Posts Tagged Choice of court

Happy Flights v Ryanair. Belgian Supreme Court (only) confirms proper lex causae for validity of choice of court under Article 25 Brussels Ia.

Thank you alumna and appreciated co-author Jutta Gangsted for flagging Charles Price’s (former learned colleague of mine at Dibb Lupton Alsop) and Sébastien Popijn’s alert on the Belgian Supreme Court’s ruling of 8 February last in C.18.0354.N Happy Flights v Ryanair. Happy Flights are a Belgium-based online claim agency to which disgruntled passengers may assign claims for compensation under Regulation 261/2004.

At issue is the validity of Ryanair’s choice of court in its general terms and conditions, referring consumers to Irish courts. The Brussels Commercial court on 30 May 2018 seemingly first of all did not assess whether the agency may be considered a ‘consumer’ within the terms of the consumer title of Brussels Ia, having been assigned the consumers’ claims. This decision is unreported <enters his usual rant about the lack of proper reporting of Belgian case-law>.

The Supreme Court (at 2, line 47) notes this lack of assessment by the lower court. It does not however complete the analysis sticking religiously to its role to interpret the law only, not the facts. Per CJEU Schrems mutatis mutandis I would suggest an affirmative answer (the agency having been assigned the consumers’ rights): in which case the Article 25 analysis becomes redundant.

The Brussels Commercial court subsequently and again from what one can infer from the Supreme Court’s ruling, discussed the validity of choice of court under Article 25 Brussels Ia, reviewing its formal conditions (formation of consent) yet judging the material validity under the lex fori, Belgian law, not the lex fori prorogati, Irish law. This is a clear violation of A25 juncto recital 20 Brussels Ia. The Supreme Court suggests that the relevant Irish implementation of the unfair consumer terms Directive 93/13 does imply invalidity of the clause (again: if the claim is held to fall under the consumer title, this analysis will become superfluous).

Note that the SC ommits recital 20’s renvoi instruction: clearly misapplying the Regulation.

The Court’s judgment unlike the understandably enthusiastic briefing by Happy Flight’s counsel does not quite yet mean that Ryanair’s terms and conditions on this issue have been invalidated. However it is likely they will be upon further assessment on the merits. As I note above first up there will be the issue of assignment rather than the issue of A25.

For your interest, I gave a Twitter tutorial on a related issue (consumer law, lex causae, compulsory referral to arbitration) recently.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.9, Heading 2.2.9.4.

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Kaefer Aislamientos v AMS Drilling et al. Article 25’s new clothes exposed.

[2019] EWCA Civ 10 Kaefer Aislamientos v AMS Drilling et al is a good illustration of the difficulty of privity of contract (here: privity of choice of court), and the limits to the harmonisation of the rules on choice of court under Article 25 Brussels I Recast.

Herbert Smith Freehills have analysis of the wider issues of the case (over and above Article 25) here. The appeal considers among others the approach that courts should adopt when, as will usually be the case at the interim stage when a jurisdiction challenge is launched, the evidence before the Court is incomplete. Goldman Sachs v Novo Banco as well as Brownlie were referenced.

Appellant contends that the Court has jurisdiction to determine the claim against defendants AT1 and Ezion under Article 25 Brussels I Recast. It is said that the relevant contract contains an English exclusive jurisdiction clause and the relevant contract was concluded by AMS Mexico and/or AMS on behalf of AT1 and/or Ezion as undisclosed principals and, it follows, the contract, including its jurisdiction agreement, bound AT1 and Ezion.

At 81 Lord Green refers to the Privy Council in Bols [2006] UKPC 45 which itself had referred to Colzani and Coreck Maritime (staple precedent at the CJEU; students of conflict of laws: time to worry if you read this around exam time and haven’t a clue). In Bols Lord Rodgers leading, held that CJEU precedent imposed on the court the duty of examining “whether the clause conferring jurisdiction upon it was in fact the subject of a consensus between the parties” and this had to be “clearly and precisely demonstrated“. The purpose of the provisions was, it was said, to ensure that the “consensus” between the parties was “in fact” established.

Lord Green (this is not part of the decision in Bols) adds that the Court of Justice has however recognised that the manner of this proof is essentially an issue for the national laws of the Member States, subject to an overriding duty to ensure that those laws are consistent with the aims and objectives of the Regulation. He does not cite CJEU precedent in support – but he is right: Article 25 contains essential, yet precious little bite in determining just how to establish such consensus. Prima facie complete, it leaves a vault of issues to be determined, starting with the element of ‘proof’ of consensus.

Of interest is that before deciding the issue, Lord Green notes at 85 Abela v Baardani [2013] UKSC 44 (“Abela“) at paragraphs [44] and [53] per Lord Clarke and Lord Sumption, that to view permission to service out of jurisdiction as more often than not exorbitant, is unrealistic in the modern era: routinely where service out is authorised the defendant will have submitted contractually to the jurisdiction of the domestic courts (or there would be an argument to that effect) and in any event litigation between residents of different states is a normal incident of modern global business. As such the decision to permit service out is, today, more generally viewed as a pragmatic decision predicated upon the efficiency of the conduct of litigation.

It was eventually held that the evidence pointed against AT1 and Exion being undisclosed principals and that therefore the Court of Appeal was right in rejecting jurisdiction.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.9, Heading 2.2.9.4.

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No VAR needed here. French Supreme Court on choice of court ex-EU in employment contracts. X v AS Monaco.

Update 30 January 2019 many thanks to François Mailhé who contacted me to point out that the reasoning re Article 1412-1 in fact was only made by claimant but not entertained by the Court, who only applied Brussels I Recast. An ‘attendu que’ which was however followed by ‘selon le moyen que’, in my haste overlooked by me. Apologies – and a first correction on any post on the blog since its launch in 2012. I have amended the post to correct this.

Thank you Hélène Péroz for flagging 17-19.935 X v AS Monaco at the French Supreme Court, held December 2018. Claimant is a former physiotherapist employed by AS Monaco. His contract included choice of court ex-EU (not further specified in the judgment but one assumes, Monaco. Monaco is one of those micro-States with a complex arrangement with the EU).

The Supreme court first of all could have addressed the application of France’s jurisdictional rule R. 1412-1 of the Code du Travail. This assigns territorial jurisdiction in principle to the employment courts of the area where the employee habitually carries out the employment, with fall-back options which are similar to yet not quite the same as the provisions of Brussels I Recast:

Art. R. 1412- 1 L’employeur et le salarié portent les différends et litiges devant le conseil de prud’hommes territorialement compétent. Ce conseil est :

1 Soit celui dans le ressort duquel est situé l’établissement où est accompli le travail ;

2 Soit, lorsque le travail est accompli à domicile ou en dehors de toute entreprise ou établissement, celui dans le ressort duquel est situé le domicile du salarié.

Le salarié peut également saisir les conseils de prud’hommes du lieu où l’engagement a été contracté ou celui du lieu où l’employeur est établi. — [ Anc. art. R. 517- 1, al. 1er à 3.]

These provisions cast a slightly wider jurisdictional net than Brussels I Recast. That gap was even wider before Brussels I Recast had extended its jurisdictional reach to parties (the employer, or the business in the case of the consumer title) domiciled ex-EU. It is particularly its existence pre Brussels I Recast for which the provision is ranked among France’s exorbitant jurisdictional rules.

Now, coming to the case at issue. Claimant had suggested the Supreme Court address the nature of the provision as lois de police, in particularly by severely curtailing same in the event of choice of court ex-EU. Claimant argued ‘ce n’est que si le contrat est exécuté dans un établissement situé en France ou en dehors de tout établissement que les dispositions d’ordre public de l’article R. 1412-1 font échec à l’application d’une telle clause.’ : it is argued that only if the contract is performed in an establishment of the employer in France, or entirely outside such establishment (from the employee’s home or ‘on the road’) does Article R.1412-1 trump choice of court ex-EU. The lower court’s judgment had failed to assess these circumstances and therefore, it was suggested, infringes the Article.

The Supreme Court unfortunately does not however dot the i’s and cross the t’s on this issue at all: it only (not unjustifiably, if an expression of judicial economy) looks at Brussels I Recast. Reportedly the application of Brussels I to the issue is not something the Court has properly done in the past.

Article 21 Brussels I Recast requires assessment of the place of habitual carrying out of the work. Claimant worked mostly from the club’s training ground, which is in Turbie, France, and accompanied the club at fixtures. These however by reason of the football calendar clearly took place in Monaco only one out of two games (see the Count of Luxembourg for similar identification of the relevant criteria). Core of the employment therefore is France, notably in the Nice judicial area and therefore the lower court was right to uphold its jurisdiction.

Addressing Article 1412-1 will have to be for future judgment, outside the Brussels I Recast context.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.8.3.

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Cunico v Daskalakis. Lugano Convention, employment and choice of court.

In [2019] EWHC 57 (Comm) Cunico v Daskalakis Baker J applies the employment and choice of court titles of the Lugano Convention 2007. Mr Daskalakis and the second defendant, Mr Mundhra, worked for the Cunico group. The group operated in base metals industries and markets. Defendants’ primary jobs were CEO and CFO respectively of Feni Industries AD (‘Feni’), the main industrial operating subsidiary of the group, incorporated and operating in FYR Macedonia. Feni owned and operated a ferronickel production plant in Kavadarci and the Rzanovo iron and nickel mine 50 km or so south of the city.

It is necessary to give a little bit of factual background to appreciate the jurisdictional issues.

Cunico Resources NV (‘Resources’) was incorporated in the Netherlands, to become the group holding company, in May 2007. Marketing was incorporated in Dubai, UAE, in July 2007, and operated in the Jebel Ali Free Zone as the main market-facing trading entity in the group. Resources had no operating activities. It existed as a holding company for the operating subsidiaries as investment assets, with a single dedicated (full-time) employee. Marketing traded by purchasing ore from other Cunico subsidiaries, and bailing the ore to a ferronickel plant within the group under a ‘tolling agreement’, for conversion by the plant to finished ferronickel. Marketing then sold the finished product to the market. Under the tolling agreement, fees for converting Marketing’s ore into finished ferronickel would be payable by Marketing to the operator of the ferronickel plant (e.g. Feni).

The Cunico group was owned, at the time of the events said to give rise to claims against the defendants, as a joint venture between International Mineral Resources BV (‘IMR’) and BSGR Cooperatief UA (‘BSGR’). Latterly, IMR has effectively all but bought BSGR out, via the intervention of proceedings in the Amsterdam Enterprise Chamber, so that today Resources is owned as to c.80% by Summerside Investments S.a.r.l., IMR’s parent company, with 50% of the remainder owned by each of IMR and BSGR.

Now, crucially (at 6): so-called ‘Advisory Contracts’ were signed as between Marketing and each of the defendants, in 2007 and again in 2010, that contained a jurisdiction provision in these words: “In case of disagreements, they shall be solved in the Court of the United Kingdom“. The claimants say that provision gives this court jurisdiction over their respective claims against the defendants under Article 23 of the Lugano Convention. It is common ground that the defendants were domiciled in Switzerland when proceedings were brought and that the claims brought against them are within the material scope of the Lugano Convention, so indeed it governs the question of jurisdiction in this case. It is also common ground that, in this international business context, the reference in the Advisory Contracts to “the Court of the United Kingdom” should be interpreted to mean the courts of England and Wales.

Marketing claims that defendants received bonus payments from Marketing to which they were not entitled and/or to procure payment of which they acted in breach of contractual and fiduciary duties owed to it.

The principal issue is whether the claims made are matters relating to individual contracts of employment so as to engage Section 5 of the Lugano Convention. Any claims that do engage Section 5 cannot be brought in England.

At 23: For each claim advanced by each claimant against either defendant, the question of jurisdiction gives rise to the following issues in this case:

i) Is that claim a matter relating to the employment of the defendant by that claimant, for the purpose of Section 5 of the Lugano Convention?

ii) If not, is that claim within the scope of the jurisdiction provision in either of the defendant’s Advisory Contracts?

iii) If so, for a claim by Resources or Feni, does that jurisdiction provision confer on the claimant an effective benefit? (This is a question under the Contracts (Rights of Third Parties) Act 1999, as each Advisory Contract was a contract only between the respective defendant and Marketing.)

Baker J decides following lengthy overview of the ’employment’ history of defendants that they were indeed employed across the group, and that Lugano’s employment heading therefore points away from jurisdiction in England. Surprisingly he does not refer at all to any CJEU precedent such as Holterman. The employment argument having succeeded, no assessment is made of Lugano’s choice of court provisions.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.8.3.

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Heller v Uber at the Ontario Court of Appeal: arbitration clause requiring arbitration in the Netherlands of disputes between drivers and Uber invalid.

Thank you Christopher Burkett for alerting me to Heller v. Uber Technologies Inc., 2019 ONCA 1.  The case is reminiscent of California’s Senate Bill 1241 (review here) and of an article that I co-authored with Jutta Gangsted [‘Protected parties in European and American conflict of laws: a comparative analysis of individual employment contracts]. The starting point of the California, the EU rules, and the Canadian judgment is the same: employees cannot be considered to really consent to either choice of law or choice of court /dispute resolution hence any clause doing same will be subject to mandatory limitations.

Here, an arbitration clause requiring arbitration in the Netherlands of disputes between drivers and Uber was held to be invalid and unenforceable, because it deprives an employee of the benefit of making a complaint to the Ministry of Labour under relevant Ontarian law.

Of note is that the judgment applies assuming the contract is one of employment – which remains to be determined under Ontarian law. Of note is also that the Court of appeal rejected Uber’s position that the validity is an issue for the arbitrator to determine because it is an issue going to the jurisdiction of the arbitrator. Uber invoked the “competence-competence” /kompetenz kompetenz principle in support of its position.

Geert.

(Handbook of) European Private international law, 2nd ed. 2016. Chapter 2, Heading 2.2.8.3, Chapter 3, Heading 3.2.5.

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Floating/Invalid Choice of Law Clauses. The Singapore High Court in Shanghai Turbo.

Marcus Teo has excellent analysis of Shanghai Turbo Enterprises Ltd v Liu Ming [2018] SGHC 172. The issue is well-known in contract law as such and takes one or two special forms in conflicts: what is the fate of a contract as a whole, and /or of contractual clauses individually, when part of a clause is defective.

In the case at issue, the relevant contractual clause read

This Agreement shall be governed by the laws of Singapore/or People’s Republic of China and each of the parties hereto submits to the non-exclusive jurisdiction of the Courts of Singapore/or People’s Republic of China.”

As far as the choice of court part of this clause is concerned, non-exclusive choice of court comes with strings attached, depending on the laws of the States concerned: under the editorship of Mary Keyes, Michiel Poesen and I have contributed to an extensive comparative volume on same wich is forthcoming. However for choice of law one need not look at the specific laws of a State to appreciate that this clause thus formulated is simply a lame duck. No clear choice of law is made at all. The pragmatic solution is to ignore the useless clause and determine the proper law of the contract in the absence of a valid expression of parties’ autonomy. Yet conceptually an argument can, and has been made that to do so ignores the very high relevance of the lex contractus in the very contract formation – a conceptual quagmire which in EU law is addressed by Rome I’s ‘bootstrap’ principle.

In the case at issue, the High Court follows a pro-validation approach (favor contractus): the invalidity of the choice of law clause does not affect the formation of the main contract. A commercially sensible solution which Marcus analysis critically in excellent detail.

Geert.

(Handbook of) EU Private international law, 2nd ed. 2016, Chapter 3, Heading 3.2.7.

 

 

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Qingdao Huiquan: Anti-suit injunction against a non-party to exclusive choice of forum (particularly: arbitration).

Thank you 20 Essex Street for flagging (and analysing)  [2018] EWHC 3009 (Comm) Qingdao Huiquan, granting anti-suit against a foreign litigant who is not a party to an exclusive choice of forum agreement (in particular: arbitration agreed in a settlement agreement). The third party, SDHX, is engaging in proceedings in China, and is related to one of the parties to the settlement agreement.

SDHX appeal to privity of contract is tainted by its invoking elements of the settlement agreement in the Chinese proceedings. Under relevant authority, this was ground for Bryan J to issue aint-suit against it.

A classic cake and eating it scenario, one could say: at 36: ‘I have had particular regard to the fact that it is clear from the Settlement Agreement that SDHX is indeed seeking to rely upon the terms of the Settlement Agreement in advancing its claims in the Chinese proceedings and that, in doing so, therefore, it has to take the burden of the arbitration clause, if an arbitration clause be a burden,..as well as the benefits that it seeks to derive from that agreement.’

Evidently Brussels I Recast is not engaged.

Geert.

European private international law, second ed. 2016, Chapter 2, Heading 2.2.2.10.

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