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On Wednesday, 13 December 2023, the comité de redaction of the Revue de droit international et de droit comparé will be hosting a webinar to celebrate the 100th issue of the journal. It will be dedicated to Les relations entre le droit comparé, l’identité nationale et le colonialisme and have the following programme:

• 17h30 : Accueil, par Guy Keutgen, directeur de la Revue 
• 17h40 : Présentation du numéro spécial et des orateurs, par Wim Decock et Henri Culot, coordinateurs du numéro spécial
• 17h50 :  « Pour un droit comparé décolonial », par Lena Salaymeh, professeure, University of Oxford et École Pratique des Hautes Études (Paris Sciences et Lettres)
• 18h10 : « L’ethnoconstitutionnalisme : signification et limites », par Éric M. Ngango Youmbi, professeur, Université de Garoua (Cameroun)
• 18h30 : Conclusion, par Henri Culot, rédacteur en chef de la Revue

The event will be open to all participants and free of charge, but registration is required.

Each year, the European Centre for Judges and Lawyers – EIPA Luxembourg hosts a conference on ‘Recent Trends in the Case Law of the Court of Justice of the EU’. The next edition will take place on 18 and 19 January 2024. The hosts have kindly shared the following information with us, which can also be found here.

Conference description

During this annual event, we will bring together leading specialists to review and comment on a number of key judgements that the Court of Justice of the European Union (CJEU) delivered in the past 12 months. The 2024 edition of the ‘Recent Trends in the Case Law of the Court of Justice of the European Union’ will be the occasion to celebrate EIPA’s longstanding contribution to the dissemination, understanding and application of EU law among legal professionals and to shed light on contemporary legal challenges, in particular those stemming from the EU’s digital transition.

As in every year, the conference will encourage interaction and will be an informative and pleasant networking opportunity for all participants. The conference is addressed to academics, legal practitioners from the EU institutions, legal professionals working for the Member States or as advocates, but also judges, lawyers and civil servants coming from candidate countries.

This 2024 edition will feature three panels. The first will discuss some prominent cases on the specific effects of the EU values and the relations between the EU and the national legal orders. The second panel will focus on judgements that shape the action and functioning of the EU in selected and varied policy areas such as competition, consumer protection and restrictive measures. The last panel will be dedicated to decisions that pertain to our 2024 topic: the EU’s digital transition. The variety of fields covered and the expertise of our speakers will provide a clear overview of the most important trends in the recent case law of the CJEU and will lead to informed discussions on contemporary legal questions.

Finally, the 2024 edition of this conference will give the floor to eminent guests to provide insights on the possible interactions between the European Public Prosecutors Office (EPPO) and the CJEU as well as on the specific role of the Advocate Generals of the Court of justice.

The methodology of the conference

The commentaries and analyses of the rulings discussed during the conference will be conducted by prominent specialists in EU law, including Members of the CJEU, the European Chief Prosecutor, EU officials, academics and CJEU legal secretaries.

Each session will be followed by discussions aimed at addressing specific questions and further clarifying key ideas. Participants will have the opportunity to exchange relevant professional experiences during these discussions. Additionally, breaks will offer excellent networking opportunities, allowing legal professionals to socialise and engage on matters related to EU law.

Speakers

Claudio Matera, Senior Lecturer and Director of EIPA Luxembourg – European Centre for Judges and Lawyers

Panagiotis Zinonos, Lecturer at EIPA Luxembourg – European Centre for Judges and Lawyers

Sara Iglesias Sánchez, Professor at the Universidad Complutense of Madrid

Matthieu Chavrier, Senior Legal Adviser, Legal Service of the Council of the EU

Daniel Sarmiento, Professor at the Universidad Complutense of Madrid and Editor-in-Chief of EU Law Live

Catherine Warin, Lecturer, Director of the Master of European Legal Studies (MELS), EIPA Luxembourg – European Centre for Judges and Lawyers

Elise Poillot, Professor at the University of Luxembourg

Godefroy de Moncuit de Boiscuillé, Associate Professor at the Université Nice Sophia Antipolis

Eleftheria Neframi, Professor at the University of Luxembourg

Panayotis Voyatzis, Legal Secretary at the General Court of the European Union

Andreas Scordamaglia-Tousis, Legal Secretary at the Court of Justice of the European Union

Katalin Ligeti, Professor at the University of Luxembourg, Dean of the Faculty of Law, Economics and Finance

Reminder: on 6 December from 13-14.00 GMT the University of Aberdeen,’s Centre for Private International Law is organising the second online seminar in their series . The topic of the day is Reciprocating the return of abducted children Under The 1980 Hague Child Abduction Convention with Muslim (Islamic Law) States. The speaker is Nazia Yaqub, who wrote her phd on this topic. The phd has been converted into a book in the Hart Private International Law series.

The focus of the seminar is the practical application and the challenges of the 1980 Hague Child Abduction Convention and the results of Nazia Yaqub’s empirical study, for which she interviewed young people in the abduction situations.

See more information about the seminar on the Centre of Private International Law’s website.

On 27 November 2023, Nigeria became the thirteenth country/State to ratify the Singapore Convention on Mediation. The Convention will enter into force in Nigeria on 27 May 2024.

The Singapore Convention on Mediation facilitates international trade and promotes mediation as an alternative and effective method of resolving commercial disputes by providing an effective mechanism for the enforcement of international settlement agreements resulting from mediation.

Nigeria is already a party to the 1958 New Yok Convention on Recognition and Enforcement of Foreign Arbitral Awards since 1988. Nigeria recently passed a new law on Arbitration and Mediation Act 2023, which repeals its old arbitration law. This demonstrates that Nigeria is interested in being a global hub for international commercial dispute settlement. Indeed, on 23 November 2023, on the invitation of the the Nigerian Group of Private International Law, Professor Adewale Olawoyin delivered a lecture on how the new Arbitration and Mediation Act will enhance Nigeria’s adjudication appeal. One of the points he mentioned was the need for Nigeria to also ratify the Singapore Convention on Mediation as it did with the 1958 New York Convention, which the Nigerian government has now done.

It remains to be seen whether Nigeria will ratify the Hague 2005 (on Choice of Court) and 2019 (on Recognition and Enforcement of Foreign Judgments) Convention as well. One of the points that I have stressed in recent times is for Nigeria and Africa to make itself very attractive for adjudication. For example, it is unacceptable that high value government matters that involve African resources are resolved in the global North, like London and Paris. This is a point Professor Richard Oppong has also stressed in the context of choice of law, in the Pan African Conference on Choice of Law in International Commercial Contracts, that held on 31 May 2023 to 3 June 2023 at the University of Johannesburg.

I have also stressed elsewhere that if Nigerian and African courts and arbitral panels want to compete favourably with other countries outside the continent in attracting litigation and arbitration business to the continent, serious institutional reforms would be required. Issues such as infrastructure, quality of the legal system, funding, delays, regular training, and corruption in the judiciary will have to be addressed.  If these issues are addressed, ratification of international instruments will make Nigeria and Africa attractive and effective for adjudication. In turn this will generate a lot of revenue for Nigeria and Africa, and Nigerian and African lawyers, judges and arbitrators stand to benefit the most by increased demand from foreign clients for their services. This will consequently improve Nigeria and Africa’s economy. Indeed, Nigeria and African countries already have talented persons that can bring this to fruition.

The time to act is now.

Written by Eduardo Silva de Freitas (Erasmus University Rotterdam),  Xandra Kramer (Erasmus University Rotterdam/Utrecht University) & Jos Hoevenaars (Erasmus University Rotterdam), members of the Vici project Affordable Access to Justice, financed by the Dutch Research Council (NWO), www.euciviljustice.eu.  

 

Introduction

Third Party Litigation Funding (TPLF) has been one of the key topics of discussion in European civil litigation over the past years, and has been the topic of earlier posts on this forum. Especially in the international practice of collective actions, TPLF has gained popularity for its ability to provide the financial means needed for these typically complex and very costly procedures. The Netherlands is a jurisdiction generally considered one of the frontrunners in having a well-developed framework for collective actions and settlements, particularly since the Mass Damage Settlement in Collective Actions Act (WAMCA) became applicable on 1 January 2020 (see also our earlier blogpost). A recent report commissioned by the Dutch Ministry of Justice and Security found that most collective actions seeking damages brought under the (WAMCA) have an international dimension, and that all of these claims for damages are brought with the help of TPLF.

This blogpost provides an update of the latest developments in the Dutch collective action field focusing on a recent interim judgment by the Amsterdam District Court in a collective action against TikTok c.s in which the Dutch court assessed the admissibility of the claimant organisations based, among other criteria, on their funding agreements. This is the second interim judgment in this case, following the first one year ago which dealt with the question of international jurisdiction (see here). After a brief recap of the case and an overview of the WAMCA rules on TPLF, we will discuss how the court assessed the question of compatibility of the TPLF agreements with such rules. Also in view of the EU Representative Action Directive for consumers, which became applicable on 25 June 2023, and ongoing discussions on TPLF in Europe, developments in one of the Member States in this area are of interest.

Recap

In the summer of 2021, three Dutch representative foundations – the Foundation for Market Information Research (Stichting Onderzoek Marktinformatie, SOMI), the Foundation Take Back Your Privacy (TBYP) and the Foundation on Mass Damage and Consumers (Stichting Massaschade en Consument, SMC) – initiated a collective action against, in total, seven TikTok entities, including parent company Bytedance Ltd. The claims concern the alleged infringement of privacy rights of children (all foundations) and adults and children (Foundation on Mass Damage and Consumers). The claims include, inter alia, the compensation of (im)material damages, the destruction of unlawfully obtained personal data, and the claimants request the court to order that an effective system is implemented for age registration, parental permission and control, and measures to ensure that TikTok complies with the Code of Conduct of the Dutch Media Act and the GDPR.

In a its second interim judgment in this case, rendered on 25 October 2023, the District Court of Amsterdam assessed the admissibility of the three representative organisations (DC Amsterdam, 25 October 2023, ECLI:NL:RBAMS:2023:6694; in Dutch), and deemed SOMI admissible and conditioned the admissibility of TBYP and SMC on amendments to their TPLF agreements. This judgment follows the District Court’s acceptance of international jurisdiction in this collective action in its first interim judgment, which we discussed on this blog in an earlier blogpost.

TPLF under the WAMCA

The idea of TPLF refers essentially to the practice of financing litigation in which the funder has no direct involvement with the underlying claim, as explained by Adrian Cordina in an earlier post on this blog. The basic TPLF contract entails the funder agreeing to bear the costs of litigation on a non-recourse basis in exchange for a share of the proceeds of the claim. Collective actions tend to attract this type of funding for two reasons. Firstly, these claims are expensive for several reasons such as the need for specialised legal expertise and complex evidence gathering, thereby creating a need for external financing through TPLF. Secondly, considering that these proceedings seek damages for mass harm, the potential return on investment for a funder can be substantial. This makes it an appealing prospect for funders who may be interested in investing with the possibility of sharing in these proceeds.

The WAMCA has put in place some rules on the practice of TPLF in the context of collective actions. These rules are inserted in the revised Article 3:305a Dutch Civil Code (DCC), which concerns the admissibility requirements for representative organisations to file such actions. Among other requirements, these rules stipulate that claimant organisations must provide evidence of their financial capacity to pursue the action while maintaining adequate control over the proceedings. This provision aims to ensure the enforceability of potential adverse cost orders and to prevent conflicts of interest between the funding entity and the claimant organisation (Tzankova and Kramer, 2021). This requirement can be waived if the collective action pursues an “idealistic” public interest and does not seek damages or only a very low amount, commonly referred to as the “light” WAMCA regime (Article 305a, paragraph 6, DCC). However, foll0wing the implementation of the Representative Actions Directive (Directive (EU) 2020/1828, or RAD) in the Netherlands, the stipulations related to financial capacity and procedural control persist when the collective action derives its legal basis from any of the EU legislative instruments enumerated in Annex I of the RAD, irrespectively of whether or not the collective action pursues an “idealistic” public interest.

Additionally, within the framework of the Dutch implementation of the RAD, it is stipulated that the financing for the collective action cannot come from a funder who is in competition with the defendant against whom the action is being pursued (Article 3:305a, paragraph 2, paragraph f, DCC).

Additional rules on TPLF can also be found in the Dutch Claim Code, a soft-law instrument governing the work of ad hoc foundations in collective proceedings. The latest version of the Claim Code (2019) mandates organisations to scrutinise both the capitalisation and reputation of the litigation funder. The Claim Code also stipulates that TPLF agreements should adopt Dutch contract law as the governing law and designate the Netherlands as the forum for resolving potential disputes. Most importantly, it emphasises that the control of the litigation should remain exclusively with the claimant organisation. Moreover, it prohibits the funder from withdrawing funding prior to the issuance of a first instance judgment. This Claim Code is non-binding, but plays an important role in Dutch practice.

The District Court’s assessment of the TPLF agreements

In the most recent interim judgment, the District Court of Amsterdam assessed the admissibility requirements concerning financial capacity and control over the proceedings for each of the organisations separately. In its first interim judgment the court had determined that, with a view to assessing the admissibility of each of the claimants and also with a view to the appointment of an exclusive representative, the financing agreement the claimants had reached with their respective funders should be submitted to the court.

After the review of these agreements all three organisations were deemed to have sufficient resources and expertise to conduct the proceedings since they are all backed by TPLF agreements (SMC and TBYP) and donation endowments (SOMI). However, the court ordered amendments to the TPLF agreements of both SMC and TBYP due to concerns related to control over the proceedings. The District Court also acknowledged concerns about potential excessiveness in compensation, particularly if calculated as a fixed percentage irrespective of awarded amounts and the number of eligible class members. Notably, the court considered the proportionality of compensation to the invested amount and emphasised the need to align it with the potential risks faced by litigation funders.

In this sense, the court indicated that the acceptable percentage of compensation for litigation funders should be contingent on the awarded amount and the expected number of class members. While a maximum of 25% accepted in case law (for example, in the Vattenfall case, DC Amsterdam 25 October 2023) could play a role, the court indicates it will use a five-times-investment maximum as a more practical approach. The court stressed the importance of adjusting compensation rates based on damages to be assessed, ensuring appropriate remuneration for funders without exceeding the established maximum.

In light of these considerations, the District Court also outlined preconditions for future approval of settlement agreements, limiting the amount deducted from the compensation of the class members to a percentage that will be established by the court and capping litigation funder fees.

 Assessment of each organisation’s control over the proceedings

The three claimant organisations have entered into different financial agreements to pursue this collective action. SOMI is financed by donations from another organisation, which does not require repayment of the amount invested. The District Court assessed the independence of SOMI’s decision-making, given that the sole shareholder of the donating organisation is also the director of SOMI. The court concluded that appropriate safeguards are in place, as the donation agreement contains clauses stipulating that this person should refrain from taking any decisions in case of a conflict of interest. It was also stressed that the donating organisation declared to be independent from SOMI’s directors and lawyers, as well as from TikTok.

On the other hand, TBYP and SMC have entered into TPLF agreements. The District Court highlighted some provisions of TPLF agreement of TBYF that were deemed dubious under the WAMCA. One clause required that no actions could be taken that could potentially harm the funder’s interests, with an exception made if such actions were legally necessary to protect the interests of the class members. The court decided that this clause compromised TBYP’s independence in controlling the claim. Another clause stipulated that TBYP could not make, accept, or reject an offer of partial or full settlement in the proceedings without first receiving advice from the lawyers that such a step was reasonable. The court viewed this clause as further compromising TBYP’s control over the proceedings.

Similarly, the District Court had reservations about some clauses in the TPLF agreement SMC had entered into. One clause stipulated that if the lawyers were dismissed, the funder could inform SMC of the replacing lawyers they would like to appoint, subject to SMC’s approval. Also, if the funder wanted to dismiss the lawyers and SMC disagreed, the dispute should be resolved by arbitration. The court decided that this gave power to the funder to disproportionately influence the proceedings. Another clause stipulated that if the chance of winning significantly decreased, the parties would need to discuss whether to continue or terminate the agreement. The court rejected this clause, stressing that terminating the TPLF agreement prematurely is unacceptable. Finally, the agreement contained a clause allowing the funder to transfer its rights, benefits, and obligations under the agreement, even without SMC’s consent. The court also rejected this clause, emphasising that SMC should not be involuntarily associated with another funder.

In view of all these considerations the District Court decided that these provisions in the TPLF agreements could compromise the independence of TBYP and SMC from their respective litigation funders. In principle, the presence of these contractual provisions should lead to TBYP and SMC being deemed inadmissible. However, considering the overall intent of the TPLF agreements and the novelty of such agreements being reviewed, the court has given TBYP and SMC the opportunity to amend their TPLF agreements to remove the contentious clauses.

Outlook

In its decision, the District Court repeatedly stressed that it was ‘entering new territory’ with this detailed assessment of the funding agreements. This is also reflected in the careful consideration the court has for the various, potentially problematic, aspects of TPLF in collective actions and the fact that it chooses to formulate a number of preconditions that it intends to apply when determining what will count as reasonable compensation in the event of future approval of a settlement agreement. It thereby forms the second act in this TikTok case, but also the firsts steps in clarifying some uncertainties in the practical implementation of the WAMCA.

The challenges collective actions and TPLF face are not unique to The Netherlands, as for instance also the PACCAR judgment by the UK Supreme Court 0f earlier this year showed (see also this recent blogpost by Demarco and Olivares-Caminal on OBLB). In this ruling, the Supreme Court considered whether Litigation Funding Agreements (LFAs) should be regarded as Damages-Based Agreements (DBAs) within the context of ‘claims management services’. The court concluded that the natural meaning of ‘claims management services’ in the Compensation Act 2006 (CA 2006) encompassed LFAs. The court dismissed arguments suggesting a narrower interpretation of ‘claims management services’, stating it would be contrary to the CA 2006’s purpose. As a result of this ruling, these agreements could potentially be deemed unenforceable if they fail to adhere to the regulations applicable to DBAs.

This second interim judgment in the TikTok case is a novelty in the Dutch practice of collective actions in terms of the detailed review of funding agreements. While generally being a collective action-friendly jurisdiction, this judgment and other (interim) judgments under the WAMCA so far, show that bringing international collective actions for damages is a long road, or what some may consider to be an uphill battle. The rather stringent requirements of the WAMCA are subject to rigorous judicial review, which has also resulted in the inadmissibility of claimant organisations and their funding agreements in other cases (notably, in the Airbus case, DC The Hague 20 September 2023, ECLI:NL:RBDHA:2023:14036). Almost four years after the WAMCA became applicable no final judgment rewarding damage claims has been rendered yet. But in the TikTok case the claimant organisations got a second chance. This open trial-and-error approach is perhaps the only way to further shape the collective action practice both in The Neterlands and other European countries.

To be continued.

 

In Case C-497/22 EM v Roompot Service BV, the CJEU has confirmed its strict reading of Article 24 Brussels Ia’s ‘tenancies of immovable properties’ provision, confirming Richard de la Tour AG’s convincing Opinion [ia his reasoning (35) ff].

Proceedings are between EM, domiciled in Germany, and Roompot Service BV, which has its registered office in the Netherlands and operates a holiday park there, comprising tourist accommodation.

[15] Per CJEU Rösler (241/83), Hacker (C‑280/90) and Dansommer (C‑8/98), contracts involving the letting of holiday accommodation abroad generally fall within the exclusive jurisdiction of the courts of the Member State in which the immovable property concerned is situated. An exception can be made to that principle only when the contract concerned is a contract of a complex nature, that is to say, a contract providing for the performance of a range of services in consideration for the lump sum paid by the customer.

[16] the additional services in the present case were the offer, on the internet page of the defendant in the main proceedings, of a variety of bungalows with different facilities, the booking of the bungalow chosen for the customer, reception of the customer at the destination and the handing over of the keys, the provision of bed linen and the carrying out of cleaning at the end of the stay – the question therefore is whether this qualifies the contract as being one of a ‘complex nature’, or [17] whether these are merely minor ancillary services, which arguably do not cancel out A24.

After recalling the restricted nature of A24 in general, the Court [27] repeats what it said most recently in Obala re the ratio legis for A24(1) exclusive jurisdiction:

as regards tenancies of immovable property in particular, it is clear from that case-law that that exclusive jurisdiction is justified by the complexity of the relationship of landlord and tenant, which comprises a series of rights and obligations in addition to that relating to rent. That relationship is governed by special legislative provisions, some of a mandatory nature, of the State in which the immovable property which is the subject of the lease is situated, for example, provisions determining who is responsible for maintaining the property and paying land taxes, provisions governing the duties of the occupier of the property as against the neighbours, and provisions controlling or restricting the landlord’s right to retake possession of the property on expiry of the lease

[29]  core consideration is whether the subject matter of that dispute relates directly to the rights and obligations arising from that tenancy (reference to CJEU Sharewood by analogy).

Two main lines of enquiry have to be pursued:

Firstly, the nature of the services at issue: 

[34] the categorisation of a contract relating to the performance of a range of services, in addition to the short-term letting of holiday accommodation, requires (reference to Richard de la Tour AG (28)) an assessment of the contractual relationship in question as a whole and in its context. [39] Where additional services are offered in return for a lump sum on the same terms as those offered to customers of a hotel complex, A24(1) is not engaged. By contrast, any additional service that is ancillary in nature to such a letting would not necessarily modify the categorisation of the contract concerned to that of tenancy, but would have to be examined in the context of that contract.

[40] neither cleaning at the end of the stay nor providing bed linen are sufficiently weighty services liable to distinguish, on their own, a tenancy from a complex holiday organisation contract. Although it is true that cleaning usually is the responsibility of the tenant at the end of a lease, it cannot be ruled out that, due to the particular nature of seasonal lettings of holiday homes, the lessor may take on that task, without that modifying the nature of the contract as a tenancy of immovable property. The same holds true for providing bed linen and handing over keys.

[41] On the other hand, information and advice, booking and reception services forming part of the offer proposed by a tourism professional, together with the letting, in return for a lump sum, constitute services which are generally provided as part of a complex holiday organisation contract.

Further, the capacity in which the travel organiser concerned intervenes in the contractual relationship at issue in the main proceedings.

[43] Per CJEU Hacker etc, the fact that the travel organiser is not the owner of the accommodation, but is subrogated in the owner’s rights, is not such on its own as to modify a possible categorisation of the contract concerned as a tenancy of immovable property. On the other hand if that travel organiser intervenes as a tourism professional and proposes, in the context of an organised stay, additional services in consideration of which the offer is accepted, that fact may be an indication of the complex nature of that contract.

In conclusion [44], while the national court will have to confirm, the circumstances suggest A24(1) is not engaged.

The judgment is a useful reminder of the A24(1) lines of enquiry.

Geert.

EU private international law, 4th ed. 2024, 2.182 ff.

CJEU confirms restrictive application of A24(1) Brussels Ia 'tenancy' agreements, in case concerning rental of bungalow park accommodation with additional (not merely 'ancillary') services

C‑497/22 EM v Roompot Service BVhttps://t.co/0lv8QdJAVI

— Geert Van Calster (@GAVClaw) November 16, 2023

 

On 17 October 2023, the European Commission adopted its 2024 work programme. As explained in a press release, the programme aims at simplifying the rules for citizens and businesses across the Union.

The initiatives that the Commission plans to take, or pursue with particular interest, in the course of 2024 are listed in three annexes.

Annex I is concerned with new policy and legislative initiatives. None of the initiatives in question relates to judicial cooperation in civil matters.

Annex II, on REFIT initiatives (i.e., initiatives aimed at making EU law simpler, less costly and future proof), contemplates, among other things, a revision of online dispute resolution for consumer disputes.

The repeal of the online dispute resolution for consumer disputes Regulation (Regulation (EU) No 524/2013) will remove associated reporting requirements, which are no considered to be longer needed. In addition, a proposal for a directive amending Directive 2013/11 on alternative dispute resolution for consumer disputes is addressed. The goal is, generally, to simplify and reduce current reporting requirements.

Various procedures with possible implications for private international law are featured in Annex III, which lists the pending procedures that the Commission regards as a priority. Although they are based on Article 114 TFEU rather than Article 81 TFEU, they are also relevant to private international law, notably insofar as they lay down provisions which are meant to apply whatever the applicable law, as determined under conflict-of-law rules, and accordingly interfere with the latter.

The list features the proposed Regulation on combating late payment in commercial transactions. The text is meant to address the inadequacy of the current legal framework, as shaped by Directive 2011/7 (the Late Payment Directive).

The proposed Directive on liability for defective products, repealing Directive 85/374 (Product Liability Directive) is also among the listed priorities, as is the proposed Directive on adapting non-contractual civil liability rules to artificial intelligence (AI Liability Directive). The objective of the latter is to promote the rollout of trustworthy AI to harvest its full benefits for the internal market. It does so by ensuring victims of damage caused by AI obtain equivalent protection to victims of damage caused by products in general. It also reduces legal uncertainty of businesses developing or using AI regarding their possible exposure to liability and prevents the emergence of fragmented AI-specific adaptations of national civil liability rules.

The proposed Directive on improving working conditions in platform work is equally on the list. Its rules may have a bearing on the operation of the rules of Rome I on the law applicable to employment contracts.

Annex III goes on by mentioning the proposed Directive on European cross-border associations, and the connected proposed Regulation as regards the use of the Internal Market Information System and the Single Digital Gateway, which aim at facilitating the effective exercise of freedom of movement of non-profit associations operating in the internal market.

The list further includes the proposals on the digital euro (see further this post) and the proposed Directive harmonising certain aspects of insolvency law. According to the Commission, action at EU level is needed in the field of insolvency to substantially reduce the fragmentation of insolvency regimes. The future instrument would support the convergence of targeted elements of Member States’ insolvency rules and create common standards across all Member States, thus facilitating cross-border investment. Measures at EU level would ensure a level playing field and avoid distortions of cross-border investment decisions caused by lack of information about and differences in the designs of insolvency regimes. This would help to facilitate cross-border investments and competition while protecting the orderly functioning of the single market. Since divergences in insolvency regimes are a key obstacle to cross-border investment, addressing this obstacle is crucial to realising a single market for capital in the EU.

Conventions & Instruments

On 1 November 2023, Canada deposited its instrument of ratification of, and Kyrgyzstan its instrument of accession to, the 2007 Child Support Convention. At present, 48 States and the European Union are bound by the Convention. More information is available here.

On 7 November 2023, the 1961 Apostille Convention entered into force for China. The Convention had already been in force in the Hong Kong and Macao Special Administrative Regions of China. The 1961 Apostille Convention currently has 126 Contracting Parties. More information is available here.

On 16 November 2023, the 2007 Child Support Convention entered into force for Botswana. At present, 48 States and the European Union are bound by the Convention. More information is available here.

On 27 November 2023, the application of the 1980 Child Abduction Convention and the 1985 Trusts Convention, to which the Netherlands is a Contracting Party, was extended to Curaçao.

 

Meetings & Events

From 13 to 17 November, the Working Group on Parentage / Surrogacy met for the first time. Pursuant to its mandate, the Working Group commenced its consideration of draft provisions for one new instrument on legal parentage generally, including legal parentage resulting from an international surrogacy agreement. 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.

The author of this post is Carlos Santaló Goris, lecturer at the Centre for Judges and Lawyers of the European Institute of Public Administration (Luxembourg).

On 26 October 2023, the High Regional Court of Karlsruhe (Oberlandesgericht Karlsruhe) rendered a judgment on an appeal confirming a decision of the Regional Court of Baden-Baden refusing to issue a European Account Preservation Order (‘EAPO’). The creditor had invoked a 2023 amendment in the Maltese Gaming Act to justify the periculum in mora required to obtain a EAPO. The judgment is at the crossroads of two issues. On the one hand, the systemic difficulties that creditors across the EU are facing to satisfy the periculum in mora condition. On the other, the Maltese legislative reform referred to, which is currently under the scrutiny of the European Commission for potentially infringing EU law.

Background to the Case

A German creditor requested an EAPO against a debtor domiciled in Malta before the Regional Court of Baden-Baden (Landgericht Baden-Baden). The debtor was a company offering online gambling services. The creditor applied for the EAPO relying on a judgment of that court sentencing the debtor to pay 13.000 euros plus interest to the creditor. The EAPO application was rejected: the court found that the periculum in mora requirement, which is essential to obtain an EAPO, had not been proven. This prerequisite is defined in the EAPO Regulation as ‘an urgent need for a protective measure in the form of a Preservation Order because there is a real risk that, without such a measure, the subsequent enforcement of the creditor’s claim against the debtor will be impeded or made substantially more difficult’ (Article 7(1) EAPO Regulation).

The creditor appealed the decision before the High Regional Court of Karlsruhe, which also considered that the periculum in mora criterion had not been duly satisfied, confirming the decision of the Regional Court of Baden-Baden.

The existence of a title is thus not sufficient to grant an EAPO. Creditors, irrespective of whether or not they have a title, have to prove the periculum in mora. In the case at hand, in order to justify the existence of such risk, the creditor argued that the 2023 amendment of the Maltese Gaming Act would prevent the future enforcement of the claim against the creditor. The reform introduced in the Maltese Gaming Act Article 56A, which states the following:

Notwithstanding any provision of the Code of Organization and Civil Procedure or of any other law, as a principle of public policy:

1. no action shall lie against a licence holder and, or current and, or former officers and, or key persons of a licence holder for matters relating to the provision of a gaming service, or against a player for the receipt of such gaming service, if such action:

• • conflicts with or undermines the legality of the provision of gaming services in or from Malta by virtue of a licence issued by the Authority, or the legality of any legal or natural obligation resulting from the provision of such gaming services; and
  • relates to an authorised activity which is lawful in terms of the Act and other applicable regulatory instruments.

2. The Court shall refuse recognition and, or enforcement in Malta of any foreign judgment and, or decision given upon an action of the type mentioned in sub acticle (i)

The reform would prevent the enforcement in Malta of judgments rendered in other Member States against holders of Maltese licenses to provide online gaming services. This is, precisely, the argument used by the German creditor to substantiate the periculum in mora. The creditor considered that ‘as long as the law is in force, there is a risk that the defendant will move money from Maltese accounts to non-European countries (…), thereby preventing enforcement’. In line with the creditor’s opinion, the German gambling regulator (Gemeinsamen Glücksspielbehörde der Länder) considered that such a solution would contravene the automatic recognition and enforcement regime of the Brussels I bis Regulation. Nonetheless, it should be noted that the Brussels I bis Regulation includes infringement of national public policy among the grounds to contest the recognition and enforcement of judgments granted in other Member States (Article 45(1)(a) Brussels I bis Regulation). Under the EAPO Regulation, it is also possible to contest the enforcement of an EAPO on the ground that it would violate the public policy of the Member State of enforcement (Article 34(2) EAPO Regulation). Had the Regional Court of Baden-Baden granted the EAPO, the debtor could have raised the violation of the Maltese public policy to contest enforcement of the EAPO.

The European Court of Justice (‘ECJ’) has generally interpreted the public policy exemption under the Brussels system in a restrictive manner: a violation of public policy exists only in case of ‘manifest breach of the rule of law regarded as essential in the legal order of the State in which enforcement is sought or a right recognised as being fundamental within that legal order’ (C‑568/20, H Limited, para. 44). The iGaming industry has significant weight in the Maltese economy – it allegedly contributes to around 12% of the Maltese GDP. However, this does not mean that is it essential or fundamental for the Maltese legal order, as the ECJ requires. Accepting the move of the Maltese legislator to protect the iGaming industry would open the door for other Member States to adopt a similar solution to protect relevant sectors of their economies. That abusive use of public policy would result in undermining the proper functioning of the simplified mechanism of recognition and enforcement under the Brussels I bis Regulation.

The controversy surrounding the Maltese legislative reform has not passed unnoticed for the European Commission. Last May, one Member of the European Parliament, Sabine Verheyen, asked the Commission what its stand was towards the reform of the Maltese Gaming Act. The Commission replied that it ‘is in the process of assessing the compatibility of the draft Bill with EU law’.

Karlsruhe High Regional Court’s approach to periculum in mora

For the High Regional Court of Karlsruhe, the Maltese legislative reform was not a reason to acknowledge the existence of the periculum in mora. It expressly relied on the guidance offered by Recital 14 of the Preamble of the EAPO Regulation, which contains certain criteria on how to determine that there is a risk. Recital 14 focuses on concrete actions adopted by the debtor that could show that they intend to hinder the enforcement of a claim such us dissipating, concealing, or destroying the assets. Other circumstances such as ‘the mere non-payment or contesting of the claim or the mere fact that the debtor has more than one creditor’ are not sufficient alone to determine that there is a risk. Therefore, for the court, ‘it follows that there must be concrete signs and not just typical abstract dangers of the risk of thwarting of enforcement or of making enforcement more difficult without the provisional account seizure’. Since the creditor did not show ‘any specific or viable indications that the debtor could use up, conceal, destroy or otherwise sell their assets through unusual actions’, the periculum in mora could not be established. The High Regional Court of Karlsruhe found that it was also irrelevant whether or not the post-reform Maltese Gaming Act is incompatible with EU law.

The interpretation that the High Regional Court of Karlsruhe gave of the EAPO´s periculum in mora is coherent with the strict interpretation other German courts had made of this prerequisite. The High Regional Court of Hamm (Oberlandesgericht Hamm) considered that transferring a debtor’s funds from a German bank account to another outside Germany was not sufficient to establish the periculum in mora. In another EAPO case before the Regional Court of Bremen (Landesgericht Bremen), the creditor justified the periculum in mora arguing that the debtor had failed to make two promised payments. Furthermore, the creditor added that the debtor was experiencing financial difficulties. The court found that both arguments were insufficient to claim the existence of a risk. Citing the Preamble of the EAPO Regulation, the court stated that mere non-payment by the debtor was not enough.

Across the EU, courts in other Member States, which relied on the Preamble of the EAPO Regulation, have also adopted a similar stance towards the periculum in mora as German courts have. In Slovakia and Portugal, the most common case law on the EAPO Regulation are judgments rejecting EAPO applications because creditors failed to satisfy the periculum in mora in light of the standards of the Preamble (see 2020 Prof. Requejo Isidro’s post concerning  a Portuguese court judgment on the EAPO). Creditors seem to find it difficult to prove that debtors have adopted specific actions intended to hinder the future enforcement of the claim. The Commission Proposal had a more lenient approach towards the periculum in mora for those creditors with an enforceable title: they were exempted from proving it (some scholars defend the reintroduction of that more lenient approach: Burkhard Hess, Europäisches Zivilprozessrecht (2nd edition De Gruyter 2021), para. 10.141). Had the EU legislator adopted the approach defended by the Commission, the creditor of the present case would not have experienced any issue since he had already obtained an enforceable judgment.

Dr Mihail Danov, Associate Professor at the University of Exeter, has accepted the invitation of the editors of the blog to present his recent book, titled ‘Private International Law and Competition Litigation in a Global Context’, published in the Hart Publishing series on Studies in Private International Law.

The book examines the private international law issues in competition law claims which are issued by private parties and which arise out of infringements that distort the process of competition in different countries. The issues are important because many private antitrust damages claims would raise regulatory issues concerning the nature of the conduct as well as tortious issues concerning the causation and quantification of damages that may be sustained by numerous consumers and businesses (that may be up or down the chain of commerce).

The private international law aspects matter in practice because the jurisdiction rules (predetermining the applicable procedural rules) and the choice-of-law rules (ascertaining applicable law/s which are used to determine whether the conduct is anticompetitive as well as to quantify damages) would both have an impact on the outcome of a cross-border competition law dispute. More importantly, the book demonstrates that private international law issues are closely intertwined with injured parties’ access to legal remedies in private antitrust damages claims. For example, since many competition law infringements may last for several years and cause harm to various injured parties, the procedural rules (concerning case-management; disclosure; standard of proof) at the place where the parties litigate would be key for judges to quantify damages by applying the applicable substantive law rules. This means that the injured parties’ access to justice might often depend on where the proceedings are issued.

A major layer of complexity, which signifies the importance of private international law, is that competition law infringements may frequently be committed by multinational groups of companies that would naturally engage in transnational economic activities. Since the relevant anticompetitive conduct would potentially cause antitrust damages to many consumers and businesses in different jurisdictions, multiple and related private antitrust damages claims (and public enforcement actions) may be issued against different subsidiaries forming part of the same infringing undertaking/s (i.e. group/s of companies). A regime for judicial cooperation is needed because competition laws would reflect the national public policy (being classified as overriding mandatory rules for the private international law purposes). In order to determine whether the conduct is anticompetitive, judges may apply extra-territorially their own competition laws (without necessarily factoring in foreign regulatory interests). This means that an important question is how any related competition law claims – which arise out of the same competition law infringement/s and which raise common issues (concerning the nature of the conduct or causation or damages) – are to be governed in a global context. A closely connected policy choice concerns any preclusive effects of foreign judgments / decision, establishing competition law infringements and/or dealing with certain common issues.

The existing private international law rules are considered along with their implications for the resolution of cross-border competition law disputes before the English courts with a view to suggesting how a regime for judicial cooperation should / could be developed. The issues – which need to be considered by injured parties, defendants, judges and which should be addressed by policy-makers with a view to promoting a level of judicial cooperation in antitrust matters – are identified. The book goes further to advance an argument for a new approach to governance by suggesting that private international law techniques may be key to attaining a level of judicial cooperation in a global context.

The author of this post is Kleopatra Koutouzi (Attorney-at-Law / In-house legal Counsel at Aims Shipping Corporation and External Collaborator with the International Labour Organisation (Maritime Unit)).

In my recently published PhD research entitled Mass Claims in Maritime Law and Alternative Methods of Dispute Resolution, I attempted to answer the above question by dealing with an issue more and more debated at a national and an international level: whether a group of people, suffering damage due to a maritime casualty, can defend their rights collectively before an arbitral tribunal, taking into consideration that collective mechanisms facilitate effective judicial protection.

Shipping has been one of the strongest supporters of arbitration for as long as one can find records. However, arbitration clauses are not included anymore only in contracts between equals. Arbitration clauses in passengers’ tickets and crewmembers’ employment contracts are a common phenomenon recently. The example of the cruise industry shows a trend which may become a mainstream in the near future. Therefore, novel dispute resolution devices affect directly the maritime industry, since most of the international trade and activities are carried out by sea. Given also that maritime casualties tend to take nowadays the form of massive catastrophes, the international maritime community should be alerted to deal with mass and often divergent claims in a rather quick and efficient way.

Cross Sectoral and Comparative analysis

Τhe research applies a cross-sectoral approach, i.e. the intersection of maritime law with international commercial arbitration law, the procedural practice of mass collective claims and alternative (out-of-court) dispute resolution (ADR). The study cuts across several legal fields and it does so on a comparative basis with four jurisdictions of reference – United States of America (USA), United Kingdom, France and Greece. For the conduct of this research, the United States jurisdiction is used as a benchmark. US law has long been recognized as one of the most friendly and familiar with methods of collective actions – in the form of the unique worldwide phenomenon of class actions – and the use of alternative methods of dispute resolution – with a great emphasis on arbitration. This turns USA into one of the main destinations for the resolution of large-scale disputes. Moreover, the recent US case law on class action waivers in consumer and employment agreements and the relevant debate generated therefrom as well as a series of court decisions compelling arbitration in seafarers’ injury claims are very pertinent to the current analysis.

Mass Claims

In this study, the term “mass claims” is used in order to describe claims which arise when a number of people, either contractually bound to the shipowner or not, suffer damages resulting from the same historic event, in our case from a maritime casualty or a maritime adventure whether on board the ship or ashore. Therefore, the claims examined arise either simultaneously or at around the same time and present very similar legal and factual issues without however being identical. In relation to the number of claims involved, for convenience purposes, the research adopts the threshold set by the EU Recommendation of 11 June 2013 and considers mass claims any claims brought collectively by two or more natural or legal persons claiming to have been harmed in a maritime casualty or adventure. Therefore, individual accidents fall outside the scope of this work.

Research Questions

The main research questions answered in this book are:

1. Is arbitration a legally permissible dispute resolution method for the handling of mass claims in the aftermath of a maritime casualty and how should the silence of the governing instruments be interpreted and handled?
2. Is it an appropriate mechanism from a policy point of view, taking into account all the interests involved (private, collective, public)? In such a case, how may a balance be established between procedural efficiency and procedural fairness?
3. Would it be possible to propose solutions, building on the common elements found in the annotated jurisdictions?
4. Is there any added value of mass arbitrations in maritime fields where specific collective indemnity schemes are already in place and have proved effective, as in the case of oil pollution from ships?

Categories of Claims

To address the above questions the book examines two different categories of claims; a) contract-based ship passengers’ claims, and b) tort-based ship pollution claims. In relation to the first category, reference is made to the specific liability regime governing the sea carriage of passengers, examining the use of arbitration in the relevant disputes (through the lens of consumer protection) as well as the issue of the class action waivers included in many passage contracts. In relation to the second category, reference is made to the specific regime regulating liability and compensation in case of ship pollution with the aim of testing whether arbitration can provide a valid alternative to the jurisdiction of national courts for the resolution of this kind of claims; to that end, the processes activated to address the consequences of the DeepWater Horizon accident provide useful food for thought.

Passenger claims

The analysis deals with international contracts of carriage and therefore cross-border disputes with a particular focus on cruises and package holidays. Cruise passengers can raise their claims based mainly on the contract they had entered into while arranging a specific cruise trip. This contract is actually a special form of consumer contract and therefore the cruise passenger “wears the consumer’s uniform” as well. The discussion in relation to ship-passenger claims revolves around the theory and application of class and collective forms of arbitration in consumer disputes. A wide spectrum of claims are taken into consideration, e.g. claims for loss of or damage to luggage, illness, injury and death, claims for delays and cancellations, loss of enjoyment, inconvenience and distress. Single events and purely domestic cases fall outside the scope of this work.

The analysis concludes that in all four examined jurisdictions, the majority of passengers’ claims are considered arbitrable. The categories of claims still excluded from arbitration are personal injury, illness, and death claims. The arbitrability of passengers’ claims is also supported by the provision for arbitration in the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea which authorizes post-dispute arbitration agreements. The main difference in the approach of the examined fora is their stance towards the form and drafting of the arbitration agreement. While the USA adopt the most extreme, if one can say, approach, by enforcing both arbitration clauses stipulating for mandatory arbitration to the exclusion of state courts and post-dispute arbitration agreements, Europe, influenced by the European Courts of Human Rights jurisprudence and the Unfair Terms Directive, clearly rejects mandatory arbitration clauses, since they are presumed to be abusive. Differently, post-dispute arbitration agreements between the passengers and the carrier do not seem to be a problem in either jurisdiction.

Many passengers fear the time, cost, and energy associated with pursuing an individual arbitration and therefore prefer to proceed on a group basis. However, the analysis reveals that large scale arbitration could work well in case of passengers with relatively low value claims, not justifying a single action. Respondents on the other hand only favor broad resolution of group claims after it becomes clear that the matter will be adjudicated on a large-scale basis. In many cases, respondents believe that their legal liability will be eliminated if they can eliminate the possibility of a group action, since many claimants will be unable or unwilling to proceed on a bilateral basis. Taking into account the above, it seems that the possibility of large-scale arbitration would be more beneficial for the passenger than for the shipowner, while at the same time the latter would still be benefited from the use of arbitration, joining multiple claims into a single neutral forum and enjoying secrecy on matters of wide social significance.

Nevertheless, in theory such arrangements are always easier than in practice. In the USA, even though the use of arbitration in consumer/passenger disputes is much more popular and advertised, large-scale arbitration seems not a feasible alternative at present. The US example of cruise lines is indicative of their approach. Specific and now standardized clauses on cruise ship tickets require passengers to submit most claims to arbitration and prohibit them from uniting similar claims in a class action or class arbitration. They contain the so called “class action waivers”. Even worse, the US Supreme Court, in a series of judgments upheld their validity.

With respect to Europe, while EU law has achieved the goal of uniformity in consumer protection, and the principle of the protection of the weaker party is incorporated in all legislations of the EU Member States, the mechanisms of collective relief are at an infant stage. Moreover, the possible application of the concepts of class actions and class arbitration in the continental law generate still various concerns. It is also true that EU policymakers, even though they have recently attributed a significant role to collective redress, they do not look at the arbitration forum for the resolution of mass claims.

Pollution claims

The discussion in relation to this category of claims revolves around the theory and application of mass forms of arbitration, which are in principle treaty-based. The analysis and arguments drawn have been heavily influenced by the concept of mass arbitration  that was first innovatively used in the context of investment arbitration. In contrast to the passengers’ claims, there is no contractual relationship in place between the victims of mass harm and the ship-owner. Also, the claims are usually vast in numbers and the various claimants cannot be easily grouped, since they base their claims on different legal grounds. Their only link is that they have suffered damage due to the same event.

The main factor that triggered the application of this exercise in the field of pollution claims is the need for concentration of these claims in one forum. This derives, on the one hand, from the text of the international conventions and, on the other hand, from the fact that they cannot be handled properly if they are not concentrated in one place.

According to the wording of 1992 CLC, if there is a pollution damage in several countries, claimants can address the courts of all of these countries, irrespective of their nationality or the exact localisation of the damage they bring their claim for. Also, there is no lis pendens rule in the 1992 CLC, according to which the proceedings in one contracting State could be stayed in favour of earlier proceedings in another contracting State. Moreover, the ship-owner has the right to set up the fund in any of the contracting States in which an action is brought, or, if no claim is brought, in any of the contracting States in which a claim could be brought. Nevertheless, only the court of the place where the fund has been constituted is competent to decide on the apportionment and the distribution of the fund, which means that all claims for payments must in the end be addressed to this court. Similar wording is used in the International Convention on Civil Liability for Bunker Oil Pollution Damage (BOPC) and the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea (HNS).

The above coupled with the different kinds of proceedings initiated in the various fora generate the reasonable question of why are there so many alternatives of competent courts since the claims will have to get technically concentrated in the end in one forum? The fact that there is not a single court that has jurisdiction over all the interested parties, creates a huge risk.

Many courts dealing with such cases resolve procedural issues by excluding foreign plaintiffs from the plaintiff group. However, courts that cannot assert jurisdiction over all of the putative parties to a dispute fail to fulfil one of the primary rationales supporting large-scale relief, namely the resolution of mass disputes at a single time, in a single forum. This deprives the parties of certain efficiencies of scale as well as the speedy route to finality that so many defendants desire. Second, it requiring claimants to seek redress in different jurisdictions can lead to different parties having different rights and remedies, despite having suffered identical injuries from the same historic event. Third, forcing cases to go forward in multiple jurisdictions can lead to inconsistent results, since courts in one state are not bound by factual or legal determinations made elsewhere. This can lead to defendants being required to undertake conflicting duties and it can also give rise to inequitable treatment of injured parties, particularly if judgements that are rendered earlier in time exhaust a limited fund.

The instruments regulating compensation for ship-source pollution do not provide for arbitration. The alleged reason is because the whole structure of compensation under the international conventions is based on an entitlement to limit liability. So, in order to claim the benefit of limitation, a shipowner is required to constitute a limitation fund with the court of the contracting state in which the action is brought against him. The conventions therefore envisage litigation rather than arbitration, although the majority of cases are settled by negotiation.

There are two kinds of (parallel) proceedings that can take place in the aftermath of a maritime casualty: proceedings on the merits of the case, if the extent of the liability and/or the extend of the damage are disputed, and limitation proceedings, which are initiated by the shipowner in order to benefit from the limitation of his liability.

The analysis carried out for the research concludes that arbitration is compatible with both proceedings.

Αs to the types of claims that arise, it is clear that all of them can be validly submitted to arbitration except for the personal injury and death claims. But, even these types of claims are clearly arbitrable in the USA and, in part, also in other common law jurisdictions, like the UK. The same applies to the types of damages claimed by the victims. Although the adjudication of damages falls strictly speaking outside the scope of the current analysis, it is worth clarifying that international tribunals are very much familiar and experienced in adjudicating both compensatory (such as actual loss, consequential loss, pure economic loss) and non-compensatory damages (such as moral and punitive damages).

Also, the selection of claims for compensation is not in any way contrary to the function of an arbitral tribunal. One can argue that the courts have better facilities and more staff to support a large volume of claims, but another could counter-argue that an arbitral tribunal constituted for this particular purpose will have more time and expertise to handle this task efficiently and quickly. Also, arbitral tribunals have historically proved that they have the capacity to deal efficiently with large-scale claims which have strong technical characteristics.

Most of the advantages of arbitration benefit both sides involved in environmental disasters. Particularly for the respondent, the possibility to adjudicate mass claims in a single neutral forum and thus to achieve concentration of homogeneous claims in one place would be a highly valued point since it would either facilitate settlements or result in consistent awards. This would be coupled with the preservation of confidentiality of the arbitral proceedings and, thus, the reduced risk of negative publicity. This would make arbitration appear very appealing to potential respondents.

Concluding Remarks

Given the need for efficiency and procedural economy as well as the trend in contemporary European civil procedure for further specialization and privatization of civil justice, arbitration comes up as a viable solution for mass claims in the maritime environment. De lege ferenda solutions, mainly in the form of legislative proposals to existing maritime treaties, are displayed in the conclusions’ chapter of the book.

To conclude, the research carried out reveals that one field which can easily generate mass sea-related pollution claims and which remains unregulated is the field of oil rigs and offshore hydrocarbon platforms. An international Convention regulating their use as well as the dispute resolution methods in case of mass accidents like Deep Water Horizon is a matter of urgent necessity. If adopted, a Convention could offer a fertile ground for the use of arbitration in tabula rasa towards the resolution of mass pollution claims.

Further insight into the results of the research can be found in the book which is available here.

In Sharp v Autorité des marchés financiers, 2023 SCC 29 (available here) the Supreme Court of Canada has held that a Quebec administrative tribunal, the Financial Markets Administrative Tribunal, can hear a proceeding brought by the administrative agency that regulates Quebec’s financial sector, the Autorité des marchés financiers, against four defendants who reside in British Columbia.  The AMF alleged in the proceedings that the defendants had contravened the Quebec Securities Act.

The courts below, including a majority of the Quebec Court of Appeal, focused the analysis on s. 93 of the Act respecting the Autorité des marchés financiers, CQLR, c. A-33.2, which grants the FMAT jurisdiction to make determinations under the Securities Act.  They interpreted and applied this provision in light of Unifund Assurance Co. v Insurance Corp. of British Columbia, 2003 SCC 40, a leading decision on the scope of application of provincial law, which held that a provincial regulatory scheme constitutionally applies to an out-of-province defendant when there is a “real and substantial connection”, also described as a “sufficient connection”, between the province and the defendant.  This test was met on the facts [see para 22] and so the FMAT had jurisdiction.  This analysis is not generally understood as being within the field of conflict of laws.  Indeed, the majority of the Court of Appeal “saw no conflict of jurisdiction or any conflict of laws that would require the application of private international law rules to this case” [see para 29].

In separate concurring reasons at the Court of Appeal, Mainville JA found that the FMAT’s jurisdiction was to be found in Title Three of Book Ten of the Civil Code of Quebec, which establishes rules for the “International Jurisdiction of Québec Authorities”.  These are Quebec’s private international law rules for taking jurisdiction and so squarely this is a conflict of laws approach.

The majority of the Supreme Court of Canada observed [para 7] that “the character of the proceedings and the conclusions sought before the FMAT could suggest, at first blush, a regulatory matter that does not concern the C.C.Q. The dispute involves a public regulator seeking prohibitions and administrative penalties under a legislative scheme designed to protect the public interest in the securities markets. One might indeed expect jurisdiction over this regulatory scheme to stand outside the scope of Quebec’s law of general application established by the C.C.Q.”  Roll credits!  In fairness, that was the view of the courts below and it seems a very straightforward way of resolving the issue.  Surprisingly, then, it does not end up being adopted by the court.

The court concludes that because securities regulation has a “hybrid character” [para 7] the starting point for analysis has to be the general approach to taking jurisdiction under the conflict of laws, looking to the provisions in the CCQ.  Because they are laws of general application, the “provisions of Title Three of Book Ten of the C.C.Q. can, in principle, apply to an administrative tribunal like the FMAT, even if no private right is in issue and even if no conflict of jurisdiction arises” [para 41; see also para 63].  However, the court then concludes, contrary to the decision of Mainville JA, that the FMAT does not have jurisdiction under the CCQ [para 73].  But a majority of the court goes on to hold that s. 93 provides the FMAT with jurisdiction over the defendants in accordance with Unifund (Cote J dissents from this view).  Section 93 is a special jurisdictional rule, beyond the CCQ, which gives the FMAT jurisdiction [paras 93-94].  In the end, the detour/digression into conflict of laws and the CCQ is not a significant factor in arriving at the ultimate result.  The majority explains that “[t]o evaluate whether these statutes may be applied in such circumstances, the Quebec securities scheme must be interpreted to determine its territorial reach. That issue involves consideration of this Court’s decision in Unifund, which holds that the permissible territorial application of provincial legislation is determined by assessing the sufficiency of the connection among the enacting jurisdiction, the subject matter of the legislation, and the individual or entity sought to be regulated” [para 102].  This aligns very closely with the position of the majority of the Court of Appeal below.

Particularly with respect to the law of Quebec, the decision is important for what it says about the relationship between the conflicts rules in the CCQ and the jurisdiction of any administrative tribunal.  It also offers, in setting out its conclusions that none of the general CCQ rules apply, some observations on the scope of those provisions, which could be helpful for future disputes.  Both the majority decision and the dissent contribute to these issues.  In addition, the majority opinion offers several observations about the Unifund test regarding the extraterritorial application of provincial law [paras 111-23].  One of these is that the “real and substantial connection” test used in Unifund is different from other “real and substantial connection” tests used elsewhere in the law, such as for purposes of assumed jurisdiction under Club Resorts Ltd. v Van Breda, 2012 SCC 17.  The majority describes this as a “family” of tests [para 118], noting that “the same formula of words … involves different considerations in each of the varying contexts in which the formula is employed”.  This has been reasonably well understood prior to this decision but it is interesting to see it explained as such by the court.

Justice Cote dissents.  She agrees with the primacy of the CCQ provisions in the analysis and that none of them apply to give the FMAT jurisdiction.  She disagrees with the majority on the basis that, in her view, none of the statutory provisions beyond the CCQ give the FMAT jurisdiction over the British Columbia resident defendants [para 156ff].  In her view, Unifund does not apply to this issue because the concern is the territorial jurisdiction of the FMAT and not the application of the Securities Act [paras 174-75].

In the Canadian context, it will be interesting to think about what the decision might herald for subsequent analysis of the jurisdiction of an administrative tribunal in a common law province.  Will the starting point in those situations be the private international law rules on jurisdiction in that province, whether found in a court jurisdiction statute or in the jurisprudence?

The Children’s Rights Academy of the University of Geneva is organising an online Executive Training on Civil Aspects of International Child Protection (ICPT) from December 2023 to April 2024. For more information, click here.

The training is divided into four modules and is being coordinated by Dr. Vito Bumbaca. There is a registration fee (for the full programme or per module). Click here to register (registration is possible until 18 January 2024).

See below for a description of the modules.

Module 1 – 07 December 2023, 14:15 – 18:45 (online learning)

Children’s Individual Rights in Transnational Parental Relationships

This module pertains to the intersection of international child protection and children’s rights. Children in need of protection hold individual rights that are impacted by parental relationships, behaviours and conduct. Such rights are enshrined in universal, regional and national legal instruments, such as the UN Convention on the Rights of the Child, the European Convention on Human Rights and national Constitutions at first. Inherently, the UN Committee on the Rights of the Child and the European Court of Human Rights, respectively as quasi-judicial and judicial bodies, have in many occasions pinpointed the undeniable legal consequences, arising from parental relationships and litigation in national and transnational contexts, on the protection of children and their fundamental rights. Particularly, but not exhaustively, civil abduction, custody, adoption, surrogacy, family reunification, migration status, children’s properties have been crucial in the courts view for the determination of children as individual rights holders and subject to international protection. Lecturers will present selected topics of current research and practice, focusing on the above intersection. Discussions will follow after each intervention.

Module 2 – 18 January 2024, 14:15 – 18:45 (online learning)

International and Comparative Family Law

This module concerns the implementation of private international law rules governing international child protection, known as ‘International Family Law’. The latter includes international conventions and regional instruments typically determining jurisdiction, applicable law, recognition, cooperation among governmental and other bodies. As a comparative assessment, national laws, known as domestic rules, and national case law are part of this module. Parental relationships and litigation are the subject of multiple legal instruments, of national, regional and international nature, whose knowledge and interplay are fundamental for the timely transnational enforcement of child protection policies and measures. Also, alternative dispute resolution methods (i.e. Arbitration, Mediation) are referred to in this module as a way of preventing parental litigation in court. Lecturers will present selected topics of current research and practice, raising awareness about the above implementation and related issues, with the support of actual case law and law clinic. Discussions will follow after each intervention.

Module 3 – 29 February 2024, 14:15 – 17:45 (online learning)

Vulnerable Migration

This module deals with the protection of unaccompanied minors, as well as with separated and displaced children seeking asylum. The context is the one of transnational movements whereby various vulnerable scenarios would be encountered, such as guardianship, legal representation, family reunification, civil abduction, child custody, recognition of child and family statuses. These are some of the legal situations that are envisaged by parallel family law and migration law procedures involving interconnected issues of vulnerable migration and child protection for civil purposes. Lecturers will present selected topics of current research and practice, handling this specific context in which transversal knowledge of international family law and migration law is required. Discussions will follow after each intervention.

Module 4 – 18 April 2024, 14:15 – 17:45 (online learning)

Practice of Child Protection Stakeholders: Inter-agency Co-operation in Context

This module accentuates both the legislative and practical course of transnational governance of child protection policies and civil measures, addressing the question of “who does what”? What are the potential fora in which international child protection policies are discussed, approved and enforced? Practically, when a child is a victim of international civil abduction, what actors may be involved and how do they cooperate? This module aims to clarify and assess the role of all actors possibly involved in legislating and implementing child protection civil procedures, also with respect to vulnerable migration and asylum contexts, notably civil abduction, parental responsibility, maintenance, and alternative care. Lecturers will present selected topics of current research and practice from the perspective of the stakeholders involved in international child protection policies and practices. Discussions will follow after each intervention.

Speakers

Dr. Roberta Ruggiero, CIDE, CRA, UNIGE

Prof. Olga Khazova, UNCRC (former member)

Prof. Karl Hanson, CIDE, UNIGE

Prof. Gian Paolo Romano, Law Faculty, INPRI, UNIGE,

Mr Philippe Lortie, Family Law Division, Hague Conference on Private International Law

Mr Michael Wilderspin, DG Just, European Commission

Dr. Ilaria Pretelli, Swiss Institute of Comparative Law

Prof. Vincent Chetail, International Law Department, Global Migration Centre, IHEID

Irina Todorova, Noelle Darbellay, Core Protection Unit, International Organization for Migration

Dr. Mayela Celis Aguilar, University of Maastricht

Prof. Jason Harts, Professor of Humanitarianism & Development at the University of Bath

Dr. Nicolas Nord, International Commission on Civil Status (ICCS/CIEC)

Joëlle Schickel, Federal Office of Justice, Swiss Central Authority

Jean Ayoub, International Social Service General Secretariat

 

A brochure with detailed information is available here.

This post has been written by Dr Bobby Lindsay, Lecturer at the University of Glasgow. He is the author of a forthcoming book in the OUP Private International Law Series, entitled Cross Border Public Law Claims: Private International Law’s Exclusionary Rules.

Introduction

It is not uncommon for a Rule formulated within Dicey, Morris and Collins to be treated by English lawyers with near-legislative reverence. Fentiman (‘English Private International Law at the End of the Twentieth Century’ in Symeonides (ed), Private International Law at the End of the Twentieth Century, 1999, p169) has noted the impression that, at least in practice, ‘coherence in the conflict of laws means coherence with that legendary work’. Even still, it is remarkable for a judgment of the UK Supreme Court to be framed almost exclusively around an inquiry into the scope of one of the Dicey rules. Rule 20(1) of the latest (16th) edition states:

English courts have no jurisdiction to entertain an action:

(1) for the enforcement, either directly or indirectly, of a penal, revenue or other public law of a foreign state

In Skatteforvaltningen (‘SKAT’) v Solo Capital Partners LLP [2023] UKSC 40, the ‘essential questions’ were identified to be the scope of Rule 20(1) and its application to the facts, which concerned an alleged widescale fraud on the Danish tax authority ([2]). It marks the first time the apex court has considered the revenue rule since Re State of Norway’s Application [1990] 1 AC 723 in 1989, and the first time it directly has addressed the ‘other public law’ strand of Rule 20(1).

Facts and Procedural History

The Danish tax authorities already have contributed to our understanding of the scope of what is now Rule 20(1). But the £4 million sought (via a nominee liquidator) by SKAT’s predecessor in QRS v Frandsen [1999] 1 WLR 2169 pales in significance compared to the £1.44 billion sought by SKAT in the present litigation. The case related to ‘cum-ex’ schemes (also known as ‘dividend stripping’). To create the impression that multiple parties owned shares with dividend entitlements, companies would trade shares with (cum) and without (ex) dividend rights at high volume. That impression allowed those multiple parties to present to tax authorities as meeting the criteria for refunds in respect of dividend tax, when only one party – the true owner of the dividend-entitled shares – could legitimately claim such a refund.

Solo Capital Partners (‘SCP’), the appellants, allegedly assisted companies with such a scheme to SKAT’s detriment. Non-residents of Denmark are liable to pay 27% in ‘withholding’ tax (WHT) on dividends received from Danish companies. Before paying out on dividends, Danish companies will withhold the tax which is due and pay this to SKAT to discharge the shareholder’s liability, before passing on the residue to the shareholder or their agent. However, taxpayers falling under provisions of relevant double taxation treaties were entitled to receive a full or partial refund in relation to the withheld WHT. Clients of SCP presented themselves to SKAT as entitled to WHT refunds, which they duly received. But SKAT later alleged that those clients never owned the relevant shares, never were liable for WHT, and were not entitled to those refunds. The scale of the fraud has become a national Danish scandal, and one factor behind the reorganisation of SKAT into seven separate authorities.

Tortious, equitable, and restitutionary claims (in English and Danish law) were brought by SKAT in England against (as at the time of the Supreme Court’s decision) 89 defendants, including SCP and associated parties. To keep such mass litigation manageable, trials of two preliminary issues were directed: the first on jurisdiction; the second to establish what constituted a valid WHT application under Danish tax law. Andrew Baker J found against SKAT on the jurisdiction point ([2021] EWHC 974 (Comm)), holding that SKAT’s claims were inadmissible attempts to enforce Danish revenue law. This was reversed by the Court of Appeal ([2022] EWCA Civ 234). Permission to appeal to the Supreme Court successfully was obtained by SCP; the trial of the second preliminary issue continued to judgment while the Supreme Court heard the jurisdiction point.

Judgment

Lord Lloyd-Jones first notes ([21]) the suggestion of the editors of Dicey, Morris and Collins that the rule does not really go to the existence of the English court’s jurisdiction, but to its exercise. His Lordship then observes the distinction between the enforcement of a revenue law (which is forbidden) and the recognition of such a law (which is permitted). He then goes on ([22]) to discuss the two primary justifications which have been put forward for the rule. First, sovereignty: by submitting a tax claim in State B, State A exceeds the bounds of its own sovereignty in an impermissible manner. Secondly, the avoidance of embarrassment: the admittance of revenue claims might risk the forum having to declare a particular foreign tax as contrary to public policy, and so wholesale rejection is said to be the safest court. Lord Lloyd-Jones disfavoured the second rationale. English courts, eg in asylum cases, or those involving forum non conveniens and the foreign act of state doctrine(s), may have cause to criticise the conduct of foreign states, their institutions, or their legal system. The sovereignty rationale provided ‘a principled basis’ for the rule.

The key dispute between the parties was whether the existence of an unsatisfied foreign revenue claim was a prerequisite for the application of the revenue rule ([23]). Lord Lloyd-Jones surveyed ([24]-[32]) revenue law authorities from Sydney Municipal Council v Bull [1909] 1 KB 7 up to Webb v Webb [2020] UKPC 22. In each, the relevant court operated on the assumption that the revenue law rule prohibits the collection or recovery of tax which has not been paid. Importantly, this was consistent with the speeches in the House of Lords in Williams & Humbert Ltd v W & H Trade Marks (Jersey) Ltd [1986] AC 368 (see [27]-[29]). There, Lord Mackay noted (at 441A) that the ‘enforcement’ of a foreign revenue law could not be said to arise where ‘no claim under that law remained unsatisfied’: an ‘unsatisfied claim’ was an ‘essential feature’ of the application of the revenue rule.

Lord Lloyd-Jones concluded ([36]) that the existence of an unsatisfied demand for tax was a prerequisite for the application of the revenue rule. Without such a claim, the foreign tax authority’s action cannot be said to involve the enforcement of the foreign revenue law. Not only was this consistent with the ratio of Williams & Humbert, but the limitation was consistent with the sovereignty-based rationale for the revenue rule: if no tax was due, then the tax authority’s claim could not be an extraterritorial assertion of the sovereign power to impose tax. It also cohered with the enforcement/recognition distinction. As the whole basis of SKAT’s claim was that no tax was due from the relevant parties at any point, the revenue rule was not engaged on the facts ([38]-[39]). While the ‘Danish tax system undoubtedly provided the context and opportunity for the alleged fraud and the operation of the fraud can be understood only by an examination of that system’, that did not make the claim one for the enforcement of Danish tax law. At most, the resolution of the claims would involve the recognition of various aspects of the Danish tax regime by the English courts, which was permissible. These were simply private law claims of the same variety as enjoyed by ‘all legal and natural persons’ ([42]).

Nor were the claims precluded by the wider ‘sovereign power’ rule: it was not a claim to recover amounts imposed by Danish public law and did not involve the exercise of any ‘prerogative right’ ([53]-[54]). The test in Mbasogo v Logo Ltd [2006] EWCA Civ 1370, focusing on the exercise of a peculiarly sovereign/prerogative/pubic right, effectively was endorsed ([55]-[57]). Any initial exercise of sovereignty by Denmark was too remote from the claims before the English courts to see them fall foul of that test; the tax regime merely provided the context for the restitutionary claims, which could have been pursued by any private party ([58]). That conclusion was not altered by the fact that SKAT had acquired evidence through sovereign powers: that was ‘at most, of merely peripheral significance’ to the characterisation of the claim ([61]). The claims, therefore, fell entirely outside the scope of Rule 20(1), and now may proceed to trial, which presently is listed to take place for well over one year.

Comment

The judgment in SKAT puts it beyond doubt that an unsatisfied tax claim due under foreign law is a prerequisite for the application of the revenue rule. In a decision handed down between the High Court and Court of Appeal judgments in SKAT, a majority of the Hong Kong Court of Appeal refused to conclude definitively on this point. Andrew Baker J’s first instance judgment played some role in the hesitancy of the majority; the categorical view of a unanimous UK Supreme Court to the contrary will no doubt influence the future position in Hong Kong and elsewhere.

Despite clearly stating the limits of the revenue rule, the decision does not give much succour to those (such as the present author) who would like to see the rule pared back. The rule still is alive and well. In discussing the conspiracy claim brought by HMRC in Case C-49/12 Sunico, Lord Lloyd-Jones opines ([44]-[47]) that private law actions brought by a foreign tax authority still will be caught by the revenue rule if their success would have the effect of making good on an unsatisfied tax claim. That stands in opposition to conclusions reached (albeit on a preliminary basis) in Hong Kong and Singapore, but a similar approach recently has been adopted in Gibraltar. The rule still will constitute a firm barrier to attempts by foreign tax authorities to pursue claims for tax the payment which has been evaded by fraudsters.

The judgment also confirms that the ‘other public law’ rule, possibly rebranded as the ‘sovereign authority rule’, definitively forms part of the exclusionary rules of English private international law.  That raises the question of its relationship with the revenue and penal law rules. Rule 20(1) suggests the ‘other public law’ rule sits alongside the revenue and penal rules. However, following SKAT, it seems that the ‘sovereign authority rule’ is a higher-order principle, and that the revenue and penal law rules are specific categories of its operation. Lord Lloyd-Jones notes ([54]) that ‘it would require exceptional circumstances’ to bring a claim falling outside the revenue rule within the ‘wider sovereign authority rule’, and it is difficult to envisage what such circumstances could entail. Lord Lloyd-Jones notes ([62]) that the sovereign authority rule, but not the revenue rule, may be subject to a public policy exception. While it might seem strange that a public policy exception operates at the general, but not the specific, level, the situation can be compared (loosely and impressionistically) with the law of negligence. There, a claim falling within an established category attracts the application of fixed rules, but a novel claim invites wider considerations of policy. The existence of that policy stopgap perhaps makes up for the fact that definition of what is an ‘other foreign public law’, or what involves the exercise of foreign ‘sovereign authority’, sometimes can be elusive.

Whether the Supreme Court’s analysis of SKAT’s claim makes that definitional exercise any more straightforward is a question for another time. More, too, could be said about Rule 20 being described as one which goes to the ‘admissibility’ of foreign claims (eg [1], [15], [39]). The Supreme Court’s faith in the ‘sovereignty’ justification, rendered contestable by convincing attacks by Carter, and a sustained recent critique by O’Hanlon, also deserves further comment. And nothing in the decision does much to help illuminate the precise relationship between Rule 20(1) (the revenue rule, the penal rule, and the ‘sovereign authority’ rule) and Rule 20(2) (the various act of state doctrines). But, on the narrow question presented to the Court, its very clear limitation of the revenue rule is to be welcomed.

The Universidade Portucalense (UPT) will be hosting the 2nd International Congress of Civil Procedural Law on 15 and 16 December 2023. The hybrid event will focus on “The Challenges of De-Judicialisation of Justice”.

The organizers have been so kind as to share the call for papers with us. Further information can also be found here.

Yesterday, the UK Government published its response to a consultation on the prospect of joining the 2019 HCCH Judgments Convention. After summarising the responses received during the consultation, the Government concludes:

16. It is clear from the responses received for questions 1, 2 and 5 that respondents consider the merits of Hague 2019 to outweigh any potential downsides. This corresponds with the feedback that the Government received from stakeholders during round-table engagement sessions on this matter.

17. Having carefully considered the responses received and wider stakeholder feedback, the Government has decided that the UK will sign Hague 2019 as soon as practicable. […]

The Government also addresses the question of possible reservations under Articles 14, 16, 18, and 19 and a possible notification under Article 29:

49. Declarations under Articles 14, 16, 18 and 19 can be made upon signature, ratification, or at any time thereafter, and may be subsequently modified or withdrawn at any time. Having carefully considered the responses to question 9, the Government is of the view that there were no sufficiently strong policy reasons raised by respondents to this Consultation to warrant the UK making declarations under the relevant articles of Hague 2019 at this time.

[…]

52. The Government will keep questions of declarations under review as it proceeds to signature and implementation, and in future as the Convention comes into force between the UK and current and future Contracting States.

53. The Government has considered the concerns in relation to the Russian Federation having signed Hague 2019 and considers that UK should sign the Convention with the understanding that a future notification in relation to the Russian Federation under Article 29 would be available to prevent the Convention applying between the UK and Russia, should there be any development in the latter’s ratification of Hague 2019.

The decision has already been welcomed by the President of the Law Society.

On 23 November 2023, the UK Ministry of Justice published its response to the consultation on whether the UK should sign and ratify the Hague Convention of 2 July 2019 on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters. The Government has concluded that it is the right time for the UK to join Hague 2019 and will seek to do so as soon as practicable.

The Convention will have UK-wide extent, that is apply in all three jurisdictions of the UK. It will be implemented using a registration model, similar to the one used for the 2005 Hague Choice of Court Convention. The UK will not make a declaration under Articles 14, 16 or 19.

The Children’s Rights Academy at the University of Geneva offers an executive training programme on Civil Aspects of International Child Protection (ICPT).

The programme includes four half-day online modules in English (Children’s Individual Rights in Transnational Parental Relationships; International and Comparative Family Law; Vulnerable Migration and Practice of Child Protection Stakeholders: Inter-agency Co-operation in Context), scheduled to take place between 7 December 2023 and 18 April 2024.

Roberta Ruggiero, Gian Paolo Romano and Karl Hanson are the programme directors; Vito Bumbaca is the coordinator.

Speakers include: Roberta Ruggiero, Olga Khazova, Karl Hanson, Gian Paolo Romano, Philippe Lortie, Michael Wilderspin, Ilaria Pretelli, Vincent Chetail, Irina Todorova, Noelle Darbellay, Mayela Celis Aguilar, Jason Harts, Nicolas Nord, Joëlle Schickel and Jean Ayoub.

For further info, see here.

Written by Bill Dodge, the John D. Ayer Chair in Business Law and Martin Luther King Jr. Professor of Law at UC Davis School of Law.

There are better and worse ways to criticize U.S. extraterritorial jurisdiction. In Part I of this post, I discussed some shortcomings of a February 2023 report by China’s Ministry of Foreign Affairs, “The U.S. Willful Practice of Long-arm Jurisdiction and its Perils.” I pointed out that the report’s use of the phrase “long-arm jurisdiction” confuses extraterritorial jurisdiction with personal jurisdiction. I noted that China applies its own laws extraterritorially on the same bases that it criticizes the United States for using. I argued that the report ignores significant constraints that U.S. courts impose on the extraterritorial application of U.S. laws. And I suggested that China had chosen to emphasize weak examples of U.S. extraterritoriality, such as the bribery prosecution of Frédéric Pierucci, which was not even extraterritorial.

In this post, I suggest some better ways of criticizing U.S. extraterritorial jurisdiction. Specifically, I discuss three cases in which the extraterritorial application of U.S. law appears to violate customary international law rules on jurisdiction to prescribe: (1) the indictment of Huawei executive Wanzhou Meng; (2) the application of U.S. sanctions based solely on clearing dollar transactions through U.S. banks; and (3) the application of U.S. export controls to foreign companies abroad based on “Foreign Direct Product” Rules. The Ministry of Foreign Affairs report complains a lot about U.S. sanctions, but not about the kind of sanctions that most clearly violates international law. The report says much less about export controls and nothing about Meng’s indictment, which is odd given the tensions that both have caused between China and the United States.

Wanzhou Meng

In 2018, federal prosecutors in New York indicted Huawei executive Wanzhou Meng for bank and wire fraud. They then sought her extradition from Canada, where she had been arrested at the request of U.S. authorities. The indictment was based on a meeting in Hong Kong between Meng and HSBC, a British bank, to convince it to continue doing business with Huawei despite concerns that the Chinese company might be violating U.S. sanctions on Iran. The prosecution’s theory appears to have been that Meng’s representations at this meeting ultimately caused HSBC’s U.S. subsidiary to clear foreign transactions denominated in dollars through the United States in violation of Iran sanctions.

During the extradition proceeding, I filed an affidavit with the Canadian court explaining why the U.S. prosecution violated international law.  Customary international law allows states to exercise prescriptive jurisdiction only when there is a “genuine connection” between the subject of the regulation and the regulating state. There are six traditional bases for jurisdiction to prescribe: territory, effects, active personality, passive personality, the protective principle, and universal jurisdiction.

Clearly the United States did not have prescriptive jurisdiction based on territory or nationality because the conduct occurred in Hong Kong and Meng is not a U.S. national. Passive personality, which recognizes jurisdiction to prescribe based on the nationality of the victim, also could not justify the application of U.S. law in this situation because the alleged misrepresentations were made to a non-U.S. bank. And bank and wire fraud do not fall within the categories of offenses that are subject to the protective principle or universal jurisdiction.

The only possible way of justifying the application of U.S. law would be effects jurisdiction, reasoning that Meng’s meeting with a British bank in Hong Kong caused its U.S. subsidiary to continue clearing dollar transactions through New York. But, in this case, it was not clear that the alleged misrepresentations actually caused such effects in the United States. And even if they did, it is difficult to say that such effects were substantial, which is a requirement for effects jurisdiction under customary international law.

Apart from customary international law, it is also doubtful that Meng’s conduct in Hong Kong fell within the scope of the federal bank and wire fraud statutes. Applying the presumption against extraterritoriality (a limit on U.S. extraterritorial jurisdiction discussed in yesterday’s post), the Second Circuit has interpreted those statutes to require conduct in the United States that constitutes a “core component” of the scheme to defraud. Although U.S. courts are currently divided on how much U.S. conduct is required under the federal bank and wire fraud statutes, Meng engaged in no U.S. conduct at all.

After nearly three years of house arrest in Canada, Meng agreed to a deferred prosecution agreement with the United States, in which she admitted that her statements to HSBC were false (though not that they violated U.S. law), and she returned to China. The agreement resolved a “damaging diplomatic row” between China and the United States. Because the indictment provides a clear example of U.S. extraterritorial jurisdiction in violation of international law, it is odd to find no mention of this case in the Ministry of Foreign Affairs report.

Correspondent Account Jurisdiction

A second example of U.S. extraterritorial jurisdiction that violates international law involves U.S. secondary sanctions. In contrast to Meng’s indictment, the report discusses U.S. sanctions at length, but it does not focus on the kind of sanctions that most clearly violate international law. This is what Susan Emmenegger has called “correspondent account jurisdiction”: sanctions imposed on foreign persons engaged in foreign transactions when the only connection to the United States is clearing dollar payments through banks in the United States.

The report calls the United States a “sanctions superpower” and specifically mentions U.S. sanctions against Cuba, Iran, Iraq, Libya, and Syria, as well as human rights sanctions under the Global Magnitsky Human Rights Accountability Act. “Sanctions strain relations between countries and undermine the international order,” the report says. They can also cause “humanitarian disasters.”

One can certainly criticize some U.S. sanctions as a matter of policy. As a matter of international law, however, most of these programs have strong support. U.S. sanctions typically take the form of access restrictions, limiting the ability of foreign parties to do business in the United States or with U.S. nationals. Under international law, these programs are based on the territoriality and nationality principles. In their comprehensive legal analysis of U.S. secondary sanctions, Tom Ruys and Cedric Ryngaert note that “most of these measures—denial of access to the US financial system, access to US markets, or access to the US for individual persons—merely amount to the denial of privileges” and “international law does not entitle foreign persons to financial, economic, or physical access to the US.”

But correspondent account jurisdiction is different. The United States is currently prosecuting a state-owned bank in Turkey, Halkbank, for violating U.S. sanctions on Iran. According  to the indictment, Halkbank ran a scheme to help Iran repatriate more than $20 billion in proceeds from oil and gas sales to Turkey’s national oil company by using the proceeds to buy gold for Iran and creating fraudulent transactions in food and medicine that would fit within humanitarian exceptions to U.S. sanctions. The only connection to the United States was the clearing of dollar payments through banks in the United States.

As discussed above, customary international law requires a “genuine connection” with the United States. None of the traditional bases for jurisdiction to prescribe would seem to supply that connection. Halkbank is not a U.S. national, and it is being prosecuted for conduct outside the United States. Passive personality does not provide jurisdiction under international law because the only potential harm to U.S. persons from Halkbank’s conduct is the risk of punishment for Halkbank’s correspondent banks for violating U.S. sanctions, harm the United States is well placed to avoid. And clearing dollar transactions is not the sort of conduct that either the protective principle or universal jurisdiction covers.

That leaves the effects principle—that by arranging transactions with Iran in dollars outside the United States, Halkbank caused the clearing of those transactions in the United States. As in Meng’s case discussed above, the problem with this argument is that the effects must be substantial to satisfy customary international law. It is difficult to see how merely clearing a transaction between foreign nationals that begins and ends outside the United States rises to the level of a substantial effect, since it does not in any way disrupt the U.S. financial system.

Correspondent account jurisdiction is not just a violation of international law; it is also a violation of U.S. domestic law. U.S. sanctions against Iran are issued under a statute called the International Emergency Economic Powers Act (IEEPA). IEEPA authorizes the President to prohibit financial transactions only “by any person, or with respect to any property, subject to the jurisdiction of the United States.” As I explain in greater detail here, if the United States does not have jurisdiction under international law, the sanctions are invalid as a matter of domestic law under IEEPA.

The Ministry of Foreign Affairs report wants to claim that U.S. extraterritorial jurisdiction “violates international law.” But on sanctions, it spends most of its energy discussing programs that are consistent with international law. The report mentions correspondent account jurisdiction only briefly, accusing the United States of exercising jurisdiction based on “the flimsiest connection with the United States, such as … using U.S. dollar[s] for clearing or other financial services.” With this example, I agree. I simply wonder why the report did not focus on it to a greater extent.

Foreign Direct Product Rules

A third example of U.S. extraterritorial jurisdiction that the report could have emphasized involves U.S. export controls. On October 7, 2022, in a “seismic shift” of policy, the United States adopted new rules to limit China’s ability to develop advanced computing power, including artificial intelligence. (The rules were updated last month.) Most of these rules are consistent with international law, but the Foreign Direct Product Rules arguably are not.

First, the regulations limit the export from the United States of computer chips with advanced characteristics, other products that contain such chips, and equipment used to manufacture such chips. These restrictions are consistent with international law because they are based on U.S. territorial jurisdiction.

Second, the regulations add several Chinese companies, universities, and other entities to the U.S. Entity List and Unverified List, which prohibit those entities from receiving exports from the United States. Again, these restrictions are consistent with international law because they are based on U.S. territorial jurisdiction.

Third, the regulations prohibit U.S. engineers and scientists from helping China with semiconductor manufacturing even if those individuals are working on things that are not subject to export controls. These restrictions are consistent with international law because they are based on U.S. nationality jurisdiction.

Fourth, the regulations extend U.S. export controls extraterritorially to non-U.S. companies outside the United States. These rules are known as Foreign Direct Product Rules (FDP rules) because they prohibit foreign companies from exporting goods to China that are the direct products of technology that originated in the United States. Currently, the most advanced computer chips are made in Taiwan, South Korea, and Japan. The machines to make these chips are manufactured in the Netherlands. But U.S.-origin technology is used in virtually all chip manufacturing. So, the effect of these FDP rules is to extend U.S. export controls to chips made in Taiwan, Japan, and South Korea even if those chips themselves contain no components that were originally made in the United States.

There is a serious question whether FDP rules violate international law. None of the traditional bases for jurisdiction to prescribe exists. These U.S. rules are not based on territory, effects, nationality, passive personality, the protective principle, or universal jurisdiction. The origin of technology is not a traditional basis for jurisdiction to prescribe. Of course, the traditional bases are not exclusive. They are simply well accepted examples of a more general requirement that the regulating state must have a “genuine connection” to whatever it wishes to regulate. But it is not clear that the origin of technology qualifies as a genuine connection.

One thing that makes this analysis more complicated is the reaction of other states. Customary international law is based on state practice, so one must pay close attention to whether other states consider the origin of technology to be a legitimate basis for export controls. China, of course, has protested the U.S. export controls. But Taiwan, Japan, South Korea, and the Netherlands have not. This is different from what happened 40 years ago when the United States imposed export controls on foreign companies to prohibit the sale of certain goods to the USSR to try to stop the building of pipelines from Russia to Europe. In that case, the United States’ allies in Europe strongly protested the export controls as a violation of international law, and in the end the United States withdrew those controls. This time, U.S. allies are supporting the export controls on sales of advanced computer chips to China.

The Ministry of Foreign Affairs report makes no mention of FDP rules. It does claim that “[u]nder the pretext of safeguarding national security,” the United States “has adopted a package of measures including the Entity List and economic sanctions to restrict foreign enterprises from obtaining raw materials, items and technologies vital to their survival and development.” The report’s specific mention of the Entity List, which essentially blacklists certain Chinese companies, is consistent with the emphasis on this list in other Chinese protests of U.S. export controls. But, as explained above, the U.S. Entity List does not violate international law, whereas the FDP rules arguably do.

Conclusion

The United States frequently exercises extraterritorial jurisdiction. As I discussed in Part I of this post, so does China. Countries are within their rights to apply their laws extraterritorially so long as doing so is consistent with international law.

In these posts, I have used the Ministry of Foreign Affairs report as a foil because it has shortcomings. As I described yesterday, it uses confusing terminology, criticizes the U.S. for regulating on the same bases that China does, ignores constraints on U.S. extraterritoriality, and illustrates its points with weak examples (like the case of Frédéric Pierucci, which was not even extraterritorial). But I do not mean to suggest that the United States is beyond criticism. The United States does sometimes apply its laws extraterritorially in ways that violate international law, and, in this post, I have pointed to three examples.

It seems to me that China’s criticism of U.S. extraterritorial jurisdiction would be more effective if it would focus on examples that violate international law rather than on examples that do not. China should be talking less about Frédéric Pierucci and more about Wanzhou Meng.

[This post also appears at Transnational Litigation Blog (TLB)]

A Russian father, who was long since separated from the mother of his children in Russia, came to Finland with his two sons in September 2022 and applied for asylum. The mother in Russia pleaded in Finnish courts that the children should be returned to Russia in line with the 1980 Hague Convention on the Civil Aspects of Child Abduction (1980 Hague Convention), which the two countries are signatories to. The father stated that a return to Russia would not be in the best interest of the children and would constitute a breach of Finland’s international obligations to protect fundamental human rights.

Judgment

In its judgment of 27 September 2023, the Finnish Supreme Court initially held that the prerequisites for return of the children were met as it was uncontested that the removal was wrongful. The issue for the court was whether a return to Russia could be refused despite this. Article 13.1.b of the 1980 Hague Convention allows for refusal if “there is a grave risk that a return would expose the child to physical or psychological harm or otherwise place the child in an intolerable situation.” With reference to the Hague Conference on Private International Law’s Guide to Good Practice from 2020, the Finnish Supreme Court held that the ground for refusal should be interpreted narrowly.

As regards refusal on the grounds of Article 13.1.b, the Court emphasized that an assessment cannot be based on a  comparison of different general living conditions in the requested state and the state of potential return. Living conditions in another country can only be taken into consideration under Article 13.1.b if the fundamental needs of the children will not be met. Holding that it was not proven that the children would lack fundamental needs like food, rest, hygiene, or child-like activities in Russia, the Court found that there was no ground for refusal under Article 13.1.b. Nor was it claimed in the case that the children risked being involved in the Russian war on Ukraine. However, the father argued that the children’s learning of military skills in school was harmful. In this regard, the Supreme Court concluded that there are ideological and practical differences between the Russian and the Finnish school systems. This difference was not considered to reach the threshold for refusing the return of the children.

The Finnish Supreme Court also noted that Article 20 of the 1980 Hague Convention allows a state requested to return a child to refuse to do so if it is not permitted by its fundamental principles relating to the protection of human rights and fundamental freedoms. Here, the court argued that Finnish law has not implemented Article 20 of the Hague Convention and that it therefore could not be applied. Nonetheless, the Court added that a return of children to another country may be refused if it is in conflict with Section 9 of Finland’s Constitution which grants foreigners the right not to be sent to countries where they risk death penalty, torture or other treatment that violates their human dignity.

Lastly, the court also assessed the views of the children themselves. Under Article 13.2, the own views of the child can be taken into consideration if the child has attained such an age and degree of maturity that this is appropriate. Both children had a strong and genuine view that they wanted to stay with the father in Finland. However, the court held that it was only the older of the two children who had attained such an age and maturity that his views could be taken into account. Thus, the Finnish Supreme Court held that “the best interest of the child” as a whole prevailed over the older child’s own view of wanting to stay with the father in Finland.

Comment

Even if the judgment truly illustrates the strong principle of returning the child after a wrongful removal under the 1980 Hague Convention, I think that the Court’s non-application of Article 20 in the Hague Convention deserves some discussion. First, it is worth noting that Article 20 of the 1980 Hague Convention is not formulated as a traditional public policy exception. According to the explanatory report to the 1980 Hague Convention, Article 20 is a compromise of opposing views (see in particular paragraphs 31-34 of the explanatory report). On the one hand, the convention would risk being a “dead letter” if the requested state too easily could apply an exception. On the other hand, the most fundamental human rights must be protected by a requested state in all circumstances. To that extent, Article 20 serves as a public policy exception in practice. Even if the legal value of human rights has increased in Europe since the 1980 Hague Convention was adopted, one must also remember that every in casu-exception of the strong principle rule that abducted children must always be returned risk leading to a collapse of the system. This is especially true for two neighbouring countries with so fundamentally different ideological and political systems as Finland and Russia.