In X, Case C-87/13, the Hoge Raad of the Netherlands asked in essence whether EU law, in particular the rules on freedom of establishment and on free movement of capital, preclude[s] a resident of Belgium who, at his request, is taxed in the Netherlands as a resident and who has incurred costs in respect of a castle, used by him as his own home, which is located in Belgium and is designated there as a legally protected monument and village conservation area, from deducting those costs in the Netherlands for income tax purposes on the grounds that the castle is not registered as a protected monument in the Netherlands?
Kokott AG opined on 4 September last (the Opinion at the time of writing was not yet available in English) and suggested The Netherlands should be allowed to go ahead with such distinction. She focussed her opinion on the free movement of establishment, suggesting the same analysis applies mutatis mutandis for free movement of capital.
A summary of the Court of Justice’s case-law on the main exceptions to the free movement of capital (and, also per Kokott AG, similarly applicable to free movement of establishment), may be found in par. 42 of Jaeger, Case C-256/06:
According to the case-law, in order for national tax legislation such as that at issue in the main proceedings, which, for the purposes of calculating inheritance tax, distinguishes between assets situated in another Member State and those situated in Germany, to be considered compatible with the provisions of the Treaty on the free movement of capital, the difference in treatment must concern situations which are not objectively comparable or be justified by overriding reasons in the general interest.
The Advocate General suggested the Court find the two situations objectively comparable, given that listed property in both countries is likely to be subject to various restrictions. Simply quoting budgetary reasons for limiting the possibility of tax offset to assets in the State of taxation is not enough under EU law. However she did find merit in the argument that the limitation to listed property in The Netherlands, is in the general interest: in contrast with other cases (e.g. Petersen C-544/11), the general interest identified by the Member State concerned, cannot be met by market participants in other Member States (at 41): allowing set-off for maintenance of listed property in another Member State, does not serve the goal of preserving Dutch national heritage, a relevant interest illustrated eg. by the references to national heritage in Articles 36 and 167 TFEU.
If adopted by the Court, the AG’s Opinion in my view would be very welcome. The EC have been using an extensive interpretation of the free movement of capital essentially to skate around its limited progress in tax harmonisation (which is subject to national veto).
Propertize: Should creditors’ domicile and mutual consent on COMI be relevant for insolvency Regulation?
In Propertize, (held 10 April 2014; delayed reporting for exam reasons) the court at ‘s-Hertogenbosch (Netherlands) held that Propertise BV has COMI in The Netherlands (and the presumption in favour of COMI being the place of corporate domicile therefore not dismissed), paying particular attention to the fact that (1) during argument at court both parties in the meantime had agreed that COMI was in The Netherlands, and (2) that the main creditors were based in The Netherlands.
Prof Wessels was right to be pleased to be quoted in the judgment – even if as he also rightfully points out, the court in fact only refers to his Handbook to cite relevant case-law and not to apply the COMI test properly (as prof Wessels’ book does): recital 13 of the Insolvency Regulation suggests COMI as being the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties. The ECJ has repeatedly emphasised the combination of both: administration of the interests elsewhere, and this as such being recognisable to third parties (e.g. at 49 in Interedil). Neither location of the creditors nor agreement between creditors on the debtors’ COMI have any relevance.
Textbook inadequate application of COMI: hence very appropriate for an exam question. Geert.
I have reported before on the lis alibi pendens issue in the Alexandros litigation. (The left-over claims as identified in my previous post were, I understand, dropped, and hence the need for ECJ referral subsided – Hill Dickinson have a good summary of the various proceedings here). The Court of Appeal on the 18th of July held on the now (following the Supreme Court’s intervention) remaining issue of declarations, damages and indemnities in respect of the owners’ proceedings in Greece seeking damages from the insurers, despite proceedings for sums due under the relevant insurance policies having been settled in England pursuant to a choice of forum clause. (Apologies for this all being a bit dense – reading my previous post helps). (Greek courts in fact rejected the claims in April).
The left-over issue essentially boils down to the question whether despite the ECJ’s prohibition of anti-suit injunctions for subject-matter falling within the Brussel I-Regulation, Member States courts are free to award damages to the party suing elsewhere in the EU in spite of a choice of court agreement between parties. The Court of Appeal held that they are. It justifiably, in my view, distinguished Turner v Grovit . In Turner v Grovit, the ECJ is concerned with mutual trust and allowing (and indeed trusting) the courts in the other Member States to make their own, proper application of the Regulation. Turner and Grovit does not uphold jurisdiction for the other court: it upholds the opportunity for that other court properly to apply the Regulation, which may or may not lead it to uphold jurisdiction.
The judgment of the Court of Appeal re-enforces the attraction of English courts as a destination of choice: parties wishing to torpedo (a prospect less likely in the Brussels I-bis Regulation) may or may not succeed in convincing alternative courts of their jurisdiction. English courts since Turner cannot issue anti-suit. However they may still hold party liable for having breached the choice of court agreement.
When should a court being asked to apply the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) – the ‘New York Convention‘, look mercifully on forum shopping with a view to the smooth enforcement of such award? That, in essence, was the issue in Yukos v Tomskneft at the Irish High Court. Both Yukos Capital and Tomskneft were originally part of the Yukos group – of PCIA Yukos arbitral award fame. Tomskneft was later transferred to Rosneft. Arbitral proceedings had taken place in Switzerland, Yukos’ attempts at enforcement in Russia failed, as they did in France. Singapore attempts are underway.
The Irish courts involvement at first view looks odd. There are no Tomskneft assets in Ireland, neither corporate domicile of any Tomskneft affiliates. As Kelly J noted, the Irish proceedings effectively would serve as a jack for proceedings in other jurisdictions where Tomskneft does hold assets. Waving a successful enforcement order (even if it were in practice nugatory, given the lack of assets) obtained in a ‘respectable’ jurisdiction, would assist with enforcement proceedings elsewhere.
The New York Convention has a pro-enforcement bias however the Irish (and other, especially common law countries’) arbitration act in enforcement of the Convention, runs alongside the application of Irish civil procedure rules ‘out of the jurisdiction’, being against a foreign defendant: Kelly J (at 59): In implementing the Convention as it did, the legislature did not attempt to dispense with the necessity to obtain leave to serve out of the jurisdiction in a case where the respondent is not normally resident within it.’
US law, too, requires that preliminary to recognising and enforcing a foreign award, in personam jurisdiction must be established. Decision on such remains subject to lex fori. A jurisdiction which all too happily entertains such cases is then said to employ ‘parochial’ or ‘exorbitant’ jurisdictional rules.
In the case at issue, after referencing prior case-law both in Ireland and elsewhere, Kelly J rejected applicant’s request (at 141): It is a case with no connection with Ireland. There are no assets within this jurisdiction. There is no real likelihood of assets coming into this jurisdiction. This is the fourth attempt on the part of the applicant to enforce this award. There is little to demonstrate any “solid practical benefit” to be gained by the applicant. The desire or entitlement to obtain an award from a “respectable” court has already been exercised in the courts of France and is underway in the courts of Singapore.’
Note therefore that the court is not unsympathetic to the attempt at employing successful (even if hollow) enforcement in one jurisdiction as a lever in the real target jurisdiction (the one with the assets). Except, in the case at issue, similar attempts had already been or still were underway elsewhere.
The case is a very good illustration of the attraction (and uncertainty) of forum shopping, in particular at the enforcement stage. As well as a powerful reminder of the in personam jurisdictional rules of the common law.