Agrégateur de flux

Disclosure I represented the Flemish Region at the Court of Justice. I wrote this post on 11 December 2018. Given that the interpretation of the judgment has a bearing on the proceedings in the national court, I decided to hold back on posting  until those proceedings would have met their national end – which they still have not. Seeing as I thought the case might be of interest I decided to go ahead now anyway.

In C-679/17 Huijbrechts the European Court of Justice held in a fashion which is fairly typical of free movement of capital cases. The Court treads carefully. Positive harmonisation of tax law is difficult for the EU to achieve for this requires unanimity. Tax measures having a direct impact on free movement of capital, too strict an enforcement of the latter may be read as tax harmonisation via the back door.

The case at issue concerns a measure by the Flemish Region of Belgium to exempt sustainable managed forests from death duties (inheritance tax). The exemption is subject to there being a forest management plan, agreed with the relevant agency, and subject to a 30 year follow-up period (should in the interim the forest no longer be sustainably managed, the heirs pay the tax pro rata the remainder of the 30 year period). The heirs concerned did not enjoy the exemption for the forests are located outside the region and suggest this is an infringement of the free movement of capital.

Defence against suggestions of infringement of Article 63 TFEU’s free movement of capital rule typically follow the following sequence: free movement is not impacted; should this fail: the domestic and foreign situation are not objectively comparable; should this fail, per C‑256/06 Jäger, public interest requires an exemption (subject to a suitability and a proportionality test).

A crucial part of free movement judgments entails having to read the judgment with an eye on the factual circumstances: the Court typically employs a formula that reads something like ‘in circumstances such as those at issue in the national proceedings’ or ‘in circumstances such as those at issue in the national law’.

In Huijbrechts, the Court at 25-26 finds that Flemish and foreign forest are objectively comparable (only) where they are transboundary and concern woods that are part of one unit or landscape (lest my geographic knowledge fails me here, this limits the impact of the judgment to French and Dutch estates; Belgium has a land border with Luxembourg and Germany, too, but Flanders does not). Interestingly, at 22 the Court indicates that in making the like forest comparison (GATT, WTO and generally free movement scholars will know where I am heading here), the regulatory goal of sustainable forest management plays a role. (See the like product /service distinction in the WTO).

For that limited group of forest, the public interest exception imposed constraints: a blanket ban on considering sustainable management outside of Flanders fails, for it does not assist with the protection of the forests. Flanders will have to allow the heirs to provide proof of sustainable management; should such proof be delivered, the burden of proof will revert to the Flemish tax authorities: they cannot blankly assume that they cannot get the necessary data from the foreign administration during the 30 year period: they have to request such data (typically: on a 30 year basis) and only should they fail to get them, can they still refuse to exempt.

The Court implicitly recognises the specific (dire) circumstances of forests in Flanders (at 31). It does not accept the heirs’ submission that the myriad of international and European policy documents on forest management somehow amount to positive harmonisation.

Geert.

 

A Chinese divorce judgment delivered on 20 December 2013 by a court from Beijing was recognised by a French court in South Western France (Bergerac) in several decisions made in 2014 and 2016.

As will be explained below, the reason why the court had to rule twice on the issue is that each of its judgments was challenged before the Court of Appeal of Bordeaux and ended up before the French supreme court for civil and commercial matters (Cour de cassation).

Eventually, after the Cour de cassation set aside the second judgment of the Bordeaux Court of Appeal and sent back the parties before the Court of Appeal of Paris, the plaintiff gave up and never petitioned the Paris court. As a result, the first instance judgment now stands.

For years, the world has been following closely instances of enforcement and recognition of foreign judgments in the People’s Republic of China (China) and Chinese judgments abroad. This is because the default regime of judgments in China is based on reciprocity. A Chinese court will only enforce a foreign judgment if the state of origin enforced a Chinese judgment before. A more liberal regime applies to the recognition in China of judgments in family matters involving at least one Chinese national.

Bilateral Treaties

However, China has entered into bilateral treaties on judicial assistance in civil and commercial matters, which provide for the recognition and enforcement of foreign judgments, with 39 states, including quite a few European states (see the list here). France was one of the first to enter into such a bilateral treaty with China in 1987. The treaty applies not only to commercial matters, but also to family matters.

The main consequence of the existence of a bilateral treaty is that it fulfills (or replaces) the requirement of reciprocity. Chinesejusticeobserver has reported that there are several cases where Chinese courts have enforced French judgments in recent years, and it does not seem that the absence of prior enforcement of a Chinese judgements in France was an issue.

Parallel Divorce Proceedings

In the particular case, two spouses initiated parallel divorce proceedings in the contracting states. The wife, who was an English national, first sued in Beijing in December 2012. The husband, who was a French national, then initiated proceedings in Bergerac, France, in July 2013. The Beijing court delivered its judgment first and granted divorce in December 2013.

In the French proceedings, the lawyer for the wife first challenged the jurisdiction of the French court on the ground of lis pendens. Under the French common law of lis pendens, French courts may decline jurisdiction if they find that the foreign judgment is likely to be recognised in France. The French court applied the 1987 Bilateral Treaty with China and ruled that the Chinese judgment, once final, would be recognised. The court thus declined jurisdiction.

As will become clearer below, it is important to note that the wife had also made a subsidiary argument based on the res judicata of the Chinese judgment.

The husband appealed. Higher courts got involved. Not for the better.

Nationality Requirement in Bilateral Treaties?

Proceedings were first brought before the Court of Appeal of Bordeaux. In a judgment of 18 November 2014, the Court allowed the appeal and ruled that the French first instance court should have retained jurisdiction on the ground that the Chinese judgment did not fall within the scope of the bilateral treaty. This decision was wrong for two reasons.

The first was that the court held that the bilateral treaty only applied to disputes between Chinese and French nationals. In this case, the wife was an English national. As we shall see, the French Supreme Court would eventually rule that there is no such requirement in the relevant treaty, which applies irrespective of the nationality of the parties.

The second mistake was that the court did not care to examine whether the Chinese judgment could be recognised under the French common law of judgments. It simply concluded that the judgment could not be recognised outside of the scope of the treaty, and that no lis pendens exception could thus be raised.

The wife appealed to the Cour de cassation, arguing that the Court of Appeal had failed to apply the bilateral treaty.

Useless Appeals

Most unfortunately, the Cour de cassation dismissed the appeal on disciplinary grounds. In a judgment of 25 May 2016, the Court held that the argument of the appeal that the bilateral treaty had been violated was a pretext, and that what the appelant was really criticising was that the lower court had failed to respond to the subsidiary res judicata argument of the wife, which could be directly addressed by a request directed to the lower court.

The judgment was difficult to interpret. Was it saying anything, even implicitly, on the conditions for applying the Bilateral treaty? Probably not, but when the case was sentback to lower courts, they understood it differently.

The case came back to the first instance court in Bergerac, which was understandably puzzled. It decided that the 2016 judgment of the Cour de cassation had two consequences: 1) French courts had jurisdiction, and 2) the Bilateral Treaty did not apply.

The Bergerac judge retained jurisdiction, but then declared the claim inadmissible. It applied the French common law of judgments and recognised the Chinese divorce judgment in France, ruling that the Chinese judgment was res judicata, and made the claim of the husband inadmissible. The Court of Appeal of Bordeaux confirmed the first instance ruling in a judgment of September 2016.

The husband appealed to the Cour de cassation and argued that the conditions for the recognition of judgments under the French common law of judgments had been wrongly applied.

Astonishingly, the Cour de cassation informed the parties that it intended to raise ex officio the issue of the applicability of the Bilateral Treaty and, after hearing them on that point, allowed the appeal on the ground that the lower courts had failed to apply the 1987 Bilateral Treaty. Two year after failing itself to respond to an argument related to the proper application of the Bilateral Treaty, the Cour de cassation disciplined the lower courts for misunderstanding that the argument that it had neglected was excellent.

The case was sent back to the Court of Appeal of Paris so that it would apply properly the Bilateral Treaty. But it seems that the husband was exhausted: he never initiated the proceedings before the Paris court.

This case was handled pathetically by the Cour de cassation, which has probably eventually exhausted financially the plaintiff who gave it up. What matters is that, eventually, the Cour de cassation made clear that 1) the 1987 Bilateral Treaty should be applied, and 2) the Chinese judgment was recognised.

More details on this case can be found here.

Se fondant sur un récent arrêt de la CEDH ayant condamné la France pour l’ineffectivité des recours préventifs offerts aux détenus, la Cour de cassation affirme qu’en cas d’atteinte à la dignité liée aux conditions de détention, le juge judiciaire doit procéder aux vérifications nécessaires et, le cas échéant, ordonner la mise en liberté de la personne concernée.

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