Posts Tagged Directive 86/653

T v O: Unamar, Ingmar and ordre public /overriding mandatory law in Austria.

Tobias Gosch has excellent overview of T v O (why o why do States feel the need the hide the identity of companies in commercial litigation) in which the Austrian Supreme Court (Oberster Gerichtshof) ruled on whether potential claims under the Austrian Commercial Agents Act (Handelsvertretergesetz) can be brought before an Austrian court even if the underlying agency agreement contains an arbitration clause and is governed by the laws of New York.

The contested part of the litigation, as Tobias writes, concerns the following: the Agent conducted the procurement of sea freight business in Austria and other countries of the European Union for the Principal. Whilst the territorial scope of the Agent’s activities complies with the conditions for the international overriding mandatory applicability of the compensation provisions of the Directive as set out by the ECJ in Ingmar, the procurement of business is not covered by the relevant definition in the Directive, which only refers to the sale or purchase of goods. Including the procurement of business therefore is a form of gold-plating and the national law’s decision to do so does not uncontestedly fall under the protection of overriding mandatory law. In other words it does not necessarily override parties’ choice of law and ensuing choice of court.

The judgment refers inter alia to Unamar to justify its direction. Rather like, as I reported at the time, the Belgian Supreme Court, the Austrian Supreme Court, too, fails properly to assess whether the Austrian legislator intended the Austrian provisions to be of overriding mandatory law character per Rome I: “1. Overriding mandatory provisions are provisions the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organisation, to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract under this Regulation.

The European Court of Justice’s general statement in Unamar that gold-plated provisions may fall under overriding mandatory law, looks set by national courts to be turned into a matter of fact priority.  That surely at some point ought to be disciplined by the CJEU.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 3, Heading 3.2.8.3.

 

 

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

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

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

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

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

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

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

A rather complex and as yet unfinalised ruling.

Geert.

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Belgian supreme court holds on gold-plated provisions in Unamar. Appeal judgment annulled, case to be revisited.

Writing a case-note on Unamar is becoming an ever moving target: the Belgian Supreme Court (Hof van Cassatie /Cour de Cassation) held on 12 September, following the ECJ’s judgment in same – I would recommend reading my earlier posting. (Relevant databases, it would seem, do not yet hold a copy of the judgment in Cassatie. Please be in touch should you like one. (Language of the case: Dutch)).

The Court has annulled the Court of Appeal judgment for lack of due justification. In doing so, it (only) refers to the ECJ’s dictum, in full, followed by the conclusion that the Court of Appeal has not duly justified its decision. Now, Supreme Court judgments are not necessarily easy to read: often lengthy and verbatim reference is made in particular to applicants’ legal argument, followed by much more succinct conclusion by the court itself. Interpretation therefore hinges on being able to identify those specific arguments which may have swayed the court. I confess I have not found it easy to do so in this instance.

In my view, the ECJ’s judgment clearly implies a presumption against the mandatory nature of gold-plated provisions: ‘only if the court before which the case has been brought finds, on the basis of a detailed assessment, that, in the course of that transposition, the legislature of the State of the forum held it to be crucial, in the legal order concerned, to grant the commercial agent protection going beyond that provided for by the directive, taking account in that regard of the nature and of the objective of such mandatory provisions.‘ (emphasis added)

The Court of Appeal at Antwerp had focused its analysis on the correct transposition of the minimum requirements of the commercial agents directive in Bulgarian law. It had referred to discussion in the Belgian parliament, suggesting the altogether limited mandatory character of the Belgian rules from the moment a conflict of laws context is present.

In other words, paraphrasing the ECJ,  there was no ‘detailed assessment, that, in the course of that transposition, [Belgium] held it to be crucial, in [its] legal order, to grant the commercial agent protection going beyond that provided for by the directive. Neither, though, did applicants’ arguments, at least as referred to in the Supreme Court’s judgment, include such detailed assessment. Had there been so in applicants’ submission, I would have assumed the Court would have referred to it.

There is in my view no active requirement for the courts to scout for indications of mandatory character. The default position is against such character. In the absence of indications of detailed assessment (not just one or two references to passing discussion in parliament) by applicants themselves, I believe the Antwerp Court of Appeal has been wrongly rebuked for not having duly entertained such assessment.

The case now goes back to appeal (this time at the Brussels Court of Appeal).  The ball must be squarely in the court of the applicants. They seek to establish the mandatory character: they ought to provide the ‘detailed assessment’ that the ECJ requires, which the Brussels Court of Appeal at its turn may or may not be convinced by. (Please note that the Court does not address at all the issue of non-abitrability, which as I noted, was not part of the reference to the ECJ).

Geert.

 

 

 

 

 

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Unamar: Better get those travaux préparatoires out. The ECJ does not rule out gold-plating as being ‘mandatory rules’ however the final judgment is up to the forum. Legality of arbitration rules undecided.

I reported earlier on the AG’s Opinion in Unamar, Case C-184/12.  The Court held this morning.

The facts  of the case were as follows:  in 2005, Unamar, as commercial agent, and NMB, as principal, concluded a commercial agency agreement for the operation of NMB’s container liner shipping service. The agreement was for a one-year term and was renewed annually until 31 December 2008. It provided that it was to be governed by Bulgarian law and that any dispute relating to the agreement was to be determined by arbitration in Bulgaria. On 19 December 2008, NMB informed its agents that it was obliged, for financial reasons, to terminate their contractual relationship. The agency contract concluded with Unamar was extended only until 31 March 2009.

Unamar brought an action on 25 February 2009 before the Antwerp Commercial Court for an order that NMB pay various forms of compensation provided for under the Law on commercial agency contracts.  NMB in turn brought an action against Unamar for payment of outstanding freight.

In the proceedings brought by Unamar, NMB raised a plea of inadmissibility alleging that the Belgian court did not have jurisdiction to hear the dispute before it because there was an arbitration clause in the commercial agency contract. By judgment of 12 May 2009, after joining the cases referred to it by each of the parties, the court ruled that NMB’s plea of lack of jurisdiction was unfounded. As regards the applicable law in the two disputes brought before it, that court ruled, inter alia, that Article 27 of the Belgian Law on commercial agency contracts was a unilateral conflict-of-law rule which was directly applicable as a ‘mandatory rule’ and which thus rendered the choice of foreign law ineffective.

Appeal brought the case in judicial review before the ECJ. The Court did not rule on the issue of jurisdiction, given that the Hof van Cassatie had not raised this in its request. This means that the debate on whether Belgian’s trumping of foreign arbitration in cases such as these continues to be unresolved.

According to NMB, the application of the Law on commercial agency contracts to the dispute in the main proceedings cannot be considered to be ‘mandatory’ within the meaning of Article 7(2) of the Rome Convention, given that the dispute concerns a matter covered by Directive 86/653 and the law chosen by the parties is precisely the law of another Member State which has also transposed that Directive into its national law. Thus, according to NMB, the principles of the freedom of contract of the parties and legal certainty preclude the rejection of Bulgarian law in favour of Belgian law.

The Court emphasises the harmonising purpose of the commercial agency contracts Directive.  It also highlights that the wording of Article 7(2) of the Rome Convention does not expressly lay down any particular condition for the application of the mandatory rules of the law of the forum.  However the ECJ then insists (at 46) that the possibility of pleading the existence of mandatory rules under Article 7(2) of the Rome Convention does not affect the obligation of the Member States to ensure the conformity of those rules with EU law. The considerations underlying such national legislation can be taken into account by EU law only in terms of the exceptions to EU freedoms expressly provided for by the Treaty and, where appropriate, on the ground that they constitute overriding reasons relating to the public interest (reference is made to Arblade). The classification of national provisions by a Member State as public order legislation applies to national provisions compliance with which has been deemed to be so crucial for the protection of the political, social or economic order in the Member State concerned as to require compliance therewith by all persons present on the national territory of that Member State and all legal relationships within that State.

The plea relating to the existence of a ‘mandatory rule’ within the meaning of the legislation of the Member State concerned, as referred to in Article 7(2) of the Rome Convention, must therefore be interpreted strictly: for otherwise it risks upsetting the core rule of that Convention, which is parties’ freedom to choose applicable law.

The Court finally holds that it is for the Belgian court,

in the course of its assessment of whether the national law which it proposes to substitute for that expressly chosen by the parties to the contract is a ‘mandatory rule’, to take account not only of the exact terms of that law, but also of its general structure and of all the circumstances in which that law was adopted in order to determine whether it is mandatory in nature in so far as it appears that the legislature adopted it in order to protect an interest judged to be essential by the Member State concerned. As the Commission pointed out, such a case might be one where the transposition in the Member State of the forum, by extending the scope of a directive or by choosing to make wider use of the discretion afforded by that directive, offers greater protection to commercial agents by virtue of the particular interest which the Member State pays to that category of nationals.‘ (at 50)

The Court then distinguishes Ingmar, in which the law which was rejected was the law of a third country, while in Unamar, the law which was to be rejected in favour of the law of the forum was that of another Member State which, according to all those intervening and in the opinion of the referring court, had correctly transposed Directive 86/653.

The Court concludes ‘Articles 3 and 7(2) of the Rome Convention must be interpreted as meaning that the law of a Member State of the European Union which meets the minimum protection requirements laid down by Directive 86/653 and which has been chosen by the parties to a commercial agency contract may be rejected by the court of another Member State before which the case has been brought in favour of the law of the forum, owing to the mandatory nature, in the legal order of that Member State, of the rules governing the situation of self-employed commercial agents only if the court before which the case has been brought finds, on the basis of a detailed assessment, that, in the course of that transposition, the legislature of the State of the forum held it to be crucial, in the legal order concerned, to grant the commercial agent protection going beyond that provided for by the directive, taking account in that regard of the nature and of the objective of such mandatory provisions.‘ (emphasis added)

The Courts instructions are therefore clear: there is a strong presumption against mandatory law, in light of the correct implementation by Bulgaria; and the national court has to conduct a proper review of the preparatory works of the relevant Belgian Act which transposed the Directive. Discussions in Belgian scholarship reveal that there is no clear view on the exact nature of the ‘mandatory’ character of the gold-plated provisions.

The ECJ does also refer in passing to the Rome Regulation. This Regulation introduces two types of mandatory provisions: simple ‘mandatory’ ones, with reference to national as well as to EU law and with specific reference to gold-plating for the latter; and ‘overriding mandatory’ ones, with reference to the Arblade criteria but no reference to gold-plating.

It is not therefore entirely certain what the precedent value is of Unamar viz the future application of the Regulation, neither is it in my view what the Hof van Cassatie’s research of the travaux préparatoires of the 1995 Act will reveal.

Geert.

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‘The Bundesgerichtshof was wrong to deny choice of court in favour of Virginia, on the basis of EU mandatory law.’ Discuss.

Such would be the title for a perfect exam question for an advanced conflict class. It would also kill the bird of making the point of German law and scholarship being particularly relevant to conflict of laws. In September 2012 (only just now brought to my attention), the Bundesgerichtshof denied a choice of court agreement in favour of the courts in Virginia. The agreement was part of a contract between a German agent and a principal from the US and co-incided with a choice of law clause, also in favour of the laws of Virginia. Under Virginian law, the agent would not have a right to indemnity, contrary to the commercial agents Directive, which was held in Ingmar to be part of EU mandatory law: that was enough for the German courts to refuse to accept the validity of the choice of court clause, and to accept jurisdiction for German courts on the basis effectively of a minimum presence rule (general jurisdiction over a defendant anywhere it maintains a registered branch or office).

Progress is to varying degree based on assimilation: I shall not therefore repeat the excellent analysis of Jennifer Antomo here.  Choice of court clauses in favour of non-EU courts are not covered by the Brussels I-Regulation. Yet when national courts refuse to acknowledge such choices and assume jurisdiction, the Rome I Regulation on applicable law for contracts, does come into play. In effect, the German court here refuses to acknowledge the clause on the basis of applicable law considerations, whence EU law is far from absent in the case. Some sort of judicial review with the ECJ might therefore have been warranted.

Geert.

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Wahl AG in Unamar: national gold-plating of Union law does qualify as lois de police under the Rome Convention

I flagged earlier that regardless of the outcome for the Unamar case itself, an important consideration would be what the Court’s eventual answer will teach us about the Rome I Regulation on the applicable law for contracts (as opposed to its Treaty predecessor, the Rome Convention, which applies to the case at issue). Wahl AG’s Opinion was published this morning (as often, the English version was not yet available at the time of writing). It focuses almost entirely on the Rome Convention – for which from a legal point of view it cannot be faulted.

Belgium’s stronger protection of the agent, long held by Belgian law to be of overriding mandatory rules calibre, gold plates the regime of the Commercial Agents Directive, Directive 86/653. In Unamar, parties have agreed on Bulgarian law being applicable law (as well as incidentally on the case having to go to arbitration in Bulgaria first, attempting to circumvent Belgian law which proscribes the use of arbitration for disputes such as those at issue; the AG notes that this issue was not actually part of the questions referred by the Hof van Cassatie, hence he does not entertain it). The question therefore arises as to whether Belgian law, the lex fori, can justifiably trump Bulgarian law of which no suggestion is being made that it does not meet the minimum standard of the precited Directive.

In view of the minimum harmonisation character of the commercial agents Directive, and of there being no indication that such application leads to infringement of primary EU law, the AG suggests that Belgium courts are justified to qualify the Belgian gold-plating as being of overriding mandatory character.

As I noted when I flagged the reference, in my view the answer would have to be different under the Rome I Regulation. In the absence of a reference to gold plating in Article 9, and (arguably) its presence in Article 3, effect utile requires that the allowance for national rules of overriding mandatory nature, does not cover gold plating. However in the Rome Convention which is applicable to the case referred, EU law as mandatory law does not figure at all, and the room for overriding rules is much wider than it is in the Rome Regulation.

One will have to wait for the ECJ’s judgment to assess whether the Court itself will reveal anything on its position vis-a-vis the Regulation.

Geert.

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Unamar and lois de police in the Rome Convention /Rome I Regulation

The Court of Justice has an opportunity to clarify the exact relationship between mandatory and overriding mandatory provisions of EU and national law under the Rome Convention on applicable law to contracts (! do note that the issue is formulated differently in the Rome Regulation).

‘Overriding mandatory provisions’ is what French and Belgian private international law refers to as ‘lois de police‘, also known as lois d’application immédiate or lois d’application nécessaire. Lois de police is  the term used in the French version of the Regulation. In Arblade, which concerned free movement of services and the application of lois de police in Belgian legal practice, the Court of Justice described ‘public order legislation’ as

national provisions compliance with which has been deemed to be so crucial for the protection of the political, social or economic order in the Member State concerned as to require compliance therewith by all persons present on the national territory of that Member State and all legal relationships within that State

In the Rome I Regulation on applicable law for contracts, room is made for overriding mandatory provisions as follows:

Article 9

Overriding mandatory provisions

1. Overriding mandatory provisions are provisions the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organisation, to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract under this Regulation.

2. Nothing in this Regulation shall restrict the application of the overriding mandatory provisions of the law of the forum.

3. Effect may be given to the overriding mandatory provisions of the law of the country where the obligations arising out of the contract have to be or have been performed, in so far as those overriding mandatory provisions render the performance of the contract unlawful. In considering whether to give effect to those provisions, regard shall be had to their nature and purpose and to the consequences of their application or non-application.

Under the Rome Convention, which ratione tempore applies to the contract at issue, room for manoeuvre for the forum was wider:

Article 7 – Mandatory rules

1. When applying under this Convention the law of a country, effect may be given to the mandatory rules of the law of another country with which the situation has a close connection, if and in so far as, under the law of the latter country, those rules must be applied whatever the law applicable to the contract. In considering whether to give effect to these mandatory rules, regard shall be had to their nature and purpose and to the consequences of their application or non-application.

2. Nothing in this Convention shall restrict the application of the rules of the law of the forum in a situation where they are mandatory irrespective of the law otherwise applicable to the contract.

Belgium’s stronger protection of the agent, long held by Belgian law to be of overriding mandatory rules calibre, gold plates the regime of the Commercial Agents Directive, Directive 86/653. In Unamar, parties have agreed on Bulgarian law being applicable law (as well as incidentally on the case having to go to arbitration in Bulgaria first, attempting to circumvent Belgian law which proscribes the use of arbitration for disputes such as those at issue). The question therefore arises as to whether Belgian law, the lex fori, can justifiably trump Bulgarian law of which no suggestion is being made that it does not meet the minimum standard of the precited Directive.

Were the case to be decided under the Rome I Regulation, I would argue in view of effet utile, that in the absence of a reference to gold plating in Article 9, and (arguably) its presence in Article 3, that the allowance for national rules of overriding mandatory nature, does not cover gold plating. However in the Rome Convention which is applicable to the case referred, EU law as mandatory law does not figure at all, and the room for overriding rules is much wider than it is in the Rome Regulation.

A reference of this kind is long overdue. What remains to be seen as what the Court’s eventual answer will teach us about the Rome Regulation (as opposed to the Convention).

Geert.

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