To frack or not to frack – Germany puts a (temporary?) end to the fracking debate

Originally posted on FRacturing law blOG:

After considerable back and forth (reported on earlier here and here ) the German Environment Ministry and the Ministry of Economics have agreed on six key points for the regulation on fracturing. A translation of the points can be found here.

According to the Environmental Ministry, these are the “most stringent rules which have ever been adopted” (see in German here) and a commercial production of shale gas in the foreseeable future will not happen. The protection of human health and drinking water are of upmost priority; the impacts of fracturing are not (yet) certain, own national reference values are still missing. Point four further takes recourse to the principles established by the European Commission and establishes the strictest European operation and management principles so far. With this position, the government follows its careful approach as also included in the coalition agreement. These amendments to the Federal Water…

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Calling time on ‘contract’ and ‘tort’ between contracting parties. The ECJ in Brogsitter.

When does a spat between contracting parties become a tort really? Relevant for all sorts of reasons of course. Not in the least, in Brogsitter, with a view to establishing jurisdiction.

Mr Brogsitter sells luxury watches. In 2005, he concluded a contract with a master watchmaker, Mr Fräβdorf, then resident in France. Fräβdorf undertook to develop movements for luxury watches, intended for mass marketing, on behalf of Mr Brogsitter. Mr Fräβdorf carried out his activity with Fabrication de Montres Normandes, company of which he was sole shareholder and manager. It appears that Mr Brogsitter paid all costs relating to the development of the two watch movements which were the subject of the contract.

Fräβdorf and his company subsequently also developed, in parallel, other watch movements, cases and watch faces, which they exhibited and market in their own names and on their own behalf, whilst advertising the products online in French and German. Mr Brogsitter submits that, by those activities, the defendants breached the terms of their contract. According to Mr Brogsitter, Mr Fräβdorf and Fabrication de Montres Normandes had undertaken to work exclusively for him and, therefore, might neither develop nor make use of, in their own names and on their own behalf, watch movements, whether or not identical to those which were the subject of the contract.

Brogsitter seeks an order that the activities in question be terminated and that damages be awarded in tort against on the basis, in German law, of the Law against Unfair Competition (Gesetz gegen den unlauteren Wettbewerb) and Paragraph 823(2) of the Civil Code (Bürgerliches Gesetzbuch); he submits that, by their conduct, the defendants breached business confidentiality, disrupted his business and committed fraud and breach of trust.

Defendants argue that only French courts have jurisdiction, under Article 5(1) of the Brussels I Regulation, to determine all the applications made by Mr Brogsitter, as both the place of performance of the contract at issue and of the allegedly harmful event were situated in France. The Landgericht Krefeld in first instance had found against its own jurisdiction. This went straight to interim appeal, with the Oberlandesgericht Düsseldorf holding that the first instance court’s international jurisdiction derived, with regard to the dispute before it, from Article 5(3) with respect to the hearing and determination of only the civil liability claims made in tort by Mr Brogsitter. The other claims, in contrast, concerned ‘matters relating to a contract’ within the meaning of Article 5(1) of that regulation, and should be brought before a French court. Krefeld was still unsure and referred the following question to the ECJ: (I do not think the ECJ in this case rephrased it much better):

‘Must Article 5(1) of Regulation [No 44/2001] be interpreted as meaning that a claimant who purports to have suffered damage as a result of the conduct amounting to unfair competition of his contractual partner established in another Member State, which is to be regarded in German law as a tortious act, also relies on rights stemming from matters relating to a contract against that person, even if he makes his civil liability claim in tort?’

The ECJ referred to familiar lines: ‘contract’ and ‘tort’ need to be interpreted autonomously. (A European definition needs to be given, not a national one). The concept of ‘matters relating to tort, delict or quasi-delict’ within the meaning of Article 5(3) covers all actions which seek to establish the liability of a defendant and which do not concern ‘matters relating to a contract’ within the meaning of Article 5(1)(a)  (Kalfelis).

However that one contracting party brings a civil liability claim against the other is not sufficient to consider that the claim concerns ‘matters relating to a contract’ within the meaning of Article 5(1)(a) (at 23). That is the case only where the conduct complained of may be considered a breach of contract, which may be established by taking into account the purpose of the contract, which will a priori [the German grundsätzlich would have been better translated as 'in principle', or indeed, assuming French was the language of the original draft, 'a priori' should have been dropped for 'en principe'; but I stray] be the case where the interpretation of the contract which links the defendant to the applicant is indispensable to establish the lawful or, on the contrary, unlawful nature of the conduct complained of against the former by the latter (at 24-25).

‘Where the interpretation of the contract which links the defendant to the applicant is indispensable to establish the lawful or, on the contrary, unlawful nature of the conduct complained of against the former by the latter’: these cases in other words do not lend themselves to a quick fix of jurisdiction review: some skimming of substantive law issues will be necessary.

Incidentally, the link between contracts and torts is also of immediate concern in the area of competition law. (Where the issue is often whether follow-on claims in damages are impacted by choice of court and choice of law in underlying contracts).

Geert.

 

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Thank you for not displaying. Objections to tobacco display ban go up in smoke.

I have previously referred to the display ban case which Philip Morris took to the EFTA Court. I have only just recently stumbled across the eventual holding of the court which had referred the case to Luxembourg. (The Norwegian court held a year after EFTA’s judgment). Not GAVClaw style to report close to 2 years after date of issue: blame the inadequate (read lack of) system by which EFTA and indeed EU Member States report back on their eventual findings in preliminary review.

The District Court had been instructed by the EFTA Court to review whether the display ban actually affects the sale of domestic products and sale of goods from other EEA States equally. If there is de facto equal treatment, the law surfs on Keck & Mithouard’s exception for ‘selling arrangements’: no infringement of the core prohibition on quantitative restrictions to trade in the first place. (See Alberto Alemanno’s analysis of the EFTA ruling for background).

The national court suggested that the EFTA Court had not been entirely clear on how that test had to be constructed: not at any rate, it held, as a market hindrance test: i.e. that new products’ chances of entering the Norwegian tobacco market should be decisive for the question of whether a restriction exists.  It referred inter alia (at p.35 of the copy referred to above) to the fact that the Norwegian Government in its submission to the EFTA Court had suggested that even though such hindrance for new products at the time did not actually exist, it could be expected indeed hoped that this would be the case. The District Court held that in the light of this acknowledgement by the Government, had the EFTA Court found this problematic, it would and should have said so explicitly. (This in some ways might be seen as a risk for the EFTA Court’s tradition, in line with the ECJ’s approach, to practice judicial economy).

The District Court in the end decided to continue the case on the basis of whether national products have a more favourable position due to local habits and customs linked to tobacco use (at p.35): the burden of proof whether the ban actually and not just potentially affects the marketing of imported tobacco products differently than imported tobacco products lies with PMI, the Court held. That, it said, was not established with clarity: the de facto discriminatory effect of the display ban was found to be too uncertain to be considered a trade barrier.

The Court then somewhat inconsistently (do Norwegian courts practice wide obiter?) did review suitability and proportionality (not needed if Keck & Mithouard applied). Here, without naming the precautionary principle, the Court applies an important consequence often associated with it: the reversal of burden of proof. The Court essentially wanted PMI to show clear evidence for the display ban not being suitable for restricting the consumption of tobacco in Norway, at any rate in the long term (p.48). The Court essentially relies on previous case-law on tobacco advertising and equates suitability of the display ban with relevant studies and case-law on advertising restrictions. This was bound to (although the court took some length to establish it) lead to a finding of suitability.

Finally, as for proportionality proper, the court (with cross-reference i.a. on the effect of these bans elsewhere) did not find less trade restrictive alternatives (within the context of access to information or branding at point of sale).

This judgment just has to be staple fodder for risk classes and the interaction between risk analysis and trade law.

Geert.

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Renewable energy and trade: Now it’s all clear, Essent it? The ECJ in Vindkraft.

As reported, the ECJ last week held in Vindkraft. It did not follow the lead of Bot AG who had suggested inter alia that Directive 2009/28 itself  (which the ECJ has now found is not exhaustive on the issue of territorial restrictions of support schemes, hence requiring assessment under primary EU law) is contrary to EU primary law in allowing Member States to discriminate against foreign produced renewable electricity by limiting access to their national support scheme to electricity generated on their territory; and that such illegality is not backed by the environmental exceptions to the Treaty. I had suggested at the time of the AG issuing his Opinion in the related case of Essent, that there is in my view merit in the argument that the relevant Union laws require Member States to roll-out their own, national renewable energy capabilities, and that systems such as the Flemish one (in Essent) or Swedish one (Vindkraft) may be required to support industry to work towards that goal.

The ECJ agrees. Member States can continue to restrict access to their support schemes (in the strict sense of not rolling out financing to renewable energy of foreign origin): this constitutes an infringement to the free movement of goods but one which can be justified. In Preussen Elektra the ECJ had allowed the German scheme despite it being discriminatory. This might have been an implicit reversal of the case-law that infringements of the free movement of goods may only be based on the court-invented ‘mandatory requirements’ (of which environmental protection is one; as opposed to those societal interests which are included in the explicit list of exceptions of Article 36 TFEU) where they do not discriminate. (Not, such as is the case here, where they undoubtedly discriminate). That it might have been such reversal  had led the AG to suggest, finding support in the integration principle, that the Court in Essent should make that reversal explicit. In the end the Court decided Vindkraft before Essent (which is still pending) and simply refers (at 80) to its Preussen Elektra case law: no explicit reversal.

That is unfortunate for we are now left to ponder whether Preussen Elektra /Vindkraft (probably also Essent?) needs distinguishing (making reneable energy /Kyoto /UNFCCC commitments stand out from other environmental requirements)?

The Court instead focusses on proportionality. In that assessment, as pointed out by Catherine Banet, the ECJ emphasises the market-based elements of the Swedish scheme (the certificates can be sold separately from the underlying electricity and the market is operated in a transparent and liquid fashion): a less market-oriented approach may not have survived ECJ scrutiny.

Deciding Vindkraft together with Essent would have been helpful. Instead, Essent still contains another angle: namely certificates of origin (as opposed to only green certificates. Green certificates are used by a Member State to show its meeting its obligations to produce a minimum amount of electricity from renewable sources. Certificates of origin allow an electricity distributor to prove that x amount of its electricity distributed, originates from renewable energy). The Flemish support scheme for renewable energy at issue in Essent, grants renewable energy certificates to producers of such energy only if they are located in the Flemish Region, and obliges electricity distributors to surrender a minimum amount of such certificates without being able to offer such certificates obtained in other EU Member States. Taking the lead of the Court in Vindkraft, the Flemish scheme looks more vulnerable to me.

In conclusion: no, it Essent yet clear.

Geert.

 

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Retrospective legislation that interfered with judicial ruling violated the Convention and the rule of law

Geert Van Calster:

A warning for other ECHR governments tempted…. (and in contrast with earlier successful Government interfering elsewhere /in other areas, such as town planning, and environment).

Originally posted on UK Human Rights Blog:

PoundlandR(on the application of Reilly (No. 2) and another) v Secretary of State for Work and Pensions, [2014EWHC 2182 (Admin) – read judgment

The High Court has issued a declaration of incompatibility following a successful challenge to the Jobseekers (Back to Work Schemes) Act 2013. The regulations under the Act that sanctioned those who did not participate in unpaid “work for your benefit” schemes by depriving them of an allowance violated the rule of law protected by the Convention and this country’s unwritten constitution. However, the dispute did not engage Article 1 of the First Protocol to the ECHR.

Factual background

The claimants, Caitlin Reilly and Jonathan Hewstone (CR and JH)  had been unemployed and claimed jobseeker’s allowance. They objected to participation in schemes devised under the Jobseeker’s Allowance (Employment, Skills and Enterprise Scheme) Regulations 2011, in which they were required to work for no…

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The EU’s ‘Bio economy’. Utopian?, realistic?, protectionist? Or all of these?

I have just recently stumbled across the EU’s Bioeconomy strategy, classified in the administrative organogram at least under ‘Research and innovation’. It could also be DG Industry. Or DG Trade. Or DG  Env. Or indeed DG Agri. Tucking it away under Research and innovation was a good idea, I believe: best to keep it safely away from daily policy concerns and ditto lobbying. The Bioeconomy – which is defined as encompassing the sustainable production of renewable resources from land, fisheries and aquaculture environments and their conversion into food, feed, fiber bio-based products and bio-energy as well as the related public goods – is seen by the EC as a successor to the EU’s Biosociety program, which however was more scientific in outlook (lots of talk of new technologies).

A big gap in its approach, to me at least, is its lack of discussion on reduced consumption and ‘need‘ (the Club of Rome has some powerful insight into this) which is a pitty. It talks mostly about increasing and diversifying ‘output’, rather than on reducing it or matching it to true need. For in its current outlook, the Bioeconomy feels more like a postersite for EU ‘innovative’ technologies than one for foresight in development priorities. And no, that is not properly done elsewhere in the EC.

Geert.

 

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Martrade Shipping: choice of law means that law can decide the limits to which it wishes to be applied. Including to promote forum shopping.

In Martrade Shipping v United Enterprises Corporation, the High Court considered the appeal against an arbitration award in relation to the applicability of the Late Payment of Commercial Debts (Interest) Act 1998 to charterparties providing for English law and London arbitration.

The vessel was owned by the Defendant, a Marshall Islands company. The vessel was registered in Panama and managed by a Liberian company registered in Greece. The vessel was chartered by the Owners to the Claimant charterers for a time charter trip via the Mediterranean/Black Sea under a charterparty on an amended NYPE form dated 2 July 2005. The Charterers are a German company. The vessel was to be placed at the disposal of the Charterers on passing Aden, and was to be redelivered at one safe port or passing Muscat outbound/Singapore range in Charterers’ option. In the event the vessel loaded cargoes of steel products at Tuapse (Russia), Odessa (Ukraine) and Constanza (Romania) and discharged them at Jebel Ali (UAE), Karachi (Pakistan) and Mumbai (India). Hire was payable in US$ to a bank account in Greece. The broker named in the charterparty as entitled to commission was Optima Shipbrokers Ltd who arre Greek. The charterparty recorded that it was made and concluded in Antwerp.

Consequently, contact with England other than the governing law and arbitration clause was non-existent.

A number of disputes between the parties were referred to arbitration, including a claim by the Owners for unpaid hire, in respect of which the Charterers claimed to be entitled to deduct sums for alleged off-hire, bunkers used during off-hire, and a bunker price differential claim. By the Award the tribunal held that Owners were entitled to an award in respect of hire in the sum of US$ 178,342.73. The tribunal further held that the Owners were entitled to interest on that sum calculated at the rate of 12.75% per annum from 23 September 2005 until the date of payment under the 1998 Act.

The appeal is against the award of interest under the 1998 Act. The Charterers contended before the tribunal, and contend on the appeal, that the 1998 Act has no application by reason of s. 12(1) which provides:

“This Act does not have effect in relation to a contract governed by a law of a part of the United Kingdom by choice of the parties if –(a) there is no significant connection between the contract and that part of the United Kingdom; and (b) but for that choice, the applicable law would be a foreign law.’

Section 12 of the Act therefore provides that where parties to a contract with an international dimension have chosen English law to govern the contract, the choice of English law is not of itself sufficient to attract the application of the Act. Section 12 mandates the application of the penal interest provisions only if one or both of two further requirements are fulfilled. There must be a significant connection between the contract and England (s. 12(1)(a)); or the contract must be one which would be governed by English law apart from the choice of law (s. 12(1)(b)). Either is sufficient. Popplewell J suggests this provision has two objectives:

- the Act reflects domestic policy considerations which are not necessarily apposite to contracts with an international dimension. What is required by the significant connecting factor(s) is something which justifies the extension of a deterrent penal provision rooted in domestic policy to an international transaction. And

- subjecting parties to a penal rate of interest on debts might be a discouragement to those who would otherwise choose English law to govern contracts arising in the course of international trade, and accordingly does not make such consequences automatic.

 

The s.12(1)(a) criterion of “significant connection” must connect the substantive transaction itself to England. Whether they provide a significant connection, singly or cumulatively, will be a question of fact and degree in each case, but they must be of a kind and a significance which makes them capable of justifying the application of a domestic policy of imposing penal rates of interest on a party to an international commercial contract. They must provide a real connection between the contract and the effect of prompt payment of debts on the economic life of the United Kingdom. (at 17).

‘Such factors may include the following:

(1) Where the place of performance of obligations under the contract is in England. This will especially be so where the relevant debt falls to be paid in England. But it may also be so where other obligations fall to be performed in England or other rights exercised in England. If some obligations might give rise to debts payable in England, the policy considerations underlying the Act are applicable to those debts; and if some debts under the contract are to carry interest at a penal rate, it might be regarded as fair and equitable that all debts arising in favour of either party under the contract should do so.

(2) Where the nationality of the parties or one of them is English. If it is contemplated that debts may be payable by an English national under the contract, the policy reasons for imposing penal rates of interest may be engaged; and if only one party is English, fairness may again decree that the other party should be on an equal footing in relation to interest whether he is the payer or the payee.

(3) Where the parties are carrying on some relevant part of their business in England. It may be thought that persons or companies who carry on business in England should be encouraged to pay their debts on time and not use delayed payment as a business tool even in relation to transactions which fall to be performed elsewhere. Moreover a supplier carrying on business in England may fall within the category identified in s.6(2)(a) of those whose financial position makes them particularly vulnerable to late payment of their debts, although these are not the only commercial suppliers for whose benefit the Act is intended to apply. The policy of the Act may be engaged in the protection of suppliers carrying on business in England, whether financially vulnerable or not, even where the particular debts in question fall to be paid by a foreign national abroad.

(4) Where the economic consequences of a delay in payment of debts may be felt in the United Kingdom. This may engage consideration of related contracts, related parties, insurance arrangements or the tax consequences of transactions.’ (at 20).

 

By contrast, a mere London arbitration or English jurisdiction clause cannot be a relevant connecting factor for the purposes of s.12(1)(a).

Popplewell J therefore expressly links the non-applicability of relevant domestic English law (where such as here that law itself suggests the need for there to be a connection between the case, and England) to the need to maintain the attraction of England as a seat of international commercial arbitration  or indeed litigation. Exactly the kind of attitude in which competing courts fall short.

Geert.

 

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