Should Bank St Petersburg anti-enforcement injunctions fall foul of the Brussels I-Regulation?

In Bank St Petersburg, the High Court issued an anti-enforcement injunction on 14 May. The Bank had obtained a number of Russian judgments in their favour (in interlocutory proceedings), which they aimed to have enforced in France and Bulgaria. Following the Russian judgments however parties agreed to have their core dispute (the control over a Russian company against the background of a restructuring operation of the  Arkhangelskys’ financial interest) judged exclusively by the English courts. The anti-enforcement injunction bans the Bank from having the judgments enforced in France, Bulgaria, or anywhere else.

Prima facie the injunction escapes all attention under the Brussels I Regulation: the judgments, enforcement of which is sought, originate from outside the EU. The choice of court clause is agreed between two parties domiciled outside of the EU, whence also falling outside the Regulation in its current version (this will change following the Brussels I-recast). (Notwithstanding Article 23(3)’s limited protection by instructing courts not named in the clause to desist – however Article 27’s lis alibi pendens rule would still protect the courts who despite  this instruction hear the case anyway).  Of particular note is also the subject-matter of the underlying dispute, which might be caught, if the Regulation were applied reflexively (such as the High Court did in Ferrexpo), by reflexive application in favour of the Russian courts of the exclusive Jurisdictional rule of Article 22(2).

These are altogether not very forceful points of entry for the Brussels I-Regulation to have a calling in the matter. Therefore this also rules out that the injunction might be caught by the ECJ’s general aversion vis–a-vis ‘anti-suit’ injunctions.

Geert.

The ECJ in Vapenik: on the perils of cross-interpretation in consumer law

The ECJ held in Vapenik some time ago (December 2013) and interprets Article 6(1) d of the European Enforcement Order (EEO) Regulation, Regulation 805/2004. This allows the Court faced with an uncontested claim in a consumer contract, with the consumer as debtor, to attach an enforcement order to its judgment, only if that court is the court of  the domicile of the consumer.

The Regulation does not further specify whether the creditor in this relationship has to be a ‘business person’ (sic) , acting in his commercial capacity, or whether relations between two persons, both acting in their ‘consumer’ capacity, might suffice. The long and the short of this discussion is that the EEO Regulation does not include the paraphernalia for ‘consumer contracts’ which both the Brussels I and the Rome I Regulation do include. (And which have been the subject of extensive case law – see tag ‘consumer’ on this blog). The ECJ justifiably refers to the need to interpret the EEO and the Brussels I Regulation coherently on this point. Justifiably: for both the Brussels I-Regulation and the EEO Regulation concern the same stage of conflict of laws: enforcement (with in the case of Brussels-I jurisdiction thrown in precisely to assist enforcement).

I disagree though with the Court’s reference to substantive European consumer law, in particular the Directive on unfair terms in consumer contracts. Not because it is particularly harmful in the case at issue. Rather because I do not think conflict of laws should be too polluted with substantive law considerations. (See also my approval of Kainz).  Do note that the ‘commercial’ nature of the counterparty to the contract, on which the ECJ ruled in Vapenik, is but one of many complications in consumer contracts under the Brussels I-Regulation. Further need for clarification therefore must not be ruled out (although national courts could take a lead from Vapenik and apply the Brussels I case-law mutatis mutandis).

Geert.

Does the EU need an arbitration Regulation?

the existence of parallel arbitration and judicial proceedings (lis pendens issues; see also here); and the circulation of arbitral awards and arbitration-related judgments, including the issue of the conclusive and preclusive effects of prior arbitral awards in relation to conflicting judgments (res judicata issues: including whether the priority which the Brussels I-Regulation concedes to the New York Convention, means that a court in a Member State can or indeed must give priority to a conflicting arbitral award over a judgment of the court of another EU Member State).

A great kick-off to a continuing debate. Geert.

 

Court of Appeal suggests in Dal Al Arkan that Choudhary reading of Article 22(5) Brussels I was per incuriam. (Exclusive jurisidiction for enforcement).

Postscript 24 November 2017 Dal Al Arkan was confirmed in Deutsche Bank AG v Sebastian Holdings Inc & Alexander Vik [2017] EWHC 459 and in Dennis v TAG Group [2017] EWHC 919 (Ch).  Permission for service out of jurisdiction is not required since the (now) Article 24(5) rule applies regardless of domicile of the parties.

In Dar Al Arkan, the Court of Appeal has suggested that the Court’s reading of Article 22(5) of the Brussels I-Regulation in Choudhary was  per incuriam (meaning, in short, without reference to relevant statutory law and case-law and hence not subject to the rule of precedent).

Article 22(5 provides for ‘exclusive jurisdiction’ ‘regardless of domicile’, ‘in proceedings concerned with the enforcement of judgments’, established for the ‘courts of the Member State in which the judgment has been or is to be enforced’.  The key word for this exclusive jurisdictional ground is ‘enforcement’. ‘Proceedings concerned with the enforcement of judgments’ means ‘those proceedings which can arise from recourse to force, constraint or distraint on movable or immovable property in order to ensure the effective implementation of judgments and authentic instruments‘ (Raport Jenard).

Difficulties arising out of such proceedings come within the exclusive jurisdiction of the courts for the place of enforcement, as was already the case in a number of bilateral Treaties concluded between a number of the original States, and also in the internal private international law of those States.

The Jenard report does not quote a specific reason for the reasoning behind this exclusivity, however one assumes that such proceedings are so intimately linked to the use of judicial authority and indeed force, that any complications in their enforcement ought to be looked at exclusively by the courts of the very State whose judicial authorities are asked to carry out the enforcement. In the words of the Court of Justice: ‘the essential purpose of the exclusive jurisdiction of the courts of the place in which the judgment has been or is to be enforced is that it is only for the courts of the Member State on whose territory enforcement is sought to apply the rules concerning the action on that territory of the authorities responsible for enforcement.’ [Case C-261/90 Reichert v Dresdner Bank, [1992] ECR 2149, para 26.).

Neither Convention, Regulation or Report Jenard clarify specifically for Article 22(5) whether the Article applies against non-EU domiciled defendants. In Choudhary, the Court of Appeal had held that it does not. However it had refrained from citing any relevant statutory or (ECJ) case-law authority. In Dar Al Arkan, the Court suggests that this renders judgment in Choudhary per incuriam in line of ECJ and scholarly authority. This is the right approach: the raison d’etre for Article 22(5) is a specific and narrowly construed one, as it is for all other parts of Article 22, in particular per the extract from Reichert, above. (A convincing case for Gleichlauf between court and applicable law).

For instance, the Article 22(5) ground for jurisdiction must not thwart jurisdiction of other courts who would have jurisdiction had the case not been brought as part of an enforcement difficulty. Therore, by way of example, the court which has jurisdiction on the basis of Article 22(5), cannot hear the defence against enforcement which is based on a request for compensation with a different mutual debt (Case 220/84, AS-Autoteile Service). Neither does Article 22(5) trump the enforcement Title of the Regulation.

Within those narrow confines, there is no reason not to extend the jurisdictional rule to defendants domiciled outside of the EU. Their non-dom status is immaterial to the proceedings. (Note that the issue on the ‘reflexive’ nature of 22(5) is not resolved by this judgment. Neither by the Brussels I recast, which does clarify (recital 14) that indeed non-EU domicile of the defendants is not relevant for the application of Article 24 of the new Brussels I-Regulation).

Geert.

 

Swiss ‘Sabena’ judgment interprets Lugano insolvency exception. Eventual recognition not impossible.

Update 22 January 2016 An amendment to the relevant parts of the Swiss PIL code is being suggested, which would make recognition of foreign insolvency proceedings less cumbersome.

In  SAirLines AG v Masse en faillite ancillaire de Sabena SA, the Swiss Bundesgericht (Federal High Court) held that the request by the liquidators of Sabena (the former Belgian national carrier) to have a Brussels Court of appeal judgment recognised and enforced in Switserland, falls within the ‘insolvency’ exception of the Lugano Convention (2007). It cannot therefore enjoy the swift recognition procedure included in that Convention. Instead, a claim under standard Swiss private international law in my view is still possbible (although, going by the Court’s obiter, see below, not promising).

The Brussels Court of Appeal in 2011 held SAirLines AG ( the holding company of the former Swiss Air Group) responsible for the insolvency of Sabena, by the misapplication of a number of crucial investment agreements (I summarise; that however is the gist of the dispute). SAirlines AG is itself being liquidated in Switserland. The Bundesgericht relied heavily on precedent in C-111/08 Alpenblumme where the insolvency exception of the Brussels I-Regulation was held as  as applying to a judgment of a court of Member State A regarding registration of ownership of shares in a company having its registered office in Member State A, according to which the transfer of those shares was to be regarded as invalid on the ground that the court of Member State A did not recognise the powers of a liquidator from a Member State B in the context of insolvency proceedings conducted and closed in Member State B.

It also referred to Gourdain. Per Gourdain, an action is related to bankruptcy only if it derives directly from the bankruptcy and is closely linked to proceedings for realising the assets or judicial supervision. It is the closeness of the link, in the sense of the case-law resulting from Gourdain, between a court action and the insolvency proceedings that is decisive for the purposes of deciding whether the exclusion in Article 1(2)(b) of the JR is applicable.

The mere fact that the liquidator is a party to the proceedings is not sufficient to classify the proceedings as deriving directly from the insolvency and being closely linked to proceedings for realising assets.

(Incidentally, for a Lugano-bound court to rely on the ECJ’s case-law on the insolvency exception may in my view in future be less obvious, at least as far as the ECJ’s case-law post the entry into force of the insolvency Regulation is concerned: the ECJ’s judgment on the respective scope of both Regulations is now obviously subject to there being the other, closely related Regulation. The Insolvency Regulation however does not apply to Switserland whence arguably the scope of the stand-alone Lugano insolvency exception need not necessarily evolve alongside that of the Brussels I-Insolvency exception).

In the case at hand, it might indeed be difficult to argue that the Belgian liquidators’ action while having an impact on the insolvency and the division of the assets, does not directly derive from the bankruptcy and would have existed even without such insolvency occurring.

The judgment does not mean that recognition and enforcement of the judgment is now totally out of the question (even the official court’s press release suggests as much in its title). Rather the Bundesgericht has simply held on the applicability of the Lugano Convention. As far as my legal German reaches (that may be an important caveat hence I would like to hear from Swiss, German or Austrian lawyers) the judgment does not prejudice enforceability under general Swiss private international law. (Although, with the same caveat, the language at para 10 of the judgment does not sound promising:

‘ Das belgische Urteil fällt aus den dargelegten Gründen nicht in den sachlichen Anwendungsbereich des Lugano-Übereinkommens. Dass das Urteil unter diesen Umständen nach den Regeln des IPRG anzuerkennen wäre, wird nicht geltend gemacht und ist aufgrund der insolvenzrechtlichen Natur der Streitsache auch nicht ersichtlich (vgl. BGE 139 III 236 E. 5.3). Bei dieser Sachlage kommt eine Anerkennung und Vollstreckbarerklärung von vornherein nicht in Frage, und es erübrigt sich, darüber zu befinden, ob die Anerkennungsvoraussetzungen gemäss dem LugÜ gegeben wären und ob die Beschwerdegegnerin überhaupt ein genügendes Rechtsschutzinteresse an einer selbstständigen Anerkennungsfeststellung und Vollstreckbarerklärung gemäss Art. 33 Abs. 2 und Art. 38 Abs. 1 LugÜ hätte, wie die Vorinstanz annahm, die Beschwerdeführerinnen hingegen bestreiten.).

 

To be continued, therefore?

Geert.

Negative jurisdiction conflicts covered by enforcement title of Brussels I – The ECJ in Gothaer

The ECJ has issued its ruling in C-456/11 Gothaer, the AG’s Opinion in which I reported earlier. The Court first of all confirmed that the term ‘judgment’ within the meaning of Article 32 of Regulation No 44/2001 covers a judgment by which a court of a Member State declines jurisdiction on the ground of an agreement on jurisdiction, even though that judgment is classified as a ‘procedural judgment’ by the law of the Member State addressed.

Moreover, the ECJ held that the court in the Member State in which enforcement is sought, is bound by the finding of the first court – made in the grounds of a judgment, which has since become final, declaring the action inadmissible – regarding the validity of that clause. To justify its finding, it refers in principle to the very definition of recognition as highlighted in the Report Jenard: recognition must ‘have the result of conferring on judgments the authority and effectiveness accorded to them in the State in which they were given’. Accordingly, a foreign judgment which has been recognised under Article 33 of Regulation No 44/2001 must in principle have the same effects in the State in which recognition is sought as it does in the State of origin. It further emphasizes the same arguments as flagged by the AG in coming to its finding.

On the peculiarity that in the case at issue, the choice of court clause points way from the EU, which raises the question what effect can be given to such clauses under the Jurisdiction Regulation, the court concedes that Article 23 does not apply, however, like the AG, it refers to the Lugano Convention, which contains a proviso very much like Article 23 JR. That to me is a bit of an awkward finding: whether the choice of court clause points to a Lugano State or not ought to be irrelevant. It would, through the recognition process, make choice of court in favour of Lugano States in some way less ‘not covered’ by the JR than those pointing to non-Lugano States (and by flagging Lugano, the Court leaves open the question of jurisdiction clauses in favour of non-Lugano States). A further argument made by the court in my view is more convincing, namely the ‘but for’ argument:

To allow a court of the Member State in which recognition is sought to disregard, as devoid of effect, the jurisdiction clause which a court of the Member State of origin has held to be valid would run counter to that prohibition of a review as to the merits, particularly in circumstances where the latter might well have ruled, but for that clause, that it had jurisdiction. (at 38)

Indeed typically the action in the court of origin is taken by the recalcitrant party (i.e. the one acting in spite of a choice of court clause), trying to convince the court of origin that it has jurisdiction on the basis of another Article in the JR, Whence indeed but for the clause, that court would most likely have exercised jurisdiction. A finding of validity of the clause therefore is likely to have been seriously considered. Allowing a court in another Member State to nevertheless exercise jurisdiction and refusing recognition and enforcement,  would make the JR nugatory.  This is in my view no different where as a result (such as here) no court in the EU will be able to hear the case.

Geert.

Court Judgment in Solvay: Roche distinguished, jurisdiction for provisional measures upheld in spite of Article 22(4) JR.

Solvay, case C-616/10 [I reported on the AG’s Opinion here; readers may want to have a quick look at that post before or after reading on], was decided by the Court on Thursday, 12 July. AG and Court revisited a number of old chestnuts in the application of the Brussels I Regulation (the Jurisdiction Regulation or ‘JR’): the exclusive ground of jurisdiction with respect to intellectual property rights, of Article 22(4); multipartite litigation in Article 6 JR; and finally provisional measures, referred to in Article 31.

Solvay accuses Honeywell Flourine Products Europe BV and Honeywell Europe NV of performing the reserved actions in the whole of Europe and Honeywell Belgium NV of performing the reserved actions in Northern and Central Europe. In the course of its action for infringement, on 9 December 2009 Solvay also lodged an interim claim against the Honeywell companies, seeking provisional relief in the form of a cross-border prohibition against infringement until a decision had been made in the main proceedings.  In the interim proceedings, the Honeywell companies raised the defence of invalidity of the national parts of the patent concerned without, however, having brought or even declared their intention of bringing proceedings for the annulment of the national parts of that patent, and without contesting the competence of the Dutch court to hear both the main proceedings and the interim proceedings.

On the applicability of Artice 6 (multipartite litigation), the Court agrees with the AG that Roche still holds: the same situation of law cannot be inferred where infringement proceedings are brought before a number of courts in different Member States in respect of a European patent granted in each of those States and those actions are brought against defendants domiciled in those States in respect of acts allegedly committed in their territory. A European patent continues to be governed, per the Munich Convention, by the national law of each of the Contracting States for which it has been granted.

However in the specific circumstances of a case, Roche may be distinguished: whether there is a risk of irreconcilable judgments if those claims were determined separately, is for the national court to determine. The Court of Justice instructs the national court to take into account, inter alia, the dual fact that, first, the defendants in the main proceeding are each separately accused of committing the same infringements with respect to the same products and, secondly, such infringements were committed in the same Member States, so that they adversely affect the same national parts of the European patent at issue.

On the application of Article 22(4), the Court emphasises the very different and unconnected nature of Article 22 and Article 31. They are part of different titles of the Regulation, etc. However, on the other hand, the application of one part of the Regulation may of course have an impact on the remainder, hence one cannot simply apply different parts of the Regulation in splendid isolation.

The COJ notes that according to the referring court, the court before which the interim proceedings have been brought does not make a final decision on the validity of the patent invoked but makes an assessment as to how the court having jurisdiction under Article 22(4) of the Regulation would rule in that regard, and will refuse to adopt the provisional measure sought if it considers that there is a reasonable, non-negligible possibility that the patent invoked would be declared invalid by the competent court. Hence there is no risk of conflicting decisions: the interim proceedings have been brought will not in any way prejudice the decision to be taken on the substance by the court having jurisdiction under Article 22(4) .

‘…does not make a final decision’: this effectively means that the Court simply states that as long as the main condition of Article 31 is met [measures covered by Article 31 need to be ‘provisional’; see also Case C-261/90 Reichert], Article 22(4) does not interfere with a court’s jurisdiction under Article 31.

Geert.

Of rocks and hard stones for national courts – Villalon AG in Mühlleitner: No need for restrictive approach to the protective jurisdictional grounds for consumers in Brussels I

Villalon AG has opined in Case C-190/11 Mühlleitner [Opinion as yet not available in English].

Article 15 of the Brussels I ‘Jurisdiction’ Regulation, offers protective jurisdictional rules for consumers, provided one or two conditions are met. Article 15(1)(c) [statutory law likes its subdivisions) offers the generic criterion for application:

‘Article 15

1.      In matters relating to a contract concluded by a person, the consumer, for a purpose which can be regarded as being outside his trade or profession, jurisdiction shall be determined by this Section, without prejudice to Article 4 and point 5 of Article 5, if: (…)

(c)      in all other cases, the contract has been concluded with a person who pursues commercial or professional activities in the Member State of the consumer’s domicile or, by any means, directs such activities to that Member State or to several States including that Member State, and the contract falls within the scope of such activities.’

In Pammer /Alpenhof,   Alpenhof had argued amongst others that that its contract with the consumer is concluded on the spot and not at a distance, as the room keys are handed over and payment is made on the spot, and that accordingly Article 15(1)(c) of Regulation No 44/2001 cannot apply. The Court of Justice had answered this with the very paragraph which has now tempted the Oberster Gerichtshof – Austria, into the preliminary review, para 87:

‘ In that regard, the fact that the keys are handed over to the consumer and that payment is made by him in the Member State in which the trader is established does not prevent that provision from applying if the reservation was made and confirmed at a distance, so that the consumer became contractually bound at a distance.’

This paragraph seemed to suggest ‘at a distance’ as the trigger for the application of Article 15(1)(c) which in turn led to the preliminary question:

Does the application of Article 15(1)(c) [   ] presuppose that the contract between the consumer and the undertaking has been concluded at a distance?

Villalon AG replied on 24 May, making specific reference to the history of Article 15, in particular with reference to the old text, under the Brussels Convention. That old provision seemed to imply that where the consumer’s contracting party had encouraged him to leave his Member State of domicile so as to conclude the contract elsewhere, the consumer could not make recourse to the protective regime. Other changes to the relevant title, too, suggested if anything that Council and Commission’s intention with the new provisions was definitely not to limit their scope of application: had they intended to do so, the AG suggests, the Institutions would have limited Article 15’s scope to contracts concluded at a distance. Court of Justice case-law hints at the same need for a wide approach [in particular, Ilsinger, where the Court of Justice held that the scope of Article 15(1)(c) appears ‘to be no longer being limited to those situations in which the parties have assumed reciprocal obligations.’]

The AG concludes with the suggestion that the reference to ‘distance’ in para 87 of Alpenhof refers to a factual circumstance, rather than a condition for application.

To many the conclusion may seem obvious, and the issue covered by acte clair (meaning the national court could have referred to the arguably obvious meaning of the provision, not to have to refer to the Court of Justice). In particular, the COJ has repeatedly emphasised the relevance of the consumer title in the Jurisdiction Regulation. On the other hand, however, the same Court has been quite anxious to give national courts detailled and specific instructions on the application of tiny details in the Regulation, making application of the acte clair doctrine quite difficult: many things one thought were clear, have been answered by the Court in unexpected ways.

National courts therefore are caught between the proverbial rock and the hard stone. Either they refer profusely, thereby feeding the cycle of micromanagement. Or they make extended use of acte clair, thereby risking unequal application of the Regulation (and potentially European Commission irk). On the issue of Article 15(1)(c) at least, the former would seem to prevail: in Slot, Case C-98/12 (hitherto still pending), the German Bundesgerichtshof has asked essentially the same question.

Geert.

 
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