Posts Tagged default judgment

Refusal of recognition for failure to serve. ECtHR tests the Brussels regime against Strasbourg in AVOTIŅŠ v Latvia

In  AVOTIŅŠ v Latvia |Avotins v LAtvia, the Grand Chamber of the ECtHR at Strasbourg held late May that Article 6 ECHR (right to fair trial) was engaged but not infringed by the Latvian’s Supreme Court’s application of Article 34(2( Brussel I (now Article 45(1) b Brussels I Recast).

The Article reads ‘A judgment shall not be recognised: (…) 2. where it was given in default of appearance, if the defendant was not served with the document which instituted the proceedings or with an equivalent document in sufficient time and in such a way as to enable him to arrange for his defence, unless the defendant failed to commence proceedings to challenge the judgment when it was possible for him to do so;…

In the case at issue applicant sought refusal by the Latvian court of recognition of a Cypriot judgment issued against him. After review of the Regulation’s core pedigree of mutual recognition and mutual trust, burden of proof particularly exercised the Court: at 121:

‘The fact that the applicant relied on that Article (34(2), GAVC) without having challenged the judgment as required necessarily raised the question of the availability of that legal remedy in Cyprus in the circumstances of the present case. In such a situation the Senate was not entitled simply to criticise the applicant, as it did in its judgment of 31 January 2007, for not appealing against the judgment concerned, and to remain silent on the issue of the burden of proof with regard to the existence and availability of a remedy in the State of origin; Article 6 § 1 of the Convention, like Article 34(2) in fine of the Brussels I Regulation, required it to verify that this condition was satisfied, in the absence of which it could not refuse to examine the applicant’s complaint. The Court considers that the determination of the burden of proof, which, as the European Commission stressed (see paragraph 92 above), is not governed by European Union law, was therefore decisive in the present case. Hence, that point should have been examined in adversarial proceedings leading to reasoned findings. However, the Supreme Court tacitly presumed either that the burden of proof lay with the defendant or that such a remedy had in fact been available to the applicant. This approach, which reflects a literal and automatic application of Article 34(2) of the Brussels I Regulation, could in theory lead to a finding that the protection afforded was manifestly deficient such that the presumption of equivalent protection of the rights of the defence guaranteed by Article 6 § 1 is rebutted. Nevertheless, in the specific circumstances of the present application the Court does not consider this to be the case, although this shortcoming is regrettable.’

Those ‘specific circumstances’ include in particular the applicant’s professional background: at 124:

‘the applicant, who was an investment consultant, should have been aware of the legal consequences of the acknowledgment of debt deed which he had signed. That deed was governed by Cypriot law, concerned a sum of money borrowed by the applicant from a Cypriot company and contained a clause conferring jurisdiction on the Cypriot courts. Accordingly, the applicant should have ensured that he was familiar with the manner in which possible proceedings would be conducted before the Cypriot courts (…). Having omitted to obtain information on the subject he contributed to a large extent, as a result of his inaction and lack of diligence, to bringing about the situation of which he complained before the Court and which he could have prevented so as to avoid incurring any damage’. 

I am not convinced by the Court’s view on the burden of proof and on the national court’s duty to assess the law in the State of origin sua sponte. Judges Lemmens and Briede, jointly concurring but for different reasons as the court, in my view have the better argument where they say

‘If the applicant wanted to argue that no remedy had in fact been available to him in Cyprus, in our opinion it would have been for him to raise this issue explicitly before the Supreme Court. We question whether he could expect the Supreme Court to raise that issue of its own motion. And we definitely consider that he cannot complain under Article 6 § 1 of the Convention about the lack of an explicit response to an argument that was not explicitly made.’

The end result is the same at the ECtHR. For future application of the Brussels I (Recast) Regulation however it makes a big difference.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.16, Heading 2.2.16.1.4 (p.198).

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

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

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

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

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

Crucial precedent, it would seem. Geert.

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

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