Tag: Employment

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CHEP. When employees’ alleged conspiracy ‘relates to’ contract of employment.

CHEP Equipment Pooling BV v ITS Ltd & Ors [2021] EWHC 2485 (Comm) concerns in the main when a claim between two parties who are in a relation of employment, ‘relates to’ that employment contract. (In the case concerned, leading to lack of jurisdiction against one of the defendants).

At issue is whether 3 former senior employees had essentially defrauded claimant by negotiating on its behalf, price-inflated audit and supply agreements with corporations which those employees (in)directly owned and /or controlled. Causes of action are breach of fiduciary duty; dishonest assistance of the breaches of fiduciary duty by the other former employees; and unlawful means conspiracy.

Whether any of these claims engage A22 jurisdiction needs to be assessed viz each claim separately: [44]: Cuneo Resources NV and others v Daskalakis and others [2019] EWHC 87 (Comm).  Among others Bosworth was discussed in the subsequent analysis. After reviewing ia the employment history of defendant with the claimant, and the bond between the alleged dishonesty and the employment contract,  Jacobs J concludes [107]

the claims relate to Mr de Laender’s contract of employment, and also …the connection between Mr de Laender’s contract and the conduct relied upon is material. It cannot be described as tenuous, or a small part of the picture, or simply part of the history. I also consider that the legal basis of the claims can reasonably be regarded as a breach of his contract, so that it is indispensable to consider the contract in order to resolve the matters in dispute.

Obiter the judge reviews locus delicti commissi and locus damni under A7(2). For Handlungsort, Jacobs J holds that the claimant has the better of the argument that that is located in England: particularly seeing as the main alleged conspirator was domiciled in England at the time the various strands of the action materialised. For locus damni – Erfolgort, the conclusion [133] is one of Mozaik per Shevill, particularly in view of a corporate reorganisation (incl a move to England) which occurred midway through the conspiracy.

Geert.

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ZN v [Bulgarian Consulate]. Confirming Mahamdia and the ‘international’ in ‘private international law’.

In C-280/20, ZN v Generalno konsulstvo na Republika Bulgaria v grad Valensia, Kralstvo Ispania [the Bulgarian consulate], the CJEU last week essentially confirmed CJEU C-154/11 Mahamdia. ZN is a Bulgarian national residing in Sofia who holds a permit to reside in Spain, where she provided services relating to the activity of the Consulate General. ZN brought an action in Bulgaria against the Consulate General seeking, first, recognition of her employment relationship and, second, payment of compensation in lieu of paid annual leave not taken during a period in which she provided services concerning the receipt of documents. The Consulate General contests the jurisdiction of the Bulgarian courts and invokes the jurisdiction of the Spanish courts as the courts of ZN’s place of employment. The referring court has doubts as to the existence of cross-border implications in so far as the dispute at issue in the main proceedings concerns a Bulgarian employee and a Bulgarian employer, and the fact that their legal relationship is closely connected with the Republic of Bulgaria.  It also notes that Bulgarian law expressly provides that, in the case of contracts concluded between a Bulgarian employer established abroad and a Bulgarian national working abroad, any disputes may be examined only by the Bulgarian courts.

In Mahamdia the Court first of all applied the Vienna Convention on Diplomatic Relations and held that an embassy often acts iure gestionis, not iure imperii, and that under the Vienna rules, the EU is perfectly entitled to apply the Regulation given that it applies to ‘civil and commercial’ matters. In that vein, an embassy may very well have to be regarded as an ‘establishment’ within the meaning of Article 20(2) (on employment contracts). In ZN, the Court [28-29] suggests that services in connection with the receipt of documents in files opened at the consulate by Bulgarian nationals and the management of those files, do not fall within the exercise of public powers and do not risk interfering with the security interests of the Republic of Bulgaria. Hence it strongly suggests the issue is a ‘civil and commercial one’, leaving final determination of same to the referring court. I would intuitively have thought that processing documents at a country’s consulate quite au contraire, does engage closely with diplomatic functions that must be qualified as iure imperii, particularly seeing as before said processing one is likely not to have knowledge of the documents’ content.

On the issue of ‘international element’ required to trigger Brussels Ia, the Court per Mahamdia considers a consulate to be an ‘establishment’ of one Member State in another Member State. Hence one of the parties to the dispute must be considered to be domiciled or habitually resident in a Member State other than that of the court seised [37]: the cross-border element is clearly present, which will not surprise many of us. One also assumes that the  aforementioned Bulgarian rule on exclusive jurisdiction for employment disputes between Bulgarians even with an international element present, does not meet with EU law requirements.

Geert.

EU Private International Law, 3rd ed. 2021, para 2.35, para 2.128.

 

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Semtech v Lacuna. When do proceedings alleging copyright violation ‘relate to’ contract of employment.

Semtech Corporation & Ors v Lacuna Space Ltd & Ors [2021] EWHC 1143 (Pat) at its core concerns an alleged breach of copyright between competitors, with former employees of one acting as a trojan horse in the conspiracy. Purvis DJ held [52 ff] with little difficulty (and with reference ia to Bosworth) that the claim however ‘relates to’ the contract of employment of the two main alleged culprits: ‘ the issues of the scope of their authority and the question of vitiation will be at the centre of their defence, and will have to be considered by reference to the contracts of employment which set out their duties and obligations with regard to Semtech. Thus, the employment contracts are not merely context and opportunity, they provide the entire legal framework for resolving Sornin and Sforza’s defence.’ The case against the two therefore needs to be brought in the employees’ domicile, France, and not in E&W.

Directing the judge away from what seems a prima facie applicable gateway in Brussels Ia is something creative counsel may of course attempt. In the case at issue, the employment DNA was all over the place rather than merely incidental. At 73-74 the judge adds that the protected categories section must of course be considered in isolation to give it its full effect: that the litigation will now splinter against various defendants cannot be rescued by an A8(1) anchor mechanism ‘sound administration of justice’ argument, nor any type of forum conveniens analysis.

Geert.

EU Private International Law, 3rd ed. 2021, 2.278 ff.

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Gruber Logistics, Samidani Trans. Sanchez-Bordona AG on true consent and correction of choice of law re minimum wage in employment contracts.

Update 16 July 2021 the CJEU yesterday held along the exact same lines.

In Joined Cases C‑152/20 and C‑218/20 Gruber Logistics and Samidani Trans (my shortening of the many parties involved, Advocate-General Sanchez-Bordona opined yesterday (no English version available at the time of writing).

The Opinion showcases a number of complex levels in Article 8 Rome I, the protective regime for individual employment contracts. The case also points to the complex task in addressing social dumping in the EU. The two cases involve a classic case of such dumping, namely international freight transport.

The AG first of all reminds the referring judges that they must consider whether Directive 96/71’s provisions on minimum wage for posted workers might not be applicable in the case (the referral decisions suggest they are not and the issue is not part of the preliminary reference).

He then dissects the cascade of Article 8 which, similarly to consumer contracts, gives parties full autonomy for choice of law with however a correction for the mandatory provisions of the default law which would apply if no choice of law is made. Whether provisions are mandatory or not, including for minimum wage and despite CJEU support for them being mandatory (Sähköalojen ammattiliitto, Case C‑396/13) continues to be the subject of national assessment: there is no EU harmonisation on same.

As for whether employees have truly consented, the odd provision of Article 3(5) Rome I means that it is the putative law which determines consent (this is notably different for the issue of consent for choice of court under Article 25 Brussels Ia). He does suggest that the Romanian statute at issue in one of the cases, should it (an issue left for the referring judge to decide) in fact oblige employees to consent to choice of law for Romanian law, negates true consent.

Geert.

European Private International Law, 3rd ed. 2021, 3.36 ff.

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No VAR needed here. French Supreme Court on choice of court ex-EU in employment contracts. X v AS Monaco.

Update 30 January 2019 many thanks to François Mailhé who contacted me to point out that the reasoning re Article 1412-1 in fact was only made by claimant but not entertained by the Court, who only applied Brussels I Recast. An ‘attendu que’ which was however followed by ‘selon le moyen que’, in my haste overlooked by me. Apologies – and a first correction on any post on the blog since its launch in 2012. I have amended the post to correct this.

Thank you Hélène Péroz for flagging 17-19.935 X v AS Monaco at the French Supreme Court, held December 2018. Claimant is a former physiotherapist employed by AS Monaco. His contract included choice of court ex-EU (not further specified in the judgment but one assumes, Monaco. Monaco is one of those micro-States with a complex arrangement with the EU).

The Supreme court first of all could have addressed the application of France’s jurisdictional rule R. 1412-1 of the Code du Travail. This assigns territorial jurisdiction in principle to the employment courts of the area where the employee habitually carries out the employment, with fall-back options which are similar to yet not quite the same as the provisions of Brussels I Recast:

Art. R. 1412- 1 L’employeur et le salarié portent les différends et litiges devant le conseil de prud’hommes territorialement compétent. Ce conseil est :

1 Soit celui dans le ressort duquel est situé l’établissement où est accompli le travail ;

2 Soit, lorsque le travail est accompli à domicile ou en dehors de toute entreprise ou établissement, celui dans le ressort duquel est situé le domicile du salarié.

Le salarié peut également saisir les conseils de prud’hommes du lieu où l’engagement a été contracté ou celui du lieu où l’employeur est établi. — [ Anc. art. R. 517- 1, al. 1er à 3.]

These provisions cast a slightly wider jurisdictional net than Brussels I Recast. That gap was even wider before Brussels I Recast had extended its jurisdictional reach to parties (the employer, or the business in the case of the consumer title) domiciled ex-EU. It is particularly its existence pre Brussels I Recast for which the provision is ranked among France’s exorbitant jurisdictional rules.

Now, coming to the case at issue. Claimant had suggested the Supreme Court address the nature of the provision as lois de police, in particularly by severely curtailing same in the event of choice of court ex-EU. Claimant argued ‘ce n’est que si le contrat est exécuté dans un établissement situé en France ou en dehors de tout établissement que les dispositions d’ordre public de l’article R. 1412-1 font échec à l’application d’une telle clause.’ : it is argued that only if the contract is performed in an establishment of the employer in France, or entirely outside such establishment (from the employee’s home or ‘on the road’) does Article R.1412-1 trump choice of court ex-EU. The lower court’s judgment had failed to assess these circumstances and therefore, it was suggested, infringes the Article.

The Supreme Court unfortunately does not however dot the i’s and cross the t’s on this issue at all: it only (not unjustifiably, if an expression of judicial economy) looks at Brussels I Recast. Reportedly the application of Brussels I to the issue is not something the Court has properly done in the past.

Article 21 Brussels I Recast requires assessment of the place of habitual carrying out of the work. Claimant worked mostly from the club’s training ground, which is in Turbie, France, and accompanied the club at fixtures. These however by reason of the football calendar clearly took place in Monaco only one out of two games (see the Count of Luxembourg for similar identification of the relevant criteria). Core of the employment therefore is France, notably in the Nice judicial area and therefore the lower court was right to uphold its jurisdiction.

Addressing Article 1412-1 will have to be for future judgment, outside the Brussels I Recast context.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.8.3.

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Cunico v Daskalakis. Lugano Convention, employment and choice of court.

In [2019] EWHC 57 (Comm) Cunico v Daskalakis Baker J applies the employment and choice of court titles of the Lugano Convention 2007. Mr Daskalakis and the second defendant, Mr Mundhra, worked for the Cunico group. The group operated in base metals industries and markets. Defendants’ primary jobs were CEO and CFO respectively of Feni Industries AD (‘Feni’), the main industrial operating subsidiary of the group, incorporated and operating in FYR Macedonia. Feni owned and operated a ferronickel production plant in Kavadarci and the Rzanovo iron and nickel mine 50 km or so south of the city.

It is necessary to give a little bit of factual background to appreciate the jurisdictional issues.

Cunico Resources NV (‘Resources’) was incorporated in the Netherlands, to become the group holding company, in May 2007. Marketing was incorporated in Dubai, UAE, in July 2007, and operated in the Jebel Ali Free Zone as the main market-facing trading entity in the group. Resources had no operating activities. It existed as a holding company for the operating subsidiaries as investment assets, with a single dedicated (full-time) employee. Marketing traded by purchasing ore from other Cunico subsidiaries, and bailing the ore to a ferronickel plant within the group under a ‘tolling agreement’, for conversion by the plant to finished ferronickel. Marketing then sold the finished product to the market. Under the tolling agreement, fees for converting Marketing’s ore into finished ferronickel would be payable by Marketing to the operator of the ferronickel plant (e.g. Feni).

The Cunico group was owned, at the time of the events said to give rise to claims against the defendants, as a joint venture between International Mineral Resources BV (‘IMR’) and BSGR Cooperatief UA (‘BSGR’). Latterly, IMR has effectively all but bought BSGR out, via the intervention of proceedings in the Amsterdam Enterprise Chamber, so that today Resources is owned as to c.80% by Summerside Investments S.a.r.l., IMR’s parent company, with 50% of the remainder owned by each of IMR and BSGR.

Now, crucially (at 6): so-called ‘Advisory Contracts’ were signed as between Marketing and each of the defendants, in 2007 and again in 2010, that contained a jurisdiction provision in these words: “In case of disagreements, they shall be solved in the Court of the United Kingdom“. The claimants say that provision gives this court jurisdiction over their respective claims against the defendants under Article 23 of the Lugano Convention. It is common ground that the defendants were domiciled in Switzerland when proceedings were brought and that the claims brought against them are within the material scope of the Lugano Convention, so indeed it governs the question of jurisdiction in this case. It is also common ground that, in this international business context, the reference in the Advisory Contracts to “the Court of the United Kingdom” should be interpreted to mean the courts of England and Wales.

Marketing claims that defendants received bonus payments from Marketing to which they were not entitled and/or to procure payment of which they acted in breach of contractual and fiduciary duties owed to it.

The principal issue is whether the claims made are matters relating to individual contracts of employment so as to engage Section 5 of the Lugano Convention. Any claims that do engage Section 5 cannot be brought in England.

At 23: For each claim advanced by each claimant against either defendant, the question of jurisdiction gives rise to the following issues in this case:

i) Is that claim a matter relating to the employment of the defendant by that claimant, for the purpose of Section 5 of the Lugano Convention?

ii) If not, is that claim within the scope of the jurisdiction provision in either of the defendant’s Advisory Contracts?

iii) If so, for a claim by Resources or Feni, does that jurisdiction provision confer on the claimant an effective benefit? (This is a question under the Contracts (Rights of Third Parties) Act 1999, as each Advisory Contract was a contract only between the respective defendant and Marketing.)

Baker J decides following lengthy overview of the ’employment’ history of defendants that they were indeed employed across the group, and that Lugano’s employment heading therefore points away from jurisdiction in England. Surprisingly he does not refer at all to any CJEU precedent such as Holterman. The employment argument having succeeded, no assessment is made of Lugano’s choice of court provisions.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.8.3.

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Dutch Supreme Court refers conflicts relevant questions on posted workers Directive to CJEU.

Update 5 December 2020. The Court has held.

Update 4 December 2018 thank you to his Grace der Graf von Luxemburg for additionally pointing out pending case C-16/18 Dobersberger dealing with workers employed on international trains which also travel through the host Member State – Update January 2020 the Court held 19 December 2019 after Opinion Szpunar AG in July 2019. – and see scholarly review of similar Dutch cases here.

Thank you MPI’s Veerle Van Den Eeckhout for pointing out a highly relevant reference to the CJEU by the Dutch Supreme Court /Hoge Raad. The link between the posted workers Directive and conflict of laws is clear, as I have also explained here. The most interesting part of the reference for conflicts lawyers, are the questions relating to ‘cabotage’, particularly where a driver carries out work in a country where (s)he is not habitually employed (international trade lawyers will recognise the issue from i.a. NAFTA). Update January 2019 the reference is now here, the case is C-815/18.

One to keep an eye on.

Geert.

(Handbook of) EU Private International Law, 2nd ed 2016, Chapter 3, Heading 3.2.5.

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Petronas Lubricants: Assigned counterclaims fall within the (anchor) forum laboris.

In C-1/17 Petronas Lubricants, the CJEU held end of June, entirely justifiably, that assigned counterclaims may be brought by the employer in the forum chosen by the employee under (now) Article 20 ff Brussels I Recast to bring his claim. In the case at issue, the employer had only obtained the claim by assignment, after the employee had initiated proceedings.

The Court pointed to the rationale underlying Article 22(1), which mirrors all other counterclaim anchor provisions in the Regulation: the sound administration of justice. That the counterclaim is merely assigned, is irrelevant: at 28:  ‘…provided that the choice by the employee of the court having jurisdiction to examine his application is respected, the objective of favouring that employee is achieved and there is no reason to limit the possibility of examining that claim together with a counter-claim within the meaning of Article 20(2)’ (Brussels I, GAVC).

Evidently the counterclaim does have to meet the criteria recently re-emphasised in Kostanjevec.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.8.3.

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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

Geert.

 

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Expect some final turbulence. CJEU wrongfoots Ryanair and Crewlink on ‘place where the employee habitually carries out his work’.

Update June 2019 just a quick note to flag that the case has undoubtedly influenced the agreements which Ryanair have recently reached with its staff.

I reported earlier on Saugmandsgaard ØE’s opinion in Cases C‑168/16 and C‑169/16, Nogueira et al and Osacar v Ryanair. The CJEU yesterday held and as I put it in immediate comment on the case reported in the FT, the Court’s view clearly resonates with the current mood against social dumping.

The case here ostensibly concerns jurisdiction only, however the Rome I Regulation includes mandatory protection of the employee guaranteed by the laws of the same place where (s)he habitually carries out his /her work. Hence a finding in the context of the Brussels I Recast inevitably has an impact on applicable law, too.

Firstly the Court has no mercy for the limiting choice of court agreement in the relevant contracts (at 53): in the case of employment contracts, a jurisdiction clause cannot apply exclusively and thus prohibit the employee from bringing proceedings before the courts which have jurisdiction under the protective regime of the Brussels I Recast.

The Court then essentially reiterates its AG: The concept of ‘place where the employee habitually carries out his work’ must be interpreted as referring to the place where, or from which, the employee in fact performs the essential part of his duties vis-à-vis his employer (at 59). Referring to its earlier case-law, the Court reiterates that national courts must, in particular, determine in which Member State is situated (i) the place from which the employee carries out his transport-related tasks, (ii) the place where he returns after his tasks, receives instructions concerning his tasks and organises his work, and (iii) the place where his work tools are to be found. (at 63). The place where the aircraft aboard which the work is habitually performed are stationed must also be taken into account (at 64).

The CJEU’s judgment then zooms in particularly on the notion of ‘home base’, a term used in relevant EU civil aviation law. The concept of ‘place where, or from which, the employee habitually performs his work’ cannot be equated with any concept referred to in another act of EU law (at 65).  However that does not mean that it is irrelevant to determine the place from which an employee habitually carries out his work. In fact, the Court held, the concept is likely to play a significant role in the identification of place of habitual employment in cases as these (at 69). In fact, taking account of the facts of each of the present cases, it would only be if applications, such as those at issue in the main proceedings, were to display closer connections with a place other than the ‘home base’ that the relevance of the latter for the identification of ‘the place from which employees habitually carry out their work’ would be undermined (at 73).

Nationality of the aircraft is summarily dismissed at 75, as being of any relevance at all.

At 62, the Court, importantly, also wars against fraudulent forum shopping: ‘That circumstantial method makes it possible not only to reflect the true nature of legal relationships, in that it must take account of all the factors which characterise the activity of the employee (see, by analogy, judgment of 15 March 2011, Koelzsch, C‑29/10, EU:C:2011:151, paragraph 48), but also to prevent a concept such as that of ‘place where, or from which, the employee habitually performs his work’ from being exploited or contributing to the achievement of circumvention strategies (see, by analogy, judgment of 27 October 2016, D’Oultremont andOthers, C‑290/15, EU:C:2016:816, paragraph 48 and the case-law cited).‘

The case now goes back to Mons however as has been reported, it is almost inconceivable for that court not to find Charleroi to be the place of habitual employment. Despite Ryanairs bravado, it is clear this judgment blows a hole in its regulatory strategy.

Geert.

(Handbook of) EU Private International Law, 2nd ed 2016, Chapter 2, Heading , Chapter 3, Heading 3.2.5.