Posts Tagged Article 25

Bestolov v Povarenkin. On the determination of domicile (and yes, Owusu strikes again).

Many thanks to Andrew Savage and Nick Payne for flagging [2017] EWHC 1968 (Comm) Bestolov v Povarenkin a little while ago, and for sending me copy of the judgment at the time. Apologies for late reporting: frustratingly even at gavclaw we cannot always devote the amount of time to the blog we would wish. Dr Maganaris in the meantime also has summary here.

As readers no doubt are aware, the Brussels I Recast Regulation (Article 62) does not define ‘domicile’: it defers to national private international law on the issue. The Civil Jurisdiction and Judgments Order 2001 establishes that a person is domiciled in England for the purpose of the Brussels Regulation (recast) if: the person is “resident” in England; and (cumulatively) the person has a “substantial connection” to England. Bryan DJ takes us through the relevant (and often colourful) precedent and notes, importantly, at 28 that the consequence of the English rules is that the same person can be resident in two different jurisdictions at the same time. At 44, he summarises with a list of criteria, and decides on the facts of the case that Mr Povarenkin is indeed domiciled in England (the substantial connection test having been more easy to determine than that of residence).

Subsequently the High Court reviews at length whether there was a valid choice of court agreement under Article 25 of the Regulation – which at this jurisdictional stage of the proceedings Bryan DJ decides there was not (choice of law for the relevant contracts being English law, was justifiably not considered definitive in this respect), at least not clearly. Obiter, the judge reviews forum non conveniens, at lenght in fact (and in a very clear way with a keen eye on relevant precedent as well as court practice in England) however he holds both before and after the obiter that evidently given Owusu, forum non conveniens has no calling.

A well written judgment, the approach of which on domicile evidently goes beyond having relevance merely for the English courts: for under the Regulation, courts in other Member States, too, may have to consider whether parties are domiciled in an EU Member State other than their own including, for the time being, the United Kingdom.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.3, Heading 2.2.14.5.

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Algeco: Scheme of arrangements tourism continues, with tenacious questions still outstanding.

Thank you Tom Whitton and Helen Kavanagh  for flagging Algeco Scotsman PIK SA [2017] EWHC 2236 (Ch). Algeco has COMI in Luxembourg.  This was clear when the relevant scheme of arrangement (‘SAR’) was being discussed. To manage potential problems at the jurisdictional stage, Hildyard J at 22 lists the precautions the company and the majority of the lenders took:

‘Accepted by the relevant 75 per cent or more, was first, the amendment of the governing law clause in the PIK Loan Agreement to change the governing law from New York law to English law; secondly, the amendment of the jurisdiction clause to submit the parties to the non-exclusive jurisdiction to the courts of England; and thirdly, a waiver of any restrictions under the PIK loan agreement so as to permit the company to take all steps necessary to confirm or establish sufficient connection with England including, if appropriate, to take steps to ensure that its COMI is in England.’

When the unsuspected reader sees ‘COMI’ of course (s)he is forgiven for immediately pondering application of the EU’s Insolvency Regulation – quod certe non: for it is clear (ia as a result of schemes of arrangement not being included in relevant Annex) that SARs fall under company law. Hildyard J’s jurisdictional kick-off at 43 is telling: ‘Dealing first with jurisdiction, the primary question is whether this Luxembourg company, the subject of the scheme, is a qualifying company so to be subject to section 895 of the Companies Act’. Idem at 45.

At 47 the High Court then applies the jurisdictional test viz the Brussels I Recast Regulation arguendo: if it were to apply (which the English Courts have taken no definitive stance on), would an English court have jurisdiction? Yes, it is held: under Article 8 (anchor defendants) and under Article 25 (choice of court).

Yet this in my view is where recourse to SARS in the English courts continues to be exposed: loan agreements and facilities agreements now routinely adopt choice of court and law in favour of English courts and ditto law. Yet where they do not, or did not, the ‘willing’ creditors consent to a change in the agreement in favour of the English courts, with the unwilling creditors left behind. Whether this holds scrutiny under Rome I is far from certain. As for Article 8, its use here may be seen as a form of abuse, disciplined under the Regulation.

Hildyard J considers the case one of ‘good forum shopping’ (at 57-58), with reference to Apcoa which I review here. The concerns above continue in my view to highlight weaknesses in the construction, which so far have not led to any collapse of this restructuring tourism. At 58 the High Court emphasises that there are cases of inappropriate forum shopping in this context (one of that includes haste) yet the role of Rome I in this context has so far played little of a role.

It is noteworthy that in my view (and I so testified in re Apcoa) even a wrong view of the English courts on Rome I’s impact, would not suffice for jurisdictions outside of the UK to refuse to recognise the scheme under Brussels I – all with the huge Brexit caveat evidently.

Geert.

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

 

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Choice of court (in tender file) under Brussels I. CJEU confirms Szpunar AG in Hőszig /Hoszig – keeps schtum on Brussels I Recast.

The CJEU has confirmed the views of Szpunar AG in C-222/15 Hőszig /Hoszig, without (much as expected) entertaining the lex fori prorogati rule of the Brussels I Recast.

Can choice of court made in underlying documentation in the context of a tender, for which Hőszig entered a winning bid, be considered valid under Article 23 of the Brussels I Regulation (now: Article 25 Brussels I Recast)? Yes, the Court said, with explicit reference to the AG. Crucial point in the consideration is whether per Case 24/76 Colzani an explicit reference to the choice has been made, reference which can be controlled by a party applying normal diligence and where it is established that the general conditions containing the jurisdiction clause was actually communicated to the other contracting party (at 40 in Hoszig). This was so in the case at issue. The court points out that Article 23 (and now Article 25) includes mostly formal requirements (expression of consent, see the references in my posting on the AG’s Opinion) and only one substantial requirement (choice of court needs to relate to an identified legal relationship between the parties). The remainder of discussion on the substantive requirements with respect to the choice of court agreement, is subject to the lex causae of that separate choice of court agreement (exactly why the current Regulation now includes the lex fori prorogati rule; Szpunar AG’s discussion of this clause however was not required to settle the issue and therefore the Court does not look into it).

‘(T)he Paris Courts [have exclusive and final jurisdiction]’ is sufficient for the CJEU to determine the choice of court with precision: it is perfectly acceptable that it will subsequently be French civil procedure laws that will determine precisely which court will have jurisdiction.

A sensible judgment following clear Opinion of the Advocate General, together further completing the choice of court provisions of Brussels I.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.9 Heading 2.2.9.4. Chapter 3, Heading 3.2.2 .

 

 

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Once again: Choice of court (this time in tender docs) under Brussels I. Szpunar AG takes the sensible route in Hőszig /Hoszig.

In C-222/15 Hőszig /Hoszig, Advocate General Szpunar opined using the sensible route, on the application of Article 23 of Regulation 44/2001 . His excursus though on Article 25 of the Brussels I Recast and the new lex fori prorogati rule is the part of his judgment which I read with most interest.

First things first: can choice of court made in underlying documentation in the context of a tender, for which Hőszig entered a winning bid, be considered valid under Article 23 of the Brussels I Regulation (now: Article 25 Brussels I Recast). Pursuant to Clause 23.1 of these ‘general conditions of purchase’, headed ‘applicable law and settlement of disputes’, ‘[t]he Order shall be governed by and interpreted in accordance with French law. The application of the United Nations Convention on the International Sale of Goods dated April 11, 1980 is excluded. Any dispute arising out of or in connection with the validity, construction, performance or termination of the Order, which the parties are unable to settle amicably shall be finally and exclusively settled by the courts of Paris, including in the case of a summary procedure, injunctions or conservatory measure.’

Hőszig tried to sue instead in what it considered to be the place of performance of the contract, per Article 5(1) (now 7(1) in the Recast). Its torpedo of the choice of court included in the general conditions of purchase, was based on recourse to Article 10(2) Rome I, which holds that the putative law of the contract does not apply to consider a party’s consent if it would not be reasonable to do so. In such case the law of the habitual residence of said party applies. Here this would lead to Hungarian law rather than French law and Hungarian law, it is argued, would not accept such incorporation of general terms and conditions. Szpunar AG however simply refers to the fact that choice of court agreements are excluded from the Rome I Regulation. Recourse to Article 10(2) is barred by that exclusion.

What needs to be considered under Article 23 Brussels I is whether parties have reached consensus, ‘clearly and precisely demonstrated’, the AG suggests. This wording is typically associated with choice of law under Rome I however I would support its use in the context of the Brussels I (and Recast) Regulation, too, for that is what the Court’s case-law on the Article amounts to. Applying Case 24/76 Colzani mutatis mutandis, and taking into account that express reference to the general terms and conditions in documents exchanged between the parties prior to the tender being awarded, the AG concludes that agreement had been reached.

Now, is the expression ‘courts of Paris’ sufficiently precise? Szpunar AG suggests it is and I would concur, albeit that the last word on  that is probably not yet said. The Advocate General refers to Capotorti AG in Case 23/78 Meeth, who had advised that a clause worded such as here, refers by implication to the system of rules of territorial jurisdiction (typically on the basis of a combination of value and subject-matter) to determine precisely at which court proceedings must be instituted. The Court itself did not at all elaborate in the eventual judgment. Szpunar AG suggests it must have taken Capororti’s suggestion for granted. Therefore (at 44 of the Opinion) it is French procedural law which governs the question of precisely which Paris court is competent.

This leaves open the question, though (which I understand is not sub judice here) whether parties can employ choice of court to trump national rules of civil procedure. What if they agree that the courts of say province X in Member State A are preferable to settle the issue, e.g. because of perceived know-how, even if national civil procedure would ordinarily assign the case to province Y? Not an issue which to my knowledge has been settled by EU case-law.

By way of sign-off, the Advocate General then reviews whether the new text, Regulation 1215/2012, has in any way altered or added to the discussion on choice of court agreements. Readers will be aware (via this blog or the Handbook or otherwise) that the new Regulation refers to the lex fori prorogati to determine the validity of the choice of court agreement:  ‘[i]f the parties, regardless of their domicile, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction, unless the agreement is null and void as to its substantive validity under the law of that Member State’ (emphasis added by Szpunar AG).

Under Brussels I, various options were defended. Szpunar AG refers to Slynn AG having defended lex fori prorogati in Case 150/80 Elefanten Schuh,  and Szpunar AH himself suggest (at 47 in fine) lex fori additi under the former Brussels I Regulation (44/2001).

The AG is most certainly correct in my view that the lex fori prorogati is not meant to cover all aspects of the validity of the agreement. In my Handbook I distinguish between the expression of consent (harmonised by Article 25), and the formation of consent (not touched upon by Brussels I and now subject to the lex fori prorogati). He then suggests that the insertion of lex fori prorogati was meant to align the Brussels I (Recast) with the 2005 Hague Convention on Choice of Court Agreements, to which the EU have now acceded. I do not recall any such reference in the travaux preparatoires of Regulation 1215/2012 – however it has been a while since I consulted them extensively and the AG presumably has.

The Court of course will be much more succinct than its AG.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.9 Heading 2.2.9.4. Chapter 3, Heading 3.2.2 .

 

 

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Choice of court in bond prospectus. The CJEU in Profit Investment Sim.

The CJEU has in my view taken the sensible approach in C-366/13 Profit Investment Sim, on (among others) whether choice of court included in a bond prospectus, binds not just the original transactional parties but also the buyers of such bonds on the secondary markets or via intermediaries. (An issue which many of us pondered in Kolassa but which was not sub judice there).

Parties at issue were Commerzbank (formerly Dresdner), the bond issuer; Redi, financial intermediary licensed by the UK FSA and subscriber of all relevant bonds on the primary market; and Profit, an Italian company, who bought part of the bonds of Redi, on the secondary market. Dresdner’s prospectus contains choice of court in favour of the English courts.

First, on the issue of the jurisdiction clause. The referring court asks, in essence, whether Article 23(1)(a) and (c) of Regulation 44/2001 (both now part of Article 25) must be interpreted as meaning that a jurisdiction clause, such as that at issue in the main proceedings, satisfies the formal requirements laid down in Article 23(1)(a) [‘in writing or evidenced in writing’] where (i) it is contained in a prospectus produced by the bond issuer concerning the issue of bonds, (ii) it is enforceable against third parties who acquire those bonds through a financial intermediary and (iii), in the event that the first two parts of the second question are answered in the negative, it corresponds to a usage in the field of international trade or commerce for the purpose of Article 23(1)(c).

Choice of court in the prospectus and the impact on the primary market.

The Court first of all holds that the ‘formal requirement’ of (now Article 25 a (a) ”in writing or evidenced in writing’ for the issue of choice of court between Dresdner and Redi is only met (along the lines of Colzani Case 24/76) if the contract signed by the parties upon the issue of the bonds on the primary market expressly mentions the acceptance of the clause by Redi, or contains an express reference to the prospectus. The latter in particular is quite likely.

Choice of court in the prospectus and enforceability against third parties acquiring through a financial intermediary.

Next, the Court (at 30) holds that the same two alternatives apply for the relationship between Redi and Profit. Here the court refers to Refcomp and  distinguishes it, basically by pointing to the specific examples of bills of lading and choice of court in shareholders registries, cases in which the CJEU had previously accepted transferability of choice of court to third parties, in specific circumstances. (Please refer to both the Refcomp judgment and to current judgment (at 33 ff) for detail).

The Court consequently held (at 37) that choice of court contained in a prospectus produced by the bond issuer concerning the issue of bonds may be relied on against a third party who acquired those bonds from a financial intermediary if it is established, which it is for the referring court to verify, that (i) that clause is valid in the relationship between the issuer and the financial intermediary, (ii) the third party, by acquiring those bonds on the secondary market, succeeded to the financial intermediary’s rights and obligations attached to those bonds under the applicable national law, and (iii) the third party had the opportunity to acquaint himself with the prospectus containing that clause. (Emphasis added).

The emphasis I added is quite important: the CJEU does not hold that such succession is somehow part of an EU Ius Commune.

Finally, if the answer to the first two questions is negative, is there usage in international trade or commercial custom between the parties? 

This, the Court holds, has to be determined by the national court. The CJEU (at 48) recalls its earlier case-law in particular C-106/95 MSG:  actual or presumed awareness of a usage on the part of the parties may be made out, in particular, by showing either that the parties had previously had commercial or trade relations between themselves or with other parties operating in the sector in question, or that, in that sector, a particular course of conduct is sufficiently well known because it is generally and regularly followed when a particular type of contract is concluded, so that it may be regarded as being an established practice.

The Court does though give a few more practical things which the national court needs to look out for: at 49. In order to determine, in the main proceedings, whether the insertion into the prospectus of a jurisdiction clause constitutes a usage in the sector in which the parties operate, of which those parties were aware or ought to have been aware, the referring court must take into account, inter alia, the fact that that prospectus was approved in advance by the Irish Stock Exchange and made available to the public on the latter’s website, which does not seem to have been contested by Profit in the proceedings on the merits. In addition, the referring court must take account of the fact that it is undisputed that Profit is a company active in the field of financial investments as well as of any commercial relationships it may have had in the past with the other parties to the main proceedings. The national court must also verify whether the issue of bonds on the market is, in that sector, generally and regularly accompanied by a prospectus containing a jurisdiction clause and whether that practice is sufficiently well known to be regarded as ‘established’.

 

Lest one forgets, the Court’s judgment is also relevant for a more general query on the nature of (now) Article 7(1): must the action seeking the annulment of a contract and the restitution of the amounts paid on the basis of a document the nullity of which is established, be regarded as ‘matters relating to a contract’ (the existence of which plaintiff seeks to dispute)? Yes, it does: if only (at 54) to ensure that Article 7(1) cannot simply be torpedoed by one party claiming that there is no contract.

(The judgment also reviews the conditions of application of (now) Article 8(1), with respect to ‘irreconcilability’ of judgments).

This judgment is quite relevant in yet again the CJEU having to defer to national law on the issue of transferability (see the emphasis I added, above). The Court very clearly does not wish to overplay its hand in trying to force a European Ius Commune in private law, via the use of private international law.

Geert.

(Handbook of) European Private International Law Chapter 2, Heading 2.2.11.1; Heading 2.2.11.1.a; 2.2.9.3;.2.2.9.7; 2.2.12

 

 

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Consenting to choice of court under the common law. The Privy Council in Vizcaya v Picard.

In Vizcaya v Picard, the Privy Council considered the issue of consent to a choice of court clause in the event no such choice has been made verbatim. It was alleged that choice of court had been made implicitly but clearly by reference to an applicable law agreement in the underlying contract. RPC have a review of the case on their blog and I am grateful to them for bringing it to my attention.

The case is a fall-out of the Bernard Madoff Ponzi scheme, carried out through Mr Madoff’s company Bernard L Madoff Investment Securities LLC (“BLMIS”), a New York corporation. After Madoff’s fraud came to light in 2008, Irving Picard (“the trustee”) was appointed as trustee in BLMIS’s liquidation in the US Bankruptcy Court for the Southern District of New York (“the New York BankruptcyCourt”). The trustee commenced proceedings under the anti-avoidance provisions of the US Bankruptcy Code against investors who had been repaid before the fraud was discovered, including the appellant, Vizcaya Partners Limited (“Vizcaya”), a BVI (British Virgin Islands) company which carried on business as an investment fund, and which invested about US$328m with BLMIS between January 2002 and December 2008, but was repaid US$180m before the fraud was discovered.

The Appeal before the Privy Council concerns primarily the content and scope of the rule in common law that a foreign default judgment is enforceable against a judgment debtor who has made a prior submission to the jurisdiction of the foreign court (as distinct from a submission by appearance in the proceedings).  Brussels I or the Recast was not applicable to the case. In that Regulation (Article 25), the expression of consent with choice of court must take one of thee forms: essentially: written (or oral but confirmed by written agreement); in accordance with lex mercatoria; or in accordance with established business practice simply between the parties.

The question in the case at issue is whether the agreement to submit must be express, or can also be implied or inferred. The Privy Council settled the uncertainty which would seem to have existed for some time in the common law, in favour of an answer in the affirmative. Consent to jurisdiction can be implied. What needs to be shown though is real ‘agreement’, or ‘consent’ (in European private international law with respect to the similar discussion re choice of law (Rome I) I would say the test is one of ‘clearly established’), quod non in casu. Choice of law (here: in favour of New York law) can be a factor but not a solely determinant one. Moreover, choice of court viz one’s business transactions does not imply automatic extension to insolvency proceedings.

Crucial precedent, it would seem. Geert.

European private international law, second ed. 2016, Chapter 2, Heading 2.2.9

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Learn your lines, son!: the (ir)relevance of grammar for choice of court underlined in Global Maritime Investments.

These general terms and conditions will be governed by and construed in accordance with English law. 

With respect to any suit, action or proceedings relating to these general terms and conditions each party irrevocably submits to the jurisdiction of the English courts.”

In Anchorage, the High Court had already dismissed a semantic approach to choice of court agreements in contracts (and choice of court clauses) subject to English law. In Global Maritime Investments Cyprus v O.W., Teare J considered in summary judgment, sought by GMI, whether the aforementioned clause is exclusive, and if not, whether proceedings commenced by GMI in England, block any future proceedings on the same (or wider) contractual issues sought by OW in Denmark. GMI had started proceedings in England following OW’s November 2014 filing for bankruptcy in Denmark. OW had initiated proceedings in Denmark in March 2015. At issue was among others the ‘netting-out’ provisions between parties (effectively, a final settlement of reciprocal dues in different currencies, with derivatives of commodity transactions being the underlying transactions between the parties in this case).

Teare J held that the clause even if not so phrased verbatim, was meant to be exclusive, among others in line with what ‘the reasonable commercial man’ (the bonus mercator, if you like) would have understood the clause to be, especially under the lex contractus, English law. All the more so in light of the use of ‘irrevocably’. At 51 he does offer sound commercial advice to avoid disputes such as the one at issue: it is desirable to employ transitive language, such as in ‘each party agrees to submit all claims’.

I do not think there is justification for the Court not to have considered the impact of the Brussels I (and /or Recast) Regulation on the clause: the judgment keeps entirely shtum about it. Under the rules of the Regulation, all clauses are considered exclusive unless specifically stated. Saying that the clause expressis verbis amounts to non-exclusivity, would be quite a stretch. (I agree it is not clearly worded exclusively – however that is exactly where the Brussels I Regulation is of assistance).

It is quite clear to me that this judgment (issued 17 August – I have delayed reporting for exam reasons) will not be the end of the jurisdictional affair. In particular, parties I am sure will be at loggerheads as to what litigation is to be considered ‘relating to these general terms and conditions’, in particular with OW’s insolvency proceedings in the background.

Geert.

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