The CJEU’s locus damni determination in Volkswagen dismisses a US style minimum contacts rule. Like the passat, it risks picking up suits and landing them almost anywhere.
Update 10 July 2020 a few hours after posting: I revisited the pending, distinct reference by the Austrian Supreme Court (see Rouzbeh Moradi’s flag here) on type approval issues (which the High Court has actually dealt with as acte clair in  EWHC 783 (QB), referred to here). I was hoping there might be scope in those questions for the CJEU to fill in the blanks signalled below. I fear there is not.
I earlier reviewed Sánchez-Bordona AG’ opinion in C‑343/19 Verein für Konsumenteninformation v Volkswagen. I noted then that despite attempts at seeing system in the Opinion, the ever unclearer distinction between direct and indirect aka ‘ricochet’ damage under Article 7(2) Brussels Ia is a Valhalla for reverse engineering.
The AG did not suggest a wild west of connecting factors for indirect damage (please refer to my full post for overview), instead suggesting a Universal Music style requirement of extra factors (over and above the location of damage) to establish jurisdiction. In particular he put forward a minimum contacts rule such as in US conflict of laws: at 75: ‘the defendant’s intention to sell its vehicles in the Member State whose jurisdiction is in issue (and, as far as possible, in certain districts within that State).’
The CJEU’s judgment yesterday was received as giving ‘consumers’ the right to sue Volkswagen in their state of domicile. This however is not quite correct. Firstly, the parties at issue are not ‘consumers’ at least within the meaning of European conflicts law: the suit is one in tort, not contract, let alone one that concerns a consumer contract. Further, the AG was clear and the CJEU arguably held along the same lines, that it is only if the car was purchased by a downstream (third party) buyer and the Volkswagen Dieselgate story broke after that purchase, that the damage may be considered to only then have come into existence, thus creating jurisdiction. See the CJEU at 29 ff:
29. That said, in the main proceedings, it is apparent from the documents before the Court, subject to the assessment of the facts which it is for the referring court to make, that the damage alleged by the VKI takes the form of a loss in value of the vehicles in question stemming from the difference between the price paid by the purchaser for such a vehicle and its actual value owing to the installation of software that manipulates data relating to exhaust gas emissions.
30 Consequently, while those vehicles became defective as soon as that software had been installed, the view must be taken that the damage asserted occurred only when those vehicles were purchased, as they were acquired for a price higher than their actual value.
31 Such damage, which did not exist before the purchase of the vehicle by the final purchaser who considers himself adversely affected, constitutes initial damage within the meaning of the case-law recalled in paragraph 26 of the present judgment, and not an indirect consequence of the harm initially suffered by other persons within the meaning of the case-law cited in paragraph 27 of the present judgment.
That ‘case-law cited’ is the classic lines of cases on locus damni per A7(2) BIa, with Trans Tibor as its latest expression.
The CJEU does not qualify the damage as purely financial: at 33, citing the EC’s court opinion: ‘the fact that the claim for damages is expressed in euros does not mean that the damage is purely financial.’: the car, a tangible asset, actually suffers a defect, over and above the impact on its value as an asset. That is a statement which cuts many a corner and which has relevance beyond the EU regime for all ‘money judgments’ (think of e.g. the Hague Judgments Convention). Update 10 July 2020 after initial posting: thank you Gordon Nardell QC for pointing out that the CJEU view here is at odds with the English conflicts rules (and with many other, I reckon) on characterisation of loss as pecuniary.
Predictability, which is firmly part of the Brussels Ia Regulation’s DNA, the Court holds, is secured seeing as a car manufacturer which ‘engages in unlawful tampering with vehicles sold in other Member States may reasonably expect to be sued in the courts of those States (at 36).
Finally, the Court throws consistency with Rome II in the mix, by holding at 39
Lastly, that interpretation satisfies the requirement of consistency laid down in recital 7 of the Rome II Regulation, in so far as, in accordance with Article 6(1) thereof, the place where the damage occurs in a case involving an act of unfair competition is the place where ‘competitive relations or the collective interests of consumers are, or are likely to be, affected’. An act, such as that at issue in the main proceedings, which, by being likely to affect the collective interests of consumers as a group, constitutes an act of unfair competition (judgment of 28 July 2016, Verein für Konsumenteninformation, C‑191/15, EU:C:2016:612, paragraph 42), may affect those interests in any Member State within the territory of which the defective product is purchased by consumers. Thus, under the Rome II Regulation, the place where the damage occurs is the place in which such a product is purchased (see, by analogy, judgment of 29 July 2019, Tibor-Trans, C‑451/18, EU:C:2019:635, paragraph 35).
The extent to which A6 Rome II applies to acts of unfair competition being litigated by ‘consumers’ (in the non-technical sense of the word), is however not quite clear and in my view certainly not settled by this para in the Court’s judgment.
Finally, on locus delicti commissi as I noted at the time, the AG had not in my view given a complete analysis. The CJEU is silent on it.
Not many will feel much sympathy for Volkswagen facing cluster litigation across the EU given its intention to cheat. However the rejection of a minimum contacts approach under A7(2) will have implications reaching small corporations, too. The Volkswagen ruling has many loose ends and will need distinguishing, with intention to defraud the consumer arguably a relevant criterion for distinction given the Court’s finding in para 36.
It is to be feared that many national judges will fail to see the need for distinguishing, adding to the ever expanding ripple effect of locus damni following the Court’s epic Bier judgment.
Ps reference to the Passat in the title is of course to the VW Passat, named after the Germanic name for one of the Trade winds.
(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 184.108.40.206.7
Fabricom: the High Court on Waste to energy – W2E and refuse derived fuel – RDF. On the nature of environment efficient power generation.
In  EWHC 1626 (TCC) Engie Fabricom, O’Farrell J essentially had to hold whether the primary activity at an energy from waste plant is power generation or waste treatment. The classification of waste to energy – W2E as either waste recovery (see Waste Framework Directive Recovery Annex, R1 ‘used principally as a fuel or other means to generate energy’) or waste disposal is a classic in EU waste law, with specific implications for shipments permits. It also of course has an impact on a Member State’s waste targets and renewable energy targets. Aside from the Waste Framework Directive, the Industrial Emissions Directive 2010/75 is also involved – although oddly no CJEU authority is mentioned in the judgment.
In the case at issue an interesting extra element is that the plant at issue received funding via the European Regional Development Fund ERDF (at 145) however ERDF funding was for the generation of electricity from the biodegradable part of waste based on advanced fluidised bed gasification technology, which at the time of the application was expected to be 84.65% of the fuel. However, subsequently the plant changed to use refuse derived fuel or RDF without any waste wood which reduced the biodegradable percentage of the waste to 50%.
At 149 Justice O’Farrell concludes that the primary activity at the Energy Works Hull facility is power generation, for the reasons listed there. Of particular relevance is her comment that ‘the plant was not developed or intended to be operated in furtherance of any particular waste or energy policy, although it was consistent with both policy initiatives.’
There is an interesting expert evidence issue to the case, as Gordon Exall discusses here. I am suspecting one or two of the issues involved could be chewed over upon appeal, with reference to CJEU case-law.
Handbook of EU Waste law, OUP, second ed, 2015.
Thank you Maxime Barba for flagging the judgment in the Paris Court of Appeal Sodmilab et al. (Text of the judgment in Maxime’s post). The case concerns the ending of a commercial relationship. Part of the contract may be qualified as agency with lex causae determined under the 1978 Hague Convention. On this issue, the Court of Appeal confirmed French law as lex causae.
Things get messy however with the determination of that part of the contract that qualifies as distribution (a mess echoing DES v Clarins), and on the application of Rome II.
The Court of Appeal first (at 59) discusses the qualification of A442-6 of the French Code du commerce, on unfair trading practices (abrupt ending of a commercial relationship), dismissing it as lois de police /overriding mandatory law under Article 9 Rome I. As I noted in my review of DES v Clarins, this is a topsy turvy application of Rome I. The qualification as lois de police is up to the Member States, within the confines of the definition in Rome I. The Court of Appeal holds that A442-6 only serves private interests, not the general economic interest, and therefore must not qualify under Rome I. Hitherto much of the French case-law and scholarship had argued that in protecting the stability of private interests, the Act ultimately serves the public interest.
Next (as noted: this should have come first), the Court reviews the application of A4f Rome I, the fall-back position for distribution contracts – which would have led to Algerian law as lex causae. It is unclear (62 ff) whether the Court reaches its conclusion as French law instead either as a confirmation of circumstantial (the court referring to invoicing currency etc.) but clear choice of law under Article 3, or the escape clause under Article 4(3), for that Article is mentioned, too.
Rome I’s structure is quite clear. Why it is not properly followed here is odd. That includes the oddity of discussing French law under Article 9 if the court had already confirmed French law as lex causae under A3 or 4.
Finally, corners are cut on Rome II, too. Re the abrupt ending of the relationship (at 66ff). French law again emerges victorious even if the general lex locus damni rule leads to Algerian law. The court does not quite clearly hold that on the basis of Article 4(3)’s escape clause, or circumstantial choice of law per A14. The court refers to ‘its findings above’ on contractual choice of law, however how such fuzzy implicit choice under Rome I is forceful enough to extend to choice of law under Rome II must not be posited without further consideration. Particularly seeing as Article 6 Rome II excludes choice of law for acts of unfair trading.
(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 220.127.116.11, Heading 18.104.22.168.9; Chapter 3, Heading 3.2.8, Heading 22.214.171.124; Chapter 4).
On the nature of private international law. Applying islamic law in the European Court of Human Rights.
Anyone planning a conflict of laws course in the next term might well consider the succinct Council of Europe report on the application of islamic law in the context of the European Convention on Human Rights – particularly the case-law of the Court. It discusses ia kafala, recognition of marriage, minimum age to marry, and the attitude towards Shari’a as a legal and political system.
Needless to say, ordre public features, as does the foundation of conflict of laws: respect for each others’ cultures.
A short update on the Prestige litigation. I reported earlier on the disclosure order in the recognition leg of the case. In that review I also listed the issues to be decided and the preliminary assessment under Title III Brussels Ia. That appeal is to be heard in December 2020 (see also 21 ff of current judgment). In The London Steam-Ship Owners’ Mutual Insurance Association Ltd v Spain (M/T “PRESTIGE”)  EWHC 1582 (Comm) Henshaw J on 18 June held on yet another set of issues, related to arbitration and State Immunity.
He concluded after lengthy analysis to which it is best to refer in full, that Spain does not have immunity in respect of these proceedings; that the permission to serve the arbitration obligation our of jurisdiction, granted earlier to the Club should stand; and that the court should appoint an arbitrator.
I am pondering whether to add a State immunity chapter to the 3rd ed. of the Handbook – if I do, this case will certainly feature.
(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 126.96.36.199, Heading 188.8.131.52, Heading 2.2.16.
Szpunar AG in Ellmes Property Services. Again, on rights in rem and, more challenging, on forum contractus and the spirit of CJEU De Bloos.
Acte clair is in the eyes of the beholder, I assume. However a confident judge would have sufficient CJEU authority to help them hold on the A24(1) BIa issues in C‑433/19 Ellmes Property Services in which Szpunar AG opined last week. (No EN version available at the time of publication of this post).
Do actions brought by a co-owner seeking to prohibit another co-owner from carrying out changes to his property subject to co-ownership, in particular to its designated use, arbitrarily and without the consent of the other co-owners, concern the assertion of a right in rem? In the negative, is the forum contractus per A7(1)(a) Brussels Ia the location of the property? The less clear issue in my view is the forum contractus element.
The location is Zell am Zee, contested use is, not surprisingly, tourist accomodation. Applicant in the national proceedings is an individual who lives in the apartment building. Defendant is a UK corporation who uses it for short-term lets despite the residential designation assigned to the building as a whole in the co-ownership agreement.
From CJEU authority including C-438/12 Weber v Weber it should be clear that other than the hardcore cases of ownership of real estate, the erga omnes v in personam character of rights in real estate depends on national law. The Advocate General in this respect points out that for the rights of co-owners in the case at issue to be rights in rem, Austrian law would have to be enable them to exercise these rights not just vis-a-vis the other co-owners, but also vis-a-vis third parties such as tenants. Whether this is the case in Austrian law has not been sufficiently explained in the reference, it seems.
For the impact of entry in the land register (where third parties can consult the co-ownership agreement), Szpunar AG reviews and contrasts C‑417/15 Schmidt v Schmidt, and C-630/17 Milivojević v Raiffeisenbank. Mere registration does not always entail erga omnes impact.
The Advocate General reminds us of the overall interpretation of Article 24, including the need for restrictive interpretation, and flags (with reference inter alia to the Handbook, p.73, for which I am, as always, sincerely humbled) that it is not just, or not even so much sound administration of justice which underlies A24. At least partially, Member States’ strategic interests are served by the issues listed in the Article.
Ellmes Property Services does not seem to raise additional issues such as we saw in C-25/18 Kerr. The Austrian courts could have dealt with this on their own, and seeing as the referring judge did not provide the kind of detail for the CJEU to judge, the AG’s suggestion is to leave it up to them to verify the erga omnes character.
That leaves (whether it will be needed depends on what the eventual insight will be on the erga omnes element), the forum contractus under A7(1). Parties differ as to the qualification of the contractual duty: is it a positive one (do!) or a negative one (must not!). The AG opts for the latter, with reference to CJEU 14/76 De Bloos: A7(1) refers to the contractual obligation forming the basis of the legal proceedings. I find the precedent value of De Bloos problematic in light of the many changes that have been made to Article 7 since, and in light of the engineering possibilities it hands to parties.
The AG advises that forum contractus will have to be determined by the Italian judge following the conflicts method per CJEU 12/76 Tessili v Dunlop, with little help from European harmonisation seeing i.a. as the initial co-ownership agreement dates back to 1978.
I am curious to see how far the Court will go in entertaining the issues at stake.
(Handbook of) EU Private International Law, Chapter 2, Heading 184.108.40.206 (cited by the AG) and Heading 220.127.116.11.
Alexander bros v Alstom. A reminder of the relevance of EU law for New York Convention refusal of recognition of arbitral awards on ordre public grounds.
In Alexander Brothers Ltd (Hong Kong SAR) v Alstom Transport SA & Anor  EWHC 1584 (Comm) Cockerill J discussed inter alia (at 177 ff) the impact of EU law on the ordre public assessment for potential refusal of recognition of an arbitral award under section 103 of the 1980 New York Convention.
CJEU authority are C-126/ 97 Eco Swiss (concerning EU competition law) and C-168/ 05 Claro (unfair terms in consumer contracts). At 183 Cockerill J does not suggest the CJEU authority should no longer stand. Indeed she suggests obiter that there is no reason to suggest the CJEU’s line of reasoning should not apply to wider issues than just competition law or consumer law. However, the burden of proof of showing that particular parts of EU law are of a nature to justify the ordre public exception, lies upon the party objecting to recognition. In casu Alstom have fallen short of that duty. Yes, there is scant reference to anti-corruption in the private sector; and yes there is EU money laundering law. However (at 186) ‘the EU has, in general terms, set its face against corruption. But aside from the area of money laundering it has not put in place mandatory laws or rules. In the context of international corruption of the kind in focus here it has left it to the individual member states to adopt what measures seem good to them. There is, in short, no applicable mandatory rule or public policy.’
An interesting discussion.
Henshaw J in DVB Bank SE v Vega Marine Ltd & Ors  EWHC 1494 (Comm) (on substance a straightforward case on sums loaned) made some important observations on the benefits of summary judgment as opposed to a default judgment in the context of recognition and enforcement.
There is no doubt the English courts have jurisdiction per a valid choice of court clause under A25 BIa. Claimants are pressing for summary judgment, citing
- Brexit. The Withdrawal Agreement extends EU law in civil procedure to proceedings issued before the end of the transition period, however claimants express anxiety over the speed of Greek enforcement proceedings given courts’ shutdown in the Covid19 era. At 61: ‘Greek counsel has advised the Claimants that the Greek courts shut down earlier this year for an indefinite period, so that obtaining an enforcement order in Greece would be likely to be delayed;’.
- More crucially however, Henshaw J notes at 61, correctly, that even under BIa, default judgments are more vulnerable: ‘there is a risk that an enforcement order based on a simple default judgment, even if obtained before 31 December 2020, might be set aside on public policy grounds. Greek counsel advised that the Greek courts would be much less likely to refuse to recognise and enforce a reasoned English judgment following a hearing on the merits.’
Summary judgment was given against the defendants.