Flux Belges et Lux

This post requires seriously engaged interest in EU waste law. Very few of you I am sure are familiar with my work  – in Dutch (with Tom de Gendt, and Kurt Deketelaere) on animal waste /animal by-products. Yet please all those of you who are not waste nerds, do not turn away yet: for animal wastes and animal by-products are a raw material for biogas installations. The regulatory issues at stake therefore are relevant to the renewable energy sector.

Saugmandsgaard ØE opined end January in C-634/16 ReFood – the English text was not available at the time of writing. A lorry with animal by-products collected in The Netherlands, was making its way to a German biogas installation (one of many many thousands such transports) when it was stopped, the driver being asked to produce the relevant waste export permit – which he did not possess.

Recital 11 of the waste shipments Regulation 1013/2006, introduces the issue at stake, which is avoiding regulatory duplication: ‘It is necessary to avoid duplication with Regulation (EC) No 1774/2002 of the European Parliament and of the Council of 3 October 2002 laying down health rules concerning animal by-products not intended for human consumption, which already contains provisions covering the overall consignment, channelling and movement (collection, transport, handling, processing, use, recovery or disposal, record keeping, accompanying documents and traceability) of animal by-products within, into and out of the Community.’ As a result, the Regulation exempts from its scope of application ‘shipments which are subject to the approval requirements of Regulation (EC) No 1774/2002’. Core of the regulatory conundrum is that Regulation 1774/2002 does not contain ‘approval requirements’ for the relevant category. (They are category 3 animal by-products, these are the least problematic animal wastes).

The AG suggests a broad reading of the exemption, and one which prevents overlap between the two regimes. Animal by-products fall under the exemption full stop: there are no two, three or more ways about it. (The AG argues along the lines of linguistic analysis, regulatory logic, and the preparatory works of all EU secondary law at issue).

Geert.

The Dutch Supreme Court late in January has confirmed the lower court’s decision (see my report here) in Yukos, not to recognise the Russian liquidation order of 1 August 2006 regarding OAO Yukos Oil Company. The decision to recognise or not evidently is based on residuary Dutch conflict of laws (the Insolvency Regulation is not engaged).

At 4.1.3 the Supreme Court emphasises that the principle of mutual trust does not apply, as it would do between EU jurisdictions. It then does not perform the entire ordre public exercise from scratch, rather assesses whether the lower court properly carried out said analysis (as befits its role as a Supreme Court). Which it finds, the Court of Appeals did. Its ordre public check did not in the abstract test Russian court proceedings, rather tested whether the precise conduct of all involved parties led to use of the judicial system in a way which compromises the core Dutch legal order (see for more detail on that, my earlier post).

Textbook ordre public.

Geert.

Twice last week did the Lugano Convention’s protected categories title feature at the Court of Justice. On Tuesday, Szpunar AG opined in C-694/17 Pillar Securitisation v Hildur Arnadottir (consumer protection), and on Thursday Saugmansgaard ØE opined in C-603/17 Bosworth (Arcadia Petroleum) (employment contracts).

The issues that are being interpreted are materially very similar as in Brussels I Recast hence both evidently have an impact on the Brussels I Recast Regulation, too.

At stake in Pillar Securitisation (no English version of the Opinion at the time of writing) is the meaning of ‘outside his trade or profession’ in the consumer title. Advocate General Szpunar takes the case as a trigger to fine-tune the exact relationship between private international law such as was the case, he suggests, in Kainz and also in Vapenik.

I wrote in my review of Vapenik at the time: ‘I disagree though with the Court’s reference to substantive European consumer law, in particular the Directive on unfair terms in consumer contracts. Not because it is particularly harmful in the case at issue. Rather because I do not think conflict of laws should be too polluted with substantive law considerations. (See also my approval of Kainz).’

Ms Arnadottir’s case relates to the Kaupting reorganisation. Her personal loan exceeded one million € and therefore is not covered by Directive 2008/48 on credit agreements for consumers (maximum threshold there is 75K). Does that exclude her contract being covered by Lugano’s consumer Title?

The Directive’s core notion is ‘transaction’, as opposed to Lugano’s ‘contract’ (at 30 ff). And the Advocate-General of course has no option but to note the support given by the Court to consistent interpretation, in Vapenik. Yet at 42 ff he suggests a narrow reading of Vapenik, for a variety of reasons, including

• the presence, here, of Lugano States (not just EU Member States);
• the need for consistent interpretation between Lugano and Brussels (which does not support giving too much weight to EU secondary law outside the private international law sphere);
• and, most importantly, Kainz: a judgment, unlike Vapenik, which directly concerns Brussels I (and therefore also the link with Lugano). One of the implications which as I noted a the time I like a lot, is precisely  its respect for the design and purpose of private international law rules as opposed to other rules of secondary law; and within PIL, the distinction between jurisdiction and applicable law.

At 52 ff Advocate General Szpunar rejects further arguments invoked by parties to suggest the consumer title of the jurisdictional rules should be aligned with secondary EU consumer law. His line of reasoning is solid, however: autonomous interpretation of EU private international law prevents automatic alignment between consumer law and PIL.

Should the CJEU follow its first Advocate General, which along Kainz I suggest it should, no doubt distinguishing will be suggested given the presence of Lugano parties in Pillar Securitisation – yet the emphasis on autonomous interpretation suggest a wider calling.

C‑603/17 Bosworth v Arcadia then was sent up to Luxembourg by the UK’s Supreme Court [UKSC 2016/0181, upon appeal from [2016] EWCA Civ 818] concerning the employment Title of Lugano 2007 (which only the other week featured at the High Court in Cunico v Daskalakis). As helpfully summarised by Philip Croall, Samantha Trevan and Abigail Lovell: do the English courts have jurisdiction over claims for conspiracy, breach of fiduciary duty, dishonest assistance and knowing receipt brought against former employees of certain of the claimant companies now domiciled in Switzerland.

Gross J at the Court of Appeal had applied Holterman and Brogsitter, particularly in fact the Opinion of Jääskinen AG in Brogsitter – albeit with caution, for the AG’s Opinion was not adopted ‘wholesale’ by the CJEU (at 58, Court of Appeal). The mere fact that there is a contract of employment between parties is not sufficient to justify the application of the employment section of (here) the Lugano Convention. Gross J at 67: “do the conspiracy claims relate to the Appellants’ individual contracts of employment? Is there a material nexus between the conduct complained of and those contracts? Can the legal basis of these claims reasonably be regarded as a breach of those contracts so that it is indispensable to consider them in order to resolve the matter in dispute?” – answer: whilst not every conspiracy would fall outside the relevant section, and those articles could not be circumvented simply by pleading a claim in conspiracy, in the circumstances of this case, however precisely the test was formulated, the answer was clearly “no”: key to the alleged fraud lay not in the appellants’ contracts of employment, but in their de facto roles as CEO and CFO of the Arcadia Group.

In the main proceedings, the referring court must therefore determine whether the courts of England and Wales have jurisdiction to rule on those claims or whether it is the courts of Switzerland, as courts of the domicile of the former directors implicated, that must hear all or part of the claims.

The facts behind the case are particularly complex, as are the various wrongdoings which the directors are accused of and there is little merit in my rehashing the extensive summary by the AG (the SC’s hearings leading to the referral lasted over a day and a half).

Saugmansgaard ØE essentially confirms Gross J’s analysis. Company directors who carry out their duties in full autonomy are not bound to the company for which they perform those duties by an ‘individual contract of employment’ within the meaning of the employment section – there is no subordination (at 46). Note that like Szpunar SG, Saugmansgaard ØE too emphasises autonomous interpretation and no automatic colouring of one field of EU law by another: ‘the interpretation which the Court of Justice gives to a concept in one field of EU law cannot automatically be applied in a different field’ (at 49).

In the alternative, he opines that a claim made between parties to such a ‘contract’ and legally based in tort does fall within the scope of that section where the dispute arose in connection with the employment relationship and, secondly, that an ‘employer’ within the meaning of the provisions of that section is not necessarily solely the person with whom the employee formally concluded a contract of employment [at 109: what the AG has in mind are group relations, where ‘an organic and economic link’ between two companies exists, one of whom sues even if the contract of employment is not directly with that company].

It is in this, subsidiary section, at 66 ff, that the AG revisits for the sake of completeness, the difference between ‘contract; and ‘tort’ in EU pil in a section which among others will delight (and occupy) one of my PhD students, Michiel Poesen, who is writing his PhD on same. Michiel is chewing on the Opinion as we speak and no doubt will soon have relevant analysis of his own.

At 82 ff the AG points to the difficulties of the Brogsitter and other lines of cases: ‘the case-law of the Court is ambiguous, to say the least, in so far as concerns the way in which Article 5(1) and Article 5(3) of the Brussels I Regulation and the Lugano II Convention are to be applied in cases where there are concurrent liabilities. It would be useful for the Court to clarify its position in this regard.’ At 83: it is preferable to adopt the logic resulting from [Kalfelis] and to classify a claim as ‘contractual’ or ‘tortious’ with regard to the substantive legal basis relied on by the applicant. At the very least, the Court should hold onto a strict reading of the judgment in Brogsitter’: at 79: the Court meant to classify as ‘contractual’ claims of liability in tort the merits of which depend on the content of the contractual duties binding the parties to the dispute.’, even if (at 84) this authorises a degree of forum shopping, enabling the applicant to choose jurisdiction, with an eye to the appropriate rules: for forum shopping particularly for special jurisdictional rules, is not at all absent from either Regulation or Convention.

There is of course an applicable law dimension to the dispute. The relationships between companies and their directors are governed not by employment law, but by company law (at 52). For an EU judge, the Rome I and Rome II Regulations kicks in. Rome I contains, in Article 8, provisions relating to ‘individual employment contracts’, however it also provides, in Article 1(2)(f), that ‘questions governed by the law of companies’ concerning, inter alia, the ‘internal organisation’ of companies are excluded from its scope (at 55). Rome II likewise has a company law exemption. That puts into perspective the need (or not; readers know that I am weary of this) to apply Rome I and Brussels /Lugano consistently.

One had better sit down for a while when reviewing these Opinions.

Geert.

Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.8.2, Heading 2.2.11.2, Heading 2.2.11.2.9.

Thank you Hélène Péroz for flagging 17-19.935 X v AS Monaco at the French Supreme Court, held December 2018. Claimant is a former physiotherapist employed by AS Monaco. His contract included choice of court ex-EU (not further specified in the judgment but one assumes, Monaco. Monaco is one of those micro-States with a complex arrangement with the EU).

The Supreme court first of all addresses the application of France’s jurisdictional rule R. 1412-1 of the Code du Travail. It assigns territorial jurisdiction in principle to the employment courts of the area where the employee habitually carries out the employment, with fall-back options which are similar to yet not quite the same as the provisions of Brussels I Recast:

Art. R. 1412- 1 L’employeur et le salarié portent les différends et litiges devant le conseil de prud’hommes territorialement compétent. Ce conseil est :

1 Soit celui dans le ressort duquel est situé l’établissement où est accompli le travail ;

2 Soit, lorsque le travail est accompli à domicile ou en dehors de toute entreprise ou établissement, celui dans le ressort duquel est situé le domicile du salarié.

Le salarié peut également saisir les conseils de prud’hommes du lieu où l’engagement a été contracté ou celui du lieu où l’employeur est établi. — [ Anc. art. R. 517- 1, al. 1er à 3.]

These provisions cast a slightly wider jurisdictional net than Brussels I Recast. That gap was even wider before Brussels I Recast had extended its jurisdictional reach to parties (the employer, or the business in the case of the consumer title) domiciled ex-EU. It is particularly its existence pre Brussels I Recast for which the provision is ranked among France’s exorbitant jurisdictional rules.

Now, coming to the case at issue. The Supreme Court first of all addresses the nature of the provision as lois de police and severely curtails same in the event of choice of court ex-EU: ‘ce n’est que si le contrat est exécuté dans un établissement situé en France ou en dehors de tout établissement que les dispositions d’ordre public de l’article R. 1412-1 font échec à l’application d’une telle clause.’ Only if the contract is performed in an establishment of the employer in France, or entirely outside such establishment (from the employee’s home or ‘on the road’) does Article R.1412-1 trump choice of court ex-EU. The lower court’s judgment had failed to assess these circumstances and therefore infringes the Article.

One suspects the Court felt it necessary to dot the i’s and cross the t’s on this issue for the natural order of analysis would of course have been to look at Brussels I Recast first: which the Court does after its analysis of the French law, thereby forgiving the lower court its incorrect application of French law. Reportedly the application of Brussels I to the issue is not something the Court has properly done in the past.

Article 21 Brussels I Recast requires assessment of the place of habitual carrying out of the work. Claimant worked mostly from the club’s training ground, which is in Turbie, France, and accompanied the club at fixtures. These however by reason of the football calendar clearly took place in Monaco only one out of two games (see the Count of Luxembourg for similar identification of the relevant criteria). Core of the employment therefore is France, notably in the Nice judicial area and therefore the lower court was right to uphold its jurisdiction.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.8.3.

Thank you Dechert for flagging Case No. 16-00636 Cuzco v Tera (Chapter 11), in which Faris J with great clarity wades in on a motion to dismiss US Chapter 11 jurisdiction in favour of exclusive jurisdiction for the Seoul courts with respect to a Korean company shareholder derivative action.

The case is relevant to insolvency practitioners. More generally however it highlights the need for a court to keep a level heading when wading through to and fro litigation in various States.

A bit of factual detail is required to appreciate the ruling.

Cuzco USA filed a chapter 11 in Hawaii with its sole asset real property in Hawaii. Tera Resources Co., Ltd. (“Tera”), one of Cuzco Korea’s shareholders asserted that the Debtor and its insiders conspired to deprive Cuzco Korea of the value of the real property. Tera commenced an action for fraud, breach of fiduciary duties, piercing the corporate veil, unjust enrichment and imposition of constructive trust.

The defendants moved to dismiss, in favour of the Korean courts – and failed, both on arguments of forum non conveniens and on arguments of there being exclusive jurisdiction for the courts at Seoul. Defendant Mr Lee is purportedly the manager of Cuzco USA and the representative director of Cuzco Korea. Defendant Ms Yang is  shareholder and creditor of Cuzco Korea and an ally of Mr. Lee.

Cuzco USA had proposed, and the court confirmed, a Third Amended Plan of Reorganization. Briefly summarized, the Third Amended Plan provided that Cuzco USA would transfer the Keeaumoku (Hawaii) Property to Newco, a Hawaii limited liability company of which Mr. Lee is the sole member, that Newco would attempt to raise enough money through a refinancing to repay all of Cuzco USA’s creditors in full, and that if the refinancing did not occur by a date certain, Newco would sell the Keeaumoku Property at auction and distribute the proceeds to Cuzco USA’s creditors.

Tera and others filed motions for reconsideration of the order confirming the Third Amended Plan. Tera is a shareholder of Cuzco Korea. It also holds a judgment, entered by a Korean court, against Ms. Yang, and orders from a Korean court that, according to Tera, resulted in the seizure of Ms. Yang’s interests in and claims against Cuzco Korea.

Cuzco USA then moved to modify the Third Amended Plan and replaced it with a Fourth Amended Plan. Briefly summarized, this Plan eliminates the transfer of the Keeaumoku Property to Newco; instead, Cuzco USA will retain the property and either refinance it or sell it at auction. Tera and others vigorously objected to plan confirmation on multiple grounds. The court confirmed the Fourth Amended Plan.

Tera argued (among other things) that the Third Amended Plan was the product of a fraudulent scheme by Mr. Lee, Ms. Yang, and others to divert the equity in Cuzco USA from Cuzco Korea to themselves and to render Tera’s interests in Cuzco Korea worthless.

That Korean law covers governs the right to bring derivative claims on behalf of a Korean corporation is not under dispute between the parties. (It is therefore considered part of the rules on internal organisation which are subject to lex societatis). However Faris J dismissed defendants’ suggestion that the US court should also respect Korea’s jurisdictional rules that such suits be brought in Seoul only.

At B, p.10: US statutes confer subject matter jurisdiction on US courts. Statutes of another nation, such as the South Korean statute on which the moving defendants rely, cannot change the subject matter jurisdiction of a United States bankruptcy court under a United States statute.

Forum non conveniens was dismissed for there is a strong policy that favors centralization of claims against the debtor in the bankruptcy court that outweighs any other interest (at C, p.12). One would have to have strong arguments to push that aside and clearly these were not present here.

Geert.

Thank you Paul Davies for signalling the recent French decree on end of waste – EoW criteria. Such national initiatives are seen by some as being a sign of the failure of relevant provisions of EU Waste law (which suggest the EU should be developing such criteria). An alternative reading may suggest that national initiatives may be better places to read the technical and environmental and pubic health safety requirements at the local level, potentially preparing the way for EU criteria. Relevant procedures under EU law arguably are not the most efficient for the initial development of this type of detailed instrument, as the example of plastics and REACH also shows.

Geert.

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

In March 2017, France’s ANSES, the relevant food, environment, and occupational health and safety agency, approved Monsanto’s Roundup Pro 360. That authorisation has now been annulled by the Courts at Lyon – around the same time the story broke of extensive unquestioned copy /pasting by regulators of industry dossiers.

At the beginning of its reasoning the court cites France’s environment charter, to which its Constitution refers. The Charter guarantees everyone in its first Article the right to live in a balanced environment and one with respect for human health. Article 5 entails the precautionary principle, with reference (of course) to scientific assessment and proportionality.

Yet this intro is made for dramatic effect only. The judgment is in fact nothing but a straightforward application of risk assessment requirements on the basis of prevention, not precaution, and a simple observation of infringement of EU law.

At 3 (p.7) the court points out the consequences of the relevant EU authorisation regime. Active ingredients such as glyphosate are authorised (or not; and potentially with conditions) by the EU. Applications in wich these substances are used, by the Member States.

France’s Centre International de Recherche sur le Cancer (CIRC) had classified glyphosate as ‘probably carcinogenic’. Its report on same is referred to by the court as a ‘handbook’, based on peer reviewed studies, the data of which are objectively verifiable as well as replicable. In the other corner, one study referred to by Monsanto (at 7). Relevant EFSA studies only look at the active ingredient and it is these studies upon which ANSES’ decision was based. These studies do not assess the active ingredients’ actual use in preparations such as Roundup Pro 360 which is 41.5% glyphosate. Consequently ANSES quite straightforwardly violates Regulation 1107/2009, particularly its Article 36(6), which prescribes that interaction between the active substance, safeners, synergists and co-formulants shall be taken into account in the evaluation of plant protection products.

The judgment is convincing and straightforward. The road to it was all but easy.

Geert.

EU environmental law (with Leonie Reins), Edward Elgar, soft cover edition 2018, p.28 ff.

In [2019] EWHC 57 (Comm) Cunico v Daskalakis Baker J applies the employment and choice of court titles of the Lugano Convention 2007. Mr Daskalakis and the second defendant, Mr Mundhra, worked for the Cunico group. The group operated in base metals industries and markets. Defendants’ primary jobs were CEO and CFO respectively of Feni Industries AD (‘Feni’), the main industrial operating subsidiary of the group, incorporated and operating in FYR Macedonia. Feni owned and operated a ferronickel production plant in Kavadarci and the Rzanovo iron and nickel mine 50 km or so south of the city.

It is necessary to give a little bit of factual background to appreciate the jurisdictional issues.

Cunico Resources NV (‘Resources’) was incorporated in the Netherlands, to become the group holding company, in May 2007. Marketing was incorporated in Dubai, UAE, in July 2007, and operated in the Jebel Ali Free Zone as the main market-facing trading entity in the group. Resources had no operating activities. It existed as a holding company for the operating subsidiaries as investment assets, with a single dedicated (full-time) employee. Marketing traded by purchasing ore from other Cunico subsidiaries, and bailing the ore to a ferronickel plant within the group under a ‘tolling agreement’, for conversion by the plant to finished ferronickel. Marketing then sold the finished product to the market. Under the tolling agreement, fees for converting Marketing’s ore into finished ferronickel would be payable by Marketing to the operator of the ferronickel plant (e.g. Feni).

The Cunico group was owned, at the time of the events said to give rise to claims against the defendants, as a joint venture between International Mineral Resources BV (‘IMR’) and BSGR Cooperatief UA (‘BSGR’). Latterly, IMR has effectively all but bought BSGR out, via the intervention of proceedings in the Amsterdam Enterprise Chamber, so that today Resources is owned as to c.80% by Summerside Investments S.a.r.l., IMR’s parent company, with 50% of the remainder owned by each of IMR and BSGR.

Now, crucially (at 6): so-called ‘Advisory Contracts’ were signed as between Marketing and each of the defendants, in 2007 and again in 2010, that contained a jurisdiction provision in these words: “In case of disagreements, they shall be solved in the Court of the United Kingdom“. The claimants say that provision gives this court jurisdiction over their respective claims against the defendants under Article 23 of the Lugano Convention. It is common ground that the defendants were domiciled in Switzerland when proceedings were brought and that the claims brought against them are within the material scope of the Lugano Convention, so indeed it governs the question of jurisdiction in this case. It is also common ground that, in this international business context, the reference in the Advisory Contracts to “the Court of the United Kingdom” should be interpreted to mean the courts of England and Wales.

Marketing claims that defendants received bonus payments from Marketing to which they were not entitled and/or to procure payment of which they acted in breach of contractual and fiduciary duties owed to it.

The principal issue is whether the claims made are matters relating to individual contracts of employment so as to engage Section 5 of the Lugano Convention. Any claims that do engage Section 5 cannot be brought in England.

At 23: For each claim advanced by each claimant against either defendant, the question of jurisdiction gives rise to the following issues in this case:

i) Is that claim a matter relating to the employment of the defendant by that claimant, for the purpose of Section 5 of the Lugano Convention?

ii) If not, is that claim within the scope of the jurisdiction provision in either of the defendant’s Advisory Contracts?

iii) If so, for a claim by Resources or Feni, does that jurisdiction provision confer on the claimant an effective benefit? (This is a question under the Contracts (Rights of Third Parties) Act 1999, as each Advisory Contract was a contract only between the respective defendant and Marketing.)

Baker J decides following lengthy overview of the ’employment’ history of defendants that they were indeed employed across the group, and that Lugano’s employment heading therefore points away from jurisdiction in England. Surprisingly he does not refer at all to any CJEU precedent such as Holterman. The employment argument having succeeded, no assessment is made of Lugano’s choice of court provisions.

Geert.

I reviewed Bot AG’s Opinion in C-386/17 Liberato here. The Court confirmed last week. Whether lis alibi pendens applies, entails applying jurisdictional rules (in essence an assessment as to whether parties are the same etc.). Except in the very rare cases of (now) Article 45 1(e) Brussels I Recast, infringement of jurisdictional rules does not feature among the reasons for refusal of recognition. Alleged infringement of the lis alibi pendens rule does not therefore qualify as ordre public.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.16.1.3, 2.2.16.1.4.

In RG 16/05579 DES v Clarins (I have a copy on file for those finding it difficult to get access) the Paris Court of Appeal on 19 September 2018 effectively applied the CJEU’s Granarolo judgment on jurisdiction, to issues of applicable law. Yet it leaves many questions unanswered and does not carry out a neat and tidy analysis at all.

The case was signalled to me by Christophe Héry, who has complete analysis here in French as well as here in English.

Companies belonging to the Clarins group (of France and Luxemburg) were sued for breach of their business relationship with a French company that distributed Clarins cosmetics in Algeria through local companies there, and for the alleged sudden halt in negotiations to try and resuscitate their contractual relationship.

The Court of appeal first of all (p.16-17 of the PDF version of the judgment) summarily rejects objections to the anchoring of non-France based defendants onto Clarins, with domicile in département 92 – Hauts de Seine: claimants request damages from all defendants, on the basis of the same facts and the same legal basis. So as to avoid conflicting judgments the Court sees no reason at all not to join the cases.

In terms of applicable law, the Court refers to Granarolo to qualify the relationship as contractual (reference is made to a tacit contract), yet then skips the application of the cascade rules of the Rome Convention (which applied ratione temporis rather than Rome I) to simply jump straight to the qualification as the relevant French rules as lois de police. As Christophe points out, there are plentry of the Convention’s default categories which could have applied to the case. Skipping the cascade to go straight to the exception is not the right way to go about conflict of laws.

The Court similarly cuts plenty a corner by summarily qualifying the sudden stop to negotiations to resuscitate a previous contractual relationship as non-contractual and applying French law as lex loci damni per Rome II (p.18), particularly as Rome II has a specific rule for culpa in contrahendo.

I am assuming an appeal with the Supreme Court is underway.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.11.2, Heading 2.2.11.2.9; Chapter 3, Heading 3.2.8, Heading 3.2.8.3).

I have previously reported extensively on various national and European developments re the right to have search results delisted, more popularly referred to as the ‘right to be forgotten’ (‘RTBF’ – a product of the CJEU in Google Spain) and its territorial limits. (Search string ‘Google’ or ‘rtbf’ ought to assist the reader). Szpunar AG opined mercifully  succinctly last Thursday in C-505/17.

Possibly because of the English-language press release (‘Advocate General Szpunar proposes that the Court should limit the scope of the de-referencing that search engine operators are required to carry out to the EU‘) and because of the actual text of the Opinion hitherto being available in French only, general reporting has been almost unequivocally (note Michèle Finck’s 10th Tweet in an early thread on the Opinion as a cautious exception), that the AG suggests that the RTBF is limited to EU soil only.

Except, he does not.

The Conseil d’Etat has referred one or two specific Qs but also, just to be sure, has also asked the Court of Justice for general insight into how data protection laws apply to the internet.

The AG of course departs from the core objective of the data protection Directive and now the GDPR, and Google Spain, and points out that the CJEU has put the protection of the fundamental rights of the data subject at the centre. At 46 he summarises his view before justifying it:

‘in my opinion one should distinguish according to the place in which the search is carried out. Searches carried out outside the EU ought not to be made subject to delisting’. (My translation from the French).

Geo-blocking can be ordered and ensures that within the EU territory, no Google extension may be used to access the information at issue (at 64 ff) after duly having balanced the right of freedom of information against the right to be forgotten.

Turning to his arguments, the AG points out at 47 ff first of all – briefly: see e.g. Belgian case-law on Facebook for more extensive discussion –  that public international law defines the borders of the EU and its Member States. The AG sees no reason (48-49) exceptionally to extend the scope of application beyond that border in the case of the Directive or the GDPR.

(51-52) Other examples of ‘extraterritoriality’ do not sway him, such as the Trademark Directive or EU competition law. He argues that in these cases the Internal Market is impacted and EU law applies to these situations ex-EU only because the Internal Market is a finite, territorial unit. The internet is not (at 53: Le marché intérieur est un territoire clairement délimité par les traités. En revanche, l’internet est, par nature, mondial et, d’une certaine manière, est présent partout. Il est donc difficile de faire des analogies et des comparaisons).

Note that references to other instances of ‘extraterritoriality’ (or not) could have been made: such as the cases surrounding animal welfare (Zuchtvieh), cosmetics, or the EU’s emissions trading scheme.

The AG also briefly discusses ‘extraterritorial’ protection of rights under the ECHR, but distinguishes the EU Charter from same. (On the topic of the ‘extraterritorial’ impact of the EU’s human rights obligations, see excellently Lorand Bartels here).

At 60-61 the AG argues (paras which have been more or less literally translated in the Press release) that if worldwide de-referencing were permitted, the EU authorities would not be able to define and determine a right to receive information, let alone balance it against the other fundamental rights to data protection and to privacy. This, the AG argues, is all the more so since ‘the right of the public to access such information’ (un tel intérêt du public à accéder à une information; this word string bizarrely translated in the press release as ‘such a publication’) will necessarily vary from one third State to another depending on its geographic location. There would be a risk, the AG suggests, that if worldwide de-referencing were possible, persons in third States would be prevented from accessing information and, in turn, that third States would prevent persons in the EU Member States from accessing information. This might in turn lead to a race to the bottom in the right to access of information.

This is an important point, because it essentially encapsulates a core argument made by Google: that particularly in the US, the constitutional right to free speech and the corollary of the freedom to receive information, gazumps a right to be forgotten – putting Google in the event of worldwide delisting orders between SCOTUS’ rock and CJEU’s hard place.

Crucially however at 62 the AG then in my view perhaps not quite torpedoes but certainly seriously softens his overall general analysis by suggesting that his views on territoriality are the default position only, which may be varied should specific instances of the balancing act of fundamental rights, so require: it’s just that the specific circumstances of the case do not.

Les enjeux en cause n’exigent donc pas que les dispositions de la directive 95/46 soient d’application au-delà du territoire de l’Union. Cela ne signifie pas pour autant que le droit de l’Union ne saurait jamais imposer à un exploitant de moteur de recherche tel que Google qu’il entreprenne des actions au niveau mondial. Je n’exclus pas qu’il puisse y avoir des situations dans lesquelles l’intérêt de l’Union exige une application des dispositions de la directive 95/46 au-delà du territoire de l’Union. Mais dans une situation telle que celle de la présente affaire, il n’y a pas de raison d’appliquer les dispositions de la directive 95/46 d’une telle manière.

The circumstances of the case do not justify worldwide blocking. Yet other circumstances might. This is a crucial section for the French data protection authority’s (CNIL) decision at issue, 2016/054 [thank you again to the Dutch Ministry of Foreign Affairs for providing the factual background to the case; also note that in the French decision Google’s name, amusingly, is anonymised] is a general CNIL instruction to Google to carry out global delisting in instances where natural persons request removal; not a case-specific one. In other words the ‘circumstances of the case’ concern a generic, not a factual balancing.

In yet other words: there could be many instances where national data protection authorities might find worldwide delisting to be the only proper means to balance the various fundamental rights at stake. The AG Opinion offers little to no support that such worldwide delisting in concrete cases were to infringe the Directive /the GDPR. Such balancing act would be akin to X v Google LLC at the Tribunal de grande instance de Paris on which I reported last week.

Note that in his Opinion of the same day in C-136/17, the AG Opines that the default response of search engine providers must be to honour requests for delisting, and to only exceptionally not do so.

Some issues for the Grand Chamber to chew on. And then some more.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.8.2, Heading 2.2.8.2.5.

SAS Institute Inc v World Programming Limited [2018] EWHC 3452 (Comm) is a rare example of refusal by an English court of enforcement of a US judgment. 20 Essex Street have excellent analysis here and I am happy generally to refer.

The outcome of English Proceedings was that WPL defeated SAS’ claims regarding software licence and copyright infringements, with an important role played by the European software Directive as applied by the CJEU in Case C-406/10 upon preliminary reference in the very case.

Meanwhile SAS had commenced concurrent proceedings in the US. WPL initially objected to the US Proceedings on forum non conveniens and other jurisdictional grounds. These objections were later withdrawn and WPL submitted to the jurisdiction of the US District Court and participated in the process before it. Judgment was awarded against it. SAS curtailed its claim of enforcement to as to increase chances of success: it only seeks to enforce the US Judgment in England insofar as it is for compensatory damages based on WPL’s fraud (an issue which was litigated in the US but not in the UK); it does not seek to enforce the breach of contract claim or that part of the US Judgment which awarded multiple damages.

At 35-36 Cockerill J summarises the law: ‘There are three strands of potential preclusion: cause of action estoppel (not live here) issue estoppel and Henderson v Henderson abuse of process. As Lord Sumption observed in Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46, [2014] AC 160 at p.180H at [17]:

“…the policy underlying all of the…[res judicata] principles…” is “…the more general procedural rule against abusive proceedings…”.

The different doctrines therefore have different requirements, but they shoot at the same target – that of ensuring that nobody should be vexed twice in respect of one and the same cause: “nemo debet bis vexari pro una et eadem causa“: as it was put by Lord Diplock in Vervaeke v Smith [1983] AC 145 at p.160A-B, G. A more modern version was given by Lord Bingham in Johnson v Gore Wood [2002] 2 AC 1 at p.31A-B in the context of the Henderson doctrine:

“Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole.” ‘

Issue estoppel per Dicey (referred to by Cockerill J) at paragraph 14-156 means that a “foreign judgment will not be recognised if it is inconsistent with a previous decision of a competent English court in proceedings between the same parties“. Akin therefore in residual English private international law (EU law is not engaged, the judgment having been issued ex-EU) to Brussels I Recast’s Article 45(1)c ‘s rule.

The fundamental point is that issue estoppel bars relitigation not of all issues, but only of issues determined as an essential part of the cause of action (at 40). The Henderson principle is concerned with protecting the integrity of the cause of action and issue estoppel defences and preventing them from being deliberately or inadvertently circumvented by a party which did not advance an argument in England which would otherwise have created such an estoppel (at 47).

This is the core of the abuse investigation and this formulated one can see why it is a difficult test to apply.

At 55: ‘There are two issues: was the Fraud claim “parasitic” on the breach of contract claim and the related question of whether the Fraud claim was a separate, distinct and independent cause of action. Both of these really go to the question of whether there is sufficient identity of issue.’ At 73 Cockerill J concludes that there was such abuse: ‘Ultimately, I have come to the conclusion that the existence of the terms of the contract was a fundamental building block for the Fraud Claim and that without it that claim – as it was formulated in the US – could not have been run. The essence of the case in the US Proceedings related to alleged fraudulent representations concerning its “present intention to comply with those terms”. It was fundamental to the claim that WPL “had no intention of abiding by those terms“. It was inherent in that case that those terms did exist; and yet the courts of this country had already held that those terms did not exist.’

Obiter, at 156 ff, Cockerill J adds that enforcement would also have been refused for reasons of the public policy embodied in the Software Directive. Authority in the arbitration context was referred to to pro inspiratio, including CJEU authority C-168/05 Mostaza Claro and C-126/97 Eco Swiss (at 163). At 179: ‘The fundamental problem for SAS is that the Directive plainly envisages the rendering null and void of provisions such as those on which SAS wants to rely, indeed that is explicitly the policy enunciated in the case-law and yet SAS’s fraud case is dependent upon those terms’ existence. The effect of the Directive is, as I have indicated above, to make SAS’s fraud claim (as formulated) impossible to express. It is therefore unrealistic to analyse the matter as the Directive “authorising frauds“.’ And at 184: ‘It is clear that the Software Directive gives expression to two important public policy objectives of preventing the monopolisation of ideas and promoting competition and consumer welfare.’

A very lengthy judgment which merits full reading.

Geert.

This is a short posting for completeness and filing purposes. The EU have requested consultations with South Korea under the Trade and Sustainable Development chapter of the EU-Korea FTA. Labour rights are at the heart of the request. The request is a first trigger of the ‘Trade and’ consultations chapters under recent EU FTAs. I am not in a position to say more at this stage.

Geert.

Many thanks to Filbert Lam for alerting me to Menon CJ’s most exquisite 2018 speech on cross-border insolvency law. His honour’s talk addresses forum shopping (including for cram down reasons), the Model Law, a most enlightening comparison between international commercial arbitration (particularly: the New York Convention’s role) and insolvency, and of course modified universalism (on which see also this recent post by Bob Wessels, with ia analysis of the EU position). A delightfully sharp observation of key elements of international insolvency practice and policy.

Geert.

(Handbook of) EU Private International Law, 2nd edition 2016, Chapter 5.

[2018] EWHC 3506 (QB) Kalma v African Minerals et al was held by the High Court on 19 December 2018. It essentially entails vicarious liability of UK-incorpored companies (jurisdiction firmly settled therefore) for human rights abuses committed by Sierra Leone police (SLP), who ensured security at the defendants’ mine. All claims were held to have failed. The judgment is lengthy and very factual, please refer to same.

Matrix have brief analysis here, critical reception of the judgment is inter alia here. The case does not raise the kind of jurisdictional or applicable law issues which trigger interest of this blog (such as yesterday’s post on Nevsun Resources). Nevertheless discussion of the factual involvement of the companies with SLP activities, required to establish vicarious liability, has echoes of the discussion on the level of oversight required for mother companies to be held liable for subsidiaries’ actions (such as e.g, in Apartheid or in various CSR cases making their way through UK courts).

Of additional note:

• Turner J’s discussion at 61 ff headed ‘keeping things in proportion’: the difficulty of a judge;s task, particularly at 63: ‘I make no complaint about the volume of written material which has been provided for my assistance. I have read all of it carefully. Both sides have been extremely well served by the industry and thoroughness of their respective legal teams. Inevitably, however, and for the sake of proportionality, I have had to leave a very considerable number of these points on the cutting room floor. This does not mean that I have failed to consider them or that I have discarded them as being entirely redundant but merely that the inclusion of their analysis or resolution in an already lengthy judgment would not have a material impact on the determination of the central issues.’ Less can be more.
• At 84: irrelevance of CSR discussions: ‘Both sides were very enthusiastic about the idea of setting the parameters of their evidence and submissions to cover broad issues concerning the general level of social responsibility displayed by the defendant – upon which topic they predictably entertained very different views. This, however, I have not permitted. The consequences of the exploration of such issues would have been entirely disproportionate, in terms both of time and costs, to the limited value of resolving them. For the same reason, I do not propose to adjudicate upon the rights and wrongs of the community and employment disputes which lay behind the incidents to which they gave rise.’

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 8, Heading 8.3.

Plenty of goings-on in the Corporate Social Responsibility /mass torts category, as regular readers of the blog and /or my Twitter-feed will know. Thank you Jutta Brunnée for alerting us to Nevsun Resources v Gize Ybeyo et al, currently making its way through the Canadian Supreme Court. Thank you also Cory Wanless for pointing out the core of the issue: Nevsun are not contesting jurisdiction (its existence is secure; much like in the EU context) e.g. on forum non conveniens grounds. Rather, the Supreme Court is asked whether there should be a new tort of breach of international law, and whether the “act of state” doctrine prevents adjudication.

The first question undoubtedly will lead to a discussion of similar issues raised in Kiobel, where they were not discussed by the USSC, and in Jesner Bank, where the USCC refused to be the dealmaker on public international law. The second issue is likely to imply consideration of the very foreign poicy considerations which featured heavily in circuit considerations prior to Kiobel.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 8, Heading 8.3.

Thank you Christopher Burkett for alerting me to Heller v. Uber Technologies Inc., 2019 ONCA 1.  The case is reminiscent of California’s Senate Bill 1241 (review here) and of an article that I co-authored with Jutta Gangsted [‘Protected parties in European and American conflict of laws: a comparative analysis of individual employment contracts]. The starting point of the California, the EU rules, and the Canadian judgment is the same: employees cannot be considered to really consent to either choice of law or choice of court /dispute resolution hence any clause doing same will be subject to mandatory limitations.

Here, an arbitration clause requiring arbitration in the Netherlands of disputes between drivers and Uber was held to be invalid and unenforceable, because it deprives an employee of the benefit of making a complaint to the Ministry of Labour under relevant Ontarian law.

Of note is that the judgment applies assuming the contract is one of employment – which remains to be determined under Ontarian law. Of note is also that the Court of appeal rejected Uber’s position that the validity is an issue for the arbitrator to determine because it is an issue going to the jurisdiction of the arbitrator. Uber invoked the “competence-competence” /kompetenz kompetenz principle in support of its position.

Geert.

(Handbook of) European Private international law, 2nd ed. 2016. Chapter 2, Heading 2.2.8.3, Chapter 3, Heading 3.2.5.

On Thursday the Advocate-General will opine in C-136/17 G.C. e.a. and  C-507/17 Google (FR) – on which I reported ia here. The issue is, in the main, the territorial scope of EU data protection laws.

X v Google LLC at the Tribunal de grande instance de Paris on 14 November 2018 is a good warm-up, forwarded to me (for which many thanks) by Jef Ausloos (I have copy for those interested). The case concerns an article in Le Monde linking a French resident, active in international hotel management, to a Moroccan enquiry into pedophilia. The court’s review of the facts suggests an unsubstantiated link between X and the case – yet the damage to claimant’s reputation evidently is done nevertheless. Claimant requests delinking not just for searches performed in France on all Google extensions, but rather for all searches performed globally.

The court first of all observes that for searches performed in France, delisting of many of the identified urls has already happened – and orders on the basis of French law (which it applies, it suggests, per the GDPR) Google LLC to carry out delisting for the others in as far as searches are carried out from French territory. X’s privacy is given priority over freedom of expression and Google LLC’s US domicile is not mentioned as being relevant (no verbatim discussion of same is recorded in the judgment. X’s French nationality and domicile however, are, hence presumably it is the infamous Article 14  Code Civil which is at play here). Google’s argument that the as listed urls link to articles in languages other than French and relating to facts taking place outside of France is dismissed as irrelevant.

Claimant however had requested global delisting, regardless of the user’s geographical location. That, the court holds, is a request it cannot grant. Its refusal is justified in one sentence only: a global delisting order would be disproportionate in the case of a French national and resident, simply because his employment record is international:

‘une telle mesure apparaît ici disproportionnée, s’agissant d’un résident français, le seul caractère international de ces démarches d’emploi ne pouvant justifier d’une telle restriction, qui conduirait in fine à soumettre le réseau internet à une injonction de portée globale.’ 

The judgment therefore does not tackle the conceptual issues surrounding jurisdiction (which the Belgian courts, for instance, have been tempted into in the Facebook case), neither does it rule out global injunctions in cases which have more than just a fleeting international element.

Happy 2019.

Geert.

An ethics-related posting seems apprioprate as last before ‘the’ season.

The relevant European expert group seeks feedback on draft ethics guidelines for trustworthy artificial intelligence.

Chapter I deals with ensuring AI’s ethical purpose, by setting out the fundamental rights, principles and values that it should comply with.
From those principles, Chapter II derives guidance on the realisation of Trustworthy AI, tackling both ethical purpose and technical robustness. This is done by listing the requirements for Trustworthy AI and offering an overview of technical and non-technical methods that can be used for its implementation.
Chapter III subsequently operationalises the requirements by providing a concrete but nonexhaustive assessment list for Trustworthy AI. This list is then adapted to specific use cases.

Of particular note at p.12-13 are the implications for the long term use of AI, on which the expert group did not reach consensus. Given that autonomous AI systems in particular have raised popular concern, most of which predicted in the longer term, it is clear that this section could prove particularly sticky as well as interesting.

For me the draft is a neat warm-up for when the group’s co-ordinator, Nathalie Smuha, returns to Leuven in spring to focus on her PhD research with me on the very topic.

Geert.

Facts in [2018] EWHC 2321 (Ch.) Caribonum Pension Trustee v Pelikan are summarised by Anthony Garon here. A suggestion of abuse of process /Fraus was rejected by Clark M. Of interest to the blog is the suggested reason for abuse: Pelikan AG argued that the claim was an abuse of process because a relevant guarantee would not be enforceable in Switzerland and that there were insufficient non-Swiss assets to satisfy the claim.

At 40 however Master Clark holds that the ability of a defendant to satisfy a judgement is not a pre-requisite to a claimant obtaining a judgement. Claimant’s counsel convincingly submitted that it was pursuing the claim for the simple and appropriate purpose of securing payment of the sums due under a holding structure-related Guarantee; and that that was not an abuse of process.

Geert.