connecting factor to determine the applicable law. It is does not, therefore, favour any particular outcome, and can be regarded as substance blind, or “neutral”. The court expressly insisted on this feature of the relevant choice of law rule.

The court held:

3. Pursuant to Article 311-14 of the Civil Code, filiation is governed by the personal law of the mother at the time of the birth of the child.

4. This provision lays down a multilateral, neutral choice of law rule which does not exclude renvoi. 

First degree renvoi

Although the English speaking world has borrowed the term renvoi from the French, the doctrine is very different in the civil law and in the common law tradition. There are, in truth, two doctrines of renvoi in the civil law tradition, and none of them corresponds to the English double renvoi/foreign court theory.

The first doctrine is first degree renvoi. It provides that if the choice of law rule of the forum designates foreign substantive law, and the foreign choice of law rule designate the substantive law of the forum, the forum should accept the renvoi and apply the substantive law of the forum. This is what this case was about: the French choice of law rule designated German substantive law, and the German choice law rule designated French substantive law. The Cour de cassation accepted the renvoi.

Scholars have long identified that first degree renvoi may lead to the remarkable situation where two states both accepting first degree renvoi would play a game of tennis table over the border and create an endless process of designating each other’s law. In the present case, Germany does accept first degree renvoi (Rückverweisung in German), so it might well be that a German court would find that French law provides for the application of German law, and accept the renvoi from Art 311-14. If that were the case, it would follow that each court would apply its own law, instead of applying each other’s law. Quite an incentive for forum shopping.

Until recently, the Cour de cassation never cared to elaborate on the rationale of its decisions. This has changed recently. So, in the present case, the court cared to explained why renvoi should be admitted. It held:

(…) the resolution of the conflict of laws by application of German rules, which designate French law, ensures coherence of outcomes irrespective of the court seized by the application of the theory of renvoi.

Well, I am not sure about that. The purpose of first degree renvoi never was to ensure consistency of outcomes. In the present case, which involves two civil law jurisdictions which admit renvoi, the doctrine will not create any coherence of outcomes whatsoever. A French court will apply French law. A German court, if it accepts renvoi, will apply German law.

In truth, it is the second doctrine of renvoi, second degree renvoi, which aims at ensuring consistency of outcomes. Under this second doctrine, the choice of law rule of the forum designates foreign jurisdiction 1, which designates foreign jurisdiction 2, which also designates foreign jurisdiction 2. The doctrine provides that all three courts should apply the law of foreign jurisdiction 2. If this is the case, then consistency of outcomes will be ensured: all courts will apply the same substantive law.

In other words, the Cour de cassation offered the rationale of second degree renvoi to justify the application of first degree renvoi.

Wrong reasoning, right outcome?

There is, however, one case scenario where first degree renvoi can accidentally ensure consistency of outcomes. This is the case of a foreign country which would not accept renvoi.

As already mentioned, German law accepts first degree renvoi in principle. However, the relevant German choice of law rule is not substance blind. It favours one outcome, namely challenge to an existing filiation. It might be, therefore, that German law limits the operation of renvoi in this context, in order not to contradict the policy advanced by the rule.

Our German readers probably know…

Edward Elgar Publishing has just launched a book series devoted to private international law. The first book in the series is titled The Rome III Regulation – A Commentary on the Law Applicable to Divorce and Legal Separation, and has been edited by Sabine Corneloup.

The blurb reads as follows.

This comprehensive Commentary provides an in-depth, article-by-article analysis of the Rome III Regulation, the uniform rules adopted by the EU to determine the law applicable to cross-border divorce and legal separation. Written by a team of renowned experts, private international law scholars and practitioners alike will find this Commentary an incisive and useful point of reference. 

Contributors include Alexandre Boiché, Laura Carpaneto, Christelle Chalas, Sabine Corneloup, Stefano Dominelli, Cristina González Beilfuss, Susanne Lilian Gössl, Petra Hammje, Bettina Heiderhoff, Fabienne Jault-Seseke, Natalie Joubert, Thalia Kruger, Caroline Sophie Rupp and Jinske Verhellen.

More information is available here.

On 13 February 2020, the CJEU ruled again on the competence of the court to hear passenger compensation claims under the Flight Compensation Regulation regarding cancelled flights.

Facts

Flightright v Iberia concerned a three-leg journey by two passengers from Hamburg to London, then London to Madrid, and finally from Madrid to San Sebastián. The whole trip was reserved in a single booking. Iberia operated the second and the third legs and it eventually cancelled the latter. The two passengers assigned their claims for compensation to the online rights portal flightright. The latter sued Iberia at the local tribunal in Hamburg, the point of departure. The tribunal doubted its jurisdiction and asked the CJEU for a preliminary ruling.

The Issue

The case turns on the second indent of Article 7(1)(b) Brussels I bis Regulation, which gives jurisdiction in matters relating to the provision of services to the tribunal of the place “where, under the contract, the services were provided or should have been provided”. The Hamburg tribunal had been unsure whether the conditions of this head of jurisdiction were fulfilled, given that Iberia was merely operating the last leg of the flight and was (1) neither the contractual partner of the passengers; nor (2) operating a flight running to or from Hamburg, the place where the suit was brought. 

Precedent

It is settled law, following the seminal CJEU decision in Rehder, that in the case of air transport contracts, the place of performance is deemed to be located at the points of both departure and of arrival, and that the passenger can choose between the two to bring her claim.

Multistop journeys and the liability of operating carriers were the subject of the decision in Air Nostrum, which also involved flightright, but which must not be confused with the present case. In Air Nostrum, suits were brought at the point of arrival regarding problems that had occurred on the first leg of the journey. The CJEU ruled that, although the carrier operating this leg had no direct contractual obligation with the passenger, it should be regarded as fulfilling an obligation freely consented to by performing a flight for another airline.  The effect of this was that Article 7(1) Brussels I bis applied. The Court of Justice also held that a multistop journey confirmed in a single booking is to be regarded as a single service for the purposes of Article 7(1) Brussels I bis. The Court of Justice therefore concluded that the tribunal at the place of the final destination of the multistop journey had jurisdiction over the carrier operating the first leg of the flight.

In another decision, České aerolinie, a passenger had booked a combined journey with the defendant, which operated the first leg of the journey, while a non-EU carrier performed the second. The latter being significantly delayed, the passenger sued the defendant – who was not involved in the delay – at the place of departure. The CJEU ruled here that indeed the defendant could be sued there because the journey is to be considered as one service (confirming the earlier judgment in Air Nostrum) and that the place of departure is to be considered a place of performance for the whole service under Article 7(1) Brussels I bis.

The COurt’s Ruling

In flightright v Iberia, the situation was somehow the reverse of Air Nostrum: the carrier operating the last and delayed leg of a multistop flight was sued at the place of departure. Again, the Court of Justice considered that the tribunal at this place had jurisdiction over the claim under Article 7(1)(b), second indent, Brussels I bis. The CJEU considered the journey comprising three legs as one service to carry the passenger from Hamburg to San Sebastián because it was made in a single booking (para. 27 – 29). In the view of the Justices, the tribunal at the place of departure (Hamburg) has a sufficiently close connection to the dispute. Even though it related to the cancelled flight between Madrid and San Sebastián, finding this tribunal competent satisfied the objective of proximity (para. 29 – 31). This solution would also fulfil the principle of predictability, given that the applicant and the defendant both could identify the place of departure and arrival (para. 32).

Assessment

The new judgment is hardly surprising. The solution reached by the CJEU fully squares with the previous rulings. Indeed, the new judgment merely continues the same logic, the main axioms of which are as follows: (1) multistop journeys are to be regarded as one service for the purposes of Article 7 Brussels I bis where they were made in a single booking; (2) a carrier operating a leg of the journey fulfils an obligation freely consented to, even though it has no direct contractual relation with the passenger; and (3) the passenger can choose to sue such carrier at the point of departure or of arrival of the whole journey.

The novel aspect of the decision is merely that a tribunal at the place of departure can be deemed competent to hear a claim for compensation relating to the final leg of the flight. Therefore, carriers operating parts of multistep journeys may find themselves sued in a court at a place to which or from which they do not fly. One can only warn them to pay particular attention to their arrangements with other airlines and to be cautious when confirming or authorising single bookings.

The first issue of the open-access journal Cuadernos de Derecho Transnacional for 2020 is out.

It includes more than fifty papers, covering a broad range of topics, such as the use of foreign powers of attorney for the purchase of immoveable property, consumer protection, the relationship between the recast Brussels II Regulation and the Hague Convention on the protection of  children, the flow of personal data between the EU and the UK after Brexit, matrimonial property regimes under Regulation 2016/1103, and the implementation of the rules on obtaining information on bank accounts under the Regulation establishing a European Account Preservation Order.

Most of the contributions are in Spanish. The rest are in English or in Italian.

The issue can be downloaded here.

The Permanent Bureau of the Hague Conference on Private International Law is seeking two legal officers. Candidates are expected to possess, among others, two years of relevant full-time professional experience (e.g., in practice, government, academia, IGOs or NGOs). They must also be nationals of Member States of the Conference.

Duties include general assistance in various areas of the work programme of the Conference, the areas of priority being international commercial litigation / civil procedure and child support (maintenance) matters.

One-year contracts are offered, starting in May 2020.

The deadline for applications is 25 March 2020 (12.00 a.m. CET).

Further information is available here.

Johnny Hallyday, born Jean-Philippe Smet, died in 2017 age 74. Over a career of 57 years, he released more than 80 albums and gave over 3200 concerts. He was nicknamed the French Elvis, l’idole des jeunes. Over a million people filled the streets of Paris for his funeral.

Although he was known to spend a lot and to tour constantly to maintain his lifestyle, Johnny had quite some assets when he died. In addition to the royalties he would receive each year, he owned a house near Paris, a house in the French Carribean and two properties in California (one in Pacific Palisades in Los Angeles, one in Santa Monica). He also owned a number of luxury cars and motorbikes.

Children

The singer had married several times and had many affairs. In 1965, he married French singer Sylvie Vartan, with whom he had a son, David.  In the early 1980s, he dated French actress Nathalie Baye and had a daughter, Laura. David Hallyday became a singer, Laura Smet an actress (picture).

Finally, in 1996, he was married to French model Laeticia Boudou by Mayor Nicolas Sarkozy. In the 2000s, they adopted two girls, Jade and Joy.

Californian Will

In 2014, Johnny wrote several wills. In the first will, he declared that he resided at his home in Los Angeles and that he donated the entirety of his estate to his last wife Laeticia pursuant to Californian law or, should she die before or with him, to his two adopted daughters, Joy and Jade. But he then wrote a new will whereby he transferred all his assets to a trust established in the U.S. and appointed his wife as executrix of the will.

Obviously, the immediate consequence of the will was that his two first children would not receive anything from their father. This would go against one of the fundamental principle of the French law of succession, namely that each of the four children was entitled to receive 18% of the entire estate. But was French law applicable?

French Proceedings

In February 2018, David and Laura initated proceedings against Laeticia and her two adopted daughters in Nanterre, France, seeking a declaration that the (last) will of their father was null and void under French law. They also sought and obtained protective measures freezing a number of the assets in dispute.

The first issue for the French court was to decide whether it had jurisdiction under the Succession Regulation. This meant assessing where the habitual residence of the deceased at the time of his death was. Scholars have long identified that a drawback of this connecting factor is that it is very difficult to apply to artists who travel all the time and have homes in different countries. Laeticia claimed that her husband (and she and her daughters) resided habitually in Los Angeles; David and Laura that he habitually resided in France.

There is no doubt that Johnny spent a lot of time in both places. His adopted daughters were schooled at the Lycee Français of Los Angeles and, as many French stars, he liked the fact that he could live an anonymous life in the U.S.  But he also spent a lot of time in France. He was a French idol, and his concerts were essentially given in France. He died at his home in Paris.

Recital 23 vs Recital 24

The Preamble to the Succession Regulation proposes alternative methods to assess residence. Recital 23 provides that, in principle, the test should be whether the deceased has a “close and stable relationship” with the state concerned. However, Recital 24 states that, in certain cases where the deceased lived in several states alternatively, it could be difficult to assess habitual residence, and it would thus be legitimate to take into account nationality and the location of the main assets of the deceased. Laeticia relied on Recital 23, David and Laura relied on Recital 24.

The Court would ultimately find that Recital 23 controlled, but decide in favour of David and Laura.

Instagram Tracking

In a judgment delivered on 28 May 2019, the Court conducted an overall assessment of the situation.

It first noted that the issue was the last habitual residence of the deceased. A number of facts were reported dating decades earlier, such as the fact that, when Sylvie Vartan, the first wife of Johnny, lived in LA with young David (now 53), the rockstar would spend most his time in France. The Court ruled that it would ignore such references to events older than 10 years.

The court started with the period 2007-2012 to insist on the fact that, during that time, Johnny declared, in particular in various wills, that he resided in Switzerland and wished to subject his succession to Swiss law. The court noted that, while the purpose of such declarations were likely tax related, it did not change the fact that under Swiss tax law, the tax status that Johnny wanted required to have significant ties with Switzerland.

The court then moved to the time period after 2012, for which much more factual evidence of the presence of the rockstar on each of the two territories was available. The Reason why was that Johnny and his last wife had opened an instragram account in 2012. David used the instagram account of his father to provide a detailed account of the time the latter spent in France and elsewhere since 2012. The result was that the rockstar spent at least 151 days in France in 2015, at least 168 days in France in 2016, and that he stayed in France in the last 8 months of his life in 2017. With modern technology, finding out where VIPs spent most of their time might not be so difficult, after all.

Finally, the court conducted a subjective analysis and assessed the conditions and reasons of the presence of the rockstar in each country. The court recognised that it was not easy to assess the state of mind of the deceased relating to his stays in each of the two countries. However, the court agreed with the proposition that it was not possible to dissociate the artist from the private person, and thus found that the decisive factor was that the singer loved to perform, and that his life was entirely directed towards this activity. He toured constantly, including in the last three years of his life, and he did so almost exclusively in France.

The court concluded that Johnny Hallyday did not have alternate residences, but only one residence, in the last years of his life. He thus fell within the scope of Recital 23 of the Preamble, not Recital 24. Quite a remarkable conclusion : although the two youngest kids of the rockstar were schooled in the U.S. and he spent time there each year, he was found to have no residence there.

Laeticia immediately lodged an appeal againt the judgment. But she waived it in November 2019.

Superior Court of California

In 2018, the trust established by the rockstar to the profit of his wife initiated proceedings in the Superior Cour of California in Los Angeles against David and Laura seeking an order to transfer various assets of the rockstar to the trust, including rights over songs, funds in a bank account, four Harley Davidsons and three luxury cars. David and Laura have filed a motion to stay or dismiss proceedings on the ground of comity and forum non conveniens.

It seems that the case puzzled the LA Court. After being postponed four times, the case was postponed again on 4 February 2020, to May 2020. I could not access the documents filed by the parties, but the popular press has reported that Justice May said during one of the hearings that he found the case “very complex”, that he did not see the jurisdiction of the French court as necessarily exclusive of the jurisdiction of his own court, and that he wondered about the base of the rights of the widow under French law: “We are talking about 25%, but the big question is, 25% of what?”

What is the territorial reach of the Succession Regulation? If it purports to reach assets situated in California, does California law allow it? If it does not, should the shares of each of the children be calculated on the French/European estate only?

All very interesting questions. We very much hope Justice May answers them.

On 14 of February 2020 a new law undermining the independence of judiciary in Poland (a so-called “muzzle law“) entered into force.

The Act of Law of 20 December 2019 bars judges from, among other things, contesting the status of other judges or the legality of their appointment (an English version of the draft Act, almost identical to the Act as adopted, is available here) .

The act is a reaction to (i) the CJEU judgment of 19 November 2019 in the AK case, by which the Court asked Polish judges to verify the conformity of the new Disciplinary Chamber of the Supreme Court with EU law, and (ii) the subsequent judgment of another chamber of the Polish Supreme Court of 5 December 2019 finding that the Disciplinary Chamber does not comply with EU law (an English version can be found here).

According to the new Act, judgments corresponding with the one laid down by Supreme Court on 5 December 2019 would be prohibited. Defecting judges can be removed from the profession.

The law has provoked strong reactions from the European institutions already at the stage of the legislative process.

The Vice-President of the European Commission, Věra Jourová, wrote on 19 December 2019 a letter to the Polish President, the Prime Minister and the Presidents of both chambers of the Parliament. The letter states that the rules of the new legislation “touch upon matters such as judicial independence, further raising the Commission’s existing concerns in this area”.

In the letter, Ms Jourová also encouraged “the Polish authorities to consult the Council of Europe’s Venice Commission on this draft legislation”, and invited “all State organs not to take forward the proceedings on the new draft legislation before carrying out all the necessary consultations”.

On 11 January 2020 a “March of 1000 Gowns” demanding “the right to independence, the right to Europe” took place in Warsaw. Polish judges supported by 50 judges from other European countries, together with thousands of citizens, protested against the draft law.

The Venice Commission adopted on 16 of January 2020 an urgent joint opinion on the draft law. The remark is made in the opinion that, by virtue of some of the amendments to the law, “the judges’ freedom of speech and association is seriously curtailed”: Polish courts will be effectively prevented from examining whether other courts within the country are ‘independent and impartial’ under the European rules”.

On 28 January 2020, the Parliamentary Assembly of the Council of Europe (PACE) opened a monitoring procedure for Poland over the functioning of its democratic institutions and the rule of law. In its resolution 2316(2020) it declared that recent reforms in Poland “severely damage the independence of the judiciary and the rule of law”.

The law was adopted anyway. An open question is what impact it will  have on the mutual trust and the mutual recognition of judgments in the European Union. Polish ‘reforms’ resulted already in the rebuttal of the presumption of mutual trust in the context of recognition of judgments in criminal matters (judgment of 25 July 2018 in the LM case, analysed here). But the restriction of the independence of the judiciary has a potential impact on all acts providing for the mutual recognition of judgments, in both criminal and civil matters.

It can be particularly challenging for judges applying norms of EU Private International Law. 

Recognition of civil judgments given by a court or tribunal of a Member State should take into account that the CJEU treats a “court” as an autonomous concept of EU law.

The CJEU elaborated on this notion, among other rulings, in Ibrica Zulfikarpašić (§43) and Pula Parking (§53), where it stated that due to the principle of mutual trust, EU law requires “that judgments the enforcement of which is sought in another Member State have been delivered in court proceedings offering guarantees of independence and impartiality”.

The above-mentioned doubts expressed by the European Commission and PACE appear to challenge that requirement.

Photo: Courtesy of Jakub Włodek / Agencja Gazeta

Dário Moura Vicente (University of Lisbon) has published the second edition of his monograph on international intellectual property (A Tutela Internacional da Propriedade Intelectual).

The books covers the traditional issues of jurisdiction and applicable law. It also discusses the merits and limits of international harmonisation in the field, and extra-judicial remedies.

More details are available here.

The last issue of the Revue critique de droit international privé for 2019 has just been released. It contains numerous casenotes and one article by Poul F. Kjaer (Copenhagen Business school) on the sociological idea of connectivity and private international law (L’idée de “connectivité” et le droit international privé).

The article is a revised translation of a paper by the same author titled Constitutionalizing Connectivity: the Constitutional Grid of World Society.

Global law settings are characterized by a structural pre‐eminence of connectivity norms, a type of norm which differs from coherency or possibility norms. The centrality of connectivity norms emerges from the function of global law, which is to increase the probability of transfers of condensed social components, such as economic capital and products, religious doctrines, and scientific knowledge, from one legally structured context to another within world society. This was the case from colonialism and colonial law to contemporary global supply chains and human rights. Both colonial law and human rights can be understood as serving a constitutionalizing function aimed at stabilizing and facilitating connectivity. This allows for an understanding of colonialism and contemporary global governance as functional, but not as normative, equivalents.

A full table of contents is available here.

No hearings on requests for a preliminary ruling concerning private international law are scheduled for March 2020. Conversely, several opinions and one judgment will be delivered.

Case C-249, JE

On March 24, AG Tanchev (Bulgaria) will give his Opinion in JE. The case concerns the interpretation of Article 10 of the Rome III Regulation on the law applicable to divorce and legal separation. The issue is whether the expression ‘the law applicable pursuant to Article 5 or Article 8 makes no provision for divorce’ is to be interpreted as merely referring to a situation where the applicable foreign law makes no provision for any form of divorce, or rather as including a situation where the applicable foreign law permits divorce, but does so in extremely limited circumstances.

The original action was brought in Romania in 2016. The applicant filed a petition for divorce claiming that the parties’ marriage should be dissolved, the applicant should return to using the name borne prior to the marriage, parental responsibility in respect of the minor child should be exercised jointly, the minor child should reside with the mother in Italy, and the defendant should be required to pay maintenance and the costs of proceedings.

After some hesitations regarding the general jurisdiction of the Romanian courts and the specific venue, the point was settled and the discussion moved to the applicable law under the Rome III Regulation. According to the court, the matter was governed by Italian law pursuant to Article 8(a) of the Regulation, since the parties were habitually resident in Italy. The court considered that the criteria laid down in Article 8(a) are framed in a hierarchical manner: if the conditions of the first criterion are satisfied, there is no need to look at the following ones.

The national court considered that that the grounds for divorce raised by the applicant are not available under the Italian legislation on divorce, and that that grounds different to those foreseen by the provision can be applied for only where there has been a legal separation of the spouses, which must be established or ordered by a court, and that the delay prescribed by the said legislation has passed since the legal separation itself. Since no provision is made for legal separation proceedings under Romanian law, the Romanian court concluded that those proceedings must be conducted before the Italian courts and therefore any application to that effect made before the Romanian courts is inadmissible.

The applicant lodged an appeal against that judgment, pointing out that, from her point of view, the criteria provided for in Article 8 of the Rome III Regulation are alternative in nature. She also stated that in the light of Italian legislation, the first sentence of Article 10 of the Rome III Regulation is applicable in the case (in my view, if I understand correctly the arguments of the Romanian court, she could have added that the absence of provisions on separation under Romanian law does not allow the court to declare itself incompetent).

Case C-215/18, Primera Air Scandinavia

The judgment in Primera Air Scandinavia is scheduled for 26 March 2020. The request for a preliminary ruling comes from District Court of Prague. It concerns the interpretation of in Article 5(1) and Articles 15 to 17 of the Brussels I Regulation.

The issue submitted to the CJEU arose in the context of an action for compensation brought under Regulation (EC) No 261/2004 by a passenger domiciled in the Czech Republic against an airline established in Denmark, on account of the long delay of a flight operated by that airline, but sold to that passenger, in conjunction with accommodation, by a Czech travel agency.

The opinion of AG Saugmandsgaard Øe (Denmark), of 7 November 2019, proposes the CJEU to answer that Article 5(1) covers an action for compensation brought by a passenger against the operating air carrier, even though those parties had not entered into a contract between them, and although that flight formed part of a package of services supplied under a contract entered into between the applicant and a third party.

On the contrary, Articles 15 to 17 of that regulation must be interpreted as meaning that they are not applicable to such an action. No surprise, considering the previous case law of the Court.

Case C-80/19, EE

The Opinion of AG Campos Sánchez-Bordona regarding the EE case, on the Succession Regulation, will also be issued on 26 March 2020.

The Supreme Court of Lithuania referred six question to the CJEU. Questions number 2 and 3, on the characterization of notaries as “courts” for the purposes of the Regulation, have already been addressed in the case of WB, still pending at the time of the referral.

By the remaining questions, the Lithuanian court conveys to the CJEU doubts related to the cross-border nature of a given succession (linked to that, to the applicability of the regulation when, in the light of the circumstances, its application would not facilitate the assertion of the rights of the heir, but rather the contrary); to the choice of law (implicit, and made during the transitional period), and to the choice of court.

The case concerned the estate of a Lithuanian national, married to a German national, who had moved to live in Germany together with her son (EE, also a Lithuanian national).

While living in Germany, EE’s mother had drawn up a will at a notary office in Kaunas (Lithuania), whereby she designated EE as the heir to her entire estate – an apartment in the same country. After the death of his mother, E.E. moved back to Lithuania, where he contacted the notary office in the City of Kaunas requesting the succession procedure be initiated, and the issuance of a certificate of succession rights. The notary refused to perform the notarial act, for, according to the Succession Regulation, the habitual place of residence of the testatrix was Germany. EE challenged the notary’s refusal before the court of first instance.

The Kaunas district court ruled in favour of EE, annulled the notary’s decision refusing to perform the notarial act, and ordered the notary to open the succession procedure in accordance with the place where the property was registered and to issue a certificate of rights of succession to the estate of the deceased mother.

The court stated that, even though the appellant’s mother had declared her departure to Germany, she was still a Lithuanian national and, on the day of her death, owned immovable property in Lithuania; she had not severed her links with Lithuania, and had visited the country and drawn up her will there.

The Kaunas regional court set aside the ruling of the court of first instance following an appeal lodged by the notary and turned down the appellant’s application. Among other, it stated that the court of first instance had, in annulling the notary’s decision under challenge, unreasonably relied on general principles. The appellant lodged an appeal in cassation against this judgment.

Case C-186/19, Supreme Site Services

AG Saugmandsgaard Øe’s Opinion in this case is scheduled for 26 March 2020, as well.

The Dutch referring court asks about the Brussels I bis Regulation and the meaning of “civil and commercial matters” in a case where an international organisation brings an action to (i) lift an interim garnishee order levied in another Member State by the opposing party, and (ii) prohibit the opposing party from levying, on the same grounds, an interim garnishee order in the future and from basing those actions on immunity of execution.

A public hearing was held in Luxembourg on 12 December 2019, where the CJEU learnt that the Dutch Appellate Court had granted immunity of jurisdiction to Shape and JCFB only two days before. The judges and AG wondered whether a reply to the preliminary reference would still be of any use. The Dutch decision on immunity, the request to the CJEU and the hearing in Luxembourg have been addressed by Geert van Calster in his blog, with a last update on January 2020.

The European Association of Private International Law will hold its founding conference in Aarhus on 14, 15 and 16 May 2020. We have invited the speakers to talk in turn about the topic of their presentations and briefly address the issues they will be discussing in Aarhus. The first speaker we host in this series is Matthias Lehmann, of the University of Bonn. His presentation, on Blockchains and Smart Contracts, is part of a block devoted to ‘Digitalization and European Private International Law’.

 

Blockchain and smart contracts are based on Distributed Ledger Technology (DLT), which combines the decentralised storage and validation of information with the use of modern cryptography. Both blockchain and smart contracts pose novel and unique challenges to Private International Law (PIL).

The first challenge is getting a proper grasp of the technology, which comes in many different forms and shapes. The benefits and potential applications are often widely exaggerated, while the real working is not fully understood. Evidently, there are obstacles in the communication between coders and lawyers. These difficulties are compounded by the fact that the technology is constantly evolving, creating the risk of any legal analysis being quickly outdated.

What is relevant for lawyers is that the blockchain allows to record new types of “crypto assets” and to transfer them easily around the globe. It can also be used for the transfer of copyrights, data or real-world assets, such as commodities or real estate. Given the value of the crypto assets, and their vulnerability to attacks (e.g. through hacks or fraud), it is necessary to put them under some sort of legal protection. Which legal protection is granted depends on the applicable national law, which must be determined first.

Smart contracts are computer programmes grafted onto the blockchain. In their most common application, they are used to automatically enforce obligations, excluding any resistance by the debtor. In such applications, they do not create or amend legal rights but shift the factual situation without either party being able to stop the process. The execution of the programme may deviate from the parties’ agreement (e.g. due to some malfunction or the input of false data). This situation must be treated by the law. There is also a very different type of smart contract: These are agreements concluded exclusively through the workings of machine, and therefore are also called “algorithmic contracts”. In such cases, the need to determine an applicable law is even more obvious and challenging.

From a PIL perspective, a major problem is shoehorning the new phenomena into the categories of conflicts of laws. Crypto assets are intangible and have no obvious counterpart in the real world. They are legal chameleons oscillating between currencies, securities, and claims. Smart contracts can either be used to automatically enforce the obligations under a contract or to create a binding agreement through algorithms. All of this is new and, so far, has no parallel in PIL.

Once a category has been found or a new one created, it will be challenging to find proper connecting factors. These difficulties stem from the fact that the creators have designed DLT as being “a-national” in the double sense that it shall work without the law and be independent of any legal system. The information is spread on computers and servers all around the world and often there is no operator controlling the process. For these reasons, finding the most significant or closest connection for the blockchain and smart contracts creates considerable headaches, more so than the internet did at the time of its introduction.

The presentation will address these issues one by one. It will analyse the applicability of existing regulations (such as Rome I, Rome II or the Succession Regulation) and explore the need for new ones. But it will also ask whether the EU is the appropriate venue to deal with these questions or whether it would be preferable to look for a world-wide solution given the global nature of DLT.

 

— More information about the EAPIL founding conference in Aarhus is available here. If you want to register, click here. 

Milana Karayanidi is the author of Rethinking Judicial Jurisdiction in Private International Law, the most recent release in the Hart Publishing’s series Studies in Private International Law.

The abstract reads:

This book explores the theory and practice of judicial jurisdiction within the field of private international law. It offers a revised look at values justifying the power of courts to hear and decide cross-border disputes, and demonstrates that a re-conceptualisation of jurisdiction is needed. Rather than deriving from territorial power of states, jurisdiction in civil and commercial cross-border matters ought to be driven by party autonomy. This autonomy can be limited by certain considerations of equality and critical state sovereign interests. The book applies this normative view to the existing rules of jurisdiction in the European Union and the Russian Federation. These regimes are chosen due to their unique positions towards values in private international law and contrasting societal norms that generate and accommodate these values. Notwithstanding disparate cultural and political ideas, these regimes reveal a surprising level of consistency when it comes to enforcement of party autonomy. There is, nevertheless, room for improvement. The book demonstrates to scholars, policy makers and lawmakers that jurisdiction should be re-centred around the interests of private actors, and proposes ways to improve the current rules.

For further information, see here.

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.

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.

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.

The proceedings of the symposium held in June 2019 on the Paris international commercial chambers were published in a special issue of the Revue Lamy Droit des Affaires which can be freely download on the website of the Paris Court of Appeal.

The presentations were made in French, and the proceedings are written in the same language.

The Court has provided the following summary in English:

Opening of the Symposium

A little more than a year after the signature of the procedural protocols establishing the international commercial chambers in the Commercial Court and the Paris Court of Appeal, the symposium was opened to a large audience by Mrs Chantal Arens, First President of the Paris Court of Appeal, who, among other things, announced the forthcoming publication of a bilingual procedural guide before these chambers, with the aim of presenting the proceedings in a detailed and didactic manner, and called for the regulatory consolidation of the jurisdiction of the Paris Court of Appeal.

Mr Gille Cuniberti, Law Professor at the University of Luxembourg and moderator of the roundtables, pointed out that the creation of international commercial chambers forms part of an international competition between courts from which one of the issues at stake is the attractiveness of French law.

The creation of the Paris International Commercial Chambers

After a reminder of the origins of the commercial chambers by Mr Guy Canivet, Honorary First President of the Court of Cassation, and of the options chosen by the Ministry of Justice presented by Mr Thomas Andrieu, Director of Civil Affairs for the French Ministry, Ms Marie-Aimée Peyron, Chairman of the Paris Bar Association, went back on the support of the Paris bar in the creation of these chambers.

Students at the Sciences Po Law school of Paris (Mr Félix Briant, Ms Auriane Clement, Mr Mathieu Larroque, Ms Charlotte Muller) presented the fruit of their work done during one year with the International Commercial Chamber of the Court of Appeal by providing an overview of the choices made abroad in the creation of international commercial courts in Europe and in the world.

Roundtables

This symposium allowed to set out how to access to the international chambers in France, their jurisdiction and the applicable procedure, stressing in particular the desire to give greater importance to predictability in the conduct of the trial, the orality of the proceedings, the possible use of foreign languages and, in particular, the use of the English language.

Mr François Ancel, Ms Fabienne Schaller and Ms Laure Albert, all three judges in the International Commercial Chamber of the Paris Court of Appeal intervened to develop these various points, as have the President of the International Commercial Chamber at the Paris Commercial Court, Mr Philippe Bernard, and Mr François Vaissette, Avocat Général representing the General Public Prosecutor’s Office of the Paris Court of Appeal , which was able to clarify the role of the Public Prosecutor’s Office in these chambers.

Mr Alban Caillemer du Ferrage and Ms Emilie Vasseur, members of the Paris Bar, stressed the important role of the creation of these chambers and the will of the bar to promote the stipulation of clauses conferring jurisdiction to the benefit of the Paris courts (in particular in the choice of ISDA to open its Master Agreement to the jurisdiction of French courts and French law) and inisted also on the judicial administration of evidence and the voluntary appearance of the parties and witnesses.

Finally, scientific insight was given by Ms Marie-Elodie Ancel, Law Professor at the University of Paris Est Créteil on the first decisions handed down by the International Chamber of the Court of Appeal and by Professor François Mailhé, Deputy-Dean of the Faculty of Law and Political Science of the Picardie Jules Verne University, who asked in particular how to meet the needs of economic stakeholders (use of the English language, set up of a procedural timetable; compulsory production of evidence; cross-examination).

Closing speech

During his executive summary, Mr Emmanuel Gaillard, Visiting Professor at the Yale Law School and at the Harvard Law School, called for pursuing the movement initiated by the creation of these chambers, in particular in favour of the use of the English language without translation and by implementing an adequate communication to raise awareness of these chambers, considering that France could usefully offer a high-quality public service of justice within a reasonable time and in accordance with international standards.