Winrow v Hemphill: The High Court emphasises exceptional nature of ‘manifestly closer connected’ in Rome II. Clarifies ‘habitual residence’.
Winrow v Hemphill ( EWHC 3164), involved a road traffic accident that occurred in Germany on 16 November 2009. The claimant was a rear seat passenger in a vehicle driven by Mrs Hemphill (‘the first defendant’), which collided head on with a German vehicle. The defendant admitted fault for the collision. As a result of the collision, the claimant sustained personal injury, for which she received some treatment in Germany and further ongoing treatment in England. She and her husband returned to live in England in June 2011, earlier than planned. ‘Second defendant’ was the German insurer of the first defendant.
The following was agreed between the parties:
- iii) Since the claimant’s husband was due to leave the army in February 2014 after twenty-two years’ service he would have returned to England one and a half to two years before that date to undertake re-settlement training. It was always their intention to return to live in England.
- ii) At the time of the accident the claimant was living in Germany, having moved there in January 2001 with her husband who was a member of Her Majesty’s Armed Services. Germany was not the preferred posting of the claimant’s husband, it was his second choice. He had four separate three year postings in Germany.
- i) The claimant was a UK national.
- iv) Whilst in Germany, the claimant and her family lived on a British Army base where schools provided an English education.
- v) While in Germany, the claimant was employed on a full-time basis as an Early Years Practitioner by Service Children’s Education, (UK Government Agency).
- vi) The claimant claimed continuing loss and damage including care and assistance and loss of earnings. She asserted that the majority of her loss has been and will be incurred in England. The claimant alleged continuing pain, suffering and loss of amenity.
- vii) The first defendant was a UK national and an army wife, with her husband serving with the Army in Germany. She had been in Germany for between eighteen months and two years before the accident. She returned to England soon afterwards.
The High Court was asked (1) what law applies per Article 4 Rome II, and (2) whether under the circumstances, Article 4(3) Rome II might have any relevance.
On the habitual residence issue, Rome II corrects the overall lex loci damni rule in cases of joint habitual residence between tortfeasor and victim (which was argued to be the case here). Habitual residence was also argued to play a role in the ‘closer connection’ test (see below).
Rome II, the Regulation of the law applicable to non-contractual obligations, does not define ‘habitual residence’ for individuals acting in their personal capacity. The matter therefore is one of national conflicts law. The habitual residence for a natural person is only defined by ht Regulation when it comes to his acting in the course of his business activity. ‘Habitual residence’ is a concept which is not used in Brussels I, however it is used in the Brussels II bis Regulation on jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matter of parental responsibility, where it is left undefined, and in the Rome III Regulation (an instrument of enhanced co-operation and hence not applicable in all Member States) implementing enhanced cooperation in the area of applicable law to divorce and legal separation, where, too, somewhat oddly given its date of adoption (after Rome I and II) it is left undefined.
The Court of Justice has defined ‘habitual residence’ in Swaddling, Case C-90/97, within the context of social security law (entitlement of benefits subject to a residence requirement) as the place ‘where the habitual centre of their interests is to be found. In that context, account should be taken in particular of the employed person’s family situation; the reasons which have led him to move; the length and continuity of his residence; the fact (where this is the case) that he is in stable employment; and his intention as it appears from all the circumstances.’
Undoubtedly the context of the adjudication needs to be taken into account, such as in Swaddling, a social security case, in which the seeking of holding of employment is likely to have a much greater relevance for determining habitual residence than in the context of, say, maintenance or parental responsibility (where, for instance, the interest and ‘anchorage’ of the child is likely to be much more relevant). [See also House of Lords M v M,  EWHC 2047 (Fam), a case referred to in Winrow]. Moreover, the Court of Justice itself has warned that its case-law on habitual residence in one area, cannot be directly transposed in the context of any other (Case C-523/07, A).
It is obvious however that the ‘centre of interest’ test which in one way or another finds its way into habitual residence in all relevant EU law, includes a subjective element: the intention of a person to be anchored in a particular place. This was argued to be relevant in the case at issue, because both victim and tortfeasor were resident in Germany on account of their husbands’ military posting there.
Slade J in my view justifiably held that having regard to the length of stay in the country, its purpose and the establishing of a life there, habitual residence of the Claimant at the time of her accident was Germany. It is not because she followed her husband who was posted in Germany on Army business, that she was in Germany involuntarily.
On the issue of manifestly closer connected per Article 4(3) Rome II, the High Court first of all confirmed the exceptional character of the escape clause, however emphasises, and I have great sympathy for this view, that in reviewing that exceptional possibility, there should be no limitation in principle of factors that can be taken into account: Article 4(3) clearly is an exception to the EU’s mantra of predictability in EU private international law, however one which even the European Commission foresaw and which is inherent to the very nature of the exception. Hence the High Court considered inter alia the joint nationality of the victims (with an interesting discussion on whether United Kingdom nationality may be relevant for the consideration of English law being applicable – there is no such things as ‘English’ nationality); habitual residence at the time of the accident and subsequently; location of subsequent consequences (the victim now suffering those in England; loss of earning occurring in England), etc.: even what a particular court in a particular Member State may consider to be relevant for the application of 4(3) may be very unpredictable indeed may also be disparate across the EU.
However on balance Slade J held that the balance was in favour of not applying the escape clause, particularly in view of the period of time of habitual residence in Germany, and subsequent continuing residence in that country (ia for follow-up treatment). Final holding therefore was
- Factors weighing against displacement of German law as the applicable law of the tort by reason of Article 4(1) are that the road traffic accident caused by the negligence of the First Defendant took place in Germany. The Claimant sustained her injury in Germany. At the time of the accident both the Claimant and the First Defendant were habitually resident there. The Claimant had lived in Germany for about eight and a half years and remained living there for eighteen months after the accident.
- Under Article 4(3) the court must be satisfied that the tort is manifestly more closely connected with English law than German law. Article 4(3) places a high hurdle in the path of a party seeking to displace the law indicated by Article 4(1) or 4(2). Taking into account all the circumstances, the relevant factors do not indicate a manifestly closer connection of the tort with England than with Germany. The law indicated by Article 4(1) is not displaced by Article 4(3). The law applicable to the claim in tort is therefore German law.
This judgment to my knowledge is one of few discussing Article 4(3)’s escape clause in such detail. A judgment which does justice to both the exceptional nature of the provision, and the need to consider all relevant factors.
In Orgacom v Vlaamse Landmaatschappij, Case C-254/13, the ECJ sent out its regular reminder of the core foundation of EU law: namely it being a customs union.
Upon receiving instruction to challenge a national tax, it is useful intuition first of all to assess whether what client is complaining about, is not actually a customs duty (or charge having equivalent effect) per Article 30 TFEU (previously 25 EC), rather than an internal tax. If it is, a win is signed, sealed, delivered. That is because contrary to the possibility for Member States to argue an exception to a trade-restrictive national tax (Article 110 TFEU, previously Article 90 EC), per the ECJ’s case-law (Vinal v Orbat, Case 46/80, was the pivotal kick-off case), there is no room for manoeuvre whatsoever which could ever justify a customs duty.
Qualifying a charge as a customs duty or an equivalent charge, renders this charge contrary to the Treaty by its very nature. Charges which fall under Article 110, on the other hand, are only incompatible with the Treaty where they are discriminatory or protective.
What distinguishes both? Any pecuniary charge, whatever its designation or mode of application, which is imposed unilaterally on goods by reason of the fact that they cross a frontier, and which is not a customs duty in the strict sense, constitutes a charge having an effect equivalent to a customs duty. The only exception is where the charge in question represents payment for a service rendered to the importer, of a sum in proportion to the service, or if it forms part of a general system of internal taxation, applied systematically in accordance with the same criteria to both national products and imported or exported products: such charges on importation fall under Article 110 TFEU where they form part of a general system applicable systematically to categories of products in accordance with objective criteria, irrespective of the origin of the products.
Orgacom is a classic tutorial in the application of Article 30 TFEU. In the case at issue, the levy in question affects the importers of surplus livestock manure on import. The trigger for the levy is simply the amount of importation in the preceding year. That there is a similar levy imposed on fertilisers produced in the Flanders Region, is not sufficient to have it qualify as a tax under Article 110: it is the frontier crossing which is the trigger; the duty is not imposed at the same marketing stage (the disputed levy is imposed on importers; while the same levy in the Flemish Region affects producers); and the two levies are calculated using different methods.
The Court therefore also dismisses first hand the argument that the levy was needed to control the stocks of manure in Flanders and to protect domestic production against external measures that distort competition and impose an additional environmental burden on Flanders: because, as noted, once the measure is qualified as a charge having equivalent effect as a customs duty, wriggle room is out of the question.
(Of note is that the Belgian Constitutional Court had previously held the levy incompatible with Belgium’s internal Economic and Monetary Union).
Never ever underestimate the power of Article 30 TFEU.
Fern v Intergraph: High Court takes a narrow view of mandatory requirements on choice of law and court viz Commercial Agents Directive
In Fern v Integraph, Mann J was asked whether a clear Texas governing law and Texas jurisdiction clause should be set aside, jurisdiction upheld by the English courts and applicable law to be held to be English law, on the basis of an alleged infringement of the UK implementation of the Commercial Agents Directive. (The procedural context is one of permission to ‘serve out of the jurisdiction’).
Fern was the agent of Intergraph in the EU. Fern claims compensation for breach of the Commercial Agents Regulations (UK), which implement the Commercial Agents Directive. Some core EU law considerations pass before the High Court, including Marleasing, Faccini Dori, von Colson and Inter-Environnement. The High Court’s main pre-occupation would seem to have been with the rescue of choice of court and of governing law as much as possible, even within the constraints of the ECJ’s decision in Ingmar. In that judgment (which was confined to choice of law; the jurisdiction of the English courts was not sub judice), the ECJ held
‘It must therefore be held that it is essential for the Community legal order that a principal established in a non-member country, whose commercial agent carries on his activity within the Community, cannot evade those provisions by the simple expedient of a choice-of-law clause. The purpose served by the provisions in question requires that they be applied where the situation is closely connected with the Community, in particular where the commercial agent carries on his activity in the territory of a Member State, irrespective of the law by which the parties intended the contract to be governed.’ (in the case at issue, a choice of law clause had been inserted which made the contract applicable to the laws of California).
However, the operative part of the ECJ’s decision in Ingmar focussed on the compensation element only: ‘Articles 17 and 18 of Council Directive 86/653/EEC of 18 December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents, which guarantee certain rights to commercial agents after termination of agency contracts, must be applied where the commercial agent carried on his activity in a Member State although the principal is established in a non-member country and a clause of the contract stipulates that the contract is to be governed by the law of that country.’
In the case at issue, the High Court seems to have leapt at the more narrow operative part in Ingmar (and its non-consideration of choice of court) in an effort to uphold the choice of court and governing law agreement: the right to compensation derives from statutory law, not from contractual obligations. Whence it does not affect aforementioned clauses. In reaching that conclusion, however, Mann J effectively refused to consider effet utile of the Commercial Agents Directive when interpreting English rules of civil procedure for serving out of jurisdiction. Effet utile does resurface, however, for parties have been given time to submit their views on whether the right to compensation as a statutory right, infringement of which would amount to a tort, would fall outside the scope of the relevant contractual clauses and would lead to jurisdiction in the English courts.
Even if this will be the eventual decision of the high court after re-submission of arguments, it is likely that the confines of that jurisdiction in England will be narrowly defined. (Viz the right to compensation only). This is a striking difference with e.g. the German courts. (I have previously posted on the view of the Bundesgerichtshof: a much swifter and absolute rejection of choice of court and governing law ex-EU in the context of the commercial agents Directive).
A rather complex and as yet unfinalised ruling.
Burgo Group: Some not altogether shocking revelations on the Insolvency Regulation. Useful revelations nevertheless.
There’s case-law of the Essent, Kylie Minogue (eDate Advertising), Seal Pups, or Kiobel type. And then there is case-law of the, well, Burgo type. In Burgo Group v Illochrama SA, Case C-327/13, the ECJ held on 4 September. The judgment does not reveal anything shocking. (Some might argue at least some of the questions could have been acte claire). However the Court’s findings nevertheless put to bed some concerns which insolvency practitioners might have had.
On 21 April 2008, the Commercial Court, Roubaix-Tourcoing (France) placed all the companies in the Illochroma group — including Illochroma, established in Brussels (Belgium) — into receivership and appointed Maître Theetten as agent. On 25 November 2008, it placed Illochroma in liquidation and appointed Maître Theetten as liquidator.
Burgo Group, established in Altavilla-Vicentina-Vicenza (Italy), is owed money by Illochroma for the supply of goods. On 4 November 2008, Burgo Group presented Maître Theetten with a statement of liability in the amount of EUR 359 778.48. Maître Theetten informed Burgo Group that the statement of liability could not be taken into account because it was out of time.
Burgo Group then requested the opening of secondary proceedings in respect of Illochroma. The referring court (The Brussels Court of Appeal) observed that the Insolvency Regulation defines ‘establishment’ as any place where the debtor carries out a non-transitory economic activity with human means and goods, which is the situation in the present case. Illochroma is a company with two establishments in Belgium, where it is the owner of a building, buys and sells goods and employs staff. Illochrama and the liquidator contend that, since Illochroma has its registered office in Belgium, it cannot be regarded as an establishment within the meaning of Regulation No 1346/2000. They argue that secondary proceedings are restricted to establishments without legal personality (issue 1).
Belgian law applicable to the present case provides that any creditor, including a creditor established outside Belgium, may bring an action before a Belgian court for the opening of insolvency proceedings against its debtor. However, Illochroma maintains that that right is restricted to creditors established in the Member State of the court before which the action seeking the opening of secondary proceedings has been brought, since the sole purpose of such proceedings is to protect local interests (issue 2).
Finally, the referring court observes that Regulation No 1346/2000 does not state whether the possibility for the persons referred to in Article 29 thereof to request, in the Member State within the territory of which the establishment is situated, the opening of secondary proceedings is a right that must be recognised by the court having jurisdiction in that regard or whether that court enjoys a discretion as to whether it is appropriate to grant that request, with a view, in particular, to protecting local interests (issue 3).
With respect to issue 1, the ECJ first of all dismissed any suggestions that COMI may be second-guessed by courts in other Member States. Even if the French courts erred in accepting primary jurisdiction, per Bank Handlowy the courts in other Member States have to stick by that judgment. Any challenge to it must be brought in the national courts of the Member States were main proceedings were opened. The Regulation nevertheless of course has inserted the possibility of secondary proceedings precisely to protect local interests in other Member States. (Even though correction of COMI was not as such thought of when secondary proceedings’ architecture was conceived, in practice they do serve to offset some of the consequences of (alleged) wrong COMI assessment).
‘Establishment’ is defined in Article 2(h) of Regulation No 1346/2000 as ‘any place of operations where the debtor carries out a non-transitory economic activity with human means and goods’. Per Interedil, the fact that that definition links the pursuit of an economic activity to the presence of human resources shows that a minimum level of organisation and a degree of stability are required. It follows that, conversely, the presence alone of goods in isolation or bank accounts does not, in principle, satisfy the requirements for classification as an ‘establishment’. On the other hand, the definition does not refer to the place of the registered office of a debtor company or to the legal status of the place in which the operations in question are carried out.The Member State where the company has its registered office clearly is not excluded from the definition: otherwise local interests would be denied the opportunity of seeking protection, which would exist in other Member States where an establishment is present.
As for the second issue, the Regulation draws a clear distinction between territorial proceedings opened prior to the opening of main proceedings, and secondary proceedings. It is only in relation to territorial proceedings that the right to request the opening of proceedings is limited by the Regulation to creditors who have their domicile, habitual residence or registered office within the Member State in which the relevant establishment is situated, or whose claims arise from the operation of that establishment (at 48, with reference to Zaza Retail). Any other conclusion would amount to indirect discrimination on the grounds of nationality, since non-residents are in the majority of cases foreigners (at 49).
Finally, with respect to issue 3, the Regulation grants broad discretion, with regard to the opening of secondary proceedings, to the court before which an action seeking the opening of secondary proceedings has been bought. Article 28 of the Regulation determines in principle as the law applicable to secondary proceedings, that of the Member State within the territory of which those secondary proceedings are opened. Whether opening of the proceeding is ‘appropriate’ has to be determined by that applicable law. EU law does have an impact on that assessment, though (at 64 ff): in deciding appropriateness, Member States must not discriminate on the basis of place of residence or registered office; the Regulation’s motifs for allowing secondary proceedings must be respected (in the main: protection of local interests, given that universal proceedings may be preferred however do often lead to practical difficulties); and finally the principle of sincere co-operation implies that the court assessing the secondary proceedings, must have regard to the objectives of the main proceedings.
All in all therefore very much a common sense judgment, with the final instruction to the courts being quite relevant: secondary proceedings must not operate as isolated incidents and they have to take some lead from the main proceedings.