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In  East-West Logistics LLP v Melars Group Ltd [2020] EWHC 2090 (Ch), at issue was COMI – Centre of Main Interests determination under Regulation 2015/848 of a  trading company incorporated in BVI, until 10 December 2015. It then moved its registered office to Malta, two months after service of the claim form in BVI proceedings and a month after acknowledging service, with regard to a charterparty gone wrong.

CJEU Interedil including its insistence on third-party observability, is the main authority called upon by parties. Baister DJ adds Northsea Base Investment in particular and notes at 22

Because this company traded virtually rather than physically, much of the case law is of little assistance: it deals largely with companies of substance that have a headquarters, offices, a tangible physical presence or assets or staff who are located and work somewhere or other.

He also notes, at 23 and I agree, that the forum shopping which the company had clearly engaged in, is not of itself of material relevance (despite nota bene the Regulation’s recitals betraying a contempt for forum shopping): ‘a debtor is entitled to move his centre of main interests and to do so for self-serving reasons. The question is whether the move is real or illusory.’ Baister DJ refers to Shierson v Vlieland-Boddy [2005] EWCA Civ 974 which albeit held early in the life of the (previous) EU Insolvency Regulation continues to have relevance.

The judge comments at 22 that ‘there appears to have been no attempt to notify any third party of the move: no evidence is given of the company’s having done so; on the contrary,…, the company continued to use a BVI address after the move’ – which could make one think that in fact BVI should emerge as a strong contender for COMI – even if seemingly neither party suggested it was.

The judge at 27 emphasises the proprio motu instruction of the EIR, i.a. in Article 4: a judge cannot ‘avoid the obligation imposed on it by the Regulation to “examine of its own motion whether the centre of the debtor’s main interests…is actually located within its jurisdiction,..”: the place of registered office is not a fallback in case parties do not provide proper evidence: the judge must examine COMI on the facts himself.

Then follows an admirably serious engagement with the few elements present in the case, leading to Baster J opting for England as COMI: at 54:

I conclude on the basis of the documentary material, the location of the company’s banking facilities from time to time, the location of its legal advisers, the location of at least one judgment creditor to which a debt was to be paid and the place where the company was involved in litigation that at the relevant time the company was administering its interests in both the UK and Switzerland so that both were centres of the company’s interests. I conclude, by a narrow margin and with misgivings, that on balance the greater use of English law for contracts, the greater use of London as a seat of arbitration, the actual recourse to or forced involvement in legal proceedings here and the consequential use of English lawyers makes the UK, on the balance of probabilities, the main centre of those interests. The company’s affairs seem to have been conducted in this country more than in Switzerland, certainly as far as contractual and litigation interests were concerned, although it is, I accept, hard to be precise.

I tend to disagree and I believe it is at 35 that the mistake is being made:

Locating the company’s centre of main interests in Malta rests on its registered office being there and no more than that. There is unchallenged evidence from the petitioner that there is no operational office and no one conducting the business of the company there. The registered office is a “letter box” and no more. It follows that if the company “conducts the administration of its interests on a regular basis elsewhere” such that that “is ascertainable by third parties,” that “elsewhere” can only be either the UK or Switzerland.

The Registered office presumption despite its rebuttability, remains a presumption. If on the facts, ‘the place where the debtor conducts the administration of its interests on a regular basis and which is ascertainable by third parties’ (definition of COMI in A3(1) EIR) does not clearly point to another place than the registered office, the presumption must remain in place. In the case at issue, the starting point seems rather to have been to establish either the UK or Switserland as COMI. In doing so the judge I feel did not give enough weight to the COMI presumption. Even with the proprio motu instruction, the judge must not scavenge for alternative COMI; there must be convincing evidence of the alternative, which I do not think from the judge’s description, is available here.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 5, Heading 5.6.1.2.Heading 5.6.1.2.4.

I. Introduction: Foundations of Mutual Trust

A crucial element element for running a system of judicial cooperation on the basis of mutual trust is sufficient trust in the participating judiciaries. EU primary law refers to this element in a more general way in that it considers itself to be based on „the rule of law“ and also „justice“. Article 2 TEU tells us: „The Union is founded on the values of (…) the rule of law (…). These values are common to the Member States in a society in which „(…) justice (…) prevail.“ Subparagraph 2 of the Preamble of the EU Charter of Fundamental Rights, recognized by the EU as integral part of the Union’s foundational principles in Article 6 (1) TEU, confirms: „Conscious of its spiritual and moral heritage, the Union (…) is based on (…) the rule of law. It places the individual at the heart of its activities, by (…) by creating an area of freedom, security and justice“. Article 47 of the EU Charter of Fundamental Rights guarantees the right to an effective remedy and to a fair trial when EU law is „implemented“ in the sense of Article 51 of the Charter, as does Article 6(1) European Convention on Human Rights generally.

The Area of Freedom, Security and Justice has indeed become a primary objective of the EU. According to Article 3 (1) TEU, „[t]he Union’s aim is to promote peace, its values and the well-being of its peoples.“ Article 3 (2) TEU further spells out these objectives: „The Union shall offer its citizens an area of freedom, security and justice without internal frontiers, in which the free movement of persons is ensured in conjunction with appropriate measures with respect to external border controls, asylum, immigration and the prevention and combating of crime“. Only in the following subparagraph, in Article 3 (2) Sentence 1 TEU, the original objective of the EU is listed: „The Union shall establish an internal market“.

II. No „blind trust“ anymore

Based on these fundaments, the CJEU, in its Opinion Opinion 2/13 of 18 December 2014, paras 191 and 192, against the EU’s accession to the European Convention on Human Rights, explained: “[t]he principle of mutual trust between the Member States is of fundamental importance in EU law (…). That principle requires (…) to consider all the other Member States to be complying with EU law and particularly with the fundamental rights recognised by EU law (…). Thus, when implementing EU law, the Member States may, under EU law, be required to presume that fundamental rights have been observed by the other Member States, so that not only may they not demand a higher level of national protection of fundamental rights from another Member State than that provided by EU law, but, save in exceptional cases, they may not check whether that other Member State has actually, in a specific case, observed the fundamental rights guaranteed by the EU”. Hence, the Court concluded, at para. 194, that “[i]n so far as the ECHR would, in requiring the EU and the Member States to be considered Contracting Parties not only in their relations with Contracting Parties which are not Member States of the EU but also in their relations with each other, including where such relations are governed by EU law, require a Member State to check that another Member State has observed fundamental rights, even though EU law imposes an obligation of mutual trust between those Member States, accession is liable to upset the underlying balance of the EU and undermine the autonomy of EU law”. This is why (inter alia) the CJEU held that the accession of the EU to the ECHR would be inadmissible – based on the promise in Article 19(1) Sentences 2 and 3 TEU: „[The CJEU] shall ensure that in the interpretation and application of the Treaties the law is observed. Member States shall provide remedies sufficient to ensure effective legal protection in the fields covered by Union law.“ When it comes to judicial cooperation, these Member States are primarily the Member States of origin, rather than the Member States of destination, unless „systemtic deficiencies“ in the Member States of origin occur.

It did not come as a surprise that the European Court of Human Rights rejected the claim made by the European Court of Justice that mutual trust trumps human rights: In Avoti?š v. Latvia (ECtHR, judgment of 23 May 2016, Application no. 17502/07), the applicant was defendant in civil default proceedings in Cyprus. The successful claimant sought to get this judgment recognized and enforced in Latvia against the applicant under the Brussels I Regulation. The applicant argued that he had not been properly served with process in the proceedings in Cyprus and hence argued that recognition must be denied according to Article 34 no. 2 Brussels I Regulation. The Latvian courts nevertheless granted recognition and enforcement. Thereupon, the applicant lodged a complaint against Latvia for violating Article 6 (1) ECHR. The ECHR observed, at paras. 113 and 114:

„[T]he Brussels I Regulation is based in part on mutual-recognition mechanisms which themselves are founded on the principle of mutual trust between the member States of the European Union. (…). The Court is mindful of the importance of the mutual-recognition mechanisms for the construction of the area of freedom, security and justice referred to in Article 67 of the TFEU, and of the mutual trust which they require. (…). Nevertheless, the methods used to create that area must not infringe the fundamental rights of the persons affected by the resulting mechanisms (…)“.

The Court further held, in direct response to Opinion 2/13 of the ECJ that „[l]imiting to exceptional cases the power of the State in which recognition is sought to review the observance of fundamental rights by the State of origin of the judgment could, in practice, run counter to the requirement imposed by the Convention according to which the court in the State addressed must at least be empowered to conduct a review commensurate with the gravity of any serious allegation of a violation of fundamental rights in the State of origin, in order to ensure that the protection of those rights is not manifestly deficient“.

Thus, a court must, under all circumstances, even within the scope of the „Bosphorus presumption“ (European Court of Human Rights, judgment of 30 June 2005 – Bosphorus Hava Yollar? Turizm ve Ticaret Anonim ?irketi v. Ireland [GC], no. 45036/98, paras. 160-65, ECHR 2005?VI), „[v]erify that the principle of mutual recognition is not applied automatically and mechanically to the detriment of fundamental rights – which, the CJEU has also stressed, must be observed in this context. In this spirit, where the courts of a State which is both a Contracting Party to the Convention and a member State of the European Union are called upon to apply a mutual-recognition mechanism established by EU law, they must give full effect to that mechanism where the protection of Convention rights cannot be considered manifestly deficient. However, if a serious and substantiated complaint is raised before them to the effect that the protection of a Convention right has been manifestly deficient and that this situation cannot be remedied by European Union law, they cannot refrain from examining that complaint on the sole ground that they are applying EU law“. To cut it short: mutual trust does not (fully) trump human rights – “no blind trust” (Koen Lenaerts, La vie après l’avis: Exploring the principle of mutual (yet not blind) trust, Common Market Law Review 54 (2017), pp. 805 et seq.).

III. What does this mean, if a Member State (Poland) undermines the independence of its judiciary?

This question has been on the table ever since Poland started “reforming” its judiciary, first by changing the maximum age of the judges at the Polish Supreme Court and other courts during running appointments, thereby violating against the principle of irremovability of judges. The Polish law („Artyku?i 37 i 111 ust?p 1 of the Ustawa o S?dzie Najwy?szym [Law on the Supreme Court] of 8 December 2017 [Dz. U. of 2018, heading 5]) entered into force on 3 April 2018, underwent a number of amendments (e.g. Dz. U. of 2018, heading 848 and heading 1045), before it was ultimately set aside (Dz. U. of 2018, heading 2507). The CJEU declared it to infringe Article 19 (1) TEU in its judgment of 24 June 2019, C- 619/18 – Commission v. Poland. The Court rightly observed, in paras. 42 et seq.: “[t]he European Union is composed of States which have freely and voluntarily committed themselves to the common values referred to in Article 2 TEU, which respect those values and which undertake to promote them, EU law being based on the fundamental premiss that each Member State shares with all the other Member States, and recognises that those Member States share with it, those same values. That premiss both entails and justifies the existence of mutual trust between the Member States and, in particular, their courts that those values upon which the European Union is founded, including the rule of law, will be recognised, and therefore that the EU law that implements those values will be respected“. Indeed, the principle of irremovability is one central aspect of judicial independence; see e.g. Matthias Weller, Europäische Mindeststandards für Spruchkörper: Zur richterlichen Unabhängigkeit, in Christoph Althammer/Matthias Weller, Europäische Mindeststandards für Spruchkörper, Tübingen 2017, pp. 3 et seq.). Later, and perhaps even more worrying, further steps of the justice “reform” subjected judgments to a disciplinary control by political government authorities, see CJEU, Ordonnance de la Cour (grande chambre), 8 avril 2020, C?791/19 R (not yet available in English; for an English summary see the Press Release of the Court). The European Court of Human Rights is currently stepping in – late, but may be not yet too late. The first communications about filings of cases concerning the independence of Poland’s judiciary came up only in 2019. For an overview of these cases and comments see e.g. Adam Bodnar, Commissioner for Human Rights of the Republic of Poland and Professor at the University of the Social Sciences and Humanities in Warsaw, Strasbourg Steps in, Verfassungsblog, 7 July 2020.

IV. What are the other Member States doing?

     1. The Netherlands: Suspending cooperation

One of the latest reactions comes from the Netherlands in the context of judicial cooperation in criminal matters, namely in respect to the execution of a European Arrest Warrant under Council Framework Decision of 13 June 2002 on the European arrest warrant and the surrender procedures between Member States. In two rulings of 24 March and one of 26 March 2020 (ECLI:NL:RBAMS:2020:1896, 24 March 2020; ECLI:NL:RBAMS:2020:1931, 24 March 2020; ECLI:NL:RBAMS:2020:2008, 26 March 2020) the Rechtbank Amsterdam stopped judicial cooperation under this instrument and ordered the prosecutor and the defence to take the entering into force of the latest judicial reforms in Poland into account before deciding to transfer a person to Poland. For a comment on this case line see Petra Bárd, John Morijn, Domestic Courts Pushing for a Workable Test to Protect the Rule of Law in the EU Decoding the Amsterdam and Karlsruhe Courts’ post-LM Rulings (Part II). Marta Requejo Isidro, on the EAPIL’s blog yesterday, rightly asked the question what a decision to reject judicial cooperation in criminal matters would mean in relation to civil matters. For myself, the answer is clear: if the fundaments for mutual trust are substantially put into question (see above on the ongoing actions by the Commission and the proceedings before the CJEU since 2016 – for a summary see here), the Member States may and must react themselves, e.g. by broadening the scope and lowering the standards of proof for public policy violations, see Matthias Weller, Mutual Trust: In search of the future of European Private International Law, Journal of Private International Law 2015, pp. 65, at pp. 99 et seq.).

       2. Germany: Pushing standards beyond reasonable degrees

Against these dramatic developments, the decision of the Regional Court of Erfurt, Germany, of 15 June 2020, Case C-276/20, for a preliminary reference about the independence of German judges appears somewhat suprising. After referring a question of interpretation of EU law in relation to the VW Diesel scandal, the referring court added the further, and unrelated question: „Is the referring court an independent and impartial court or tribunal for the purpose of Article 267 TFEU, read in conjunction with the third sentence of Article 19(1) TEU and Article 47(2) of the Charter of Fundamental Rights of the European Union?“ The referring court criticizes blurring lines between the executive and the judiciary – which is the very issue in Poland. It explained:

„The referring court, a civil court in the Thuringia region of Germany, shares the concerns and doubts of the Verwaltungsgericht Wiesbaden (Administrative Court, Wiesbaden, Germany) as to the institutional independence of the German courts and their right of reference pursuant to Article 267 TFEU … . The court refers to the question referred by the Administrative Court, Wiesbaden, on 28 March 2019 and the proceedings pending before the Court of Justice of the European Union (… C-272/19 …). (…). According to the [CJEU’s] settled case-law, a court must be able to exercise its functions wholly autonomously, without being subject to any hierarchical constraint or subordinated to any other body and without taking orders or instructions from any source whatsoever (see judgment of 16 February 2017, C-503/15, paragraph 36 et seq.). Only then are judges protected from external intervention or pressure liable to jeopardise their independence and influence their decisions. Only that can dispel any reasonable doubt in the mind of an individual seeking justice as to the imperviousness of the courts to external factors and their neutrality with respect to the conflicting interests before them.

The national constitutional situation in Germany and in Thuringia does not meet those standards (see, with regard to the lack of independence of the German prosecution service, judgment of 27 May 2019, C-508/18). It only recognises a functional judicial independence in the key area of judicial activity, which is a personal independence. However, that is not sufficient to protect judges from all forms of external influence. The additional institutional independence of the courts required for that is by no means guaranteed. However, the independence of individual judges is guaranteed by the independence of the judiciary as a whole.

In Thuringia, as in every other federal state in Germany, the executive is responsible for the organisation and administration of the courts and manages their staff and resources. The Ministries of Justice decide on the permanent posts and the number of judges in a court and on the resources of the courts. In addition, judges are appointed and promoted by the Ministers for Justice. The underlying assessment of judges is the responsibility of the ministries and presiding judges who, aside from any judicial activity of their own, must be regarded as part of the executive. The Ministers for Justice and the presiding judges who rank below them administratively and are bound by their instructions act in practice as gatekeepers. In addition, the presiding judges exercise administrative supervision over all judges.

The formal and informal blurring of numerous functions and staff exchanges between the judiciary and the executive are also typical of Germany and Thuringia. For example, judges may be entrusted with acts of administration of the judiciary. The traditional practice of seconding judges to regional or federal ministries is one particular cause for concern. Seconded judges are often integrated into the ministerial hierarchy for years. It is also not unusual for them to switch back and forth between ministries and courts and even between the status of judge and the status of civil servant.

The judge sitting alone who referred the question has personally been seconded three times (twice to the Thuringia Ministry of Justice and once to the Thuringia State Chancellery).

This exchange of staff between the executive and the judiciary infringes both EU law and the Bangalore Principles of Judicial Conduct applied worldwide (see Commentary on the Bangalore Principles of Judicial Conduct, www.unodc.org, p. 36: ‘The movement back and forth between high-level executive and legislative positions and the judiciary promotes the very kind of blurring of functions that the concept of separation of powers intends to avoid.’).

Most importantly, these informal practices sometimes appear to be arbitrary. While the courts guarantee the absence of arbitrariness outwardly, informal practices may expose judges to the threat of arbitrariness and administrative decisionism. Inasmuch as ‘expression-of-interest’ procedures have been initiated recently, including in Thuringia, as awareness of the problem increases, for example on secondments and trial periods in higher courts or on the management of working groups for trainee lawyers, there is still no justiciability (enforceability).

All this gives the executive the facility to exert undue influence on the judiciary, including indirect, subtle and psychological influence. There is a real risk of ‘reward’ or ‘penalty’ for certain decision-making behaviours (see Bundesverfassungsgericht (Federal Constitutional Court, Germany) order of 22 March 2018, 2 BvR 780/16, … , paragraphs 57 and 59).”

The close interlock in Germany between the judiciary and the executive and the hierarchical structure and institutional dependence of the judiciary are rooted in the authoritarian state of 19th century Germany and in the Nazi principle of the ‘führer’. In terms of administrative supervision, the entire German judiciary is based on the president model (which under National Socialism was perverted and abused by applying the principle of the ‘führer’ to the courts … ).“

Although these submissions appear to go way over the top: mechanisms to incentivise (which inenvitable contain an aspect of indirect sanction) are well-justified in a judiciary supposed to function within reasonable time limits. Comparing the voluntary (!) temporary placement of judges in justice ministries or other positions of the government (or, as is regularly the case, in EU institutions), while keeping a life-time tenure under all circumstances (!) can hardly be compared or put into context with methods of the Nazi regime at the time whereas cutting down currently running periods of judges and disciplinary sanctions in relation to the contents and results of judgments evidently and clearly violate firmly established principles of judicial independence, as well as a direct influence of the government on who is called to which bench. Yet, the German reference illustrates how sensitive the matter of judicial independence is being taken in some Member States– and how far apart the positions within the Member States are. It will be a delicate task of the EU to come to terms with these fundamentally different approaches within the operation of its systems of mutual recognition based on mutual trust. Clear guidance is needed by the CJEU in the judicial dialogue between Luxemburg and the national courts. One recommendation put on the table is to re-include the Member States in its trust management, i.e. the control of compliance with the fundaments of judicial cooperation accordingly; concretely: to re-allow second and additional reviews by the courts of the receiving Member States in respect to judicial acts of a Member State against which the EU has started proceedings for violation of the rule of law in respect to the independence of its judiciary.

The European Law Institute informs us that the ELI-UNIDROIT Model European Rules of Civil Procedure were approved by the ELI bodies on 15 July and 5 August 2020. The UNIDROIT Governing Council will vote upon the Model European Rules of Civil Procedure soon at its meeting on 23–25 September 2020.

if adopted as wll there, the ELI/UNIDROIT Rules may contribute harmonising the national procedural rules of the EU Member States and as such broaden the basis for mutual trust in the Member States’ judicial cooperation in civil matters. The Rules may be taken as a kind of minimum standard or best practice, as the case may be in the respective issue in question, and the more a national rule of civil procedure deviates from these standards, the more justifications and explanations are invited, if not expected (see e.g. Matthias Weller, in Matthias Weller/Christoph Althammer, Mindeststandards im europäischen Zivilprozessrecht – Grundvoraussetzung für gegenseitiges Vertrauen, Mohr Siebeck, Tübingen 2015, Vorwort, p. VI, comparing this mechanism to some extent with the control of standard terms).

The full text of the ELI announcement and further information can be found here.

Traxys Europe SA v Sodexmines Nigeria Ltd [2020] EWHC 2195 (Comm)  concerns the alleged dishonest substitution by Sodexmines Nigeria Limited in Nigeria in 2018 of a virtually worthless product in place of a valuable tin product which it had agreed (with choice of court and law pro England) to sell to the Claimant, Traxys Europe SA.  Second defendant is the beneficial owner and alter ego of the First Defendant (note at 31 Teare J’s insistence that they are legally separate and distinct persons). Permission to serve Mr. Ali out of the jurisdiction was granted on the basis that he was a necessary and proper party to the claim against First Defendant and that England is the proper place in which to bring the claim.

Mr Ali has applied for a stay (oddly not: an application to set aside the service order) on forum non conveniens grounds, which would ordinarily per Lord Goff in Spiliada (see discussion at 9 ff) with Teare J here at 11 holding he

‘should have regard to the substance of the matter, namely, that this is a case where the Claimant was not entitled to commence proceedings against Mr. Ali “as of right” (the expression used by Lord Goff at p.481 E) but needed to persuade the court, not only that there was a jurisdictional gateway permitting service out, but also that England was the forum conveniens for the claim against Mr. Ali. Thus, notwithstanding that as a matter of form and language Mr. Ali is seeking a stay, I consider that once battle lines were drawn as to whether England was the forum conveniens the burden lay on the Claimant to establish that England was the forum conveniens.’

At 16-17 arguments for both are listed, summarily discussed (per Lord Briggs’ instruction in Vedanta) with conclusion at 38

the claim against him lies in tort. The events which have given rise to those claims took place (in the main) in Nigeria. The witnesses upon whom the Claimant will rely to establish their claim against Mr. Ali are in Nigeria. In truth this is a Nigerian case, not an English case. The centre of gravity of the case is in Nigeria, not in England. To use the phrase used in one of the cases to which I was referred “the fundamental focus of the litigation” is on Nigeria, not England.

Of note is that the contractual and in all likelihood tort case against the first defendant will go ahead. I am not au fait whether leave to appeal was granted. On burden of proof, Teare J’s findings are quite relevant and must be I imagine subject to differences of view.

Geert.

Vesna Rijavec, Katja Drnovsek, C.H. van Rhee have edited Cross-border enforcement in Europe: national and international perspectives, published by Intersentia.

The volume addresses the enforcement of judgments and other authentic instruments in a European cross-border context, as well as enforcement in a selection of national European jurisdictions. The volume is divided into two parts. Part I on ‘Cross-border Enforcement in Europe’ opens with a contribution comparing the European approach in Brussels I Recast with the US experience of enforcement in the context of judicial federalism. This is followed by two contributions concentrating on aspects of Brussels I Recast, specifically the abolition of exequatur and the grounds for refusal of foreign judgments (public order and conflicting decisions). The two concluding texts in this part deal with the cross-border enforcement of notarial deeds and the sister regulation of Brussels I Recast, Brussels II bis (jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility). Part II is devoted to aspects of (cross-border) enforcement in a selection of European states (Poland, the Czech Republic, the Netherlands, Slovenia and the Republic of North Macedonia). The topics discussed include the authorities entrusted with enforcement, judicial assistance and the national rules relevant from the perspective of Brussels I Recast. 

The book’s table of contents can be found here. See here for further information.

 

Holidays are over, it is time for all the services of the Court to resume full activity.

As regards private international law, September 2020 will start with the delivery, on Thursday 3, of the 1st Chamber (Bonichot, Safjan, Bay Larsen, Toader, Jääskinen) judgment in C-186/19, Supreme Site Services e.a.: a request for a preliminary ruling from the Netherlands on the
interpretation of Article 1(1), and Article 24(5) of the Brussels I bis Regulation.

The request was made in the course of an application brought by an international organisation for the adoption of interim measures to lift an interim garnishee order levied on an escrow account by his opponent. In support of its action, the organisation had relied on immunity from execution under international law. The referring court’s doubts on Article 1(1) of Brussels I bis stem from that fact.

AG Oe’s Opinion was delivered on 2 April 2020 (see here). He was asked to address only the questions on Article 1(1) of the Regulation.

On the same day, an order is expected in C-98/20, mBank, on Article 17(1)(c) and Article 18(2) of the same Brussels I bis Regulation. The request was referred by the Obvodní soud pro Prahu 8 (Czech Republic), who had doubts about the relevant date of domicile for the consumer section to apply.

On Thursday 10, AG Oe will deliver his Opinion on C-59/19,Wikingerhof. The request, from the Bundesgerichtshof, addresses the divide between Article 7(1) and (2) of the Brussels I bis Regulation. The question reads:

‘Is Article 7(2) … to be interpreted as meaning that jurisdiction for matters relating to tort or delict exists in respect of an action seeking an injunction against specific practices if it is possible that the conduct complained of is covered by contractual provisions, but the applicant asserts that those provisions are based on an abuse of a dominant position on the part of the defendant?’

It actually looks as a follow up to Brogsitter (C-548/12), except that this time the Grand Chamber will decide (Lenaerts, Silva de Lapuerta, Bonichot, Arabadjiev, Prechal, Safjan, Rodin, Xuereb, Rossi, von Danwitz, Toader, Šváby, Jürimäe, Lycourgos, Piçarra), and an AG’s Opinion has been deemed necessary.

On the same day, a hearing will take place on case C-709/19, Vereniging van Effectenbezitters: again a preliminary reference from the Netherlands, this time in relation to Article 7(2) of Brussels I bis, going to the core of the ‘holistic approach’. The Dutch referred four (de facto, five) questions to the CJEU:

‘1.   (a)   Should Article 7(2) … be interpreted as meaning that the direct occurrence of purely financial damage to an investment account in the Netherlands or to an investment account of a bank and/or investment firm established in the Netherlands, damage which is the result of investment decisions influenced by globally distributed but incorrect, incomplete and misleading information from an international listed company, constitutes a sufficient connecting factor for the international jurisdiction of the Netherlands courts by virtue of the location of the occurrence of the damage (‘Erfolgsort’)?

(b)   If not, are additional circumstances required to justify the jurisdiction of the Netherlands courts and what are those circumstances? Are the additional circumstances referred to [in point 4.2.2. of the request for a preliminary ruling] sufficient to found the jurisdiction of the Netherlands courts?

2. Would the answer to Question 1 be different in the case of a claim brought under Article 3:305a of the BW (Burgerlijk Wetboek: Netherlands Civil Code) by an association the purpose of which is to defend, in its own right, the collective interests of investors who have suffered damage as referred to in Question 1, which means, among other things, that neither the places of domicile of the aforementioned investors, nor the special circumstances of individual purchase transactions or of individual decisions not to sell shares which were already held, have been established?
3. If courts in the Netherlands have jurisdiction on the basis of Article 7(2) of the Brussels Ia Regulation to hear the claim brought under Article 3:305a of the BW, do those courts then, on the basis of Article 7(2) of the Brussels Ia Regulation, also have international and internal territorial jurisdiction to hear all subsequent individual claims for compensation brought by investors who have suffered damage as referred to in Question 1?
4. If courts in the Netherlands as referred to in Question 3 above have international, but not internal, territorial jurisdiction to hear all individual claims for compensation brought by investors who have suffered damage as referred to in Question 1, will the internal territorial jurisdiction be determined on the basis of the place of domicile of the misled investor, the place of establishment of the bank in which that investor holds his or her personal bank account or the place of establishment of the bank in which the investment account is held, or on the basis of some other connecting factor?’

In the light of the facts of the case (summary here), some of them might be declared inadmissible, though. The reference has been assigned to the 1st Chamber (Bonichot, Safjan, Bay Larsen, Toader, Jääskinen), with Judge Safjan as reporting judge. Mr. Campos Sánchez-Bordona is the designated AG.

One week later the 1st Chamber will read the judgments in C-540/19, Landkreis Harburg (Subrogation d’un organisme public au créancier d’aliments), on the Maintenance Regulation. AG Sánchez-Bordona’s Opinion was published on 18 June 2020 (see here). The question referred reads

‘Can a public body which has provided a maintenance creditor with social assistance benefits in accordance with provisions of public law invoke the place of jurisdiction at the place of habitual residence of the maintenance creditor under Article 3(b) of the European Maintenance Regulation  in the case where it asserts the maintenance creditor’s maintenance claim under civil law, transferred to it on the basis of the granting of social assistance by way of statutory subrogation, against the maintenance debtor by way of recourse?’.

The judgment corresponds to the 3rd Chamber (Prechal, Lenaerts, Rossi, Biltgen, Wahl), with Ms. Rossi as reporting judge.

Albeit not directly on PIL issues: several hearings will take place in relation to the independence of the judiciary in Poland. AG Bobek will publish as well his Opinion on several cases regarding Romania, also connected to the independence of judges.

Recently, a (widely reported in the media) request for a PPU has been filed by the Rechtbank Amsterdam under Council Framework Decision 2002/584/JHA; thr underlying question is whether (all) Polish judges do still qualify as such for the purposes of the Framework Decision. If they don’t: should a similar conclusion apply to civil cooperation matters?

It is not per se unheard of for European conflict of laws developments to be referred to in other jurisdictions. In Bauer v QBE Insurance [2020] WADC 104 however the intensity of reference to CJEU authority and EU conflicts law is striking and I think interesting to report.

The context is an application to serve out of jurisdiction – no ‘mini trail’ (Melville PR at 20) therefore but still a consideration of whether Western Australia is ‘clearly an inappropriate forum’ in a case relating to an accident in Australia following an Australian holiday contract, agreed between a German travel agent and a claimant resident (see also below) in Germany but also often present in Australia – which is where she was at the time the contract was formed. Defendant contests permission to serve ia on the basis of an (arguable) choice of court and governing law clause referring exclusively to Germany and contained in defendant’s general terms and conditions.

Two other defendants are domiciled in Australia and are not discussed in current findings.

In assessing whether the German courts have exclusive jurisdiction and would apply German law, the Australian judge looks exclusively through a German lens: what would a German court hold, on the basis of EU private international law.

Discussion first turns to the lex contractus and the habitual residence, or not, of claimant (who concedes she is ‘ordinarily’, but not habitually resident in Germany) with reference to Article 6 Rome I’s provision for consumer contracts. This is applicable presumably despite the carve-out for ‘contracts of carriage’ (on which see Weco Projects), seeing as the contract is one of ‘package travel’. Reference is also then made to Winrow v Hemphill.  Melville PR holds that claimant’s habitual residence is indeed Germany particularly seeing as (at 38)

she returned to Germany for what appears to be significant and prolonged  treatment after the accident rather going elsewhere in the world and after only apparently having left her employment in Munich in 2014, is highly indicative of the fact the plaintiff’s state of mind was such that she saw Germany as her home and the place to return to when things get tough, a place to go to by force of habit.

Discussion then turns to what Michiel Poesen has recently discussed viz contracts of employment: qualification problems between contract and tort. No detail of the accident is given (see my remark re ‘mini-trial’ above). Reference to and discussion is of Rome II’s Article 4. It leads to the cautious (again: this is an interlocutory judgment) conclusion that even though the tort per Article 4(3) Rome II may be more closely connected to Australia, it is not ‘manifestly’ so.

Next the discussion gets a bit muddled. Turning to jurisdiction, it is concluded that the exclusive choice of court is not valid per Article 25 Brussels Ia’s reference to the lex fori prorogati.

• Odd is first that under the lex contractus discussion, reference is made to Article 6 Rome I which as I suggested above presumably applies given that the carve-out for contracts of carriage does not apply to what I presume to be package travel. However in the Brussels Ia discussion the same applies: contracts of carriage are excluded from Section 4’s ‘consumer contracts’ unless they concern (as here) package travel.
• Next, the choice of court is held to be invalid by reference to section 38(3) of the German CPR, which to my knowledge concerns choice of court in the event neither party has ‘Gerichtsstand’ (a place of jurisdiction’) in Germany.  Whatever the precise meaning of s38(3), I would have thought it has no calling as lex fori prorogati viz A25 BIa for it deals with conditions which A25 itself exhaustively harmonises (this argument might be aligned with that of defendant’s expert, Dr Kobras, at 57). Moreover,  the discussion here looks like it employs circular reasoning: in holding on the validity of a ‘Gerichtsstand’, the court employs a rule which applies when there is no such ‘Gerichtsstand’.
• Finally, references to CJEU Owusu and Taser are held to be immaterial.

In final conclusion, Western Australia is not held to be a clearly inappropriate forum. The case can go ahead lest of course these findings are appealed.

Geert.

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

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

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

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

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

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

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

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

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

Geert.

 

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

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

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

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

Bilateral Treaties

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

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

Parallel Divorce Proceedings

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

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

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

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

Nationality Requirement in Bilateral Treaties?

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

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

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

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

Useless Appeals

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

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

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

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

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

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

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

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

More details on this case can be found here.

Gilles Cuniberti (University of Luxembourg) and Manuel Segovia (European Law Institute, formerly University of Monterrey) will soon publish an empirical study of choice of law in Latin American arbitration in the THEMIS-Revista de Derecho (Choice of law in Latin American arbitration: Some Empirical Evidence and Reflections on the Latin American Market for Contract).

The abstract reads as follows:

The aim of this Article is to assess the preferences of parties to Latin American international business transactions when they choose the law governing their contracts. For that purpose, we have conducted an empirical analysis of data that we were able to gather from arbitral institutions active in Latin America, with a focus on years 2011 and 2012. We then offer some reflections on the results and assess whether they can be explained by the territorial approach of choice of law in Latin America, the importance of the United States as a trading partner for Latin American countries and the extent to which Anglo-American lawyers are present on Latin American markets.

The Article is a follow-up of similar studies conducted by G. Cuniberti, including one on Choice of Law in Asian Arbitration.

On Tuesday, Sep 1, the Hamburg Max Planck Institute will host its third monthly virtual workshop in private international law, again in German. Giesela Rühl (Jena, soon Humboldt University Berlin) will speak in German about private international law and comparative law aspects of distribution chains, followed by open discussion. All are welcome. More information and sign-up here.

In Weco Projects APS v Piana & Ors [2020] EWHC 2150 (Comm),  Hancock J held on a case involving Brussel Ia’s consumer title, including the notion of contract of ‘transport’, Article 25’s choice of court regime, and anchor jurisdiction under Article 8(1) BIa.

The facts of the case are complex if not necessarily complicated. However the presence of a variety of parties in the chain of events led to litigation across the EU. Most suited therefore to be, as WordPress tell me, the 1000th post on the blog.

For the chain of events, reference is best made to the judgment itself. In short, a Yacht booking note, with choice of court and choice of law was made for the Yacht to be carried from Antigua to Genoa. Reference was also made to more or less identical standard terms of a relevant trade association. A clause was later agreed with the identity of the preferred Vessel to carry out the transfer, followed by subcontracting by way of a Waybill.

The Yacht was lost at sea. Various proceedings were started in Milan (seized first), Genoa and England.

At 21, Hancock J first holds obiter that express clauses in the contract have preference over incorporated ones (these referred to the trade association’s model contract), including for choice of court. Readers will probably be aware that  for choice of law, Rome I has a contested provision on ‘incorporation by reference’, although there is no such provision in BIa.

Next comes the issue of lis alibi pendens. Of particular note viz A31(2) [‘Without prejudice to Article 26, where a court of a Member State on which an agreement as referred to in Article 25 confers exclusive jurisdiction is seised, any court of another Member State shall stay the proceedings until such time as the court seised on the basis of the agreement declares that it has no jurisdiction under the agreement’] is the presence of two prima facie valid but competing exclusive choice of court agreements. Hancock J proceeds to discuss the validity of the English choice of court agreement in particular whether the businessman whose interest in sailing initiated the whole event, can be considered a consumer.

The judge begins by discussing whether the contract concerned is one of mere ‘transport’ which by virtue of A17(3) BIa rules out the consumer title all together. At 37 it is concluded that the contract is indeed one of transport and at 37(8) obiter that freight forwarding, too, is ‘transport’. Hancock J notes the limited use of CJEU authority, including Pammer /Alpenhof. In nearly all of the authority, the issue is whether the contracts at issue concerned more than just transport, ‘transport’ itself left largely undiscussed.

Obiter at 75, with reference to CJEU Gruber and Schrems, and also to Baker J in Ramona v Reliantco, Hancock J holds that Mr Piana had failed to show that the business use of the Yacht was merely negligible.

Following this conclusion the discussion turns to the impact of the UK’s implementation of the EU’s unfair terms in consumer contracts regulations, with counsel suggesting that the impact of these is debatable, in light of A25 BIa’s attempt at harmonising validity of choice of court. Readers will be aware that A25’s attempt at harmonisation is incomplete, given its deference to lex fori prorogati). Hancock J does not settle that issue, holding at 111 that in any event the clause is not unfair viz the UK rules.

Next follows the Article 8(1) discussion with reference to CJEU CDC and to the High Court in Media Saturn. Hancock J takes an unintensive approach to the various conditions: they need to be fulfilled without the court at the jurisdictional stage getting too intensively caught up in discussing the merits. At 139 he justifiably dismisses the suggestion that there is a separate criterion of foreseeability in A8(1). On whether the various claims for negative declaratory relief are ‘so closely connected’, he holds they are on the basis of the factuality of each being much the same and therefore best held by one court. Abuse of process, too, is ruled out per Kolomoisky and Vedanta: at 143: there is no abuse of process in bringing proceedings which are arguable for the purposes of founding jurisdiction over other parties.

(The judgment continues with extensive contractual review of parties hoping to rely on various choice of court provisions in the chain).

Quite an interesting set of Brussels Ia issues.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, big chunks of Chapter 2.

 

 

 

On 10 August 2020, the European Commission launched a public consultation on Regulation 805/2004 creating a European Enforcement Order for uncontested claims (“the EEO Regulation”).

The consultation is carried out in the framework of an ongoing evaluation of the EEO Regulation.

In this context, the European Commission “seeks opinions on how the Regulation is working, also with regard to the revised Brussels I Regulation (Regulation 1215/2012). It also aims to collect practical experiences with the EEO Regulation, and attitudes towards its use in the future”.

The consultation is open until 20 November 2020 (midnight Brussels time) and can be found here.

Applications are now open for three- to six-month legal internships at the HCCH Permanent Bureau in The Hague, for the period from January to June 2021.

Interns work with our legal teams in the areas of family & child protection law, legal cooperation, dispute resolution, commercial & financial law. It’s a great way to gain practical experience, deepen your knowledge of private international law, and to understand how the HCCH functions.

Due to the current global situation and the associated travel limitations and restrictions, the Permanent Bureau of the HCCH may consider the possibility that internships be carried out remotely. Interns may also be eligible for a monthly stipend.

We encourage you to share this opportunity with law students and graduates within your networks.

Applications close on 30 September 2020. For more information, please visit the Internships page of the HCCH website.

This post is published by the Permanent Bureau of the Hague Conference of Private International Law (HCCH). 

As reported in this blog, the CJEU gave on 9 July 2020 its long-awaited judgment in VKI v Volkswagen (Case C-343/19). It ruled that the buyers of VW cars equipped with emissions test defeat devices can sue the manufacturer at the place where they had purchased the cars.

This result, which is broadly in line with the conclusions of the Advocate General, was hardly surprising. Nevertheless, a number of questions remain.

Where is the “Place of Purchase”?

The first and most urgent of these is what the CJEU means by the “place of purchase”. The Austrian court that submitted the reference for a preliminary ruling had identified three different places that could meet this description: (1) the place where the contract to purchase  the cars had been concluded, (2) the place where the purchase price had been paid, and (3) the place where the transfer or delivery of the vehicles had taken place (see para 10 of the judgment). In the dispute at hand, all three places happened to be located in the same district, but this will not be the case universally. In cases where they are different, which of these three places is the CJEU referring to?

What is the Role of the Place of Marketing?

The second question relates to the extent to which competent court will be foreseeable. The CJEU reasoned that the manufacturer must have anticipated that damage will occur at the place of purchase, as it knowingly contravened the statutory requirements imposed on it at this location (para 37). But this place of damage is foreseeable only on the assumption that VW will always market the vehicles in the country of purchase. That the place of acquisition and the place of marketing can differ is illustrated by Article 5(1)(b) Rome II Regulation.

Proximity of Tribunal or Protection of Tort Victims?

Third, one may harbour doubts about the CJEU’s argument that the tribunal at the place of purchase is best placed to carry out the assessment of damage (para 38). Proximity and the sound administration of justice would rather have suggested concentrating all cases in the court of the place of the manufacturer. The Court passed in silence over the main justification for locating jurisdiction over the tort in Austria; namely, the advantage to the tort victims in sparing them and their assignee the need to bring their claims in the home jurisdiction of the manufacturer, i.e. in Germany.

Purely Financial Loss or Not?

Fourth, it is unclear why the CJEU spent so much effort diffusing the referring court’s idea that the damage was “purely financial”. The Court of Justice was at great pains to make clear that the present case concerns material damage because the buyers received a vehicle with a defect (paras 32-35). Yet it did not draw any conclusions from this characterisation; in particular, it did not locate the damage at the place where the car had been used or registered. Instead, the Court abstracted from the vehicles and referred to the place of purchase, where the only loss incurred was…ehm…financial.

Parallel to Unfair Competition?

Fifth, it is a mystery why the CJEU – in holding that the damage occurred at the place of purchase for the purposes of Article 7 no 2 Brussels I bis Regulation – drew an analogy to the rules on unfair competition in Article 6(1) Rome II Regulation (para 39). The present case was not about unfair competition. Instead, the claimant brought a number of damages claims for defective vehicles.

Similarly, the situation was also quite different from the case of VKI v Amazon to which the Court of Justice referred. In that case, VKI had claimed in its own right when it applied for an injunction to restrain the use of unfair contract terms under the national law transposing Directive 2009/22/EC; whereas in the present case, it now brought a number of individual claims that had been assigned to it. It is true that the CJEU had ruled in VKI v Amazon that collective and individual claims must be treated under the same law. Yet this statement was made in the context of the validity of standard contract terms; it does not nearly have the same force with regard to damages claims. Even under the Court of Justice’s own standard in the new VW case, the latter will be judged under different laws and by different courts, depending on the country in which the vehicles were purchased.

An Alternative Proposal

The place of purchase that the CJEU identifies as the place where the damage occurred may be fortuitous, is subject to possible manipulation, and can hardly be determined in the case of e-commerce. It would have been more convincing to take into account other circumstances, such as the place of habitual residence of the purchasers, the place where they used the vehicle, and the place of marketing, as already suggested in this blog. Advocate General Sánchez Bordona had also suggested a combination of the place of purchase and the place of marketing. Only a holistic approach can properly balance the interests of the claimant and the defendant.

Trevor Hartley (London School of Economics) has published the 3rd edition of his textbook on International Commercial Litigation.

The book combines extensive texts presenting the topics discussed and extracts from cases and legislative materials (European regulations, international conventions, national acts). It is a mix of a textbook and a casebook.

As its title suggests, the focus of the book is on international civil procedure. It presents in depth issues of jurisdiction and foreign jugdments, but also freezing assets and the taking of evidence abroad. As its title does not suggest, the last part of the book also covers choice of law, and offers an in depth treatment of choice of law in contracts, torts and property.

The book is remarkable by the comparative stance that it takes on all the topics that the covers. It systematically presents the position in the EU, in England and in the U.S. It also sometimes includes cases and materials from other common law jurisdictions such as Canada.

Taking a fresh and modern approach to the subject, this fully revised and restructured textbook provides everything necessary to gain a good understanding of international commercial litigation. Adopting a comparative stance, it provides extensive coverage of US and Commonwealth law, in addition to the core areas of English and EU law. Extracts from key cases and legislative acts are designed to meet the practical requirements of litigators as well as explaining the ideas behind legal provisions. Significant updates include coverage of new case-law from the Court of Justice of the European Union. Of particular importance has been a set of judgments on jurisdiction in tort for pure financial loss, many of which have involved investment loss. New case law from the English courts, including the Supreme Court, and from the Supreme Court of the United States, is also covered.

Early July the Dutch Supreme Court followed-up on CJEU C–535/17 NK v BNP Paribas Fortis re the Peeters /Gatzen suit – a judgment I covered here. Roel Verheyden has additional analysis of the SC ruling, in Dutch, here. The SC held that the Dutch courts do not have jurisdiction, identifying Belgium as the Erfolgort per CJEU Marinari and Kolassa. As Roel notes, the SC (other than its AG) attention to potential ‘specific factors’ suggesting The Netherlands as an Erfolgort, is underwhelming and may lead to a general conclusion that Dutch Insolvency practitioners applying the Peeters /Gatzen suit to foreign parties while have to sue these abroad – leading to potential issues in the governing law itself and a disappearance of Peeters /Gatzen altogether.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 5, Heading 5.4.1, Heading 5.7.

Erfolgsort bij Peeters/Gatzen-vordering

 

Mark C. Weidemaier (University of North Carolina School Law) and G. Mitu Gulati (Duke Law School) have posted Unlawfully-Issued Sovereign Debt on SSRN.

The abstract reads:

In 2016, its economy in shambles and looking to defer payment on its debts, the Venezuelan government of Nicolás Maduro proposed a multi-billion dollar debt swap to holders of bonds issued by the government’s crown jewel, state-owned oil company Petroleós de Venezuela S.A. (“PDVSA”). A new government now challenges that bond issuance, arguing it was unlawful under Venezuelan law. Bondholders counter that this does not matter—that PDVSA freed itself of any borrowing limits by agreeing to a choice-of-law clause designating New York law.

The dispute over the PDVSA 2020 bonds implicates a common problem. Sovereign nations borrow under constraints imposed by their own laws. Loans that violate these constraints may be deemed invalid. Does an international bond—i.e., one expressly made subject to the law of a different jurisdiction—protect investors against that risk? The answer depends on the text of the loan’s choice-of-law clause, as interpreted against the backdrop of the forum’s rules for resolving conflict of laws problems.

We show that the choice-of-law clauses in many international sovereign bonds—especially when issued under New York law—use language that may expose investors to greater risk. We document the frequent use of “carve outs” that could be interpreted to require the application of the sovereign’s local law to a wide range of issues. If interpreted in this way, these clauses materially reduce the protection ostensibly offered by an international bond. We explain why we think a narrower interpretation is more appropriate.

Written by Mayela Celis – The comments below are based on the author’s doctoral thesis entitled “The Child Abduction Convention – four decades of evolutive interpretation” at UNED (forthcoming)

As indicated in a previous post, the comments on the HCCH Guide to Good Practice on the grave-risk exception (Art. 13(1)(b)) under the Child Abduction Convention (subsequently, Guide to Good Practice or Guide) will be divided into two posts. In a previous post, I analysed the Guide exclusively through the lens of human rights. In the present post, I will comment on some specific legal issues of the Guide but will also touch upon on some aspects of human rights law.

Please refer to Part I. All the caveats mentioned in that post also apply here.

The Guide to Good Practice is available here.

I would like to touch upon three topics in this post: 1) the examples of assertions that can be raised under Article 13(1)(b) and their categorisation; 2) measures of protection and 3) domestic violence.

1) One of the great accomplishments of the Guide to Good Practice is the categorisation of the examples of assertions that can be raised under Article 13(1)(b) of the Child Abduction Convention. While at first sight the categorisation may appear to be too simplistic, it is very well thought through and encompasses a wide range of scenarios.

I include below the assertions as stated in the Guide:

Examples of assertions that can be raised under Article 13(1)(b)
a. Domestic violence against the child and / or the taking parent
b. Economic or developmental disadvantages to the child upon return
c. Risks associated with circumstances in the State of habitual residence
d. Risks associated with the child’s health
e. The child’s separation from the taking parent, where the taking parent would be unable or unwilling to return to the State of habitual residence of the child
    i. Criminal prosecution against the taking parent in the State of habitual residence of the child due to wrongful removal or retention
    ii. Immigration issues faced by the taking parent
    iii. Lack of effective access to justice in the State of habitual residence
    iv. Medical or family reasons concerning the taking parent
    v. Unequivocal refusal to return
f. Separation from the child’s sibling(s)

Nevertheless, while this categorisation is very comprehensive, there are a few matters that are mentioned only very briefly in the Guide and could have benefited from a more in-depth discussion. One of them is the extensive case law on what constitutes “zone of war” or a place where there is conflict. See footnotes 88 and 89 of the Guide under the heading c. Risks associated with circumstances in the State of habitual residence.

Perhaps due to political sensitivities, it would be hard to pinpoint in the Guide jurisdictions that have been discussed by the courts as possibly being a “zone of war”. Among these are Israel (most of the case law), Monterrey (Mexico – during the war on drugs) and Venezuela. See for example: Silverman v. Silverman, 338 F.3d 886 (8th Cir. 2003) [INCADAT reference: HC/E/USf 530] (United States); Kilah v. Director-General, Department of Community Services [2008] FamCAFC 81 [INCADAT reference: HC/E/AU 995] (Australia) and other references in footnotes 88 and 89 of the Guide.

Some of course may argue that “zone of war” is a gloss on the Convention and that as such it should not be analysed. However, one may also describe such situations without labelling them as “zone of war”, such as a State where there is conflict, be it military, social, political, etc. Perhaps this could have been expanded under the heading c. Risks associated with circumstances in the State of habitual residence of the Guide referred to above.

While the “zone of war” exception has hardly been successful, it would have been beneficial to discuss some of the arguments set forth by the parties such as: the fluctuation of violence throughout the years, terrorist attacks, a negative travel advice by a government concerning the State of habitual residence of the child, the specific place where the family lives and the risks of terrorism, the violence of drug cartels, and the fact of being a political refugee in the State where the child was abducted. The negative travel advice is particularly apposite to our times of Covid-19 as that would have given some guidance to the courts.

Another assertion made under Article 13(1)(b) of the Child Abduction Convention that could have been analysed in more depth by the Guide – perhaps under a. Domestic violence against the child and/or the taking parent – is the sexual abuse of children. The Guide includes very brief references to sexual abuse in the glossary, paragraphs 38 and 57, and footnote 76.

Undoubtedly, sexual abuse is a terrible and unbearable experience for children but it is still a taboo to single out this topic, let alone explain the current trends existing in the case law when this issue has been raised. Nevertheless, from my research there seems to be a very clear distinction in the case law: when the sexual abuse has been raised in the State of habitual residence and no action or insufficient action was taken by such authorities, and there is evidence of sexual abuse, the State where the child has been abducted tends to reject the return of the child to his or her State of habitual residence. In cases where this is not the case, the child is ordered back to the State of habitual residence, often with measures of protection. See for example: the multiple-layered decisions in the case of Danaipour v. McLarey, see for example the decision Danaipour v. McLarey, 386 F.3d 289 (1st Cir. 2004) [INCADAT reference: HC/E/USf 597] (United States). This brings us to:

2) The second topic of this post: measures of protection (also referred to as protective measures). The paragraphs dedicated to this topic in the Guide are 43-48. The Guide is absolutely at the forefront of the latest developments and social research on the effectiveness of measures of protection. It has answered the call of many professors/scholars and practitioners, who have cautioned about the indiscriminate use of measures of protection, in particular of undertakings, when the person causing the violence is known to infringe orders and not to heed the warnings of the courts. The Guide is to be commended for this great step forward.

The Guide defines undertakings as follows: “an undertaking is a voluntary promise, commitment or assurance given by a natural person – in general, the left-behind parent – to a court to do, or not to do, certain things. Courts in certain jurisdictions will accept, or even require, undertakings from the left-behind parent in relation to the return of a child. An undertaking formally given to a court in the requested jurisdiction in the context of return proceedings may or may not be enforceable in the State to which the child will be returned.” Because undertakings are a voluntary promise, their enforcement is fraught with problems, especially if the left-behind parent refuses to comply once the child has been returned. Where the primary carer (usually the mother) returns with the child to a “domestic violence” situation and it is not possible to enforce undertakings, both the mother and the child may be subject to a grave risk of harm. For more information, see Taryn Lindhorst, Jeffrey L. Edleson. Battered Women, Their Children, and International Law: The Unintended Consequences of the Hague Child Abduction Convention (Boston: Northeastern University Press, 2012). This leads us to:

3) The third topic of this post: domestic violence. Many claim that domestic violence is a human rights violation. In a wider context, there is indeed a correlation between domestic violence and human rights and this has been recognised by resolutions of the United Nations Committee on the Elimination of Discrimination against Women (CEDAW) and the judgment of the European Court of Human Rights. See for example AT (Ms) v. Hungary, (Decision) CEDAW Committee and Opuz v. Turkey (Application No. 33401/02), respectively.

While the issue of domestic violence in the context of Article 13(1)(b) of the Child Abduction Convention was the one topic that sparked concern among the Contracting States to the Child Abduction Convention, as well as judges and the legal profession alike, the Guide only dedicates a few paragraphs to it. See paragraphs 57-59 of the Guide. It also arrives at a conclusion, which raises some doubts.

In particular, the Guide states that “Evidence of the existence of a situation of domestic violence, in and of itself, is therefore not sufficient to establish the existence of a grave risk to the child.” There are a few problems with such a statement. Domestic violence comes in different shapes and sizes and the level of violence can be high or low. This statement is a “one-size-fits-all” and thus is necessarily flawed. In addition, it does not say what it means by “in and of itself”, does it mean prima facie? Also, it does not elaborate on what is necessary to invoke and substantiate domestic violence in order for this assertion to be considered sufficient. It also appears to set a standard of proof when it says that it “is not sufficient”, which might perhaps not be appropriate for a soft law instrument, such as a Guide to Good Practice, to do.

Some scholars have analysed and criticised this statement of the Guide. In particular, Rhona Schuz and Merle H. Weiner in the following article “A Small Change That Matters: The Article 13(1)(b) Guide to Good Practice” (Family Law LexisNexis©, January 2020) I refer to their arguments and prefer not to replicate them in this post.

Despite the weakness mentioned above and in Part I of this post, I believe that this Guide would be of great benefit to the legal profession.

Having all the above in mind, I would like to conclude with some words of the renowned American judge Richard Posner: “[t]here is a difference between the law on the books and the law as it is actually applied, and nowhere is the difference as great as in domestic relations.” (Van De Sande v. Van De Sande, 431 F.3d 567 (7th Cir. 2005) [INCADAT reference: HC/E/USf 812] (United States)).

 

I have twice already reported on The Prestige recognition issue: see here and here. In a further judgment at the end of July, [2020] EWHC 1920 (Comm), Butcher J after helpfully summarising the various claims, considered

• whether a Member State may be served under the EU Service Regulation 1393/2007, or whether residual PIL (here: the UK State immunity Act) may insist on an alternative. This did not so much engage the issue of ‘civil and commercial’ (CJEU Fahnenbrock being cited) on which both parties agreed. Rather on the exhaustive effect or not of the Service Regulation, in particular, whether Member States may insist on service upon authorities of other Member States via diplomatic means only. Butcher J holding correctly in my view at 45, that service via the means provided for in the Regulation, suffices.
• next, whether the case engages sovereign immunity of Spain and France which Butcher J held that they do not for the most part. He mostly cites the States’ submission to arbitration in this respect.
• further, whether the English courts have jurisdiction or whether that is ruled out by virtue of the arbitration exception or the insurance title of the Regulation (at 93 ff; the preceding paras concern claims which fall outside BIA and are to be judged under common law). At 107 Butcher J holds that the arbitration exclusion is not engaged, citing national and CJEU authority as well as recital 12 BIa, and holding at 108 that ‘(t)he present Judgment Claims are a further step beyond what is contemplated by an ‘action or judgment concerning … the enforcement of an arbitral award’ in recital (12).’ As for the insurance heading, with reference to Aspen Underwriting, he holds that the insurance title is engaged, and (at 132) that the States they are entitled to the jurisdictional protections of Section 3, without it having to be shown that they are in fact economically weaker parties. (There is a lingering doubt over one of the claims subrogated to Spain). The insurance title being engaged, this mains that the parties protected by it may only be sued in their jurisdiction (Article 14(2)’s exception to that was held not to be applicable), hence the English Courts for those claims do not have jurisdiction.

The result is a partial jurisdiction in England only – and permission to appeal, I imagine.

Geert.

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

 

State immunity, Prestige disaster
Application seeks, should Spain judgments be enforced, to set off the amount which claimant seeks to obtain in these actions
Held: no immunity
No BIa jurisdiction (93 ff): 'matters relating to insurance'
Background https://t.co/CutzVVyoho https://t.co/0JvWW3fhiq

— Geert Van Calster (@GAVClaw) July 24, 2020