First analysis of the European Parliament’s draft proposal to amend Brussels Ia and Rome II with a view to corporate human rights due diligence.

Update 12 October 2020 Jan von Hein has weighed in on the debate here. Update 9 October 2020 Giesela Ruhl has further review of the Rome II elements here.

Thank you Irene Pietropaoli for alerting me to the European Parliament’s draft proposal for a mandatory human rights due diligence Directive. The official title proposed is a Directive on Corporate Due Diligence and Corporate  Accountability). Parliament also proposes insertions in both Brussels Ia and Rome II. For the related issues see a study I co-authored on the Belgian context, with links to developments in many jurisdictions.

I do not in this post go into all issues and challenges relating to such legislation, focusing instead on a first, preliminary analysis of the conflicts elements of the proposal.

A first issue of note in the newly proposed Directive is the definitional one.  The proposal’s full title as noted uses ‘corporate due diligence and corporate accountability’. However in its substantive provisions it uses ‘duty to respect human rights, the environment and good governance’ and it defines each (but then with the denoter ‘risk’) in Article 3. For human rights risks and for governance risks these definitions link to a non-exhaustive list of international instruments while for the environment no such list is provided.

The proposed Directive points out the existence of sectoral EU due diligence legislation e.g. re timber products and precious metals, and suggests ‘(i)n case of insurmountable incompatibility, the sector-specific legislation shall apply.’ This is an odd way to formulate lex specialis, if alone for the use of the qualifier ‘insurmountable’. One assumes the judge seized will eventually be the arbitrator of insurmountability however from a compliance point of view this is far from ideal.

As for the proposed amendment to Brussels Ia, this would take the form of a forum necessitatis as follows:

Article 26a
Regarding business-related civil claims on human rights violations within the value chain of a company domiciled in the Union or operating in the Union within the scope of Directive xxx/xxxx on Corporate Due Diligence and Corporate Accountability, where no court of a Member State has jurisdiction under this Regulation, the  courts of a Member State may, on an exceptional basis, hear the case if the right to a fair trial or the right to access to justice so requires, in particular: (a) if proceedings cannot reasonably be brought or conducted or would be impossible in a third State with which the dispute is closely related; or (b) if a judgment given on the claim in a third State would not be entitled to recognition and enforcement in the Member State of the court seised under the law of that State and such recognition and enforcement is necessary to ensure that the rights of the claimant are satisfied; and the dispute has a sufficient connection with the Member State of the court seised.

This proposal is a direct copy paste (with only the reference to the newly proposed Directive added) of the European Commission’s proposed forum necessitatis rule (proposed Article 26) at the time Brussels I was amended to Brussels Ia (COM (2010) 748). I discussed the difficulty of such a forum provision eg here (for other related posts use the search string ‘necessitatis’). The application of such a rule also provokes the kinds of difficulty one sees with A33-34 BIa (including the implications of an Anerkennungsprognose).

Coming to the proposed insertion into Rome II, this text reads

Article 6a
Business-related human rights claims
In the context of business-related civil claims for human rights violations within the value chain of an undertaking domiciled in a Member State of the Union or operating in the Union within the scope of Directive xxx/xxxx on Corporate Due Diligence and Corporate Accountability, the law applicable to a non-contractual obligation arising out of the damage sustained shall be the law determined pursuant to Article 4(1), unless the person seeking  compensation for damage chooses to base his or her claim on the law of the country in which the event giving rise to the  damage occurred or on the law of the country in which the parent company has its domicile or, where it does not have a domicile in a Member State, the law of the country where it operates.

I called this a choice between lex locus damni; locus delicti commissi; locus incorporationis; locus activitatis. Many of the associated points of enquiry of such a proposal are currently discussed in Begum v Maran (I should add I have been instructed in that case).

A first obvious issue is that the proposed Article 6a only applies to the human rights violations covered by the newly envisaged Directive. It does not cover the environmental rights. These presumably will continue to be covered by Rome II’s Article 7 for  environmental damage. This will require a delineation between environmental damage that is not also a human rights issue, and those that are both. Neither does the proposed rule apply to the ‘good governance’ elements of the Directive. These presumably will continue to be covered by the general rule of A4 Rome II, with scope for exception per A4(3).

My earlier description of the choice as including ‘locus incorporationis’ is not entirely correct, at least not if the ‘domicile’ criterion is the one of Brussels Ia. A corporation’s domicile is not necessarily that of its state of incorporation and indeed Brussels Ia’s definition of corporate domicile may lead to more than one such domicile. Does the intended rule imply claimant can chose among any of those potential domiciles?

Locus delicti commissi in cases of corporate due diligence (with the alleged impact having taken place abroad) in my view rarely is the same as locus damni, instead referring here to the place where the proper diligence ought to have taken place, such as at the jurisdictional level in CJEU C-147/12 OFAB, and for Rome II Arica Victims. This therefore will often co-incide with the locus incorporationis.

Adding ‘locus activitis’ as I called it or as the proposal does, the law of the country where the parent company operates, clearly will need refining. One presumes the intention is for that law to be one of the Member States (much like the proposed Directive includes in its scope ‘limited liability undertakings governed by the law of a non-Member State and not established in the territory of the Union when they operate in the internal market selling goods or providing services’). Therefore it would be be best to replace ‘country where it operates’ with ‘Member State’ where it operates. However clearly a non-EU domiciled corporation may operate in many Member States, thereby presumably again expanding the list of potential leges causae to pick from. Moreover, the very concept of ‘parent’ company is not defined in the proposal.

In short, the European Parliament with this initiative clearly hopes to gain ground quickly on the debate. As is often the case in such instances, the tent pegs have not yet been quite properly staked.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 8, Heading 8.3.

(3rd ed forthcoming February 2021).

 

 

 

Restructuring tourism and Virgin Atlantic. The first application of England’s new Restructuring Plan leaves the jurisdictional issue hanging.

I flagged [2020] EWHC 2191 (Ch) Virgin Atlantic (the plan in the meantime has been sanctioned in [2020] EWHC 2376 (Ch)) in an update of my earlier post on the Colouroz Investment Scheme of Arrangement.

Restructuring practitioners have been justifiably excited by this new addition to England’s regulatory competition in restructuring tourism.

In my many posts on Schemes of Arrangements (see in particular Apcoa with the many references to later cases in that post; and Lecta Paper), I have summarised the modus operandi: no firm decision on jurisdiction under Brussels Ia is made (it is by no means certain but scheme creditors have so far not taken much of a swipe seeing as they tend to accept the attraction of the debtor company continuing as  a going concern following the use of an English scheme). If at least one of the creditors is domiciled in England, it is considered sued and a defendant per Article 4 Brussels Ia. Other, non-England domiciled creditors are then pulled into English jurisdiction using the one anchor defendant per Article 8(1). Trower J extends that assumption to Restructuring Plans at 58 ff:

      1. It is now well-established that an application for sanction of a Part 26 scheme is a civil or commercial matter and the reasoning seems to me to apply with equal force to a Part 26A restructuring plan. However, it has never been completely determined whether the rule laid down in Article 4(1) of the Regulation, that any person domiciled in an EU member state must (subject to any applicable exception) be sued in the courts of that member state, also applies to a Part 26 scheme, although the matter has been referred to and debated in a number of cases.
      1. In the present case, I shall adopt the usual practice of assuming without deciding that Chapter II and, therefore, Article 4 of the Recast Judgments Regulation applies to these proceedings on the basis that Plan Creditors are being sued by the company and that they are defendants, or to be treated as defendants, to the application to sanction the scheme. If, on the basis of that assumption, the court has jurisdiction because one of the exceptions to Article 4 applies, then there is no need to determine whether the assumption is correct and I will not do so.
      1. In the present case, the Company relies on the exception provided for by Article 8 of the Recast Judgments Regulation. By Article 8, a defendant who is domiciled outside a member state may be sued in that member state provided that another defendant in the same action is domiciled there and provided that it is expedient to hear the claims against both together to avoid risk of irreconcilable judgments resulting in separate proceedings. The consequence of this is that if sufficient scheme creditors are domiciled in England then Article 8(1) confers jurisdiction on the English court to sanction a scheme affecting the rights of creditors domiciled elsewhere in the EU, so long as it is expedient to do so, which it normally will be (see, for example, Re DTEK Finance Plc [2017] BCC 165 and [2016] EWHC 3563 (Ch) at the convening and sanctioning stages).
    1. and concluding at 61
      1. In the present case, the evidence is that at least one Plan Creditor from each class is domiciled in the jurisdiction. Perhaps most importantly, so far as in terms of Trade Plan Creditors, it is 90 out of 168. In my view, this is amply sufficient to ensure that the requirements of Article 8 are satisfied.’

Article 25 BIa jurisdiction is obiter dismissed at 62 for not all creditors have credit arrangements subject to English choice of court.

Restructuring Plans do have features which differ from Schemes of Arrangement and some of those do trigger different considerations at the recognition and enforcement level than have hitherto been the case for Schemes.

Geert.

(Handbook of) EU Private International Law, 2nd edition 2016, Chapter 2, Chapter 5. Note: 3rd of the Handbook is forthcoming (February 2021).

Marriott v Fresson. A finding on exclusive jurisdiction distinguishing Ferrexpo.

In Marriott v Fresson & Ors [2020] EWHC 2515 (Comm) at issue in the jurisdictional challenge is whether Articles 24(2) or (3) Brussels Ia are engaged in litigation essentially seeking to uphold commitments included in two contracts expressly governed by English law and with an exclusive jurisdiction clause in favour of the courts of England. The goal of the agreements being the transfer of shares in Spanish-domiciled corporation (PEV), the question is whether they ‘have as their object the validity of the constitution, the nullity or the dissolution of companies or other legal persons or associations of natural or legal persons, or the validity of the decisions of their organs’ (A24(2)) alternatively ‘have as their object the validity of entries in public registers’ (A24(3)).

Toledano DJ referred ia to Koza, Zavarco, and C-144/10 BVG and held that the principal object of the proceedings is the enforcement of shareholder agreements.

Even the defendants, in their jurisdictional challenge, do not suggest that the proceedings directly call into question the validity of any specific decision of PEV organs. Rather, they contend that the proceedings are principally concerned with a claim to the legal ownership of shares in PEV which impacts upon the composition of the shareholders of PEV and prospectively therefore upon the validity of decisions of the shareholders as an organ of that company.

That was a bit optimistic for Brussels Ia’s exclusive jurisdictional rules quite clearly do not aim at claims whose eventual effect might engage the heads of jurisdiction listed in them. The distinction however is not always easy to make. Claimants may creatively formulate their claims so as they do not fall within A24 (a tactic used particularly in A24(4) intellectual property rights cases, hence requiring the judge to decide what the true object of the proceedings might be; see e.g. Chugai v UCB).

Marriott v Fresson clearly differs from Ferrexpo, which is discussed in the judgment, where validity of the resolutions of the company’s general meeting of shareholders was the direct and specifically formulated claim engaged Article 24 which was applied reflexively.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.6, Heading 2.2.6.5.

Wikingerhof v Booking.com. Saugmandsgaard AG on the qualification in contract or tort of alleged abuse of dominant position between contracting parties. Invites the Court to confirm one of two possible readings of Brogsitter.

Saugmandsgaard AG opined yesterday in C-59/19 Wikingerhof v Booking.com (no English version of the Opinion at the time of writing). At issue is whether allegations of abuse of dominant position create a forum contractus (Article 7(1) Brussels Ia) or a forum delicti (A7(2) BIa).

I published on jurisdiction and applicable law earlier this year and I am as always genuinely humbled with the AG’s (three) references to the handbook.  Wikingerhof submits inter alia that it only ever agreed to Booking.com’s general terms and conditions (‘GTCs’) because Booking.com’s dominant position leaves it no choice. And that it had most certainly not agreed to updates to the GTCs, effected via amendments on the ‘Extranet’, which is the portal via which the hotel may update its information and retrieve reservations.

At 16 of its referral, the Bundesgerichtshof holds acte clair and therefore without reference to the CJEU that there is no durable record of the alleged consent by Wikingerhof of the amended GTCs, including choice of court. Booking.com claimed these amounted to a ‘form which accords with practices which the parties have established between themselves’ pursuant to Article 25(1)(b). This finding echoes the requirements of housekeeping which I signalled yesterday.

In my 2020 paper I point out (p.153) inter alia that in the context of Article 25’s choice of court provisions, the CJEU in C-595/17 Apple v eBizcuss suggested a fairly wide window for actions based on Article 102 TFEU’s prohibition of abuse of dominant position to be covered by the choice of court. At 28 in Apple v eBizcuss: ‘the anti-competitive conduct covered by Article 102 TFEU, namely the abuse of a dominant position, can materialise in contractual  relations that an undertaking in a dominant position establishes and by means of contractual terms’. The AG as I note below distinguished Apple on the facts and applicable rule.

In the request for preliminary ruling of the referring court, CJEU C-548/12 Brogsitter features repeatedly. The Bundesgerichtshof itself is minded to hold for forum delicti, given that (at 24 of its reference)

‘ it is not the interpretation of the contract that is the focus of the legal disputes  between the parties, but rather the question of whether the demand for specific contractual conditions or the invoking of them by a company with an — allegedly — dominant market position is to be regarded as abusive and is therefore in breach of provisions of antitrust law.

In fact on the basis of the request, the court could have held acte clair. It referred anyway which gives the AG the opportunity to write a complete if  to begin with concise précis on the notion of ‘contract’ and ‘tort’ in BIa. At 38, this leads him to conclude inter alia that despite the need strictly to interpret exceptions to the A4 actor sequitur forum rei rule, these exceptions including the special jurisdictional fori contractus ut delicti, must simply be applied with their purpose in mind.

He calls it an application ‘assouplie’, best translated perhaps as ‘accommodating’ (readers may check this against the English version when it comes out) (viz tort, too, the AG uses the term assouplie, at 45, referring eg to CJEU C-133/11 Folien Fisher).

Further, the AG notes that in deciding whether the claim is one in contract, necessarily the claimant’s cause of action has an impact, per CJEU C-274/16 Flightright (at 61 of that judgment, itself refering to C‑249/16 Kareda which in turn refers to 14/76 De Bloos). The impact of claimant’s claim form evidently is a good illustration of the possibility to engineer or at least massage fora and I am pleased the AG openly discusses the ensuing forum shopping implications, at 58 ff. He starts however with signalling at 53 ff that the substantive occurrence of concurrent liability in contract and tort is subject to the laws of the Member States and clearly differs among them, making a short comparative inroad e.g. to English law, German law and Belgian /French law. (Michiel Poesen recently wrote on the topic within the specific context of the employment section).

The AG’s discussion of CJEU authority eventually brings him to Brogsitter. He he firmly supports a minimalist interpretation.  This would mean that only if the contractual context is indispensable for the judge to rule on the legality or not of the parties’ behaviour, is forum contractus engaged. This is similar to his Opinion in Bosworth, to which he refers. He rejects the maximalist interpretation. This approach puts forward that contractual qualification trumps non-contractual (arguably, a left-over of CJEU Kalfelis; but as the AG notes at 81: there is most certainly not such a priority at the applicable law level between Rome I and II) hence the judge regardless of the claimant’s formulation of claim, must qualify the claim as contractual when on the facts a link may exist between the alleged shortcomings of the other party, and the contract.

The maximum interpretation, at 76 ff, would require the judge to engage quite intensively with the merits of the case. That would go against the instructions of the CJEU (applying the Brussels Convention (e.g. C-269/95 Benincasa)), and it would (at 77) undermine a core requirement of the Brussels regime which is legal certainty. That the minimalist approach might lead to multiplication of trials seeing as not all issues would be dealt with by the core forum contractus, is rebuked at 85 by reference to the possibility of the A4 domicile forum (an argument which the CJEU itself used in Bier /Mines de Potasse to support the Mozaik implications of its ruling there) and by highlighting the Regulation’s many instances of support for forum shopping.

The AG then discusses abusive forum shopping following creative claim formulation at 88 ff. This  is disciplined both by the fact that as his comparative review shows, the substantive law of a number of Member States eventually will not allow for dual characterisation and hence reject the claim in substance. Moreover clearly unfounded claims will be disciplined by lex fori mechanisms (such as one imagines, cost orders and the like). This section confuses me a little for I had understood the minimalist approach to lay more emphasis on the judge’s detection of the claim’s DNA (along the lines of Sharpston AG in Ergo) than on the claim’s formulation.

The AG then continues with further specification of the minimalist approach, including at 112 a rejection, correct in my view (for the opposite would deny effet utile to A7(2), of the suggestion to give the A7(1) forum contractus the ancillary power to rule of over delictual (A7(2)) issues closely related to the contractual concerns.

Applying the minimalist test to the case at issue the AG concludes that it entails forum delicti, referring in support to CDC and distinguishing Apple v eBizcuss (which entails choice of court and relies heavily on textual wording of the clause).

It will be interesting to see which of the two possible interpretations of Brogsitter the CJEU will follow and whether it will clarify the forum shopping implications of claim formulation.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.11.2, Heading 2.2.11.2.9.

 

Stephenson Harwood v MPV (and Kagan). On interpleader (‘stakeholder’) actions and when engagement with the merits of the case leads to submission under Lugano.

In Stephenson Harwood LLP v Medien Patentverwaltung AG & Ors [2020] EWHC 1889 (Ch), proceedings were triggered by funding arrangements and alleged success fee entitlements following patent infringement proceedings. MPV is Swiss-based.

The action is an ‘interpleader’ one, now called a ‘stakeholder’ action: as Lenon DJ at 34 described, it is a ‘means by which a court (at the request of claimant, who typically holds property on behalf of one of the parties, GAVC) compels competing claimants to the subject matter of the application to put forward their claims and have them adjudicated on, thereby enabling the stakeholder to drop out of the picture.’

In the English residual private international law, stakeholder actions ground jurisdiction on the basis of the defendant’s property being present there. This is the kind of assets- based jurisdiction which the EC, but not the other Institutions, had wanted to introduce in Brussels Ia. As a result of the Brussels Convention’s Article 3 (materially the same as Article 3 Lugano), these actions became part of residual rules which could no longer be invoked against EU /Lugano States based defendants.  In the Schlosser report on the UK’s accession to the Brussels Convention, to which the judge refers at 40, it was said

“Interpleader actions (England and Wales) … are no longer permissible in the United Kingdom in respect of persons domiciled in another Member State of the Community, in so far as the international jurisdiction of the English or Scottish courts does not result from other provisions of the 1968 Convention. This applies for example, to actions brought by an auctioneer to establish whether ownership of an article sent to him for disposal belongs to his customer or a third party claiming the article.”

An alternative jurisdictional gateway therefore needs to be found. The discussion turned to submission (aka voluntary appearance) and CJEU C-150/80 Elefanten Schuh GmbH v Pierre Jacqmain. In particular, MPV completed the acknowledgment of service form indicating that it intended to contest Stephenson Harwood’s claim, did not tick the box saying that it intended to dispute jurisdiction and set out its own claim for payment of the Monies which it intended to pursue in the stakeholder application and stating its intention to exchange evidence. It then served and filed two witness statements in support of that claim addressing the merits and rebutting Mr Kagan’s claim. As the judge notes at 49,

MPV’s case that it has not submitted to the jurisdiction depends on the Court accepting the premise that it is open to MPV to distinguish for jurisdictional purpose between Stephenson Harwood’s claim (in relation to which MPV has raised no jurisdictional dispute) and Mr Kagan’s claim made as part of the stakeholder proceedings (in relation to which MPV does dispute jurisdiction). It is on this basis that MPV simultaneously asks the Court to order payment of the Monies to itself, as a disposal of the stakeholder application, while disputing the jurisdiction of the Court to determine Mr Kagan’s claim to the Monies.

However Lenon DJ holds that appearance was entered, as Mr Kagan’s claim is part and parcel of the stakeholder application and cannot be separately rejected at the level of jurisdiction. The level of engagement with the claim amounts to voluntary appearance viz both parties. At 53 obiter discussion of other gateways is pondered but not further entertained for lack of proper discussion by the parties.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 1, Heading 1.3.1,

Supreme Sites Services: Immunity of international organisations and ‘civil and commercial’. CJEU holds with emphasis on the provisional nature of the proceedings and the ordinary contractual nature of the goods supplied.

María Barral Martínez and I reviewed Saugmandsgaard Øe’s Opinion in C-186/19 Supreme Site Services v SHAPE here – see also references to earlier postings in that report. The Court held yesterday. The case involves both Article 1 Brussels Ia, on the issue of ‘civil and commercial’ and the impact on same of claimed immunity; and on the application of Article 24(5)’s exclusive jurisdictional rule for proceedings ‘concerned with the enforcement of judgments’.

The case concerns SHAPE’s appeal to a Dutch Court to lift the attachment aka ‘garnishment’ of a Belgian NATO /SHAPE escrow account by Supreme Services GmbH, a supplier of fuel to NATO troops in Afghanistan. In 2013, Supreme and Allied Joint Force Command Brunssum (JFCB), the Netherlands-based regional headquarters of NATO, set up an escrow bank account in Belgium with the goal of offsetting any contingent liabilities on both sides at the end of Basic Ordering Agreements (BOAs). Supreme Services in 2015 initiated proceedings against SHAPE and JFCB in the Netherlands arguing that the latter parties had not fulfilled their payment obligations towards Supreme. It also attached the account in Belgium.

Maria earlier discussed the oddity that the Dutch Court of Appeal in the meantime has already held on the merits of the case. Shape submitted at the CJEU that this, and the fact that the Belgian courts executed their Dutch counterpart’s lifting of the garnishee order following the Dutch-Belgian 1925 Bilateral Convention, meant the questions had become largely inadmissible. The CJEU disagrees: the case before it has been referred by the Supreme Court, and that court has exclusive power under national law to determine how much it can still interfere in the substance of the case, which is still very much ‘alive’ therefore.

A first issue under discussion was whether the garnishment order, which the Court per C‑261/90 Reichert and Kochler qualifies as ‘provisional, including protective measures’ under (now) Article 35 BIa, concerns ‘civil and commercial matters’. Among others Greece and Shape argue that the nature of the substantive proceedings determines this exercises, while the CJEU, following the view of ia the EC, BEN and NL, insists it is the nature of the rights which the provisional and protective measure seek to safeguard, that must rule that exercise – support is found in 143/78 de Cavel. This finding reinforces the particular nature of ‘provisional, including protective measures’ in the set-up of the Regulation.

On the impact of claimed immunity on the subsequent qualification as ‘civil and commercial’, reference is of course made to the CJEU’s May judgment in C-641/18 Rina which I reviewed here. The Court extends its reasoning there to here despite the fact that as it notes at 61, States’ immunity is automatic and based on par in parem non habet imperium, while for international organisations it is not automatic and has to be conferred by the treaties establishing those organisations. Per Rina the CJEU assesses whether the international organisation acted iure imperii, for which of course it has a range of predecent available. At 66 it emphasises that how the organisation uses the supplied goods (here: to support the military campaign in Afghanistan) does not impact on the nature of the relationship it has with the supplier. The Court ends by instructing the Dutch SC to carry out the necessary factual checks however it suggests that in casu neither the legal relationship between the parties to an action such as that in the main proceedings nor the basis and the detailed rules governing the bringing of that action (here: the ordinary Article 705(1) of the Dutch CPR) can be regarded as showing the exercise of public powers for the purposes of EU law.

On the issue of Article 24(5), the Court takes a restrictive view as it becomes all elements of Article 24: reference here is made to CJEU C-722/17  Reitbauer: only proceedings relating to recourse to force, constraint or distrain on movable or immovable property in order to ensure the effective implementation of judgments and authentic instruments fall within A24(5)’s scope.

I trust public international lawyers will have more to say about the PIL implications of the judgment.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.2.2.

Weco projects: on Yachts lost at sea, anchor jurisdicton (that’s right), lis alibi pendens, carriage, ‘transport’ and choice of court.

In Weco Projects APS v Piana & Ors [2020] EWHC 2150 (Comm),  Hancock J held on a case involving Brussel Ia’s consumer title, including the notion of contract of ‘transport’, Article 25’s choice of court regime, and anchor jurisdiction under Article 8(1) BIa.

The facts of the case are complex if not necessarily complicated. However the presence of a variety of parties in the chain of events led to litigation across the EU. Most suited therefore to be, as WordPress tell me, the 1000th post on the blog.

For the chain of events, reference is best made to the judgment itself. In short, a Yacht booking note, with choice of court and choice of law was made for the Yacht to be carried from Antigua to Genoa. Reference was also made to more or less identical standard terms of a relevant trade association. A clause was later agreed with the identity of the preferred Vessel to carry out the transfer, followed by subcontracting by way of a Waybill.

The Yacht was lost at sea. Various proceedings were started in Milan (seized first), Genoa and England.

At 21, Hancock J first holds obiter that express clauses in the contract have preference over incorporated ones (these referred to the trade association’s model contract), including for choice of court. Readers will probably be aware that  for choice of law, Rome I has a contested provision on ‘incorporation by reference’, although there is no such provision in BIa.

Next comes the issue of lis alibi pendens. Of particular note viz A31(2) [‘Without prejudice to Article 26, where a court of a Member State on which an agreement as referred to in Article 25 confers exclusive jurisdiction is seised, any court of another Member State shall stay the proceedings until such time as the court seised on the basis of the agreement declares that it has no jurisdiction under the agreement’] is the presence of two prima facie valid but competing exclusive choice of court agreements. Hancock J proceeds to discuss the validity of the English choice of court agreement in particular whether the businessman whose interest in sailing initiated the whole event, can be considered a consumer.

The judge begins by discussing whether the contract concerned is one of mere ‘transport’ which by virtue of A17(3) BIa rules out the consumer title all together. At 37 it is concluded that the contract is indeed one of transport and at 37(8) obiter that freight forwarding, too, is ‘transport’. Hancock J notes the limited use of CJEU authority, including Pammer /Alpenhof. In nearly all of the authority, the issue is whether the contracts at issue concerned more than just transport, ‘transport’ itself left largely undiscussed.

Obiter at 75, with reference to CJEU Gruber and Schrems, and also to Baker J in Ramona v Reliantco, Hancock J holds that Mr Piana had failed to show that the business use of the Yacht was merely negligible.

Following this conclusion the discussion turns to the impact of the UK’s implementation of the EU’s unfair terms in consumer contracts regulations, with counsel suggesting that the impact of these is debatable, in light of A25 BIa’s attempt at harmonising validity of choice of court. Readers will be aware that A25’s attempt at harmonisation is incomplete, given its deference to lex fori prorogati). Hancock J does not settle that issue, holding at 111 that in any event the clause is not unfair viz the UK rules.

Next follows the Article 8(1) discussion with reference to CJEU CDC and to the High Court in Media Saturn. Hancock J takes an unintensive approach to the various conditions: they need to be fulfilled without the court at the jurisdictional stage getting too intensively caught up in discussing the merits. At 139 he justifiably dismisses the suggestion that there is a separate criterion of foreseeability in A8(1). On whether the various claims for negative declaratory relief are ‘so closely connected’, he holds they are on the basis of the factuality of each being much the same and therefore best held by one court. Abuse of process, too, is ruled out per Kolomoisky and Vedanta: at 143: there is no abuse of process in bringing proceedings which are arguable for the purposes of founding jurisdiction over other parties.

(The judgment continues with extensive contractual review of parties hoping to rely on various choice of court provisions in the chain).

Quite an interesting set of Brussels Ia issues.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, big chunks of Chapter 2.

 

 

 

Yet more on The Prestige recognition tussle. On service, state immunity and the insurance title of Brussels Ia.

I have twice already reported on The Prestige recognition issue: see here and here. In a further judgment at the end of July, [2020] EWHC 1920 (Comm), Butcher J after helpfully summarising the various claims, considered

  • whether a Member State may be served under the EU Service Regulation 1393/2007, or whether residual PIL (here: the UK State immunity Act) may insist on an alternative. This did not so much engage the issue of ‘civil and commercial’ (CJEU Fahnenbrock being cited) on which both parties agreed. Rather on the exhaustive effect or not of the Service Regulation, in particular, whether Member States may insist on service upon authorities of other Member States via diplomatic means only. Butcher J holding correctly in my view at 45, that service via the means provided for in the Regulation, suffices.
  • next, whether the case engages sovereign immunity of Spain and France which Butcher J held that they do not for the most part. He mostly cites the States’ submission to arbitration in this respect.
  • further, whether the English courts have jurisdiction or whether that is ruled out by virtue of the arbitration exception or the insurance title of the Regulation (at 93 ff; the preceding paras concern claims which fall outside BIA and are to be judged under common law). At 107 Butcher J holds that the arbitration exclusion is not engaged, citing national and CJEU authority as well as recital 12 BIa, and holding at 108 that ‘(t)he present Judgment Claims are a further step beyond what is contemplated by an ‘action or judgment concerning … the enforcement of an arbitral award’ in recital (12).’ As for the insurance heading, with reference to Aspen Underwriting, he holds that the insurance title is engaged, and (at 132) that the States they are entitled to the jurisdictional protections of Section 3, without it having to be shown that they are in fact economically weaker parties. (There is a lingering doubt over one of the claims subrogated to Spain). The insurance title being engaged, this mains that the parties protected by it may only be sued in their jurisdiction (Article 14(2)’s exception to that was held not to be applicable), hence the English Courts for those claims do not have jurisdiction.

The result is a partial jurisdiction in England only – and permission to appeal, I imagine.

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.

 

Bundeszentralamt Fur Steuern v Heis. On comity, staying proceedings, and the ‘public /private’ divide in international litigation.

Bundeszentralamt Fur Steuern (Being the Federal Central Tax Office of the Federal Republic of Germany) & Ors v Heis & Ors [2019] EWHC 705 (Ch) was held in March 2019 bit only came unto BAILII recently and had not caught my attention before.

The primary question raised is whether appeals by the applicants, the German Federal Tax Office (“the GTA”) and by Deutsche Bank AG (“DB”) against the rejection by the Joint Special Administrators (“the Administrators”) of MF Global UK Limited (“MFGUK”) of their respective proofs of debt, to allow the underlying claim which forms the subject of the proof to be resolved by the specialist German tax or fiscal courts, which both the applicants (for different reasons) contend are the natural forum for the determination of the claims and the forum in which they can be resolved most efficiently.

The underlying issue concerns German withholding tax.

The GTA has at all times maintained that its claim should be determined in Germany by the German tax courts, per the UK-Germany double taxation Treaty, based on the OECD model convention (for those in the know: it is Article 28(6) which the GTA has suggested exclusively reserves its GTA Claim to the German Courts). However it felt compelled to submit a proof in MFGUK’s UK administration proceedings in order to preserve its rights.

Under German law, it is within the GTA’s power to give a decision on MFGUK’s objection to relvant Amended Tax Assessment Notices. If and when it did so, it would then be for MFGUK, if it wished to pursue the matter further, to file an appeal against that decision by the GTA with the Fiscal Court of Cologne. The Fiscal Court of Cologne is one of the 18 fiscal courts in Germany which are the courts of first instance for tax matters. That seems a natural course to take however here the GTA is caught in a conundrum: at 18: the GTA has not yet formally rejected MFGUK’s objection. This is because such objection would establish proceedings in Germany, and there is a procedural rule of German law that, in order to prevent parallel proceedings, a German court will automatically defer to the court first seized of a matter. Accordingly, it seems likely that if the GTA were to reject MFGUK’s objection before the Stay Application has been decided by the UK Court, on any appeal by MFGUK, the Fiscal Court of Cologne might as a matter of comity defer to this Court in order to avoid parallel proceedings.

At 57: Brussels Ia is not engaged for the case concerns both the insolvency and the tax exclusion of Articles 1.1 and 1.2.b. At 56 Hildyard J considers the issues under English rules on the power to stay, with a focus on the risk of irreconcilable judgments.

At 84 Hildyard J holds that the GTA read too much into A28(6) and that there is no exclusive jurisdiction, leaving the consideration of whether a stay might be attractive nevertheless (at 89 ff the issue is discussed whether German courts could at all entertain the claim). This leads to an assessment pretty much like a stay under Brussels Ia as ‘related’ (rather than: the same, to which lis alibi pendens applies) cases. Note at 87(6) the emphasis which the GTA places on the actual possibility of consolidating the cases – similar to the arguments used in BIa A33-34 cases such as Privatbank and later cases).

At 115 the impact of this case having public law impacts becomes clear: ‘It seems to me that, despite my hunch that there will also be considerable factual enquiry, and a factual determination of the particular circumstances may determine the result …, the legal issues at stake are not only plainly matters of German law, but controversial and complex issues of statutory construction of systemic importance and substantial public interest in terms of the legitimate interests of the public in the protection of its taxation system from what are alleged to be colourable schemes.’

And at 116, referring ia to VTB Capital v Nutritek, ‘the risk of inconsistent decisions in concurrent proceedings in different jurisdictions, is the more acute when in one of the jurisdictions the issue is a systemic one, or may be decided in a manner which has systemic consequences. Especially in such a context, there is a preference for a case to be heard by the courts of the country whose law applies.’ Reference to VTB is made in particular with resepect to the point that Gleichlauf (the application by a court of its own laws) is to be promoted in particular (at [46] in VTB per Lord Mance: “it is generally preferable, other things being equal, that a case should be tried in a country whose law applies. However, this factor is of particular force if issues of law are likely to be important and if there is evidence of relevant differences in the legal principles or rules applicable to such issues in the two countries in contention as the appropriate forum.’

At 117: ‘even if the factual centre of gravity may be London, the jurisdiction likely to be most affected by the result is Germany: and even if the US approach of ‘interest analysis’ is not determinative in this jurisdiction it does not seem to me to be an impermissible consideration.’

Held, at 121, there is here ‘a sufficiently “rare and compelling” reason for granting the stay sought by the GTA, provided that the German Fiscal Court are an available forum in which to determine the substance of the disputes.’ At 122 Hildyard J seeks assurances ‘insofar as the parties’ best endeavours can secure it, resolution of both the GTA Claim and the Later MFGUK Refund Claim as expeditiously as possible. That seems to me necessary in order to safeguard this jurisdictions’ insolvency processes and for the protection of the interests of the body of creditors as a whole.’

Then follows at 131 ff extensive analysis of the impact of this stay decision on the related case of Deutsche Bank, with at 190 a summary of the issues to be decided. Held at 218: ‘By careful selection of potentially dispositive issues, I consider that there is some prospect of that process enabling a determination without recourse to the intricacies of German tax law which are to be decided in the context of the GTA Claim; whereas an immediate stay guarantees a long delay before this court can determine the matter, based on presently hypothetical claims, after a long wait for non-binding guidance from the German court which may result from other cases to which DB is not a party.’ However at 219 the prospect of a stay after all is held out, should a quick resolution of those issues not be possible.

Most interesting.

Geert.

 

The CJEU’s locus damni determination in Volkswagen dismisses a US style minimum contacts rule. Like the passat, it risks picking up suits and landing them almost anywhere.

Update 26 August 2020 see Matthias Lehmann for similar as well as additional criticism here.

Update 10 July 2020 a few hours after posting: I revisited the pending, distinct reference by the Austrian Supreme Court (see Rouzbeh Moradi’s flag here) on type approval issues (which the High Court has actually dealt with as acte clair in [2020] EWHC 783 (QB), referred to here). I was hoping there might be scope in those questions for the CJEU to fill in the blanks signalled below. I fear there is not.

I earlier reviewed Sánchez-Bordona AG’ opinion in C‑343/19 Verein für Konsumenteninformation v Volkswagen. I noted then that despite attempts at seeing system in the Opinion, the ever unclearer distinction between direct and indirect aka ‘ricochet’ damage under Article 7(2) Brussels Ia is a Valhalla for reverse engineering.

The AG did not suggest a wild west of connecting factors for indirect damage (please refer to my full post for overview), instead suggesting a Universal Music style requirement of extra factors (over and above the location of damage) to establish jurisdiction. In particular he put forward a minimum contacts rule such as in US conflict of laws: at 75: ‘the defendant’s intention to sell its vehicles in the Member State whose jurisdiction is in issue (and, as far as possible, in certain districts within that State).’

The CJEU’s judgment yesterday was received as giving ‘consumers’ the right to sue Volkswagen in their state of domicile. This however is not quite correct. Firstly, the parties at issue are not ‘consumers’ at least within the meaning of European conflicts law: the suit is one in tort, not contract, let alone one that concerns a consumer contract. Further, the AG was clear and the CJEU arguably held along the same lines, that it is only if the car was purchased by a downstream (third party) buyer and the Volkswagen Dieselgate story broke after that purchase, that the damage may be considered to only then have come into existence, thus creating jurisdiction. See the CJEU at 29 ff:

29. That said, in the main proceedings, it is apparent from the documents before the Court, subject to the assessment of the facts which it is for the referring court to make, that the damage alleged by the VKI takes the form of a loss in value of the vehicles in question stemming from the difference between the price paid by the purchaser for such a vehicle and its actual value owing to the installation of software that manipulates data relating to exhaust gas emissions.

30      Consequently, while those vehicles became defective as soon as that software had been installed, the view must be taken that the damage asserted occurred only when those vehicles were purchased, as they were acquired for a price higher than their actual value.

31      Such damage, which did not exist before the purchase of the vehicle by the final purchaser who considers himself adversely affected, constitutes initial damage within the meaning of the case-law recalled in paragraph 26 of the present judgment, and not an indirect consequence of the harm initially suffered by other persons within the meaning of the case-law cited in paragraph 27 of the present judgment.

That ‘case-law cited’ is the classic lines of cases on locus damni per A7(2) BIa, with Trans Tibor as its latest expression.

The CJEU does not qualify the damage as purely financial: at 33, citing the EC’s court opinion: ‘the fact that the claim for damages is expressed in euros does not mean that the damage is purely financial.’: the car, a tangible asset, actually suffers a defect, over and above the impact on its value as an asset. That is a statement which cuts many a corner and which has relevance beyond the EU regime for all ‘money judgments’ (think of e.g. the Hague Judgments Convention). Update 10 July 2020 after initial posting: thank you Gordon Nardell QC for pointing out that the CJEU view here is at odds with the English conflicts rules (and with many other, I reckon) on characterisation of loss as pecuniary.

Predictability, which is firmly part of the Brussels Ia Regulation’s DNA, the Court holds, is secured seeing as a car manufacturer which ‘engages in unlawful tampering with vehicles sold in other Member States may reasonably expect to be sued in the courts of those States (at 36).

Finally, the Court throws consistency with Rome II in the mix, by holding at 39

Lastly, that interpretation satisfies the requirement of consistency laid down in recital 7 of the Rome II Regulation, in so far as, in accordance with Article 6(1) thereof, the place where the damage occurs in a case involving an act of unfair competition is the place where ‘competitive relations or the collective interests of consumers are, or are likely to be, affected’. An act, such as that at issue in the main proceedings, which, by being likely to affect the collective interests of consumers as a group, constitutes an act of unfair competition (judgment of 28 July 2016, Verein für Konsumenteninformation, C‑191/15, EU:C:2016:612, paragraph 42), may affect those interests in any Member State within the territory of which the defective product is purchased by consumers. Thus, under the Rome II Regulation, the place where the damage occurs is the place in which such a product is purchased (see, by analogy, judgment of 29 July 2019, Tibor-Trans, C‑451/18, EU:C:2019:635, paragraph 35).

The extent to which A6 Rome II applies to acts of unfair competition being litigated by ‘consumers’ (in the non-technical sense of the word), is however not quite clear and in my view certainly not settled by this para in the Court’s judgment.

Finally, on locus delicti commissi as I noted at the time, the AG had not in my view given a complete analysis. The CJEU is silent on it.

Not many will feel much sympathy for Volkswagen facing cluster litigation across the EU given its intention to cheat. However the rejection of a minimum contacts approach under A7(2) will have implications reaching small corporations, too. The Volkswagen ruling has many loose ends and will need distinguishing, with intention to defraud the consumer arguably a relevant criterion for distinction given the Court’s finding in para 36.

It is to be feared that many national judges will fail to see the need for distinguishing, adding to the ever expanding ripple effect of locus damni following the Court’s epic Bier judgment.

Geert.

Ps reference to the Passat in the title is of course to the VW Passat, named after the Germanic name for one of the Trade winds.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.11.2.7