Tag: characterisation

Posted on

Banca Intesa v Venezia: An excellent illustration of the relevance of characterisation. (And of the application of the ‘purely domestic contracts’ rule, with a pudding of the ‘consideration’ theory as lois de police)).

Banca Intesa Sanpaolo SPA & Anor v Comune Di Venezia [2022] EWHC 2586 (Comm) is an excellent illustration of the relevance of characterisation and of the international harmonisation of same. It also discusses the application of the ‘purely domestic contracts’ rule of Article 3(3) Rome Convention, carried over into the Rome Regulation.

Background is long-running litigation involving derivative transactions used by Italian municipalities to hedge their interest rate risk, as Sarah Ott summarises the context here (she discusses Dexia Crediop SpA v Provincia di Pesaro e Urbino [2022] EWHC 2410 (Comm), a case with many similar issues).

Venice contends that, for various reasons, it lacked the substantive power to enter into the Transactions as a matter of Italian law, and that, applying English conflict of law principles, that means that it did not have capacity to enter into the Transactions and that they are not valid. It also contends that the Transactions breached various rules of Italian law which have the status of “mandatory rules of law” for the purposes of A3(3) Rome Convention 1980 (which is applicable and not the Rome I Regulation) and that as a result the Transactions are void and/or unenforceable.

The Banks deny that the entry into the Transactions contravened any provisions of Italian law, on the basis of arguments as to the effect of Italian law and its application to the facts of this case, and further deny that any such contravention would deprive Venice of capacity to contract as a matter of English conflict of laws principles in any event.

Capacity to enter into contractual relationship itself is not caught by the Rome Convention as a result of the Convention’s carve-out of Article 1(2) c (most legal systems make such capacity subject to the lex incorporationis, and [115] is determined by reference to the law in force when the Transactions were entered into). Foxton J refers as authority to Credit Suisse International v Stichting Vestia Groep [2014] EWHC 3103 (Comm) [185].

Who then is to decide whether a particular issue of Italian law raises a question of capacity, or authority, or some other kind of legal challenge to the validity and efficacy of the Transactions? Here Foxton J wrongly in my view simply refers to lex fori, English law. In reality of course it is the Rome Convention that does so, although as I have pointed out before, neither the Rome Convention nor Rome I excels at clarifying.

[129] ff then follows lengthy analysis of the issues of capacity under Italian law as the lex causae, with the conclusion being that Venice did indeed so lack capacity under Italian law.

The issue of mandatory Italian law replacing the English lex contractus as a result of Article 3(3) Rome Convention’s ‘purely domestic contracts’ rule, is dealt with obiter. It fails at the first hurdle with Foxton J holding [341] that the scenario is not purely domestic. He does not much entertain the issue of whether under Italian law (lack of) a theory of contractual consideration might be of mandatory nature, referring [356] to the similar issues of consideration and privity of contracts under English law (which in effect might subsequently become relevant under the overriding mandatory rules of the forum).

An interesting judgment.

Geert.

Posted on

Rokkan v Rokkan. An excellent primer on the concept and consequences of characterisation in the conflict of laws.

Rokkan v Rokkan & Anor [2021] EWHC 481 (Ch) is most excellent material for anyone looking to teach and /or understand the concept of ‘characterisation’ in private international law /the conflict of laws.

It also of course shows how qualification may be used (albeit here unsuccessfully) to try and reverse the unfortunate consequences of a particular action. In essence, claimant is a son of the deceased (she died in 2016 domiciled in the UK having lived there for a long time) who in her  2012 testament had been given the funds in two Norwegian bank accounts of the deceased, which she had emptied in 2014 via transfers to the UK.

Upon the 1979 death in Norway of her husband, the surviving spouse had applied for “uskifte” or “deferred probate” by which, in broad terms, the surviving spouse may apply to the court for an order by which (s)he is allowed to possess the whole of the joint estate of the deceased and the surviving spouse, and becomes subject to various obligations. The law provides that when the surviving spouse dies the joint estate is divided in two and each half passes to the heirs of the deceased spouse and the surviving spouse respectively (who may of course be the same).

Under England and Wales inheritance laws there is no reserved share. For claimant to obtain part of the estate, he must qualify his claim as something else than one in inheritance. The routes he opts for, are contractual (the argument here being that by exercising the right of deferred probate, the now deceased undertook obligations which were contractual and are governed by Norwegian law) or in trust (applying for and being granted deferred probate gave rise to a trust, whereby the now deceased held the joint assets on trust for herself but also for the first deceased heirs. It is alleged that the trust is governed by Norwegian law).

The characterisation principles are laid out at 33 ff, with focus mostly on characterisation following lex fori. Miles J does not discuss the role of the Rome Regulations (one imagines parties had not done so either) and under Rome I in particular, plenty of exceptions (family relationships, constitution of trusts) might well kick in. At 39 ff for the contract claim and at 49 ff for the trust claim under the Hague Convention, he rather swiftly decides the arguments are contrived: the Norwegian regime is near-entirely determined by Statute and that the initial kick-off requires the surviving spouse to apply for it, does not in and of itself render the whole regime a contractual one.

Good teaching material. Geert.

EU private international law 3rd ed. 2021, ia para 1.13

 

Posted on

McDonald v Broadspectrum. When does a claim by an employee against her employer ‘relate to’ the contract of employment?

[2019] QSC 313 McDonald v Broadspectrum can go straight into the comparative binder – thank you Angus Macinnis for signalling it. A teacher employed by Broadspectrum on Nauru, sues it for personal injury. Amongst other things, Ms McDonald alleges Broadspectrum failed to provide a safe place or system of work, to warn her about the mould contamination, to provide protective clothing or respirators, to prevent exposure, and to provide adequate ventilation, in each instance in Nauru.

Broadspectrum applied for a declaration at the Supreme Court of Queensland that the substantive law applicable to her claims is the law of New South Wales and for an order setting aside or staying and transferring her claims to the Supreme Court of that State.

The relevant compensation schemes, in Queensland and New South Wales, each exclude from their scheme an employer’s liability arising under the law of another country. Bradley J however held that lex loci delicti is Nauru law,  which therefore is lex causae. The argument that the employment contract contained implied term to the contrary was rejected.

As I discussed with Angus, I was confused by the court’s qualification of the facts as ‘tort’ (particularly as it also refers to claimant’s argument re forum contractus being Nauru); is this not a contractual claim rather than one in tort? (and one relating to the employment contract, for that matter). Angus however pointed out that in Australia workplace injury claims are usually brought as tortious breach of care claims rather than breach of a contractual obligation to provide a safe system of work. Comparatively speaking, the EU approach would probably be different. For a comparative (consumer contracts, health and safety) angle see e.g. [2018] EWCA Civ 1889 Committeri v Club Med.

On the issue of concurrent liabilities and  EU PIL see recently also Bosworth.

Geert.

Posted on

Secure Capital v Credit Suisse: Downstream holders of securities and third party redress.

As I seem to be in a mopping-up mode this morning, I might as well sneak in late review of Secure Capital SA v Credit Suisse AG, [2015] EWHC 388 (Comm) and at the Court of Appeal [2017] EWCA Civ 1486. Draft post of the latter has been in my ledger since 2017…

The cases essentially are concerned with characterisation; privity of contract, choice of law and dépeçage (bifurcation or severance).

My father-in-law OBE wonderfully sums up the world of international finance as fairy money. Harry (aka Tim Nice But Balding) & Paul express a similar feeling here. I can’t help but think of both when re-reading judgments in both cases.

Allen & Overy have most useful overview here, and RPC add useful analysis here. Claim related to eight longevity notes issued by Credit Suisse in 2008. The Notes were linked to life insurance policies, which meant that the prospect of the holder receiving payments for the Notes depended on mortality rates among a set of “reference lives”.  Secure Capital contended that Credit Suisse failed to disclose that the mortality tables used to generate the estimated life expectancies were shortly to be updated in a way that would significantly increase life expectancies, rendering the Notes effectively worthless. Secure Capital relied on a term in the issuance documentation that stated that Credit Suisse had taken all reasonable care to ensure that information provided in such documentation was accurate and that there were no material facts the omission of which would make any statements contained in those documents misleading.

The Notes were issued by Credit Suisse’s Nassau branch. Under the terms of the transaction documents, the Notes were deposited with the common depositary, Bank of New York Mellon, which held the securities on behalf of the clearing system, in this case Clearstream: which is Luxembourg-based.  The Notes were governed by English law and issued in bearer form.

Secure Capital essentially employ an attractive proposition in Luxembourg law reverse-engineering it either as the proper law of the contract in spite of prima facie clear choice of law, or alternatively as dépeçage: it argues that the provisions of a 2001 Luxembourg law on the Circulation of Securities, being the law that governed the operation of Clearstream through which the Notes were held, gave it an entitlement “to exercise the right of the bearer to bring an action for breach of a term of the…Notes“. In order to succeed, Secure Capital would have to circumvent the English law on privity of contract in respect of a transaction governed by English law.

Allen & Overy’s and RPC’s analysis is most useful for the unsuspected bystander like myself (thankfully I have a researcher, Kim Swerts, starting soon on a PhD in the area of conflict of laws and financial law).

In the High Court Hamblen J at 35 ff discusses the alternative arguments, wich would displace the suggestion that Secura Capital’s claim is a contractual claim. (Tort, as Betson LJ at the appeal stage notes at 24, was not advanced). This included a suggested property right (with discussion on the issue of the lex causae, whether e.g. this might be the lex situs), or, more forcefully, a right sui generis. None of these was upheld. Discussion on relevance of Rome I and /or the Rome Convention took place very succinctly at 53-54 – a touch too succinctly for Hamblen J’s swift reflection is that under both Rome and English conflicts rules, there was no suggestion of displacing the lex contractus. Depending on what counsel discussed, one would have expected some discussion of mandatory law perhaps, or indeed dépeçage – the latter was discussed summarily by Beatson LJ at the Court of Appeal under 54-55.

Geert.

(Handbook of) Private International Law, 2nd ed. 2016, Chapter 3.

 

%d bloggers like this: