Posts Tagged Australia
Looking over the fence in re B.C.I Fins. Pty Ltd. (In Liquidation). The rollercoaster world of conflict of laws.
In re B.C.I Fins. Pty Ltd. (In Liquidation) (thank you Daniel Lowenthal for flagging) illustrates to and fro exercise, hopping between laws, and the use of choice of law rules to establish (or not) jurisdiction. This method is often called the ‘conflicts method’ or ‘looking over the fence’: to establish whether one has jurisdiction a judge has to qualify his /her district as a place of performance of an obligation, or the situs of a property, requires the identification of a lex causae for the underlying obligation, application of which will in turn determine the situs of the obligation, property etc.
As Daniel points out, Bankruptcy Code section 109(a), says that “only a person that resides or has a domicile, a place of business, or property in the United States, or a municipality may be a debtor under this title.” Lane J considers the issue in Heading B and concludes that the Debtors’ Fiduciary Duty Claims against Andrew and Michael Binetter constitute property in the United States to satisfy Section 109(a).
There is no federal conflicts rule that pre-empts. New York conflict of law rules therefore apply. New York’s “greatest interest test” pointed to Australian substantive law to determine the situs of the fiduciary duties claims: “[t]he Liquidators were appointed by an Australian court, and are governed by Australian law, and Andrew Binetter is an Australian citizen. Perhaps even more importantly, the Fiduciary Duty Claims arose from acts committed in Australia and exist under Australian law, and any recovery will be distributed to foreign creditors through the Australian proceeding.’
Lane J then applies Australian substantive law eventually to hold on the situs of the fiduciary duty: considering the (competing) Australian law experts, he is most swayed by the point of view that under Australian law ‘not only debts, but also other choses in action, are for legal purposes localised and are situated where they are properly recoverable and are properly recoverable where the debtor resides.’ The Binetters reside in New York.
In summary: New York conflict of law rules look over the fence to locate the situs of a fiduciary debt to be in New York, consequently giving New york courts jurisdiction. A neat illustration of the conflicts method.
(Handbook of) EU private international law, Chapter 3, Heading
Sinocore International Co Ltd v RBRG Trading: The commercial court on fraus, ordre public and arbitration.
Fraus omnia corrumpit (fraud corrupts all; alternatively formulated as ex turpi causa non oritur actio) is not easily applied in conflict of laws. See an earlier post here. In  EWHC 251 (Comm) Sinocore International Co Ltd v RBRG Trading , the Commercial Court granted permission for the enforcement of a foreign arbitral award despite allegations that the transaction in question had been “tainted” by fraud: this is how the case is summarised by Mayer Brown and I am happy broadly to refer to their overview and analysis.
The Commercial Court’s relaxed attitude is another sign of strong support of the English courts for the New York Convention and its narrow application of ordre public.
An interesting case for comparative conflicts /arbitration classes.
Fraus omnia corrumpit or accidental oversight? New South Wales Supreme Court goes full throttle in Proactive Building Solutions
Fraus omnia corrumpit (fraud corrupts all) is not easily applied in conflict of laws. Both forum shopping and choice of law ought not prima facie to be regarded with much suspicion, especially in a B2B context. States typically employ mandatory law provisions, sometimes restricted to ‘overriding mandatory law’ (such as in the EU’s Rome I Regulation for choice of law in contracts) to ring-fence parts of national law not capable of being avoided by choice of law in purely domestic situations, and ‘public order’ provisions to trump choice for foreign law even in not purely domestic contexts, but then only for the most essential parts of a State’s legal fabric.
In Proactive Building Solutions, McDougall J held ex tempore that a choice of court and choice of law clause in favour of the English courts cq English law, was void in its entirety for it negated the working of a provision of the New South Wales Building and Construction Industry (Security of Payment) Act 1999 (NSW) (SOP Act). The object of this Act is to ensure that any person who undertakes to carry out construction work (or who undertakes to supply related goods and services) under a construction contract is entitled to receive, and is able to recover, progress payments in relation to the carrying out of that work and the supplying of those goods and services.
Section 34 of that Act reads
34 No contracting out
(1) The provisions of this Act have effect despite any provision to the contrary in any contract.
(2) A provision of any agreement (whether in writing or not):
(a) under which the operation of this Act is, or is purported to be, excluded, modified or restricted (or that has the effect of excluding, modifying or restricting the operation of this Act), or
(b) that may reasonably be construed as an attempt to deter a person from taking action under this Act, is void.
Section 7(1) of the Act, not referred to in judgment, reads
Subject to this section, this Act applies to any construction contract, whether written or oral, or partly written and partly oral, and so applies even if the contract is expressed to be governed by the law of a jurisdiction other than New South Wales.
As pointed out by Leigh Duthie and his colleagues, while Section 7(1) may have normally allowed the Court to void only the SOP relevant aspects of choice of law, the trouble in the current case was that the contract had thrown choice of court and choice of law into one clause (a very common contractual occurrence), with a foreign court adjudicating. McDougall J found it highly unlikely that the English courts would uphold the provisions of the SOP Act, hence giving the NSWSC no choice but making the clause void in its entirety. Consequently the whole contractual arrangement became subject to choice of court and choice of law as if no express clause had been inserted, even if the workings of the SOP Act would have had only a minor impact on parties’ contractual relations.
An obvious remedy is to lift SOP relevant parts of the contract out of the choice of court clause, however even in such case some uncertainty persists: for the recalcitrant party, suing in NSW in spite of a choice of court elsewhere, could attempt to raise the SOP flag if only to delay proceedings.
An interesting case for comparative conflicts classes.
Australia, Nigeria and South Korea (a bit of an unusual troika, truth to be told) have jointly proposed an amendment to the London Protocol [Convention on the Prevention of Marine Pollution
by Dumping of Wastes and Other Matter 1972 and 1996 Protocol Thereto]. The Amendment would severely and formally restrict the legality of geo-engineering among signatory States. As reported earlier, in 2008, Parties to the London Convention and Protocol adopted a resolution prohibiting ocean fertilization other than for legitimate scientific research. The proposed amendment would strengthen the nature of that prohibition.
Ocean fertilisation would be the only accepted form of geo-engineering which can continue to be researched, under monitoring and supervision of the Protocol. All other activities would remain subject to the general ban on dumping of wastes at sea. Evidently the Protocol does not capture all geo-engineering techniques, whence even if accepted, the amendment would fall short of a global regime for geo-engineering, thereby confirming the incremental process of regulating global environmental concerns.
I have searched high and low but have as yet not located a copy of the actual proposal: this post is based on the Australian government’s press release, on reporting in The Age, Environment and the geo-engineering blogspot.
Update 25 May 2015 BAT and PMI now have also launched in the High Court in the UK .with BAT putting aside the Australian ruling, reported below, as distinguishable, and PMI focusing on EU trade mark laws.
As reported earlier, the High Court of Australia held in the summer that the Australian Plain Packaging regulations are not unconstitutional. It has now also released its reasons for finding so. The relevant Commonwealth constitutional provision is Section 51(xxxi) which confers upon the Commonwealth Parliament the power to make laws with respect to:
“[t]he acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws”.
‘Just terms’ (including compensation) are only due if there is an ‘acquisition’; this, the High Court held, is not the case here. It notes (per French CJ)
‘Taking involves deprivation of property seen from the perspective of its owner. Acquisition involves receipt of something seen from the perspective of the acquirer. Acquisition is therefore not made out by mere extinguishment of rights.‘ (footnotes omitted).
‘Importantly, the interest or benefit accruing to the Commonwealth or another person must be proprietary in character. On no view can it be said that the Commonwealth as a polity or by any authority or instrumentality, has acquired any benefit of a proprietary character by reason of the operation of the TPP Act on the plaintiffs’ property rights.’
There is plenty of scope for distinguishing the Australian constitutional arguments from other jurisdictions (indeed the judgment itself refers to distinctions with the US Constitution). Moreover, as I have already flagged in an earlier posting, the legal fronts on which this battle is fought are very wide. Immediate reactions during the summer (along the lines of ‘with this judgment there is no stopping plain packaging regulations’) seemed a bit premature to me – they do all the more now that we have had a chance to read the actual judgment.