Posts Tagged Article 35
Ergo, and Haras des Coudrettes. Provisional measures under Brussels I Recast and Lugano before the French Supreme Court.
Thank you Nicolas Contis and Leonardo Pinto for reporting judgments by the French Supreme Court (Cour de Cassation) 16-19-731 Ergo Versicherung v Volker and 16-27.913, Haras des Coudrettes v X, both held on 14 March 2018.
The judgments concern the interpretation of Article 35 Brussels I Recast c.q. Article 31 of the Lugano Convention (the second case concerned a defendant domiciled in Switzerland) on provisional measures.
Please refer to Nicolas and Leonardo for a summary of the facts the judicial proceedings in the case. In neither cases do the French courts have subject-matter jurisdiction: in Ergo, the German courts do by virtue of choice of court; in Haras des Coudrettes, the Swiss courts do by virtue of Article 5(3) Lugano (locus delicti commissi being there; and direct damage also having occurred there hence leaving only indirect, financial damage with the French owner of the horse at issue, even if the exact nature and size of those direct injuries could only be later established in France).
In Ergo, the Supreme Court held that ‘la juridiction française (est) compétente pour ordonner, avant tout procès, une mesure d’expertise devant être exécutée en France et destinée à conserver ou établir la preuve de faits dont pourrait dépendre la solution du litige. Appointing an expert to assess any damages caused to a solar plant, and to explore liabilities for such damage, falls within Article 35 Brussels I Recast. I would agree with such a wide reading as I have discussed before in my review of the Belo Horizonte case. The Supreme Court does not consider relevant to the outcome claimants’ argument, that under Article 2 Brussels I Recast, provisional measures only enjoy free movement under the Regulation when ordered by a court with subject-matter jurisdiction. Indeed in view of the Supreme Court the Court of Appeal need not even consider whether it has such jurisdiction. Given that the form Annexed to the Regulation includes a box requiring exactly that, this may seem odd. One assumes the Court held so given that the forensic measures ordered, can be rolled out entirely in France: no need for any travel at all.
In Haras des Coudrettes, the Supreme Court annulled because the Court of Appeal had established subject-matter jurisdiction for the Swiss courts, and had subsequently not entertained the possibility of provisional measures, even though the object at issue (the mare: ‘la jument’) is in France: ‘Qu’en statuant ainsi, alors qu’elle relevait que la mesure sollicitée avait pour objet notamment d’examiner la jument située en France, la cour d’appel, qui n’a pas tiré les conséquences légales de ses propres constatations, a violé les textes susvisés.‘
and ‘une mesure d’expertise destinée à conserver ou établir la preuve de faits dont pourrait dépendre la solution du litige, ordonnée en référé avant tout procès sur le fondement du second de ces textes, constitue une mesure provisoire au sens du premier, qui peut être demandée même si, en vertu de cette Convention, une juridiction d’un autre Etat lié par celle-ci est compétente pour connaître du fond’:
expert findings which aim at maintaining or establishing facts upon which the eventual solution of the litigation may depend, fall within the scope of provisional measures and may be ordered even before any entertainment of subject-matter jurisdiction. Again, the fact that for the effective roll-out of the provisional measures no other State need be engaged, must have relevance in this assessment.
(Handbook of) EU Private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.15.
Banca Turco: Popplewell J explains that worlwide freezing orders, particularly ex parte, are not extended willy-nilly.
In  EWHC 662 (Comm) Banca Turco Romana, Popplewell J explained his reasons for discontinuing ex parte freezing orders, with reference among others to C-391/95 Van Uden. At 22-23 he discusses the not entirely clear application of the jurisdictional rules of Brussels I, which indicated that that Regulation was engaged either via Article 2 (now 4: domicile in Romania) or 4 (now 6): residual Member State (here: Romanian) jurisdictional rules, which go on to be sheltered under the Brussels I Regulation.
At 20 he refers to the earlier case of ICICI Bank UK plc v Diminco NV  EWHC 3124 (Comm) in which he summarised the English Courts’ requirements for the issuing of ex parte freezing orders where the defendant is neither resident within the jurisdiction nor someone over whom the court has or would assume in personam jurisdiction for some other reason:
‘the court will only grant a freezing order extending to foreign assets in exceptional circumstances. It is likely to be necessary for the applicant to establish at least three things:
(a) that there is a real connecting link between the subject matter of the measure sought and the territorial jurisdiction of the English court in the sense referred to in Van Uden;
(b) that the case is one where it is appropriate within the limits of comity for the English court to act as an international policeman in relation to assets abroad; and that will not be appropriate unless it is practical for an order to be made and unless the order can be enforced in practice if it is disobeyed; the court will not make an order even within the limits of comity if there is no effective sanction which it could apply if the order were disobeyed, as will often be the case if the defendant has no presence within the jurisdiction and is not subject to the in personam of the English court;
(c) it is just and expedient to grant worldwide relief, taking into account the discretionary factors identified at paragraph 115 of the Motorola case. They are (i) whether the making of the order will interfere with the management of the case in the primary court, e.g. where the order is inconsistent with an order in the primary court or overlaps with it; (ii) whether it is the policy in the primary jurisdiction not itself to make to make worldwide freezing/disclosure orders; (iii) whether there is a danger that the orders made will give rise to disharmony or confusion and/or risk of conflicting, inconsistent or overlapping orders in other jurisdictions, in particular the courts of the state where the person enjoined resides or where the assets affected are located; (iv) whether at the time the order is sought there is likely to be a potential conflict as to jurisdiction rendering it inappropriate and inexpedient to make a worldwide order; and (v) whether in a case where jurisdiction is resisted and disobedience may be expected the court will be making an order which it cannot enforce.”
In Banca Turco discontinuation was ultimately mostly based not on any slip-up of jurisdictional basis, but rather on the absence of full disclosure by the requesting party: at 45: ‘The importance of the duty of disclosure has often been emphasised. It is the necessary corollary of the court being prepared to depart from the principle that it will hear both sides before reaching a decision, which is a basic principle of fairness. Derogation from that basic principle is an exceptional course adopted in cases of extreme urgency or the need for secrecy. If the court is to adopt that procedure where justice so requires, it must be able to rely on the party who appears alone to present the evidence and argument in a way which is not merely designed to promote its own interests, but in a fair and even-handed manner, drawing attention to evidence and arguments which it can reasonably anticipate the absent party would wish to make. It is a duty owed to the court which exists in order to ensure the integrity of the court’s process. The sanction available to the court to preserve that integrity is not only to deprive the applicant of any advantage gained by the order, but also to refuse to renew it.’
Belo Horizonte: Court at Rotterdam (using English as language of the oral procedure): Access to seized documents is no provisional measure under Brussels I Recast.
Arnold van Steenderen and Milan Simić have complete and concise review here of judgment of the Rotterdam court of December 2017 in re the Belo Horizonte (officially Cefetra et al v Ms ‘IDA’ Oetker Schiffahrtsgesellschaft MbH & Co KG et al). The case is a follow-up to 2015 proceedings. In these the Rotterdam court had first sanctioned seizure, and then rejected further action for claimant had not formally requested access to the documents.
Arnold and Milan summarise the facts very very helpfully – I am much obliged for the judgment is in Dutch (although as the judgment shows, the proceedings were actually conducted in English: a nice example of the use of regulatory competition in civil procedure) and their efforts have saved me a lot of translation time:
The decisions of the Rotterdam Court are a result of the carriage under bill of lading of soya beans on behalf of Cefetra B.V. (Netherlands based) on board of the “Belo Horizonte” from Argentina to the United Kingdom. Cefetra supplies raw materials to the feed, food, and fuel industries. Cefetra Ltd. (UK based) was the holder of the b/l’s and English law applied to the b/l’s. The vessel is owned by MS ‘IDA’ Oetker and is time chartered by Rudolf A Oetker (both German based, together addressed as Oetker). MS ‘IDA’ Oetker is the carrier under the b/l’s. London arbitration is agreed upon for any dispute rising from the contract of carriage and the b/l’s.
Following engine failure, ‘(d)uring the voyage, experts commissioned by both Cefetra and Oetker visited the “Belo Horizonte” to preliminary assess the condition of the vessel and its engines. Further investigation was conducted upon arrival in England. Oetker, however, only granted permission for inspection of the engine room and refused to disclose the documents on board. Crew interviews were not allowed as well. Subsequently, Cefetra obtained leave to attachment for the purpose of preserving evidence in the Netherlands on 27 October 2015. The leave was effected by the bailiff on 28 October 2015 on board of the “Belo Horizonte”. Several documents were seized and handed over to a sequestrator. Cefetra initiated proceedings’ to gain access to the seized documents.
The dispute in the main is arbitrable in London.
Oetker disputes jurisdiction of the court at Rotterdam on the basis of defendants’ domicile in Germany. Cefetra argue in favour of jurisdiction on the basis of Article 7(1), alternatively 7(2) or indeed Article 35 Brussels I Recast:
- 7(1) forum contractus: for, it is argued, the main agreement between the two parties implies an obligation to provide any relevant evidence; the place of performance for that ‘obligation in question’ lies in The Netherlands since that is where the sequestrator holds them.
- 7(2) forum delicti: Oetker’s obstruction of truth finding is a tort which is located (locus delicti commissi) at Rotterdam since that is where Oetker opposes disclosure.
- 35 provisional, including protective measures.
The Court does not at all entertain Cefetra’s arguments on the basis of 7(1) or 7(2). Wrongly so: plenty of not at all obvious contracts or torts could qualify as same under these provisions. To not address them at all does not make them simply go away.
The court first of all (5.7 in fine) rejects relevance of the arbitration exclusion on the basis of C-391/95 Van Uden Deco-Line. It then sticks to a very restrictive approach to Article 35, with the classic provisionary (not covered by Article 35) v provisional (covered) nature of measures, as also discussed in C-104/03 St. Paul Dairy/Unibel (to which the Court refers). In the words of the court: seizure of evidence is provisional; actual access, copy or extract is not (5.8): the court suggests this is not provisional since it allows the party to gauge the evidentiary position of the party and hence is irreversible.
I disagree -and I have at least a shelf in my library to support the discussion.
Ireversibility in fact (once the evidence seen, the party can never wipe it from its memory, so to speak) does not equate ireversibility in law. The court takes a very limited view of Article 35 and I do not believe it is the right one.
There are not that many national judgments covering Article 35 quite so expressly. This is one to treasure.
(Handbook of) EU Private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.15.
For the facts of the case, and the reasoning of the AG in C-559/14 Meroni, I refer to my earlier posting. At the end of May (I am indeed still hoovering up the queue) the Court held very much alongside Kokott AG’s Opinion, I shall therefore not repeat its reasoning here. The CJEU does insist that if third parties rights are directly affected with the intensity as in the case at issue, that third person must be entitled to assert his rights before the court of origin (which English courts provide for), lest one runs the risk of the injunction being refused recognition under ordre public. As I had feared, the Court does not address the AG’s concern whether Mareva orders actually constitute a ‘judgment’ for the purposes of the Regulation.
Post Brexit, this considerable attraction of English courts in interlocutory proceedings might become a lot less real. (Like many of us, I am working on a short review of Brexit consequences for European private international law).
(Handbook of) European private international law, second ed. 2016, Chapter 2, 188.8.131.52.1, 184.108.40.206.4
Kokott AG on the notion of ‘judgment’ and the compatibility of Mareva orders with EU law (ordre public).
In Kokott AG’s words, ‘following the West Tankers case…in the present case the Court is once again confronted with a specific procedural feature of the Anglo-American legal system.’
Article 34 of the Brussels I Regulation (Article 35 in the recast) enables a court, by way of derogation from the principles and objectives of the Regulation, to refuse to recognize a judgment given by a court of another Member State. The whole starting point of the Regulation and its antecedents was to avoid much recourse to refusal of recognition. Free movement of judgments lies at the very core of the foundations of European private international law.
Little wonder then that the Regulation leaves limited freedom for Member States authorities (including courts) who are asked to recognise and enforce another State’s judgment. As I noted at the time, in Trade Agency the CJEU insisted that refusal of recognition on the basis of ordre public is only possible after review of the individual merits of the case. Courts in other EU Member States may not decide that the English system as such as contrary to public policy in the state of enforcement. Relevant case-law was most recently summarised by (the same) Kokott AG in fly LAL and also in Diageo.
The exequatur procedure of the Brussels I Regulation has been amended in the Brussels I Recast. However it is exactly on issues of the rights of the defence that exequatur can never be entirely automatic, even among EU Member States.
In Case C-559/14 Meroni, at issue are Mareva injunctions: (sometimes) worldwide freezing orders issued by English courts (among others), designed to prevent a creditor being deprived of access to the debtor’s assets as a result of a prior disposal of those assets. However, as is often the case, the reputation of Mareva injunctions far exceeds their actual bite. There is no one size fits all such injunction and a number of tools are at the disposal of both the debtor affected, and third parties, to have the order varied or indeed lifted. The rights of third parties in particular are quite relevant in the current review with the CJEU. Part of the injunction are often the debtor’s participations in companies: for the recalcitrant debtor may find all sorts of useful ways to spirit value away from his companies and into vaults safe from prying English or European eyes – especially if the debtor is sole or majority shareholder.
In the case at issue, Mr A.L. is prohibited, inter alia, from disposing of assets which can be attributed directly or indirectly to his property. The injunction extends to interests in the Latvian company VB. Mr A.L. has a direct interest in that company with only one share. According to the referring court, however, he is also the ‘beneficial owner’ of shares in at least one other company (‘Y’), which itself has substantial interests in VB. Mr Meroni is part of the management of Y. Following a seizure ordered by the relevant Latvian office, he also acts as the bailee for the interests in Y. for which Mr A.L. is the beneficial owner. Mr Meroni claims that the freezing injunction prevents the shareholder Y. from exercising its voting rights in respect of VB. This affects constitutionally protected property rights, especially since the company was not heard in the English proceedings. This, it is argued, is contrary to the principle of the right to a fair trial.
The AG Opined differently. At 44, she argues that it is not clear to what extent that injunction might be contrary to basic principles of Latvian substantive law or procedural law, especially since, as the referring court acknowledges, the Latvian legal order does permit judgments as provisional measures without a prior hearing of the party against whom enforcement is sought. Consequently measures such as Mareva orders cannot be said to be fundamentally against the Latvian ordre public. At 45: ‘ Aside from this, the English freezing injunction at issue does not provide for any irreversibly drastic measures for its enforcement overseas, in particular in so far as third persons who were not parties to the proceedings in England are concerned. Rather, the freezing injunction claims legal effects on third persons resident in other countries — and thus the companies controlled by Mr A.L. — only subject to strict requirements: first, it is to have legal effects on a without notice basis only where this is permitted by the foreign law; second, anyone served with the freezing injunction may apply to the court to vary or discharge it; and, third, compliance with contractual obligations in other countries is still to be possible notwithstanding the freezing injunction.‘ (footnotes omitted)
There is no evident breach of basic principles of the legal order of the State in which enforcement is sought – breach of ordre public must therefore be rejected.
Now, earlier in the judgment, the AG also considers albeit more or less obiter (the CJEU is certain not to entertain it) what may in fact be the more important (for it tends to be less sub judice at the CJEU) part of her Opinion: whether the Mareva orders actually constitute a ‘judgment’ for the purposes of the Regulation. Ms Kokott suggests that the Denilauler criteria (easily fulfilled in the case at issue: see para 31) ought to be relaxed under the Regulation, as opposed to the stricter approach under the 1968 Convention. That is because following judgment in ASML, notwithstanding defects in service, if the person concerned fails to commence proceedings in the State of origin of the judgment to challenge the judgment issued upon default, when it was possible for him to do so, recognition may not be refused. The AG suggests to extend the ASML rule to provisional measures.
European private international law, second ed. 2016, Chapter 2, 220.127.116.11.1, 18.104.22.168.4
Lis alibi pendens rule does NOT apply (to the court seized second having such jurisdiction) in the event of exclusive jurisdictional rules – The ECJ in Weber v Weber
In C-438/12 Weber v Weber the ECJ gave helpful clarification of the non-application of the strict lis alibi pendens rules of the Jurisdiction Regulation in the event of infringement of the Regulation’s exclusive jurisdictional rules. This to my knowledge at least had not yet been clearly established by the Court.
Ms I. Weber (I’) and Ms M. Weber (‘M’), are co-owners to the extent of 6/10 and 4/10 of a property in Munich. On the basis of a notarised act of 20 December 1971, a right in rem of pre‑emption over the four-tenths share belonging to M was entered in the Land Register in favour of I. By a notorial contract of 28 October 2009, M sold her four-tenths share to Z. GbR, a company incorporated under German law, of which one of the directors is her son, Mr Calmetta, a lawyer established in Milan. According to one of the clauses in that contract, M, as the seller, reserved a right of withdrawal valid until 28 March 2010 and subject to certain conditions.
Being informed by the notary who had drawn up the contract in Munich, I exercised her right of pre-emption by letter of 18 December 2009. On 25 February 2010, by a contract concluded before that notary, I and M once more expressly recognised the effective exercise of the right of pre-emption by I and agreed that the property should be transferred to her for the same price as that agreed in the contract for sale signed between M and Z. GbR. However, the two parties asked the notary not to carry out the procedures for the registration of the transfer of property in the Land Register until M had made a written declaration before the same notary that she had not exercised her right of withdrawal or that she had waived that right arising from the contract concluded with Z. GbR within the period laid down, which expired on 28 March 2010. On 2 March, I paid the agreed purchase price of EUR 4 million.
By letter of 15 March 2010, M declared that she had exercised her right of withdrawal from the contract of 28 October 2009. By an application of 29 March 2010, Z. GbR brought an action against I and M, before the District Court, Milan, seeking a declaration that the exercise of the right of pre-emption by I was ineffective and invalid, and that the contract concluded between M and that company was valid.
On 15 July 2010, I brought proceedings against M before the Landgericht München, seeking an order that M register the transfer of ownership of the four-tenths share with the Land Register.
The Court of Justice first of all had to decide whether an action seeking a declaration that a right in rem in immovable property has not been validly exercised, falls within the category of proceedings which have as their object right in rem in immovable property, within the meaning of Article 22(1) of Regulation No 44/2001. It held that it did, with the required amount of deference to national law: a right of pre-emption, such as that provided for by Paragraph 1094 of the BGB, which attaches to immovable property and which is registered with the Land Register, produces its effects not only with respect to the debtor, but guarantees the right of the holder of that right to transfer the property also vis-à-vis third parties, so that, if a contract for sale is concluded between a third party and the owner of the property burdened, the proper exercise of that right of pre-emption has the consequence that the sale is without effect with respect to the holder of that right, and the sale is deemed to be concluded between the holder of that right and the owner of the property on the same conditions as those agreed between the latter and the third party.
The next core question was whether Article 27’s lis alibi pendens rule applies in the event of the court second seized having exclusive jurisdiction. Here, the ECJ distinguished Gasser, in which it declined freedom for the court second seized to assume priority on the basis of a choice of court agreement. (A particular use of torpedoeing which is now addressed by the Brussels I-bis Regulation). It refers in particular to the positive obligation included in Article 35 of the Jurisdiction Regulation for courts not to recognise earlier judgments which were held in contravention of Article 22’s exclusive jurisdictional rules. Article 23’s choice of court agreements, by contrast, does not feature in Article 35.
The ECJ’s reference to Article 35 in my view means that the Court’s reasoning extends to all jurisdictional rules included in that article, including the protected categories of consumers and insureds (not, strangely, employees. This will change however following the Brussels I recast). There is lingering doubt however over the impact of the judgment on the application of Article 22(4)’s rule on intellectual property. In Weber (at 56) the Court holds that ‘ In those circumstances, the court second seised is no longer entitled to stay its proceedings or to decline jurisdiction, and it must give a ruling on the substance of the action before it in order to comply with the rule on exclusive jurisdiction.‘ In the application of Article 22(4), this continues to raise the question whether ‘the substance of the action before it’ only concerns the validity of the intellectual property, or also the underlying issue of infringement of such property.
Weber v Weber is a crucial further step in clarifying the lis alibi pendens rule. Sadly, family tussles do often advance the state of the law.