The Prestige recognition tussle – ctd. On arbitration and state immunity.

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”) [2020] 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.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.11.1, Heading 2.2.11.2, Heading 2.2.16.

The Prestige recognition tussle puts the spotlights on (now) Article 45 Brussels Ia, and on the relation between competing arbitral awards and judgments in ordinary.

Spain v The London Steam-Ship Owners’ Mutual Insurance Association Ltd [2020] EWHC 142 (Comm) reports on the CMR (case management conference) re what promises to be interesting litigation. A Spanish judgment concerning liability for the pollution damage caused when the vessel PRESTIGE broke in two off the coast of Spain in 2002, needs to be enforced in the UK. Brussels Ia’s contestation of recognition is involved: particularly Articles 34(1) and (3).

At 2 Teare J summarises the story so far:

The parties have been in dispute about liability for many years. Criminal proceedings were brought against the master of PRESTIGE in Spain in 2002 and, after the conclusion of the investigative stage of the proceedings, civil proceedings were brought against the master, the Owners of PRESTIGE and the Club, as liability insurer of the Owners, in 2010. (I am told that in addition to Spain there are some 264 other claimants.) In 2012 the Club commenced arbitration proceedings in London against Spain and in February 2013 obtained an award from the sole arbitrator Mr. Alistair Schaff QC which declared that, as a result of the “pay to be paid” clause in the policy the Club had no liability to Spain. In this court Spain challenged the jurisdiction of the arbitrator but the court (Hamblen J. as he then was) held in 2013 that the arbitrator had jurisdiction. Later that year the court in La Coruna dismissed the civil claim against the master, Owners and Club but convicted the master of the crime of disobeying orders by the Spanish authorities to accept a tow of the vessel. In 2015 the English Court of Appeal upheld the decision of Hamblen J. In 2016 the Spanish Supreme Court reversed the decision of the court in La Coruna and held that the master had been seriously negligent and that the Owners and Club were liable for the damage caused. In execution proceedings in Spain, the court in La Coruna declared the Spanish State entitled to enforce a claim up to approximately €2.355 billion against the defendants in the Spanish proceedings and declared the master, Owners and the Club liable in respect of the claims, although subject (in the case of the Club) to a global limit of liability in the sum of approximately €855 million.’

Thus the Club has an arbitration award in its favour but Spain has a judgment of the Spanish Supreme Court in its favour. Spain obtained an order from Master Cook pursuant to which the Spanish judgment was registered so that it could be enforced here against the Club. The Club seeks to appeal from that order. One of the grounds on which it seeks to appeal is that the Spanish judgment is irreconcilable with the judgment of Hamblen J. and the Court of Appeal (A34(3) BIa). Another ground is that recognition of England is contrary to the public policy of England (A34(1)).

This particular CMS concenrs disclosure requirements: the Club’s seeking of disclosure from Spain is resisted by the latter on grounds that is clashes with BIa’s intention of swift recognition.

One of the issues on which disclosure is sought, is Spain’s position under the insurance title of BIa: “Are the English Judgments not qualifying judgments within article 34(3) because the English Judgments conflict with Section 3 of Chapter II of the Brussels 1 Regulation ? In particular …(b) Is the respondent [Spain] entitled to rely on the exclusive rules for jurisdiction in Section 3 of Chapter II. In particular: (i) Is the respondent [Spain] a qualifying party that is entitled to the protective rules in Section 3 ?” Reference is made to Aspen Underwiting: the Club states that it is necessary for Spain to show that it is a member of the class protected by Section 3, which (per Aspen Underwriting, GAVC] excludes “professionals in the insurance sector or entities regularly involved in the commercial or otherwise professional settlement of insurance related claims who voluntarily assumed the realisation of the claim as part of its commercial or otherwise professional activity”. Aspen Underwriting in the meantime (Teare J’s judgment was issued in January; it has been in the blog queue) has been varied by the Supreme Court.

It will therefore be necessary, submitted counsel for the Club, for Spain to disclose documents which show “the class of business” conducted by it. If it is a member of the relevant class it can rely on section 3. If it is not, it cannot.

The second class of document of which disclosure is sought is very different and relates to the public policy defence. Did the Spanish Courts refuse to allow the master to participate in an underwater investigation of the strength of the vessel’s hull and refuse to disclose the results of the investigation (so that there was a breach of the master’s right to equality of arms and to be able to prepare a defence) or were the results disclosed to the master in sufficient time to allow him to prepare his defence. The Club therefore seeks disclosure of the documents relating to that question held by Spain. Here Teare J at 21 assumes that Spain’s evidence can be expected to support its case and to rely upon the documents which show when the results were disclosed to the master and in what terms. If the evidence does not deal with this issue then Spain will be unable to advance its factual case. ‘I therefore consider it very likely that no disclosure under this head will be required. In the unlikely event that it is required a focused application can be made after Spain has provided its evidence.’

The Order eventually imposes a timetable for exchange of evidence (including expert reports) and later settlement of disclosure issues should they arise. Hearing in principle in December 2020.

This could turn out to be a most relevant case.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.11.1, Heading 2.2.11.2, Heading 2.2.16.

GDE v Anglia Autoflow. Governing law for agency agreements under the Rome Convention.

Update 26 May 2020 for a Greek SC judgment discussing choice of court v choice of law in agency, and applying CJEU C-159/97 Trasporti Castelleti, see here.

In GDE LLC & Anor v Anglia Autoflow Ltd [2020] EWHC 105 (Comm) (31) the Rome I Regulation does not apply ratione temporis; the Agency Agreement was concluded on about 9 April 2009 which is a few months before the kick-off date of the Regulation (note there is no default rule for agency in Article 4 Rome I in the event of lack of lex voluntatis). Dias DJ therefore turns to the 1980 Rome Convention.

Parties are in dispute as to the governing law of the Agency Agreement by which the claims should be determined. AAL alleges that the governing law is that of Ontario while the Claimants allege that the Agency Agreement is governed by English law. The point is of critical importance because the Claimants concede that, if AAL is correct, their claim is time-barred under Ontario law: although this, as readers know, assumes statutes of limitation are subject to the governing law – which is far from certain: see Jabir v KIK and Spring v MOD.

Parties’ arguments are at 10 and 11 and of course they reverse engineer. In essence (at 20) claimants say that there was an implied choice of English law. Alternatively, if that is not correct, the presumption in Article 4(2) of the Rome Convention, which would otherwise point to Georgia law, falls to be disapplied in favour of English law. The Defendant says that there was no implied choice and that application of Article 4(2) leads to Ontario law. Alternatively, if (which it denies) the presumption in Article 4(2) leads to any other governing law, the presumption is to be disapplied in favour of Ontario.

At 21 ff follows a rather creative (somewhat linked to the discussion of ex officio Rome Convention application in The Alexandros), certainly unexpected (yet clearly counsel will do what counsel must do) argument that essentially puts forward that under the common law approach of foreign law = fact hence must be proven, any discussion of a law as governing law, not suggested by the parties (here: the laws of (the US State of) Georgia) that is not English law (which clearly the English curia does ‘novit’), cannot go ahead. At 22 Dias DJ already signals that ‘once the wheels of the Convention had been put in motion, they could not be stopped short of their ultimate destination. The idea that the process dictated by the Convention should be hijacked halfway, as it were, on the basis of a pleading point was, to my mind, deeply unattractive.’

At 31 she sinks the argument. I think she is right.

Having at length considered the facts relevant to the contract formation, discussion then turns again to the Rome Convention with at 105 ff a debate on the role to be played by factors intervening after contract formation with a view to establishing [implicit, but certain: see at 117 with reference to the various language versions of the Convention and the Regulation essentially confirming the French version] choice of law or closest connection. (Dias J refers to the Court of Appeal in Lawlor v Sandvik Mining and Construction Mobile Crushers and Screens Ltd, [2013] EWCA Civ 365[2013] 2 Lloyd’s Rep 98 where, at paragraphs 21-27, it pointed out that the common law approach frequently blurred the distinction between the search for the parties’ inferred intention and the search for the system of law with which the contract had its closest and most real connection).

At 120: the hurdle is high: choice of law implicitly made must have nevertheless been made: ‘The court is not looking for the choice that the parties probably would have made if they had turned their minds to the question.’ at 122: In the present case the evidence established that there was no reference by the parties to the question of governing law at all. Choice of court for England (discussed ia with reference to Rome I and to Brussels Ia Article 25) does not change that. At 160 ff therefore follows the discussion of Article 4 of the Rome Convention, leading to a finding of the laws of Ontario as the lex contractus under Article 4(1). Article 4(5) does not displace it.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 3, Heading 3.2.4, Heading 3.2.6.

ZDF: A German refusal of Polish judgment based on ordre public. (And prof Hess’ comment on same).

Many of you will have already seen (e.g. via Giesela Ruehl) the German Supreme Court (Bundesgerichtshof – BGH)’s refusal to recognise and enforce a Polish judgment under the Brussels I Regulation (application was made of Brussels I but the Recast on this issue has not materially changed). The BGH argued that enforcement would violate German public policy, notable freedom of speech and freedom of the press as embodied in the German Constitution.

Giesala has the necessary background. Crux of the refusal seemed to be that the Court found that to require ZDF to publish by way of a correction /clarification (a mechanism present in all Western European media laws), a text drafted by someone else as its own opinion would violate ZDF’s fundamental rights.

Refusal of course is rare and in this case, too, one can have misgivings about its application. The case however cannot be decoupled from the extremely strong sentiment for freedom of speech under German law, for obvious reasons, and the recent controversy surrounding the Polish law banning the use of the phrase ‘Polish concentration camps’.

I am very pleased to have been given approval by professor Burkhard Hess to publish the succinct comment on the case which he had sent me when the judgment was issued. I have included it below.

Geert.

European private international law, second ed. 2016, Chapter 2, 2.2.16.1.1, 2.2.16.1.4

 

The German Federal Civil Court rejects the recognition of a Polish judgment in a defamation case under the Brussels I Regulation for violation of public policy

 

Burkhard Hess, Max Planck Institute Luxembourg

 

In 2013, the German broadcasting company ZDF (a public body) broadcast a film about Konzentrationcamps. In the film, it was (incorrectly) stated that Auschwitz and Majdanek were “Polish extermination camps”. Further to the protests made by the Polish embassy in Berlin, ZDF introduced the necessary changes in the film and issued an official apology. However, a former inmate of the KZ, brought a civil lawsuit in Poland claiming violation of his personality rights. With his claim he sought remedy in the form of the broadcasting company (ZDF) publishing on its Internet home page both a declaration that the history of the Polish people had been falsified in the film and a statement of apology. Ultimately, the Cracow Court of Appeal ordered the publication of the declaration on the company’s home page. While ZDF published the text on its website visibly for one month, it did not post it on its home page.

Consequently, the plaintiff sought the recognition of the Polish judgment in Germany under the Brussels I Regulation. However, the German Federal Court denied the request for recognition on the grounds that it would infringe on German public policy (article 34 No 1 Regulation (EU) 44/2001). In its ruling, the Court referred to the freedom of the press and of speech (article 5 of the Constitution) and to the case-law of the Constitutional Court. The Court stated that the facts had been incorrectly represented in the film. However, it held that, under German law, ordering a declaration of apology qualifies as ordering a declaration of opinion (Meinungsäusserung) and that, according to the fundamental freedom of free speech, nobody can be obliged to make a declaration which does not correspond to his or her own opinion (the right to reply is different as it clearly states that the reply is made by the person entitled to the reply). As a result, the Polish judgment was not recognized.

BGH, 19 July 2018, IX ZB 10/18, The judgment can be downloaded here.

To my knowledge, this is one of the very rare cases where a foreign judgment was refused recognition in Germany under article 34 no 1 of the Brussels I Regulation (now article 45 (1) (a) Brussels Ibis Regulation) because substantive public policy was infringed.

Speaking frankly, I’m not convinced by the decision. Of course, the text  which the ZDF, according to the Cracow court, had to make as its own statement represented a so-called expression of opinion. Its imposition is not permissible under German constitutional law: requiring the ZDF-television to making this expression its own would have amounted to an infringement of the freedom of speech as guaranteed by article 5 of the Constitution.

However, it corresponds to well settled principles of the recognition of judgments to substitute the operative part of the foreign judgment by a formula which comes close to it. This (positive) option is totally missing in the formalistic judgment of the Federal Civil Court. In this respect I’m wondering why the BGH did not simply order that the operative part of the Polish judgment as such was declared enforceable. My proposed wording of a declaration of enforceability would be drafted as follows: “According to the judgment of the Appellate Court of Krakow the ZDF is required to publish the following decision:…”

This solution would have solved the problem: No constitutional conflict would have arisen and the political issues would have mitigated. Seen from that perspective, the judgment appears as a missed opportunity.