Tag: Choice of law

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Banco Santander Totta: the High Court upholds snowball interest rate swaps under English law. The ‘purely domestic contracts’ provision of Article 3(3) Rome I is not engaged.

Update December 2016 the Court of Appeal has confirmed in [2016] EWCA Civ 1267.

A longer title than readers are used to from this blog. However judgment itself is also an unusually long 163 pages. In [2016] EWHC 465 Banco Santander Totta, the High Court was asked whether snowball interest rates swaps in loan agreements between a Portuguese Bank and four Portuguese public transport companies, should be declared invalid under Portuguese ‘mandatory’ law, applicable by use of the corrective mechanism of Article 3(3) Rome I.

The Transport Companies do not assert that BST wrongly advised them to enter into the swaps, or misrepresented the swaps to them. Rather,  defences raised by the Transport Companies are that:

(1) under Portuguese law, each company lacked capacity to enter the swaps which are therefore void; this is on the basis (among other reasons) of an assertion that the swaps were speculative transactions; this defence applies regardless of the law applicable to the swaps; it is common ground that, if correct, it is a complete answer to the claim;

(2) although English law governs the Master Agreements, this is subject to Art. 3(3) of the Rome Convention; this provides that where all the elements relevant to the situation at the time of the choice of law are connected with one country only, the choice does not prejudice the application of rules of the law of that country which cannot be derogated from by contract (“mandatory rules”). Portuguese mandatory rules apply to the swaps, giving rise to two defences: a) under rules dealing with gaming and betting and ordre public, the swaps are void for being unlawful “games of chance”, alternatively speculations; b) seven of the nine swaps are liable to be terminated under rules dealing with an “abnormal change of circumstances” (which termination takes effect as though the swaps were void); this is on the basis that since 2009 (following the financial crisis), the reference interest rates relating to the swaps (EURIBOR and LIBOR) have been close to zero (and remain so at the time of this judgment);

(3) in presenting the swaps to the Transport Companies, the bank acted in breach of its duties under provisions of the Portuguese Securities Code which implement relevant European Union legislation; these apply to the bank as a financial intermediary and relate to the protection of the legitimate interests of the Transport Companies as clients, and to conflicts of interest; the breach is said to entitle the Transport Companies to damages thereby extinguishing their liabilities under the swaps.

Blair J reviews precedent (European (limited, mostly related to the preparatory works), English and Portuguese (likewise limited) and decides against the engagement of Article 3(3). I will not regurgitate all of the analysis: readers are best referred to the judgment, in particular p.65 onwards, and the decision at 411, where Blair J concludes

because of the right to assign to a bank outside Portugal, the use of standard international documentation, the practical necessity for the relationship with a bank outside Portugal, the international nature of the swaps market in which the contracts were concluded, and the fact that back-toback (sic) contracts were concluded with a bank outside Portugal in circumstances in which such hedging arrangements are routine, the court’s conclusion is that Art. 3(3) of the Rome Convention is not engaged because all the elements relevant to the situation at the time of the choice were not connected with Portugal only. In short, these were not purely domestic contracts. Any other conclusion, the court believes, would undermine legal certainty.  

The latter element is quite important. Referring in particular to Briggs (at 374), the Court holds that the uncertainty of the rule of Article 3(3) should lead to its narrow interpretation. I agree. With party autonomy the core consideration of the Regulation, standard recourse to Article 3(3) [or 3(4) for that matter) under the pretext for instance of a general campaign against fraus legis is most definitely not warranted.

Permission was granted to appeal the issues on the Rome Convention (thank you to Ali Malek QC for pointing that out).

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 3, Heading 3.2.8, Heading 3.2.8.1

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Unjust enrichment under Rome II. The High Court in Banque Cantonale de Genève.

RPC and Sarah Shaul it seems, like me, are hoovering up database backlog – once again thank you to their excellent blog for alerting me to Banque Cantonale de Genève v Polevent. Other than the direct impact for the interpretation of Rome II‘s Article 10, and its relation with Article 4’s general rule, an important lesson from the case to me seems to be, yet again, the relevance of the articulation of claims, for the determination of jurisdiction.

Facts are as follows (at 2 ff). Claimant (“BCGE”) is a bank in Geneva. On 24 March 2104 a man calling himself Mr. Dumas telephoned BCGE and asked to speak to Yvan Nicolet of the accounting department. He was not in the office and so the call was taken by Jacqueline Konrad-Bertherin. Mr. Dumas asked her to send a confidential message to what he said was the private mail address of Eric Bourgeaux, the deputy CEO of BCGE. She did so and received a reply from someone claiming to be Mr. Bourgeaux instructing her to pay Euro 6,870,058 from BCGE to the Natwest Bank in London in favour of Polevent Limited. She did so. She believed she had been instructed to do so by Mr. Bourgeaux; but she had not been. The fraud was discovered and repayment was requested later that day.

Shortly before the fraud Natwest had been advised of a freezing order against Polevent in favour of an Italian company Enoi SpA (“Enoi”). The funds were therefore frozen in Polevent’s account with Natwest. BCGE has claimed damages from Polevent for deceit. BCGE accepts that that claim is governed by the law of Geneva. It has also advanced a claim against Polevent in restitution on the basis that the sum was paid by mistake. It claims that since Polevent must have realised that the sum was paid by mistake the conscience of Polevent was affected such that a constructive trust arises thereby providing BCGE with a proprietary claim in respect of the frozen funds. BCGE says that this proprietary claim is governed by English law.

Enoi is another creditor of Polevent. Enoi maintains that BCGE’s claim for restitution, in common with the claim is in deceit, is governed by the law of Geneva which does not recognise a proprietary claim. The resulting dispute is therefore between two creditors of Polevent. That company is in liquidation and has taken no part in this dispute.

 

The only preliminary issue which the High Court was asked to adjudicate on is worth repeating in full:

“On the basis of the facts as pleaded in the Amended Particulars of Claim and on the basis that the claim set out at paragraph 13 of the Amended particulars of Claim is governed by the law of Geneva, are the claims set out at paragraph 15 of the Amended particulars of Claim governed by English law or by the law of Geneva ? ”

One can appreciate why two different claims were formulated here.

For the claim in damages for deceit, BCGE accept Geneva law applies. The claim for restitution on the basis of unjust enrichment, however, is covered in its view by Article 10(3) Rome II: the law of the place in which the unjust enrichment took place, this being England, hence allowing for the existence of a constructive trust and priority in the pecking order following Polevent’s insolvency.

Enoi argue that the claim in restitution, like the claim in damages, is covered by the law of Geneva: at 9:

The submission of counsel for Enoi is that the law governing the claim in restitution is the law of Geneva by reason of Article 4(1) of Rome II. The claim arises out of the tort/delict of fraud and so the governing law is that of the place in which the damage occurred, namely, Geneva. Alternatively, the governing law is the law of Geneva pursuant to Article 10(1) on the grounds that the unjust enrichment concerns a relationship arising out of a tort/delict such that the governing law is that which governs that relationship, namely, the law of Geneva. In the further alternative the governing law is the law of Geneva pursuant to Article 10(4) on the grounds that the obligation arising out of the unjust enrichment is manifestly more closely connected with Geneva.

Both parties of course reverse engineer their governing law arguments: being aware of the attraction of one State’s laws over the other, counsel brief is to convince the court that the matter is characterised so that it leads to the warranted applicable law.

Enoi suggest that BCGE in reality have one claim only: one in fraud, a tort, it argues, from which the claim in unjust enrichment follows in a dependent fashion. Teare J disagrees (at 13). A claim in restitution need not be fault-based. It is a separate claim, to which Article 10’s regime applies (in the end leading to a finding of English law).

The judgment is in fact quite short. Its crucial implication to me would seem to be that BCGE has won the day by formulating two separate heads of action. Teare J acknowledges that his view may be an ‘unduly English law’ view, in other words, that he read the formulation of two claims at face value, as being two separate claims, because English law recognises non-fault based unjust enrichment. Regardless of the fact that other States, including European States, do so too, the obvious question is whether the EU’s qualification would be the same. The concept of unjust enrichment, like the concept of tort, necessarily needs to be an ‘autonomous’ one. Yet without much guidance in the preparatory works of Rome II on this concept, who can blame national law for filling in the blanks?

Geert.

(Handbook EU Private International Law, 2nd ed 2016, Chapter 4, Heading 4.7).

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Consenting to choice of court under the common law. The Privy Council in Vizcaya v Picard.

In Vizcaya v Picard, the Privy Council considered the issue of consent to a choice of court clause in the event no such choice has been made verbatim. It was alleged that choice of court had been made implicitly but clearly by reference to an applicable law agreement in the underlying contract. RPC have a review of the case on their blog and I am grateful to them for bringing it to my attention.

The case is a fall-out of the Bernard Madoff Ponzi scheme, carried out through Mr Madoff’s company Bernard L Madoff Investment Securities LLC (“BLMIS”), a New York corporation. After Madoff’s fraud came to light in 2008, Irving Picard (“the trustee”) was appointed as trustee in BLMIS’s liquidation in the US Bankruptcy Court for the Southern District of New York (“the New York BankruptcyCourt”). The trustee commenced proceedings under the anti-avoidance provisions of the US Bankruptcy Code against investors who had been repaid before the fraud was discovered, including the appellant, Vizcaya Partners Limited (“Vizcaya”), a BVI (British Virgin Islands) company which carried on business as an investment fund, and which invested about US$328m with BLMIS between January 2002 and December 2008, but was repaid US$180m before the fraud was discovered.

The Appeal before the Privy Council concerns primarily the content and scope of the rule in common law that a foreign default judgment is enforceable against a judgment debtor who has made a prior submission to the jurisdiction of the foreign court (as distinct from a submission by appearance in the proceedings).  Brussels I or the Recast was not applicable to the case. In that Regulation (Article 25), the expression of consent with choice of court must take one of thee forms: essentially: written (or oral but confirmed by written agreement); in accordance with lex mercatoria; or in accordance with established business practice simply between the parties.

The question in the case at issue is whether the agreement to submit must be express, or can also be implied or inferred. The Privy Council settled the uncertainty which would seem to have existed for some time in the common law, in favour of an answer in the affirmative. Consent to jurisdiction can be implied. What needs to be shown though is real ‘agreement’, or ‘consent’ (in European private international law with respect to the similar discussion re choice of law (Rome I) I would say the test is one of ‘clearly established’), quod non in casu. Choice of law (here: in favour of New York law) can be a factor but not a solely determinant one. Moreover, choice of court viz one’s business transactions does not imply automatic extension to insolvency proceedings.

Crucial precedent, it would seem. Geert.

European private international law, second ed. 2016, Chapter 2, Heading 2.2.9

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Separable, but not that separate. The Irish High Court in C&F Green Energy on settling applicable law as a preliminary issue.

The procedural context of C&F Green Energy v Bakker Magnetic BV is an attempt at making the courts preliminarily decide the isuse of applicable law to the contract between the parties. Gearóid Carey  explains the Irish civil procedure context here. In this posting I just want to flag one or two Rome I/II issues.

Plaintiffs (an Irish company), wind turbine manufacturers, seek declaratory relief and damages arising out of an alleged breach of contract and negligence on the part of the defendant in connection with the supply of magnets to the plaintiffs for use in the turbines. Defendant denies liability and has counterclaimed in respect of unpaid invoices and loss of profit.

The issue sought to be resolved at a preliminary hearing is whether it is Irish or Dutch law which governs the contract and should be applied by the court when the case comes on for full hearing. It was not for the High Court to determine the applicable law issue at this stage but rather to decide whether this crucial issue is to be decided at a preliminary hearing or whether it should be dealt with as one of the issues at the trial. Hedigan J decided it should be the latter. He dismissed i.a. the argument that much time will be saved because the parties will only have to prepare the case on the basis of one applicable law whatever the result of the preliminary issue, as ‘a little overblown’: expert opinion of one or two Dutch lawyers may be sought, however the facts of the case once the applicable law issue is settled, ought not to be overly complicated.

What interests me here is the ease with which, wrongly, the Court (however presumably just paraphrasing counsel at this point) applies the cascade or waterfall of Article 4 Rome I.  Parties’ views on applicable law are summarised in the judgment as follows: (at 5.2-5.3)

‘The defendant argues that the issue is a very discrete question of law relatively easily established. It argues that pursuant to Article 3.1 of the Rome I Regulation, a contract shall be governed by the law chosen by the parties. It argues that the defendant’s general conditions of sale were incorporated into the contract because of their attachment to a series of quotations delivered by email and their inclusion in their order confirmation forms. Thus, Dutch law was chosen by the parties to govern their contract. It argues that if they succeed on this point then little remains to be decided because certain clear time limits will apply and these, they claim, have clearly not been met….

The plaintiffs argue that it is not Article 3 but Article 4(3) of the Rome I Regulation that should apply. This Article provides that it is the law of the country most closely connected to the contract that shall apply. Although Article 4 provides for the applicable law only in the absence of a choice of law, the plaintiff argues that this Article will fall to be considered if they can establish that the orders for the goods were not, in fact, made subject to the condition importing Dutch law. In this regard, they characterised the emails relied upon by the defendant as merely pre-contract correspondence. They will rely upon the evidence of the parties to demonstrate that Dutch law was never accepted as the law of the contract. They will argue that the choice of law should be determined pursuant to Article 4(3) by an examination of all the numerous connections between the contract and Ireland. This, they argue, will involve a consideration of all the evidence of the negotiations that took place between the parties. In relation to their claim in tort, they argue that the general rule under Rome II Article 4(1)(i) should apply i.e. the law of the country where the damage occurred. They argue that Article 4(3) of Rome II further brings into play evidence as to manifest proximity. Both of these, they argue, will involve evidence of the parties.’

Which of these will prevail will now be settled at trial stage. Defendant will have to show that what it refers to as the pre-contractual quotations of its general conditions of sale, seemingly by e-mails and eventually in the confirmation forms, amounts to a choice of law clearly established, per Article 3(1) Rome I.  There is considerable case-law on the mirror issue of choice of Court under Brussels I, also in an e-mail context (see e.g. here) however  to what degree one can simply apply the same principles to choice of law, is not clearly established in case-law.

An interesting point is that the Court (and counsel with it, one presumes) jumps straight to Article 4(3) Rome I should choice of law per Article 3(1 not be clearly established. Article 4(3) however is the escape clause (referred to by Hedigan J as ‘manifest proximity’), which must only apply in exceptional circumstance. The correct next steps following failure to establish clearly established choice of law, are firstly the assumptions made under Article 4(1)  (Article 4(1) (a) would seem most obvious here); should that fail, Article 4(2)’s characteristic performance test; and failing that, Article 4(4)s ‘proper law of the contract’ consideration. Article 4(3) only corrects Article 4(1) or (2)s more mechanical (‘objective’ as it is also called) choice of law determination. The judgment mixes Article 4(3)’s ultimate and exceptional correction, with the proper law of the contract test.

My concerns here should likewise not be overblown. Actual determination of the applicable law was not the court’s task. However now that the issue goes back to trial, correct application of Rome I must be made.

Geert.

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Proposed EU e-commerce rules further reduce choice for consumer contracts.

I have referred repeatedly in the past to an inevitable attraction which some find in harmonising private, incuding contract law, in the Member States. The Common European Sales Law (CESL) proposal is dead, and for good reason. Its demise however has not led to the European Commission leaving the path of harmonisation in contract law. The EC has now selected bits and pieces of the CESL approach which it reckons might pass Member States objections. The proposed ‘fully harmonised’ rules on e-commerce formally do not close the door on party autonomy in the contracts under their scope of application. Yet in forcing regulatory convergence top-down, the aim is to make choice of law for these contracts effectively nugatory.

The EC itself formulates it as follows (COM(2015)634, p.1:

“This initiative is composed of (i) a proposal on certain aspects concerning contracts for the supply of digital content (COM(2015)634 final), and (ii) a proposal on certain aspects concerning contracts for the online and other distance sales of goods (COM(2015)635 final). These two proposals draw on the experience acquired during the negotiations for a Regulation on a Common European Sales Law. In particular, they no longer follow the approach of an optional regime and a comprehensive set of rules. Instead, the proposals contain a targeted and focused set of fully harmonised rules.”

Consequently the same proposal reads in recital 49 ‘Nothing in this Directive should prejudice the application of the rules of private international law, in particular Regulation (EC) No 593/2008 of the European Parliament and of the Council and Regulation (EC) No 1215/2012 of the European Parliament and the Council‘: that is, respectively, Rome I and Brussels I Recast’.

Consequently and gradually, choice of law for digital B2C contracts becomes redundant, for the content of national law converges. Support for this in my view is not rooted in fact (the EC’s data on the need for regulation have not fundamentally changed since its doomed CESL proposal), neither is it a good development even for the consumer. National consumer law is able to adapt, often precisely to the benefit of the consumer, through national Statute and case-law. Turning the EU regulatory tanker is much more cumbersome. The circular economy, recently often debated, is a case in point. Many national authorities point to limitations in contract law (incuding warranty periods and design requirements) as an obstacle to forcing manufacturers, including for consumer goods, to adopt more sustainable manufacturing and distribution models. The EC’s current proposals do no meet those challenges, rather, they obstruct them.

Geert.

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Privy Council in National Housing Trust: Curial law /law of the seat of arbitration determines power to award interest

The Privy Council does not all that often (well, that is actually relative: 47 times already in 2015; that’s not a bad working load for a supreme court) rear its judiciary head. In National Housing Trust it did viz the powers of an arbitrator in respect of an aborted joint-venture in Jamaica. (For particulars of the case, see here). The case concerns the jurisdiction to make, and legitimacy of a supplementary award by an arbitrator, of compound interest.

Arbitration leads to a myriad of applicable law to be decided: one has to ascertain

lex arbitri (the law of the arbitration agreement: ie the law applicable to parties’ agreement to make recourse to arbitration);

the curial law or the ‘law of the seat’ (the procedural law which will guide the arbitration proceedings; despite the latin curia not commonly referred to as lex curia);

and the ‘proper law’, the law that governs the actual contract (lex contractus), of which the arbitration agreement forms a part.

In National Housing Trust, the Privy Council held that first and foremost, the issue of compound interest (indeed the powers of the arbitrator as a whole) is subject to agreement between the parties. Failing such agreement, it is the law of the seat of arbitration which determines the arbitrator’s powers.

Many ADR clauses are boilerplate and last-minute. National Housing Trust once again shows that adding such midnight clauses without much consideration, may come back to haunt parties.

Geert.

 

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Learn your lines, son!: the (ir)relevance of grammar for choice of court underlined in Global Maritime Investments.

“These general terms and conditions will be governed by and construed in accordance with English law. 

With respect to any suit, action or proceedings relating to these general terms and conditions each party irrevocably submits to the jurisdiction of the English courts.”

In Anchorage, the High Court had already dismissed a semantic approach to choice of court agreements in contracts (and choice of court clauses) subject to English law. In Global Maritime Investments Cyprus v O.W., Teare J considered in summary judgment, sought by GMI, whether the aforementioned clause is exclusive, and if not, whether proceedings commenced by GMI in England, block any future proceedings on the same (or wider) contractual issues sought by OW in Denmark. GMI had started proceedings in England following OW’s November 2014 filing for bankruptcy in Denmark. OW had initiated proceedings in Denmark in March 2015. At issue was among others the ‘netting-out’ provisions between parties (effectively, a final settlement of reciprocal dues in different currencies, with derivatives of commodity transactions being the underlying transactions between the parties in this case).

Teare J held that the clause even if not so phrased verbatim, was meant to be exclusive, among others in line with what ‘the reasonable commercial man’ (the bonus mercator, if you like) would have understood the clause to be, especially under the lex contractus, English law. All the more so in light of the use of ‘irrevocably’. At 51 he does offer sound commercial advice to avoid disputes such as the one at issue: it is desirable to employ transitive language, such as in ‘each party agrees to submit all claims’.

I do not think there is justification for the Court not to have considered the impact of the Brussels I (and /or Recast) Regulation on the clause: the judgment keeps entirely shtum about it. Under the rules of the Regulation, all clauses are considered exclusive unless specifically stated. Saying that the clause expressis verbis amounts to non-exclusivity, would be quite a stretch. (I agree it is not clearly worded exclusively – however that is exactly where the Brussels I Regulation is of assistance).

It is quite clear to me that this judgment (issued 17 August – I have delayed reporting for exam reasons) will not be the end of the jurisdictional affair. In particular, parties I am sure will be at loggerheads as to what litigation is to be considered ‘relating to these general terms and conditions’, in particular with OW’s insolvency proceedings in the background.

Geert.

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Choice of court and law for the holiday season.

As the holiday season now is in full swing, here’s a choice of court and choice of law clause I received. For us all to ponder on the beaches /in the mountains /whatever retreat we’ll find ourselves on:

‘LAW AND JURISDICTION
This agreement is between the holiday-maker (the renter) and the agency or property owner. Booking ltd is acting only as a representative of the agency or owner listed on the voucher and as such can not be held directly responsible for any problems concerned with the booking. The owners of Booking LTd its employees or agents shall not be liable for any damage, loss or personal injury which may be sustained by persons or property at any time during the reserved stay. In the event of controversies arising from the booking of the rental, the Irish Court only can deal with the matter and Irish law only applies. Signing the booking form and making the booking implies that the General Letting Conditions have been understood and have thereby been accepted without reserve and without exception. If any of the conditions of this contract have become invalid or were invalid or if in this contract there should be a gap, the other conditions cannot be contested.

Any and all issues regarding the property, such as damages, injury, etc, shall be a dispute between the owner or agency and the renter of the property. In such cases, with no exceptions, Irish law will apply and the jurisdiction will be the local courts in Ireland.’

Happy holidays. Geert.

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Location, location, location. Arbitration, curial and applicable law: Shagang v Daewoo confirms the importance of venue.

I reported earlier on Sulamerica and the need properly and preferably, expressly to provide for choice of law vis-a-vis arbitration agreements, in particular vis-a-vis three elements: lex arbitri, lex curia, lex contractus. The High Court has now added its view on the possible relevance of a fourth factor: the geographical venue of the arbitration, and its impact in particular on the curial law: the law which determines the procedure (e.g. such as here, the appointment of a sole arbitrator) which is to be followed.

Christopher Lockwood has a good summary of case and judgment here – I am happy to refer. Of most relevance is Hamblen J’s finding that while a choice of governing law (the substantive law of the contract) is often made express, it is far less common separately to identify curial law: most often, that is simply inferred from the place of arbitration. Moreover, while it is not commercially uncommon to separate procedure and governing law, it is quite uncommon to have ‘a bifurcation between the place of arbitration and the law governing the conduct of the arbitration there’ (at 25). In other words, seat, ‘curia’ of arbitration, which determines arbitral procedure, and geographical place or venue of arbitration, are not commonly separated. Any intention of the parties to do so, must be clearly expressed and cannot be implicitly inferred.

‘that the agreement that the arbitration is “to be held in Hong Kong” carries with it an implied choice of Hong Kong as the seat of the arbitration and of the application of Hong Kong law as the curial law.’ (at 56): location, dear readers: location, location, location.

Geert.

 

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Fern v Intergraph: High Court takes a narrow view of mandatory requirements on choice of law and court viz Commercial Agents Directive

In [2014] EWHC 2908 (Ch) Fern v Integraph, Mann J was asked whether a clear Texas governing law and Texas jurisdiction clause should be set aside, jurisdiction upheld by the English courts and applicable law to be held to be English law, on the basis of an alleged infringement of the UK implementation of the Commercial Agents Directive. (The procedural context is one of permission to ‘serve out of the jurisdiction’).

Fern was the agent of Intergraph in the EU. Fern claims compensation for breach of the Commercial Agents Regulations (UK), which implement the Commercial Agents Directive.  Some core EU law considerations pass before the High Court, including Marleasing, Faccini Dori, von Colson and Inter-Environnement. The High Court’s main pre-occupation would seem to have been with the rescue of choice of court and of governing law as much as possible, even within the constraints of the ECJ’s decision in Ingmar.  In that judgment (which was confined to choice of law; the jurisdiction of the English courts was not sub judice), the ECJ held

‘It must therefore be held that it is essential for the Community legal order that a principal established in a non-member country, whose commercial agent carries on his activity within the Community, cannot evade those provisions by the simple expedient of a choice-of-law clause. The purpose served by the provisions in question requires that they be applied where the situation is closely connected with the Community, in particular where the commercial agent carries on his activity in the territory of a Member State, irrespective of the law by which the parties intended the contract to be governed.’ (in the case at issue, a choice of law clause had been inserted which made the contract applicable to the laws of California).

However, the operative part of the ECJ’s decision in Ingmar focussed on the compensation element only: ‘Articles 17 and 18 of Council Directive 86/653/EEC of 18 December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents, which guarantee certain rights to commercial agents after termination of agency contracts, must be applied where the commercial agent carried on his activity in a Member State although the principal is established in a non-member country and a clause of the contract stipulates that the contract is to be governed by the law of that country.’

In the case at issue, the High Court seems to have leapt at the more narrow operative part in Ingmar (and  its non-consideration of choice of court) in an effort to uphold the choice of court and governing law agreement: the right to compensation derives from statutory law, not from contractual obligations. Whence it does not affect aforementioned clauses. In reaching that conclusion, however, Mann J effectively refused to consider effet utile of the Commercial Agents Directive when interpreting English rules of civil procedure for serving out of jurisdiction. Effet utile does resurface, however, for parties have been given time to submit their views on whether the right to compensation as a statutory right, infringement of which would amount to a tort, would fall outside the scope of the relevant contractual clauses and would lead to jurisdiction in the English courts.

Even if this will be the eventual decision of the High Court after re-submission of arguments, it is likely that the confines of that jurisdiction in England will be narrowly defined. (Viz the right to compensation only). This is a striking difference with e.g. the German courts. (I have previously posted on the view of the Bundesgerichtshof: a much swifter and absolute rejection of choice of court and governing law ex-EU in the context of the commercial agents Directive).

A rather complex and as yet unfinalised ruling.

Geert.

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