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Carlos Santaló Goris, Researcher at the Max Planck Institute Luxembourg for International, European and Regulatory Procedural Law and Ph.D. candidate at the University of Luxembourg, offers a summary and a compelling analysis of the Czech domestic legislation regarding the EAPO Regulation.

Introduction

On 22 January 2021, the Czech Chamber of Deputies approved “the government act amending Act No. 6/2002 Coll., on courts, judges, lay judges and the state administration of courts and amending certain other acts (the Courts and Judges Act), the wording of later regulations, and other related laws, according to the Chamber of Deputies 630 as amended by the Chamber of Deputies”. The reform is now pending before the Czech Senate.

The first legislative implementation of the EAPO Regulation in the Czech national law

This act introduces the very first amendment of the Czech domestic legislation regarding Regulation No 655/2014, establishing a European Account Preservation Order (“EAPO Regulation”).

The act foresees the concentration of all the applications for EAPOs in one single court, and namely the Prague 1 District Court (Obvodní soud pro Prahu 1). Nowadays, based on the information available in the e-justice portal, the competent court corresponds to the territorially competent court in the debtor’s domicile. However, if the debtor lives outside the Czech Republic, the competent court is the one of the district where the debtor is domiciled.

The upcoming reform envisaged with the act will also affect the application mechanism to gather information on the bank accounts established in Article 14 of the EAPO Regulation. Creditors can also request to investigate if debtors hold bank accounts in the other Member States. Each Member State has an information authority which is charge of searching for the information on the bank accounts. Member States had to notify the Commission with the names of the information authorities by 16 July 2016.

Currently, there is no central information authority in the Czech Republic. Any district court with territorial competence over the debtor’s domicile is an information authority for the purposes of the EAPO Regulation. When the debtor is not domiciled in the Czech Republic, the information authority is the competent court in the district where the bank, which holds the accounts, is located. This can result in challenges for the courts of other Member States searching the information. In case the creditor even ignores the name of the debtor’s bank, how can the competent authority to provide the information on the bank accounts be identified? One Luxemburgish judge has experienced this very dilemma.

The information on the bank accounts is obtained directly from the banks. Czech courts submit a request to “all banks in its territory to disclose, upon request by the information authority, whether the debtor holds an account with them” (Article 14(5)(b) of the EAPO Regulation).

Eventually, if the reform is approved by the Czech Senate, the information authority will also be centralized in the Prague 1 District Court.

The reasons behind the implementation

According to Dr. Katerina Valachová, the member of the Czech Chamber of Deputies who sponsored the amendments concerning the EAPO Regulation, the reform is due to “the complexity of the legislation on the EAPO, as well as the short deadlines set by the EAPO Regulation”. Having a single court for all the EAPO applications will help in terms of specialization. Furthermore, since most of the headquarters of the banks that operate in the Czech Republic are located within the area of the Prague 1 District Court when the court acts as an information mechanism, it can obtain the information on the bank accounts from the banks faster.

The Czech reform in the European context

Establishing a central authority to gather information on the bank accounts is the most common solution followed among those Member States in which the EAPO Regulation applies. Only four out of the twenty-six Member States (France, Finland, Latvia, and the Netherlands), have opted for a complete decentralized information authority. Two other Member States, Austria, and Italy adopted a hybrid approach: they have a central authority when the debtor is domiciled abroad and a decentralized authority when the debtor is domiciled in the country.

However, establishing a centralized court to handle all EAPO applications is a less common choice among other Member States. Only three countries have appointed centralized courts to issue EAPOs: Austria, Slovakia, and Finland.

The Czech Republic’s two neighbouring Member States, Slovakia and Austria, introduced a partial centralization of the EAPOs applications. In Slovakia, the Banská Bystrica District Court (Okresný súd Banská Bystrica) handles all the EAPO applications when the debtor’s “general territorial affiliation cannot be determined” within the Slovakian territory. In Austria, the Vienna Inner City District Court (Bezirksgericht Innere Stadt Wien) is responsible for issuing all the EAPOs when requested before initiation of the proceedings on the merits and before the enforcement of the judgment on the merits of the claim.

Finland has gone a step further than Austria and Slovakia. Similarly, to the ongoing Czech reform, it appointed one sole court – the district court of Helsinki – responsible for issuing all EAPOs.

Outside the EAPO Regulation scheme, we can also find examples of domestic “centralized courts” responsible for other European civil proceedings. For instance, in Germany the European Payment Order (“EPO”) was centralized in the Local Court in Wedding, Berlin. In 2019, France the French legislator approved the creation of a centralized court, which will handle all the EPO applications.

A more efficient application of the EAPO Regulation

Establishing a centralized court for the EAPO Regulation in Czechia is very welcome among those of us who want the EAPO Regulation to become a successful instrument. The future central court will become specialized with the EAPO Regulation, an instrument that can result too complex and requires a certain amount time for its adequate understanding. The centralization will also assure a coherent and uniform application of the EAPO Regulation at the Czech national level. Moreover, in case an issue on the interpretation of the text of that Regulation arises, that centralized court might be more willing to make a preliminary reference to the European Court of Justice (“ECJ”) than regular judges who might not encounter many applications for EAPOs. The ECJ has itself expressly acknowledged the benefits of the centralization in the context of the Maintenance Regulation. In fact, in C-400/13, Sanders and Huber, the ECJ affirmed that “a centralization of jurisdiction, such as that at issue in the main proceedings, promotes the development of specific expertise, of such a kind as to improve the effectiveness of recovery of maintenance claims, while ensuring the proper administration of justice and serving the interests of the parties to the dispute” (C-400/13, Sanders and Huber, 18 December 2014, ECLI:EU:C:2014:2461, para. 45).

Hopefully, in the future more Member States will follow the example of Czechia or Finland and will concentrate the application of the EAPO in a sole court in their territories.

The Mexican Academy of Private International and Comparative Law (AMEDIP) is holding a webinar on 11 February 2021 at 8:00 am (Mexico City time – CST), 3:00 pm CET time. The topic of the webinar is the HCCH Convention of 19 October 1996 on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-operation in Respect of Parental Responsibility and Measures for the Protection of Children – a perspective from Europe and will be presented by Professor Beatriz Campuzano Díaz (in Spanish).

The details of the webinar are:

Link: https://us02web.zoom.us/j/82362628717?pwd=QWNSdTRVWHY0dllhNzlINEthTUZnQT09

Meeting ID: 823 6262 8717

Password: BMAAMEDIP

Participation is free of charge.

This event will also be streamed live: https://www.facebook.com/AmedipMX/about

Cecilia Rizcallah (ULB & University of Saint-Louis, Belgium) has just published a monograph on the principle of mutual trust in EU Law, based on her doctoral thesis: Le principe de confiance mutuelle en droit de l’Union européenne – Un principe essentiel à l’épreuve d’une crise de valeur, Bruylant, 2020.

The author has provided the following abstract in English:

The legal structure of the European Union “is based on the fundamental premiss that each Member State shares with all the other Member States, and recognises that they share with it, a set of common values on which the Union is founded, as stated in Article 2 TEU”, states the Court of Justice of the European Union. Among these common values, fundamental rights, the rule of law and democracy occupy a central position. This “premiss”, according to the Court, “implies and justifies the existence of mutual trust between the Member States”.

Yet, as we all know, the European Union is currently facing a “crisis of values”. This crisis results from the increasingly frequent questioning, in the European Union, of the values on which it is allegedly based. The semantics of mutual trust between Member States has nevertheless never been more present in official speeches. Like the dictum according to which “we never talk as much about water as in the desert”, should the rise of the discourses on mutual trust be seen as an “excess of vocabulary” symptomatic of the climate of mistrust between Member States?

 This question, prompted by the success of the principle of mutual trust at a time when the context reveals fundamental divisions between Member States as to the meaning of European integration and the values on which it is based, is at the heart of this book.

In order to provide some answers, the first part of the book proposes to “clear the ground” and offer a cross-cutting definition of the principle of mutual trust in Union law, which applies both to internal market law and to the law of the Area of freedom, security and justice. It is the presumptive mechanism that seems, in this respect, to offer the best description of the principle under consideration.

The book then analyses the apparently consubstantial link between this principle and the founding values of the Union. Constituting an uncertain foundation and an imperfect limit to mutual trust, the EU founding values have an ambivalent relationship with the principle under consideration.

Finally, this book concludes with a third part which analyses the essential role played by the principle of mutual trust in Union law, at the crossroads of the imperatives of unity, diversity and equality. Because of the risks entailed by this principle regarding EU founding values, the book, however, argues in favour of moving mutual trust from the rank of postulate to that of method.

More details are available here, including a foreword by Eleanor Sharpston (Former Advocate General at Court of Justice of the European Union).

Since mutual trust is of particular interest for EU Private international law experts, Cecilia will soon provide the readers of this blog with a special focus on the principle of mutual trust in the field of EU judicial cooperation in civil matters, based on her doctoral research.

The U.S. Supreme Court issued its decision yesterday in Federal Republic of Germany v. Philipp. This is the case we previewed here concerning the Guelph treasure, allegedly taken by Nazis from its Jewish owners via a coerced sale for a fraction of its value prior to World War II. The heirs of the rightful owners and the government had agreed to conciliate the claim before a German Commission, which found that the taking had not been coerced. Dissatisfied with the decision, the heirs sued in Washington under the expropriation exception to the Foreign Sovereign Immunities Act, which provides that a foreign state is not immune from jurisdiction of the U.S. courts in cases “in which rights in property taken in violation of international law are in issue.” The District Court and the DC Circuit held that Germany was not immune, and the Supreme Court granted Germany’s petition for review. There were a number of issues at play in this case, but Germany’s primary argument was that a state does not violate international law by expropriating the property of its own nationals.

The Court, in a unanimous decision by Chief Justice Roberts, sided with Germany. When the FSIA was enacted in 1976, Roberts said, it was “clear” that a taking of property violated international law only when a state took an alien’s property. The text of the statute also “places repeated emphasis on property and property-related rights, while injuries and acts we might associate with genocide are notably lacking.” Put simply, the Court viewed the statute as linked to direct expropriation of alien property, and not as a way for U.S. courts to hear any claims arising under international law. Repeating a theme against asserting U.S. jurisdiction to acts occurring abroad, Justice Roberts stressed that “United States law . . . does not rule the world,” and noted that the Court will interpret our laws to “to avoid, where possible, “producing friction in our relations with [other] nations.”

Due to its decision on the expropriation exception, the Court did not need to decide whether comity provided an independent basis for dismissal. The court also issued a one-sentence opinion vacating a lower-court ruling in Republic of Hungary v. Simon, a similar lawsuit brought by Holocaust survivors seeking compensation for Hungary’s confiscation of Jewish property.

On 22 February 2021, from 5 to 7 pm CET, the Catholic University of the Sacred Heart in Milan will host a webinar titled The Fundamental Rights of Persons with Cognitive Disabilities in Cross-border Situations – Time for Italy and Spain to Join the Hague Adults Convention.

The Hague Convention of 13 January 2000 on the International Protection of Adults is currently in force for thirteen States. As the Hague Conference on Private International Law is preparing to host a Special Commission to review the practical operation of the Convention, scheduled to take place in 2022, other States – including Italy and Spain – are considering ratification.

The purpose of the webinar is to give an account of the domestic rules of private international law governing the protection of adults in Spain and Italy, and explore the benefits that joining the Convention would entail in the two countries for the adults concerned, the competent authorities and legal practitioners, including notaries.

In carrying out this exercise, regard will be had, in particular, to the experience of Portugal, which became a party to the Convention in 2018.

The organisers also seek to collect the views of stakeholders, notably human rights organisations with a focus on the rights of those with cognitive disabilities, regarding the issues surrounding the protection of such rights in cross-border situations, and the role that the Convention may play in enhancing such protection.

Speakers include Philippe Lortie (First Secretary of The Hague Conference on Private International Law), Salomé Adroher Biosca (Comillas Pontifical University), Pietro Franzina (Catholic University of the Sacred Heart) and Geraldo Maciel Rocha Mendes Ribeiro (University of Coimbra).

Attendance is free. No prior registration is required.

For more information, including the link to access the webinar, see here.

Lyle & Scott Ltd v American Eagle Outfitters, Inc [2021] EWHC 90 (Ch) entertains ia the question whether the governing law for passing-off claims involving an eagle trademark, fall under Article 6 or 8 Rome II. The application is for an earlier order allowing service of jurisdiction, to be set aside.

Parties had agreed a ‘memorandum’ (which may or may not be a ‘contract’ – it is further referred to in the judgment as a ‘contract’) following a disagreement on whether each corporation’s eagle (L&S’s being trademarked in the UK and various EU Member States; AEO’s not being trademarked here, I understand) incorporated in apparel involved infringement of trademark and passing off.

AEO are domiciled in the US  and have no physical presence in the UK (or, one assumes, anywhere in the EU (the litigation was initiated pre-Brexit); their apparel is offered via online sales.

Jurisdiction is decided on the basis of the laws of E&W. Applicable law comes into the discussion for per Lord Mance at 46 in VTB v Nutritek,

“The governing law, which is here English, is in general terms, a positive factor in favour of trial in England, because it is generally preferable, other things being equal, that a case should be tried in the country whose law applies. However, that factor is of particular force if issues of law are likely to be important and if there is evidence of relevant differences in the legal principles or rules applicable to such issues in the two countries in contention as the appropriate forum…”.

Miles J discusses the governing law issue at 64 ff. Claimant argue the claim comes under A8 Rome II: infringement of intellectual property rights, English law, lex loci protectionis. Defendants argue they fall under A4 (by way of A6(2): Act of unfair competition), and that A4(3) is engaged to make the applicable law that of the state of Pennsylvania, because of the ‘contractual’ relationship.

At 72 Miles J agrees with the classification under A6, holding ia that ‘(t)he cause of action protects the goodwill of traders against deceptive conduct; goodwill is not an intellectual property right; and passing off is not the infringement of a right.’ Unlike the judge I do not think Rome II’s recital is of much help here and I suspect more can be made of the comparative law insights (common law and civil law) offered.

The next question is whether the claim falls within A6 (2). In Miles J’s succinctly expressed view it does, at 73: ‘The act of unfair competition alleged (passing off) affects exclusively the interests of a specific competitor (L&S). It follows that Art. 4 applies.’ As I have often noted, I find it very difficult to think of acts of unfair competition do not ultimately also impact the consumers of those involved.

The final hurdle then is whether A4(3) is engaged to displace E&W law as the lex loci damni, which at 75 the judge holds is not the case. Parties have not agreed on a governing law for the ‘contract’, they have conducted previous proceedings on the basis of that law being the laws of Pennsylvania. However even if the lex contractus is probably Penn law, and English law probably the lex causae for the passing off claim, Miles J holds this should not have an impact at the jurisdictional level: particularly seeing as there is no immediate reason to assume E&W courts will have great difficulty in applying Penn law to what on the contractual substance does not seem an overly complicated case.

Application dismissed, service out of jurisdiction stands.

This case once again highlights the level of complication resulting from having inserted different heads of applicable law into Rome II – a phenomenon which as I recently reported, might soon be expanded upon.

Geert.

EU private international law, 3rd ed. 2021, Chapter 4, Heading 4.5.2, 4.6.2, 4.6.4.

Horatia Muir Watt, Lucia Biziková, Agatha Brandão de Oliveira, Diego P. Fernández Arroyo and Megan Ma (Sciences Po Law School) have edited Le tournant global en droit international privé, published by Pedone.

This is the French version of Global Private International Law – Adjudication without Frontiers, that the same team of authors had published in 2019 with Edward Elgar.

Global Private International Law is a groundbreaking casebook, combining the expertise of over sixty international and interdisciplinary contributors who analyze key legal proceedings in order to provide a comprehensive study of the impact of globalisation on the law.

Providing a unique and clearly structured tool, this book presents an authoritative collection of carefully selected global case studies. Some of these are considered global due to their internationally relevant subject matter, whilst others demonstrate the blurring of traditional legal categories in an age of accelerated cross-border movement. The study of the selected cases in their political, cultural, social and economic contexts sheds light on the contemporary transformation of law through its encounter with conflicting forms of normativity and the multiplication of potential fora.

Key Features:

• the specific global scope allows the reader to gain a contextualised understanding of legal transformation

• each case has two commentaries from different viewpoints, ensuring a nuanced perspective on the implications of the global turn in private international law and its importance for adjudication

• an astute combination of theory and practice ensures readers gain an understanding of the relevance of innovative legal theories in interpreting concrete cases in a changing world

• comparative material and ground-breaking analysis make this book eminently suitable for use with students and a useful tool for researchers and courts confronted with novel topics or issues.

The French book includes a foreword of Paul Lagarde and an introductory chapter of Horatia Muir Watt which are freely available here, together with the table of contents.

The first chapter of the English book can be freely accessed here.

We have previously reported on this case here. This is a collective redress action to seek damages resulting from the Volkswagen emission scandal (also known as Dieselgate).  Proceedings were commenced in the Netherlands against Volkswagen (Group) and involve other related parties such as Audi, Seat, Skoda, Porsche, Robert Bosch, importer(s) and dealers in the Netherlands and abroad. This action is made pursuant to the Dutch Collective Redress of Mass Damages Act (Wet afwikkeling massaschade in collectieve actie, WAMCA).

On 18 January 2021, a case management -pre-trial- hearing (regiezitting in Dutch) was held before the Amsterdam District Court. The purpose of this meeting was for all the parties involved to exchange views on “the desired sequence of subjects to be addressed in the initial phases of the WAMCA procedure”. This includes issues such as the jurisdiction of the Dutch court over the claims, the law that would be applicable to the case, the appointment of an Exclusive Representative Party, etc. For more information, click here.

As indicated before, one of the institutes / organisations seeking to be the exclusive representative in this collective redress action is Diesel Emissions Justice Foundation (DEJF).  The DEJF has stated that: “The [Amsterdam District Court] has indicated that a decision on the order of handling of [these] points can be expected on March 3.”

See also our previous posts: Mass Litigation in Times of Corona and Developments in the Netherlands, Jurisdiction over financial damages – the A-G Opinion in the Volkswagen Case before the CJEU (CJEU) and The VW NOx Emissions Group Litigation, [2019] EWHC 783(QB), and (some aspects of) CoL (UK).

Interestingly, the DEJF has reported about a recent case where a Spanish court ordered damages against Volkswagen. I transcribe the summary of the case provided on the DEFJ website: “25 January 2021 – A Madrid court has found Volkswagen guilty of the use of manipulated software, or “cheating software”. In proceedings brought by a Spanish consumer association against Volkswagen on behalf of 5,400 affiliated consumers, the judge awarded damages totalling € 16.3million for unfair commercial practices, amounting to an average of € 3,000 per consumer. The judge used a pragmatic method to determine this amount; half to compensate for the depreciation of the affected cars and the inconvenience of use of having to have the cars repaired, and the other half for “moral damage” as breach of confidence due to the advertised “green” image of these cars, the environmental damages and the impact on society.” The judgment is available here (in Spanish).

And let us not forget the significant judgment of the Court of Justice of the European Union (CJEU) of 17 December 2020 (Second Chamber): Criminal proceedings against X, Request for a preliminary ruling from the Juge d’instruction du tribunal de grande instance de Paris Case C-693/18 (in French, which was the language of the proceedings). See also here (in other languages but not yet in English). Although this case arises in the context of criminal proceedings, it provides support to the claims above and in establishing liability.

More information is available here.

The Court of First Instance of Thessaloniki ruled on 24 June 2020 that an application by a psychological (non biological) mother to recognize and declare enforceable a UK custody order concerning a child born by the applicant’s partner contravenes Greek public policy (Ruling No. 6175, unreported).

The applicant [A] is a woman of Greek and American nationality. Her partner was a woman of American nationality [P]. They registered their partnership in the UK on 20 August 2013. Nearly a month later, P. gave birth to a child. The partners married in January 2015.

A. filed an application for child custody and parenting arrangements order in the UK. The court granted the application, and ordered that the child stays with the psychological mother on the basis of previous decisions concerning parental responsibility rights issued in the same country. In addition, the court ordered that the child reside with A., and it issued an order to remove the child permanently to Greece. Finally, the same court arranged the contact rights of the biological mother [P]. The information given in the Greek judgment is that the UK order was issued by the High Court – Family Division in Chelmsford, and that it was final. A. filed an application for the recognition and enforcement of the UK order before the Court of First Instance in Thessaloniki.

The Court of Thessaloniki began by acknowledging its jurisdiction and venue for the case at hand. It then entered into an analysis of the public policy defence, culminating in the conclusion, that the forum judge is obliged to defend national public policy, while at the same time demonstrating respect towards the state’s international obligations. To that end, a proportionality test of the domestic public policy with Article 8 ECHR standards is imperative. Following the above introduction, the court rushed to declare that same-sex marriage, and any subsequent relations emanating thereof are not allowed in Greece.

The first point raised by the court was a contradiction of the English order with established perceptions of Greek family law. By invoking Article 33 Greek Civil Code, i.e. the public policy defence in domestic Private International Law, the court held that Greek family law grants parental responsibility rights to the mother, if the child was born out of wedlock. In addition, the court stated that in the given situation, it was the biological mother who should be granted custody rights.

The second point raised by the court referred to the fundamental choice made by the domestic legislator and the Supreme Court, i.e. the prohibition of same-sex marriage. The public policy defence is the guarantor of this premise: Hence, an ontological change of a legal relationship within the country of destination, caused by the recognition of a foreign decision, affects state sovereignty. For a domestic standpoint, it is not acceptable to grant maternity rights to two women. It is also unbearable for the court that the birth of the child is a product of a same-sex marital relationship, which does not produce any legal effects in Greece.

In addition, the court held that the best interests of the child may not guarantee the preservation of a parental relationship with the biological mother, the latter being a situation not protected under Greek law. The bond worthy of protection emanates from constitutional provisions (equality / personality rights), the Fundamental Rights Charter, EU and ECHR standards. Consequently, the court ruled that the recognition and enforcement of the UK order would distort the legal pace of the country, because it is contrary to core domestic values and perceptions.

The judgment follows a hard line under the strong influence of the harsh position taken by the Greek Supreme Court against same-sex couples. The factual situation is obviously not shaking the court’s foundation; even the best interests of the child did not motivate the court to soften its position. Hence, the child will have two mothers in the UK, and no mother in Greece.

What is also striking is the omission of the court to approach the matter from its European point of view. Out of the abundant material of legal scholarship, European and domestic case law concerning the matter, I will focus on the Coman case, which decided as follows:

In a situation in which a Union citizen has made use of his freedom of movement by moving to and taking up genuine residence, in accordance with the conditions laid down in Article 7(1) of Directive 2004/38/EC of the European Parliament and of the Council of 29 April 2004 on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States amending Regulation (EEC) No 1612/68 and repealing Directives 64/221/EEC, 68/360/EEC, 72/194/EEC, 73/148/EEC, 75/34/EEC, 75/35/EEC, 90/364/EEC, 90/365/EEC and 93/96/EEC, in a Member State other than that of which he is a national, and, whilst there, has created or strengthened a family life with a third-country national of the same sex to whom he is joined by a marriage lawfully concluded in the host Member State, Article 21(1) TFEU must be interpreted as precluding the competent authorities of the Member State of which the Union citizen is a national from refusing to grant that third-country national a right of residence in the territory of that Member State on the ground that the law of that Member State does not recognise marriage between persons of the same sex.

The case, of course, was not concerned with recognition of foreign judgments, but the rationale seems to make it relevant in this respect as well.

There are two more instances available for the applicant to alter the landscape. A first sign of progress has been already reported. It will be interesting to follow the developments and to report in due time.

Mateusz Grochowski (European University Institute) and Katarzyna Południak-Gierz (Jagiellonian University) have posted EU Private International Law in Internet-Related Disputes: The Polish Case Law Approach on SSRN.

The abstract reads:

The paper examines the way Polish courts apply EU private international law (EU PIL) rules in the disputes concerning online context. The analysis seeks, in particular, to better understand the patterns recurring in the judicial reasoning and to map the typical circumstances of internet-related disputes pled before Polish courts. The paper attempts to cluster the existing case law and to trace the use made of EU PIL and CJEU decisions by Polish judges. It also aims to identify how the courts perceive specificity of internet-related disputes from the perspective of conflict of laws and how they understand specific goals of EU PIL (especially consumer protection). The text delves also into the cases where – despite encountering transnational elements – courts did not address conflict of laws issues. It attempts to indicate the most common instances of such omission and hence, to elucidate further the possible barriers to full application of EU PIL.

This post has been in my draft folder a long time for First Advocate General Szpunar opined Mid-October in C-469/19 All in One Star Ltd. Still worth a flag, with the CJEU presumably soon issuing judgment. The case concerns the refusal of German authorities to enter a branch of a UK-incorporated company, in the German commercial register.  C-106/16 Polbud is the most recent major case on the issue.

The Opinion follows the (slow) progress of positive harmonisation of EU company law, with Directive 2017/1132 core to the questions. The AG opined that that Directive does not preclude a national provision under which the managing director of the company has to provide an assurance that there is no barrier to his personal appointment under national law in the form of a prohibition, ordered by a court or public authority, on practising his profession or trade. However he suggests the Treaty provisions on free movement oppose the authorities of destination requesting the director provide assurances that a notary, a representative of a comparable legal advisory profession or a consular officer has confirmed such absence of obstacle to him.

The AG was asked by the CJEU not to discuss the other question: whether a Member State may insist upon indication of the amount of share capital or a comparable capital value, for a branch of a limited liability company with registered office in another Member State to be entered in the commercial register. Presumably because the answer is clearly ‘No’ in light of earlier case-law.

Clearly following Brexit (the TCA as far as I am aware has no straight free movement principles for corporations) the issue will be different for UK corporations however it will continue to present itself in light of the intra-EU competition in corporate law.

Geert.

EU Private international law, 3rd ed 2021, Chapter 6.

ICMY: Opinion Szpunar AG in All in One Star Ltd: Inbound free movement of corporations, further extension of Centros and Inspire Art case-law https://t.co/19bHt9w5U5 (no EN text available).
Re refusal to enter a branch of a company registered in the UK in DE commercial register.

— Geert Van Calster (@GAVClaw) October 15, 2020

The Universidade Portucalense, based in Porto, and its Research Center, in collaboration with the Universities of Vigo, Malaga, Salamanca and Granada as well as with the Federal University of Rio de Janeiro, organise an International Congress on Civil Procedural Law titled The Challenges of Sustainable Global and Digital Development, to be held on 20 and 21 May 2021, in virtual format.

The concept is as follows:

The pandemic caused by COVID-19 exposed the world to the positive and negative aspects of globalization; it also made evident the need for States to prepare for the challenges of global development; and, well, it showed us that the application and use of new technologies are fundamental. All these phenomena, of a transversal nature, are the motto of this Congress and motivate the study of procedural matters in the global and digital era, with a view to a result process.

In this context and also in the light of the United Nations 2030 Agenda Sustainable Development Goals, in particular those for promoting the rule of law at national and international level and ensuring equal access to justice for all, it is current and it is of practical and academic interest in critical analysis and the presentation of innovative proposals for procedural solutions that are part of this orientation. Above all, pay attention to the importance of consumer relations in sustainable development and in disputes with consumers.

This Congress aims to bring together researchers and professionals who, through their scientific studies and practical experiences, can contribute to the analysis of the impact of global and digital sustainable development in matters of procedural law, especially in civil proceedings, without excluding the application of the process to various branches of law.

Those interested in presenting a paper at the conference are invited to submit their abstracts on any of the following ‘thematic lines’: Transnational and European Civil Procedure. Global development process and challenges; Civil Procedure in the Digital Age – Challenges of technological development; Sustainable Consumption and Process.

The deadline for submissions is 28 February 2021.

See here for more information.

By Magdalena Lagiewska, University of Gdansk

This post reviews the symposium issue of the American Journal of International Law Unbound on “Global Labs of International Commercial Dispute Resolution”. This issue includes an introduction and six essays explaining the current changes and developments in the global landscape for settling international commercial disputes. The multifarious perspectives have been discussed to show tendencies and challenges ahead.

Overall, the AJIL Unbound special issue is, without doubt, one of the most impactful contributions on changes in international commercial dispute resolution landscape. It is a successful attempt and a fascinating analysis of recent developments in this field. This is certainly a must-read for anyone interested in reshaping the landscape of dispute resolution worldwide. Beyond the theoretical context, it includes many practical aspects and provides new insight into the prospects of its development and potential challenges for the future. I highly recommend it not only to the researchers on international commercial dispute resolution, but also to legal practitioners—lawyers, arbitrators, and mediators among others. Below, I have outlined each of the symposium’s contributions.

As mentioned in the introduction by Anthea Roberts [1], instead of the previous bipolarity and centralization around New York and London, international commercial dispute resolution is facing a new process of decentralization and rebalancing. Today, we are all witnessing the adaptation to a new reality and the COVID-19 pandemic is speeding up the entire process. “New legal hubs” and “one-stop shops” for dispute resolution are springing up like mushrooms in Eurasia and beyond. Therefore, due to the competitiveness between the “old” and “new” dispute resolution institutions, these new bodies are more innovative and thus are expected to attract more and more interested parties.

The main aim of this symposium was to outline the new challenges of the international commercial dispute resolution mechanism around the world. New dispute resolution centres not only influence on the current landscape, but also they offer “fresh insight” in this field.

The first essay by Pamela K. Bookman and Matthew S. Erie, entitled “Experimenting with International Commercial Dispute Resolution” [2], pays attention to the new phenomena on emerging “new legal hubs” (NLHs), international commercial courts and arbitral courts worldwide. This new tendency has recently appeared in China, Singapore, Dubai, Kazakhstan and Hong Kong. All of these initiatives affect the international commercial dispute settlement landscape and increase the competitiveness among these centres. Those centres bravely take advantage of “lawtech” and challenge themselves. As a result, they are experimenting with legal reforms and some institutional design to attract more interested parties and to become well-known platforms providing high-quality dispute resolution services. The Authors set forth the challenges and threats that may exist in this respect. They also provide an insightful analysis of the impact of these new initiatives on the international commercial dispute resolution, international commercial law, and the geopolitics of disputes.

Further, Giesela Rühl’s contribution focuses on “The Resolution of International Commercial Disputes – What Role (if any) for Continental Europe?” [3]. The author pays attention to the Netherlands, which took the initiative to establish a new court exclusively devoted to international cases, and Germany and France, which took more skeptical efforts to establish international commercial chambers both before and after the Brexit referendum in 2016. Rühl believes that the far-reaching reform should be implemented at the European level. Therefore, she advocates the establishment of a common European Commercial Court. This seems to be an interesting approach that would certainly strengthen Europe’s position in the global dispute resolution landscape.

Julien Chaisse and Xu Qian outline the importance and key features of the recently established China International Commercial Court (CICC) [4]. Given its foundation, this court should operate as a “one-stop shop” combining litigation, arbitration, and mediation. It is dedicated to solving Belt and Road Initiative (BRI) related disputes. The Authors point out that this court is much more akin to a national court than a genuine international court. Therefore, they challenge its importance with respect to BRI-related disputes and attempt to determine whether the Court will play a significant role in the international dispute settlement landscape. These considerations are especially important given the primary sources in Chinese which bring the reader closer to Chinese legislation.

The following essay, by Wang Guiguo and Rajesh Sharma, addresses the International Commercial Dispute Prevention and Settlement Organization (ICDPASO) established in 2019 [5]. It is another global legal hub that offers “one-stop” services in China. At first glance, the ICDPASO seems to be an interesting body with an Asian flavour, however, the Authors shine a spotlight on some practical challenges ahead and its limited jurisdiction. This body differs significantly from the aforementioned CICC. Whether the ICDPASO will be a game-changer in the BRI-related disputes and will influence importantly on international dispute resolution landscape seems to be a melody of the future. It is ultimately too soon to answer those questions now, but it is certainly worthwhile to watch this institution.

Further, S.I. Strong brings attention to the actual changes in international commercial courts in the US and Australia [6]. Although Continental Europe, the Middle East, and Asia try to reshape the current international dispute resolution landscape, common law jurisdictions, such as the United States and Australia, are less inclined to changes in establishing international courts specialized in cross-border disputes. Compared to the US, Strong believes that Australia has made more advanced efforts to establish such courts. Nevertheless, aside from the traditional international commercial courts, the newly emerging international commercial mediation services are gaining popularity, most notably due to the entry into force of the UN Convention on International Settlement Agreements Resulting from Mediation (the Singapore Convention).

Last but not least, Victoria Sahani contribution’s outlines third-party funding regulation [7]. While third-party funding remains a controversial issue in litigation or arbitration, whether domestic or international, it is becoming much more popular globally. There are already over sixty countries experimenting with regulatory questions about third-party funding. In this case, we also deal with some “laboratories” that try out different methods of regulation.

The entire symposium is available here.

The fourth issue of 2020 of the Dutch PIL journal Nederlands Internationaal Privaatrecht is dedicated to Arbitration and conflicts of laws.

Some of the papers are in English, others in Dutch.

Editorial

Peters & B. van Zelst (guest editors), Arbitration and conflicts of laws / p. 631-633

A.J. B?lohlávek, Determining the law governing obligations in arbitration and the applicability of the Rome I Regulation / p. 634-651

Factors specific to arbitration, and particularly the fact that the place of arbitration is often chosen as a neutral venue with no links to the domicile of the parties or to the subject of the dispute, also influence the procedures followed to determine the substantive law governing obligations. Even so, it is essential to employ a method for determining this law that is transparent, that excludes arbitrariness on the part of arbitrators, and that allows the parties to rely on a certain degree of predictability. Considering the growing importance of the seat of arbitration, which has seen the relevance of the theory of the anationality of arbitration decline in most cases, it is always necessary to assess the importance of the lex fori arbitri in determining the applicable substantive law. Unless the application of EU legislation, and hence also the Rome I Regulation, on the law applicable to obligations stems, as a matter of necessity, from the mandatory lex fori arbitri (which tends to be the exception), the application of the Rome I Regulation must always be kept to a minimum. There is therefore no reason why the Rome I Regulation cannot also be used in arbitral proceedings to determine the applicable law. Arguments such as the fact that this is a regulation applicable exclusively to civil litigation must be rejected.

Meški? & A. Gagula, Lex mercatoria and its limits in international arbitration / p. 652-668

This contribution aims to provide guidance on the usual steps an arbitrator undertakes when using lex mercatoria in international arbitration. The first step is the identification of rules that represent lex mercatoria and deserve such a qualification. It involves a discussion on the private international law analysis, especially absent a choice of law by the parties and its relationship to (potentially) applicable national law. The statistics presented in this paper show that parties in an overwhelming majority of cases choose national law as the applicable law and that lex mercatoria needs to co-exist with national law. Here, the joint use of national law and lex mercatoria is discussed in the context of the example of construction arbitration as the most common area of international arbitration practice. The growing popularity of certain legal solutions of lex mercatoria in procedural or substantive matters followed by a codification trend contribute to an effect of a rebuttable presumption in the fields of its application. This triggers the question as to how the right to be heard can be preserved, especially when the initiative for the use of lex mercatoria does not come from the parties, but from the arbitral panel. The lack of a strict judicial review of the applicable law used in arbitration gives the arbitrators the power to find the right balance between the guidance offered by lex mercatoria and parties’ expectations.

Shehata, Overriding mandatory rules and international commercial arbitration: the Swiss and French perspectives / p. 669-686

The treatment of overriding mandatory rules has always been the subject of multiple studies, especially in the field of international commercial arbitration. The fact that most arbitration jurists agree that arbitration does not have a lex fori is an essential reason for making this discussion a captivating one. Further, if we couple this lack of a lex fori in commercial arbitration with the arbitrators’ duty to render enforceable awards, then we face an extremely intriguing dilemma in this regard.

Instead of reviewing how arbitral tribunals deal with this conundrum, I try to explore this issue through the lens of selected national reviewing courts (i.e., Swiss and French Courts). In my opinion, the review by the national courts represents the end game and should prove critical in guiding future arbitral tribunals in how they should treat overriding mandatory rules at the earlier stage of issuing their arbitral awards.

Ernste, Het toepasselijke bewijsrecht in arbitrage / p. 687-698

This article focuses on the applicable law of evidence, including the law that is applicable to the allocation of the burden of proof in the case of (international) arbitration with the seat of arbitration being in the Netherlands. In international arbitration, the applicable arbitration law, including the applicable law of evidence, shall be determined by the lex arbitri. The Dutch Arbitration Act is applicable if the seat of arbitration is in the Netherlands. An arbitral tribunal has to decide with respect to the allocation of the burden of proof whether it applies the law of the arbitral seat (based on the theory that the burden of proof is procedural) or the law governing the underlying substantive issues (based on the theory that the burden of proof is substantive). According to Dutch Arbitration law, the allocation of the burden of proof is procedural. As a result, an arbitral tribunal is not bound by rules regarding the allocation of the burden of proof laid down in the law governing the underlying substantive issues.

Zilinsky, Toepasselijk recht op de bindende kracht en de rechtsgevolgen van arbitrale uitspraken / p. 699-714

This contribution focuses on the res judicata of arbitral awards. What is actually the purpose of the res judicata of an arbitral award? Should an arbitrator or a court verify ex officio whether an arbitral award had become res judicata or should this be invoked by the parties? As the parties are free to determine the manner in which and by whom dispute resolution takes place, the question arises as to which applicable law should determine the issue of an arbitral award becoming res judicata. Although the existing instruments, such as the 1958 New York Convention, deal with the recognition and enforcement of arbitral awards, these instruments leave this question unanswered. These instruments are based on the principle that the Contracting States recognize the arbitral awards and that a recognized arbitral decision is binding. This contribution discusses the different approaches to determining the res judicata effect of an arbitral award.

Peters, Enkele gedachten over de toepasselijkheid van het beginsel van ius curia novit in gerechtelijke procedures in verband met arbitrage en de gevolgen daarvan voor arbitrage / p. 715-730

It is often assumed that arbitrators are not obliged to apply conflict of laws rules or to add to the legal grounds ex officio, but this is not necessarily true. In this publication the author sets out that arbitrators, under specific circumstances, should have regard to the rules that the national courts should apply in annulment proceedings and should not consider themselves to be bound by the parties’ submissions. In this respect, the arbitrators should have an understanding of the scope of annulment proceedings and the application of the principle of ius curia novit in these proceedings, which are also discussed in this publication.

Van Zelst, Het recht van toepassing op de aansprakelijkheid van arbiters / p. 731-747

This article investigates and challenges existing notions of private international law aspects of the liability of arbitrators. The starting point of the inquiry is a succinct comparative analysis of how the role of the arbitrator is viewed and which standards apply to arbitrator liability in various jurisdictions. The article proceeds with an analysis of the applicability of the Rome I Convention, finding that Rome I applies to the contractual liability of an arbitrator. Subsequently, the article assesses how Rome I’s substantive provisions – Article 4 more specifically – should be applied. It concludes that the law of the habitual residence (of each) of the arbitrator(s) applies to contractual claims vis-a-vis the arbitrator(s).

In addition the issue contains a case note

X.P.A. van Heesch, Samenloopperikelen bij het aannemen van bevoegdheid o.g.v. Verordening Brussel I-bis. Hoge Raad 17 juli 2020, ECLI:NL:HR:2020:1280, NIPR 2020, 487 (V Marine Fuels/Dexhon c.s.) / p. 748-759

This article discusses the judgment of the Dutch Supreme Court dated 17 July 2020, ECLI:NL:HR:2020:1280. In this case, the Dutch Supreme Court answered the question of whether the Dutch Court had jurisdiction based on Article 5 of the Arrest Convention when the Court of Casablanca had arrested the ship in question. Even though Article 5 of the Arrest Convention does not grant explicit exclusive jurisdiction to the court of the forum arresti, exclusive jurisdiction can be assumed based on the interpretation of the Arrest Convention. The author then explains the relation between the Brussels I-bis Regulation and Conventions which, in relation to particular matters, govern jurisdiction or the recognition or enforcement of judgments (specialized Conventions). The general rule regarding this relation is laid down in Article 71 Brussels I-bis Regulation and entails that the Brussels I-bis Regulation does not affect any specialized Conventions to which the Member States are parties. The Court of Justice of the European Union has provided two restrictions to this rule. These two restrictions entail that Article 71 Brussel I-bis Regulation (i) only applies to aspects that the specialized Convention governs and not to aspects that the specialized Convention does not govern and (ii) can only apply if the specialized Convention does not compromise the principles which underline judicial cooperation in the European Union (such as the free movement of judgments, predictability as to the courts having jurisdiction and legal certainty for litigants). In the legal literature, ideas differ on how to interpret this last restriction, which is set out by the author as well. Finally, the author construes whether the Dutch Supreme Court should have applied the two restrictions on Article 71 Brussels I-bis Regulation before it ruled that the Dutch Court did not have jurisdiction in this case.

The Hague Court of Appeal on January 29, 2021 held that Shell’s parent and subsidiary company in Nigeria were liable for oil spillage in Bayelsa State – an oil producing area in Nigeria. The Court held that Shell had failed to prove beyond reasonable doubt that the oil spillage was caused by sabotage by a third party.

The full details on the above important case can be found here

February starts with a hearing on 4 February in a PPU case. C-603/20 PPU MCP is a preliminary reference from the High Court of Justice, Family Division (United Kingdom), filed on November 2020 (that much for Brexit…), on the interpretation of Council Regulation (EC) No 2201/2003. The facts concern two Indian citizens habitually resident in the United Kingdom who share the parental responsibility for P, a British citizen aged three, born in the UK. P has been living in India since October 2018, when the mother took him there fleeing from (alleged) domestic violence. There has been no contact between the father and P since 2018.

The mother did not seise the English courts before removing P to India, nor did she obtain the consent of the father. On 26 November 2019, she seised the Family Court at Chelmsford for ‘permission to change jurisdiction of the child’. On 26 August 2020, the father filed an application in the High Court requesting in essence the return of the child to the UK. On 6 November 2020, the High Court (Family Division) addressed the issue of jurisdiction and determined that the English courts could not base jurisdiction neither on Article 8 on Article 12(3) of the Brussels IIa Regulation. Having doubts as to whether Article 10 of the Regulation applies where a child is wrongfully removed to or retained in a third country, it referred the following question for a preliminary ruling:

Does Article 10 of Brussels 2 retain jurisdiction, without limit of time, in a member state if a child habitually resident in that member state was wrongfully removed to (or retained in) a non-member state where she, following such removal (or retention), in due course became habitually resident?

The case is allocated to a chamber of five judges, with E. Regan as reporting judge. A. Rantos is the advocate general in charge.

The Opinion of AG Bobek in case C-800/19, reported in this blog some days ago, will be delivered on 23 February.

Finally, the judgment in C-804/19 Markt24 will be published on 24 February. The blog had informed about the questions referred here. The Opinion by AG Oe, of October 29, 2020, is not available in English. My tentative translation would be:

1. A claim for payment of the remuneration agreed in an employment contract, filed by a worker domiciled in a Member State against an employer domiciled in another Member State, falls within the scope of Regulation (EU) No. 1215/2012 (…) and, more specifically, section 5 of its chapter II, even when the worker has not, in practice, performed any work in compliance with the contract in question.
2. Regulation No. 1215/2012 precludes the application of the rules on jurisdiction established by the national law of the court seised, enabling an employee to bring an action in the place where his domicile or habitual residence is located during the employment relationship, or before the court in the place where the remuneration is to be paid.
3. When a employee and an employer have entered into an employment contract and, for whatever reason, no performance has been made in practice in compliance with that contract, ‘the place where or from where the employee habitually carries out his work’, within the meaning of Article 21, paragraph 1, letter b), subparagraph i), of Regulation No. 1215/2012, will coincide, in principle, with the workplace agreed in the aforementioned contract.

Although not directly related to PIL, I would like to draw the readers’ attention also to case C-490/20 Stolichna obshtina, Rayon “Pancharevo”. Hearing is taking place on 9 February. The questions referred by Administrativen sad Sofia-grad (Bulgaria) are:

Must Article 20 TFEU and Article 21 TFEU and Articles 7, 24 and 45 of the Charter of Fundamental Rights of the European Union be interpreted as meaning that the Bulgarian administrative authorities to which an application for a document certifying the birth of a child of Bulgarian nationality in another Member State of the EU was submitted, which had been certified by way of a Spanish birth certificate in which two persons of the female sex are registered as mothers without specifying whether one of them, and if so, which of them, is the child’s biological mother, are not permitted to refuse to issue a Bulgarian birth certificate on the grounds that the applicant refuses to state which of them is the child’s biological mother?

Must Article 4(2) TEU and Article 9 of the Charter of Fundamental Rights of the European Union be interpreted as meaning that respect for the national identity and constitutional identity of the Member States of the European Union means that those Member States have a broad discretion as regards the rules for establishing parentage? Specifically:

–    Must Art. 4(2) TEU be interpreted as allowing Member State to request information on the biological parentage of the child?

–    Must Article 4(2) TEU in conjunction with Article 7 and Article 24(2) of the Charter be interpreted as meaning that it is essential to strike a balance of interests between, on the one hand, the national identity and constitutional identity of a Member State and, on the other hand, the best interests of the child, having regard to the fact that, at the present time, there is neither a consensus as regards values nor, in legal terms, a consensus about the possibility of registering as parents on a birth certificate persons of the same sex without providing further details of whether one of them, and if so, which of them, is the child’s biological parent? If this question is answered in the affirmative, how could that balance of interests be achieved in concrete terms?

Is the answer to Question 1 affected by the legal consequences of Brexit in that one of the mothers listed on the birth certificate issued in another Member State is a UK national whereas the other mother is a national of an EU Member State, having regard in particular to the fact that the refusal to issue a Bulgarian birth certificate for the child constitutes an obstacle to the issue of an identity document for the child by an EU Member State and, as a result, may impede the unlimited exercise of her rights as an EU citizen?

If the first question is answered in the affirmative: does EU law, in particular the principle of effectiveness, oblige the competent national authorities to derogate from the model birth certificate which forms part of the applicable national law?

This will be (not surprisingly) a Grand Chamber decision.

From 15 to 20 February 2021, Università degli Studi di Milano and the European Court of Arbitration, in cooperation with the Law Firms BonelliErede and DLA Piper Italy, organize the first edition of the “Milan Investment Arbitration Week” (MIAW), a series of different events (conferences, round-table debates, legal competitions), held in streaming and related to international investment law and arbitration. Renowned Italian and foreign experts from academia, legal profession and arbitral institutions will address from different angles some of the most relevant topics related to the field. In addition, MIAW will include two legal competitions: the second edition of the Milan Investment Arbitration Pre-Moot and the first edition of the Construction Arbitration Moot, with the participation of several Universities from all around the world. Detailed information available here.

Michiel Posen appropriated a currently popular meme and went (almost) viral. Is his observation right? Comments very welcome.

by Jingru Wang, Wuhan University Institute of International Law

1. Background

A blocking statute is adopted by a country to hinder the extraterritorial application of foreign legislation.[1] For example, the EU adopted Council Regulation No 2271/96 (hereinafter “EU Blocking Statute”) in 1996 to protest the US’s extraterritorial sanctions legislation concerning Cuba, Iran and Libya.[2] Since Donald Trump became the US president, the US government officially defined China as its competitor.[3] Consequently, China has been increasingly targeted by US sanctions. For example, in 2018, the US imposed broad sanctions on China’s Equipment Development Department (EDD), the branch of the military responsible for weapons procurement and its director for violating the US law on sanctions against Russia.[4] In 2020, the US announced new sanctions on Chinese firms for aiding North Korea’s nuclear weapons program.[5] A number of “Belt and Road” countries are targeted by US primary sanctions, which means that Chinese entities may face a high risk of secondary sanctions for trading with these countries. In these contexts, Chinese scholars and policy makers explore the feasibility to enact blocking law to counter foreign sanctions.[6] On 9 January 2021, China’s Ministry of Commerce (hereinafter “MOFCOM”) issued “Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures” (hereinafter “Chinese Blocking Rules”), which entered into force on the date of the promulgation.[7]

2. Analysis of the Main Content

Competent Authority: Chinese government will establish a “Working Mechanism” led by the MOFCOM and composed of relevant central departments, such as the National Development and Reform Commission. The Working Mechanism will take charge of counteracting unjustified extraterritorial application of foreign legislation and other measures (Art. 4).

Targeted extraterritorial measures: The Chinese Blocking Rules target foreign legislation and other measures unjustifiably prohibit or restrict Chinese parties from engaging in normal economic, trade and related activities with third state’s parties (Art. 2), which is the so-called “secondary sanction”. Namely, if China considers sanctions unilaterally imposed by the US against a third country unjustified and violating international law, it may nullify such sanctions and allow Chinese companies to continue to transact with the third country. These Rules do not impact restrictions on business activities between China and the sanctioning country.

Unlike the EU Blocking Statute, the Chinese Blocking Rules do not provide an annex listing the legislation subject to the blocking but grant the Working Mechanism discretion. To determine whether foreign legislation or other measures fall within the application scope of the Chinese Blocking Rules, the Working Mechanism shall consider (1) the international law and fundamental principle of international relations; (2) potential impact on China’s national sovereignty, security and development interests; (3) potential impact on the legitimate interest of the Chinese party and (4) all other factors (Art. 6). On the one hand, the non-exhaustive list grants the Working Mechanism broad flexibility to analyse on a case-by-case basis. China has repeatedly become the target of US secondary sanctions. An exhaustive list of foreign legislation and other measures is insufficient to deal with the changing situations. On the other hand, China is prudent in confrontation with other countries. In a press conference, the MOFCOM spokesman stated that “the working mechanism will closely follow the inappropriate extraterritorial application of relevant national laws and measures.”[8] Therefore, the response of other countries will influence the enforcement of the Chinese Blocking Rules.

It is noteworthy the Chinese Blocking Rules will not affect China’s performance of its international obligations. These Rules shall not apply to such extraterritorial application of foreign legislation and measures as provided for in treaties or international agreements to which China is a party (Art. 15).

Information reporting system: A Chinese party prohibited or restricted by foreign legislation and other measures from engaging in normal economic, trade and related activities with a third state’s party shall report such matters to the MOFCOM within 30 days (Art. 5). Otherwise, the Chinese party may be warned, ordered to rectify or fined (Art. 13). To encourage the information report, Art. 5 of the Chinese Blocking Rules also provides that the competent authority shall keep such report confidential at the request of the Chinese party. The staff of the competent authority may undertake administrative penalties if they fail with such obligation (Art. 14).

Concerning the Information reporting system, when the report obligation is triggered is unclear. Should the Chinese party report within 30 days after the foreign legislation is published or other measures are taken or after its actual operation is restricted? Moreover, since the Chinese Blocking Rules do not list targeted foreign legislation and other measures, the Chinese party should rely on their judgment to report. Finally, who should report on behalf of the legal person remains to be answered.

Prohibition order: Once the unjustified extraterritorial application of foreign legislation and other measures is confirmed, the Working Mechanism may decide that the MOFCOM shall issue a prohibition order to ban the effect of relevant foreign legislation and other measures (Art. 7). A Chinese party that fails to observe the prohibition order will be punished (Art. 13). Therefore, Chinese parties are forced to comply with either Chinese or foreign laws. In other words, they will be punished by one or the other. To free the party from the dilemma, a Chinese party may apply for exemption from compliance with a prohibition order (Art. 8). China-based subsidiaries of foreign companies are formed under Chinese law. They are considered to be Chinese entities. Therefore, unless otherwise provided by law, they are subject to the prohibition order issued under the Chinese Blocking Rules and can apply for the exemption.

One major uncertainty is whether third state’s parties are subject to the prohibition order. These Rules do not stipulate that foreign entities will be punished by violating the prohibition order or can apply for the exemption. However, it is suggested that the prohibition order may bind the third state’s party for two reasons. Firstly, the US may issue secondary sanctions to prohibit Chinese parties from trading with third state’s parties (Iran as an example), or to prohibit third state’s parties (EU as an example) from trading with Chinese parties. According to Art. 2 of the Chinese Blocking Rules, both situations may obstruct the normal economic, trade and related activities between the Chinese party and the third state’s party. If the prohibition order merely applies to the Chinese party, it cannot protect Chinese businesses from being prejudiced by the US secondary sanctions in the latter situation. Secondly, a Chinese party can bring a lawsuit before the People’s Court against the party who infringes the legitimate interest of such Chinese party by complying with the foreign legislation and other measures covered by the prohibition order (Art. 9). This article does not limit the defendant to “a Chinese party.” Thus it shall include the third state’s party. If the prohibition order does not bind the third state’s party, it is doubtful that such third state’s party is liable for not complying with the prohibition order.

The prohibition order refrains relevant parties from complying with specific foreign legislation and other measures. A question is how should the prohibition order be observed. According to the European Commission’s Guidance Note, the purpose of the EU Blocking Statute is to ensure that business decisions on trading with third States remain free. It does not oblige EU operators to do business with Iran or Cuba. Also, the Chinese Blocking Rules cannot and should not oblige the Chinese party and the third state’s party to engage with each other. Therefore, it raises the worry that these Rules may apply better for breach of existing contract but be more difficult to “force” someone to enter into a contract or in terms of the pre-contractual obligation.

Judicial Remedy: A Chinese party can bring a lawsuit before the People’s Court of PRC against the party who infringes its legitimate interest by complying with the foreign legislation or measures covered by the prohibition order. A Chinese party may also suit the party who benefits from the judgment or ruling made under such foreign legislation or other measures before the People’s Court (Art. 9). Problems may arise if the losing party has no asset in China seized for enforcement by the Chinese court. Other countries may be reluctant to recognize and enforce such judgment.

Government support: Members of the Working Mechanism shall provide guidance and service to Chinese parties to deal with unjustified extraterritorial application of foreign legislation and other measures (Art. 10). Suppose a Chinese party that observes the prohibition suffers significant losses resulting from non-compliance with the relevant foreign legislation and measures. In that case, relevant government departments may provide necessary support based on specific circumstances (Art. 11). Which government department is responsible for these matters? Does “Necessary support” include financial compensation or support on litigation in the sanctioning country? These questions remain to be answered.

3. Impact of the Blocking Statute

Considering that China has long suffered from secondary sanctions issued by the US government, promulgating the Chinese Blocking Rules is not a surprise. Overall, the Chinese Blocking Rules attempt to establish three core institutions anticipated by Chinese scholars: (1) blocking the effect and enforcement of specific foreign legislation in China; (2) prohibiting relevant parties from complying with specific foreign legislation and other measures; (3) enabling relevant parties to recover the damage from the party who complies with the foreign legislation and measures covered by the prohibition order. Therefore, a blocking statute serves as both shield and sword to fight against foreign sanctions.

But the function of blocking statute shall not be overemphasized. The same as the EU Blocking Statute, the Chinese Blocking Rules create a quandary for relevant parties.

For Chinese parties, if they comply with the Chinese prohibition order, they have to deal with US penalties. Chinese parties may invoke “foreign sovereign compulsion”[9] as a defence to insulate themselves from certain US sanctions penalties. In determining whether to buy such argument, US courts often consider whether foreign states actively enforce them.[10] The Chinese Blocking Rules can provide a legal basis for Chinese parties to exempt from the US sanctions by strategic enforcement actions. If so, Chinese parties will be relieved to transact with third state’s parties. But the Chinese government may not be willing to provide the same exemption. Out of self-interest, Chinese parties may be more likely to comply with the Chinese Blocking Rules.

These Rules have not yet stipulated the legal result if third states’ parties violate the Chinese prohibition order. In principle, prescriptive jurisdiction can be extraterritorial, but enforcement jurisdiction must be territorial. Therefore, China cannot always extend the effect of Blocking Rules to a third state’s party even if it has the will. However, it is reasonable to assume that third state’s parties may be added to the “unreliable entities list”[11] for disregarding the Chinese prohibition order. It may prompt third state’s parties to observe the Chinese prohibition order voluntarily to preserve their assets and reputation in China. But even if third state’s parties value the Chinese market, it is uneasy for them to choose China over the US.

China has become more active in exploring countermeasures against the US. On 19 September 2020, MOFCOM released provisions on establishing “unreliable entity list.”[12] Promulgation of the Chinese Blocking Rules is another proactive attempt. However, both are departmental rules, which are at a relatively low-level in the Chinese legal system. Predictably, higher-level legislation concerning the extraterritorial effect of foreign legislation and other measures will be enacted in the future. It may prompt China and the US back to the negotiating table.

[1] Menno T. Kamminga, “Extraterritoriality”, Max Planck Encyclopedia of Public International Law, November 2012, para. 26.

[2] COUNCIL REGULATION (EC) No 2271/96, available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:01996R2271-20140220.

[3] White House, National Security Strategy of the United States of America, December 2017.

[4] CAATSA – Russia-related Designations, available at: https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20180920_33. aspx.

[5] North Korea Designations, available at: https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20201208.

[6] Ye Yan, “On the EU Blocking Statute”, Pacific Journal, Vol. 28, No. 3, Mar. 2020, pp. 50-66; Huo Zhengxin, “Extraterritoriality of Domestic Law: American Model, Jurisprudential Deconstruction and Chinese Approach”, Tribune of Political Science and Law, Vol. 38, No. 2, Mar. 2020, pp. 173-191.

[7] Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures, available at: http://www.mofcom.gov.cn/article/i/jyjl/e/202101/20210103032421.shtml.

[8] The Head of the Department of Treaty of Law of Ministry of Commerce answers press on “Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures”, available at:  http://www.mofcom.gov.cn/article/news/202101/20210103029779.shtml.

[9] “Foreign Sovereign Compulsion” means that if a party is obliged to do or not to do an act by a state, it may constitute a defence for not complying with the obligation specified by the US law before the US court. See American Law Institute, Restatement of the Law, Third, The Foreign Relations Law of the United States, American Law Institute Publishers, 1990, p. 341.

[10] M. J. Hoda, “The Aerospatiale Dilemma: Why U.S. Courts Ignore Blocking Statutes and What Foreign States Can Do About It”, California Law Review, Vol. 106, No. 1, 2018.

[11] The entity added to the list will be restricted on China-related trade, investment in China and travel or work permits. See “MOFCOM Order No. 4 of 2020 on Provisions on the Unreliable Entity List”, available at:

http://www.mofcom.gov.cn/article/b/fwzl/202009/20200903002593.shtml.

[12] Ibid.

On 19 January 2021, Namibia deposited its instrument of acceptance of the Statute, becoming the 87th Member of the HCCH. More information is available here. 

On 1 January 2021, the HCCH 2000 Protection of Adults Convention entered into force for Belgium. The Convention currently has 13 Contracting Parties. More information is available here. 

On 1 January 2021, the United Kingdom’s new instrument of accession to the HCCH 2005 Choice of Court Convention and new instrument of ratification to the HCCH 2007 Child Support Convention entered into force. The United Kingdom has already been bound by the Choice of Court Convention since 2015 and by the Child Support Convention since 2014, by virtue of the European Union’s approval. To ensure continuity in their application following its withdrawal from the EU, the United Kingdom deposited these new instruments of accession and ratification on 28 September 2020. More information is available here. 

On 18 January 2020, Singapore deposited its instrument of accession to the HCCH 1961 Apostille Convention. With the accession of Singapore, the Apostille Convention now has 120 Contracting Parties. Singapore is the third ASEAN Member State to join the Apostille Convention. It will enter into force for Singapore on 16 September 2021. More information is available here. 

From 22 to 27 January, the Applicable Law Working Group on the HCCH 2007 Maintenance Obligations Protocol met via videoconference. The Group provided guidance in relation to issues of applicable law arising from certain family relationships, the law applicable to preliminary / incidental questions, as well as the interpretation and scope of certain articles of the Protocol. More information is available here. 

On 29 January, the Permanent Bureau announced the publication of translations, in all European Union languages, of the Practical Handbook for Competent Authorities on the 2007 Child Support Convention, the 2007 Maintenance Obligations Protocol, and the 2009 EU Maintenance Regulation. The translations were made possible with the support of the Directorate-General for Justice and Consumers of the European Commission. The Handbook, originally published in English, French, and Romanian, was jointly developed by the HCCH, the Ministry of Justice of Romania, and the French National School for the Judiciary (ENM). More information is available here. 

These monthly updates are published by the Permanent Bureau of the Hague Conference on Private International Law (HCCH), providing an overview of the latest developments. More information and materials are available on the HCCH website.