Posts Tagged Bundesgerichtshof
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.
European private international law, second ed. 2016, Chapter 2, 220.127.116.11.1, 18.104.22.168.4
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.
Kuhn: ‘Civil and commercial’ viz bearers of Greek bonds. Bot AG applies Fahnenbrock’s ‘direct and immediate effect’ and distinguishes Kolassa.
Advocate-General Bot opined on 4 July 2018 in the case of C-308/17 Leo Kuhn, domiciled at Vienna, who had purchased through an Austrian bank, Greek sovereign bonds. Pursuant to a forced exchanged /haircut carried out by Greece in March 2012, the bonds were replaced with new bonds with a lower nominal value. Mr Kuhn sued to have the initial borrowing terms enforced.
The Advocate-General is of course aware of the similarities with Fahnenbrock – in which he himself had also opined but was not followed by the Court. He first of all points out the similarities between the service Regulation and the Brussels I Recast (both e.g. limiting their scope of application to ‘civil and commercial’ matters), however also flags the specific recitals (in particular: recital 12) suggesting that in the context of the services Regulation the analysis needs to be done swiftly hence only cases which prima facie fall outside the scope of application (including where they manifestly (see the dictum of Fahnenbrock and para 50 of the AG’s Opinion in Kuhn) are not covered by that Regulation.
Coming next to the consideration of the application of ‘civil and commercial’, the facts of this case reflect very much the hybrid nature of much of sovereign debt litigation. In my view yes, the haircut took place within the wider institutional nature of Greece’s debt negotiations with the EU. Yet the ‘collective action clause’ (CAC) which was not part of the original terms and conditions (there was no CAC in the original lex causae, Greek law, but there is one in the newly applicable lex causae, English law: at 63 of the Opinion), was negotiated with the institutional holders of the bond and crammed down the minority holders like Mr Kuhn (at 66). The AG suggest that this does not impact on the qualification of the changes being ‘immediate and direct’, this being the formula employed by the Court in Fahnenbrock.
I am not so sure of the latter but it will be up to the CJEU to decide.
The Advocate General note bene subsequently ‘completes the analysis’ in case the CJEU disagrees with this view, and finds that if the issue is civil and commercial, it can be litigated under Article 7(1)’s rule on special jurisdiction for contractual obligations (the AG at para 88 ff distinguishes the case from C-375/13 Kolassa (in which the CJEU saw no contractual bond between the issuer of the bonds and the acquirer on the secondary market), the obligation at issue, he suggests, having to be performed in Greece. As for the latter element, the Advocate General does refer for the determination of the place of performance to the initially applicable law: Greek law, leaving the later lex causae, English law, undiscussed.
Whether the Court will follow the AG remains of course to be seen.
Fahnenbrock: ‘Civil and commercial’ viz bearers of Greek bonds. ECJ puts forward ‘direct and immediate effect’.
[Postscript 11 March 2016. The decision of the Bundesgerichtshof on 8 March 2016 is at odds with the CJEU’s finding. Peter Bert has background. The German Court declared action by German bondholders against the Greek State inadmissable on grounds of sovereign immunity: if the case were admissible, the German courts would have to assess the merits of Greek acta iure imperii].
Within the context of the service of documents Regulation (1393/2007) but with no less relevance for the Jurisdiction Regulation, the Court held last week on the qualification of an action by (German) holders of Greek bonds, against the Greek State, for the involuntary shave they took on those bonds. I reviewed Bot AG’s Opinion here. He had suggested that in the case at issue, the Greek State, with its retroactive insertion of the collective action clause in the underlying contract, exercised acta uire imperii with direct intervention in the contract itself. Not an abstract, general regime (such as a change in overall tax) which only has an impact on said contract at arm’s length.
The ECJ disagreed. Its finding may be distinguishable, in that it emphasises (at 40 and 44 in particular) that for the service of documents Regulation, things need to move fast indeed and hence interpretation even of core concepts of the Regulation needs to proceed swiftly: ‘in order to determine whether Regulation No 1393/2007 is applicable, it suffices that the court hearing the case concludes that it is not manifest that the action brought before it falls outside the scope definition of civil and commercial matters.‘ (at 49) However in the remainder of the judgment it does refer to precedent in particular under the Brussels I Regulation, hence presumably making current interpretation de rigueur for European civil procedure generally.
As noted in my earlier review, Bot AG opined that the Greek State’s intervention in the contracts was direct and not at a distance from the contract. The Court on the other hand essentially emphasised (at 57) that even though the Greek State, with its retroactive insertion of the collective action clause in the underlying contract, enabled the subsequent vote by the majority of the bondholders (to the dismay of the outvoted applicants), it was the vote, which led directly and immediately to changes to the financial conditions of the securities in question and therefore caused the damage alleged by the applicants – not the Act which enabled it. Not acta iure imperii therefore and hence European civil procedure is applicable.
I need to ponder this a bit further however at first sight the ‘direct and immediate’ effect test brings back soar memories of the ‘primarily aimed at’ test in WTO law, which took some time for the Appellate body to shake off. A bit of a leap, I know, but the trade lawyers among you will know what I mean. Applicants in the case at issue may be left arguing that identifying the Greek State’s intervention as the cause of the change in law, is no application of the butterfly effect (an extremely remote event which is being blamed for downstream effects) but rather an elephant in the Greek bond market room.
‘Direct and immediate effect’ may become an important consideration in the ECJ’s application of ‘civil and commercial’ in EU civil procedure law.
‘The Bundesgerichtshof was wrong to deny choice of court in favour of Virginia, on the basis of EU mandatory law.’ Discuss.
Such would be the title for a perfect exam question for an advanced conflict class. It would also kill the bird of making the point of German law and scholarship being particularly relevant to conflict of laws. In September 2012 (only just now brought to my attention), the Bundesgerichtshof denied a choice of court agreement in favour of the courts in Virginia. The agreement was part of a contract between a German agent and a principal from the US and co-incided with a choice of law clause, also in favour of the laws of Virginia. Under Virginian law, the agent would not have a right to indemnity, contrary to the commercial agents Directive, which was held in Ingmar to be part of EU mandatory law: that was enough for the German courts to refuse to accept the validity of the choice of court clause, and to accept jurisdiction for German courts on the basis effectively of a minimum presence rule (general jurisdiction over a defendant anywhere it maintains a registered branch or office).
Progress is to varying degree based on assimilation: I shall not therefore repeat the excellent analysis of Jennifer Antomo here. Choice of court clauses in favour of non-EU courts are not covered by the Brussels I-Regulation. Yet when national courts refuse to acknowledge such choices and assume jurisdiction, the Rome I Regulation on applicable law for contracts, does come into play. In effect, the German court here refuses to acknowledge the clause on the basis of applicable law considerations, whence EU law is far from absent in the case. Some sort of judicial review with the ECJ might therefore have been warranted.