Posts Tagged employees
Merinson v Yukos: Dutch settlement following employment contract. Appeal denied. England has full jurisdiction as domicile of the defendant.
In  EWCA Civ 830 the Court of Appeal has dismissed the appeal against Yukos v Merinson which I reviewed here – review which readers may need to appreciate the judgment. Three issues were considered by Gross LJ at the Court of Appeal:
1. Are the Damages Claims and/or the Annulment Claims “matters relating to [an] individual contract of employment” within the meaning of Article 20(1)?>>>Salter DJ’s answer at the High Court was YES. I suggested in my review that that finding should not have been made without considering the lex causae of the employment contract: Rome I in my view should have been engaged here. Both Salter DJ and Gross LJ (at 27 ff) were persuaded however by the highly material nexus between the annulment claims – whether considered together with or separately form the damages claims (Gross LJ distinguished Aspen Underwriting in the process).
2. If so, is the Settlement Agreement “an agreement .. entered into after the dispute has arisen” within the meaning of Article 23(1)?>>>Salter DJ’s answer was negative, on the basis of extensive reference to the Jenard Report and Convention and Regulation scholarship. Gross LJ agrees – I continue to find that conclusion unconvincing.
3. Further, is the English court, in any event, precluded from entertaining the Annulment Claims by Chapter IV of the Recast Judgments Regulation? >>>Here the Court of Appeal made the High Court’s reasoning its own, much more succinctly than its entertaining of the other questions.
Plenty to discuss here for the 3rd ed of the Handbook.
Bosworth (Arcadia Petroleum), and Pillar Securitisation v Hildur Arnadottir. Two AGs on protected categories (consumers, employees) in the Lugano Convention- therefore also Brussels I Recast.
Update 11 April 2019. The CJEU held today in Bosworth: no contract for employment. the AG’s Opinion and Gross J’s analysis confirmed.
Update 06 02 2018 I have inserted in the analysis below of Arcadia, a reference to De Bloos, in the context of the forumshopping considerations (I have also tidied up punctuation in that section).
Twice last week did the Lugano Convention’s protected categories title feature at the Court of Justice. On Tuesday, Szpunar AG opined in C-694/17 Pillar Securitisation v Hildur Arnadottir (consumer protection), and on Thursday Saugmansgaard ØE opined in C-603/17 Bosworth (Arcadia Petroleum) (employment contracts).
The issues that are being interpreted are materially very similar as in Brussels I Recast hence both evidently have an impact on the Brussels I Recast Regulation, too.
At stake in Pillar Securitisation (no English version of the Opinion at the time of writing) is the meaning of ‘outside his trade or profession’ in the consumer title. Advocate General Szpunar takes the case as a trigger to fine-tune the exact relationship between private international law such as was the case, he suggests, in Kainz and also in Vapenik.
I wrote in my review of Vapenik at the time: ‘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).’
Ms Arnadottir’s case relates to the Kaupting reorganisation. Her personal loan exceeded one million € and therefore is not covered by Directive 2008/48 on credit agreements for consumers (maximum threshold there is 75K). Does that exclude her contract being covered by Lugano’s consumer Title?
The Directive’s core notion is ‘transaction’, as opposed to Lugano’s ‘contract’ (at 30 ff). And the Advocate-General of course has no option but to note the support given by the Court to consistent interpretation, in Vapenik. Yet at 42 ff he suggests a narrow reading of Vapenik, for a variety of reasons, including
- the presence, here, of Lugano States (not just EU Member States);
- the need for consistent interpretation between Lugano and Brussels (which does not support giving too much weight to EU secondary law outside the private international law sphere);
- and, most importantly, Kainz: a judgment, unlike Vapenik, which directly concerns Brussels I (and therefore also the link with Lugano). One of the implications which as I noted a the time I like a lot, is precisely its respect for the design and purpose of private international law rules as opposed to other rules of secondary law; and within PIL, the distinction between jurisdiction and applicable law.
At 52 ff Advocate General Szpunar rejects further arguments invoked by parties to suggest the consumer title of the jurisdictional rules should be aligned with secondary EU consumer law. His line of reasoning is solid, however: autonomous interpretation of EU private international law prevents automatic alignment between consumer law and PIL.
Should the CJEU follow its first Advocate General, which along Kainz I suggest it should, no doubt distinguishing will be suggested given the presence of Lugano parties in Pillar Securitisation – yet the emphasis on autonomous interpretation suggest a wider calling.
C‑603/17 Bosworth v Arcadia then was sent up to Luxembourg by the UK’s Supreme Court [UKSC 2016/0181, upon appeal from  EWCA Civ 818]. It concerns the employment Title of Lugano 2007. (Which only the other week featured at the High Court in Cunico v Daskalakis).
As helpfully summarised by Philip Croall, Samantha Trevan and Abigail Lovell, the issue is whether the English courts have jurisdiction over claims for conspiracy, breach of fiduciary duty, dishonest assistance and knowing receipt brought against former employees of certain of the claimant companies now domiciled in Switzerland. In the main proceedings, the referring court must therefore determine whether the courts of England and Wales have jurisdiction to rule on those claims or whether it is the courts of Switzerland, as courts of the domicile of the former directors implicated, that must hear all or part of the claims.
Gross J at the Court of Appeal had applied Holterman and Brogsitter, particularly in fact the Opinion of Jääskinen AG in Brogsitter – albeit with caution, for the AG’s Opinion was not adopted ‘wholesale’ by the CJEU (at 58, Court of Appeal). The mere fact that there is a contract of employment between parties is not sufficient to justify the application of the employment section of (here) the Lugano Convention. Gross J at 67: “do the conspiracy claims relate to the Appellants’ individual contracts of employment? Is there a material nexus between the conduct complained of and those contracts? Can the legal basis of these claims reasonably be regarded as a breach of those contracts so that it is indispensable to consider them in order to resolve the matter in dispute?”. Gross J had answered that whilst not every conspiracy would fall outside the relevant section, and those articles could not be circumvented simply by pleading a claim in conspiracy, in the circumstances of this case, however precisely the test was formulated, the answer was clearly “no”. Key to the alleged fraud lay in his view not in the appellants’ contracts of employment, but in their de facto roles as CEO and CFO of the Arcadia Group.
The facts behind the case are particularly complex, as are the various wrongdoings which the directors are accused of and there is little merit in my rehashing the extensive summary by the AG (the SC’s hearings leading to the referral lasted over a day and a half).
Saugmansgaard ØE essentially confirms Gross J’s analysis.
Company directors who carry out their duties in full autonomy are not bound to the company for which they perform those duties by an ‘individual contract of employment’ within the meaning of the employment section – there is no subordination (at 46). Note that like Szpunar SG, Saugmansgaard ØE too emphasises autonomous interpretation and no automatic colouring of one field of EU law by another: ‘the interpretation which the Court of Justice gives to a concept in one field of EU law cannot automatically be applied in a different field’ (at 49).
In the alternative (should the CJEU accept a relationship of employment), he opines that a claim made between parties to such a ‘contract’ and legally based in tort does fall within the scope of that section where the dispute arose in connection with the employment relationship. Secondly, he argues that an ‘employer’ within the meaning of the provisions of that section is not necessarily solely the person with whom the employee formally concluded a contract of employment (at 109). What the AG has in mind are group relations, where ‘an organic and economic link’ between two companies exists, one of whom sues even if the contract of employment is not directly with that company.
It is in this, subsidiary section, at 66 ff, that the AG revisits for the sake of completeness, the difference between ‘contract’ and ‘tort’ in EU pil. This is a section which among others will delight (and occupy) one of my PhD students, Michiel Poesen, who is writing his PhD on same. Michiel is chewing on the Opinion as we speak and no doubt will soon have relevant analysis of his own.
At 82 ff the AG points to the difficulties of the Brogsitter and other lines of cases. ‘(T)he case-law of the Court is ambiguous, to say the least, in so far as concerns the way in which Article 5(1) and Article 5(3) of the Brussels I Regulation and the Lugano II Convention are to be applied in cases where there are concurrent liabilities. It would be useful for the Court to clarify its position in this regard.’
At 83: it is preferable to adopt the logic resulting from [Kalfelis] and to classify a claim as ‘contractual’ or ‘tortious’ with regard to the substantive legal basis relied on by the applicant. At the very least, the Court in the AG’s view should hold on to a strict reading of the judgment in Brogsitter’: at 79: ‘the Court meant to classify as ‘contractual’ claims of liability in tort the merits of which depend on the content of the contractual duties binding the parties to the dispute.’ This in the view of the AG should be so even if (at 84) this authorises a degree of forum shopping, enabling the applicant to choose jurisdiction, with an eye to the appropriate rules. The AG points out that forum shopping particularly for special jurisdictional rules, is not at all absent from either Regulation or Convention.
Forum shopping considerations in (now) Article 7(1) have been an issue since the seminal case of De Bloos, C-14/76: at 13: ‘for the purposes of determining the place of performance within the meaning of Article 5, quoted above, the obligation to be taken into account is that which corresponds to the contractual right on which the plaintiff’s action is based.’ Among others Brogsitter may be seen as an attempt by the Court to manage the forum shopping considerations arising from De Bloos. It would be good for the Court to clarify whether De Bloos is still good authority, given the many textual changes and case-law considerations of (now) Article 7(1).
Finally, there is of course an applicable law dimension to the dispute although this does not feature in the reference. The relationships between companies and their directors are governed not by employment law, but by company law (at 52). For an EU judge, the Rome I and Rome II Regulations kicks in. Rome I contains, in Article 8, provisions relating to ‘individual employment contracts’, however it also provides, in Article 1(2)(f), that ‘questions governed by the law of companies’ concerning, inter alia, the ‘internal organisation’ of companies are excluded from its scope (at 55). Rome II likewise has a company law exemption. That puts into perspective the need (or not; readers know that I am weary of this) to apply Rome I and Brussels /Lugano consistently.
One had better sit down for a while when reviewing these Opinions.
Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 126.96.36.199, Heading 188.8.131.52, Heading 184.108.40.206.9.
Yukos v Merinson: A Brussels I jurisdictional bonanza. Particularly the issue of ‘after the issue has arisen’ for protected categories.
I have been posting a series of comments in recent weeks, with more on the way, on cases that caught my attention pre-exam period. They were all candidates for exam questions except much as I would want to, I can only subject my students to that many developments in conflict of laws. Another one in this series of ‘overdue’ postings:  EWHC 335 (Comm) Yukos v Merinson.
From Salter DJ’s summary of the facts: (excuse their length – this is rather necessary to appreciate the decision)
_____________The defendant was employed by the first claimant under a contract of employment governed by Dutch law. Various proceedings were commenced before the Dutch courts by the defendant and entities within the claimant group in relation to the defendant’s employment. The parties reached terms of settlement of those proceedings, which were embodied in a settlement agreement executed by the parties and subject to the exclusive jurisdiction of the Dutch courts. The settlement agreement was in turn approved by the Dutch courts, with the effect that it became a “court settlement” within the meaning of article 2 of Brussels I Recast. Subsequently, upon certain additional facts as to the defendant’s conduct being learnt by the claimants, they brought a claim against the defendant in England, where the defendant was then domiciled, seeking damages for losses allegedly suffered as a result of the defendant’s breach of duties under his employment contract (“the damages claims”) and a declaration that the settlement agreement did not bar the damages claims, alternatively an order that the settlement agreement should be annulled under Dutch law on the grounds of error and/or fraud (“the annulment claims”). The defendant applied for a declaration that the courts of England and Wales had no jurisdiction to try the claims brought and an order that the claim form be set aside, on the grounds that all of the claims fell within the settlement agreement conferring exclusive jurisdiction on the Dutch courts, which therefore had exclusive jurisdiction by operation of Article 25 Brussels I Recast, and (1) in respect of the annulment claims, Article 25 could not be overridden by Articles 20(1) and 22(1) requiring proceedings to be brought in the courts of the state of the defendant’s domicile at the time of issue of the claim form, since those claims were not “matters relating to [an] individual contract of employment” within the meaning of Article 20(1); (2) in respect of all claims, Article 23(1) allowed the rule in Articles 20(1) and 22(1) to be departed from, since the settlement agreement had been entered into after the dispute had arisen; and (3) the settlement agreement being a juridical act of the Dutch courts, the English courts were precluded by Article 52 from reviewing its substance in respect of the annulment claims and, the settlement agreement also being a court settlement, the English courts were required by Articles 58 and 59 to recognise and enforce it unless it was manifestly contrary to public policy._______________
All in all, plenty of issues here, and as Salter DJ was correctly reassured by counsel for the various parties, not any that the CJEU has had the opportunity to rule on. Four issues were considered:
1. Are the Damages Claims and/or the Annulment Claims “matters relating to [an] individual contract of employment” within the meaning of Article 20(1)?>>>Salter DJ’s Answer: 25 ff: YES. His main argument: the Settlement Agreement set out the terms on which Mr Merinson’s contract of employment came to an end. In so doing, it also varied the terms of that contract of employment. The terms of the Settlement Agreement now form part of the contractual terms on which Mr Merinson was employed, and which govern the rights and liabilities arising out of the employment relationship between him and the Yukos Group. In my view this finding should not have been made without considering the lex causae of the employment contract: Rome I in my view should have been engaged here.
2. If so, is the Settlement Agreement “an agreement .. entered into after the dispute has arisen” within the meaning of Article 23(1)?>>>Answer (on the basis of extensive reference to Brussels Convention and Regulation scholarship): a dispute will have “arisen” for the purposes of these Articles only if two conditions are satisfied: (a) the parties must have disagreed upon a specific point; and (b) legal proceedings in relation to that disagreement must be imminent or contemplated. Salter DJ correctly emphasises the protective policy which underlies these provisions, however I am not confident he takes that to the right conclusion. Common view on the protective regime is that when parties have had the privilege of legal advice, they can be assumed to have been properly informed: the position of relative weakness falls away.
3. Further, is the English court, in any event, precluded from entertaining the Annulment Claims by Chapter IV of the Recast Judgments Regulation? >>>The issue of court settlements was specifically considered in the Brussels Convention, and the Jenard Report, given their importance in Dutch and German practice. In C-414/92 Solo Kleinmotoren the CJEU (at 17) held ‘to be classified as a “judgment” within the meaning of the Convention, the act must be that of the court belonging to a Contracting State and ruling on its own authority on points in dispute between the parties.’: considering Dutch expert evidence on the issue, the decision here is that despite the limited authority under Title III Brussels I Recast for other Courts to refuse to recognise a court settlement (ordre public in essence), it is not a ‘judgment’. Salter DJ concludes on this point that normal jurisdictional rules to challenge the settlement apply. At 81 he suggests, provisionally, that ‘it would nevertheless be open to this court in those circumstances to case manage the enforcement application and the set-aside action, so that they are dealt with together, the result of the action determining the enforcement application. Fortunately, I am not required to wrestle with those practical complexities in order to determine the present application, and I make no decision one way or another on any of these matters. There is no application before me to enforce the Dutch Court Settlement, merely an application for a declaration that the court “has no jurisdiction to try the Claimants’ claims”.‘
This insight into the case-management side of things, however, does highlight the fact that the findings on the jurisdiction /enforcement interface appear counterintuitive. Particularly in cases where the English courts would not have jurisdiction viz the settlement, but would be asked to enforce it – which they can only refuse on ordre public grounds, the solution reached would not work out at all in practice.
4. And finally what are the consequences, as regards jurisdiction, of the decisions on the first three of these issues?>>>Held: the English court, as the court of the Member State in which Mr Merinson was domiciled at the date this action was commenced, has jurisdiction in relation to all of the claims made in the present action.
There is much more to be said on each of the arguments – but I must not turn the blog into a second Handbook, I suppose.
FC Black Stars Basel: international arbitration cannot circumvent non-arbitrability of employment disputes.
I post this item mostly as a point of reference for discussions on mandatory law, employment disputes, and the use of arbitral tribunals to circumvent limitations in domestic litigation.
In FC Black Stars Basel 4A_7/2018, the Swiss Supreme Court held in April that mandatory Swiss law on limited arbitrability of domestic employment disputes, cannot be circumvented by submitting dispute to international arbitration. Schellenberg Witmer have succinct analysis here.
Note in particular 2.3.3:
Vor diesem Hintergrund erscheint es zur Vermeidung von Wertungswidersprüchen folgerichtig, den in Art. 341 OR angeordneten Schutz der sozial schwächeren Partei im Rahmen der Beurteilung der freien Verfügbarkeit nach Art. 354 ZPOinsoweit in das Prozessrecht hinein zu verlängern, als Schiedsvereinbarungen nicht uneingeschränkt zugelassen werden
Update 28 December 2018 the Court of Appeal in  EWCA Civ 2748 has confirmed. Rome I issues no longer featured in the analysis.
Update 10 November 2017:  UKEAT 0056_17_1011: The Appeals Tribunal has confirmed.
Thank you Steve Peers for alerting me to the relevance of the conflict of laws and the Rome I Regulation in particular in the recent Aslam et al v Uber Employment Tribunal decision. The case essentially revolves around whether claimants are employees – it is a pivotal case determining the immediate regulatory context for this part of the ‘sharing economy’. Para 87 is a particularly delightful expression of scepticism towards the sharing economy’s claims (further highlights are here).
Conflict of laws is addressed at para 103 onwards, a completion of the analysis in case of rejection of the tribunal’s view that the UK company in the Uber group employs claimants, and instead one would have to regard Uber BV (of The Netherlands) as employer. I do not think the tribunal expresses itself entirely clearly on Rome I.
If Uber BV is the employer, reclassification of the contract as one of employment (as opposed to one for the provision of services), makes the choice of law for Dutch law partially inoperable (not, as the tribunal notes at para 105 in fine, replaced with the laws on England and Wales). Next the tribunal (paras 106-109) continues to speak of ’employer’ but reviews application of Article 3 (including the application of Article 3(3)’s ‘purely domestic contracts’. If there is a contract of employment, in my view only Article 3(1) and (2) can have any impact on the analysis: the remainder of Article 3 concerns provisions for which Article 8 itself provides exhaustive rules.
From para 110 onwards, the tribunal does more tidily address Article 8 Rome I and holds, after reference to counsel view, that if indeed the Dutch BV is the employer (for it does not suggest that the contract would have to be qualified as one of services), Dutch law would largely apply, except for a limited number of provisions of English law by way of mandatory rules. (Reference to Article 21’s ordre public is justifiably rejected).
I am assuming Uber are appealing. Expect the conflicts analysis to return.
(Handbook of) European private international law, Chapter 3, Heading 3.2.5.