Droit international général

On 6 April 2020, the High Court of England and Wales handed down its judgment in the VW NOx Emissions Group Litigation. Besides many points of interest for owners of VW cars, it contains a new and rather unexpected development of EU private international law. In effect, the judgment significantly increases the role of administrative rulings in civil cross-border cases.

Background

The German Federal Motor Vehicle Authority (Kraftfahrzeugbundesamt) had written letters in 2015 regarding “defeat software”, by which VW vehicles recognised when they were being tested for compliance with emissions standards and consequently lowered performance. The letters were addressed to VW and demanded the removal of the software.

Although these administrative measures have prima facie no connection to the private law dispute pending before the High Court, Waksman J considered that he was bound by them (margin Nos 303-418). His main argument was by reference to the Framework Directive, which harmonises car type-approval in the EU (margin No 379). The German Federal Motor Vehicle Authority is the competent authority under the Directive for VW.

Binding Nature of Administrative Fact-Findings in Civil Proceedings

A critical point is that the letters did not contain any approval, but merely demanded the removal of certain software. Moreover, any determination that the software was illegal would be a matter of fact, and would not affect any order itself. It remains therefore questionable whether a court would be bound by this statement. Indeed, even German courts continue to disagree as to the statements’ effect in civil litigation.

Waksman J nevertheless thought to be bound by the letters for the following reasons (margin No 377):

No other approval authority [than the German authority] could make such an order [to remove the defeat software]. It would be very odd if Member States other than that in which the measures were ordered were not bound, so that authorities in those other Member States were left to decide what to do about it. This negates the objective of total harmonisation set out in Article 1 of the Framework Directive. It would enable a manufacturer in private proceedings in another Member State to argue that it was not in fact bound to take the measures ordered by the relevant approval authority because that authority got it wrong. But the manufacturer could only be prevented from making that argument if the order of the relevant approval authority was in fact binding throughout the EU.

Applicable Law to Binding Nature

In Waksman J’s view, the question regarding which orders are binding fell to be determined under local law which, in the case before him, was German law (margin No 380). As such, the orders were to be final and subject to appeal (id.). Their challenge would also be governed by German law according to the “local remedies rule” (margin No 383).

Duty of Sincere Cooperation

To buttress his position, Waksman J pointed to the duty of sincere cooperation under Article 4(3) of the Treaty on European Union (margin no 384). This would oblige the UK to follow this principle and grant mutual recognition to decisions under the harmonised approval regime until the end of the transition period, which is set to expire on 31 December 2020 (margin no 386). In his view, the duty of sincere cooperation implies a “principle of deference”, which would inhibit courts from second-guess the findings of another Member State’s authorities (margin nos 387-388). If it were open to courts to challenge the statements of the competent authority, this would run contrary the principle of full effectiveness (effet utile) of EU law (margin No 389).

Competition Law Analogy

Waksman J further drew an analogy with EU competition law (margin Nos 397-409), under which regulatory decisions by the Commission are binding on courts in civil proceedings (see Art 16(1) Regulation 1/2003). The fact that the letters in question were issued by a national authority and not by the Commission did not matter, because the German authority would have exclusive jurisdiction under the harmonised Framework (margin No 397).

Conflict-of-Laws Principles

Finally, Waksman J pointed out that, even if his analysis of EU law were incorrect, he would still be bound by the German authority’s findings under conflict-of-laws principles. The reason he gave for this view is extremely terse (margin No 419):

… even if the KBA decision did not bind directly as a matter of EU law, then, either as a matter of EU conflicts principles, or as a matter of English law, the question of its binding effect here must be decided by reference to German law being the local law of the KBA.

Assessment

The judgment is a bold and audacious leap forward. The CJEU has so far ruled that courts must take administrative decisions from other Member States into account (see CJEU, Land Oberösterreich v Čez). Furthermore, the Court has decided that courts cannot ignore legal situations created in other Member States  (see CJEU, Garcia Avello). But it has not considered fact-findings in administrative decisions to be binding in cross-border civil litigation. The position under competition law is different, as there is no provision comparable to Article 16(1) of Regulation 1/2003 in the Framework Directive for car type approvals.

There are strong reasons to give administrative rulings a more prominent role in civil law proceedings (see Lehmann, Regulation, Global Governance and Private International Law: Squaring the Triangle). The judgment goes very far in recognising administrative fact-findings as conclusive for private disputes. This raises a number of questions, Which findings are binding – only those that are relevant for the order, or also others? What if the authority had found that VW had not installed “defeat” software; would that also be binding on a foreign court? What happens if the administrative decision is withdrawn or annulled in court?

Irrespective of these doubts, one must welcome the High Court’s decision. If it were followed across the EU, contradictory rulings on civil liability for the violation of regulatory law could largely be avoided. In this sense, the judgment could help deeper harmonisation in the Single Market. It forcefully demonstrates that British courts still can make a signification contribution to European law despite Brexit.

— Many thanks to Marion Ho-Dac and Amy Held for their contributions to this post.

Advocate-General Szpunar in his Opinion in C-73/19 Belgische Staat v Movic BV et al refers in footnote to the comment made by Yours Truly (much humbled) on p.38 of the Handbook, that the seminal Eurocontrol and Steenbergen judgments on the concept of ‘civil and commercial’ in the Brussels regime, each posit dual criteria for the concept but only ever have one of their two legs applied. The Opinion in general testifies to the complex picture that emerges in case-law on the issue.

The issue is a knock-out point under Brussels Ia and the majority of EU private international law instruments. If the case is not civil and commercial, European PIL does not apply and residual national law takes over. Despite or perhaps because of this core relevance, the debate on the concept is far from settled. I reported on it as recently as a few weeks back (Øe AG in C-189/19 Supreme Site; and a little before that C-421/18 Dinant Bar v maître JN,) and I expressed a need for serious chewing over following different strands of focus among the CJEU’s chambers (my post on C-579/17 Buak).

The case at issue concerns enforcement of Belgium’s unfair trading act, not as in C‑167/00 Henkel by a consumer group but rather by the public authorities of the Member State.

Movic BV of The Netherlands and the others defendants practices ticket touting: resale of tickets for leisure events. Belgium in recent years has been cracking down on the phenomenon and in conflict terms, has expressed an eagerness to qualify big chunks of e-commerce laws as lois de police. One assumes this explains the reluctance of the defendants to be hauled in front of a Belgian judge.

At 12: what the Belgian authorities are seeking, is

first, findings of infringement in respect of conduct constituting, inter alia, unfair commercial practices, secondly, an order for the cessation of such infringement, thirdly, an order for publicity measures to be taken at the expense of the defendants; fourthly, the imposition of a penalty payment in a fixed sum, due in respect of each and every infringement which may be found to have taken place after service of the judgment, and fifthly, permission for the fact of such infringement to be certified simply by means of a report drawn up by a sworn official of one of the authorities in question.

At 16: arguments against the issue being of a civil and commercial nature, are

first, unlike any other person, the Belgian authorities are not required to demonstrate that they have an interest of their own in bringing proceedings of the kind illustrated by the main proceedings, secondly, their powers of investigation are not available to legal persons governed by private law, and thirdly, they also have enforcement powers which are not available to such persons.

As for the issue of lack of requirement of showing interest:

The first authority signalled is C‑551/15 Pula Parking: acting in the public interest does not equate acting in the exercise of State authority. Per the same case and per Fahnenbrock, and Kuhn, neither, the AG points out, does origin of authority in Statute, equate acta iure imperii. The fact that a power was introduced by a law is not, in itself, decisive in order to conclude that the State acted in the exercise of State authority (at 32). Neither does it follow from C-271/00 Baten that that the mere fact of exercising a power which the legislature has specifically conferred on a public authority automatically involves the exercise of public powers (at 34).

The AG then more specifically discusses the issue of lack of requirement to show interest to establish standing. Here there are plenty of similarities with the consumer organisations at issue in Henkel (37 ff). The exemption does not mean that the entity enjoys a prerogative under which it has powers altering the civil or commercial nature of its legal relationship with the private law entities, or the subject matter of the proceedings in which a cessation action is brought.  Similarly, it has no such powers as regards the procedural framework within which the proceedings arising out of those relationships are heard, which is identical whatever the status of the parties to the proceedings may be.

Further, with respect to the powers of investigation:  here the AG reads C‑49/12 Sunico as meaning that to exclude proceedings from the scope of ‘civil and commercial matters’, (at 53)

it is not sufficient to identify national provisions which, in abstracto, authorise a public authority to gather evidence through the use of its public powers and to use such evidence in legal proceedings. Equally, it is not sufficient to find that that evidence has in fact been used in the proceedings. In order to exclude the proceedings from the scope of that expression, it must also be determined, in concreto, whether, by virtue of having used that evidence, the public authority is not in the same position as a person governed by private law in analogous proceedings.

(In the case at issue there are no such indications). This reading of Sunico makes the exemption exercise very much a factual one – which is not in itself unusual in the context of the case-law on ‘civil and commercial’. One hopes the Court itself will give clear guidance on how Sunico must be read.

The AG also zooms in on the request for penalty payments. Here, the core reference is C‑406/09 Realchemie. At 72 (after having analysed the issue): a procedure in which such payment is sought, falls within the scope of ‘civil and commercial matters’ where,

‘first, the purpose of the penalty payment is to ensure the effectiveness of the judicial decision given in the proceedings, which fall within the scope of that expression, and secondly, the penalty payment is a normal measure of civil procedure which is also available to private individuals, or which is imposed without exercising special powers that go beyond those arising from the rules of general law applicable to relationships between private individuals.’

(With both these boxes ticked in casu). This I believe is most sound.

Within the same context, the last argument refers to the need or not to instruct a bailiff to certify the existence (and frequency) of continued infringement: the relevant Belgian authorities can suffice with an oath by a civil servant. This is in fact not a point signalled by the referring court however the Belgian Government at hearing seemingly sought insurance cover as it were, effectively seeking sanction of its use of a civil servant statement in lieu of what ordinary parties would have to do, which is to instruct a bailiff. This, the AG suggest (at 75), does amount to exercise of public authority, but only then for that part of the claim (the penalty payment( against the Dutch defendants): weapons which an ordinary person could not avail themselves of (I would refer to C-271/00 Steenbergen here).

 

All in all the case illustrates the relatively narrow room for abstract pondering of the issue of ‘civil and commercial’. The Opinion is highly factual, and admirably on point viz the extensive CJEU authority. The need for highly factual considerations sits uneasily with the Regulation’s expressed DNA of predictability. However this squares with the CJEU case-law on same. And it bodes interestingly when we will start applying the corresponding Hague Judgments Convention provisions…

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Heading 2, Heading 2.2.

The latest issue of the „Praxis des Internationalen Privat- und Verfahrensrechts (IPRax)“ features the following articles:

A. Stein: The 2019 Hague Judgments Convention – All’s Well that Ends Well?

The Hague Convention on the Recognition and Enforcement of Foreign Judgments, which was concluded in July 2019, holds the potential of facilitating the resolution of cross-border conflicts by enabling, accelerating and reducing the cost of the recognition and enforcement of judgments abroad although a number of areas have been excluded from scope. As the academic discussion on the merits of this instrument unfolds and the EU considers the benefits of ratification, this contribution by the EU’s lead negotiator at the Diplomatic Conference presents an overview of the general architecture of the Convention and sheds some light on the individual issues that gave rise to the most intense discussion at the Diplomatic Conference.

C. North: The 2019 HCCH Judgments Convention: A Common Law Perspective

The recent conclusion of the long-awaited 2019 HCCH Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (the “Judgments Convention”) provides an opportunity for States to reconsider existing regimes for the recognition and enforcement of foreign judgments under national law. This paper considers the potential benefits of the Judgments Convention from a common law perspective. It does so by considering the existing regime for recognition and enforcement at common law, and providing an overview of the objectives, structure and a number of key provisions of the Judgments Convention. It then highlights some of the potential benefits of the Convention for certain common law (and other) jurisdictions.

P.-A. Brand: Recognition and enforcement of decisions in administrative law matters

Whereas for civil and commercial matters there are extensive rules of international and European civil procedural law on mutual legal assistance and in particular on the recognition and enforcement of civil court decisions, there is no similar number of regulations on legal assistance and for the international enforcement of administrative court decisions. The same applies to the recognition of foreign administrative acts. This article deals with the existing rules, in particular with regard to decisions in administrative matters, and concludes that the current system of enforcement assistance in the enforcement of administrative decisions should be adapted to the existing systems of recognition and enforcement of judgments in civil and commercial matters.

B. Hess: About missing legal knowledge of German lawyers and courts

This article addresses a decision rendered by the Landgericht Düsseldorf in which the court declined to enforce, under the Brussels Ibis Regulation, a provisional measure issued by a Greek court. Erroneously, in its decision the Landgericht held that applications for refusal of enforcement of foreign decisions (article 49 Brussels Ibis Regulation) are to be lodged with the Landgericht itself. Since the party lodged its application with the Landgericht on the last day of

the time limit, the Oberlandesgericht Düsseldorf eventually held that the application was untimely as it was not lodged with the Oberlandesgericht, instead. The Oberlandesgericht refused to restore the status quo ante because the information about the competent court had been manifestly erroneous, whereas the lawyer is expected to be familiar with articles 49 (2) and 75 lit b) of the Brussels Ibis Regulation. This article argues that jurisdiction over applications for refusal of enforcement is not easily apparent from the European and German legal provisions and that the legal literature addresses the issue inconsistently. This results in a certain degree of uncertainty as concerns jurisdiction over such applications, making it difficult to establish cases of possibly manifestly incorrect applications.

C.F. Nordmeier: Abuse of a power of attorney granted by a spouse – The exclusion of matrimonial property regimes, the place of occurrence of the damage under Brussels Ibis and the escape clause of art. 4 (3) Rome II

The article deals with the abuse of power of attorney by spouses on the basis of a decision of the Higher Regional Court of Nuremberg. The spouses were both German citizens, the last common habitual residence was in France. After the failure of the marriage, the wife had transferred money from a German bank account of the husband under abusive use of a power of attorney granted to her. The husband sues for repayment. Such an action does not fall within the scope of the exception of matrimonial property regimes under art. 1 (2) (a) Brussels Ibis Regulation. For the purpose of determining the place where the damage occurred (Art. 7 No. 2 Brussels Ibis Regulation), a distinction can be made between cases of manipulation and cases of error. In the event of manipulation, the bank account will give jurisdiction under Art. 7 No. 2 Brussels Ibis Regulation. Determining the law applicable by Art. 4 (3) (2) Rome II Regulation, consideration must be given not only to the statute of marriage effect, but also to the statute of power of attorney. Particular restraint in the application of Art. 4 (3) (2) Rome II Regulation is indicated if the legal relationship to which the non-contractual obligation is to be accessory is not determined by conflict-of-law rules unified on European Union level.

P.F. Schlosser: Governing law provision in the main contract – valid also for the arbitration provision therein?

Both rulings are shortsighted by extending the law, chosen by the parties for the main contract, to the arbitration provision therein. The New York Convention had good reasons for favoring, in the absence of a contractual provision specifically directed to the arbitration provision, the law governing the arbitration at the arbitrators’ seat. For that law the interests of the parties are much more predominant than for their substantive agreements.

F. Rieländer: Choice-of-law clauses in pre-formulated fiduciary contracts for holding shares: Consolidation of the test of unfairness regarding choice-of-law clauses under Art. 3(1) Directive 93/13/EEC

In its judgment, C-272/18, the European Court of Justice dealt with three conflict-of-laws issues. Firstly, it held that the contractual issues arising from fiduciary relationships concerning limited partnership interests are included within the scope of the Rome I Regulation. While these contracts are not covered by the exemption set forth in Art. 1(2)(f) Rome I Regulation, the Court, unfortunately, missed an opportunity to lay down well-defined criteria for determining the types of civil law fiduciary relationships which may be considered functionally equivalent to common law trusts for the purposes of Art. 1(2)(h) Rome I Regulation. Secondly, the Court established that Art. 6(4)(a) Rome I Regulation must be given a strict interpretation in light of its wording and purpose in relation to the requirement “to be supplied to the consumer exclusively in a country other than that in which he has his habitual residence”. Accordingly, this exception is applicable only if the consumer needs to leave the country in which he has his habitual residence for the purpose of enjoying the benefits of the services. Thirdly, the Court re-affirmed that choice-of-law clauses in pre-formulated consumer contracts are subject to a test of unfairness under Art. 3(1) Directive 93/13/EEC. Since the material scope of this Directive is held to apply to choice-of-law clauses, such a clause may be considered as unfair if it misleads the consumer as far as the laws applicable to the contract is concerned.

U. Bergquist: Does a European Certificate of Succession have to be valid not only at the point of application to the Land Registry, but also at the point of completion of the registration in the Land Register?

When it comes to the evidentiary effect of European Certificates of Successions, there are different opinions on whether a certified copy of the certificate has to be valid at the time of the completion of a registration in the Land register. The Kammergericht of Berlin recently ruled that a certified copy loses its evidentiary effect in accordance with art. 69 (2) and (5) of the European Succession Regulation (No. 650/2012) after expiry of the (six-month) validity period, even if the applicant has no influence on the duration of the registration procedure. This contribution presents the different arguments and concludes – in accordance with the Kammergericht – that not the date of submission of the application but the date of completion of the registration has to be decisive for the required proof.

D. Looschelders: International and Local Jurisdiction for Claims under Prospectus Liability

The judgment by the Austrian Supreme Court of Justice (Oberster Gerichtshof, OGH) deals with international and local jurisdiction for a claim under prospectus liability. It is mainly concerned with the determination of the place in which the harmful event occurred, as stated in Art. 5(3) of Regulation No 44/2001. Specifying the damage location can pose significant problems due to the fact that prospectus liability compensates pure economic loss. The OGH had stayed the proceedings in order to make a reference to the European Court of Justice (ECJ) for a preliminary ruling on several questions related to this issue. However, the decision by the ECJ left many details unsettled. This article identifies the criteria developed by the OGH in light of the case. The author agrees with the OGH to designate the damage location in this particular case as the injured party’s place of residence. Nevertheless, he points out the difficulties of this approach in cases where not all investment and damage specific circumstances point to the investor’s country of residence.

W. Voß: U.S.-style Judicial Assistance – Discovery of Foreign Evidence from Foreign Respondents for Use in Foreign Proceedings

In the future, German litigants in German court proceedings will have to hand over to the opposing party evidence located on German territory based on American court orders? In general, under German law, the responsibility to gather information and to clarify the facts of the case lies with the party alleging the respective facts, while third parties can only be forced to produce documents in exceptional circumstances.  However, the possibility to obtain judicial assistance under the American Rule 28 U.S.C. § 1782(a) increasingly threatens to circumvent these narrow provisions on document production in transatlantic relations. For judicial assistance this Federal statute provides parties to foreign or international proceedings with access to pre-trial discovery under U.S. law, if the person from whom discovery is sought “resides or is found” in the American court district. Over the years, the statute has been given increasingly broad applicability – a trend that is now being continued by the recent ruling of the Second Circuit Court of Appeals discussed in this article. In this decision, the Court addressed two long-disputed issues: First, it had to decide whether the application of 28 U.S.C. § 1782(a) is limited to a person who actually “resides or is found” in the relevant district or whether the statute could be read more broadly to include all those cases in which a court has personal jurisdiction over a person. Second, the case raised the controversial question of whether 28 U.S.C. § 1782 allows for extraterritorial discovery.

M. Jänterä-Jareborg: Sweden: Non-recognition of child marriages concluded abroad

Combatting child marriages has been on the Swedish legislative agenda since the early 2000s. Sweden’s previously liberal rules on the recognition of foreign marriages have been revisited in law amendments carried out in 2004, 2014 and 2019, each reform adding new restrictions. The 2019 amendment forbids recognition of any marriage concluded abroad as of 1/1/2019 by a person under the age of 18. (Recognition of marriages concluded before 1/1/2019 follows the previously adopted rules.) The marriage is invalid in Sweden directly by force of the new Swedish rules on non-recognition. It is irrelevant whether the parties had any ties to Sweden at the time of the marriage or the lapse of time. The aim is to signal to the world community total dissociation with the harmful practice of child marriages. Exceptionally, however, once both parties are of age, the rule of nonrecognition may be set aside, if called upon for “extraordinary reasons”. No special procedure applies. It is up to each competent authority to decide on the validity of the marriage, independently of any other authority’s previous decision.  While access to this “escape clause” from the rule of non-recognition mitigates the harshness of the system, it makes the outcome unpredictable. As a result, the parties’ relationship may come to qualify as marriage in one context but not in another. Sweden’s Legislative Council advised strongly against the reform, as contrary to the aim of protecting the vulnerable, and in conflict with the European Convention on Human Rights, as well as European Union law. Regrettably, the government and Parliament took no notice of this criticism in substance.

I. Tekdogan-Bahçivanci: Recent Turkish Cases on Recognition and Enforcement of Foreign Family Law Judgements: An Analysis within the Context of the ECHR

In a number of recent cases, the Turkish Supreme Court changed its previous jurisprudence, rediscovered the ECHR in the meaning of private international law and adopted a fundamental-rights oriented approach on the recognition and enforcement of foreign judgements in family matters, i.e. custody and guardianship. This article aims to examine this shift together with the jurisprudence of the European Court of Human Rights, to find a basis for this shift by analysing Turkey’s obligation to comply with the ECHR and to identify one of the problematic issues of Turkish private international law where the same approach should be adopted: namely recognition and/or enforcement of foreign judgements relating to non-marital forms of cohabitation.

 

Written by Elijah Granet

When a British woman gives birth in a German hospital staffed with British midwives on a contract from the British ministry of defence, what law applies and to what extent? This seemingly simple question took Mrs Justice Foster, in the English and Welsh High Court of Justice, 299 paragraphs to answer in a mammoth judgment released on 24 April: Roberts (a minor) v Soldiers, Sailors, Airmen and Families Association & Ors [2020] EWHC 994 (QB).   In the course of resolving a variety of PIL issues, Mrs Justice Foster held that the German law of limitations should be disapplied as, on the specific facts of the case, contrary to public policy.

Facts

The British military has maintained a continuous presence in Germany since the end of the Second World War.   In June 2000, Mrs Lauren Roberts, the wife of a British soldier serving in Germany and herself a former soldier, gave birth to her son, Harry, in the Allegemeines Krankenhaus in Viersen (‘AKV’), a hospital in North-Rhine Westphalia.

AKV had been contracted to provide healthcare for British military personnel and their dependents by Guy’s & St Thomas’s Hospital NHS Trust in London, which, in turn, had been contracted  by the British Ministry of Defence (‘MoD’) to procure healthcare services in Germany.  Midwifery care for British personnel and dependents, however, was supplied instead by the Soldiers, Sailors, Airmen and Families Association (‘SSAFA’), a charity.  These British midwives worked under the direction of AKV, taking advantage of the mutual recognition of qualifications under EU law.

Tragically, during the birth, Harry suffered a brain injury which has left him severely disabled.  Mrs Roberts, who brought the action in her son’s name, alleges that negligence on the part of an SSAFA midwife during Harry’s birth caused these injuries. She further alleges that the MoD is vicariously liable for this negligence.  The MoD, in turn, while denying negligence on the midwife’s part, asserts that, regardless, German law  allocated any vicarious liability to AKV.  These allegations have yet to be tried before the court.

The applicable law

Due to unfortunate procedural delays, the case, although begun in 2004, took until 2019 to reach the High Court. This meant that the 2007 Rome II Regulation was inapplicable, and the case instead was governed by English conflicts rules.  The relevant statutory provision was the Private International Law (Miscellaneous Provisions Act).  Section 11 of that Act lays out a general rule of lex loci delicti commissi, but s 12 allows this principle  to be displaced where significant factors connecting a tort or delict to another country mean ‘that it is substantially more appropriate’ to use a law other than that of the location of the tort or delict.  Counsel for Mrs Roberts argued that the s 12 exception should apply, given that inter alia Mrs Roberts was only in Germany at the behest of the Crown, had no familial or personal connections to Germany, moved back to England in 2003, and were being treated by English-trained midwives who were regulated by British professional bodies.

The authoritative  text on English conflicts rules, Dicey, Morris & Collins on the Conflict of Laws (15th ed), provides that at para 35-148 that the threshold for invoking s 12 is very high, and that the section is only rarely invoked successfully.  This is reinforced by inter alia  the decision of the English and Welsh Court of Appeal, per Lord Justice Longmore, in Fiona Trust and Holding Corp & Ors v Skarga & Ors [2012] EWCA Civ 275.   Mrs Justice Foster (at para 132) ruled (at paras 132–144) that this threshold was not met.  Her Ladyship placed great significance on the fact that the midwives were required to learn basic German, follow the directions of German obstetricians, operate according to the rules of the German healthcare system, and provide care to military personnel who were living in Germany.  Thus, German law was applicable.

The limitation period question

English jurisprudence addresses questions of foreign law as matters  of objective fact to be determined through expert evidence.  This can prove, as it did in this case, to an extremely complex task.  For the purposes of this article, it is sufficient to note that Mrs Justice Foster ultimately found (after extensive discusssion at paras 192–280) that, in light of various decisions of the German Bundesgerichtshof (Federal Court of Justice) on the application of both the old and new versions of §852 of the Bürgerliches Gesetzbuch (German Civil Code), the relevant limitation period of  three years commenced in 2003, meaning that the claim issued in 2004 was within time.

More relevantly for PIL scholars, Her Ladyship also ruled that, in the alternative, any applicable German limitation period was to be disapplied.  In English law, the disapplication of foreign limitation periods is governed by the appropriately-named Foreign Limitation Periods Act 1984.  While the general rule is that foreign limitation periods displace English limitations, Section 2(2) allows for the disapplication of foreign limitation periods where their application would ‘conflict with public policy to the extent that its application would cause undue hardship’ to a party.  This is, once again, a deliberately high threshold which is rarely applied; the authoritative English text on limitation, McGee on Limitation Periods (8th ed), provides (at para 25-027) that ‘[j]udges should be very slow indeed to substitute their views for the views of a foreign legislature’.   Similarly, Mr Justice Wilkie, in KXL v Murphy [2016] EWHC 3102 (QB), para 45, warned that the entire system of private international law could collapse if public policy was too readily invoked, and the public policy test should only succeed where the foreign provision caused undue hardship which would be ‘contrary to a fundamental principle of justice’.

After surveying the case law, Mrs Justice Foster concluded, at paras 181–184, that undue hardship must be a ‘detriment of real significance’, whose existence (or lack thereof) must be determined through a careful and holistic evaluation of the particular facts of any given situation.  Thus, the question was not if the German limitation period per se caused undue hardship (and indeed, Mrs Justice Foster held at para 182 that it did not), but rather if the application of an otherwise unobjectionable provision to the unique factual matrix of the case would create undue hardship.  Thus, Mrs Justice Foster ruled (at paras 185–6) that, if (contrary to her findings) the German limitation period commenced in 2001, this would be a disproportionate hardship given the disadvantages Mrs Roberts had as a primigravida unfamiliar with obstetrics who had given birth in a foreign country where she did not speak the language. Furthermore, the highly complex organisational structure of medical care, between the SSAFA, the MoD, and AKV would mean that it would be unjust and disproportionate for the relevant ‘knowledge’  for the purposes of the §852 limitation period to have been said to commence in 2001.

Comment

This case demonstrates the complexities which arise when applying abstract rules of private international law to the realities of human affairs.  Although the (by comparative standards) wide discretion accorded to judges in English law has its critics, in this case, the ability to disapply foreign law where it might lead to an unjust result was able to ensure that the Roberts family, for whom one must have the greatest sympathy, were able to proceed with their claim.  It is hard to disagree with Mrs Justice Foster’s conclusion that, on the facts, it would be a disproportionate hardship on the family. Both the case-law and texts are clear that this discretion should be applied only rarely, given that its overuse would be to the detriment of the principles of legal certainty and English conflicts rules, Roberts demonstrates that the common law preference for flexibility can, if used wisely, avert serious injustice in those rare circumstances where the general rules are insufficient.

The author of this post is Eduardo Álvarez-Armas, Brunel University London and Université Catholique de Louvain.

As announced in this blog, Anne Peters, Sabine Gless, Chris Thomale, and Marc-Philippe Weller have recently published an interesting and topical paper entitled Business and Human Rights: Making the Legally Binding Instrument Work in Public, Private and Criminal Law.

The paper, a must-read for anyone interested in the Business & Human Rights field, is an enlightening assessment of several issues and recent developments in the area, and very valuable in its transversal approach to its themes, from the standpoint of several different branches of law.

However, the point the paper makes on the determination of the law applicable to torts arising from human rights violations before EU Member-State courts is open for discussion.

In this respect, the position sustained in the paper basically interprets Articles 4(1) and (3) of the Rome II Regulation in a manner that “replicates”, in respect of torts stemming out of a violation of human rights, what has been legislatively enacted in respect of environmental torts in Article 7 of the same Regulation: the enshrinement of the theory of ubiquity (with differences/different rationale with respect to Article 7(2) of the Brussels I bis Regulation, but still the theory of ubiquity, nevertheless), assorted with victim’s choice.

The following are some difficulties encountered by the said interpretative proposal.

The effet utile of Article 7

If Articles 4(1) and (3) could be interpreted the way suggested in the paper, what would be the effet utile of Article 7 then? Surely, the arguments put forward in respect of the interpretation of Articles 4(1) and (3) as regards human-rights violations also cover environmental torts, and therefore, there would have been no need to enact Article 7 to begin with (a provision which was very controversial during the Rome II legislative process).

The structure of Article 4 Rome II

As Article 4(3) is an escape clause, Articles 4(1) and (3) are not placed in an alternative/elective position, but are exclusive from each other. If Article 4(3) applies, then Article 4(1) does not (see notably Recital 18 of the Rome II Regulation). Human-rights-violation victims may try to plead Article 4(3) (a closer connection to another legal system) as a “getaway” from Article 4(1) if they believe that their circumstances allow them to do so. However, they cannot plead that they have a choice as such in choice-of-law terms between Articles 4(1) and (3). Having a free choice of applicable law in one´s hands (as environmental victims do in Article 7) is not the same as having to contend and prove a manifestly closer connection, as Article 4(3) would require.

The points put forward on legal arbitrage and race to the bottom in Prof. Weller’s blog reply to my first brief comment are sensible, and they sustain conceiving human-rights violations in supply chains as “complex torts” (“délits complexes”, “distantdeliktze”) where the action/omission takes place in the parent company’s headquarters and the result materializes in the “host country”. Therefore, as suggested, they may potentially sustain attempting to resort to Article 4(3) to plead for the closer connection to the law of the headquarters of the parent company (provided that evidence allows for it), but they do not seem to sustain an “ubiquity + choice by the victim” construction.

Indeed, I largely share Prof. Weller’s arguments on legal arbitrage and race to the bottom in respect of environmental torts (as a preview of an English monograph coming in 2021 in Hart’s Studies in Private International Law, see E. Álvarez Armas, “Contentieux du droit international privé pour responsabilité environnementale devant le juge européen : la détermination du droit applicable comme outil de gouvernance globale environnementale”, Annales de Droit de Louvain, Vol. 77-1/2017, pp. 63-87; and E. Álvarez Armas, “Daños al medioambiente y Derecho Internacional Privado Europeo: ¿Quid de la determinación de la ley aplicable como herramienta de gobernanza global medioambiental?”, Anuario Español de Derecho Internacional Privado, t. XVIII/2018, pp. 193–225). However, the core difference is that Art. 7, as it stands nowadays, structurally allows for these ideas, while Articles 4(1) and (3) do not.

The ratio legis of Article 4 Rome II

If the rationale of Article 4 of the Rome II Regulation was the protection of victims, then, as Articles 4(1) and (3) are general provisions, nothing would hinder any other victim of torts not specifically covered by “special” provisions(Articles 5 and following) from benefiting from the same construction. This would significantly hinder the foreseeability of the applicable law.

However, the policy rationale of Article 4, as the main provision in the Regulation, is not the protection of victims, but “a reasonable balance between the interests of the person claimed to be liable and the person who has sustained damage” and “the foreseeability of court decisions”, as explained by Recital 16 of the Rome II Regulation. More specifically:

[a] connection with the country where the direct damage occurred (lex loci damni) strikes a fair balance between the interests of the person claimed to be liable and the person sustaining the damage, and also reflects the modern approach to civil liability and the development of systems of strict liability.

These ideas can be tracked back to the explanatory memorandum to the Rome II Proposal, where the EU Commission repeatedly refers to “foreseeability” and “certainty” in the determination of the applicable law, explicitly rejects the theory of ubiquity as a potential general solution to be enshrined in the Regulation’s main rule (p. 11 – penultimate paragraph) and concludes (pp. 11-12) that

[t]he rule also reflects the need to strike a reasonable balance between the various interests at stake. The Commission has not adopted the principle of favouring the victim as a basic rule, which would give the victim the option of choosing the law most favourable to him. It considers that this solution would go beyond the victim’s legitimate expectations and would reintroduce uncertainty in the law, contrary to the general objective of the proposed Regulation. The solution in Article [4] is therefore a compromise between the two extreme solutions of applying the law of the place where the event giving rise to the damage occurs and giving the victim the option.

Precisely, as an exception, the explicit ratio legis of Article 7 Rome II (per Recital 25) is not to protect, but even to favour the victim (favor laesi) by allowing her the prerogative of choosing the applicable law.

Overall, the arguments put forward in the paper may sustain de lege ferenda that an Art. 7 bis be added to Rome II, enshrining the theory of ubiquity and victim’s choice in respect of torts arising from the violation of human rights. However, the current text of the Regulation does not seem to comfort the paper´s interpretative proposal.

Anatol Dutta and Wolfgang Wurmnest edited a book on European Private International Law and its ramifications with treaties signed by EU-Member States with third countries. The publication focuses on inheritance matters, i.e. Regulation (EU) No 650/2012 on matters of succession.

The national reports prepared feature Austria, Belgium, Croatia, The Czech Republic, Finland, Sweden, France, Germany and Italy from the EU. Reports from Bosnia and Herzegovina, Serbia, North Macedonia and Montenegro, Iran, Switzerland and Turkey, cover some non-EU jurisdictions. The third and last part of the publication features articles from the editors: Prof. Dutta approaches the issue from the perspective of the European Union, whereas Prof. Wurmnest offers a Comparative Report and Policy Perspectives.

The compilation of treaties listed in the Annex, presented in English translation, is undoubtedly giving added value to the book.

The work done by editors and authors, and the future plans of the endeavor, namely to cover wider aspects of European Private International Law, deserves our gratitude for providing us with very interesting material in the field.

More information on the publication is available here.

In Strategic Technologies v Procurement Bureau of the Republic of China Ministry of National Defence [2020] EWHC 362 (QB), Carr J i.a. set aside a November 2016 order by Supperstone J granting a certificate under Article 53 Brussels Ia.

Justice Carr adopts the routine approach of former English case-law calling the Brussels regime the ‘Judgments Regulation’. The certificate was issued  in relation to a default judgment issued in 2009 by Claimant, Strategic Technologies against Defendant, the Ministry of National Defence (“the MND”) of the Republic of China (“ROC”), also and better known as Taiwan.

Carr J is right when at 134 ff she rejects the route taken by claimants (and adopted by Supperstone J) that the principle in CJEU C-192/92 Owens Bank v Bracco (that the Brussels Convention does not apply to proceedings for the enforcement of judgments given in civil and commercial matters in non-contracting states) has no application where, as here, the judgment of a non-contracting state (ie Cayman) has become a judgment of a Member State (ie the United Kingdom).

She refers to the clear language in formerly A25 Brussels Convention, now Article 2 Brussels Ia, that for a ruling to be a judgment it must be given by a court or a tribunal of a Member State. Adoption of a judgment by another State is not covered. She notes the CJEU referred to this definition in its Owens Bank v Bracco ruling. She also notes that the St. Vincent judgment in Owens v Bracco had in fact also been registered in England by the time that the House of Lords referred the matter to the CJEU.

Other issues in the judgment are less relevant to the blog. Do note that Taiwan does not call upon sovereign immunity: at 3: ‘The MND is an arm of the government of the ROC. Although it is by its own law a state, the ROC has an unusual status in international, and English, law: although it has all the generally recognised characteristics of statehood, and is often treated as a country, it is not recognised as a state by the United Kingdom and there are no formal diplomatic relations between the two. For the purpose of these proceedings only, and without making any wider concession, the MND does not rely on the State Immunity Act 1978.’ Clearly this case was not considered by Taiwan to be a case to force the recognition issue.

Geert.

 

The sixth edition of Derecho de los Negocios Internacionales, a treatise on international business law authored by José Carlos Fernández Rozas, Rafael Arenas García and Pedro Alberto De Miguel Asensio, was published in March 2020 by the Spanish publisher Iustel.

The new edition is arranged into the following sections: Regulating Cross-Border Business Activities; Intellectual Property, Unfair Competition and Antitrust; Company Law; International Commercial Contracts; Sale of Goods and Transport; Means of Payment, Guarantees and Financing; Distribution Contracts, Transfer of Technology and E-Commerce; Insolvency Proceedings and International Commercial Arbitration.

See here for more information, and here to access the extended table of contents.

Brexit and its legal consequences was the topic of an earlier post in this blog, suggesting the United Kingdom should join the Lugano Convention. The British government has now taken the first step in this direction.18

The UK’s Application for Accession

On 8 April 2020, the UK deposited an application to accede to the Lugano Convention with the Swiss Federal Council as the depositary of the Convention (Article 69(2) Lugano Convention). In accordance with Article 72(2) of the Lugano Convention, the information was transmitted to the Contracting Parties. Enclosed as Annex A was the information required under Article 72(1) of the Convention, amounting to 41 pages. The necessary French translation (Article 70(2) Lugano Convention) is still missing.

Switzerland requested to convene a meeting of the Standing Committee in accordance with Article 4(2) of Protocol 2 to the Convention. The Signatories of the Convention (the EU, Denmark, Iceland, Norway and Switzerland) now have to decide whether to grant the application. According to Article 72(3) Lugano Convention, they shall endeavour to give their consent at the latest within one year.

The Situation During the Transition Period

Already on 30 January 2020, the Swiss Federal Council informed the Signatories of a document it had received titled Annex to the Note Verbale on the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community. The objective of this Annex is to secure the UK’s continued treatment as a party to the Lugano Convention during the transition period, which runs from 1 February 2020 to at least 31 December 2020, subject to a further extension for up to one or two years.

The Annex to the Note Verbale first sets out some principles of the Withdrawal Agreement concluded between the EU and the UK. In particular, it recalls that the “Withdrawal Agreement encompasses international agreements concluded by the Union” (point 4 Annex). In relation to the EU and Euratom, the UK is bound by these international agreements during the transition period (Art 129(1) Withdrawal Agreement). Furthermore, the Withdrawal Agreement provides that the EU notifies parties to international agreements that the UK is treated by the Union as a Member State for the purposes of these international agreements (point 5 Annex).

After recalling these principles, the Annex to the Note Verbale adds the following sentence (point 6 Annex):

It is understood that the principles set out in this Annex also extend to international instruments and arrangements without legally binding force entered into by the Union or Euratom and to international agreements referred to in point 4 above which are provisionally applied.

The Swiss Federal Council has asked the Signatories to consent to the Note Verbale, which the EU has already done. If the other Signatories agree as well, the Lugano Convention could remain binding on all parties during the transition period. Unfortunately, the outcome of the process is unknown, which creates unnecessary uncertainty.

Back to the Past?

The UK’s application to accede to the Lugano Convention is the strongest indication yet that the UK wishes to continue participating in judicial cooperation in Europe. There are important voices against the UK’s accession to the Convention. Without it, though, those seeking legal protection will encounter obstacles in the enforcement of British judgments on the European continent, and vice versa. It therefore seems better the UK’s request would be granted.

A quick note on Granville Technology & Ors v Infineon Technologies AG & Anor [2020] EWHC 415 (Comm) which concerns proceedings brought by three companies who were engaged in the assembly and sale of desktop PCs and notebooks. The claims arise from a price-fixing cartel, the subject of findings by the EC in COMP/38511. The Cartel concerned the market for direct random access memory (“DRAM”) and Rambus DRAM used in the manufacture of PCs and Notebooks.

Both Infineon (domiciled at Germany) and Micron Europe (of England) have pleaded, among other defences, that the Claimants’ claims are time-barred under relevant UK limitation statutes – their arguments were partially upheld. I keep the note very short for seemingly not at issue was either jurisdiction or applicable law. Of note is the classic appearance in anchored competition cases of the group liability argument held in Cooper Tire, Cooper Tire & Rubber Co Europe Ltd v Shell Chemicals UK Ltd [2010] EWCA Civ 864 , referred to by Foxton J at 123 (followed by a decision on the need for discovery (held: none here) given the Court of Appeal’s finding in Cooper Tire that anchor defendants have to have been parties or aware of the anti-competitive conduct of their parent company” and that “The strength (or otherwise) of any such case cannot be assessed (or indeed usefully particularised) until after disclosure of documents because it is in the nature of anti-competitive arrangements that they are shrouded in secrecy.”

Geert.

 

 

 

 

 

Follow-on damage suit following #cartel.
Pleas of statute of limitation (time-barred). Reference ia to Cooper Tyre. https://t.co/EefHASBQ8S

— Geert Van Calster (@GAVClaw) February 25, 2020

By Radhika Parthasarathy

The advent of the internet has led to mass-communication like no other. Everything one wants is at the tip of our fingers now, thanks to mobile phones, laptops, iPads and the likes. Mass consumerism has seen an exponential increase in the last ten years. If one needs to buy quirky stationery, we have the likes of Amazon and Chumbak online; if one wants to watch the latest episode of Brooklyn Nine-Nine, Netflix does the needful; if we wish to read multiple newspapers, while also saving papers, multiple Apps such as InShorts exist.  Platforms such as these stream large quantities of data across the globe, thus bringing the world closer, but also leading to certain jurisdictional issues in case of litigations. Such activity requires a cross-cutting need and definition of personal jurisdiction.

Personal jurisdiction relates to the jurisdiction of a Court to adjudge a dispute between parties. The general rule is that to exercise such jurisdiction, physical presence is mandatory. As such, jurisdiction in personam is not to be exercised over a person who is not subject to the jurisdiction of courts. This has become a commonly accepted principle domestically and globally. However, the advent of technology and the pervasiveness of the world wide web has led to massive debates in this regard. How is personal jurisdiction then to be adjudicated for matters of cyber torts, or that of defamation that takes place online? In the context of the internet, personal jurisdiction oft refers to and deals with websites or services on the internet that deal with advertisements or promotions of business or brands online in their home State but debate their liability to be litigated within another foreign State. However, courts in the United States, Europe and, India are now determining how to assess and enforce such jurisdiction.[1]

Understanding Personal Jurisdiction: the United States and Europe A.   The United States

In the United States [“the US”], the criteria of “certain minimum contact” with the jurisdiction where the cyber transaction has occurred must be met to assess personal jurisdiction. This aligns with the Long Arm Statute of the United States of America. Traditionally, in International Shoe v. Washington, the Supreme Court held that a defendant may be held liable for such cross-border issues if they have at least a minimum level of contact with the State that seeks to hold them liable and there must be a reasonable expectation of being sued in that State.[2] In this regard, courts in the US have held that mere advertisements on a website are not enough to hold a defendant liable for a cross-border tort and to exercise personal jurisdiction there.[3]

Before this, however, was the iconic case, Calder v. Jones,[4] where the Court, in 1984, held that where an action is targeted at a particular forum, even if there is minimum contact, the “effects” test may be applied. In this case, an article was written and edited in Florida, the article concerned a resident in California and relied on sources in California, and thus, the Court held that the intentional tortious act was “expressly aimed at California”. This test essentially, thus, lays down that where an act is done intentionally, has an effect within the forum state and is directed or targeted at the forum state, then jurisdiction will be satisfied.[5] Thus, the effects test is useful when the exact nature of the defendant’s internet activities need to be assessed vis-à-vis, injury caused to a resident elsewhere, in a different State.[6]

The legal position in the US has been seemingly settled, off late, in this regard in Zippo Manufacturing Co. v. Zippo Dot Com Inc,[7] which rendered the famous Zippo Test. Per the Zippo Test, a finding of jurisdiction would be contingent upon the nature of the website and sought to employ a sliding scale test. It further laid down two important points:

1. The interactive nature of the site, which would aid in quantifying the extent of the damage so caused;
2. The harmful effect within the jurisdiction of the concerned state.

Per Zippo, websites are of three kinds- websites that conduct business over the internet; websites where users exchange information with the host computers; and websites that do little more than present information.[8] However, this has been criticized for not providing enough information on the assessment of the extent of interactivity of the website to justify purposeful availment.[9]

Multiple cases, however, well into the 2000s, yet apply the Calder case. For instance, in Blakey v. Continental Airlines,[10] the minimum contacts test was applied along with the effects test to assess “proper jurisdiction”. This was further cemented by Young v. New Havem Advocate,[11] where two Connecticut newspapers defamed the warden of Virginian prison. Here, the court assessed the issues based on the Calder test once again and opined that proof must be derived that the defendant’s internet activity is expressly targeted at or directed to the forum State. Similarly, in Yahoo! Inc. v. La Ligue Contre Le Racisme et l’antisemitisme,[12] the Calder test was applied once again to establish personal jurisdiction between two French organizations and Yahoo (an American company). Thus, it seems more appropriate to say that Courts in the US, first apply the Zippo Test, but then apply the effects test as laid down in Calder to have a wholly encompassing test.

B.    European Standing

In the European Union [“EU”], the Brussels Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters [“Brussels Convention”][13] regulates acts concerning torts, delict and quasi-delict under Art. 5(3) and thereby, a defendant may be sued in the court of the place where the harm has occurred.[14] The leading law on the matter of defamation can be found in Shevill & Ors. v. Presse Alliance S.A.,[15] where a libellous article was published in one place but distributed across multiple jurisdictions. Here, the ECJ devised what came to be known as the mosaic approach and held that the place where the harm has occurred includes:

1. the place where publisher resides, or where the defamatory statement came into existence, or the place of publication;
2. the place of distribution or where the material was read and received.

This approach was also applied in Handelskwekerij G J Bier B. V. v. Mines de Potasse d’Alsace SA, where the Court held that the “place where the harmful event occurred” must be understood as being intended to cover both the place where the damage occurred and the place of the event giving rise to it.[16] However, this approach has led to criticism that it enables forum shopping for the plaintiff.[17] This approach suggests that the plaintiff may choose the more convenient forum under Art. 5(3) as one forum may have a more liberal approach to prove defamation than another.

Article 5(3) was subject to further interpretation in 2011 when the ECJ held that a person may bring an action for liability when their rights have been infringed on the internet before:

1. the courts of the Member State in which the publisher of that content is established; or
2. before the courts of the Member State in which the centre of his interests is based; or
3. the courts of each Member State in the territory of which content placed online is or has been accessible.[18]

This position has since been challenged in the Svensk Handel case, wherein Article 7 of the Brussels Recast Regulation (similar to Article 5(3)) was assessed.[19] Here, while the Court didn’t expressly reject the Mosaic Approach, it did, however, lay down that “the centre of interest” must be located and interpreted broadly to include residence, where the most harm occurs. However, the Court laid down an important safeguard by stating that any order for the takedown of insulting content cannot be initiated in every Member State where the website is accessible. Since the earlier days till now, there seems to be a newfound cogency in the application of personal jurisdiction for defamatory matters in the EU.

Banyan Tree Holdings and the Indian Position

In the case of Banyan Tree Holdings v. A. Murali Krishna Reddy,[20] the plaintiff is part of the hospitality business and has since 1994, used the word mark, “Banyan Tree” which has now acquired a secondary meaning. It also maintains websites that use the mark and are accessible in India. However, in 2007, the defendants began work on Banyan Tree Retreat and hosted a website which directed to a “Banyan Tree” project. The Plaintiffs contended that the use of this mark is dishonest and aimed at encashing on the reputation and goodwill of the Plaintiff. They also claim that it would lead to confusion and deception if such usage was so allowed.

In this case, the Court found that the website of the defendant is accessible in Delhi and is thus, not a passive website, as derived from American laws. Further, the defendant also sent a brochure to Delhi regarding their property’s sale. In this case, parties relied on the holdings and observations of International Shoe Co., the Zippo Test of “sliding scale”, Cybersell Inc. and the effects test in Calder, among multiple other American cases on the same issue. It then discussed cases from Australia and Canada before assessing the Indian Position on the same.

In India, there seems to have been some form of debate on such issues. In a similar factual matrix as Banyan Tree, the Delhi High Court in Casio India Ltd. v. Ashita Tele Systems Pvt Ltd.[21] held that even a mere likelihood of deception on the internet would entertain an actual action for passing off and no actual deception needed to be proven. Thus, the mere accessibility of the website from Delhi could invoke the Court’s jurisdiction. However, in another case,[22] the Court held that the mere accessibility of a website from one jurisdiction may not be enough or sufficient for a court to exercise its jurisdiction.

In Banyan Tree, on an analysis of these positions, Justice Muralidhar found that essential principles developed in other jurisdictions may be seamlessly adopted into our own.[23]  The Court chose to disagree with Casio and held that a passive website, with no intention to specifically target audiences outside the State where the host of the website is located, cannot vest the forum court with jurisdiction.[24] Further, it observed that the degree of the interactivity apart, the nature of the activity permissible and whether it results in a commercial transaction has to be examined while adjudging the “effects” test.[25] Additionally, there is a need to assess whether the Plaintiff can show a prima case that the specific targeting in the forum State by the Defendant resulted in an injury or harm to the Plaintiff within the forum state.[26] The Court thus chose to apply the “effects” test with the “sliding scale” taste, this reconciling the application of the Calder test with the Zippo Test in India.

On the matter of jurisdiction, the Court held that to establish a prima facie case under Section 20(c) of the Code of Civil Procedure, 1908 [“the CPC”], the Plaintiff will have to establish that irrespective of the passive or interactive nature of the website, it was targeted specifically at viewers in the forum State, which in this case would have been Delhi.[27] They will then have to establish that there has been specific harm or injury caused to it by the Defendant’s actions.

Conclusion: Certainty in India’s Position?

In India’s case, it has become abundantly clear that cross-border defamation will be adjudged as per Section 19 of the CPC, as per the residence of the defendant or where the wrong has been done. Additionally, India also follows the double actionability rule to adjudge applicable law in such matters. However, if the tort is committed outside India, then Section 19 yields to Section 20 of the CPC, and the territorial jurisdiction is adjudged as such.[28] The factors relating to the cause of action and its assessment have been discussed in multiple cases. For instance, online sale of property in a different jurisdiction did not constitute sufficient cause of action for courts in Kerala.[29] However, while the test in Banyan Tree may be quite descriptive, Muralidhar J. opines that it does not lay down a “one size fits all” test,[30] in the sense that while it is foolproof for an online commercial transaction and intellectual property issues, it does not cover the area of torts such as defamation.

In a differing opinion, in World Wrestling Entertainment, Inc. v. M/s Reshma Collection & Ors,[31] the Appellant was a Delaware based company providing the online sale of digital merchandise to customers world over and also in Delhi and held the trademark for the same. Here, the Court held that due to the spontaneous nature of the transactions (offer and acceptance and payment of consideration) over the internet, the cause of action is deemed to have occurred at the place the customer carried out his part of the transaction.[32]

The jurisprudence in such torts is still developing in India and largely follows the double actionability rule. The double actionability rule is the foundation or cross-border torts, particularly, defamation.[33] This rule lays down two points:

1. The act must be “actionable” as a tort in England; and
2. The act must be “non-justifiable” by the law of the place where it was committed. (this was eventually overruled by Boys v. Chaplin)[34]

This rule was further discussed and upheld in Govindan Nair v. Achuta Menon,[35] when the then Raja of Cochin (which was at the time an independent Indian State), sent a communication to the plaintiff excommunicating him from his caste in British India. The High Court applied the rule but dismissed the case as there was no trace of malice. In more recent times, the order in Baba Ramdev and Anr. v. Facebook Inc.,[36] is highly interesting. The allegation here was that a book based on the plaintiff was being circulated on a global basis by social media platforms, such as Facebook. The basic issue here was whether a global takedown order could even be passed by the Court. The Court essentially held that:

1. If the content was uploaded in India, or from IP addresses in India, the content had to be taken down, blocked/ restricted on a global basis;[37]
2. However, if uploaded from outside India, the Court cannot exercise its jurisdiction.[38]

Such exercise of jurisdiction has also been discussed in YouTube v. Geeta Shroff, wherein the Court held that any exercise of jurisdiction must be done assuming that the internet transaction is one akin to a real-life transaction, thereby ensuring that the Court cannot assume extra-territorial jurisdiction on the matter.[39]

Julia Hornle points out that the laws in the US are quite liquid on the point of personal jurisdiction and can be used to adapt to multiple scenarios.[40] However, tests in India have seemingly been fact-specific and not one test that can cover the entirety of actions that take place on the internet. Thus, courts may exercise jurisdiction either very broadly or very narrowly. However, this does not mean that India does not follow any minimum standard. The laws laid down in the US and other common law jurisdictions have gone a long way in establishing India’s position on personal jurisdiction in matters of cyber-transactions. Thus, it is easy to conclude by saying India has given the concept of personal jurisdiction a wide berth and a multi-dimensional interpretation and one can hope to have a “one size fits all” criteria in the foreseeable future, as Courts get better acclaimed with the use of and the advancement of technology in all fields – legal, commercial

[1] TiTi Nguyen, A Survey of Personal Jurisdiction based on Internet Activity: A Return to Tradition, 19 Berkeley Tech. L.J. 519 (2004).

[2] International Shoe v Washington, 326 U.S. 310 (1945)

[3] Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414 (9th Cir. 1997)

[4] Calder v. Jones, 465 U.S. 783 (1984)

[5] Id.

[6] Dudnikov v. Chalk & Vermilion, 514 F.3d 1063 (10th Cir. 2008).

[7] Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119

[8] Id; Christopher Wolf, Standards for Internet Jurisdiction, FindLaw (May 03, 2016), https://corporate.findlaw.com/litigation-disputes/standards-for-internet-jurisdiction.html

[9] No Bad Puns: A different Approach to the Problem of Personal Jurisdiction and the Internet, 116 Harv. L. Rev. 1821, 1833 (2003).

[10] Blakey v. Continental Airlines, 751 A.2d 538 (NJ 2000)

[11] Young v. New Havem Advocate, 315 F 3d 256 (4th Cir, 2003)

[12]Yahoo! Inc. v. La Ligue Contre Le Racisme et l’antisemitisme, 433 F.3d 1199 (9th Cir. 2006)

[13]Brussels Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters, Regulation 44/2001 (Dec. 22, 2000)

[14] Article 5(3) allows for two jurisdictions – the place of domicile of the defendant OR the place where the harm has occurred; Handelskwekerij G. J. Bier B.V. v Mines de Potasse d’Alsace S.A. (preliminary ruling requested by the Gerechtshof of The Hague) (Case 21/76) [1976] ECR 1735, [1978] QB 708, [1977] 1 CMLR 284.

[15] Shevill & Ors. v. Presse Alliance S.A., Case C-68/93 [1995] 2 W.L.R. 499

[16]  Handelskwekerij G J Bier B. V. v. Mines de Potasse d’Alsace SA, Case 21/76 [1976] E.C.R. 1735

[17] Christopher Forsyth, Defamation under the Brussels Convention: A Forum Shopper’s Charter?, 54(3) Cam. L.J. 515 (1995)

[18] eDate Advertising GmbH and Others v X and Société MGN Limited, Cases C-509/09 and C-161/10

[19] Bolagsupplysningen OÜ Ingrid Ilsjan v. Svensk Handel AB, Case C-194/16, ECJ

[20]Banyan Tree Holdings v. A. Murali Krishna Reddy, CS (OS) No.894/2008 (Nov. 23, 2009) [hereinafter Banyan Tree]

[21] Casio India Co. Limited v. Ashita Tele Systems Pvt. Limited 2003 (27) PTC 265 (Del)

[22] (India TV) Independent News Service Pvt. Limited v. India Broadcast Live Llc And Ors., 2007 (35) PTC 177 (Del.).

[23]Banyan Tree, supra note 20 at ¶38

[24] Id at ¶38

[25] Id at ¶42

[26]Id

[27] Id at ¶45

[28] Sarine Technologies v. Diyora and Bhanderi Corpn., 2020 SCCOnline Guj 140.

[29] Presteege Property Developers v. Prestige Estates Projects Pvt. Ltd., 2008 (37) PTC 413 (SC)

[30] Justice Muralidhar, Jurisdictional Issues in Cyberspace, 6 Ind. J. L & Tech. 1 (2010).

[31] World Wrestling Entertainment, Inc. v. M/s Reshma Collection & Ors, AO (OS) 506/2013 and CM Nos. 17627/2013 & 18606/2013, decided on October 15, 2014.

[32] Id.

[33] Philips v Eyre, 6 L.R. Q.B. 1, 28 (1870, Queen’s Bench).

[34] Boys v. Chaplin, 2 Q.B. 1 (1968, Queen’s Bench).

[35] Govindan Nair v. Achuta Menon, (1915) I.L.R. 39 Mad 433.

[36] Baba Ramdev and Anr. v. Facebook Inc, CS (OS) 27/2019

[37]Id at ¶96(i)

[38] Id at ¶96(ii)

[39] YouTube v. Geeta Shroff, FAO 93/2018

[40] Julia Hörnle, The Conundrum of Internet Jurisdiction and How US Law has Influences the Jurisdiction Analysis in India, 14 Ind. J. L. Tech. 183 (2018).

On 25 and 26 September 2020, the University of Bonn will host a conference titled The 2019 Hague Judgments Convention: Prospects for Judicial Cooperation in Civil Matters between the EU and Third Countries.

The conference focuses on the Hague Convention of 2 July 2019 on the recognition and enforcement of foreign judgments in civil and commercial matters, and is organised by Moritz Brinkmann, Nina Dethloff, Matthias Lehmann, Philipp Reuss and Matthias Weller.

The event is organised in cooperation with the Permanent Bureau of the Hague Conference on Private International Law (HCCH), the Zentrum für europäisches Wirtschaftsrecht at the University of Bonn and The International Litigation Exchange (ILEX). Dr Christophe Bernasconi, Secretary General of the HCCH, will give a welcome note (via video message), while Dr Ning Zhao, Senior Legal Officer, HCCH, will provide an overview of the genesis of the Convention, and Dr João Ribeiro-Bidaoui, First Secretary, HCCH, will conclude the event with summary remarks.

Speakers include Hans van Loon (Former Secretary General of the Hague Conference on Private International Law), Pietro Franzina (Catholic University of Milan), Xandra Kramer (Erasmus Universiteit Rotterdam), Wolfgang Hau (Ludwig-Maximilians-Universität Munich), Francisco Garcimartín Alférez (Autonomous University of Madrid), Colin Brown (to be confirmed) and Andreas Stein (both European Commission), Jan Teubel (German Ministry of Justice), Heiko Heppner (ILEX), Paul Beaumont (University of Stirling), Marie-Elodie Ancel (University of Paris-Est Créteil), Pippa Rogerson (University of Cambridge), Ilija Rumenov (Ss. Cyril and Methodius University), Veronica Ruiz Abou-Nigm (University of Edinburgh), José Angelo Estrella-Faria (Former Secretary General of UNIDROIT, Senior Legal Officer UNCITRAL Secretariat, International Trade Law Division Office of Legal Affairs, United Nations).

The programme of the event can be found here. Looking forward to meeting as many as possible of you in Bonn!

Today, AG Szpunar delivered his Opinion on the request for a preliminary ruling from the hof van beroep te Antwerpen (Court of Appeal of Antwerp, Belgium) on the interpretation of “civil and commercial matters“ according to Article 1(1) Brussels I bis Regulation.

The question was (para. 1o):

“Is an action concerning a claim aimed at determining and stopping unlawful market practices and/or commercial practices towards consumers, instituted by the Belgian Government in respect of Dutch companies which from the Netherlands, via websites, focus on a mainly Belgian clientele for the resale of tickets for events taking place in Belgium, (…) a civil or commercial matter within the meaning of Article 1(1) of [Regulation 1215/2012], and can a judicial decision in such a case, for that reason, fall within the scope of that regulation?“

The relevant Belgium law prohibits, amongst others, the resale of event admission tickets. In addition, the business practice in question falls under the unfair business-to-consumer commercial practices legislation in Belgium. In both cases, the President of the Commercial Court deals with the matter. Actions are brought at the request of the competent minister of the Belgium Government. A variety of measures of relief was sought in the proceedings at hand: (1) a declaration that unfair commercial practices have taken place, (2) an order for cessation of those practices, (3) an order to publicise the court’s decision about the infringement at the expense of the defendants, (4) an order for penalty payments to be made in a fixed amount in respect of every future infringement, and (5) a ruling permitting the fact of such infringement to be certified simply by means of a report drawn up by an official, on oath, of the Algemene Directie Economische Inspectie (Directorate-General for Economic Inspection).

The matter thus was whether or to what extent the expression “civil and commercial matters” in Article 1(1) of the Brussels I bis Regulation, encompasses proceedings of that kind between the authorities of a Member State and private law entities established in another Member State. Evidently, this matter touches upon the delicate question of a private-public divide which generally is perceived to be more and more blurring (see e.g. Burkhard Hess, The Private-Public Divide in International Dispute Resolution, Recueil des Cours Vol. 388, The Hague 2018). Nevertheless, many instruments of Private International Law of the European Union make use of this divide to delineate their respective material scope of application and it may indeed be assumed that the term „civil and commercial matters“ should be interpreted not only autonomously but also consistently across the respective instruments (para. 41, with reference to the ECJ’s judgment of 28 July 2016, Verein für Konsumenteninformation, C?191/15, EU:C:2016:612, paragraph 39), at least in principle. The ECJ has struggled with this question in the past and has tended towards a broad understanding of civil and commercial matters, see e.g. ECJ, judgment of 9 March 2017, C?551/15, EU:C:2017:193 – Pula Parking, for a comment (mainly on other aspects of the case) on this blog see here; see also the recent Opinion by AG Spzunar in Rina, C?641/18, EU:C:2020:3, reported on this blog here. The judgment in Rina is expected to be handed down on 7 May 2020 – we will keep you posted. The Opinion im Movic seems to continue this tendency:

The following considerations were taken into account: (1) what does the nature of interests of the public authority to issue its request to the court need or not need to be (paras. 24 et seq.); (ii) in what way does the authority’s powers of investigation influence the analysis (paras. 48 et seq.), and (iii) whether the authority is granted special powers not available to private persons (here in particular the power to certify that infringements have occurred) contribute to the analysis (paras. 63 et seq.).

On the basis of this analysis, AG Szpunar proposed (para. 80) that

“proceedings relating to an action brought by the public authorities of a Member State against persons governed by private law established in another Member State, in which a declaration is sought that infringements constituting unfair commercial practices have taken place, together with an order for the cessation of those practices, an order for measures of publicity at the expense of the defendants, and an order for penalty payments to be made in a fixed amount in respect of every future infringement, fall within the scope of ‘civil and commercial matters’ within the meaning of that provision. On the other hand, such proceedings do not fall within the scope of that expression in so far as they relate to an action in which the public authorities seek the grant of special powers that go beyond those arising from the rules applicable in relationships between private individuals.“

The full text of the Opinion is available here.

 

Spain v The London Steam-Ship Owners’ Mutual Insurance Association Ltd [2020] EWHC 142 (Comm) reports on the CMR (case management conference) re what promises to be interesting litigation. A Spanish judgment concerning liability for the pollution damage caused when the vessel PRESTIGE broke in two off the coast of Spain in 2002, needs to be enforced in the UK. Brussels Ia’s contestation of recognition is involved: particularly Articles 34(1) and (3).

At 2 Teare J summarises the story so far:

The parties have been in dispute about liability for many years. Criminal proceedings were brought against the master of PRESTIGE in Spain in 2002 and, after the conclusion of the investigative stage of the proceedings, civil proceedings were brought against the master, the Owners of PRESTIGE and the Club, as liability insurer of the Owners, in 2010. (I am told that in addition to Spain there are some 264 other claimants.) In 2012 the Club commenced arbitration proceedings in London against Spain and in February 2013 obtained an award from the sole arbitrator Mr. Alistair Schaff QC which declared that, as a result of the “pay to be paid” clause in the policy the Club had no liability to Spain. In this court Spain challenged the jurisdiction of the arbitrator but the court (Hamblen J. as he then was) held in 2013 that the arbitrator had jurisdiction. Later that year the court in La Coruna dismissed the civil claim against the master, Owners and Club but convicted the master of the crime of disobeying orders by the Spanish authorities to accept a tow of the vessel. In 2015 the English Court of Appeal upheld the decision of Hamblen J. In 2016 the Spanish Supreme Court reversed the decision of the court in La Coruna and held that the master had been seriously negligent and that the Owners and Club were liable for the damage caused. In execution proceedings in Spain, the court in La Coruna declared the Spanish State entitled to enforce a claim up to approximately €2.355 billion against the defendants in the Spanish proceedings and declared the master, Owners and the Club liable in respect of the claims, although subject (in the case of the Club) to a global limit of liability in the sum of approximately €855 million.’

Thus the Club has an arbitration award in its favour but Spain has a judgment of the Spanish Supreme Court in its favour. Spain obtained an order from Master Cook pursuant to which the Spanish judgment was registered so that it could be enforced here against the Club. The Club seeks to appeal from that order. One of the grounds on which it seeks to appeal is that the Spanish judgment is irreconcilable with the judgment of Hamblen J. and the Court of Appeal (A34(3) BIa). Another ground is that recognition of England is contrary to the public policy of England (A34(1)).

This particular CMS concenrs disclosure requirements: the Club’s seeking of disclosure from Spain is resisted by the latter on grounds that is clashes with BIa’s intention of swift recognition.

One of the issues on which disclosure is sought, is Spain’s position under the insurance title of BIa: “Are the English Judgments not qualifying judgments within article 34(3) because the English Judgments conflict with Section 3 of Chapter II of the Brussels 1 Regulation ? In particular …(b) Is the respondent [Spain] entitled to rely on the exclusive rules for jurisdiction in Section 3 of Chapter II. In particular: (i) Is the respondent [Spain] a qualifying party that is entitled to the protective rules in Section 3 ?” Reference is made to Aspen Underwiting: the Club states that it is necessary for Spain to show that it is a member of the class protected by Section 3, which (per Aspen Underwriting, GAVC] excludes “professionals in the insurance sector or entities regularly involved in the commercial or otherwise professional settlement of insurance related claims who voluntarily assumed the realisation of the claim as part of its commercial or otherwise professional activity”. Aspen Underwriting in the meantime (Teare J’s judgment was issued in January; it has been in the blog queue) has been varied by the Supreme Court.

It will therefore be necessary, submitted counsel for the Club, for Spain to disclose documents which show “the class of business” conducted by it. If it is a member of the relevant class it can rely on section 3. If it is not, it cannot.

The second class of document of which disclosure is sought is very different and relates to the public policy defence. Did the Spanish Courts refuse to allow the master to participate in an underwater investigation of the strength of the vessel’s hull and refuse to disclose the results of the investigation (so that there was a breach of the master’s right to equality of arms and to be able to prepare a defence) or were the results disclosed to the master in sufficient time to allow him to prepare his defence. The Club therefore seeks disclosure of the documents relating to that question held by Spain. Here Teare J at 21 assumes that Spain’s evidence can be expected to support its case and to rely upon the documents which show when the results were disclosed to the master and in what terms. If the evidence does not deal with this issue then Spain will be unable to advance its factual case. ‘I therefore consider it very likely that no disclosure under this head will be required. In the unlikely event that it is required a focused application can be made after Spain has provided its evidence.’

The Order eventually imposes a timetable for exchange of evidence (including expert reports) and later settlement of disclosure issues should they arise. Hearing in principle in December 2020.

This could turn out to be a most relevant case.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.11.1, Heading 2.2.11.2, Heading 2.2.16.

Giesela Rühl (University of Jena) has posted Smart (Legal) Contracts, or: Which (Contract) Law for Smart Contracts? on SSRN.

The abtract reads:

The law applicable to smart contracts is a neglected topic. At times it is even discarded as irrelevant or unnecessary. In fact, many authors claim that smart contracts especially when stored and executed with the help of blockchain technology make contract law and, in fact, the entire legal system obsolete. “Code is law” is the frequently (mis-) cited catchphrase. In the following chapter I will challenge this view and argue, first, that smart contracts need contract law just as other, traditional contracts, and, second, that the applicable contract law can – at least in most cases – be determined with the help of the traditional rules of private international law.

The paper is forthcoming in Benedetta Cappiello & Gherardo Carullo (eds.), Blockchain, Law and Governance, Springer.

Written by Dr Meng Yu and Dr Guodong Du, co-founders of China Justice Observer. [Note: Click on the tables to enlarge them.]

A list of cases on the recognition and enforcement of foreign judgments between China and twenty (20) States and regions has been published by China Justice Observer, a legal information provider based in Beijing. This is a project sponsored by the Academy for the Rule of Law at China University of Political Science and Law. The contributors are Dr. Meng Yu and Dr. Guodong Du, co-founders of China Justice Observer.

You can download the List at:

https://www.chinajusticeobserver.com/a/list-of-chinas-cases-on-recognition-of-foreign-judgments.

The Case List is made available for the readers to build reasonable expectations on recognition and enforcement of foreign judgments (“REFJ”) in China. It comprises public Chinese court decisions involving REFJ, and many (if not all) foreign counterparts concerning the recognition and enforcement of Chinese judgments. Please note that foreign divorce judgments are excluded in the Case List.

To date, China Justice Observer has collected 57 cases involving China and 20 foreign States and regions. The Case List is continually updated with new reports. Case information, comments, and suggestions are most welcome. Please feel free to contact Dr. Meng Yu via e-mail at meng.yu@chinajusticeobserver.com.

For an overview of the disposition of cases on recognition of foreign judgments, please see table 1 below.

For information about bilateral judicial assistance treaties that China and 39 States have concluded, please see table 2 below.

For the detailed country(region) report about cases on recognition of foreign judgments, please see the following charts.

1. America (USA) – China

To date, there are 13 court decisions involving the REFJ between China and the United States of America. More specifically:

• In China, there are 7 cases, among which, Chinese courts recognized US judgments in 2 cases, while refused to recognize US judgments in 3 cases.
• In the US, there are 6 cases, among which, the US courts recognized Chinese judgments in 4 cases, while refused to recognize Chinese judgments in 1 case.

Have China and the US concluded any treaty concerning REFJ? No.

What is the prerequisite and basis for Chinese courts to review US judgments? Reciprocity.

For the case info, please see the list above.

2. Australia – China

To date, there are 4 court decisions involving the REFJ between China and Australia. More specifically:

• In China, there is one case, where the Chinese court refused to recognize an Australian judgment.
• In Australia, there are 3 cases, among which, the Australian courts recognized Chinese judgments in 2 cases, while refused to recognize Chinese judgments in 1 case.

Have China and Australia concluded any treaty concerning REFJ? No.

What is the prerequisite and basis for Chinese courts to review Australian judgments? Reciprocity.

For the case info, please see the list above.

3. British Virgin Islands (BVI) – China

To date, there is one court decision involving the REFJ between China and the British Virgin Islands (BVI). More specifically:

• In the BVI, there is one case, where the BVI court recognized a Chinese judgment.

Have China and the BVI concluded any treaty concerning REFJ? No.

What is the prerequisite and basis for Chinese courts to review the BVI judgments? Reciprocity.

For the case info, please see the list above.

4. Canada – China

To date, there is one court decision involving the REFJ between China and Canada. More specifically:

• In Canada, there is one case, where the Canadian court recognized a Chinese judgment.

Have China and Canada concluded any treaty concerning REFJ? No.

What is the prerequisite and basis for Chinese courts to review Canadian judgments? Reciprocity.

For the case info, please see the list above.

5. Chad – China

To date, there is one court decision involving the REFJ between China and Chad. More specifically:

• In China, there is one case, where the Chinese court refused to recognize a Chadian judgment.

Have China and Chad concluded any treaty concerning REFJ? No.

What is the prerequisite and basis for Chinese courts to review Chadian judgments? Reciprocity.

For the case info, please see the list above.

6. France – China

To date, there are 5 court decisions involving the REFJ between China and France. More specifically:

• In China, there are 5 cases, among which, Chinese courts recognized French judgments in 3 cases, while refused to recognize French judgments in 2 cases.

Have China and France concluded any treaty concerning REFJ? Yes.

What is the prerequisite and basis for Chinese courts to review French judgments? The bilateral treaty.

For the case info, please see the list above.

7. Germany – China

To date, there are 4 court decisions involving the REFJ between China and Germany. More specifically:

• In China, there are 3 cases, among which, Chinese courts recognized German judgments in one case, while refused to recognize German judgments in 2 cases.
• In Germany, there is one case, where the German court recognized a Chinese judgment.

Have China and Germany concluded any treaty concerning REFJ? No.

What is the prerequisite and basis for Chinese courts to review German judgments? Reciprocity.

For the case info, please see the list above.

8. Israel – China

To date, there are 2 court decisions involving the REFJ between China and Israel. More specifically:

• In China, there is one case, where the Chinese court refused to recognize an Israeli judgment.
• In Israel, there is one case, where the Israeli court recognized a Chinese judgment.

Have China and Israel concluded any treaty concerning REFJ? No.

What is the prerequisite and basis for Chinese courts to review Israeli judgments? Reciprocity.

For the case info, please see the list above.

9. Italy – China

To date, there are 4 court decisions involving the REFJ between China and Italy. More specifically:

• In China, there are 4 cases, among which, Chinese courts recognized Italian judgments in one case, while refused to recognize Italian judgments in 3 cases.

Have China and Italy concluded any treaty concerning REFJ? Yes.

What is the prerequisite and basis for Chinese courts to review Italian judgments? The bilateral treaty.

For the case info, please see the list above.

10. Japan – China

To date, there are 4 court decisions involving the REFJ between China and Japan. More specifically:

• In China, there are 2 cases, where Chinese courts refused to recognize Japanese judgments.
• In Japan, there are 2 cases, where the Japanese court refused to recognize Chinese judgments.

Have China and Japan concluded any treaty concerning REFJ? No.

What is the prerequisite and basis for Chinese courts to review Japanese judgments? Reciprocity.

For the case info, please see the list above.

11. Malaysia – China

To date, there is one court decision involving the REFJ between China and Malaysia. More specifically:

• In China, there is one case, where the Chinese court refused to recognize a Malaysian judgment.

Have China and Malaysia concluded any treaty concerning REFJ? No.

What is the prerequisite and basis for Chinese courts to review Malaysian judgments? Reciprocity.

For the case info, please see the list above.

12. Netherlands – China

To date, there is one court decision involving the REFJ between China and the Netherlands. More specifically:

• In the Netherlands, there is one case, where the Dutch court recognized a Chinese judgment.

Have China and the Netherlands concluded any treaty concerning REFJ? No.

What is the prerequisite and basis for Chinese courts to review Dutch judgments? Reciprocity.

For the case info, please see the list above.

13. Poland – China

To date, there is one court decision involving the REFJ between China and Poland. More specifically:

• In China, there is one case, where the Chinese court recognized a Polish judgment.

Have China and Poland concluded any treaty concerning REFJ? Yes.

What is the prerequisite and basis for Chinese courts to review Polish judgments? The bilateral treaty.

For the case info, please see the list above.

14. Russia – China

To date, there is one court decision involving the REFJ between China and Russia. More specifically:

• In China, there is one case, where the Chinese court recognized a Russian judgment.

Have China and Russia concluded any treaty concerning REFJ? Yes.

What is the prerequisite and basis for Chinese courts to review Russian judgments? The bilateral treaty.

For the case info, please see the list above.

15. Singapore – China

To date, there are 3 court decisions involving the REFJ between China and Singapore. More specifically:

• In China, there are 2 cases, where Chinese courts recognized Singaporean judgments.
• In Singapore, there is one case, where the Singaporean court recognized Chinese judgments.

Have China and Singapore concluded any treaty concerning REFJ? No, but the heads of the supreme courts in China and Singapore signed China-Singapore Memorandum of Guidance on Recognition and Enforcement of Money Judgments (Memorandum of Guidance).

What is the prerequisite and basis for Chinese courts to review Singaporean judgments? Reciprocity.

For the case info, please see the list above.

16. South Korea – China

To date, there are 4 court decisions involving the REFJ between China and South Korea. More specifically:

• In China, there are 3 cases, among which, the Chinese courts recognized a South Korean judgment in one case, while refused to recognize South Korean judgments in 2 cases.
• In South Korea, there is one case, where the South Korean court recognized a Chinese judgment.

Have China and South Korea concluded any treaty concerning REFJ? No.

What is the prerequisite and basis for Chinese courts to review South Korean judgments? Reciprocity.

For the case info, please see the list above.

17. Turkey – China

To date, there is one court decision involving the REFJ between China and Turkey. More specifically:

• In China, there is one case, where the Chinese court recognized a Turkish judgment.

Have China and Turkey concluded any treaty concerning REFJ? Yes.

What is the prerequisite and basis for Chinese courts to review Turkish judgments? The bilateral treaty.

For the case info, please see the list above.

18. UAE – China

To date, there are two court decisions involving the REFJ between China and the UAE. More specifically:

• In China, there are two cases, where the Chinese courts recognized UAE judgments.

Have China and the UAE concluded any treaty concerning REFJ? Yes.

What is the prerequisite and basis for Chinese courts to review UAE judgments? The bilateral treaty.

For the case info, please see the list above.

19. UK – China

To date, there are 2 court decisions involving the REFJ between China and the UK. More specifically:

• In China, there is one case, where the Chinese court refused to recognize British judgments.
• In the UK, there is one case, where the British court recognized a Chinese judgment.

Have China and the UK concluded any treaty concerning REFJ? No.

What is the prerequisite and basis for Chinese courts to review British judgments? Reciprocity.

For the case info, please see the list above.

20. Uzbekistan – China

To date, there are two court decisions involving the REFJ between China and Uzbekistan. More specifically:

• In China, there are two cases, where the Chinese courts refused to recognize Uzbekistani judgments.

Have China and Uzbekistan concluded any treaty concerning REFJ? Yes.

What is the prerequisite and basis for Chinese courts to review Uzbekistani judgments? The bilateral treaty.

For the case info, please see the list above.

 

By Jos Hoevenaars and Xandra Kramer, Erasmus University Rotterdam (postdoc and PI ERC consolidator project Building EU Civil Justice, Erasmus University Rotterdam)

Introduction

As is illustrated in a series of blog posts on this website, the current pandemic also has an impact on the administration of justice and on international litigation. As regards collective redress, Matthias Weller reported on the mass litigation against the Austrian Federal State of Tyrol and local tourist businesses. The Austrian Consumer Protection Association (Österreichischer Verbraucherschutzverein, VSV) has been inviting tourists that have been in the ski areas in Tyrol – which turned into Corona infection hotspots – in the period from 5 March 2020 and shortly afterwards discovered that they were infected with the virus, to enrol for claims for damages against the Tyrolean authorities and the Republic of Austria. Hundreds of coronavirus cases in Iceland, the UK, Germany, Ireland, Norway, Denmark and the Netherlands can be traced back to that area. Currently over 4,000 (including nearly 400 Dutch nationals) have joined the action by the VSV.

It may be expected that other cases will follow as the global impact of the pandemic is overwhelming, both in terms of health and economic effects, and it seems that early warnings have been ignored. Like for instance the Volkswagen emission case, these events with global impact are those in which collective redress mechanisms – apart perhaps from piggybacking in pending criminal procedures – are the most suitable vehicles. This blog will address mass litigation resulting from the corona crisis and use the opportunity to bring a new Dutch act on collective action to the attention.

Late Response

After the WHO declared the coronavirus a global emergency on 30 January 2020, and after the virus made landfall in Europe in February, the beginning of March still saw plenty of skiing and partying in Tyrolean winter sports resorts such as Ischgl and Sankt Anton. It later turned out that during that period thousands of winter sports tourists were infected with the corona virus and who, upon returning to their home countries, spread the virus throughout Europe. A group of Icelandic vacationers had already returned sick from Ischgl at the end of February. In response, Iceland designated Tyrol as a high-risk zone. They warned other countries in Europe, but these did not follow the Icelandic example.

The first alarm bells in Tyrol itself rang on 7 March 2020 when it became known that a bartender from one of the busiest and best-known après-ski bars in Ischgl, Café Kitzloch, had tested positive for the corona virus. A day later it appeared that the entire waiting staff tested positive. Still, the bar remained open until 9 March. Other bars, shops, restaurants were open even longer, and it took almost a week for the area to go into complete lockdown. The last ski lifts stopped operating on 15 March.

The public prosecutor in Tirol is currently investigating whether criminal offenses were committed in the process. The investigation started as early as 24 March, at least in part after German channel ZDF indicated that at the end of February there was already a corona infection in an après ski bar in Ischgl and that it had not been made public. Public officials in Tyrol might thus face criminal proceedings, and civil claims are to be expected later in the year. For instance Dutch media have reported that Dutch victims feel misinformed by the Austrian authorities and nearly 400 Dutch victims have joined the claim.

Corona-related Damage as Driver for International (Mass) Litigation

It is unlikely that COVID-19 related mass claims will be confined to the case of Tirol, and to damages resulting directly from infections and possible negligent endangerment of people by communicable diseases. The fall-out from the wide-spread lockdown measures and resulting economic impact on businesses and consumers alike, has been called a ‘recipe for litigation’ for representative organizations and litigation firms.

With the coronavirus upending markets, disrupting supply chains and governments enacting forced quarantines, the fallout from lockdowns as well as the general global economic impact will provide fertile grounds for lawsuits in a host of areas. Some companies are already facing legal action. For instance, GOJO, the producer of Purell hand sanitizer, is being accused of ‘misleading claims’ that it can prevent ‘99.9 percent of illness-causing germs’ (see for instance this NBC coverage), and law suits have been brought for price gouging by Amazon for toilet paper and hand sanitizer, and for sales of face masks through eBay (see here for a brief overview of some of the cases).

Further down the line, manufacturers may sue over missed deadlines, while suppliers could sue energy companies for halting shipments as transportation demand dwindles. Insurers are likely to find themselves in court, with businesses filing insurance claims over the coronavirus fallout. And in terms of labor law, companies may be held liable in cases where work practices have led to employees being exposed and infected with the virus. For instance, this March, in the US the nurses’ union filed a law suit against the New York State Department of Health and a few hospitals for unsafe working conditions (see for instance this CNN coverage). Already at the end of January, the pilots’ union at American Airlines Group Inc. took legal action to prevent the company from serving China, thereby putting its employees at risk (see for instance this CBS coverage).

Private care facilities too, like nursing homes that have seen disproportionate death rates in many countries, could face claims that they didn’t move quickly enough to protect residents, or didn’t have proper contingency plans in place once it became clear that the virus posed a risk especially to their clientele. Similarly, states have a responsibility for their incarcerated population and may face liability claims in case of outbreak in prison facilities. Airlines that have spent years in EU courts fighting and shaping compensation rules for passengers may well again find themselves before the Court of Justice pleading extraordinary circumstances beyond their control to avoid new payouts to consumers. And finally, governments’ careful weighing of public health against individual rights could result in mass claims in both directions.

Developments in the Netherlands: the WAMCA

Dutch collective redress mechanisms have been a subject of discussion in the EU and beyond. While we are not aware of cases related to COVID-19 having been brought or being prepared in the Netherlands so far, the latest addition to the Dutch collective redress mechanisms could prove to be useful. In the Netherlands, a procedure for a collective injunctive action has been in place since 1994. This was followed by a collective settlement scheme in 2005 (the Collective Settlement Act, WCAM) which facilitates collective voluntary settlement of mass damage. Especially the Shell and Converium securities cases have attracted widespread international attention. The decision by the Amsterdam Court of Appeal – having exclusive competence in these cases – has been criticized for casting the international jurisdiction net too wide in the latter case in particular (see for a discussion of private international law aspects Kramer 2014 and Van Lith 2010). These, and a number of other Dutch collective redress cases, have spurred discussions about the alleged risk of the Netherlands opening itself up to frivolous litigation by commercially motivated action groups, a problem that has often been associated with the US system. In an earlier blog post our research group has called for a nuanced approach as there are no indications that the Dutch system triggers abuse.

At the time of enacting the much discussed WCAM, the Dutch legislature deliberately chose not to include the possibility of bringing a collective action for the compensation of damages in an attempt to avoid some of the problematic issues associated with US class actions. However, last year, after many years of deliberating (see our post of 2014 on this blog on the draft bill) the new act enabling a collective compensatory action was adopted. The Collective Redress of Mass Damages Act (Wet afwikkeling massaschade in collectieve actie, WAMCA) entered into force on 1 January 2020. It applies to events that occurred on or after 15 November 2016.

As announced in an earlier post on this blog, this new act aims to make collective settlements more attractive for all parties involved by securing the quality of representative organizations, coordinating collective (damages) procedures and offering more finality. At the same time it aims to strike the balance between better access to justice in a mass damages claim and the protection of justified interests of persons held liable. The WAMCA can be seen as the third step in the design of collective redress mechanisms in the Dutch justice system, building on the 1994 collective injunctive action and the 2005 WCAM settlement mechanism. An informal and unauthorised English version of the new act is available here.

The new general rule laid down in Article 3:305a of the Dutch Civil Code, like its predecessor, retains the possibility of collective action by a representative association or foundation, provided that it represents these interests under the articles of association and that these interests are adequately safeguarded by the governance structure of the association or foundation. However, stricter requirements for legal standing have been added, effectively raising the threshold for access to justice. This is to avoid special purpose vehicles (SPVs) bringing claims with the (sole) purpose of commercial gain. In addition to a declaratory judgment a collective action can now also cover compensation as a result of the new act. In case more representatives are involved the court will appoint the most suitable representative organisation as exclusive representative. As under the old collective action regime, this has to be a non-profit organisation. The Claim Code of 2011 and the new version of 2019 are important regulatory instruments for representative organisations. Should parties come to a settlement, the WCAM procedural regime will apply, meaning that the settlement agreement will be declared binding by the Court of Appeal in Amsterdam if it fulfils the procedural and substantive requirements. This is binding for all parties that didn’t make use of the opt-out possibility.

Limited territorial scope and the position of foreign parties

To meet some of the criticism that has been voiced in relation to the extensive extraterritorial reach of the WCAM, the new act limits the territorial scope of collective actions.

First, the new Article 3:305a of the Dutch Civil Code contains a scope rule stating that a legal representative only has legal standing if the claim has a sufficiently close relationship with the Netherlands. A sufficiently close relationship with Dutch jurisdiction exists if:

(1) the legal person can make a sufficiently plausible claim that the majority of persons whose interests the legal action aims to protect have their habitual residence in the Netherlands; or

(2) the party against whom the legal action is directed is domiciled in the Netherlands, and additional circumstances suggest that there is a sufficiently close relationship with Dutch jurisdiction; or

(3) the event or events to which the legal action relates took place in the Netherlands

Though this is not an international jurisdiction rule – that would be at odds with the Brussels I-bis Regulation – this scope rule prevents that the Dutch court can decide cases such as the Converium case in which the settling company was situated abroad and only 3% of the interested parties were domiciled in the Netherlands. In fact, it is a severe restriction of the international reach of the Dutch collective action regime.

Second, another often debated issue is the opt-out system of the WCAM. While this makes coming to a settlement obviously much more attractive for companies and increases the efficiency of collective actions, an exception is made for collective actions involving foreign parties. Dutch parties can make use of an opt-out within a period to be set by the court of one month at least. However, for foreign parties the new act provides for a general opt-in regime for foreign parties. Article 1018 f (5) of the Dutch Code of Civil Procedure provides that persons who are not domiciled or resident in the Netherlands are only bound if they have informed the court registry within the period set by the court that they agree to having their interests represented in the collective action. There is a little leeway to deviate from this rule. The court may, at the request of a party, decide that non-Dutch domiciles and residents belonging to the precisely specified group of persons whose interests are being represented in the collective action, are subject to the opt-out rule.

The introduction by the WAMCA of a compensatory collective action complementing the injunctive collective action and providing a stick to the carrot of the WCAM settlement offers new opportunities, while increased standards of legal standing provide the necessary safeguards. However, the limitation of the scope of the new regime to cases that are closely related to the Netherlands – on top of the international jurisdiction rules – and deviating from the effective opt-out rule for foreign parties restrict the scope of Dutch collective actions. Time will tell what role the new Dutch collective action regime will play in major international cases, and whether it will be of use to provide redress for some of the culpable damage caused by the present pandemic.

Written by Haggai Carmon, Carmon & Carmon, an international law firm with offices in Tel Aviv and a front office in New York.

The requirement of parties’ good faith conduct is fundamental in Israeli law and jurisprudence. However, only recently the Supreme Court has applied that doctrine to enforcement of foreign judgments as thus far, only lower courts have followed that doctrine.

In Civil Appeal Prof. Menachem Smadja v. Bankruptcy Office Geneva, the Supreme Court (per Esther Hayut, Chief Justice,) on August 27, 2019, unanimously denied an appeal over a District Court’s earlier finding that procedural bad faith is independently  sufficient grounds to rule against a party whose conduct during proceedings to enforce a Swiss judgment, was so egregious that it warranted such extreme measure.

“In the course of the proceedings in the case, the appellant demonstrated contempt for the court’s proceedings, the counterclaimant’s rights and the duties imposed on him under the Rules of Civil Procedure and the judicial decisions given in his case. In doing so, the appellant violated his duty to act fairly and reasonably to enable proper judicial proceeding. In light of all the foregoing, there is no escaping of the conclusion that the appeal before us is one of those rare instances where the appellant’s bad faith conduct, who has taken practical measures to thwart the enforcement of the judgment rises to an abuse of court proceedings. Under these exceptional circumstances, in my opinion, it is justified to use the authority given to us and order the appeal be denied in limine.”

Although lack of good faith or unacceptable conduct do not, pursuant to the Israeli Foreign Judgments Enforcement Law, provide independent cause to refuse recognition or enforcement of a foreign judgment, “however certainly this carries weight in the court’s considerations together with all other conditions”[1] for such recognition or enforcement. [Judge Keret-Meir’s ruling in Bankruptcy File (T.A.) 2193/08 First International Bank of Israel Ltd. v. Gold & Honey (1995) L.P. et al.

Earlier, the Jerusalem District Court’s judgment in D.C.C. (Jm.) 3137/04 Ahava (USA) Inc. v. J.W.G. Ltd (Ahava)[2]concerned whether a U.S. judgment precluding an Israeli company from marketing Israeli products in the United States through a website was a foreign judgment enforceable pursuant to the Enforcement Law. The court held that “the filter of ‘public policy’ allows us to uproot unjust outcomes that may arise from the application of a foreign law,”[3] and addressed at length the essence of public policy:[4]

What is public policy? It is a broad term, “flexible and not entirely definable” …. Some will emphasize the local nature of public policy… but it seems that the basic requirements of law, including good faith, equity, and human rights, do not carry national identities, nor do they evaporate at international borders. Recognition of this approach grew with the erosion of “the archaic definition of the sovereignty doctrine, and as territorial sovereignty boundaries between legal systems blurred” (I. Canor, Private International Law and the Decay of Sovereignty in the Globalization Age: The Application of Foreign Public Law on International Contracts… p. 491). This process expanded the definition of public policy and imparted it with a quality of tikkun olam (bettering society) in its literal sense, such that appropriate applications are made from the public and private law of foreign legal systems to a domestic forum. In this context, we can even identify certain international rules which obligate even the parties of a purely domestic contract (Canor, id. 513). The inclination to apply rules of global public policy will increase as the link between the contract and local law weakens. A component of this global public policy is the very need to enforce foreign judgments.

The District Court held essentially that the protection of intellectual property does not in and of itself violate public policy in Israel, as this includes as well the principle that prohibits taking another’s work or basing one’s work on it, and this principle also applies to trademark law and other protections related to the appearance of the product. In these circumstances, the court ruled that the prohibition placed by the U.S. court, on the basis of internal U.S. trademark law, did not conflict with public policy in Israel.

In D.C.C. (T.A.) 22673-07-10 Nader & Sons LLC et al v. Homayon Antony Namvar (Nader),[5] the District Court rejected arguments that a summary judgment by the Supreme Court of the state of New York was unenforceable in Israel as having been rendered in unjust and improper proceedings, so that it conflicted with the public policy of Israel. The respondent argued that the choice of such proceedings in a suit of such broad scope constituted lack of good faith and an attempt to evade thorough investigation of the claims, as well as that significant details and facts withheld from the New York court might have affected the outcome of the proceedings.

The court dismissed these arguments:[6]

As stated, external public policy, in the sense of Article 3(3) of the Foreign Judgments Enforcement Law, refers to conformance with the basic principles of Israeli law, and the argument of the respondent regarding the flaws that, in his opinion, characterize the proceedings in New York, as decisive as they may be, do not testify to any conflict with these basic principles (regardless of the validity of these claims) and are not directly connected to the content of the judgment.

In Justice Procaccia commented in C.A. 5793/05 The Great Synagogue Shone Halachot Association v. Netanya Municipality:[7]

It is true that the Arbitration Law, 5728-1968 does not set a binding deadline on the prevailing party in an arbitration award to file a motion for its confirmation.… Nevertheless, this does not signify that there exists no limit whatsoever for filing a motion for the confirmation of an arbitration award and that the procedural rights of the holder of such an award are everlasting. A party who prevailed in arbitration is required by procedural good faith to submit the award for confirmation within a reasonable time period, given the special circumstances of the relevant incident. A party who for years ignored the award, did not act on it, and appeared to no longer have any intention of enforcing it, is liable to face a procedural estoppel claim (Ottolenghi, Arbitration: Law and Procedure, 4th ed., 2005, 914-916). Like any other complaint filed with a court, a motion for confirmation of an arbitration award is also subject to the rules of procedural good faith and reasonability regarding the timing, form, and content of the filing. The civil rules of laches apply to the timing of filing, as they apply to civil suits in the framework of statutory periods of limitations.

The question of whether this judgment, which deals with a 30-year delay in filing a motion for the confirmation of an Israeli arbitration award, will also apply to an arbitral award issued abroad under the New York Convention, remains open and has not been addressed. Because the New York Convention and the regulations for its execution make no mention of laches, it is unclear if the application of the Convention should be restricted and subjected to those principles, thus bypassing the absence of deadline for filing for confirmation under the Convention. In general, foreign arbitration takes place between commercial entities or countries, and at times, the difficulty in enforcing arbitration awards for various reasons is universal. There are many cases in which enforcement in one country encounters protracted difficulties, and then, upon locating debtor’s assets in another country, the award holder applies for enforcement of the award in that country. This may be many years after the award was issued. Blocking the procedural path of the holder through laches is unjust, at least under such circumstances, and it appears that the New York Convention’s silence in this context is not for naught. Presumably for the same reason, the Convention does not list laches among the grounds for refusal to recognize or enforce an award, nor does it impose a time limit for filing a motion for the confirmation of an arbitration award under the Convention.

For more informaiton, see Haggai, Foreign Judgements in Israel — Recognition and Enforcement,  published in Hebrew by the Israeli Bar Association. Springer published an English translation.

[1] See Judge Keret-Meir’s ruling in Bankruptcy File (T.A.) 2193/08 First International Bank of Israel Ltd. v. Gold & Honey (1995) L.P. et al.

[2]P.M. 5763 (2) 337 (2004).

[3] Id. at 343.

[4] Id. at 344.

[5]Nevo (May 5, 2011).

[6]Id. at 9.

[7]Nevo (Sep. 11, 2007).

Written by Hetal Doshi & Sankalp Udgata

Combining law, computer science and finance in unprecedented ways, “Smart Contract” is the latest addition to the unending list of Internet of Things. Unlike a traditional contract, which only lays out the terms of agreement for subsequent execution, a smart contract autonomously executes some or all of the terms of the agreement as it are usually based on Block-chain. It has the potential to reshape our understanding of contract and technology law. The shift from the code naïve to the code-savvy, has surfaced problems in dispute resolution beyond the existing legal perception which this article aims at analysing and resolving.

Working of the Smart Contract

By removing the need for direct human involvement, a smart contract is deployed on to a distributed Trustless Public Ledger. However, in order for the smart contract to work efficiently, exactly specified conditions for the execution of the contract are necessary, otherwise, it will be impossible to automate the process. Also, smart contracts receive information from outside block-chain platform through the use of Oracle programs that mediate with external databases and are entered into the block-chain technology.

A Hornet’s Nest

Smart contract come with their own sets of limitation and drawbacks. Following are few of the many problems, inevitable in resolving disputes over smart contracts. Interestingly however, although these problems may be encountered by an Arbitral Tribunal, arbitration (with requisite checks) is the most efficient mechanism to deal with such problems.

Enforceability Quandary

1. A) Formal Enforcement

A very fundamental and critical impediment, Courts and Tribunals are consistently skeptical in enforcing such unconventional contracts. Although the use of automated communication or system to conclude contracts or make it binding on the parties has been long accepted by the business community, a Tribunal is often troubled with disparity in validity of smart contracts over conflicting jurisdictions.

Secondly, Article 2.1.1 of UNIDROIT (PICC) undoubtedly includes automated contracting. However, problems may arise in relation to codes meeting the in writing requirement of UNCITRAL and the New York Convention.

1. B) Substantive Enforcement

The artificial nature of contracting deprives actions of the human touch. Complexities arise when there a subsequent smart contracts. For example, if there is a supplementary smart contract, consent for which is sought from the parent contract. Since it is the codes in the parent smart contract that initiate the subsequent contracts and transactions and the performance, can consent be said to have been given by a mere code and is such consent valid and enforceable against such code.

A Hitch in the Seat

Given the distributed nature of block-chain i.e. a ledger which is spread across the network among all peers in the network and the operation of Smart Contracts, it is important to agree a seat for the arbitration to avoid satellite disputes about the applicable seat and/or procedural law.

Problems in Execution- Irreversibility and Irremediability

Since they are theorized to be complete contract by focusing on ex ante rather than ex post, they eliminate the act of remediation, by admitting no possibility of breach. However, the DAO case was incomplete as it failed to anticipate the possibility that coding errors could result in unexpected wealth transfers. In addition, smart contract may deal with commercial scenarios so complex and unpredictable that the code will fail to embed all possible answers to all possible questions.

Further, if the smart contract contains a mistake, security flaw, or does not accurately capture the parties’ intent, the smart contracts will be difficult to modify or change, due to a block-chain’s resilient and tamper resistant nature. The program will continue to blindly execute its code, regardless of the intent of the parties or changed circumstances. When the transaction is more complex, involving multiple players (humans or machines), multi-component assets and diverse jurisdictions, computer code smartness may easily turn into plain dumbness.

Needless to mention, a Tribunal or a Court will encounter several problems in executing a decision vis-à-vis a smart contract such as:

1. Lack of in-rem jurisdiction- Reversing a transaction on a decentralised ledger with several contributors that may not even be parties before the Tribunal.
2. Excusing future performance or specific performance- Since they operate automatically and are not flexible.

The Truth about Consent

Contracting also has issues such as duress, fraud, forgery, lack of legal capacity and unconscionability which require human judgement and cannot be scrutinised by a smart contract which simply functions on a series of binary inputs. Moreover, though it provides guarantee of execution to certain extent, it cannot verify whether the contracting parties have the legal capacity to get into legal relationships or business capacity to make an agreement.

It also does not care whether there truly exists consensus as idem between contractual parties, there is no possibility for the contract to be void or voidable. However, although codes are not natural language that might be vague or ambiguous, leaving space for interpretation. For a consensual dispute resolution mechanism like arbitration, the indispensable requirement of free consent and the evaluation of intention of parties cannot be comprehended by a smart contract that stands deprived of reason and morale.

This may be an issue in circumstances where the Smart Contract is entered into by a computer, is in code and/or and does not create legally binding contractual obligations under the applicable law. The solution to this can be that the Arbitration clause can become part of the Ricardian contract which like any other similar contract is a hybrid form of smart contract which is partly in human readable form.

The Catch in Imputing Liability in a Dispute

The code smart is sadly not insusceptible to security vulnerabilities and exploits like forking, which could cause a smart contract to operate unexpectedly and invalidate transactions, or worse, enable a third-party to siphon digital currency or other assets from contracting parties accounts. Scary, isn’t it?

However, since a Tribunal is only an in personam jurisdiction, it can barely inspect or issue directions against such third parties. Such vulnerabilities might also jeopardise the secrecy that arbitration aims to achieve.

It is not unjust to say that such a contract is dangerous enough to attract strict liability in case of any harm caused due to an error in coding. That, juxtaposed with the existence of foreseeable risk in execution of smart contracts poses a potentially huge hurdle to the exponentially growing use of block-chain technology.

Furthermore, disputes, to summarize, may arise:

1. between the parties of a smart contract, or
2. between two conflicting smart contracts.

Since the code smart is a form of artificial intelligence replacing human involvement, it is the second set of disputes where a Tribunal or Court will be troubled with the attachment of liability.

Cutting the Gordian knot – checks and suggestions

Given our shift from not so smart contracts, we must keep an eye for the following checklist while dealing with dispute resolution in smart contracts.

Formality requirements

Parties should therefore ensure the arbitration agreement meets any formality requirements under the governing law of the arbitration agreement and Smart Contract, the law of the seat and wherever the award is likely to be enforced.

Choice of seat

Parties should base check whether in their chosen seat,

1. Domestic law does not render a Smart Contract illegal or unenforceable
2. The disputes likely to arise are arbitrable
3. The codified arbitration agreement in question will be upheld and enforced by the supervisory courts.

Tribunal with specialist technical knowledge

Some Smart Contract disputes will be fairly vanilla contract law disputes, but others will be of a highly technical nature, for example, where the code does not operate as expected. Pursuant to the novel nature of the smart contract the importance of having a tribunal familiar with the technology against the importance of having the dispute decided by experienced arbitrators becomes crucial.

Severable arbitration clause

Although the doctrine of separability protects the validity of an arbitration clause, the dispute resolution clause should always be kept independent of any smart codes.

Localised Termination Clause

Given the automated and perpetual nature of smart contracts, there should be an option to terminate the contract. Although non-amenability is an essential feature of a smart contract, the option to cede away from the distributed ledger (terminate the contract) should be sole switch available the each of the contributors. The code may prescribe conditions for pulling the plug, i.e. create joint switches. Therefore, a party shall not be able to terminate its obligations without assent from any of its debtor on the ledger. As a result, once the debt is settled either by payment of dues or by an award of a Tribunal, the parties may pull the plug.

Power of Pardon

Each party to a smart contract should be at liberty to excuse payment by a debtor in under a direction by a tribunal or a Court in case of a force majeure or any other scenario where performance is liable to be excused.

This list, although non-exhaustive, will certainly sustain best practices in arbitration until the next great invention in the sphere of technology and business will live to fight another day.

 

 

Written by Sankalp Udgata & Hetal Doshi, National Law University (NUSRL), Ranchi

The choice of arbitration as the default system of resolution of commercial disputes, which was initially restricted to the foreign parties is now being reciprocated by even the Indian parties, thus setting the stage for India being a global hub for commercial arbitration. Surprising as it is, commercial agreements worth billions have but a succinct recording of a seat of arbitration. Sloppy as they are, these poorly drafted dispute resolution clauses open the doors to a tsunami of litigation which simply intervene and delay the entire resolution process thereby defeating the very virtue arbitrations proclaim to instil.

Since arbitrations are out-of-court proceedings, they do not by themselves command the authority of the sovereign. Therefore, every arbitration must be guided and overseen by a Court that has supervisory jurisdiction over it. This Court is the Juridical Seat of the arbitration as determined by the parties and the most important concept that the territorial situs of the Seat denotes. In absence of a positive determination by the parties in the arbitration agreement, the Tribunal or a Court whose supervisory jurisdiction is sought must first determine the Seat and consequently whether it has the jurisdiction, as the Juridical Seat, to hear the matter.

However, arbitration in India has been a Hornet’s nest if not a Pandora’s box to say the least. Admittedly, the vast majority of problems associated with international commercial arbitrations taking place in India revolve around the uncertainty in the Courts’ approach to determination of the seat when the parties have failed to choose one. The Indian Courts, much rather the Supreme Court of India (“SCI”) has shown a consistent disparity in applying any particular method for determination of the Seat in such situations. This article aims to reconcile the various tests that the Supreme Court of India has applied over the years and attempts to plot their reasoning into three distinct methods for determination of a seat when the arbitration agreement fails to explicitly document one. This article also discusses the various factors relevant in each method with examples and can therefore serve as a catalogue for practitioners as well as valuable literature to the academia.

I. Seat <=> Venue Method

Representing the most widely accepted view, this method is applicable when parties have at least chosen a particular geographic location as the venue for the arbitration to take place without specifically designating a Seat. Finally, setting the clock straight and reconciling to the globally accepted rules, the SCI in Soma JV case held that the venue of arbitration shall be the default Seat in absence of any contrary indica. (¶63)

For it to be the default Seat, the venue must exist in absence of any of the following factors that, over the years, the Court has found to be contrary indications to venue being the Seat.

• Designation of an alternate place as Seat

When there is an express designation of the arbitration venue, combined with a supranational body of rules governing the arbitration the venue shall be the seat unless the parties have designated any alternative place as the seat. (Shashoua, ¶34,42)

• Existence of a national set of lex arbitri or proper law

Despite having designated London as the venue of arbitration, the SCI held Bombay to be the Seat in the 2014 Enercon Case. In making this determination, the Court was heavily swayed by the fact that the laws specifically chosen by the parties in the contract to apply to different aspects of the dispute were Indian laws.

• Existence of an alternate place of making of award

Since it is necessary for the arbitral award to be made and signed at the place of arbitration as determined by Section 20 of the 1996 Arbitration Act (“Act”), an award made at one of the two designated venues resulted in the venue where the award was not signed was not the Seat in the Soma JV case.

• Venue of an arbitration proceeding

The Court has on several occasions differentiated between the venue of arbitration proceedings from the venue of an arbitration proceeding for the later cannot be construed as anything but a convenient location for the conduction of a meeting. (2012 Enercon case)

II. Inverse Closest & Most Real Connection Method (“Inverse-CMRC”)

The globally acclaimed CMRC test is used to determine either lex arbitri or the proper law governing the arbitration agreement when the place of arbitration has been decided as the same would be the law most closely connected to the choice of place. While the English Courts in Peruvian Insurance Case applied the law of the place of arbitration as the lex arbitri, in the Sulamerica Case, applied it to the proper law governing the arbitration agreement as they had the most real connection to the place chosen by the parties. India has also used the test in a peculiar way to apply the lex arbitri to the whole of the agreement. This proximity is essentially based on the legal localisation of the place.

However, India has been applying the above test somewhat inversely based on the geographic localisation of the law instead. Bemusing everyone, the SCI in Enercon Case applied the Inverse CMRC Method to determine the Seat to be India as it was most closely and intimately connected to the lex arbitri and the proper law of the contract, both of which were Indian. The Indian model seems to presume that the parties could not have contemplated a delocalised lex arbitri or proper law. Be that as it may, where a supranational set lex arbitri or proper law exists, the first method will prevail as these laws will not be sufficient contrary indications.

III.  Cause of Action Method

This is an unsuitable method of determination of seat. In this case, if the arbitration agreement does not reveal a Seat then the Courts of the place where the cause of action arose will be considered as the Juridical Seat of the arbitration. This is derived from the definition of ‘Court’ under Section 2(1)(e) of the Act which also includes the Court that would have jurisdiction over the question if it formed the subject matter of a suit.

Understanding this to mean that the legislature has intended to give jurisdiction to both the Court of arbitration and the Court having territorial jurisdiction over the place where the cause of action arose, concurrently, the SCI has caused tremendous controversy by in Paragraph 96 of BALCO judgment. However, when read wholly and not in isolation, BALCO judgment very distinctly states that if concurrent jurisdiction were to be the order of the day, despite the seat having been located and specifically chosen by the parties, party autonomy would suffer and therefore Courts were intended to exercise supervisory jurisdiction to the exclusion of other Courts as provided under Section 42. (Soma JV case, ¶51)

Therefore, since the application referred to under Section 42 can only be legitimately made to the Court of the Seat, this method is only useful where seat could not be determined by any of the above methods maybe owing to lack of any territorial nexus.

Conclusion

The contradictory judgments of the English and Indian Courts over the determination of Seat in the Enercon case caused a delay of two years and has painted a Medusa of how the incongruous views of Courts across jurisdictions terrorise the development of international commercial arbitration. Therefore, arbitrations anchored in India or involving Indian parties must be planned in a manner eliding with the recent set of “pro-arbitration” trends in determination of Seat.

Although there is no specific order of precedence for application of these methods, their very nature and the manner of their application till date suggest that the Seat-Venue method takes precedence over the other two owing to its strong territorial nexus. Ideally thus, upon failure of this method owing to the presence of a sufficient contrary indica, should the Inverse-CMRC method be applied followed by the Cause of Action method as the last resort in this three-fold method for determination of Seat.