Droit international général

I have of course posted regularly on the issues of unstunned slaughter, freedom of religious expression and animal welfare (search tag ‘shechita’ should pull out the relevant postings). The Belgian Constitutional court, to the expectations I assume of counsel in the case, yesterday referred to the CJEU for preliminary reference (cases 52 and 53/2019).

The subject of the litigation is the Flemish decree banning unstunned slaughter outright (for standing reasons the similar Walloon regime is no longer sub judice). The Belgian court requests the CJEU to clarify its judgment in C-426/16, on which I reported here,

Q1: does Regulation 1099/2009 allow Member States to introduce an outright ban; Q2 in the affirmative, is that compatible with the Charter’s right to religious expression; Q3 in the event of an affirmative answer to Q1: the elephant in the Regulation’s room which I flagged years back: is it not discriminatory to allow Member States to restrict religious slaughter, while simply exempting hunting, fishing and ‘sporting and cultural events’ from the Regulation altogether.

Readers will know my answer to these questions.

Geert.

Written by John Coyle, the Reef C. Ivey II Term Professor of Law, Associate Professor of Law at the University of North Carolina School of Law

Last week, I wrote about the interpretive rules that U.S. courts use to construe ambiguous choice-of-law clauses.  Choice-of-law clauses are not, however, the only means by which contracting parties may exercise their autonomy under the rules of private international law.  Parties may also select via contract the forum in which their disputes will be resolved.  In the United States, these contractual provisions are generally known as forum selection clauses.  Elsewhere in the world, such provisions are generally known as choice-of-court clauses.  Since this post is largely focused on U.S. practice, I utilize the former term.

The question of whether and to what extent forum selection clauses should be enforceable is contested.  It is also well beyond the scope of this post.  Instead, I want to call attention to a related issue that has attracted considerably less scholarly attention.  This is the issue of how to interpret the contractual language by which private actors exercise their autonomy to choose a forum.  I explore this issue at some length in a forthcoming article.  Over the past several decades, the courts in the United States have developed several interpretive rules of thumb—canons of construction, to use a fancy term—that assign meaning to ambiguous words and phrases that frequently appear in forum selection clauses.  I discuss several of these interpretive rules below.

The first and most important of these interpretive rules help a court determine whether a forum selection clause is exclusive or non-exclusive.  An exclusive forum selection clause requires that any litigation proceed in the named forum to the exclusion of all others.  In a non-exclusive forum selection clause, by contrast, the parties merely consent to personal jurisdiction in the chosen forum or agree not to object to venue if the other party files suit in the chosen forum.  Over the past few decades, U.S. courts have heard thousands of cases in which they were called upon to distinguish exclusive clauses (sometimes described as mandatory clauses) from non-exclusive clauses (sometimes described as permissive clauses).  To assist them in this task, they have developed a set of rules that I describe as the canons relating to exclusivity.

At the outset, it is important to emphasize that, under prevailing U.S. legal doctrine, forum selection clauses are presumptively non-exclusive.  This rule is different from the one stated in Article 3(b) of the Hague Convention on Choice-of-Court Agreements, which provides that forum selection clauses are presumptively exclusive.  In the United States, therefore, the presumption of non-exclusivity must be rebutted by so-called “language of exclusivity,” i.e. language that signals the intent of the parties to litigate in the chosen forum and no other.  If a clause states that litigation “must” proceed in the chosen forum or that the chosen forum shall have “exclusive jurisdiction” to hear the case, then the clause is exclusive.  If a clause merely states that the parties “consent to jurisdiction” in the chosen forum or that they “agree not to object to venue” in the chosen forum, by comparison, the clause is non-exclusive.

Foreign actors should be aware that U.S. courts will frequently apply the canons relating to exclusivity to construe forum selection clauses selecting a foreign jurisdiction even when the contract contains a choice-of-law clause selecting foreign law.  In one recent case, a Florida court was called upon to determine whether the following forum selection clause was exclusive or non-exclusive:

This Agreement shall be governed by and construed in accordance with the Laws of Malta and each party hereby submits to the jurisdiction of the Courts of Malta as regards any claim, dispute or matter arising out of or in connection with this Agreement, its implementation and effect.

Notwithstanding the fact that the clause expressly stated that it was to be governed by the Laws of Malta, the Florida court looked exclusively to U.S. precedent to conclude that the clause was, in fact, non-exclusive, and that the suit could proceed in Florida state court.  When dealing with U.S. counterparties, therefore, foreign companies are well advised to draft their forum selection clauses with an eye to U.S. interpretive rules even when the contract contains a choice-of-law clause selecting the law of their home jurisdiction.

The second set of interpretive rules are the canons relating to scope.  These canons are used to determine whether a forum selection clause applies exclusively to contract claims or whether it also applies to related tort and statutory claims.  To date, U.S. courts have developed at least five different interpretive rules that purport to resolve this question and no one test has attracted majority support.  The courts have, however, consistently held that forum selection clauses which state that the chosen forum shall hear all claims “relating to” the contract are broad enough to encompass tort and statutory claims with some connection to the agreement.  To the extent that contracting parties want their forum selection clause to sweep broadly, therefore, they are well advised to include “relating to” language in their agreements.  For readers interested in exactly how many angels can dance on the head of this particular pin, a detailed analysis of the various canons relating to scope is available here.

The third set of interpretive rules are the canons relating to non-signatories.  These canons help the courts determine when a forum selection clause binds parties who did not actually sign the contract.  Ordinarily, of course, individuals who have not signed an agreement cannot be bound by it unless they are third-party beneficiaries.  In the context of forum selection clauses, however, U.S. courts have crafted a more lenient rule.  Specifically, these courts have held that a non-signatory may be covered by a forum selection clause if that non-signatory is “closely related” to a signatory and it is “foreseeable” that the non-signatory would be bound.  In practice, this means that parent companies, subsidiary companies, corporate directors, and agents, among others, are frequently permitted to invoke forum selection clauses set forth in contracts they did not sign to obtain the dismissal of cases filed outside the forum named in those clauses.  Although this rule is difficult to justify under existing third-party beneficiary doctrine, U.S. courts have reasoned that it is necessary to avoid fragmented litigation proceedings and, at the end of the day, generally consistent with party expectations.

The fourth and final set of interpretive rules are the canons relating to federal court.  In the United States, one may file a lawsuit in either state court or federal court.  A recurring question in the interpretation of forum selection clauses is whether the parties wanted to litigate their disputes in state court to the exclusion of federal court or whether they wanted to litigate their disputes in either state or federal court.  In order to distinguish one type of clause from the other, U.S. courts have drawn a sharp distinction between the word “of” and the word “in.”  When the parties select the “courts of New York,” they are deemed to have selected the state courts of New York to the exclusion of the federal courts because only state courts are “of” New York.  When the parties select the “courts in New York,” by comparison, they are deemed to have selected either the state courts or the federal courts in New York because both sets of courts are physically located “in” New York.

Sophisticated parties may, of course, contract around each of the interpretive default rules discussed above by stating clearly that they want their clause to (a) be exclusive or non-exclusive, (b) apply or not apply to specific types of claims, (c) apply or not apply to non-signatories, or (d) select state courts, federal courts, or both.  To date, however, many U.S. parties have failed to update their forum selection clauses to account for these rules.  Chris Drahozal and I recently reviewed the forum selection clauses in 157 international supply agreements filed with the SEC between 2011 and 2015.  We discovered that (i) approximately 30% of these clauses were ambiguous as to their intended scope, and (ii) none of these clauses specifically addressed the status of non-signatories.  These findings—along with the results of a lawyer survey that I conducted in the summer of 2017—suggest that the feedback loop between judicial decisions interpreting contract language and the lawyers tasked with drafting contract language does not always function effectively.

Going forward, it would be fascinating to know whether any non-U.S. courts have developed their own interpretive rules that assign meaning to ambiguous words and phrases contained in forum selection clauses.  If anyone is aware of any academic papers that have explored this issue from a non-U.S. perspective, I would be very grateful if you could bring it to my attention.

This year’s edition of the Brussels Global Week, an annual forum open to academics, researchers, students, NGOs, legal practitioners, regulators and decision-makers to discuss issues of law and globalization, will take place from 20 to 23 May 2019 at the Solbosch Campus of the Université Libre de Bruxelles.

Speakers include Karim Benyekhlef (Montréal), Jean-Sylvestre Bergé (Nice Sophia Antipolis), Walter Mattli (Oxford), and Wolfgang Schulz (Hamburg).

The Chaïm Perelman Lecture will be delivered by Gunther Teubner (Goethe Univ.).

The full programme can be found here. For further information, see here.

Outline and Call for Papers

On 25 September 2015 the UN General Assembly unanimously adopted the Resolution Transforming our world: the 2030 Agenda for Sustainable Development. The core of the Resolution consists of 17 Sustainable Development Goals (SDGs) with 169 associated targets, and many more indicators. The SDGs build on the earlier UN Millennium Development Goals, “continuing development priorities such as poverty eradication, health, education and food security and nutrition”. Yet, going “far beyond” the MDGs, they “[set] out a wide range of economic, social and environmental objectives”. The SDGs add new targets, such as migration (8.8; 10.7), the rule of law and access to justice (16.3), legal identity and birth registration (16.9), and multiple “green” goals. And, more than the MDGs, they emphasize sustainability.

The SDGs have attracted significant attention. Although not undisputed – for example, regarding their assumption that economic growth may be decoupled from environmental degradation, and their lack of attention to the concerns of indigenous people – the SDGs have become a focal point for comprehensive thinking about the future of the world. This is so at least in the area of public law and public international law. With regard to private law, by contrast, there has been less attention, although the SDGs are directed not only to governments and parliaments, the UN and other international institutions, but also to “local authorities, indigenous peoples, civil society, business and the private sector, the scientific and academic community – and all people”.

Certainly, public action and public law will not be enough if the goals are to be achieved. Even a spurious stroll through the SDGs demonstrates interplay with private international law (PIL). The SDGs name goals regarding personal status and family relations: “By 2030, provide legal identity for all, including birth registration” (16.9), or “Eliminate… forced marriage…”(5.3), both well-known themes of PIL. The SDGs focus on trade and thereby invoke contract law in multiple ways. On the one hand, they encourage freedom of contract when they call to “correct and prevent trade restrictions and distortions in world agricultural markets”… (2.b) or “promote the development, transfer, dissemination and diffusion of environmentally sound technologies to developing countries on favourable terms… as mutually agreed” (17.7). On the other hand, they insist on restrictions, for example, the “immediate and effective” eradication of forced labour, “modern slavery” and child trafficking ((8.7, 16.2); “by 2030 significantly reduce illicit financial and arms flows”…(16.4); “substantially reduce corruption and bribery in all their forms” (16.5). There is clearly also a role for tort law, including its application to cross-border situations, for example in order to fulfill goals regarding environmental protection and climate change.

Other targets concern not substantive private law, but civil procedure. Thus, the call to “ensure equal access to justice for all” (16.3) has traditionally been confined to equal treatment within one legal system. But as a global goal it invokes global equality: for instance, the ability for European victims of the Volkswagen Diesel scandal to access courts like US victims, the access to court of Latin American victims of oil pollution on a similar level to those in Alaska, and so forth. All of this has multiple implications in the sphere of cross-border civil procedure: the admissibility of global class actions and public interest actions, judicial jurisdiction and recognition and enforcement of judgments concerning corporate social and environmental responsibility, and so on.

Finally, the SDGs have an institutional component. SDG 16 calls, among others, for “strong institutions,” and it encourages cooperation. What comes into focus here, from a private international law perspective, are institutions like the Hague Conference and treaties like the Hague Conventions, but also other possible instruments of cooperation and institutionalization in the private international law realm.

All this suggests that there are plenty of reasons to examine the relationship between the SDGs and PIL. And since the 2030 Agenda explicitly calls on the private sector and the academic world to cooperate for its implementation, and time is running fast, such an examination is also timely, indeed urgent. With this in mind, Ralf Michaels, Verónica Ruiz Abou-Nigm and Hans van Loon are organizing a conference at the Max Planck Institute in Hamburg on 10-12 September 2020. Speakers will systematically analyze the actual and potential role of Private International Law for each of the seventeen SDGs. The overall purpose is twofold:

(1) to raise awareness of the relations between the SDGs and private international law as it already exists around the world. Private international law is sometimes thought to deal with small, marginal issues. It will be important, for those inside and outside the discipline alike, to generate further awareness of how closely its tools and instruments, its methods and institutions, and its methodologies and techniques, are linked to the greatest challenges of our time.

(2) to explore the potential need and possibilities for private international law to respond to these challenges and to come up with concrete suggestions for adjustments, new orientations and regional or global projects. This exploration can aim to identify the need for further and/or new research agendas in specific fields; the development of new mechanisms and approaches, the usefulness of new international cooperation instruments, be it new Conventions at the Hague Conference or elsewhere, or be it new institutions.

Call for Papers

Submission deadline: May 10, 2019.

We are inviting contributions to this project. Interested applicants should submit the application by May 10, 2019. We ask you to identify which of the 17 development goals you want to address, which (if any) work you have already done in that area, and, in a few paragraphs (up to a maximum of 500 words), what you intend to focus on. We plan to select participants and invite them by the end of May 2019. Selected participants would be expected to come to Hamburg to present research findings in the conference, and to provide a full draft paper by the end of June 2020 (in advance of the conference), for discussion and subsequent publication as part of an edited collection to be published after the conference. We expect to be able to fund all travel and accommodation costs. If you are interested, please send your brief application to Britta Arp (arp@mpipriv.de) in Hamburg. Please title your email “SDG2030 and PIL,” and your document “SDG2030 and PIL_lastname”. We look forward to hearing from you.

Ralf Michaels, Director, Max Planck Institute for Comparative and International Private Law, Hamburg;

Verónica Ruiz Abou-Nigm, Senior Lecturer in International Private Law, University of Edinburgh;

Hans van Loon, former Secretary General of the Hague Conference.

Last week, the European Parliament adopted the highly controversial proposal for a new Copyright Directive (which is part of the EU Commission’s Digital Single Market Strategy). The proposal had been criticized by academics, NGOs, and stakeholders, culminating in an online petition with more than 5 million signatures (a world record just broken by last week’s Brexit petition) and public protests with more than 150,000 participants in more than 50 European (although mainly German) cities.

Under the impression of this opposition, one of the strongest proponents of the reform in the European Parliament, Germany’s CDU, has pledged to aim for a national implementation that would sidestep one of its most controversial elements, the requirement for online platforms to proactively filter uploads and block unlicensed content. The leader of Poland’s ruling party PiS appears to have recently made similar remarks.

But even if such national implementations were permissible under EU law, private international law seems to render their purported aim of making upload filters ‘unnecessary’ virtually impossible.

Background: Article 17 of the DSM Copyright Directive

Article 17 (formerly Article 13) can safely be qualified as one of the most significant elements of an otherwise rather underwhelming reform. It aims to address the so-called platform economy’s ‘value gap’, i.e. the observation that few technology giants like ‘GAFA’ (Google, Apple, Facebook, Amazon) keep the vast majority of the profits that are ultimately created by right holders. To this end, it carves out an exception from Art 14(1) of the e-Commerce Directive (Directive 2000/31/EC) and makes certain ‘online content-sharing service providers’ directly liable for copyright infringements by users.

Under Art 17(4) of the Directive, platforms will however be able to escape this liability by showing that they have

(a) made best efforts to obtain an authorisation, and

(b) made, in accordance with high industry standards of professional diligence, best efforts to ensure the unavailability of specific works and other subject matter for which the rightholders have provided the service providers with the relevant and necessary information; and in any event

(c) acted expeditiously, upon receiving a sufficiently substantiated notice from the rightholders, to disable access to, or to remove from, their websites the notified works or other subject matter, and made best efforts to prevent their future uploads in accordance with point (b).

This mechanism has been heavily criticised for de-facto requiring platform hosts to proactively filter all uploads and automatically block unlicensed content. The ability of the necessary ‘upload filters’ to distinguish with sufficient certainty between unlawful uploads and permitted forms of use of protected content (eg for the purposes of criticism or parody) is very much open to debate – and so is their potential for abuse. In any case, it does not seem far-fetched to assume that platforms will err on the side of caution when filtering content this way, with potentially detrimental effects for freedom of expression.

In light of these risks, and of the resulting opposition from stakeholders, the German CDU has put forward ideas for a national implementation that aims to make upload filters ‘unnecessary’. In essence, they propose to require platform hosts to conclude mandatory license agreements that cover unauthorised uploads (presumably through lump-sum payments to copyright collectives), thus replacing the requirement of making ‘best efforts to ensure the unavailability of unlicensed content’ according to Art 17(4) of the Directive.

Leaving all practical problems of the proposal aside, it is far from clear whether such a transposition would be permissible under EU law. First, because it is not easily reconcilable with the wording and purpose of Art 17. And second, because it would introduce a new exception to the authors’ rights of communication and making available to the public under Art 3 of the Information Society Directive (Directive 2001/29/EC) without being mentioned in the exhaustive list of exceptions in Art 5(3) of this Directive.

Private International Law and the Territorial Scope of Copyright

But even if EU law would not prevent individual member states from transposing Art 17 of the Directive in a way that platforms were required to conclude mandatory license agreements instead of filtering content, private international law seems to severely reduce the practical effects of any such attempt.

According to Art 8(1) Rome II, the law applicable to copyright infringements is ‘the law of the country for which protection is claimed’ (colloquially known as the lex loci protectionis). This gives copyright holders the option to invoke any national law, provided that the alleged infringement falls under its (territorial and material) scope of application. With regard to copyright infringements on the internet, national courts (as well as the CJEU – see its decision in Case C-441/13 Hejduk on Art 5(3) Brussels I) tend to consider every country in which the content can be accessed as a separate place of infringement.

Accordingly, a right holder who seeks compensation for an unlicensed upload of their content to an online platform will regularly be able to invoke the national laws of every member state – most of which are unlikely to opt for a transposition that does not require upload filters. Thus, even if the German implementation would allow the upload in question by virtue of a mandatory license agreement, the platform would still be liable under other national implementations – unless it has also complied with the respective filtering requirements.

Now, considering the case law of the Court of Justice regarding other instruments of IP law (see, eg, Case C-5/11 Donner; Case C-173/11 Football Dataco), there may be room for a substantive requirement of targeting that could potentially reduce the number of applicable laws. But for the type of online platforms for which Art 17 is very clearly designed (most importantly, YouTube), it will rarely be possible to show that only audiences in certain member states have been targeted by content that has not been geographically restricted.

So either way, if a platform actually wanted to avail itself of the option not to proactively filter all uploads and, instead, pay for mandatory license agreements, its only option would be to geographically limit the availability of all content for which it has not obtained a (non-mandatory) license to users in countries that follow the German model. It is difficult to see how this would be possible… without filtering all uploaded content.

After April Fools’ Day in the House of Commons, stepping up preparations for a no-deal Brexit has become more important than ever. Insofar, it should be noted that not only the EU Commission has been active in this regard (see our earlier posts here and here), but that national legislators are bracing for the fallout from a hard Brexit as well. On 29 March 2019, the German law on Brexit-related measures in the field of taxation entered into force. In spite of its bland title, this law goes far beyond tax law and includes transitory provisions in a number of important areas of business law, ranging from banking to insurance and securities law. Most articles provide that German authorities may order that British companies will be treated like EU companies for a transition period no longer than 21 months in case of a hard Brexit. By such an extension, the German legislature hopes to buffer the economic shocks that may arise in the absence of a withdrawal agreement.

Dr. Marlene Brosch (Senior Research Fellow at the Max Planck Institute Luxembourg for International, European and Regulatory Procedural Law) recently published a book on Choice of Law Agreements and Jurisdictional Agreements in EU International Family Law and Succession Law.

Here is a brief overview provided by the author:

Choice of Law Agreements and Choice of Court Agreements are fundamental legal instruments in Private International Law, expressing the parties’ autonomy to determine the applicable law and the competent court(s). In the field of Family Law and Succession Law, party autonomy has only recently taken root through the enactment of several EU Regulations that recognise limited party autonomy: Rome III, Brussels II-bis, Maintenance Regulation, Succession Regulation, as well as the Regulations on Matrimonial Property Regimes and Property Regimes of Registered Partnerships.

The book constitutes an in-depth comparison of the rules on party autonomy in the aforementioned legal instruments from a functional and systematic perspective. Special regard is given to the interrelations between applicable law and jurisdiction. This comparative analysis serves as the starting point for
assessing inconsistencies and deficiencies, which further lead to discussing reform proposals for a more coherent normative system.

More information can be found at https://www.mohrsiebeck.com/en/book/rechtswahl-und-gerichtsstandsvereinbarung-im-internationalen-familien-und-erbrecht-der-eu-9783161562730?no_cache=1 .

The UK has suspended its accession to the HCCH Convention of 30 June 2005 on Choice of Court Agreements (Choice of Court Convention) and its ratification to the HCCH Convention of 23 November 2007 on the International Recovery of Child Support and Other Forms of Family Maintenance (Child Support Convention) until 13 April 2019 or 23 May 2019 as the case may be in accordance with the European Council Decision. This takes effect as of 1 April 2019 (the scheduled date of their entry into force).

In the meantime, and as a Member State of the European Union,  European Union law, including the above-mentioned HCCH Conventions, will remain applicable to and in the United Kingdom.

Moreover, the UK adds with regard to the Choice of Court Convention: “As stated in the Note Verbale, in the event that the Withdrawal Agreement is signed, ratified and approved by the United Kingdom and the European Union, the United Kingdom will withdraw the Instrument of Accession which it deposited on 28 December 2018.”

And with respect to the Child Support Convention: “As stated in the Note Verbale, in the event that the Withdrawal Agreement is signed, ratified and approved by the United Kingdom and the European Union, the United Kingdom will withdraw the Instrument of Ratification which it deposited on 28 December 2018.”

Please note that a different set of declarations would apply if the UK instruments do enter into force. See here.

For more information, see here for the Choice of Court Convention and here for the Child Support Convention (Depositary’s website in both French and English).

I. Introduction

It was the 3rd of March 1989, when an announcement was published in the Official Gazette of the Hellenic Republic, stating that the Brussels Convention would finally enter into force on April 1, 1989. Why finally? Because it took the state nearly a decade after the accession to the EC [1.1.1981] to activate the Brussels Convention in the country. After a long hibernation time, Law Nr. 1814/1988 was published in November 11, 1988, marking the official ratification of the Convention. In less than a year, the Convention became operative in the Greek legal order. Since that time, a great number of judgments were published in the legal press, some of them with elucidating notes and comments. Commentaries and monographs paved the path for widespread knowledge and ease of access to the new means of handling cross border cases within the EC.

Almost 12 years later, Regulation 44/2001 replaced the Brussels Convention. On the whole, the application of the Regulation in the country can be described as satisfactory. Courts proved to be open minded in exequatur proceedings, thus fulfilling the mandate for a free circulation of judgments dictated by the EU. Only minor issues cause some skepticism, the majority of which could have been solved by means of an implementing act to the Regulation. Regrettably enough, Greek governments persistently omit to issue any such acts in the course of communitarization in civil and commercial matters. Consequently, primarily academics, and later courts, were called to find viable solutions to problems faced or potentially confronted in the future.

II. Problems faced / solutions given

A problem causing doubts and confusion in Greece was the exact definition of the term used under Art. 36 Brussels Convention. Unlike the English version, where the same terminology is used [“may be appealed”], the Greek text showed a discrepancy, causing contradictory rulings. The issue reached the Supreme Court, which finally clarified the problem in 2001. In particular, the wording used in Articles 36.1, 37-40 Brussels Convention did not make specific reference to an appeal. Instead, the terminus used was the equivalent of “recourse”. For the purposes of Art. 37 Brussels Convention, the Hellenic Government declared that the “recourse” shall be filed at the Court of Appeal. It is an elementary rule in Greek civil practice, that all remedies against first instance decisions are filed with the secretariat of the court rendering the decision challenged. In light of this fact, several lawyers lodged the “recourse” there, i.e. at the competent 1st instance court. In the ensuing process before the CoA however, they were in for a surprise: Many appellate courts in the country repeatedly dismissed the “recourse” as inadmissible, because it was not filed properly. As a result, courts followed different directions which can be summarized as follows: The first view considered the “recourse” as a blend of 1st and 2nd instance legal remedies; consequently it reached the conclusion that ordinary rules of appeal proceedings are to be used in the process at hand, with the exception that the “recourse” shall be filed with the secretariat of the CoA, which was the competent one according to Art. 37 Brussels Convention. Furthermore, given the fact that the appellant is not obliged to serve the appeal under Greek law, the terms set under Art. 36.2 Brussels Convention & 43.5 Brussels I Reg. relate to the act of filing, not serving the document. The opposite view however confers to the recourse the nature of third party proceedings, thus changing the procedural requirements. In particular, by adopting this position, the appellant is burdened with the duty to serve the document within the term of one or two months respectively. The latter view has finally prevailed.

Following the entry into force of the Brussels I Regulation, the above issue has been made redundant, given that the Greek wording was streamlined to that of the English text. The Greek version of the Brussels I bis Regulation follows suit.  However, it still affects the adjacent area of the Lugano Convention. A recent ruling of the Supreme Court bears witness to this assumption [SC 2078/2017, confirming Thessaloniki CoA 1042/2015, published in: Civil Procedure Law Review 2015, 351, note Anthimos: Filing does not suffice; service of the appeal to the appellee is imperative, otherwise the remedy is dismissed as inadmissible].

III. The Brussels I bis Regulation

Entering into the era of the Brussels I bis Regulation, we see however a remarkable absence of case law in regards to Chapter III on recognition and enforcement: For more than 4 years after the Regulation entered into force, there isn’t a single judgment reported in the country, most notably on Section 3, which established the new system of the application for refusal of recognition and enforcement [Articles 45 et seq.]. In the sole case found, the creditor followed erroneously the previous system of exequatur, which led the court to dismiss the application as inadmissible [lack of locus standi].

Hence, the question: Is Greece the sole exception to other Member States’ practice? I could associate the lack of case law with the devastating situation my country suffered over the last years: The Grexit-nightmare, financial instability and capital restrictions could serve as an explanation for this plunge.

However, to the extent of my ability to follow the German literature, I do not see any application of Chapter III in Germany either. It would be very interesting to find out by the readers of this blog, whether there’s already some ‘action’ in other Member States.

Absolutely brilliant analysis of the Brexit shambles by KJ Garnett over on EU Perspectives. A poor, poor game of contract bridge.

EU Perspectives

Putin, the old cliché goes, views the international world order as a game of chess where pawns, knights, bishops and queens are played off one against the other until there is only one outright winner: Russia. Putin’s strategy is to align both his and his opponent’s pawns (the mob) with the bishops and knights (the snob) to weaken and topple his rival. His tactic has been to whip his adversary’s pawns into a state of fury through the spread of misinformation, defamation and slander thereby undermining his adversary’s legitimacy and authority. On the face of it both his strategy and his tactic appear to be working. Across the European Union we see the rise of extremism, the victory of populists in democratic elections and the phenomenal rise of an out-raged right-wing media slamming the European project as a wicked “cabal of high-priests”.

Putin has every right to feel smug. He…

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The title of this piece is optimistic. Broadly defined many of the conflicts issues I address touch upon civil procedure of course. Yet I rarely address civil procedure pur sang (see here for an example). C-637/17 Cogeco was held by the European Court of Justice yesterday.

The Court held that the EU (competition law) damages Directive 2014/104 does not apply ratione temporis to the facts at issue.

The Directive includes two recitals on limitation periods:

Recital 36 argues

‘National rules on the beginning, duration, suspension or interruption of limitation periods should not unduly hamper the bringing of actions for damages. This is particularly important in respect of actions that build upon a finding by a competition authority or a review court of an infringement. To that end, it should be possible to bring an action for damages after proceedings by a competition authority, with a view to enforcing national and Union competition law. The limitation period should not begin to run before the infringement ceases and before a claimant knows, or can reasonably be expected to know, the behaviour constituting the infringement, the fact that the infringement caused the claimant harm and the identity of the infringer. Member States should be able to maintain or introduce absolute limitation periods that are of general application, provided that the duration of such absolute limitation periods does not render practically impossible or excessively difficult the exercise of the right to full compensation.’

Recital 49 adds

‘Limitation periods for bringing an action for damages could be such that they prevent injured parties and infringers from having sufficient time to come to an agreement on the compensation to be paid. In order to provide both sides with a genuine opportunity to engage in consensual dispute resolution before bringing proceedings before national courts, limitation periods need to be suspended for the duration of the consensual dispute resolution process.’

Article 10 then foresees expressis verbis

1.   Member States shall, in accordance with this Article, lay down rules applicable to limitation periods for bringing actions for damages. Those rules shall determine when the limitation period begins to run, the duration thereof and the circumstances under which it is interrupted or suspended.

2.   Limitation periods shall not begin to run before the infringement of competition law has ceased and the claimant knows, or can reasonably be expected to know:

(a) of the behaviour and the fact that it constitutes an infringement of competition law;

(b) of the fact that the infringement of competition law caused harm to it; and

(c) the identity of the infringer.

3.   Member States shall ensure that the limitation periods for bringing actions for damages are at least five years.

4.   Member States shall ensure that a limitation period is suspended or, depending on national law, interrupted, if a competition authority takes action for the purpose of the investigation or its proceedings in respect of an infringement of competition law to which the action for damages relates. The suspension shall end at the earliest one year after the infringement decision has become final or after the proceedings are otherwise terminated

Article 11 adds for joint and several liability

‘Member States shall ensure that any limitation period applicable to cases under this paragraph is reasonable and sufficient to allow injured parties to bring such actions.’

and finally Article 18(1) reads

‘Member States shall ensure that the limitation period for bringing an action for damages is suspended for the duration of any consensual dispute resolution process. The suspension of the limitation period shall apply only with regard to those parties that are or that were involved or represented in the consensual dispute resolution.’

Of note in my view is first of all the unavailing nature of much of the recitals quoted above. As the overview shows, the recitals are more or less verbatim repeated in the actual rules; or the other way around: the Articles’ provisions are copy /pasted into the recitals. To that there is not much point.

Further, the minimum period imposed by the Directive (not applicable, as noted, ratione temporis) is five years. (Compare in the mooted amendment of the motor insurance Directive  2009/103: minimum 4 years is being suggested – subject to gold plating). The Court could not evidently read that minimum period as being ius commune. However it did read much of the qualitative requirements of recitals and articles effectively as ius commune using the effective enforcement of EU competition law as an anchor. It held that the Portuguese limitation period of three years, which, first, starts to run from the date on which the injured party was aware of its right to compensation, even if the infringer is not known and, secondly, may not be suspended or interrupted in the course of proceedings before the national competition authority, renders the exercise of the right to full compensation practically impossible or excessively difficult.

I realise it is a bit of a stretch to see this as a move towards a European Ius Commune on limitation periods. Yet it might be a first cautious step.

Geert.

The Conclusions & Recommendations (C&R) of the governance body of the Hague Conference on Private International Law (HCCH) (i.e. the Council on General Affairs and Policy) are available in both English and French.

The conclusions that are more worthy of note are the following:

The Parentage/Surrogacy Project is going ahead. The Council endorsed the continuation of the work in line with the latest report of the Experts’ Group (see my previous post here). See C&R 7-12.

The Tourist and Visitors Project is also moving forward. See C&R 14-17.

A meeting of the Experts’ Groups on these respective topics will take place in the near future.

As regards the HCCH publications, it should be noted that there were two Guides on family law, one Guide on the Evidence Convention and one WIPO-HCCH Guide on intellectual property that were submitted for approval to Council; the full titles of which are:

• The revised draft Practical Guide on the cross-border recognition and enforcement of agreements reached in the course of family matters involving children
• The revised draft Guide to Good Practice on Article 13(1)(b) of the 1980 Child Abduction Convention
• The draft Guide to Good Practice on the Use of Video-link under the Evidence Convention
• The WIPO-HCCH Guide on “When Private International Law meets Intellectual Property Law – A Guide for Judges”

See also my previous posts here (Child Abduction) and here (Evidence Convention).

The Council approved only one: the WIPO-HCCH Guide. With regard to the other three, the Council decided instead to put into place a procedure to obtain further comments from Members.  Importantly, there were concerns expressed by Members regarding the two family law guides, which means that further work is needed. An important issue that might have played a role in these decisions is the massive amount of information that was submitted this year to Council.

Because of the complexity of the conclusions, I prefer to include some excerpts below:

“19. In light of concerns expressed, Council did not approve the revised draft Practical Guide [on the cross-border recognition and enforcement of agreements reached in the course of family law matters involving children]. Council asked that the draft Practical Guide be re-circulated to Members to provide additional comments within a three-month period. All comments received will be made available to other Members on the Secure Portal of the HCCH website. The draft Practical Guide would then be revised by the Experts’ Group with a view, in particular, to increasing its readability for a wider audience. The finalised draft Practical Guide would be circulated to Members for approval. In the absence of any objection within one month, the draft Practical Guide would be taken to be approved; in the case of one or more objections, the draft Practical Guide would be put to Council at its 2020 meeting, without any further work being undertaken. Council requested that the Permanent Bureau immediately notify the Members of any objections.”

“24. Council thanked the Working Group and stressed the importance of the Guide to Good Practice on Article 13(1)(b). In light of concerns expressed, Council did not approve the revised draft Guide. Council asked that the draft Guide be re-circulated to Members to provide additional comments within a two-month period. All comments received will be made available to other Members on the Secure Portal of the HCCH website. The draft Guide would then be revised by the Working Group. The finalised draft Guide would be circulated to Members for approval. In the absence of any objection within one month, the draft Guide would be taken to be approved; in the case of one or more objections, the draft Guide would be put to Council at its 2020 meeting, without any further work being undertaken. Council requested that the Permanent Bureau immediately notify the Members of any objections.”

Council was more lenient with regard to the Video-link Guide:

“38. Council welcomed the preparation of the draft Guide to Good Practice on the Use of Video-Link under the Evidence Convention and thanked the Experts’ Group. Council asked that the draft Guide be re-circulated to Members to provide additional comments within a one-month period. All comments received will be made available to other Members on the Secure Portal of the HCCH website. The draft Guide would then be revised by the Experts’ Group. The finalised draft Guide would be circulated to Members for approval. In the absence of any objection within one month, the draft Guide would be taken to be approved; in the case of one or more objections, the draft Guide would be put to Council at its 2020 meeting, without any further work being undertaken. Council requested that the Permanent Bureau immediately notify the Members of any objections.”

All this means that these three Guides are not final and readers must await the revised versions, which might or might not need to be submitted to the next meeting of the Council in March 2020. I advise you then to be patient.

The Court held today in C-60/18 AS Tallinna Vesi and agrees with its AG re the possibility of national criteria, yet unlike Ms Kokott does not see an obligation in the WFD for the Member States to have a proactive vetting and decision procedure. It does not give much specification to its reasoning, other than a reference to the ‘circumstances of the case’. This may refer, but I am speculating, to applicant wanting the authorities generally to sign off on its production method, rather than requesting an opinion on an individual stream.

If my interpretation is right it underscores what I have remarked elsewhere on the regulatory process, for instance in the case of circular economy: in a grey regulatory zone, we need to think of mechanisms to assist industry in embracing environmentally proactive solutions, rather than driving them into incumbent technologies or worse, illegality.

Geert.

Handbook of EU Waste law, 2nd ed. 2015, OUP, 1.166 ff and 1.189 ff.

Case C-129/18 SM v Entry Clearance Officer, UK Visa Section was held last Tuesday in Grand Chamber. It concerns the application of the EU’s main migration Directive, 2004/38 and essentially addresses the fear of the Member States (many of whom appeared before the court, all arguing a rather restrictive interpretation) that the islamic system of Kafala or Kefala hands human traffickers a means to support their trade.

As I flagged in an earlier post, in which I also referred to the case involving SM, kafala is clearly not equivalent to adoption. It is more akin to guardianship or custody in advance of adoption, or in the case of the Middle East, is even used as a form of visa et al sponsorship for migrant workers (hence leading to issues of slavery and the like).

In SM’s case, Mr and Ms M are two French nationals who married in the UK in 2001. They travelled to Algeria in 2009 to be assessed as to their suitability to become guardians of a child under Algerian kafala and were deemed ‘suitable’. SM, who was born in Algeria in June 2010, was abandoned by her biological parents at birth. In October 2011, Mr M returned to the UK where he has a permanent right of residence, for professional reasons. For her part, Ms M remained in Algeria with SM. In May 2012, SM applied for entry clearance for the UK as the adopted child of an EEA national. Her application was refused by the Entry Clearance Officer on the ground that guardianship under Algerian kafala was not recognised as an adoption under UK law and that no application had been made for intercountry adoption.

The Court essentially agrees with the Member States that the case does not fall under directive 2004/38’s heading on ‘direct descendants’ (‘blood’ relatives in e.g. the Dutch version) which the Court interprets (as do the Member States) as both biological and adopted direct descendants. This is a consequence of the qualification by the lex fori itself: unlike adoption, which is prohibited by Algerian law, the placing of a child under kafala does not mean that the child becomes the guardian’s heir. In addition, kafala comes to an end when the child attains the age of majority and may be revoked at the request of the biological parents or the guardian.

Yet the Court also finds that the Member States’ concerns over human trafficking are properly addressed by the Directive’s provisions for ‘other family Members’. Unlike the right to entry for direct descendants, other family members’ visa applications must be processed taking into account an extensive examination of their personal circumstances. At 69: in the case of minors, that assessment must take into consideration, inter alia, the age at which the child was placed under Algerian kafala system, whether the child has lived with its guardians since its placement under that system, the closeness of the personal relationship which has developed between the child and its guardians and the extent to which the child is dependent on its guardians, inasmuch as they assume parental responsibility and legal and financial responsibility for the child.

That the Algerian system of kafala guardian’s assessment clearly does not meet with the 1996 Hague Convention requirements for assessment of prospective adoptive parents and the interests of the child (to which Algeria is not a party but the Member States are) is not material: such assessment must be weighed against the factual elements identified by the Court at 69, see above.

Hague and Kafala at Kirchberg. Not an everyday occurrence.

Geert.

The International Business Courts saga continued: NCC First Judgment – BIBC Proposal unplugged

Written by Georgia Antonopoulou and Xandra Kramer, Erasmus University Rotterdam (PhD candidate and PI ERC consolidator project Building EU Civil Justice)

1. Mushrooming International Business Courts on the Eve of Brexit

Readers of this blog will have followed the developments on the international business courts and international commercial chambers being established around Europe and elsewhere. While many of the initiatives to set up such a court or special chamber date from before the Brexit vote, it is clear that the UK leaving the EU has boosted these and is considered to be a big game changer. Whether it really is remains to be seen, but in any case the creation of courts and procedures designed to deal with international commercial disputes efficiently is very interesting!

The Netherlands was one of the countries where, after the Senate came close to torpedoing the proposal (see our earlier blogpost), such an international commercial court (chamber) was created. The Netherlands Commercial Court (NCC) opened its doors on 1 January 2019, and it gave its first judgment on 8 March 2019 (see 2). Meanwhile, in Belgium the proposal for the Brussels International Business Court (BIBC) seems to be effectively unplugged due to lack of political support (see 3).

2. The First NCC Judgment

As reported earlier on this blog, on 18 February 2019 the Netherlands Commercial Court (NCC) held its first hearing (see here). The NCC’ s first case Elavon Financial Services DAC v. IPS Holding B.V. and others was held in summary proceedings and concerned an application for court permission to privately sell pledged shares under Article 3:251 (1) Dutch Civil Code. The NCC scheduled a second hearing on 25 February 2019, offering the interested parties that did not appear before court the opportunity to be heard. However, these notified the court about their intention not to their intention not to attend the hearing and leave the application uncontested. As a result, the NCC cancelled the planned hearing and gave its first judgment granting the requested permission on 8 March 2019 (see here). Our discussion will focus on the NCC’s judgment regarding the four main jurisdictional requirements and aims at offering offers a sneak preview on the Court’s future case law on the matter.

(a) Jurisdiction of the Amsterdam District Court

Unlike what the name suggests, the NCC is not a self-standing court but a chamber of the Amsterdam District Court (see the new Article 30r (1) Dutch Code of Civil Procedure (DCCP) and Article 1.1.1. NCC Rules). Therefore, the jurisdiction of the NCC depends on the jurisdiction of the Amsterdam District Court (Article 30r (1) DCCP  and Article 1.3.1. (a) and (c) NCC Rules). The Court confirmed its international and territorial jurisdiction based on a contractual choice-of-court agreement in favour of the Amsterdam District Court (Article 25 (1) Brussels Regulation Recast). With regard to the interested parties that were not a party to the agreement, the Court based its jurisdiction on the fact that they either entered an appearance or sent a notice to the Court acknowledging its jurisdiction without raising any objections (Article 26 (1) Brussels Regulation Recast and Article 25 Lugano Convention). Regarding the subject-matter jurisdiction of the Amsterdam District Court, Article 3:251 (1) Dutch Civil Code explicitly places applications for the private sell of pledged assets under the jurisdiction of the provisional relief judge of the District Court.

(b) Civil or commercial matter within the parties’ autonomy

Second, the dispute concerned a civil or commercial matter that lies within the parties’ autonomy (Article 30r (1) Dutch Code of Civil Procedure and Article 1.3.1. (a) NCC Rules).

(c) Internationality

Third, the NCC solely deals with international, cross-border disputes. So as to define the notion of internationality, the Explanatory Notes to Article 1.3.1. (b) NCC Rules entail a list of alternative, broad criteria that grants to the dispute the required internationality (see Annex I, Explanatory Notes). The application in question was filed by Elavon Financial Services DAC, a company established in Ireland, and some of the interested parties are Dutch subsidiaries of a Swiss parent company (Explanatory Notes to Article 1.3.1. (b)). Although, pursuant to the Explanatory Notes, these circumstances were sufficient to establish the matter?s international character, the court went on to address other cross-border elements present in the case. Based on a broad understanding of a dispute’s international character, the court underlined that some of the interested parties are internationally active, operate or at least plan to operate business abroad (see also The Hague Court of Appeal, ECLI:NL:GHSGR:2011:BR1381). Similar to the rules of other countries’ international commercial courts, he NCC Rules qualify a case as international when the dispute arises from an agreement prepared in a language other than Dutch. Since the documents related to the application were drafted in English, the NCC regarded the English language of the contract as another international element.

(d) NCC Agreement

The fourth  requirement for the NCC’s jurisdiction is that the parties should have expressly agreed in writing for the proceedings to be in English and according to the NCC Rules (Article 30r (1) Rv and Article 1.3.1. (d) NCC Rules). Since the NCC, unlike the rest of the Dutch courts, conducts proceedings entirely in English and applies its own rules of civil procedure the parties’ agreement justifies such a deviation and ensures that the parties wilfully found themselves before the newly established chamber. In the present matter, the parties signed a pre-application agreement and expressly agreed on the NCC’ s jurisdiction to hear their case. Although, two of the interested parties were not signatories to that agreement one of them appeared before the court leaving the NCC’ s jurisdiction uncontested and the other did not raise any objections against the chamber’ s jurisdiction in its communication with the court (see also Article 2.2.1 NCC Rules and the Explanatory Rules).

(3) The Fate of the Belgian BIBC Proposal

As reported on this blog, the proposal to create the Brussels International Business Court was brought before Parliament in May 2018. Interesting features of this proposal are that the rules of procedure are based on those of the UNCITRAL Model Law on International Commercial Arbitration and that cases are heard by three judges, including two lay judges. From the outset the proposal was criticized (see for some interesting initial thoughts Geert Van Calster’s blogpost). As in the Netherlands, many discussions evolved around the fear for a two-tiered justice system, giving big commercial parties bringing high value claims a preferential treatment over ordinary court cases (see for the discussions in the Netherlands our earlier blogpost). The Belgian Ministry of Justice and Prime Minister presented the English language court as an asset in times of Brexit and efforts were made to adjust the proposal to get it through.

Over the last week it became clear that there is insufficient political backing for the proposal after one of the big parties withdrew its support (see De Standaard). Other – mostly left-wing parties – had expressed their concerns earlier and the proposed court has been referred to as a ‘caviar court’ and a ‘court for the super rich’. But probably the most fierce opponent is the judiciary itself. Arguments range from principled two-tiered justice fears (including for instance by the First President of the Court of Cassation) to concerns about the feasibility to attract litigation in the Brussels courts and the costs involved in establishing this new ‘vip court’. The message seems to be: we have enough problems as it is. Referring to the Dutch NCC and the French International Commercial Chamber, the Minister of Justice, Koen Geens, said that withdrawing the BIBC proposal would be a missed opportunity and that he can counter the arguments against the establishment of the BIBC. However, as it looks now it seems highly unlikely that Belgium will be among the countries that will have an international business court in the near future.

Thank you Thomas Kendra and Thibaud Roujou de Boubée for signalling 16/25484 Cameroon v Projet Pilote Garoubé at the Paris Court of Appeal end of December 2018. The essence of the case is the Court confirming an arbitral award applying OHADA law. OHADA stands for ‘Organisation pour l’harmonisation en Afrique du droit des affaires’ – ie the Organisation for the Harmonization of Corporate Law in Africa.

Thomas and Thibaud analyse excellently – of note for this blog are the issue of non-State law as lex contractus (compare with Rome I), the recognition of same as trumping Cameronese law essentially as overriding mandatory law, and the rejection of the Cameronese argument that its wildlife laws qualify themselves as lois de police /overriding mandatory law and that the lack of recognition of same violates ordre public.

Interesting arbitration /conflicts material.

Geert.

The European Commission has just released some new factsheets and Q&A documents regarding the consequences of a no-deal Brexit here. Inter alia, the information given concerns the rights of consumers (including the applicable law and the enforcement of judgments), of EU citizens living in the UK, of UK citizens living in the EU, and the position of EU students enrolled at UK universities. However, the date for a hard Brexit mentioned in the documents is still 29 March 2019, which is in any event no longer accurate after last week’s summit (see our previous post here).

Kokott AG Opined in C-624/17 OM v Tronex end of February (I had flagged the case summarily earlier): whether consumer returns of electrical appliances some of which are no longer usable because defective, and residual stock are to be regarded as waste that may be exported only in accordance with the Waste Shipment Regulation. – Reminiscent of the issues in Shell: in that case in a B2B context.

Tronex’ export consignment that was stopped, consisted of appliances which had been returned by consumers under a product guarantee, on the one hand, and goods which, because of a change to the product range, for example, were or could no longer be sold (normally), on the other. A number of the boxes in which the appliances were packaged carried a notice stating their defects. The glass in some of the glass kettles was damaged. The shipment was to take place without notification or consent in accordance with the Waste Shipment Regulation.

The AG takes a sensible approach which distinguishes between consumer and collector. At 31 ff: The mere fact that objects have been collected for the purpose of reuse does not in itself necessarily support the assumption that they have been discarded. Indeed, it seems sensible, both economically and from the point of view of the efficient use of resources, to make appliances which can no longer be sold on the market for which they were originally intended available on other markets where they may still sell. Particularly in the case of residual stock which is still in its unopened original packaging, therefore, the request for a preliminary reference contains insufficient evidence to support the conclusion that there has been any discarding.

Returned appliances which, on account of serious defects, are no longer usable and can no longer be repaired at reasonable cost, on the other hand, must unquestionably be regarded as waste. Kokott AG suggests waste classification as the default position. At 39: in so far as there are doubts as to the reuse of the goods or substance in question being not a mere possibility but a certainty, without the necessity of using any of the waste recovery processes referred to in the Waste Directive prior to reuse, only the possibility of ‘prompt’ dispelling of the doubt by an inspection of the appliances, can shift the presumption of it being waste.

‘Repair’ is what the AG proposes as the distinctive criterion: at 40: if the inspection shows that the item is still capable of functional use, its status as waste is precluded. The same is true of goods with minor defects which limit functionality only negligibly, meaning that these goods can still be sold without repair, in some cases at a reduced price. At 41: ‘In so far as the inspection identifies defects which need to be repaired before the product is capable of functional use, however, that product constitutes waste, since there is no certainty that the retailer will actually carry out the repair. Whether the repair is less or more expensive cannot be decisive in this regard, since a product that does not work constitutes a burden and its intended use is in doubt.’ The same goes for goods (other than those in the original packaging, per above) which have not been inspected at all.

At 45 ff the AG supports this conclusion with reference to instruction in Annexes to the WEEE Directive. She also suggests that her interpretation, given the criminal law implications, be limited to those instances occurring after the eventual CJEU judgment.

Geert.

(Handbook of) EU Waste law, 2nd ed. 2015, Oxford, OUP, Chapter 1, 1.149 ff.

After last Thursday’s EU summit, which resulted in a double-barreled “flextension” of the date for Brexit, all cards are on the table again. Insofar, it is worth noticing that the German journalist Harald Martenstein, in his weekly column for the Berlin-based “Tagesspiegel”, has recently offered three innovative solutions for the Brexit dilemma:

The first one may be called the “one island, two countries” proposal: Great Britain would be split into two parts, one leaving the EU, the other remaining. All Britons would then be granted double citizenship and be free to make up their minds according to their preferences.

The second solution that the columnist proposes takes up the frequently raised demand for a second referendum that should overturn the first Brexit vote. Well, if there is going to be a second referendum, why not a third or even a fourth one? Thus, Martenstein suggests that, in the future, a referendum should be held every year on 2 January; for the remaining part of the year, the United Kingdom would then be either in or out of the EU.

Thirdly and finally, if all else fails, Martenstein argues that the UK might simply turn the tables and offer the other Member States the possibility of leaving the EU as well and joining the UK instead, which would then change its name to “Greatest Britain Ever”.

Obviously, the proposals made by the columnist are meant as a satirical comment. Yet, there are some elements of reality contained in his mockery: who knows whether, in case of a hard Brexit, Scotland (or Northern Ireland) would stay a part of the UK or whether a new referendum on seceding from the UK – and re-joining the EU – would be organized? And already today, numerous Britons are applying for a double citizenship in order to keep a foothold in the EU. Who knows whether a second referendum on Brexit will take place and whether it will actually settle the matter once and for all? And wasn’t the EU summit an attempt by the EU-27 to avoid the Brexit populist contagion from spreading to the continent via the impending EU parliamentary elections? In sum, the situation is increasingly reminiscent of a book title by Paul Watzlawick: hopeless, but not serious…

Written by John Coyle, the Reef C. Ivey II Term Professor of Law, Associate Professor of Law at the University of North Carolina School of Law

Over the past few decades, the concept of party autonomy has moved to the forefront of private international law scholarship.  The question of whether (and to what extent) private actors may choose the law that will govern their relationship has generated extensive commentary and discussion.  The result?  An ever-expanding literature on the role of party autonomy in private international law.

In this post, I want to call attention to a related issue that has attracted considerably less scholarly attention.  This is the issue of how to interpret the contractual language by which private actors exercise their autonomy to choose a governing law.  (I explored this issue in a recent article.)  Over the past several decades, the courts in the United States have developed several interpretive rules of thumb—canons of construction, to use a fancy term—that assign meaning to ambiguous words and phrases that frequently appear in choice-of-law clauses.  I discuss several of these interpretive rules—and the various ways in which parties can contract around them—after the jump.

The first, and arguably the least controversial, of these interpretive rules is the canon in favor of internal law.  When presented with a choice-of-law clause that selects the “laws” of a given jurisdiction, courts in the United States will generally interpret the word “laws” to refer to the internal law of the chosen jurisdiction (excluding its conflicts rules) rather than the whole law of the chosen jurisdiction (including its conflicts rules).  This interpretive rule is eminently sensible.  Since the entire point of a choice-of-law clause is to reduce legal uncertainty, it would defeat the purpose to interpret the clause to select the conflicts rules of the chosen jurisdiction, which could in turn result in the application of the law of a different jurisdiction.

The second interpretive rule is the canon in favor of federal inclusion and preemption.  This canon requires a bit of explanation for those not familiar with the U.S. legal system.  Most U.S. choice-of-law clauses select the laws of one of the fifty states (e.g. New York) rather than the nation (i.e. the United States).  When a clause selects the “laws” of New York, however, it is not clear whether the parties are selecting the laws of New York to the exclusion of any relevant provisions of federal law or whether they are selecting the laws of New York including any relevant provisions of federal law.  U.S. courts have consistently adopted the latter interpretation.  When the parties select the laws of New York, they are presumed to have also selected any applicable federal statutes and federal treaties.  In the event of a conflict between federal law and state law, moreover, the federal law will prevail.

As a practical matter, this interpretive rule is most often relevant in the context of international sales agreements.  The United States is a party to the United Nations Convention on Contracts for the International Sale of Goods (CISG), which covers much of the same ground as Article 2 of the Uniform Commercial Code (UCC).  When the parties to an international sales agreement select the “laws” of New York to govern their agreement, they may think that they are getting New York’s version of the UCC.  Instead, they will get the CISG.  This is because the “laws” of New York will be deemed to include any relevant provisions of federal law (including the CISG) and that treaty will, in turn, be deemed to preempt UCC Article 2.  (I discuss the relationship between choice-of-law clauses and the CISG in greater depth here.)

The third interpretive rule is the canon of linguistic equivalence.  This canon holds that a choice-of-law clause stating that the contract shall be “interpreted” or “construed” in accordance with the laws of a given state is the linguistic equivalent of a clause stating that the contract shall be “governed” by the laws of that state.  This conclusion is by no means inevitable.  Indeed, some court in the United States have declined to follow this canon.  Most U.S. courts, however, have reasoned that while there may technically be a linguistic distinction between the words “interpreted” and “construed,” on the one hand, and the word “governed,” on the other, most contracting parties are completely unaware of the distinction when it comes to their choice-of-law clauses.  Most courts have also reasoned that contracting parties rarely, if ever, intend to select one law to govern interpretive issues arising under the contract while leaving unanswered the question of what law will govern the parties’ substantive rights and obligations under that same contract.  Accordingly, they read the words “interpret” and “construe” to be the linguistic equivalent of “governed.”

I refer to the fourth collection of interpretive rules, collectively, as the canons relating to scope.  These canons help the courts determine whether a choice-of-law clause applies exclusively to contract claims brought by one contracting party against the other or whether that clause also selects the law for any tort and statutory claims that may be brought alongside the contract claims.  The highest court in New York has held that a generic choice-of-law clause—one which states that the agreement “shall be governed by the laws of the State of New York”—only covers contract claims.  The highest court in California, by comparison, has interpreted the same language to cover any contract, tort, or statutory claims brought by one party against the other.  Courts in Texas and Florida have followed New York’s lead on this issue.  Courts in Minnesota and Virginia have followed California’s lead.

To make things even more complicated, U.S. courts have yet to reach a consensus on how to select the relevant body of interpretive rules.  The courts in California have held one should apply the canons followed by the jurisdiction named in the clause to interpret the clause.  The courts in New York, by contrast, have held that one should apply the canons followed by the forum state to interpret the clause.  The California courts clearly have the better of the argument—there is absolutely no reason to deny the parties the power to choose the law that will be applied to interpret their choice-of-law clause—but several states have followed New York’s lead.  The result is a baffling and befuddling jurisprudence relating to the scope of generic choice-of-law clauses.

Sophisticated parties may, of course, contract around each of the interpretive default rules discussed above.  To preempt the canon in favor of internal law, they can include the phrase “without regard to conflict of laws” in their choice-of-law clause.  To preempt the canon of federal inclusion and preemption, they can state that “the CISG shall not apply” to their agreement.  To preempt the canon of linguistic equivalence, they can simply state that the contract shall be “governed” by the laws of the chosen state.  And to preempt the canons relating to scope, they can either state that claims “relating to” the contract shall be covered by the clause (if they want a broad scope) or that the clause only applies to “legal suits for breach of contract” (if they want a narrow scope).  To date, however, many U.S. parties have failed to update their choice-of-law clauses to account for these judicial decisions.

I recently reviewed the choice-of-law clauses in 351 bond indentures filed with the U.S. Securities and Exchange Commission (SEC) in 2016 that selected New York law.  I discovered that (a) only 55% excluded the conflicts rules of the chosen jurisdiction, (b) only 83% contained the phrase “governed by,” and (c) only 12% addressed the issue of scope.  Chris Drahozal and I also recently reviewed the choice-of-law clauses in 157 international supply agreements filed with the SEC between 2011 and 2015.  We discovered that (i) only 78% excluded the conflicts rules of the chosen jurisdiction, (ii) only 90% contained the phrase “governed by,” and (iii) only 20% addressed the issue of scope.  These findings suggest that the feedback loop between judicial decisions interpreting contract language and the lawyers tasked with drafting this language does not always function effectively.  Contract drafters, it would appear, do not always take the necessary steps to rework their choice-of-law clauses to account for judicial decisions interpreting language that commonly appears in these clauses.

Going forward, it would be fascinating to know whether any non-U.S. courts have developed their own interpretive rules that assign meaning to ambiguous words and phrases contained in choice-of-law clauses selecting non-U.S. law.  If anyone is aware of any academic papers that have explored this issue from a non-U.S. perspective, I would be very grateful if you could bring that work to my attention and the attention of the broader community in the Comment section below.