Posts Tagged CSR

Spizz v Goldfarb. Applying the US presumption against extraterritoriality in bankruptcy cases.

Charles Oellermann has excellent analysis of Spizz v. Goldfarb Seligman & Co. (In re Ampal-Am. Israel Corp. 562 B.R. 601 (Bankr. S.D.N.Y. 2017). The U.S. Bankruptcy Court for the Southern District of New York ruled that the avoidance provisions of the Bankruptcy Code do not apply outside the U.S. because, on the basis of the language and context of the provisions, Congress did not intend for them to apply extraterritorially. In so holding, it applied the Morrison test which was central to the United States’ Supreme Court ruling in Kiobel, which of course has been the subject of repeated analysis on this blog.

Whether an avoidance action (which in civil law jurisdictions would be tackled by an actio pauliana) is extraterritorial in and of itself, is not easily ascertained. In his review, Charles has superb overview of case-law applying a centre of gravity test: depending on the facts of the case, parties’ action does or does not take place outside the US in relation to the parties’ domicile, the subject of the transaction, etc.  He also rightfully highlights that courts are aware that even if one were to apply the provisions extraterritorially, a US judgment might not be easily enforced against foreign debtors.

Case-law is evidently not settled and one imagines that the extraterritoriality of bankruptcy laws will in some form further end up at the USSC.

Geert.

 

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Jesner v Arab Bank. Corporate culpability, the substantive question ignored in Kiobel, makes certiorari.

Thank you, Ludo Veuchelen, for alerting me to Adam Liptak’s reporting on Jesner v Arab Bank, in which certiorari was granted by the United States Supreme Court early April. The case may finally have us hear SCOTUS’ view on the question which led to certiorari in Kiobel but was subsequently ignored by the Court: whether corporations can be culpable for violation of public international law. ‘May’ is probably the keyword in the previous sentence.

Geert.

(Handbook of) EU Private international law, 2nd ed. 2016, Chapter 8, Heading 8.2.

 

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Help, I am going bananas. US courts and Chiquita.

The title of this post is a result of my confusion on the state of various suits against Chiquita, on alleged collusion in or perpetration of human rights abuses in Columbia. I had reported earlier (scroll down to ‘update on linked development’; this hyperlinks to all relevant links) that the US Supreme Court had denied certiorari in a ruling of the 11th U.S. Circuit Court of Appeals in Miami. This left that ruling standing (a strict application of SCOTUS’ view in Kiobel).

End November (I had tweeted it at the time; my ledger has not left me an opportunity to post on it since) the Southern District court of Florida dismissed an application on forum non conveniens grounds in what must be related litigation. Except my limited knowledge of jurisdictional levels in the US leaves me in doubt where the link is between these two developments (US readers please assist if you can).

At any rate, the ruling reviewed here is a textbook example of forum non conveniens (motion dismissed, nota bene) and a great source for a comparative conflicts class. Such as I teach at Monash :-).

Geert.

(Handbook of) European Private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.14.5.

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Unilever. Accepting CSR jurisdiction against mother companies not the High Court’s cup of tea.

After  Shell/Okpabi, the High Court has now for the second time in 2017 rejected jurisdiction to be established against the foreign subsidiary (here: in Kenya) using the mother company as an anchor. In [2017] EWHC 371 (QB) AAA et al v Unilever and Unilever Tea Kenya ltd, Unilever is the ultimate holding company and registered in the UK. Its subsidiary is a company registered in Kenya. It operates a tea plantation there. Plaintiffs were employed, or lived there, and were the victims of ethnic violence carried out by armed criminals on the Plantation after the Presidential election in Kenya in 2007. They claim that the risk of such violence was foreseeable by both defendants, that these owed a duty of care to protect them from the risks of such violence, and that they had breached that duty.

Laing J unusually first of (at 63 ff) all declines to reject the case on ‘case management’ grounds. Unlike many of her colleagues she is more inclined to see such stay as ignoring ‘through the back door’ Owusu‘s rejection of forum non conveniens.  I believe she is right. Instead the High Court threw out the case on the basis that the claims, prima facie (on deciding jurisdiction, the Court does not review the substantial merits of the case; a thin line to cross) had no merit. Three issues had to be decided:

i) By reference to what law should the claim be decided? This was agreed as being Kenyan law.

ii) Are the criteria in Caparo v Dickman [1990] 2 AC 605 satisfied? (A leading English law case on the test for the duty of care). The relevance of English law on this issues comes about as a result of Kenyan law following the same Caparo test: as I have noted elsewhere, it is not without discussion that lex fori should apply to this test of attributability. Laing J held that the Caparo criteria were not fulfilled. The events were not as such foreseeable (in particular: a general breakdown in law and order). Importantly, with respect to the holding company and as helpfully summarised by Herbert Smith:

  • the pleaded duty effectively required the holding to ensure that the claimants did not suffer the damage that they suffered, and not merely to take reasonable steps to ensure their safety;
  • the pleaded duty also effectively imposed liability on that holding for the criminal acts of third parties, and required it to act as a “surrogate police force to maintain law and order”; and
  • such a duty would be wider than the duty imposed on the daughter, as the actual occupier of the Plantation, under the Kenyan Occupiers’ Liability Act

At 103, Laing J discussed and dismissed plaintiff’s attempts at distinguishing Okpabi. In her view, like in Shell /Okpabi, the mother’s control is formal control exercised at a high level of abstraction, and over the content and auditing of general policies and procedures. Not  the sort of control and superior knowledge which would meet the Chandler test.

iii) Are the claims barred by limitation? This became somewhat irrelevant but the High Court ruled they were not. (This, under the common law of conflicts, was a matter of lex causae: Kenyan law, and requiring Kenyan expert input. Not English law, as the lex fori).

The case, like Okpabi, is subject to appeal however it is clear that the English courts are not willing to pick up the baton of court of prefered resort for CSR type cases against mother companies.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 8, Heading 8.3.

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Finding SHELLter. The High Court on CSR and applicable law in Okpabi.

Where does one look first? : as I reported last week, Ms Kiobel is now taking her US case to The Netherlands (this case essentially involves human rights), at a time when Shell is still pursued in the Netherlands by Milieudefensie, in a case involving environmental pollution in Nigeria.

That latter case now is being mirrored in the High Court in London in Okpabu v Shell [2017] EWHC 89 (TCC). The dual proceedings are squarely a result of the split listing of Shell’s mother company, thus easily establishing jurisdiction in both The Netherlands and London, under Article 4 Brussels I Recast.

The only preliminary issue which the High Court had to settle at this early stage was whether Shell’s holding company, established in the UK, can be used as anchor defendant for proceedings against Shell Nigeria. It held that it could not. The questions dealt with are varied and listed as follows:

1. Do the claimants have legitimate claims in law against RDS?

2. If so, is this jurisdiction the appropriate forum in which to bring such claims? This issue encompasses an argument by RDS that it is an abuse of EU law for the claimants to seek to conduct proceedings against an anchor defendant in these circumstances.

3. If this jurisdiction is the appropriate forum, are there any grounds for issuing a stay on case management grounds and/or under Article 34 of the Recast Regulation in respect of the claim against RDS, so that the claim against SPDC can (or should) proceed against SPDC in Nigeria?

4. Do the claims against SPDC have a real prospect of success?

5. Do the claims against SPDC fall within the gateway for service out of the jurisdiction under paragraph 3.1(3) of CPR Practice Direction 6B?

This issue requires consideration of two separate sub-issues, namely (a) whether the claims against RDS involve a real issue which it is reasonable for the Court to try; and (b) whether SPDC is a necessary or proper party to the claims against RDS.

6. Is England the most appropriate forum for the trial of the claims in the interests of all parties and for the ends of justice?

7. In any event, is there a real risk the Claimants would not obtain substantial justice if they are required to litigate their claims in Nigeria?

 

In detailed analysis, Fraser J first of all seems to accept case-management as a now established route effectively to circumvent the ban on forum non conveniens per Owuso (see Goldman Sachs and also reference in my review of that case, to Jong and Plaza). Over and above case-management he refers to potential abuse of EU civil procedure rules to reject the Shell Nigeria joinder. That reference though is without subject really, for the rules on joinders in Article 8 Brussel I recast only apply to joinder with companies that are domiciled in the EU – which is not the case for Shell Nigeria.

Of specific interest to this blog post is Fraser J’s review of Article 7 Rome II: the tailor made article for environmental pollution in the determination of lex causae for torts: in the case at issue (and contrary to the Dutch mirror case, which is entirely being dealt with under residual Dutch conflicts law) Rome II does apply to at least part of the alleged facts. See here for my background on the issue. That issue of governing law is dealt with at para 50 ff of the judgment.

For environmental pollution, plaintiff has a choice under Article 7 Rome II. Either lex damni (not appealing here: for Nigerian law; the judgment discusses at some length on the extent to which Nigerian law would follow the English Common law in issues of the corporate veil), or lex loci delicti commissi. This, the High Court suggest, can only be England if two questions are answered in the affirmative (at 79). The first is whether the parent company is better placed than the subsidiary to avoid the harm because of its superior knowledge or expertise. The second is, if the finding is that the parent company is better placed, whether it is fair to infer that the subsidiary will rely upon the parent. With reference to precedent, Fraser J suggest it is not enough for the parent company simply to be holding shares in other companies. (Notice the parallel here with the application of ATS in Apartheid).

The High Court eventually holds that there is no prima facie duty of care that can be established against the holding company, which would justify jurisdiction vis-a-vis the daughter. At 106, the Court mirrors the defendant’s argument: it is the Nigerian company, rather than the holding, that takes all operational decisions in Nigeria, and there is nothing performed by the holding company by way of supervisory direction, specialist activities or knowledge, that would put it in any different position than would be expected of an ultimate parent company. Rather to the contrary, it is the Nigerian company that has the specialist knowledge and experience – as well as the necessary licence from the Nigerian authorities – to perform the relevant activities in Nigeria that form the subject matter of the claim. … It is the specialist operating company in Nigeria; it is the entity with the necessary regulatory licence; the English holding company is the ultimate holding company worldwide and receives reports back from subsidiaries.

 

Plaintiffs have been given permission to appeal. Their lawyers have indicated to rely heavily on CJEU precedent, particularly T-343/06 Shell v EC. This case however concerns competition law, which as I have reported before, traditionally has had a theory on the corporate veil more easily pierced than in other areas. Where appeal may have more chance of success, I believe is in the prima facie character of the case against the mother company. There is a thin line between preliminary assessment with a view to establishing jurisdiction, and effectively deciding the case on the merits. I feel the High Court’s approach here strays too much into merits territory.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 8, Heading 8.3.

 

 

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The Trafigura litigation continues: Dutch court accepts jurisdiction but denies standing to victims’ association.

I have in the past reported fleetingly about the Trafigura litigation, in which the company is and has been pursued in various jurisdictions for the environmental and public health damage resulting from the dumping in Abidjan, Ivory Coast’s capita, of toxic waste originating from the Probo Koala. I discuss the corporate social responsibility implications of conflict of laws ia here.

The case has led ia to the so-called ‘Leigh Day settlement’ in the United Kingdom (representing 30.000 victims) and to a 2007 ‘Protocole d’Accord’ between Trafigura and Ivory coast.

Current judgment was issued on 30 November and involves Stichting Union des Victimes de Déchets Toxiques D`Abidjan et Banlieues, a foundation set up in accordance with Dutch law, claiming to represent victims not yet represented in the Leigh Day settlement.

The Dutch court first of all swiftly rejects any impact of the choice of court clause included in the 2007 protocol. This discussion could have been quite interesting, however the Court suffices with a reference to the narrow formulation of the clause. It refers to any and all issues arising out of the validity, application and interpretation of the agreement. The agreement being a contractual arrangement and the suit here being based on liability in tort, in an action started by victims not party to the agreement, the court at Amsterdam suffices with the remark that current case is evidently not covered by the clause.

This leaves aside the discussion on the merits with respect to that choice of court. The 2007 protocol was signed by Ivory Coast ‘for and on behalf of all victims of the toxic wastes’. Whether the State can legitimately bind all those victims, particularly since presumably not all of them are Ivory Coast nationals, requires a lex causae to settle. Were this to follow the Brussels I Recast rule (the case looks to have been introduced after January 2015), this would imply a discussion on the inclusion of choice of court ex-EU. Over and above that discussion, the Court at Amsterdam would then have to discuss whether perhaps ordre public protests against allowing a State to represent all victims in cases such as these.

Having dismissed (again, all too briefly) choice of court, the court subsequently upholds jurisdiction on the basis of Article 4 Brussels I Recast: the Dutch domicile of Trafigura Beheer BV.

In the remainder of the assessment of jurisdiction and standing, the Court applies Dutch law (de Stichting has been set up under Dutch law) and finds ultimately that the personal, business interests of its creator are not sufficiently split from the interests of the victims which the foundation purports to represent. The court adds that the Stichting would not seem properly to manage its documentation etc., leaving doubt as to whether it is properly equipped to attain its objective.

The suit is therefore dismissed on standing.

An interesting judgment to kick-start all sorts of issues of relevance to corporate social responsibility.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.9.2, Chapter 8, Heading 8.3.

 

 

 

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Lungowe v Vedanta and Konkola. One lb of Owusu and one lb of Chandler v Cape make for a powerful potion.

Here’s the recipe for Lungowe v Vedanta at the High Court.

Obtain one lb of C-291/02 Owusu: European authority: forum non conveniens has no place in the Brussels jurisdictional regime; particularly now in Article 4 of the Brussels I Recast for as Coulson J points out at 57 in his judgment in Lungowe, Articles 33-34 of the Recast Regulation do foresee consideration in the event of parallel proceedings outside of the EU.

Mix with one lb of Chandler v Cape : English authority: parent companies may in circumstances be held liable for the actions of their foreign subsidiaries; referred to with approval by the Dutch Courts in Shell.

Have Zambian claimants in a case of environmental pollution employ Article 4 to establish jurisdiction against a holding company established in England. The company is a holding company for a diverse group of base metal and mining companies, including the second defendant, Konkola.

The fact that Vedanta are domiciled in the United Kingdom is, evidently, one of the principal reasons why they have been pursued in these proceedings (see Coulson J’s acknowledgment of same at 76). This is a manifestation of forum shopping which the CJEU has certainly encouraged. Moreover, as Coulson J suggests at 77-78, claimants also wish to pursue Vedanta because they are seen as the real architects of the environmental pollution in this part of Zambia. The argument is that, since it is Vedanta who are making millions of pounds out of the mine, it is Vedanta who should be called to account. On balance, the use of Vedanta as an anchor defendant can hardly be seen as a malicious ‘device’ or an abuse of the anchor defendant mechanism.

On that issue of abuse, reference is made by the High Court to Freeport and to CDC at the CJEU. There is no suggestion of course that either are direct precedent for the anchor defendant mechanism in residual national private international law. (Which is the case here: for the Brussels Recast joinder mechanism in Article 7 most certainly does not apply to defendants domiciled outside of the EU). It is telling therefore that the Court does refer to them here. (And inevitably raises the question whether English Court will continue to do so after Brexit).

Both 20 Essex Street and RPC have further discussion. All in all an uplifting day in the English Courts for corporal social responsibility campaigners.

European private international law, second ed. 2016, Chapter 8, Headings 8.3.1.1., 8.3.2

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