Droit international général

The Milan Law Review (MLR) of the State University of Milan Law Faculty is a multidisciplinary and multilingual law journal, published on a six-monthly basis in open access mode. 

Articles on topics of private international law, public international law and European Union law are welcome. 

Papers can be written in Italian or English. Instructions for authors and more information about the journal can be found on the website: https://riviste.unimi.it/index.php/milanlawreview/about. 

Papers may be submitted to the Journal by email to the following address: milanlawreview@unimi.it. 

The next deadline for submitting papers is 31 October 2021.

Written by William S. Dodge (Professor, University of California, Davis, School of Law)

& Wenliang Zhang (Associate Professor, Renmin University of China Law School)

In Shanghai Yongrun Investment Management Co. v. Kashi Galaxy Venture Capital Co., the Supreme Court of New York (New York’s court of first instance) denied enforcement of a Chinese court judgment on the ground that the judgment “was rendered under a system which does not provide impartial tribunals or procedures compatible with the requirements of due process of law.” The decision disagrees with every other U.S. and foreign court to have considered the adequacy of the Chinese judicial system in the context of judgments recognition. In recent years, there has been a growing trend in favor of the recognition of Chinese judgments in the United States and U.S. judgments in China. See William S. Dodge & Wenliang Zhang, Reciprocity in China-U.S. Judgments Recognition, 53 Vand. J. Transnat’l L. 1541 (2020). Unless this recent decision is overturned on appeal, it threatens to reverse the trend, to the detriment of judgment creditors in both countries.

In 2016 Shanghai Yongrun purchased an interest in Kashi Galaxy. In 2017, Kashi Galaxy agreed to repurchase that interest for RMB 200 million, an agreement that Kashi Galaxy allegedly breached by paying only part of the repurchase price. The agreement was governed by Chinese law and provided that suits could be resolved by courts in Beijing. In 2018, Shanghai Yongrun sued Kashi Galaxy, Maodong Xu, and Xu’s wife in the Beijing No. 1 Intermediate People’s Court. After a trial in which defendants were represented by counsel, the court granted judgment in favor of Shanghai Yongrun. The Beijing Higher People’s Court affirmed the judgment on appeal, but it could not be enforced in China because no assets were available within the court’s jurisdiction.

In 2020, Shanghai Yongrun brought an action against Kashi Galaxy and Xu in New York state court, seeking to have the Chinese judgment recognized and enforced. Article 53 of New York’s Civil Practice Law and Rules (CPLR) has adopted the 1962 Uniform Foreign Money-Judgments Recognition Act (1962 Uniform Act), which provides that final money judgments rendered by foreign courts are enforceable in New York unless one of the grounds for non-recognition set forth in CPLR 5304 is established. These grounds include that the foreign court did not have personal jurisdiction, that the foreign court did not have subject matter jurisdiction, that the defendant did not receive notice of the foreign proceeding, that the judgment was obtained by fraud, that the judgment is repugnant to the public policy of the state, that the judgment conflicts with another final judgment, that the judgment is contrary to a forum selection clause, that personal jurisdiction was based only on service, and that the judgment is for defamation and provided less protection for speech than would be available in New York. The defendants raised none of these grounds for non-recognition. Instead, they raised the broadest and least frequently accepted ground: that “the judgment was rendered under a system which does not provide impartial tribunals or procedures compatible with the requirements of due process of law.” CPLR 5304(a)(1).

To find a systemic lack of due process in the Chinese judicial system, the New York court relied entirely on the State Department’s Country Reports on Human Rights Practices for 2018 and 2019. In particular, the court quoted the observations that Chinese “[j]udges regularly received political guidance on pending cases, including instructions on how to rule, from both the government and the [Chinese Communist Party], particularly in politically sensitive cases” and that “[c]orruption often influenced court decisions.” The court held that these country reports “conclusively establish as a matter of law that the PRC judgment was rendered under a system that does not provide impartial tribunals or procedures compatible with the requirements of due process of law in the United States.”

The implications of this ruling are broad. If the Chinese judicial system suffers from a systemic lack of due process, then no Chinese court judgments may ever be recognized and enforced under New York law. What is more, ten other states have adopted the 1962 Uniform Act, and an additional twenty-six states have adopted the updated 2005 Uniform Foreign-Country Money Judgments Recognition Act (2005 Uniform Act), which contains the same systemic due process ground for non-recognition. If followed in other jurisdictions, the New York court’s reasoning would make Chinese judgments unenforceable throughout much of the United States.

But it seems unlikely that other jurisdictions will follow suit or that the New York court’s decision will be upheld on appeal. U.S. decisions denying recognition on systemic due process grounds are rare. The leading cases have involved extreme and unusual circumstances: a Liberian judgment rendered during that country’s civil war when the judicial system had “collapsed,” Bridgeway Corp. v. Citibank, 201 F.3d 134, 138 (2d Cir. 2000), and an Iranian judgment against the sister of the former Shah, Bank Melli Iran v. Pahlavi, 58 F.3d 1406 (9th Cir. 1995). Although other courts have considered State Department country reports to be relevant in considering claims of systemic due process, none has found them to be dispositive. For example, the Fifth Circuit rejected a claim that Moroccan courts suffered from systemic lack of due process notwithstanding a statement in the 2009 country report that “in practice the judiciary . . . was not fully independent and was subject to influence, particularly in sensitive cases.” DeJoria v. Maghreb Petroleum Exploration, S.A., 804 F.3d 373, 381 (5th Cir. 2015). This language about Moroccan courts is quite similar to the country report statements about China that the New York court found conclusive.

With respect to China specifically, no U.S. court had previously denied recognition based on a systemic lack of due process. To the contrary, a prior New York state court decision held that “the Chinese legal system comports with the due process requirements,” Huizhi Liu v. Guoqing Guan, Index No. 713741/2019 (N.Y. Sup. Ct., Jan. 7, 2020),  and a federal court in California concluded that “the Chinese court was an impartial tribunal.” Qinrong Qiu v. Hongying Zhang, 2017 WL 10574227, at *3 (C.D. Cal. 2017). Other U.S. decisions have specifically noted that the party resisting enforcement had not alleged systemic lack of due process as a ground for non-recognition. See Global Material Technologies, Inc. v. Dazheng Metal Fibre Co., 2015 WL 1977527, at *7 (N.D. Ill. 2015); Hubei Gezhouba Sanlian Industrial Co. v. Robinson Helicopter Co., 2009 WL 2190187, at *6 (C.D. Cal. 2009).

China has been promoting the rule of law, and its legal system is modernizing to follow internationally accepted standards. The independence of China’s judiciary is guaranteed by its Constitution and other laws. To promote international trade and investment, China has emphasized the independence and impartiality of its courts. Other countries have repeatedly recognized and enforced Chinese judgments, including Australia, Canada, Germany, Israel, the Netherlands, New Zealand, Singapore, South Korea, and the United Kingdom. When parties have questioned the integrity of the Chinese judicial system as a whole, courts have rejected those arguments. Recently, in Hebei Huaneng Industrial Development Co. v. Deming Shi, [2020] NZHC 2992, the High Court of New Zealand found that the Chinese court rendering the judgment “was part of the judicial branch of the government of the People’s Republic China and was separate and distinct from legislative and administrative organs. It exercised a judicial function. Its procedures and decision were recognisably judicial.” When claims of improper interference are raised in the context of judgments recognition, the New Zealand court suggested, “the better approach is to see whether justice was done in the particular case.”

The New York court’s decision in Shanghai Yongrun is not only contrary to past decisions involving the enforcement of Chinese judgments in the United States and other countries. It also threatens to undermine the enforceability of U.S. judgments in China. Under Article 282 of the Civil Procedure Law of the People’s Republic of China, foreign judgments are recognized and enforced “in accordance with the principle of reciprocity.” For U.S. judgments, Chinese courts in cases like Liu v. Tao (Reported on by Ron Brand) and Nalco Co. v. Chen have found China’s reciprocity requirement to be satisfied by U.S. decisions that recognized and enforced Chinese judgments. If U.S. courts change course and begin to hold that China’s judiciary can never produce enforceable judgments, Chinese courts will certainly change course too and deny recognition to U.S. judgments for lack of reciprocity.

Maintaining reciprocity with China does not require U.S. courts to enforce every Chinese judgment. U.S. courts have denied recognition and enforcement of Chinese judgments when the Chinese court lacked personal jurisdiction, Folex Golf Indus., Inc. v. O-Ta Precision Industries Co., 603 F. App’x 576 (9th Cir. 2015), or when the Chinese judgment conflicted with another final judgment, UM Corp. v. Tsuburaya Prod. Co., 2016 WL 10644497 (C.D. Cal. 2016). But so far, U.S. courts have treated Chinese judgments the same as judgments from other countries, applying the case-specific grounds for non-recognition in an evenhanded way. The systemic due process ground on which the New York court relied in Shanghai Yongrun is fundamentally different because it holds Chinese judgments to be categorically incapable of recognition and enforcement.

New York may be on the verge of expanding the case-specific ground for non-recognition by adopting the 2005 Uniform Act to replace the 1962 version that is currently in place. A bill to adopt the 2005 Act has passed both the Assembly and the Senate in New York. The 2005 Act adds two grounds for non-recognition not found in the 1962 Act: (1) that “the judgment was rendered in circumstances that raise substantial doubt about the integrity of the rendering court with respect to the judgment”; and (2) that “the specific proceeding in the foreign court leading to the judgment was not compatible with the requirements of due process of law.” These grounds, already found in the laws of twenty-six other states that have adopted the 2005 Uniform Act, would allow New York courts to review foreign judgments for corruption and for lack of due process in the specific case without having to condemn the entire foreign judiciary as incapable of producing recognizable judgments. It is worth noting that the defendants in Shanghai Yongrun did not claim that there was any defect in the Chinese proceedings that led to the judgment against them.

Many court systems around the world are imperfect. The case-specific grounds for non-recognition found in the 1962 and 2005 Uniform Acts allow U.S. courts to refuse enforcement to foreign judgments on a range of case-specific grounds from lack of jurisdiction or notice, to public policy, to corruption or lack of due process. These case-specific grounds largely eliminate the need for U.S. courts to declare that an entire judicial system is incapable of producing valid judgments.

The new issue of International & Comparative Law Quarterly (Volume 70, Issue 2) is out. Some of the articles relate to private international law. Their abstracts are provided below. The whole issue is available here.

P. Giliker, Codification, Consolidation, Restatement? How Best to Systemise the Modern Law of Tort

The law of tort (or extra or non-contractual liability) has been criticised for being imprecise and lacking coherence. Legal systems have sought to systemise its rules in a number of ways. While civil law systems generally place tort law in a civil code, common law systems have favoured case-law development supported by limited statutory intervention consolidating existing legal rules. In both systems, case law plays a significant role in maintaining the flexibility and adaptability of the law. This article will examine, comparatively, different means of systemising the law of tort, contrasting civil law codification (taking the example of recent French proposals to update the tort provisions of the Code civil) with common law statutory consolidation and case-law intervention (using examples taken from English and Australian law). In examining the degree to which these formal means of systemisation are capable of improving the accessibility, intelligibility, clarity and predictability of the law of tort, it will also address the role played by informal sources, be they ambitious restatements of law or other means. It will be argued that given the nature of tort law, at best, any form of systemisation (be it formal or informal) can only seek to minimise any lack of precision and coherence. However, as this comparative study shows, further steps are needed, both in updating outdated codal provisions and rethinking the type of legal scholarship that might best assist the courts.

C. Harris, Incidental Determination In Determinations in Proceedings under Compromissory Clauses

A dispute brought before an international court or tribunal pursuant to a compromissory clause in a specific treaty may involve issues under rules of international law found outside of the treaty in question. In what circumstances can a court or tribunal determine such external issues? At present, there is no clear answer to this question. This article sets out a framework for how courts and tribunals exercising jurisdiction under compromissory clauses could approach external issues.

M. Teo, Narrowing Foreign Affairs Non-Justiciability

The UK Supreme Court’s decision in Belhaj v Straw defined foreign affairs non-justiciability and unearthed its constitutional foundations. However, two decisions since Belhaj—High Commissioner for Pakistan v Prince Muffakham Jah and The Law Debenture Trust Corpn plc v Ukraine—have called Belhaj into doubt, narrowing non-justiciability to give effect to ordinary private law rights. This article analyses these decisions and argues that their general approach of subjecting issues involving transactions between sovereign States to private international law’s framework is desirable, because the constitutional foundations of non-justiciability identified in Belhaj are shaky. Yet, it is suggested that private international law itself may require courts to exercise judicial restraint on these issues, given its goal of upholding the efficient resolution of international disputes in appropriate fora.

The issue also contains review, by M. Chen-Wishart, Y. Wu, of Contract Law in Japan by H. Sono, L. Nottage, A. Pardieck and K. Saigusa, Wolters Kluwer: Alphen aan den Rijn 2018.

In DTEK Energy BV, Re [2021] EWHC 1551 (Ch) Norris J yesterday expanded on his reason to sanction this scheme of arrangement of a Dutch corporation. I had referenced an earlier DTEK scheme in my post here. The judge firstly pointed out the straddle position of the E&W courts, in assessing the sanction of the scheme from the jurisdictional point of view: [30]:

for the purposes of testing whether the Judgments Regulation presented a jurisdictional bar to the English Court exercising jurisdiction over EU domiciled scheme members or creditors it was assumed to apply (and an appropriate gateway identified). But for the purposes of testing international effectiveness it was not assumed to apply, and the English Courts looked for expert evidence which demonstrated alternative bases.

He also points out [31] what I have repeatedly mentioned: the analysis was never extensive, for the schemes tended eventually to be unopposed. Summary of the default position is done [31] with reference to Van Gansewinkel (in which I acted as one of the experts) seeing as, like DTEK, it involved recognition and enforcement in The Netherlands.

At [37], importantly, the judge refers to a report produced by Prof. Dr. Christoph Paulus and Prof. Dr. Peter Mankowski as to the likelihood of the recognition of the Bank Scheme by EU Member States. They seemingly are of opinion that the Bank Scheme would be given effect in every Member State by virtue of Art 12(1)(d) Rome I. This provides that the law applicable to a contract (in the instant case, English law) shall govern the various ways of extinguishing obligations: and that rule covers all modes of extinguishing obligations (including those operating against dissentient creditors). At [38] this conclusion is said to have been supported by a number of relevant E&W precedents (all of which  I have reported on the blog; see eg Lecta Paper) however these all merely scratched the surface.

Gazprombank however oppose this conclusion and refer in support to a report produced (I have not seen it) by Dr Peters for the Dutch situation and, at [44] by Mr Vorkas for the Cypriot situation. Both question the opposability of the scheme to recalcitrant creditors in light of amended choice of law. I have not studied the issue in the detail these reports have, and I have not seen any of them, however my own view on this is that there is certainly merit in what are here the opponents: certain English schemes’ position under Rome I is really quite vulnerable.

At [41] the judge on balance sides with the Paulus /Mankowiski report for ‘it is common ground that I cannot decide between the rival Dutch views’ (later repeated for the Cypriot report). I do not think that is necessarily correct, or at least it deserves some discussion: Brussels Ia may not be retained EU law yet Rome I is, therefore this is arguably not an issue of ‘foreign law’ (and certainly not ‘Dutch law’).  

Conclusion [46]: If sanctioned, the Bank Scheme will certainly be effective as regards 95% of Energy’s creditors. There is a reasonable prospect that the sole dissentient creditor will be unable to mount any challenge to it. Even in the event of a challenge, uncontested evidence demonstrates that the Bank Scheme will be effective in the jurisdiction in which operations are undertaken and assets located.

Seeing as this is one of the first times the BIa and particularly the Rome I situation is discussed in greater detail, I do hope this case is heading for the Court of Appeal.

Geert.

EU Private International Law, 3rd ed. 2021, para 5.35 ff.

A more extensive than usual consideration of jurisdiction, applicable law re schemes of arrangement.
Norris J in DTEK yesterday (which I cross-referred herehttps://t.co/3QeZJfflxF)
Brussels Ia, Rome I https://t.co/Bkg4ctn6er

— Geert Van Calster (@GAVClaw) June 9, 2021

Mary Keyes (Griffith University) has posted Women in Private International Law on SSRN.

The abstract reads:

There has been almost no consideration of the position of women in private international law. There is very little published research applying a feminist analysis to, or even considering the position of women in, private international law. This field gives almost no attention to the particular interests, positions and experiences of women as subjects of the law, or the contribution of women as makers of the law. In the common law, private international law was largely developed in the 19th century, by male judges who were strongly influenced by commentary written exclusively by men. This chapter establishes that the apparently gender-neutral nature of private international law conceals profoundly ingrained assumptions about gender, in which the masculine is represented as a rational and sophisticated businessman, and the feminine is represented as a legally incapable wife. It then considers the gendered dimension of private international law in international family law, referring in particular to the regulation of international child abduction, international family property agreements, and international commercial surrogacy. Each of these examples demonstrates the differential impact of the law on women, indicating the need for greater awareness of and attention to gender. It concludes that while there have been some advances recently, particularly in terms of increased representation of women in making and commenting on private international law, there remains a great need for further research into the position of women as legal subjects and law-makers in this field.

Election or political party disputes often feature before Nigerian courts. In Nigeria jurisdiction in matters of conflict of laws (called “territorial jurisdiction” by many Nigerian judges) also applies to matters of disputes between members of a political party in the inter-state context.[1]

In Oshiomhole v Salihu (No. 1)[2] (reported on June 7, 2021), one of the issues for determination was whether the High Court of the Federal Capital Territory, Abuja possessed territorial jurisdiction to handle a dispute between members of Nigeria’s ruling political party. The 1st defendant/appellant was at the time the National Chairman of the 2nd defendant/appellant (the ruling party in Nigeria). It was alleged by some Members of the party that he had been suspended at the ward level in Edo State and he was thus disqualified from holding the position of National Chairman. The 1st defendant/appellant, inter alia, filed a preliminary objection to the suit and argued that the High Court of the Federal Capital Territory did not possess territorial jurisdiction because the cause of action arose in Edo State where he was alleged to have been suspended as the National Chairman. The Court of Appeal (per Onyemenam JCA in his leading judgment) dismissed the preliminary objection and held as follows:

“The issue herein is straightforward. Order 3 rule 4 of the High Court of Federal Capital Territory (Civil Procedure) Rules 2018 provides that:

“All other suits shall where the defendant resides or carries on business or where the cause of action arose in the Federal Capital Territory, be commenced and determined in the High court of Federal Capital Territory, Abuja.”

By this Rule, apart from the matters that fall under Order 3 Rules 1 & 2 of the High Court of Federal Capital Territory (Civil Procedure) Rules 2018, the High Court of Federal Capital Territory, Abuja shall have territorial jurisdiction where:

1. The defendant resides within the Federal Capital Territory or
2. The defendant carries on business within the Federal Capital Territory or
3. The cause of action arose within the Federal Capital Territory or

In either of the three circumstances stated above, the High Court of Federal Capital Territory, Abuja shall have territorial jurisdiction to hear and determine the suit. The appellants’ contention herein is that the cause of action arose in Edo State and not in the Federal Capital Territory, Abuja and as such the High court of Federal Capital Territory, Abuja lacks the jurisdiction to hear the suit. This argument is one third percent correct for the simple fact that, where cause of action arose is not the sole source of territorial jurisdiction of the High court of Federal Capital Territory, Abuja. In the instant case, the office of the 1st appellant as National Chairman of the 2nd appellant; as well as the Registered office and Secretariat of the 2nd appellant are both within the Federal Capital Territory, Abuja. This makes the High court of Federal Capital Territory, Abuja, have territorial jurisdiction over the suit filed by the respondents under Order 3 rule 4(1) of the High Court of Federal Capital Territory(Civil Procedure) Rules, 2018…

I therefore hold that the trial court has the territorial jurisdiction to hear the respondent’s suit and resolve the issue in favour of the 1st – 6th respondents.”[3]

The above rationale for the Court of Appeal’s decision of Onyemenam JCA in his leading judgment is clearly wrong. Order 3 rule 4 of the High Court of Federal Capital Territory (Civil Procedure) Rules 2018 is a choice of venue rule for allocating jurisdiction as between the judicial division of the Federal Capital Territory for the purpose of geographical and administrative convenience. It cannot and should not be used to resolve inter-state matters of conflict of laws. It is submitted that the better view is stated by the Court of Appeal in Ogunsola v All Nigeria Peoples Party,[4] where Oduyemi JCA in his leading judgment at the Court of Appeal, rightly held that:

“Where the dispute as to venue is not one between one division or another of the same State High Court or between one division or the other of the F.C.T. Abuja High Court, but as between one division or the other of the F.C.T Abuja High Court, but as between the High Court of one State in the Federation and the High Court of the F.C.T. then the issue of the appropriate or more convenient forum is one to be determined under the rules of Private International Law formulated by courts within the Federation.”[5]

In Oshiomhole (supra) the opportunity was missed to apply and develop jurisdictional conflict of law rules for disputes between members of a political party in Nigeria. The  result of the decision reached in Oshiomhole (supra) in applying choice of venue rules through Order 3 rule 4 of the High Court of Federal Capital Territory (Civil Procedure) Rules 2018 will conflate with the principles of Nigerian private international as the defendants were resident in the State they were sued. So the Court of Appeal in Oshiomhole (supra) incorrectly reasoned its way to the right conclusion – the High Court of the Federal Capital Territory had jurisdiction in this case.

Unfortunately, in recent times the Supreme Court of Nigeria has held that the High Court of a State cannot establish jurisdiction over a cause of action that occurs in another State – the strict territorial jurisdiction approach.[6] This approach has also been applied to disputes between members of a political party.[7] This approach is also wrong as it ignores the principles of traditional Nigerian common law conflict of laws. It also leads to injustice and unduly circumscribes the jurisdiction of the Nigerian court, which ultimately makes Nigerian courts inaccessible and unattractive for litigation. Nigerian courts should have jurisdiction as of right once a defendant is resident or submits to the jurisdiction of the Nigerian court. In Oshiomhole (supra), if the strict territorial jurisdiction approach was applied, the High Court of the Federal Capital Territory, Abuja would not have had jurisdiction because the cause of action arose in Edo State.

In summation, applying the right principle of private international law, the Court of Appeal in Oshiomhole (supra) reached the right decision (residence of the defendant) through an incorrect reasoning of relying on Order 3 rule 4 of the High Court of Federal Capital Territory (Civil Procedure) Rules 2018, which is choice of venue rule for judicial divisions within a State. If the recent Supreme Court cases, which apply the strict territorial jurisdiction approach was applied in this case, Oshiomhole (supra) would be per incuriam and, the High Court of the Federal Capital Territory, Abuja would not have had jurisdiction because the cause of action arose in Edo State.

[1]Ogunsola v All Nigeria Peoples Party (2003) 9 NWLR (Pt. 826) 462, 480.

[2] (2021) 8 NWLR (Pt. 1778) 237.

[3]Oshiomhole v Salihu (No. 1) (2021) 8 NWLR (Pt. 1778) 237, 275-6.

[4](2003 ) 9 NWLR (Pt. 826) 462, 480 .

[5] Ogunsola v All Nigeria Peoples Party (2003 ) 9 NWLR (Pt. 826) 462, 480 .

[6] Capital Bancorp Ltd v Shelter Savings and Loans Ltd (2007) 3 NWLR 148; Dairo v Union Bank of Nigeria Plc (2007) 16 NWLR (Pt 1059) 99,

[7]Mailantarki v Tongo & Ors (2017) LPELR-42467; Audu v. APC & Ors (2019) LPELR – 48134.

In C-280/20, ZN v Generalno konsulstvo na Republika Bulgaria v grad Valensia, Kralstvo Ispania [the Bulgarian consulate], the CJEU last week essentially confirmed CJEU C-154/11 Mahamdia. ZN is a Bulgarian national residing in Sofia who holds a permit to reside in Spain, where she provided services relating to the activity of the Consulate General. ZN brought an action in Bulgaria against the Consulate General seeking, first, recognition of her employment relationship and, second, payment of compensation in lieu of paid annual leave not taken during a period in which she provided services concerning the receipt of documents. The Consulate General contests the jurisdiction of the Bulgarian courts and invokes the jurisdiction of the Spanish courts as the courts of ZN’s place of employment. The referring court has doubts as to the existence of cross-border implications in so far as the dispute at issue in the main proceedings concerns a Bulgarian employee and a Bulgarian employer, and the fact that their legal relationship is closely connected with the Republic of Bulgaria.  It also notes that Bulgarian law expressly provides that, in the case of contracts concluded between a Bulgarian employer established abroad and a Bulgarian national working abroad, any disputes may be examined only by the Bulgarian courts.

In Mahamdia the Court first of all applied the Vienna Convention on Diplomatic Relations and held that an embassy often acts iure gestionis, not iure imperii, and that under the Vienna rules, the EU is perfectly entitled to apply the Regulation given that it applies to ‘civil and commercial’ matters. In that vein, an embassy may very well have to be regarded as an ‘establishment’ within the meaning of Article 20(2) (on employment contracts). In ZN, the Court [28-29] suggests that services in connection with the receipt of documents in files opened at the consulate by Bulgarian nationals and the management of those files, do not fall within the exercise of public powers and do not risk interfering with the security interests of the Republic of Bulgaria. Hence it strongly suggests the issue is a ‘civil and commercial one’, leaving final determination of same to the referring court. I would intuitively have thought that processing documents at a country’s consulate quite au contraire, does engage closely with diplomatic functions that must be qualified as iure imperii, particularly seeing as before said processing one is likely not to have knowledge of the documents’ content.

On the issue of ‘international element’ required to trigger Brussels Ia, the Court per Mahamdia considers a consulate to be an ‘establishment’ of one Member State in another Member State. Hence one of the parties to the dispute must be considered to be domiciled or habitually resident in a Member State other than that of the court seised [37]: the cross-border element is clearly present, which will not surprise many of us. One also assumes that the  aforementioned Bulgarian rule on exclusive jurisdiction for employment disputes between Bulgarians even with an international element present, does not meet with EU law requirements.

Geert.

EU Private International Law, 3rd ed. 2021, para 2.35, para 2.128.

This post was drafted by Paul Eichmüller and Matthias Lehmann.

Almost six years after the Volkswagen Dieselgate scandal became public, the issue of international jurisdiction for damage claims arising from the fraud is still creating headaches. In a recent decision from 24 March 2021, the Austrian Supreme Court decided a case that was in many respects similar to the one giving rise to the much discussed ECJ judgment of C-343/19, VKI/VW – yet, there was one important difference: the car was transported to another country after its purchase.

Like in previous cases, the Austrian Supreme Court had to decide on a damage claim resulting from the sale of a car produced by a member of the VW group. The claimant was resident in Austria but had acquired the car directly from the manufacturer in Germany, where the vehicle was also handed over to the buyer. He then paid the price from his Austrian bank account and imported the car to Austria, where he continued to use it. The manufacturer’s representative had been aware of this intention at the time when the contract was concluded. After the discovery of the emission fraud scandal, the buyer brought a claim for damages against the manufacturer in Austrian courts, claiming compensation for the decreased value of the car due to the fraud.

The courts of first and second instance both declined international jurisdiction since the car had been bought and handed over in Germany. They argued that for the sale of movable goods, the place where the damage occurs in the sense of Article 7(2) Brussels I bis Regulation should always be located where a good is handed over, and not in the country of (intended) habitual use.

The Austrian Supreme Court agreed with the legal opinion of the lower courts. It cited the CJEU ruling in C-343/19, VKI/VW, according to which the damage occurs at the place of purchase (see para 37). As in its view the damage had already occurred in the moment of the purchase in Germany, the Austrian Supreme Court concluded that the subsequent transport to Austria – be it with the previous knowledge or even the consent of the seller – could not change the competent court.

Neither did the fact that the payment was effected from an Austrian bank account establish jurisdiction of Austrian courts change the analysis in the eyes of the Austrian Supreme Court. It distinguished the CJEU judgment in C-304/17, Löber, on the ground that the damage materialised in a tangible object and not in a bank account.

The buyer’s final argument was based on the fact that the seller had allegedly directed his activity to Austria and thus, the applicable law to the contract would be Austrian law pursuant to Art 6(1)(b) Rome I Regulation. However, this argument was rejected on purely procedural grounds.

Austrian courts thus lacked jurisdiction and the claim was rejected. The Supreme Court did not deem a request for a preliminary ruling necessary, as it considered it a case of the acte éclairé doctrine.

The judgment by the Austrian Supreme Court is a logical next step from the CJEU ruling in VKI/VW. The latter gave precedence to the place of purchase, citing the interest of legal certainty, the need for the court to determine the market conditions at this place and the competitive relations or collective consumer interests that may be affected there as the main reasons. These considerations force the conclusion that the damage occurs at the place of purchase irrespective of where the car is subsequently used. This new ruling results from the CJEU using a single connecting factor in VKI/VW instead of weighing a number of different factors. Assigning jurisdiction to the courts of Germany may pose a disadvantage for some customers, but they must be aware that a purchase in a foreign country may also have legal side-effects.

Louis Perreau-Saussine and Sophie Lemaire (Université Paris Dauphine) are the editors of a new book on International Mandatory Rules in International Business Law (L’impérativité en droit international des affaires : questions d’actualité).

Contributors include Pierre Mayer, Louis Perreau-Saussine, Sophie Lemaire, Mathias Audit, Patrick Mathet, Hubert de Verdelhan, Stéphanie Francq, Andrea Bonomi, Martine Behar-Touchais, Juliette Morel-Marroger, Tristan Azzi, Etienne Pataut.

The book collects the proceedings of a conference held at the Cour de cassation in Paris on February 2018. Videos of the conference are freely available here.

On 7 June 2021, the Council of the European Union has adopted a political document titled Conclusions on the Protection of Vulnerable Adults across the European Union.

The document sets out the views of the Council in this area with respect to both civil and criminal matters.

As regards civil matters, the document stresses the importance of the Hague Convention of 13 January 2000 on the international Protection of Adults, which is currently in force for ten Member States, and some third countries, such as Switzerland and the UK (albeit only with respect to Scotland).

The Council invites the Member States for which the Hague Convention is already in force to promote greater awareness of the  Convention among courts and practitioners.

Member States that are engaged in procedures procedures to ratify the Convention, are invited to advance such procedures with a view to finalising the ratification as swiftly as possible, in particular in view of the 2022 Special Commission on this Convention organised by the Hague Conference on Private International Law.

Finally, the Council invites all other Member States to commence and/or advance domestic consultations on a possible ratification of the Convention as swiftly as possible.

The document highlights the relevance of the (international) protection of adults, as understood by the Convention, to the implementation of the EU Strategy for the Rights of Persons with Disabilities (2021-2030).

It also notes that both the number and proportion of older people are growing across Europe. According to the Ageing Report 2021 issued by the European Commission on 20 November 2020, the total population of the EU is projected to decline in the long term, and the age structure will change significantly in the coming decades. The EU population is projected to decline from 447 million people in 2019 to 424 million in 2070 and, during this period, Member States’ populations will age dramatically given the dynamics in fertility, life expectancy and migration. The median age is projected to rise by five years over the coming decades.

A significant number of adults – the document observes – face limitations. Eurostat expects a fifth of the EU population to have some form of disability by 2050. Many of these adults are or will become vulnerable and, by virtue of the multiple barriers that are still in place for persons with a serious mental and/or physical disability, are not or will not be in a position to protect their own interests without adequate support.

This situation impacts the legal capacity of vulnerable adults, who face challenges and difficulties in protecting their rights, defending their interests and accessing justice, both in national and in cross-border situations. In cross-border situations, for instance in the case of citizens residing in a State other than that of their nationality, these existing difficulties may be exacerbated by additional obstacles with respect to language, representation or access to the judicial system and to public services in general.

Today, there are no uniform private international law rules applicable in the field of judicial cooperation in civil matters regarding the protection of vulnerable adults in cross-border situations across the EU, and there are disparities between Member States’ laws on jurisdiction, applicable law, and the recognition and enforcement of protection measures.

The Council acknowledges in its Conclusions that diversity of the rules on these issues might impair the exercise of the right of vulnerable adults to move freely and reside in the Member State of their choice, and might also hinder the possibility for these citizens to obtain adequate protection regarding the administration of their property in a cross-border context.

The document further recalls that the right to self-determination is a fundamental right, and powers of representation through which an adult has made arrangements in advance for his or her care and/or representation should be respected within the EU. The Hague Convention, among other things, ensures that such a power of representation has legal force in a Contracting Party.

Finally, the Council takes note that at the ‘High-Level Conference on the protection of vulnerable adults across Europe: the way forward’, held on 30 March 2021, some panelists stressed that, while it is important to build experience and assess the results of implementing the 2000 Hague Convention, the EU should be more ambitious and go further in seeking the approximation of private international law rules to ensure the effective protection of vulnerable adults on the basis of the principle of mutual recognition.

The Conclusions, however, do not include any indication as to whether and when the political institutions of the Union might consider the adoption of such additional measures.

Published in the Oxford University Commonwealth Law Journal by Saloni Khanderia, Alexander von Humboldt Fellow (Experienced Researcher), Chair for Civil Law, International Private Law and Comparative Law, Ludwig Maximilian University, München and Professor of Law, OP Jindal Global University, Sonipat, India.

The article provides a comparative analysis of the mechanism to determine the ‘international jurisdiction’ of a court in the recognition and enforcement of foreign judgments in civil and commercial matters in Indian and South African private international law. It examines the theoretical bases for executing foreign judgments in these jurisdictions and the grounds on which a foreign court will be considered as ‘internationally competent’ under the private international laws of these BRICS jurisdictions. Accordingly, it demonstrates how the rules to ascertain the competency of the foreign forum in these jurisdictions are narrow and, consequently, impede the free movement of judgments and prevents access to justice. The article highlights some plausible ways to improve the free movement of judgments and access to justice in India and South Africa. In particular, it suggests the endorsement of the Hague Conventions on the Choice of Court Agreements and the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters.

The full text of the article may be found here.

The conference titled Child-friendly procedures in cases of international child abduction will take place online on 24 and 25 June 2021. The conference will present the results of research conducted with the INCLUDE project on what is considered to be ‘good practice’ for professionals in a context of child abduction as seen by children themselves. You can consult the agenda of the conference here, and register for it here.

The INCLUDE project, as explained by its coordinators, aims to enhance the wellbeing of children at all stages of an international child abduction by providing guidelines and good practices to legal and other professionals.

The deliverables of the project (including an International Child Abduction – Legal Framework and Literature Study) are available on the project’s website.

The University of Szeged Faculty of Law and the ELKH Centre for Social Sciences, Institute for Legal Studies are organizing an international online conference: “Cross-Border Litigation in Central-Europe: EU Private International Law before National Courts”. The conference will present the main results of the EU-funded CEPIL research project (“Cross-Border Litigation in Central-Europe: EU Private International Law before National Courts”, 800789 — CEPIL — JUST-AG-2017/JUST-JCOO-AG-2017). The CEPIL project inquires whether EU PIL functions optimally in the CE Member States in order to secure “a Europe of law and justice”. It examines whether EU PIL instruments are applied in CE Member States in a correct and uniform manner, whether Member State courts deal appropriately with disputes having a cross-border element and whether the current legal and institutional architecture is susceptible of securing legal certainty and an effective remedy for cross-border litigants. The project’s research output will be published by Kluwer International.

The online conference will take place via Microsoft Teams on July 6, 2021. The full programme of the event is available here. Participation is free but online registration is kindly requested to receive the link to the conference, which will be emailed shortly before the event.

The INCLUDE project is nearing it end. The project, co-funded by the European Commission, departed from the finding in previous research that children involved in child abduction cases feel frustrated by the lack of clear information and involvement. The teams discussed with youngsters what they think the needs of children are in child abduction cases. These workshops took place in Hungary and Cyprus and led to a Pratice Guide aimed at professionals dealing with child abduction proceedings or the enforcement of return orders. The national reports of Hungary and Cyprus are also available.

The results will be set out and discussed at the final conference (on Zoom) on 24 June (afternoon) and 25 June (morning). Registration is free: see the site of Missing Children Europe.

The United Nations Convention on International Settlement Agreements resulting from Mediation (the ‘Singapore Convention’) entered into force on 12 September 2020. However, the Convention has not been signed by the EU or its Member States. What keeps the EU or its member states from signing the Singapore Convention on Mediation? Experts will discuss pertinent aspects of the Singapore Convention on Mediation to create awareness of the Convention and will debate the EU’s position.

Webinar Link
DATE: Friday 18 June 2021 | 11:00 – 13:00 CET Vienna time (17:00 -19:00 GMT+8
Singapore Time)

To access the webinar use this link:

https://vuw.zoom.us/webinar/register/WN_hSFTXym_SrKRCTIsZ7NgLQ
Please email herman.verbist@everest-law.be if you have any questions.

11.00 (CET) Welcome by Sir Michael Burton, President of FICA

11.05 (CET) Roundtable “The reflection process of the European Commission”
• Is the accession to the Singapore Convention an exclusive jurisdiction of the EU or is it a shared competence of the EU and Member States?
• To what extent would the Singapore Convention benefit EU stakeholders?
• Developing mediation policies and practices in Europe.
• The views of States that signed the Singapore Convention.

12.00 (CET) Break

12.05 (CET) Roundtable “What is the impact of the Singapore Convention on the EU laws and policies?”
• Does the Singapore Convention interfere with the EU internal regulatory framework (as REIO)?
• The role of the Hague Convention on Choice of Forum 2005 or the Hague Judgments Convention 2019.

Panellists include:
• Dr Nadja Alexander, Professor at Singapore Management University
• Ms Anna Joubin-Bret, Secretary of UNCITRAL
• Sir Michael Burton, President of FICA
• Mrs Francisca da Silva Dias Van Dunem, Minister of Justice of Portugal & Chair of the Council of Ministers of Justice during the Portuguese Presidency to the Council (tbc)
• Dr Catherine Kessedjian, former Deputy Secretary General of the Hague Conference on Private International Law & Professor emerita at University Panthéon-Assas Paris II
• Mr Bernard Lange, Chairman of INTA, European Parliament (tbc)
• Dr Dr hc Thomas Pfeiffer, Professor at Heidelberg University & Chair of the European Law Institute Special Interest Group on Dispute Resolution
• Mr Didier Reynders, European Commissioner for Justice (tbc)
• Dr Norel Rosner, Legal and Policy Officer, Directorate-General for Justice and Consumers, European Commission
• Ms Natalie Morris-Sharma, former Chair of UNCITRAL Working group II which drafted the Singapore Convention & Deputy Senior State Counsel with Singapore’s Attorney-General Chambers
• Dr Rimantas Simaitis, Chairman of the CEPEJ-GT-MED
• Mr Aleš Zalar, former Minister of Justice of Slovenia and current co-chair of ELI hub in
Slovenia, will be moderating the roundtable.

Participants will be able to raise questions. Participation is free of charge. In cooperation with:

This Thursday, the Court of Justice delivered its judgment in the case ZN, C-280/20, which heavily relies and confirms the judgment in Mahamdia, C-154/11.

The request for a preliminary ruling arouse out of proceedings in which ZN, a Bulgarian national residing in Sofia, brought an action in Bulgaria against the Consulate General of the Republic of Bulgaria in Valencia, submitting that, in Spain, she has been providing services concerning the receipt of documents in files opened at the consulate and the handling of those files.

In these circumstances, the Bulgarian court referred a following question to the Court:

‘Is Article 5(1) of [the Brussels I bis Regulation], in conjunction with recital 3 thereof, to be interpreted as meaning that the regulation applies for the purpose of determining the international jurisdiction of the courts of a Member State to adjudicate in a dispute between a worker from that Member State and the consular service of that Member State in the sovereign territory of another Member State? Or should those provisions be interpreted as meaning that the national jurisdictional rules of the Member State of which both parties are nationals apply to such a dispute?’

In its judgment delivered without Advocate General’s Opinion, the Court interpreted the question as limited solely to the application of the Brussels I bis Regulation as such and not concerning the determination of the jurisdiction (international/territorial, I suppose given the wording of the national jurisdictional rules at hand) of the Bulgarian or Spanish courts (paragraph 40).

In this regard, the Court held, in the first place, that a dispute involving a Consulate General and a person who provides services which do not fall within the exercise of public powers and which do not risk interfering with the security interests of the Republic of Bulgaria, falls within the notion of “civil and commercial matters” within the meaning of Article 1 of the Brussels I bis Regulation (paragraph 28).

In the second place, echoing the doubts of the referring court (see point 50 of the request for a preliminary ruling), the Cour examined whether the dispute at hand has cross-border implications and as such does indeed fully fall within the scope of the Brussels I bis Regulation. Considering that this is indeed the case, it held that a consulate is an ‘establishment’ of one Member State in another Member State and therefore one of the parties to the dispute must be considered to be domiciled or habitually resident in a Member State other than that of the court seised (paragraph 37). Moreover, the Court added that the contracts for the provision of services at issue in the main proceedings have been concluded in Spain and it was in that Member State that the obligations imposed by those contracts have been performed (paragraph 38).

Interestingly, admitting that the international aspect whose existence is a condition for the applicability of the Brussels I bis Regulation, the Court referred itself to its recitals 3 and 26, where the term ‘cross-border disputes’ is employed with no further guidance as to its definition (paragraph 30). In the present judgment the Court did not rely on the legal basis of the Regulation in order to substantiate the requirement of the international aspect, while it may be argued that such approach would also be possible in the light of the considerations pertaining to the Brussels II bis Regulation in the judgment in UD, C-393/18 PPU, paragraphs 38 to 40.

Ultimately, the Court considered that:

“Article 5(1) of the [Brussels I bis Regulation], read in conjunction with recital 3 of that regulation, must be interpreted as meaning that it applies for the purposes of determining the international jurisdiction of the courts of a Member State to hear and rule on a dispute between an employee from a Member State who does not carry out duties involving the exercise of public powers and a consular authority of that Member State situated in the territory of another Member State”.

The judgment can be consulted here.

A short note on the claim form for the collective claim by a group of parents based in The Netherlands against TikTok Technology Limited, domiciled at Dublin, Ireland.  It engages Article 79 GDPR, as well as the consumer section of Brussels Ia. At the applicable law level, it suggests application of Article 6 Rome I (consumer contracts; a logical counterpart of the jurisdictional analysis) and, in subsidiary fashion, Article 4 Rome II, each to suggest application of Dutch law.

I wrote on Article 79 here, and the problems which I signalled have in the meantime surfaced in case-law, as I signalled ia here.  Current TikTok claim however prima facie would seem to be more straightforward under both GDPR, BIa and Rome I – one imagines a possible TikTok’s defence to go towards the meaning of ‘establishment’.

Geert.

Dutch collective claim against #TikTok
Claim form here https://t.co/YhQ8IfXxA8
At jurisdictional level it engages A79 #GDPR (see https://t.co/KBZ4s5diN7) & consumer section BIa
Re applicable law, A6 Rome I, A4 Rome II.
A claim form only, the analysis on both is as yet incomplete. https://t.co/ShOhuQwzP4

— Geert Van Calster (@GAVClaw) June 2, 2021

The Council of the European Union will aim at establishing a general approach on the regulation on assignments of claims on 7 June 2021 in Luxembourg.

The text which should be adopted is an amended version of the 2018 proposal of the European Commission for a Regulation on the law applicable to the third-party effects of assignments of claims, which was adopted by the European Parliament  in 2019 with 24 amendments.

The main features of the new text are as follows.

One of the most debated issues was whether the principle should be that third party effects of assignment of claims should be governed by the law of the habitual residence of the assignor or the law of the assigned claim. The Commission had proposed to retain the former, with certain exceptions.

In line with the Commission proposal, the law of the assignor’s habitual residence received more support than the assigned-claim law as it would lead to more predictability for third parties. The law of the assignor’s habitual residence was deemed suitable for bulk assignments subject to different laws and future claims and consistent with Regulation (EU) 2015/848 (Insolvency Regulation).

The list of exceptions, however, has slightly increased. The law of the assigned claim would apply to a longer list of claims in financial markets, but also to credit claims. This last exception will not doubt be criticised. Recital 27(b) clarifies its scope, which seems extensive:

The third-party effects of assignments of claims arising out of agreements whereby credit is granted in the form of a loan should be governed by the law of the assigned claim. This should include credit claims as defined in point (o) of Article 2(1) of Directive 2002/47, often used as financial collateral within the Eurosystem. In order to facilitate the cross-border assignment of claims arising out of syndicated loans and lending-based crowdfunding on secondary financial markets, the third-party effects of the assignment of claims arising out of syndicated loans and lending-based crowdfunding should also be subject to the law of the assigned claim.

It was also thought that the scope of the instrument should be further clarified and restricted. In particular, three matters are excluded from the scope of the future regulation:

– the transfer of financial instruments, including securities and derivatives;
– the transfer of crypto-assets; and
– the assignment of claims where the claims are not in intangible form but incorporated in a certificate or represented by a book entry.

Franco  Ferrari (New York University School of Law) has published his Hague Lectures on Forum Shopping despite Unification of Law in the Collected Courses of The Hague Academy of International Law (volume 413). 

The abstract reads:

It has often been suggested that forum shopping is “evil” and needs to be eradicated. And it is in this context that one must understand statements by commentators to the effect that the unification of substantive law through international conventions constitutes one way to reach this result. These lectures show not only that the qualification of forum shopping as something that is deplorable is outdated, that the negative attitude vis—à—vis forum shopping seems grounded on outdated preconception and prejudice, and disregards, for example, that critical analysis has demonstrated that forum shopping also has beneficial effects, such as the promotion of ethical representation of one’s client, the protection of access to justice, and the provision of a remedy for every injury.

These lectures also show that the drafting of uniform substantive law convention cannot prevent forum shopping, for many reasons, of which these lectures create a taxonomy. The reasons are classified into two main categories, namely convention-extrinsic and convention-intrinsic reasons. The former category comprises those reasons upon which uniform substantive law conventions do not have an impact at all, and which therefore will continue to exist regardless of the coming into force of any such convention. These reasons range from the costs of access to justice to the bias of potential adjudicators to the enforceability of judgments. These and the other convention-extrinsic reasons discussed in these lectures are and will not be influenced by uniform substantive law conventions.

The convention-intrinsic reasons, on the other hand, are reasons that relate to the nature and design of uniform substantive law conventions, and include their limited substantive and international spheres of application as well as their limited scope of application, the need to provide for reservations, etc. And no drafting efforts will be able to do away with these convention-intrinsic reasons, because they touch upon features of these conventions that are ontological in nature.

The lectures also address another forum shopping reason that cannot be overcome, namely the impossibility to ensure uniform applications and interpretations of the various uniform substantive law conventions. As these lectures show, as long as these conventions are interpreted horizontally, diverging interpretations and applications by courts of different jurisdictions of conventions that need to be drafted using vague language cannot be avoided. This is due mostly to a natural tendency by adjudicators to rely on their domestic legal background and notions when having to resolve problems arising in the context of the interpretation and application uniform substantive law conventions.

It is in light of all of the above that the lectures predict that forum shopping is here to stay.

More details, including the table of contents, can be found here.

Written by Béligh Elbalti (Associate Professor, Graduate School of Law and Politics – Osaka University)

1. Introduction

Assume that you successfully obtained a favourable judgment from a foreign court that orders the losing party to pay punitive damages in addition to compensatory damages. Assume also that, later, you could obtain a partial satisfaction of the amount awarded by the court by way of compulsory execution in the rendering state. Happy with the outcome and knowing that punitive damages cannot be enforced in Japan, you confidently proceed to enforce the remaining part before a Japanese court arguing that the payment you would like to obtain now corresponds to the compensatory part of the award. Could the judgment be enforced in Japan where punitive damages are considered as contrary to public policy? In other words, to what part of the damages the paid amount corresponds: the compensatory part or the punitive part?

This is the question that the Supreme Court of Japan answered in its recent judgment rendered on 25 May 2021.

The present case has already yielded an important Supreme Court decision rendered on 18 January 2019 (decision available here). The main issue that was addressed therein concerned the compatibility of the foreign judgment with the procedural public policy of Japan. The summary below will however be limited to the issue of punitive damages as this was the main issue the Supreme Court has addressed in its decision reported here.

2. Facts:

In 2013, the Xs (Appellees) filed an action with a Californian court seeking damages against the Y (appellant) and several other persons for illegally obtaining their trade secrets and business models. In 2015, the Californian court rendered a default judgment against Y ordering him to pay about USD 275,500, including punitive damages (USD 90,000) and compensatory damages (USD 184,990) as well as other related additional fees. Soon after the decision became final and binding, Xs petitioned for the compulsory execution of the said decision in the US and could obtain partial payment of the awarded damages (USD 134,873). Thereafter, Xs moved to claim the payment of the remaining part (i.e. USD 140,635) by seeking the enforcement of the Californian judgment after deducting the part of the payment already made. Xs argued that the judgment did not violate public policy as the amount they were seeking to obtain in Japan was anyway confined within the scope of the compensatory damages. Y challenged the petition for enforcement, inter alia, on the ground that punitive damages were incompatible with Japanese public policy and therefore had no effect in Japan; accordingly, the payment made in the US should be appropriated to the satisfaction of the compensatory part of the foreign judgment. Thus the question above.

3. Rulings

The first instance court (Osaka District Court) considered that the punitive damages ordered by the Californian court were effectively punitive in nature and as such against public policy and had no effect in Japan. The court then considered that the payment made abroad could not correspond to the payment of the punitive damages part, because this would result in enlarging the scope of the enforcement of the other part of the judgment and consequently lead to a result that did not substantially differ from the recognition of the effect of the punitive award. The court stated that the payment made abroad corresponded to the part other than the punitive portion of the damages. It finally ruled that the enforcement petition was to be admitted to the extent of the remaining amount (i.e. only USD 50,635), after deducting both the payment already made (USD 134,873) and the punitive damages part (USD 90,000).

On appeal, the issue of punitive damages was not addressed by the second Instance Court (Osaka High Court). The Court decided to reject the enforcement of the Californian default judgment on the ground of violation of procedural public policy of Japan because Y was deprived of an opportunity to file an appeal as the notice of entry of judgment was sent to a wrong address. However, unsatisfied with the ruling of the High Court as to whether Y was actually deprived of an opportunity to file an appeal, the Supreme Court quashed the High Court ruling and remanded the case to the same court for further examination. Again, the issue of punitive damages was not raised before the Supreme Court.

Before the Osaka High Court, as the court of remand, the issue of the enforceability of punitive damages was brought back to the center of the debate. In this respect, like the Osaka District Court, the Osaka High Court considered that the USD 90,000 award was punitive in nature and therefore incompatible with public policy in Japan. However, unlike the Osaka District Court, the High Court considered that since the obligation to pay punitive damages in California could not be denied, the payment made abroad through the compulsory execution procedure should be appropriated to the satisfaction of the amount ordered by the Californian court as a whole. Therefore, the since the remaining part (i.e. USD 140,635) did not exceed the total amount of the foreign judgment excluding the punitive damages part (i.e. USD 185,500), the High Court considered that its enforcement was not contrary to public policy. Unhappy with this ruling, Y appealed to the Supreme Court.

The Supreme Court disagreed (decision available here, in Japanese only). According to the Supreme Court, “if payment was made with respect to an obligation resulting from a foreign judgment including a part ordering the payment of monies as punitive damages, which do not meet the requirements of Art. 118(iii) CCP, it should be said that the foreign judgment cannot be enforced as if the said payment was appropriated to the satisfaction of the punitive damages part, even when such payment was made in the compulsory execution procedure of the foreign court” (translation by author).

The Supreme Court considered that the payment made should be appropriated to the satisfaction of the parts of the foreign judgment other than punitive damages. According to the Supreme Court, punitive damages had no effect in Japan and therefore, there could be no obligation to pay punitive damages when deciding the effect of a payment of an obligation resulting from a foreign judgment. The Supreme Court finally agreed with the Osaka District Court in considering that, since there was no obligation on the part of Y to pay punitive damages due to their incompatibility with Japanese public policy, Y’s obligation under the foreign judgment was limited to USD 185,500. Therefore, since Y had already paid USD 134,873 in the compulsory execution procedure in rendering state, Xs were entitled to claim only the difference of USD 50,635.

4. Comments:

The ruling of the Supreme Court is interesting in many regards. First, the Supreme Court reiterated its earlier categorical position on the incompatibility of punitive damages with Japanese public policy. This position is in line with the prevailing opinion in Japan according to which punitive damages are in principle contrary to Japanese public policy due to the fundamental difference in nature (civil v. criminal) and function (compensatory v. punitive/sanction) (For a general overview on the debate in Japan, see Béligh Elbalti, “Foreign Judgments Recognition and Enforcement in Civil and Commercial Matters in Japan”, Osaka University Law Review, Vol. 66, 2019, pp. 7-8, 24-25 available here).

Second, the solution in the present decision can be regarded as a logical consequence of the absolute rejection of punitive damages. In effect, in deciding as it did, the Supreme Court showed its intention to discharge the judgment debtor from his/her obligation to pay punitive damages resulting from a foreign judgment even in the case where a partial payment has been made as a consequence of a compulsory procedure before the foreign court. Indeed, since there can be no obligation to pay punitive damages resulting from a foreign judgment, any payment made abroad should be appropriated to the satisfaction of the parts of the awarded damages other than the punitive portion.

Third, after the first Supreme Court decision on punitive damages, a practice has been established based on which judgment creditors who seek the enforcement of a foreign judgment containing punitive damages, usually, content themselves with the request for the enforcement of the compensatory part to the exclusion of the punitive part of the foreign judgment. (See for example, the Supreme Court judgment of 24 April 2014, available here). For a comment on this case from the perspective of indirect jurisdiction, see Béligh Elbalti, “The Jurisdiction of Foreign Courts and the Recognition of Foreign Judgments Ordering Injunction – The Supreme Court Judgment of April 24, 2014, Japanese Yearbook of International Law, vol. 59, 2016, pp. 295ss, available here). This practice is expected to continue after the present decision as well. However, in this respect, the solution of the Supreme Court raises some questions. Indeed, what about the situation where the judgment creditor initiates a procedure in Japan seeking the enforcement of compensatory part of the judgment first? Would it matter if the judgment creditor shows the intention to claim the payment of the punitive part later so that he/she ensures the satisfaction of the whole amount of the award? More importantly, if the judgment debtor was obliged to pay for example the full award including the punitive part in the rendering state (or in another state where punitive damages are enforceable), would it be entitled to claim in Japan the payment back of the amount that corresponds to the punitive part of the foreign judgment? Only further developments will provide answers to these questions.

In any case, one can somehow regret that the Supreme Court missed the chance to reevaluate its position with respect to punitive damages. In effect, the court ruled as it did without paying the slightest heed to the possibility of declaring punitive damages enforceable be it under certain (strict) conditions. In this regard, the court could have adopted a more moderate approach. This approach can consist in admitting that punitive damages are not per se contrary to public policy, and that the issue should be decided on a case by case basis taking into account, for example, the evidence produced by the judgment creditor to the effect that the awarded amount would not violate public policy (see in this sense, Toshiyuki Kono, “Case No. 67” in M Bälz et al. (ed.), Business Law in Japan – Cases and Comments – Intellectual Property, Civil, Commercial and International Private Law (Wolters Kluwer Law & Business, 2012), p. 743s); or when the amount awarded is not manifestly disproportionate with the damages actually suffered (for a general overview, see Béligh Elbalti, “Spontaneous Harmonization and the Liberalization of the Recognition and Enforcement of Foreign Judgments, Japanese Yearbook of Private International Law, Vol. 16, 2014, pp. 274-275 available here).

In this respect, it is interesting to note that such an approach has started to find its way into the case law in some jurisdictions, although the methods of assessment of compatibility of punitive damages with the public policy of the recognizing state and the outcome of such an assessment differed from one jurisdiction to another (for a general overview, see Csongor I Nagy, Recognition and Enforcement of US Judgments Involving Punitive Damages in Continental Europe, 30 Nederlands Internationaal Privaatrecht 1 2012, pp. 4ss). For example, the Greek Supreme Court has refused to enforce punitive damages but after declaring that punitive damages may not violate public policy if they are not excessive (judgment No. 17 of 7 July 1999, decision available at the Greek Supreme Court homepage). The French Cour de cassation has also refused to enforce a foreign judgment awarding punitive damages, but – again – after declaring that punitive damages were not per se contrary to French ordre public, and that that should be treated as such only when the amount award was disproportionate as compared with the sustained damages (judgment No. 09-13.303 of 1 December 2010, on this case, see Benjamin West Janke and François-Xavier Licari, “Enforcing Punitive Damages Awards in France after Fountaine Pajot”, 60 AJCL 2012, pp. 775ss). On the other hand, the Spanish Supreme Court accepted the full enforcement of an American judgment including punitive damages (judgment of No. 1803/2001 of 13 November 2001; on this case see Scott R Jablonski, “Translation and Comment: Enforcing U.S. Punitive Damages Awards in Foreign Courts – A Recent Case in the Supreme Court of Spain” 24 JLC 2005, pp. 225ss). Finally, the recent extraordinary revirement jurisprudentiel of the Italian Supreme Court deserves to be highlighted. Indeed, in its judgment No. 16601 of 5 July 2017, the Corte Suprema di Cassazione declared that punitive damages could be enforced under certain conditions after it used to consider, as Japanese courts still do, that punitive damages as such were contrary to Italian public policy (on this case see, Angelo Venchiarutti, “The Recognition of Punitive Damages in Italy: A commentary on Cass Sez Un 5 July 2017, 16601, AXO Sport, SpA v NOSA Inc” 9 JETL 1, 2018, pp.104ss). It may take some time for Japanese courts to join this general trend, but what is sure is that the debate on the acceptability of punitive damages and their compatibility with Japanese public policy will certainly be put back in the spotlight of doctrinal discussions in the coming days.