Posts Tagged Attribution

Location of damage resulting from law firm’s alleged wrongful inducement in breach of exclusive jurisdiction clause. The High Court in AMT v Marzillier.

Update May 2019 For ease of reference: confirmed by the Court of Appeal [2015] EWCA Civ 143 and by the Supreme Court  [2017] UKSC 13. Review of the latter two here.

AMT v Marzillier [2014] EWHC 1085 (Comm) concerns special jurisdiction under tort, Article 5(3) of the Brussels I-Regulation, in the event of a loss of contractual right – as well as a cursory review of the consumer title.

Here: the loss, allegedly due to wrongful inducement by defendant (a law firm) to have a contractual claim heard in England. Contractual claims (alleged precarious investment advice) by a group of individuals had been settled by AMT in Germany.  Popplewell J concisely revisits the complete history of Article 5(3), from Bier via Kalfelis and Dumez France to Marinari and Kronhofer, however, leaving out Shevill. (See also below).

On the basis of said precedents he holds that the Courts of England do indeed have jurisdiction: ‘The place where the damage occurred as a result of MMGR’s allegedly tortious conduct was England, where such conduct deprived AMT of the contractual benefit of the exclusive jurisdiction clause which ought to have been enjoyed in England. ‘ (at 46). Counsel for AMT had also put forward an alternative ground which was that the payments for the settlements and costs came from England, and that England is where management time was wasted and future business lost.  Not so: Popplewell J: ‘The unquantified heads of loss for wasted management time and loss of business are not the primary heads of claim and do not constitute the main part of the damage said to have occurred as a result of the harmful event. They are not the damage. They are not initial, direct or immediate damage, but to the extent quantifiable and recoverable, merely the remoter financial consequences of the harm suffered in Germany. ‘ (at 52).

Per Shevil, jurisdiction of the English courts will be limited to the extent of damages suffered by the loss of the contractual benefit of the exclusive jurisdiction clause which ought to have been enjoyed in England: how exactly that ought to be quantified (if liability is at all withheld, of course) will not be a straightforward matter, one assumes.

Succinct review is also made of the consumer title, with the finding that on its applicability there is an issue to be tried. At 58, Popplewell J suggests ‘wherever the dividing line is to be drawn in the case of investors, the result is likely to be heavily dependent on the circumstances of each individual and the nature and pattern of investment. At one end of the scale may be the retired dentist who makes a single investment for a modest amount by way of pension provision. At the other may be an investment banker or asset manager who plays the markets widely, regularly and for substantial amounts, for his own account. In between there are many factors which might influence the result, including the profile of the investor, the nature and extent of the investment activity, and the tax treatment of any profits or losses. The issue is fact specific.’ I do not think too much should be read in these examples – more so, the insistence that circumstances of the case do have an impact on the qualification as ‘consumer’.

Geert.

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No national (tort) law, please. The ECJ in Melzer v MS Global.

In Case C-228/11 Melzer v MS Global, the court at Dusseldorf requested the Court of Justice to clarify Article 5(3) Brussels I, the special jurisdictional rule for tort: on the basis of the application of this rule in Bier, a defendant may be sued in the place where the damage occurred (locus damni) and, if different, where the action (or inaction) leading to that damage occurred (the locus delicti commissi) . Article 5(3), like Article 5(1), determines not just international jurisdiction [i.e. the courts of which Member State have jurisdiction], but also territorial jurisdiction within that State.

Mr Melzer, who is domiciled in Berlin, was solicited as a client and looked after by telephone by the company Weise Wertpapier Handelsunternehmen (‘WWH’), whose registered office is in Düsseldorf. That company opened an account for Mr Melzer with MF Global UK Ltd (‘MF Global UK’), a brokerage house located in London, which traded in stock market futures for Mr Melzer in return for corresponding fees. Mr Melzer brought proceedings before the Landgericht Düsseldorf claiming that MF Global UK should be ordered to pay him damages equivalent to the difference between what he had paid out and what he had received in the context of those transactions, namely EUR 171 075.12, with interest. W.W.H. has not been implicated in the proceedings. In support of his claims, Mr Melzer maintained that he had not been sufficiently informed about the risks involved in futures trading, so far as options contracts were concerned, either by WWH or by MF Global UK.

The court at Dusseldorf rejected its jurisdiction on the basis of locus damni, arguing that this had taken place in Berlin (Melzer’s domicile), not Dusseldorf. It does however argue that it has jurisdiction on the basis of the locus delicti commissi, based on a combination of Article 5(3) Brussels I and the German Civil Code. Under Paragraph 830 of that Code (Bürgerliches Gesetzbuch), entitled ‘Joint participants and common purpose’:

 ‘(1)      Where several persons have caused damage by the commission of an unlawful act undertaken in common, each of them shall be liable for that act. That is also the case even where it is impossible to determine which of the persons involved caused the damage by his act.

(2)      Instigators and accomplices shall be treated as joint participants of the act.

The attribution of W.W.H.’s actions to MS Global, in the view of the Dusseldorf court, gives it jurisdiction on the basis of Article 5(3). It asked the following of the Court of Justice:

‘In the context of jurisdiction in matters relating to tort or delict under Article 5(3) of Regulation [No 44/2001], where there is cross-border participation of several persons in a tort or delict, is reciprocal attribution of the place where the event occurred admissible for determining the place where the harmful event occurred?’

There is no trace in the Jurisdiction Regulation of any rule on attribution for acts committed in tort. There are however many arguments against allowing such attribution from creating extra fora:

The JR’s general rule determines jurisdiction in the domicile of the defendant. This principle may be subject to many exceptions, and to many a jurisdictional rule which trumps it, however it remains the principle. As emphasised repeatedly by the ECJ, exceptions to Article 2’s general rule must be interpreted strictly, for the exceptions would otherwise lead to too many potential jurisdictions. All the more so in the case at issue. Allegations of attributions are easily made, and it is not clear how far the Court can go in reviewing the merits of the argument at the jurisdictional stage.

A restrictive interpretation also serves the Regulation’s purpose, as emphasised by the ECJ, of predictability and reliability. A party may otherwise end up being pursued in courts in which it could not reasonably have foreseen to be sued.

Furthermore of course, the attributive rule at issue superimposes national law unto Article 5(3) JR. The Court’s emphasis on autonomous interpretation sits uneasily with that.

Alternative jurisdictional rules would have been possible to establish jurisdiction: Article 6’s rule on joinders (which would have required plaintiff to use WWH as an anchor defendant) comes to mind; as does Article 5(1)’s rule on contracts (although it may not have been easy to establish that the services under contract were or should have been provided in Dusseldorf).

The Court held on 16 May. It referred inter alia to Refcomp to emphasise the presumption against letting national law infiltrate the concepts used by the Regulation, and to many of the arguments referred to above, and held

Accordingly, the answer to the question referred is that Article 5(3) of Regulation No 44/2001 must be interpreted as meaning that it does not allow the courts of the place where a harmful event occurred which is imputed to one of the presumed perpetrators of damage, who is not a party to the dispute, to take jurisdiction over another presumed perpetrator of that damage who has not acted within the jurisdiction of the court seised.

Geert.

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Piercing the corporate veil in competition cases – The ECJ in Eni

Update 13 June 2019 for an interesting paper by Anil Yilmaz Vastardis and Rachel Chambers, comparing investment law and the relevant issues for corporate veil and human rights abuses, see here.

Update 21 September 2016. For an application in the environment field, see [2016] EWCA Crim 1043 R v Powell and Westwood and analysis by Robert Biddlecombe, who brought the case to my attention.

Update 20 June 2016 the strict approach was confirmed in C-155/14P Evonik.

There is no general EU rule on the piercing of the corporate veil. Neither company law nor tort law is sufficiently (or in the case of tort law even embryonically) harmonised to be able to speak of much EU influence here. However in EU competition law, the principle is more or less established and may, one suspects, inspire in other areas, too. In Eni, the ECJ confirmed on 8 May the strong presumption of attribution in the case of shareholder control.

It is established case-law under EU competition law that the conduct of a subsidiary may be imputed, for the purposes of the application of Article 101 TFEU, to the parent company particularly where, although having separate legal personality, that subsidiary does not autonomously determine its conduct on the market but mostly applies the instructions given to it by the parent company, having regard in particular to the economic, organisational and legal links which unite those two legal entities. In such a situation, since the parent company and its subsidiary form part of a single economic unit and thus form a single undertaking for the purpose of Article 101 TFEU, the Court has repeatedly held that the Commission may address a decision imposing fines to the parent company without being required to establish its individual involvement in the infringement.

In the particular case in which a parent company holds all or almost all of the capital in a subsidiary which has committed an infringement of the European Union competition rules, there is a rebuttable presumption that that parent company exercises an actual decisive influence over its subsidiary. In such a situation, it is sufficient for the Commission to prove that all or almost all of the capital in the subsidiary is held by the parent company in order to take the view that that presumption is fulfilled.

In addition, in the specific case where a holding company holds 100% of the capital of an interposed company which, in turn, holds the entire capital of a subsidiary of its group which has committed an infringement of European Union competition law, there is also a rebuttable presumption that that holding company exercises a decisive influence over the conduct of the interposed company and also indirectly, via that company, over the conduct of that subsidiary.

In the present case, for the entire duration of the infringement in question, Eni held, directly or indirectly, at least 99.97% of the capital in the companies which were directly active within its group in the sectors in which there had been a violation of competition law. The ECJ held that in particular the absence of management overlap between Eni and the daughter companies, was not enough to rebut the presumption of the companies being a single economic unit. In competition law, therefore, the corporate veil may be quite easily pierced in a holding context, which undoubtedly is not the approach which many Member States take outside of the competition law area.

The waters therefore on the piercing of the corporate veil other than in the area of competition law, remain quite deep. This has an impact on the conflicts area, in particular in the application of the Rome II Regulation and the debate on corporate social responsibility, on which I have reported before on this blog.

Geert.

postscript: point made in e.g. the UKSC on 12 June 2013, in Petrodel v Prest (a matrimonial assets case which was decided on the basis of trust), where Lord Neuberger stated obiter  “if piercing the corporate veil has any role to play, it is in connection with evasion”.

Lord Sumption’s take was “there is a limited principle of English law which applies when a person is under an existing legal obligation…which he deliberately evades or whose enforcement he deliberately frustrates by interposing a company under his control. The court may then pierce the corporate veil for the purpose, and only for the purpose, of depriving the company or its controller of the advantage that they would otherwise have obtained by the company’s separate legal personality“. He added ‘The principle is properly described as a limited one, because in almost every case where the test is satisfied, the facts will in practice disclose a legal relationship between the company and its controller which will make it unnecessary to pierce the corporate veil.’

Lord Clarke, agreeing with Lord Mance and others, stated “the situations in which piercing the corporate veil may be available as a fall-back are likely to be very rare”.

 

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