Skat v Solo Capital Partners. When faced with Dicey rule 3, I’ll see your tax claim and raise it to a fraud one.

I reviewed the first instance judgment in Skat v Solo Capital Partners here and concluded that it endangered the effet utile of Brussels Ia (and Lugano). Justice Baker had concluded that all SKAT’s claims were inadmissible as a consequence of Dicey Rule 3. The Court of Appeal has now largely reversed, [Skatteforvaltningen v Solo Capital Partners Llp [2022] EWCA Civ 234] thereby resurrecting a £1,4 billion claim.

SKAT (Danish customs and excise) seeks the return of amounts it says it was wrongly induced to pay out as tax refunds. SKAT is not seeking to recover due and unpaid dividend tax or indeed any tax, because the foundation of its argument is that in the case of the alleged fraud defendants there was no liability to pay tax, no shares, no dividends, no tax and no withholding tax. There was never a taxpayer/tax authority relationship between the Solo etc Applicants or the alleged fraud defendants and SKAT. The mere fact that the alleged fraud is committed in the context of taxation or against a foreign tax authority is insufficient to bring the matter within the rule [SKAT’s counsel arguments, [30]-[31]). To allow the defendants to escape their liability, not in a tax fraud but in a general conspiracy, would also run counter the fraus omnia corrumpit principle [ditto, 62], a point which Flaux C agrees with obiter [146] in a case of a major international fraud..

Flaux C is much less verbose than the submissions before him. Yet again a jurisdictional point was allowed to be litigated to great length – albeit one may appreciate counsel and clients’ energy on those issues given the value of the claim.

[127] the basis of the claim is fraudulent misrepresentation. It is not a claim to unpaid tax or a claim to recover tax at all. It is a claim to recover monies which had been abstracted from SKAT’s general funds by fraud [128]. Even though SKAT may be an emanation of the Danish state, the Dicey revenue rule does not apply [128], neither does the wider sovereign powers rule within Dicey Rule 3:

‘In bringing a claim to recover the monies of which it was defrauded, SKAT is not doing an act of a sovereign character or enforcing a sovereign right, nor is it seeking to vindicate a sovereign power. Rather it is making a claim as the victim of fraud for the restitution of monies of which it has been defrauded, in the same way as if it were a private citizen.’ [129]

This latter reasoning falls short I find of proper criteria to guide its future application, although more is said at [130]: the claim to recover the money is at the core of the Chancellor’s reasoning here and that claim is a straightforward money claim, and [133] ‘the claims are ones which could just as well be brought by a private citizen’. That is the kind of argument which echoes CJEU authority on civil and commercial and to my mind the Court of Appeal could have helped us all by pointing out more specifically to what degree Dicey Rule 3 be informed by CJEU authority on ‘civil and commercial’, regardless of Brexit.

That there would be a detailed examination of the Danish tax regime and possible criticism of it and of SKAT’s systems and control, does not somehow convert the claim into one to enforce that tax regime. Recognition of foreign revenue laws is permissible under Dicey Rule 3 [138].

The position of one of the defendants, ED&F Man, is different in the sense that there is no allegation that they were implicated in a fraud. Although it is alleged that misrepresentations were made by them, the misrepresentations are said to have been negligent.

SKAT has to accept that as against those defendants the claim is inadmissible by virtue of Dicey Rule 3 unless it can satisfy the Court: (i) that the claim is a “civil and commercial matter” not a “revenue matter” for the purposes of Article 1(1) of the Brussels Recast Regulation; and (ii) that the operation of Dicey Rule 3 is precluded because, contrary to the judge’s analysis, it would impair the effectiveness of the Brussels Recast Regulation.

Contrary to the conclusion the judge reached the Court of Appeal finds that the claim against ED&F Man is a “revenue matter” falling outside the Brussels Recast Regulation. Here the Court of Appeals applies parity of reasoning with its assessment of the other claims: [150]:

Whilst the test for the application of Dicey Rule 3 may not be identical to that for determining what is a “revenue etc matter” for Article 1(1) of the Brussels Recast Regulation, it can be seen that its application leads to the same answer. If Dicey Rule 3 applies (as SKAT has to accept it does in relation to the claim against ED&F Man) then by the same reasoning, the basis for the claim by SKAT against those defendants is either a right which arises from an exercise of public powers or a legal relationship characterised by an exercise of public powers, from which it necessarily follows that the claim is a revenue matter outside the Brussels Recast Regulation.

Unfortunately therefore the effet utile argument (that application of Dicey rule 3 impairs the effectiveness of BIa /Lugano, as I had argued in my earlier post) is not discussed [153].

The title of this piece of course hints at the relevance of claim formulation. It is also exaggerated: SKAT cannot conjure up fraud elements out of nowhere to reinvent a tax claim as one in mere tortious and fraudulent misrepresentation. However it is clear that in cases that are somewhat murky, claim formulation will be crucial to navigate Dicey Rule 3.

Geert.

EU Private International Law, 3rd ed. 2021, para 2.28 ff.

Athena Capital Fund v Secretariat of State for the Holy See. Thank Heavens for jurisdictional mercies (here inter alia involving lex fori prorogati and agency for choice of court).

Athena Capital Fund Sicav-Fis SCA & Ors v Secretariat of State for the Holy See [2021] EWHC 3166 (Comm) features as defendant the Secretariat of State of the Holy See  (not the Holy See itself), and relates to a fraud and embezzlement claim of property in Chelsea, London.

Defendant says that from the perspective of Claimants, the purpose and intention of bringing these proceedings is to try to influence the criminal process in Italy, and/or the publicity emanating from the criminal process.

For its jurisdictional challenge, defendant argues [81] i) The claim was not a “civil and commercial matter” within the meaning of A1(1) BIa; ii) one of the claimants was not a party to the relevant Sale and Purchase Agreement (SPA) and could not rely upon it [this was summarily dealt with [88] by suggesting an amendment of claim] and, more forcefully, (iii) Defendant was not a party to the SPA for the purposes of A25 BIa.

Salzedo J justifiably in my view held [84] that

whether the claim is a civil or commercial matter does not turn on the subjective intentions of the claimant as to the ultimate effect that a claim might have on its interests, but on an objective reading of the claim itself and the relief that it seeks from the court. On that basis, it is a claim for declarations against the Defendant concerning the Defendant’s entry into commercial transactions with the Claimants.

and that the transaction was not entered into by the Defendant in the purported exercise of public powers: [86]

The Transaction was one that any private person could have entered into if it had the requisite funds. Nothing that was essential to the Transaction required sovereign powers to enter it and nothing that the Defendant did or purported to do was in the exercise of public authority.

As for the defendant not being a party to the SPA, the context here is whether a party involved in the signing accepted the SPA and its choice of court as an agent of the defendant. The judge, confirming the parties’ consensus, points out that that agency issue befalls to be addressed by English law. It is not said why that is the case however it is of course the result of the amended A25 – as others before it, however, the court does not complete the lex fori prorogati analysis with the recital 20 in fine mandated renvoi. On the agency issue the judge holds there is a good arguable case that the relevant agent did bind the defendant.

Next [103] ff follows a CPR-heavy discussion on the amendment of the claim form, seeing as the claimants erroneously assumed [120] that BIa was not engaged as the Vatican is not party to Brussels Ia. At [123] the conclusion is that the claim form may be amended and that defendants’ time spent in dealing with the service out issues under the common law (a wasted exercise as BIa applied), may be met in the costs order.

Once the A25 point rejected, there would have been a most narrow window for any kind of stay, yet the defendants try anyways, with [129] a series of abuse and case management arguments. One particularly poignant one is that the proceedings would interfere with a criminal proceeding. After discussion the judge [159] dismisses the idea on the facts, seeing as none of the declarations sought would involve any assertion as to what does or does not amount to criminality as a matter of the law of the Vatican State.

[163] ff discusses the abuse of process issue which the defendants, I understand, presented more or less as being integrated into the criminal procedure element, discussed above. That was wise, for abuse of process, while entertained among others in Vedanta, is arguably noli sequitur in a BIa claim. [Support for the alternative view here was sought [172ff] in Messier-Dowty v Sabena SA[2000] 1 WLR 2040]

The case-management stay proper is discussed 192 ff with reference ia to Municipio, and Mad Atelier. The judge in current case is very aware of not re-introducing through the back door what CJEU Owusu shut the front door on. He summarily discussed the possibility anyway, only to reject it. He does however eventually order a stay on the grounds that the current claim cannot usefully be pursued as long as the defendant is in a bind about the outcome of the criminal proceedings in Italy, and because the real adversary of the Claimants in relation to the Transaction is not the Defendant, but other organs of the Holy See or the Vatican State itself – the chances of those ever appearing in a civil proceeding in E&W are extremely slim. The claims were therefore held not to serve any useful purpose and where stayed on that basis, and for as long as a material change in circumstances might alter the finding of uselessness.

An interesting case.

Geert.

ZN v [Bulgarian Consulate]. Confirming Mahamdia and the ‘international’ in ‘private international law’.

In C-280/20, ZN v Generalno konsulstvo na Republika Bulgaria v grad Valensia, Kralstvo Ispania [the Bulgarian consulate], the CJEU last week essentially confirmed CJEU C-154/11 Mahamdia. ZN is a Bulgarian national residing in Sofia who holds a permit to reside in Spain, where she provided services relating to the activity of the Consulate General. ZN brought an action in Bulgaria against the Consulate General seeking, first, recognition of her employment relationship and, second, payment of compensation in lieu of paid annual leave not taken during a period in which she provided services concerning the receipt of documents. The Consulate General contests the jurisdiction of the Bulgarian courts and invokes the jurisdiction of the Spanish courts as the courts of ZN’s place of employment. The referring court has doubts as to the existence of cross-border implications in so far as the dispute at issue in the main proceedings concerns a Bulgarian employee and a Bulgarian employer, and the fact that their legal relationship is closely connected with the Republic of Bulgaria.  It also notes that Bulgarian law expressly provides that, in the case of contracts concluded between a Bulgarian employer established abroad and a Bulgarian national working abroad, any disputes may be examined only by the Bulgarian courts.

In Mahamdia the Court first of all applied the Vienna Convention on Diplomatic Relations and held that an embassy often acts iure gestionis, not iure imperii, and that under the Vienna rules, the EU is perfectly entitled to apply the Regulation given that it applies to ‘civil and commercial’ matters. In that vein, an embassy may very well have to be regarded as an ‘establishment’ within the meaning of Article 20(2) (on employment contracts). In ZN, the Court [28-29] suggests that services in connection with the receipt of documents in files opened at the consulate by Bulgarian nationals and the management of those files, do not fall within the exercise of public powers and do not risk interfering with the security interests of the Republic of Bulgaria. Hence it strongly suggests the issue is a ‘civil and commercial one’, leaving final determination of same to the referring court. I would intuitively have thought that processing documents at a country’s consulate quite au contraire, does engage closely with diplomatic functions that must be qualified as iure imperii, particularly seeing as before said processing one is likely not to have knowledge of the documents’ content.

On the issue of ‘international element’ required to trigger Brussels Ia, the Court per Mahamdia considers a consulate to be an ‘establishment’ of one Member State in another Member State. Hence one of the parties to the dispute must be considered to be domiciled or habitually resident in a Member State other than that of the court seised [37]: the cross-border element is clearly present, which will not surprise many of us. One also assumes that the  aforementioned Bulgarian rule on exclusive jurisdiction for employment disputes between Bulgarians even with an international element present, does not meet with EU law requirements.

Geert.

EU Private International Law, 3rd ed. 2021, para 2.35, para 2.128.

 

Skatteforvaltningen v Solo Capital Partners. Unfinished business on endangering Brussels Ia’s effet utile, ‘civil and commercial’ in revenue matters, enforcing foreign public law and Dicey Rule 3.

At issue in Skatteforvaltningen (The Danish Customs And Tax Administration) v Solo Capital Partners LLP & Ors [2021] EWHC 974 (Comm)  is ‘Dicey Rule 3’ which states that “English courts have no jurisdiction to entertain an action: (1) for the enforcement, either directly or indirectly, of a penal, revenue or other public law of a foreign State; or (2) founded upon an act of state“. The assertion of such claims is an extension of a sovereign power of taxation and, per Lord Keith of Avonholm in Government of India v Taylor [1955] A.C. 491, 511: “an assertion of sovereign authority by one State within the territory of another, as distinct from a patrimonial claim by a foreign sovereign, is (treaty or convention apart) contrary to all concepts of independent sovereignties“.

By its claims, SKAT (Danish customs and excise) seeks the return of amounts it says it was wrongly induced to pay out as tax refunds.

Brussels Ia and Lugano (the latter viz a number of defendants domiciled in Lugano States) feature in the discussion because SKAT argue that [22] ‘: (i) this is a ‘civil and commercial matter’, not a ‘revenue, customs or administrative matter’, under A1(1) BIa; and (ii) it is therefore not possible to invoke Dicey Rule 3 to dismiss its claims against Brussels-Lugano defendants, because to do so would be to decline to exercise a jurisdiction conferred by the Brussels-Lugano regime otherwise than in accordance with its rules.’

If the argument were upheld, any claims falling within Dicey Rule 3 would proceed against Brussels-Lugano defendants while being dismissed against other defendants. 

Dicey Rule 3 is not a jurisdictional rule: it is a substantive rule of English law. Yet SKAT’s argument in my view essentially means that an application of Dicey Rule 3 to the matter, would deprive A1(1) BIa of its effet utile.

Logically the BIa /Lugano argument would have had to have been considered first. Baker J does the opposite (his thinking process, unlike writing up, may of course first have considered the BIa argument) and holds at 120 after thorough consideration of the authorities on Dicey Rule 3, that the rule applies: SKAT’s claims seek indirectly to enforce in E&W, Danish revenue law.

In an interesting Coda at 121 ff, he also considers obiter the argument that, in essence, was that in line with a long public international law history, the cross-border recovery of tax refunds wrongfully procured is seen as or assumed to be a matter of revenue law requiring to be dealt with (if at all) by supranational legal instrument. Refence here is made ia to 1925 League of Nations reports.

Justice Baker starts [132] the BIa /Lugano argument along familiar lines: need for autonomous interpretation. QRS 1 ApS et al v Frandsen [1999] EWCA Civ 1463 is English authority under the Brussels Convention, and CJEU C-49/12 Sunico (to which both the AG and the CJEU refer in C-73/19 Belgische Staat v Movic BV et al) CJEU authority.

[142] In Sunico, the CJEU considered claims brought by HMRC alleging missing trader VAT carousel frauds. The substantive claims, for damages at common law for an alleged tortious conspiracy to defraud, were pursued in E&W against defendants domiciled in Denmark. HMRC also brought ancillary  proceedings in Denmark to attach assets with a view to enforcing any damages judgment obtained in England. Those Danish proceedings were objected to on the basis that they were a ‘revenue [etc] matter’ excluded from BI.

[144] The CJEU concluded at [41]-[43], essentially, that because the claim was framed in tort and not as a claim under a tax law, the proceedings were a ‘civil and commercial matter’ and not a ‘revenue [etc] matter’ for the purpose of Article 1(1) of the Brussels Regulation, so long as “the commissioners were in the same position as a person governed by private law in their action against Sunico and the other non-residents sued in the High Court of Justice” (ibid at [43]).

At 149 Baker J concedes that the decision of the Court of Appeal in Frandsen was incorrect per Sunico, however then holds that the result would be the same: the classification of proceedings as a ‘civil and commercial matter’ or a ‘revenue [etc] matter’ for the purpose of applying the Brussels-Lugano regime does not touch the question whether Dicey Rule 3 applies so as to defeat the claim. He suggests [149] a search for the lex causae under Rome II would be largely irrelevant for per A16 Rome II Dicey Rule 3 qualifies as lois de police, and finds support for his view that despite scholarly suggestion (i.a. by prof Briggs), Frandsen must not be displaced, in The Law Debenture Trust Corporation [2017] EWHC 655 (Comm) [and in Andrew Dickinson’s reporting on same], in which the English Act of State doctrine was upheld despite Rome II’s classification of the matter as civil and commercial.

At 165 ff he, somewhat superfluously still considers the more recent CJEU authority of Buak and the aforementioned Movic, and decides at 174 that per BUAK and Movic (on the use of evidence etc.) that SKAT was neither attempting nor able to change the rules of the litigation game, either as to the substantive rules of law that would apply in determining its claims, or as regards the procedural rules applicable in the litigation, or as regards the status or effect of any of the evidence it might deploy or disclose. SKAT was not by this litigation pursuing public law proceedings, in which liabilities are determined as if this were a judicial review of SKAT’s actions, decisions or exercise of public law powers.

Yet that the matters are of a civil and commercial nature, in the end does not matter at all: [176]

To the extent that SKAT relied on the Brussels-Lugano regime as the basis for this court having jurisdiction over the Brussels-Lugano defendants that have been sued, including it may be for serving proceedings out of the jurisdiction, in my judgment it was right to do so. But its having been entitled to do so did not oust or disapply Dicey Rule 3 in respect of those defendants.

Using prof Dickinson’s words (26-27), there is a dissonance here between Brussels Ia and the applicable law. One that, I would suggest, endangers the effet utile of Brussels Ia. Dicey Rule 3’s character as a substantive rather than a jurisdictional rule, does not to my mind save that.

Geert.

EU Private International Law, 3rd ed. 2021, para 2.28 ff.

Groundhog day, but with Unicorns. Bobek AG in Obala v NLB i.a. on ‘civil and commercial’.

Update 15 December 2020. I have now had help from a little Kirchberg bird in cracking the Groundhog Day mystery:  Bobek AG most most probably did not refer to Groundhog Day in the Opinion discussed in current post, for he had already done so a few weeks earlier in C-505/19 at 121. A case on Interpol and Schengen (I follow a lot of CJEU issues; but this one had escaped me).

Probably precisely because it would have been obvious, Bobek AG did not refer in the opening lines of his Opinion in C-307/19 Obala v NLB to Groundhog Day, which, following Pula Parking, this case certainly is. He did at 2 summarise why the issue, essentially on the notion of ‘civil and commercial’ under Brussels Ia and the Service Regulation 1393/2007 keeps on coming before the CJEU (this time in no less than 9 long questions):

The crux of the problem appears to be a certain double privatisation carried out by the Croatian legislature at both management and enforcement level. A matter commonly perceived in other Member States to be administrative in nature is entrusted to private entities. The subsequent enforcement of such a claim is also not designed to be a matter for the courts, but rather, at least at first instance, for notaries.

The EC had objected to quite a few questions on the basis that they engaged too much the substance of the case, which the AG disagrees with: at 31 he suggest that inevitably in conflict of laws jurisdictional advice, ‘telescopic analysis of the substance’ is needed.

On the issue of ‘civil and commercial’, Germany and Slovenia submit the origin of the power under which the contract was concluded and which is enforced in this respect that is determinant.  The applicant, the Croatian Government and the Commission take the opposite view: to them, it is not the origin of the power but rather the modalities of its exercise which represent the determinative element for identifying ‘civil and commercial matters’. It is quite extraordinary that we should still not have consensus on this after to many cases, however as I noted in my review of Buak, the divergent emphasis by different chambers of  the Court has not helped.

At 42 ff Bobek summarily revisits the case-law under BIa (he concedes at 53-54 that case-law on other instruments does not add much), concluding at 52 that the CJEU has used both the ‘subject matter’ approach and the ‘legal relationship’ approach, without expressing a preference for either.

At 59 the Advocate-General opts for the ‘legal relationship’ approach, arguing that path ‘most reliably performs the function of the figurative railroad switch point guiding the dispute from one procedural track to another in search of the ‘right’ institutional path in a Member State at the preliminary stage of jurisdiction’. That path is also the one which as I point out in my review of Buak, was followed by the Second (which includes President Lenaerts, the chair of conflict of laws at Leuven prior to my immediate predecessor, Hans van Houtte) and not the First Chamber:

The Second chamber (K. Lenaerts, A. Prechal, Toader, Rosas and Ilešič in Buak, focus on Sapir which was issued by the third Chamber, comprising at the time Toader (Rapporteur), Ilešič, Jarašiūnas, Ó Caoimh,  Fernlund. Toader and Ilešič are the common denominator with judment in BUAK. Sapir has focus also firstly on the legal relationship between the parties to the dispute, but secondly the basis and the detailed rules governing the bringing of the action (not: the to my knowledge never applied Eurocontrol criterion of ‘subject matter’ of the action).

At 66 the AG offers ‘pointers’ within the ‘nature of the legal relationship’ approach which he believes may be of assistance to any public power assessment:

‘(i) start with the legal relationship which characterises the dispute; (ii) assess it against the framework generally applicable to private parties; and (iii) establish whether the dispute arises from a unilateral exercise of public powers outside that normal private ‘reference framework’.’

which applied to the case at issue, he concludes at 87, leads to a finding of there not appearing to be an exercise of public powers.

I conclude my overview of ‘civil and commercial’ at para 2.65 of the third ed of the Handbook (forthcoming February 2021) with

the acte clair doctrine (meaning that national courts need not refer to the CJEU when the interpretation of EU law is sufficiently clear either by virtue of that law itself or following CJEU interpretation in case-law) implies that national courts by now ought to have been given plenty of markers when applying this condition of application of the Brussels I and Recast Regulation. Except of course the acte might not be that clair at all, as the above overview shows.

Bobek AG seems to have a similar end in mind: at 65: there is no unicorn, a truly autonomous interpretation of ‘civil and commercial’.

The Opinion continues with the classic themes of whether notaries are courts, and a firm opinion that leaving your car in a public parking space provokes contractual relations.

Geert.

European Private International Law, 3rd ed. 2021, paras 2.28 ff concluding at 2.65.

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.

Update 9 February 2021 see also Gilles Cuniberti’s review here.

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.

The CJEU in Movic on enforcement of unfair trading practices and the less than abstract determination of ‘civil and commercial’.

I reviewed Szpunar AG’s Opinion in C-73/19 Belgische Staat v Movic BV et al here. The CJEU held this morning. At the time of posting an English version of the judgment was not yet available. The case at issue concerns enforcement of Belgium’s unfair trading act by the public authorities of the Member State. Movic BV of The Netherlands and the others defendants practices ticket touting: resale of tickets for leisure events.

The Court is more succinct than the AG in its analysis yet refers repeatedly to points made by Szpunar AG without itself therefore having to refer to so extensive an analysis.

The fact that a power was introduced by a law is not, in itself, decisive in order to conclude that the State acted in the exercise of State authority (at 52). Neither does the pursuit of the general interest automatically involve the exercise of public powers (at 53). With respect to the authorities’ powers of investigation, it would seem that the Court like the AG reads (at 57) C‑49/12 Sunico as meaning that to exclude proceedings from the scope of ‘civil and commercial matters’, it must be determined, in concreto, whether the public authority uses evidence which it has in its possession as a result of its public powers of investigation, hence putting it in a different position as a person governed by private law in analogous proceedings. Collecting evidence in the same way as a private person or a consumer association could, does not fall within that category (at 58).

Neither the request for penalty payments nor an application for an injunction makes the proceedings drop out off Brussels Ia: both instruments are available to private parties, too. That is not however the case for the observation of continued infringement by mere civil servant oath as opposed to bailiff certification. This, the Court holds like the AG, does amount to exercise of public authority (at 62) however (at 63) that element alone escapes BIA, it does not so taint the other part of the proceedings.

As I noted in my review of first Advocate General Szpunar’s Opinion, the need for highly factual considerations sits uneasily with the Regulation’s expressed DNA of predictability. However this squares with the CJEU case-law on ‘civil and commercial’.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Heading 2, Heading 2.2.

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.

 

Ships classification and certification agencies. The CJEU (again) on ‘civil and commercial’, and immunity.

Update 9 February 2021 see also Gilles Cuniberti’s review here.

I earlier reviewed Szpunar AG’s Opinion in C‑641/18 Rina, on which the Court held on 7 May, confirming the AG’s view. Yannick Morath has extensive analysis here and I am happy to refer. Yannick expresses concern about the extent of legal discretion which agencies in various instances might possess and the impact this would have on the issue being civil and commercial or not. This is an issue of general interest to privatisation and I suspect the CJEU might have to leave it to national courts to ascertain when the room for manoeuvre for such agencies becomes soo wide, that one has to argue that the binding impact of their decisions emanates from the agencies’ decisions, rather than the foundation of the binding effect of their decisions in public law.

I was struck by the reference the CJEU made at 50 ff to the exception for the exercise of official authority, within the meaning of Article 51 TFEU.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.16.1.1.

 

Enforcement of unfair trading practices and ‘civil and commercial’. Szpunar AG extensively in Movic (re ticket touts).

Advocate-General Szpunar in his Opinion in C-73/19 Belgische Staat v Movic BV et al refers in footnote to the comment made by Yours Truly (much humbled) on p.38 of the Handbook, that the seminal Eurocontrol and Steenbergen judgments on the concept of ‘civil and commercial’ in the Brussels regime, each posit dual criteria for the concept but only ever have one of their two legs applied. The Opinion in general testifies to the complex picture that emerges in case-law on the issue.

The issue is a knock-out point under Brussels Ia and the majority of EU private international law instruments. If the case is not civil and commercial, European PIL does not apply and residual national law takes over. Despite or perhaps because of this core relevance, the debate on the concept is far from settled. I reported on it as recently as a few weeks back (Øe AG in C-189/19 Supreme Site; and a little before that C-421/18 Dinant Bar v maître JN,) and I expressed a need for serious chewing over following different strands of focus among the CJEU’s chambers (my post on C-579/17 Buak).

The case at issue concerns enforcement of Belgium’s unfair trading act, not as in C‑167/00 Henkel by a consumer group but rather by the public authorities of the Member State.

Movic BV of The Netherlands and the others defendants practices ticket touting: resale of tickets for leisure events. Belgium in recent years has been cracking down on the phenomenon and in conflict terms, has expressed an eagerness to qualify big chunks of e-commerce laws as lois de police. One assumes this explains the reluctance of the defendants to be hauled in front of a Belgian judge.

At 12: what the Belgian authorities are seeking, is

first, findings of infringement in respect of conduct constituting, inter alia, unfair commercial practices, secondly, an order for the cessation of such infringement, thirdly, an order for publicity measures to be taken at the expense of the defendants; fourthly, the imposition of a penalty payment in a fixed sum, due in respect of each and every infringement which may be found to have taken place after service of the judgment, and fifthly, permission for the fact of such infringement to be certified simply by means of a report drawn up by a sworn official of one of the authorities in question.

At 16: arguments against the issue being of a civil and commercial nature, are

first, unlike any other person, the Belgian authorities are not required to demonstrate that they have an interest of their own in bringing proceedings of the kind illustrated by the main proceedings, secondly, their powers of investigation are not available to legal persons governed by private law, and thirdly, they also have enforcement powers which are not available to such persons.

As for the issue of lack of requirement of showing interest:

The first authority signalled is C‑551/15 Pula Parking: acting in the public interest does not equate acting in the exercise of State authority. Per the same case and per Fahnenbrock, and Kuhn, neither, the AG points out, does origin of authority in Statute, equate acta iure imperii. The fact that a power was introduced by a law is not, in itself, decisive in order to conclude that the State acted in the exercise of State authority (at 32). Neither does it follow from C-271/00 Baten that that the mere fact of exercising a power which the legislature has specifically conferred on a public authority automatically involves the exercise of public powers (at 34).

The AG then more specifically discusses the issue of lack of requirement to show interest to establish standing. Here there are plenty of similarities with the consumer organisations at issue in Henkel (37 ff). The exemption does not mean that the entity enjoys a prerogative under which it has powers altering the civil or commercial nature of its legal relationship with the private law entities, or the subject matter of the proceedings in which a cessation action is brought.  Similarly, it has no such powers as regards the procedural framework within which the proceedings arising out of those relationships are heard, which is identical whatever the status of the parties to the proceedings may be.

Further, with respect to the powers of investigation:  here the AG reads C‑49/12 Sunico as meaning that to exclude proceedings from the scope of ‘civil and commercial matters’, (at 53)

it is not sufficient to identify national provisions which, in abstracto, authorise a public authority to gather evidence through the use of its public powers and to use such evidence in legal proceedings. Equally, it is not sufficient to find that that evidence has in fact been used in the proceedings. In order to exclude the proceedings from the scope of that expression, it must also be determined, in concreto, whether, by virtue of having used that evidence, the public authority is not in the same position as a person governed by private law in analogous proceedings.

(In the case at issue there are no such indications). This reading of Sunico makes the exemption exercise very much a factual one – which is not in itself unusual in the context of the case-law on ‘civil and commercial’. One hopes the Court itself will give clear guidance on how Sunico must be read.

The AG also zooms in on the request for penalty payments. Here, the core reference is C‑406/09 Realchemie. At 72 (after having analysed the issue): a procedure in which such payment is sought, falls within the scope of ‘civil and commercial matters’ where,

‘first, the purpose of the penalty payment is to ensure the effectiveness of the judicial decision given in the proceedings, which fall within the scope of that expression, and secondly, the penalty payment is a normal measure of civil procedure which is also available to private individuals, or which is imposed without exercising special powers that go beyond those arising from the rules of general law applicable to relationships between private individuals.’

(With both these boxes ticked in casu). This I believe is most sound.

Within the same context, the last argument refers to the need or not to instruct a bailiff to certify the existence (and frequency) of continued infringement: the relevant Belgian authorities can suffice with an oath by a civil servant. This is in fact not a point signalled by the referring court however the Belgian Government at hearing seemingly sought insurance cover as it were, effectively seeking sanction of its use of a civil servant statement in lieu of what ordinary parties would have to do, which is to instruct a bailiff. This, the AG suggest (at 75), does amount to exercise of public authority, but only then for that part of the claim (the penalty payment( against the Dutch defendants): weapons which an ordinary person could not avail themselves of (I would refer to C-271/00 Steenbergen here).

 

All in all the case illustrates the relatively narrow room for abstract pondering of the issue of ‘civil and commercial’. The Opinion is highly factual, and admirably on point viz the extensive CJEU authority. The need for highly factual considerations sits uneasily with the Regulation’s expressed DNA of predictability. However this squares with the CJEU case-law on same. And it bodes interestingly when we will start applying the corresponding Hague Judgments Convention provisions…

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Heading 2, Heading 2.2.

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