Posts Tagged Contract
Dinant Bar v maître JN. Bar membership fees. Saugmansdgaard ØE on whether they are at all ‘civil and commercial’ and if so, whether they are ‘contractual’.
In C-421/18 Saugmansdgaard ØE opined (Opinion a yet available in a handful of languages only, not including English) on the issue of ‘civil and commercial’ (last reviewed by the Court in Buak) and ‘contract’ (within Article 7(1) Brussels Ia.
At issue was the relationship between a France-domiciled practising lawyer, registered with the Dinant (Belgium) Bar, and that Bar. Maître JN, now a very occasional practitioner it seems, had been refusing to pay his Bar Membership fees even after the Bar council had reduced them to the level of insurance premiums paid by it to the insurance company running the collective professional insurance scheme.
The referring court at Namur had not in fact asked the CJEU about the interpretation of ‘civil and commercial’. It was the EC’s comments which triggered Saugmansdgaard ØE’s review of that issue (albeit he insists the final call is up to the referring court). He refers to the public interest duties carried out by the Bar Council (in particular, ensuring the public’s trust in the proper representation before the judicial authorities), and the authority entrusted to the Council by Belgian’s code of civil procedure (particularly at 34). At 35 ff he then considers whether in its collection of the Bar fees set by and due to it by the registered lawyers, the Council acts in the exercise of that authority, and decides it does not: the fees are determined by the general council of the Bar and in the main represent the professional insurance fees. That is all the more made clear by the fact that in the case of maître JN the Bar had reduced the fees to the exact amount paid to the insurance company.
The dispute therefore he advices is about pennies, not power.
Turning to the issue of ‘contract’ reference is made ia to the recent CJEU decision in Kerr. Particularly at 81 ff the Advocate General emphasises the specificities of the case: the solicitor in question had effectively retired yet chose to continue to pay Bar membership fees. In contrast to for instance Austro-Mecana and more in line with Kerr (and in contrast also one could argue with fully practising lawyers) the voluntary character of the relationship is core.
LIC Telecommunications et al v VTB Capital et al. High Court suggests autonomous EU approach to asymmetric choice of court. Also discusses contract and tort distinction, and abuse of process.
In  EWHC 1747 (Comm) LIC Telecommunications et al v VTB Capital et al Moulder J suggests an unorthodox interpretations of Article 25 of the Brussels Ia Regulation. (Note also her very critical view at 22 of one of the experts, whom she found having confused his role as expert with a role as advocate). Much of the lengthy judgment is devoted to intricate discussions of Luxembourgish corporate law (hence the need for expert evidence) and the jurisdictional issues are, somewhat illogically, discussed towards the end of the judgment, at 245 ff.
Maze, one of the defendants, acts as a manager of V2 pursuant to a directorship agreement dated 26 May 2015 (the “Directorship Agreement”). It relies on the effect of clause 19 of the Directorship Agreement and submitted that claims against it are subject to the exclusive jurisdiction of the courts of Luxembourg pursuant to Article 25 Brussels Ia. Clause 19 provides:
“for the benefit of the Manager, the Shareholder and the Company hereby irrevocably, specially and expressly agree that the courts of Luxembourg city have jurisdiction to settle any disputes in connection with this Agreement and accordingly submits to the jurisdiction of the courts of Luxembourg city. Nothing in this clause limits however the rights of the Manager to bring proceedings against the Company in connection with this Agreement in any other court of competent jurisdiction or concurrently in more than one jurisdiction.”
The clause is asymmetric aka hybrid aka unilateral. (See e.g. my discussion of Rothschild etc.). These clauses as I have noted elsewhere highlight the clear insufficiency of Brussels Ia’s new lex fori prorogati (including renvoi) rule for choice of court. Which court has been prorogated, hence also lex fori prorogati, is not clear when the clause is asymmetric.
Moulder J discusses  EWHC 161 (Comm) Commerzbank v Liquimar Tankers as precedent: I reviewed it here and signalled at the time that it would not be the last we would hear of the issue. In that case Cranston J held ‘There is nothing in Article 25 that a valid jurisdiction agreement has to exclude any courts, in particular non EU Courts. Article 17, penultimate paragraph, of the Brussels Convention recognised asymmetric jurisdiction clauses. To my mind it would need a strong indication that Brussels 1 Recast somehow renders what is a regular feature of financial documentation in the EU ineffective.‘ I was never taken by that conclusion viz the Brussels Convention: its Article 17 reference to a party having ‘benefit’ from choice of court does not relate entirely to the same discussion on asymmetric clauses (Peralla v Codere  EWHC 1182 (Comm) which I discussed here illustrates that difference).
At any rate I disagree with Moulder J’s statement at 254 that
It is now common ground that it is a question of autonomous EU law and not a question of national law. (It was I believe accepted that the proviso “unless the agreement is null and void as to its substantive validity” refers to issues such as capacity, fraud and mistake, not whether particular kinds of “choice of court” agreements are permitted under the Regulation).
Asymmetric clauses are the first example often given when highlighting the limited cover of Article 25 Brussels I a (and the need for certainty on the lex causae for choice of court). There is no autonomous interpretation there at all. I do agree however with the conclusion at 261: that Luxembourg courts, applying EU law, would not uphold such clauses was not made out on the evidence. Luxembourgish courts at least when they apply Luxembourgish law, generally uphold the validity of asymmetric choice of court.
At 263 ff then follows discussion of Article 7(1) and 7(2). Much of the authority discussed has been reviewed on this blog. (Including Bosworth (Arcadia) which in the meantime has been held by the CJEU but without the contract /tort element – the CJEU found against a contract of employment). Moulder J holds that Article 7(2) is engaged, not 7(1), and on the former discusses locus delicti commissi with reference to JSC BTA Bank v Khrapunov. At 295: it is not sufficient that there are meetings in England to implement the conspiracy, it is the making of the agreement in England which is to be regarded as the harmful event. Claimants have not supplied a plausible evidential basis that the agreement was made in England. Their evidence is consistent with a case that the conspiracy was implemented in England but that is not sufficient.
As for locus damni, at 298: Even though the share purchase agreement was under English law, it is the loss of the shares in the Luxembourg company which is the pleaded damage not the agreement to sell or the auction. The Vivacom group consists of Bulgarian telecommunications companies which were held by InterV through Viva Luxembourg Bulgaria EOOD (paragraph 3 of the Agreed List of Agreed Issues). Locus damni is Bulgaria, perhaps Luxembourg. But not England.
Finally, abuse of process considerations are linked to English procedural law (whether claims should have been brought sooner).
(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.9, Heading 18.104.22.168, Heading 22.214.171.124 .
Just a quick note for completeness’ sake on Pitruzzella AG’s Opinion in Joined cases C-349/18 to C-351/18 NMBS v Mbutuku Kanyeba et al. It engages consumer protection law, not conflict of laws. To decide whether there is a ‘contract’ between public transport providers and (alleged) fare dodgers, the AG has no choice but to refer to national law:
La directive 93/13/CEE ne réglemente pas les conditions de formation des contrats et le régime relatif aux clauses abusives qu’elle contient est en principe applicable exclusivement aux relations juridiques d’origine contractuelle, qui doivent être qualifiées par le juge national sur le fondement du droit national.
Readers of the blog will appreciate the echoes of Tessili v Dunlop and Handte /Kalfelis, Feniks etc. discussions.
Comparative US /EU jurisdiction material: Mitchell v. DePuy Orthopaedics (Missouri); and KGS v Facebook (Alabama).
Thank you Stephen McConnell for flagging Mitchell v. DePuy Orthopaedics, Inc., 2019 U.S. Dist. (Missouri) and Alani Golanski for doing the same for KGS v Facebook at the Alabama Supreme Court,
Both cases have plenty of scope for comparative analysis viz EU law and non-US common law. Which is why I had pondered them for use in exam essays but in the end did not – they might come in handy at a later stage.
Readers best refer to the reports linked above for a full picture. In short, Mitchell involves the minimum contacts rule as well as ‘directing activities towards forum residents’: both have clear echos (and differences) in EU jurisdictional rules. On neither ground was specific (what the EU would call ‘special’) jurisdiction upheld.
In the Facebook case, Facebook argument is included on p.10-11. Claimant put forward a case for jurisdiction on p.13-14. She argues i.a. effects doctrine. Bryan J discussed both extensively p.15 ff and held that doing business in Alabama is not sufficient for personal jur., and (p.39) Facebook engagement with complaints not enough for specific jurisdiction.
In both cases the US Supreme Court’s decision in Bristol-Myers Squibb is cited as highly relevant authority.
Back to the 80s. Arthur Scargill, submission (voluntary appearance) under Brussels Ia and applicable law for statutes of limitation.
In  EWHC 1359 (Comm) National Union of Mineworkers v Organisation Internationale de l’energie et des mines defendant is French-domiciled and represented by its chair, Arthur Scargill. That’s right, many of us whether Brits or not will remember him from the 1970s and 1980 mine strikes. (Unlike what some think, he did not though feature in the Tracey Ullman cover of Madness’ ‘my girl’: that was Neil Kinnock.
Of more immediate relevance for the blog is the discussion at 19 ff on jurisdiction and applicable law.
Defendant is an international body to which a number of trade unions are affiliated. Those unions operate in different countries but all represent workers engaged in the fields of mining and/or energy supply. The name the Defendant uses in English is the International Energy and Mineworkers’ Organisation (“the IEMO”) and it is the successor to the International Mineworkers’ Organisation (“the IMO”) following a merger in 1994.
The proceedings relate to the parties’ respective rights in relation to sums recovered by the Defendant from Mr. Roger Windsor in August 2012 after prolonged legal proceedings in the French Republic and in England. Those proceedings were undertaken in the name of the Defendant but funded in part by the Claimant. There is a shortfall between the sums recovered and the amounts of the principal debt and the legal costs of the proceedings. The parties are in dispute as to the distribution of the sums recovered from Mr. Windsor; as to which should bear any shortfall between the sums recovered and the costs incurred in the proceedings; and as to the amounts which each has paid by way of costs in those proceedings.
The underlying indebtedness which resulted in recovery being made against Mr. Windsor derived from a loan of £29,500 which the Claimant made to him in 1984. He was then the Claimant’s Chief Executive Officer and the loan was made by way of assistance with house purchase following the relocation of the Claimant’s headquarters from London to Sheffield in 1983. There was a repayment of that loan in November 1984 but it is common ground that to the extent that there was such a repayment it came from funds which had been lent to Mr. Windsor. In 1986 the right to recover payment from Mr. Windsor (either of the original loan or of the subsequent loan) was assigned to the IMO.
Claimant argues the courts of England and Wales have jurisdiction by reason of Articles 7(1) and 25(1)(b) Brussels Ia (by virtue of an agreement made in 1990), and that in any event defendant is to be treated as having accepted that the court has jurisdiction to try this matter (an Article 26 ‘prorogation’, ‘submission’ or ‘voluntary appearance’ in other words).
Eyre J at 24 agrees that submission has taken place: CPR rules (Pt11) provide the details the procedure to be followed by a defendant contesting jurisdiction. Defendant did make an application to the court within 14 days of filing the acknowledgement of service, as requested by CPR 11. However, it expressly accepted that the application was to be regarded as relating to the questions of limitation and of the effect of the Release Agreement. In its application it made extensive reference to Brussels Ia but did so in that context. In particular that material was put forward in support of the contention that the claim was statute-barred either by reference to the Limitation Act 1980 or by reference to the French limitation provisions. There was in other words no wider or more fundamental challenge to the court’s jurisdiction and the realisation probably in hindsight that jurisdiction may not be that straightforward, cannot impact on that original application.
Had there not been submission, interesting discussions could have ensued I suspect on the place of performance of the agreement (unless clear choice of court had been made), England as a forum contractus, and I for one shall be using the case in my classes as a good illustration of the ‘conflicts method’ (looking over the fence)
Attention then turns to the issue of applicable law for the time-barred argument: at 26: ‘Defendant also argued that the proceedings were to be regarded as subject to French law and in particular the French limitation provisions which impose a time limit of three years for claims. The Defendant made reference to the Civil Jurisdiction and Judgments Act 1982 and the Foreign Limitation Periods Act 1984. The contention was that French law was applicable because the judgments against Mr. Windsor were obtained in France and then registered in England and Wales. That argument was misconceived. Such an argument might have relevance if the issue were one of the enforcement of the judgments against Mr. Windsor though I make no finding on that question. The current proceedings are not concerned with the enforcement of the judgments against Mr. Windsor but with the distribution of the sums which have been received by the Defendant as a result of the litigation against Mr. Windsor. It follows that the provisions to which the Defendant made reference can have no relevance to the current proceedings. The Defendant made passing reference to the fact that it is domiciled in France but this was not the principal basis of the contention that French law was applicable and without more it would not cause the parties’ dealings to be governed by French law. In those circumstances the parties’ rights and liabilities are to be determined by reference to the law of England and Wales and any questions of limitation are governed by the Limitation Act 1980.‘
I am not privy to the submissions on applicable law, but I am assuming that there must have been some discussion of the impact of the 1980 Rome Convention. Not the Rome I Regulation which would not have applied ratione temporis. That Regulation like Rome II has not altogether straightforward provisions (as I have noted on other occasions) on procedure being covered by the lex contractus. Whether Eyre J classifies the limitation issue as being covered by English law per lex fori or alternatively as lex causae (lex contractus of the 1990 agreement) is not clear.
Back in the 80s I would have never dreamed of bumping into Mr Scargill again in the context of an interesting conflict of laws issue.
(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 1, Heading 1.3.1, Chapter 2, Heading 2.2.7.
Judgment in Kerr v Postnov(a): a surprisingly swift conclusion on Article 24 and ‘services’ in Brussels Ia /Rome I.
My review of Kokott AG’s Opinion C-25/18 Brian Andrew Kerr v Pavlo Postnov and Natalia Postnova (Kerr v Postnov(a)) discussed, as did the AG, the application of Brussels I Recast’s Articles 24(1) and (2) exclusive jurisdictional rules, cq the application of Article 7(1) jurisdictional rules on contracts, and applicable law consequences of same. The Court ruled on 8 May.
Coming to the first issue: Article 24(1) – this is not properly answered by the Court.
I signalled the potential for engineering even in Article 24 cases: particularly here, the prospect of adding an enforcement claim to an otherwise contractual action. At 37-38 the Court deals most succinctly with this issue: ‘in so far as the action which gave rise to the dispute in the main proceedings does not fall within the scope of any of those actions, but is based on the rights of the association of property owners to payment of contributions relating to the maintenance of the communal areas of a building, that action must not be regarded as relating to a contract for a right in rem in immovable property, within the meaning of Article 4(1)(c) of Regulation No 593/2008.’: ‘in so far as’ – ‘dans la mesure où’: the Court would seem to dodge the issues here which the AG did discuss, in particular vis-a-vis the enforcement accessory: that discussion I feel is not over.
Note also the straight parallel which the Court makes between lex contractus under Rome I and Article 24.
The discussion of Article 24(2) does lead to a clear conclusion: the forum societatis is not engaged. However on Rome I the Court does not follow the AG, with specific reference to the Lagarde report (at 33-34). Unlike its AG if finds that Rome I’s lex societatis exception is not engaged.
As for Article 7(1) forum contractus: at 27 usual authority going back to Handte assists the Court in its conclusion that ‘even if membership of an association of property owners is prescribed by law, the fact remains that the detailed arrangements for management of the communal areas of the building concerned are, as the case may be, governed by contract and the association is joined through voluntary acquisition of an apartment together with ownership shares of the communal areas of the property, so that an obligation of the co-owners towards the association of owners, such as that at issue in the main proceedings, must be regarded as a legal obligation freely consented to’ (at 27). At 28: ‘the fact that that obligation results exclusively from that act of purchase or derives from that act in conjunction with a decision adopted by the general assembly of the association of the owners of property in that building has no effect on the application of Article 7(1)(a)’.
At 39-40 the Court then swiftly comes to the conclusion of ‘services’ under Article 4(1)(c) Rome I, without much ado at all. The AG had opined that the non-uniform nature of the contributions leads to non-application of the service rule of Article 7(1)b BruIa and therefore a resurrection of the classic Tessili formula: the CJEU itself went for the acte clair route.
(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.6, 126.96.36.199
Kokott AG in Kerr v Postnov(a): How house association meetings turn into a jurisdictional and applicable law potpourri.
Advocate General Kokott opined end of January in C-25/18 Brian Andrew Kerr v Pavlo Postnov and Natalia Postnova (let’s call the case Kerr v Postnov(a)). The case concerns the application of Brussels I Recast’s Articles 24(1) and (2) exclusive jurisdictional rules, cq the application of Article 7(1) jurisdictional rules on contracts, and applicable law consequences of same.
Incidentally, Ms Kokott’s use of ‘Brussels Ia’ instead of the Brussels I Recast Regulation adds to the growing chorus to employ Brussels Ia (lower case, no space between I and a) instead of Brussels I Recast, Brussels bis, or as recently seen at the High Court, BIR (BrusselsIRecast).
The Advocate General’s Opinion is a useful and succinct reminder of CJEU authority, suggesting the issue is acte clair really, except there are one or two specific issues (e.g. the enforcement issue, discussed below) which justify clarification.
The case concerns proceedings concerning claims for payment arising from resolutions made by an association of property owners without legal personality in connection with the management of the property in question. Mr Kerr, appellant in the proceedings before the referring court, is a manager of an association of owners of a property situated in the town of Bansko (Bulgaria). He brought proceedings before the Razlog District Court, Bulgaria against two property owners, Mr Postnov and Ms Postnova, concerning payment of contributions that were owed by them wholly or in part for the maintenance of communal parts of the building on the basis of resolutions made by the general meeting of the property owners in the period from 2013 to 2017. According to the appellant in the main proceedings, an action to secure enforcement of the claim pursued was brought with the application.
Address of the defendants used by the court at first instance is in the Republic of Ireland. (As the AG notes, whether service was properly given is relevant for the recognition of the eventual judgment; this however is not the subject of the current proceedings neither is it detailed in the file.)
Coming to the first issue: Article 24(1) requires strict and autonomous interpretation. The main proceedings have as their object the payment of outstanding contributions purportedly owed by two co-owners for the management and maintenance of the property concerned. At 34: It is thus a matter of obligations — to use the words of the referring court — arising from ownership of shares in the commonhold as rights in rem in immovable property. At 38: to be covered by 24(1) the right in question must have effect erga omnes and that the content or extent of that right is the object of the proceedings (reference ex multi to Schmidt and Komu).
Prima facie this would mean that Article 24(1) must be ruled out: at 39: in the main proceedings, the action brought by the manager is based on claims in personam of the association of owners for payment of contributions for the maintenance of communal areas of the property. The rights in rem of the defendant co-owners of the commonhold — in the form of intangible ownership shares — initially remain unaffected. However, at 40 Ms Kokott signals the enforcement issue: that action could affect the defendants’ rights in rem arising from their ownership shares, for example by restricting their powers of disposal – an assessment subject to the applicable law, which is for the referring court to make. In footnote the Advocate General suggests the potential involvement in that case of Article 8(4)’s combined actio in rem and in personam.
The case therefore illustrates the potential for engineering even in Article 24 cases: firstly, by varying the claim (the content or extent of the rights contained in Article 24 has to be the ‘object’ of the proceedings; claimant can manipulate the claim to that effect); second, the prospect of adding an enforcement claim to an otherwise contractual action. This engineering evidently clashes with the objective and forum-shopping averse interpretation of Article 24, however as I have repeatedly discussed on this blog, abusive forum shopping is a difficult call for the CJEU and indeed national courts to make.
The discussion of Article 24(2) does lead to a clear conclusion: the forum societatis is not engaged. Article 24(2) covers only proceedings which have as their object the legal validity of a decision, not proceedings which have as their object the enforcement of such decisions, like the action at issue seeking payment of contributions based on such a decision (at 44).
As for Article 7(1) forum contractus the usual Handte et al suspects feature in the Opinion as does Case 34/82 Peters Bauunternehmung. The association is joined through voluntary acquisition of an apartment together with ownership shares of the communal areas of the property (at 54): there is a ‘contract’. [Advocate General Kokott already pre-empts similar discussion in Case C‑421/18, where the Court will have to clarify whether these considerations can also be applied to a case in which a bar association is taking legal action to assert claims for payment of fees against one of its members].
The AG makes a brief outing into Rome I to point out that Rome I has a lex societatis exception. Under the conflict-of-law rules, claims for payment made by a legal association against its members are not to be assessed on the basis of the Rome I Regulation, even though such claims are to be regarded as ‘matters relating to a contract’ within the meaning of Article 7(1) of the Brussels Ia Regulation (at 60).
However for the purposes of Article 7(1), where the CJEU to find that it is engaged, place of performance needs to be decided. If none of the default categories of Article 7(1) apply, the conflicts method kicks in and Rome I’s lex societatis exception is triggered (residual conflict of laws will determine the applicable law which in turn will determine place of obligation; see also at 74 and the reference to the Tessili rule).
Is the management activity itself is carried out for remuneration (as required per Falco Privatstiftung and also Granarolo) or at least an economic value per Cormans-Collins? The facts of the case do not clearly lay out that they are but even if that were the case (appointment of a specialist commercial party to carry out maintenance etc.), the contributions to be paid to the association by the co-owners are intended in no small part to cover taxes and duties, and not therefore to fulfil contractual obligations towards third parties which were entered into on behalf of and for the account of the association of owners (at 71). All in all, the AG opines, the non-uniform nature of these contributions leads to non-application of the service rule of Article 7(1)b and therefore a resurrection of the classic Tessili formula.
Not so acte clair perhaps after all.
(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.6, 188.8.131.52