Owen v Galgey. Applying A4(2) Rome II to multiparty claims (following Marshall), and a rare, if in my view uncertain, reversal using A4(3)’s ‘manifestly more closely connected’ escape clause.

Update 29 January 2021 today posted additional critical analysis here.

In Owen v Galgey & Ors [2020] EWHC 3546 (QB), Linden J yesterday dealt with the application of Rome II’s common habitual residence exception to A4(1) lex loci damni rule, and with the general escape clause of A4(3).

These cases often involve tragic accidents and injuries and the sec conflict of laws analysis below in no way of course mean any disrespect to claimant and his loved ones.

Claimant is a British citizen who is domiciled and habitually resident in England. He brings a claim for damages for personal injury sustained by him as result of an accident in France (3 April 2018), when he fell into an empty swimming pool which was undergoing works at a villa in France, a holiday home owned by the First Defendant, whose wife is the Second Defendant. They are also British citizens who are domiciled and habitually resident in England, Third Defendant is a company domiciled in France, and the public liability insurer of the First and Second Defendants. Fourth Defendant is a contractor which was carrying out renovation works on the swimming pool at the time of the accident. Fifth Defendant is the public liability insurer of the Fourth Defendant. Fourth and Fifth Defendants are both companies which are domiciled in France.

That French law applies to the claims against Fourth and Fifth Defendant is undisputed. There is however a dispute as to the applicable law in relation to his claims against the First to Third Defendants. These Defendants contend that, by operation of A4(2) Rome II, English law applies because the Claimant and the First and Second Defendants are habitually resident in England. Claimant contends that French law applies by operation of A4(3) Rome II: the ‘manifestly more closely connected’ rule.

Textual argument suggest that on the basis of the text of Recital 18 and A4(2) itself, A4(2) only applies to two party cases and does not apply in multi-party cases. Linden J at 29 notes that this would also correspond with the narrow reading required of A4(2). However he follows of course the authority of Marshall, which I approved of at the time (if only because, if multi-party claims were outside the scope of A42(), it would suffice for either claimant artificially to add a defendant to the claim, or for a defendant similarly to manoeuvre in a second defendant, for A4(2) to become inoperable). A4(2) also applies if more than one party is involved.

On A4(3), then, Marshall, too, is authority and Winrow v Hemphill another rare case that seriously engaged with the issue. In the latter case, Slade J held that the balance was in favour of not applying the escape clause, particularly in view of the period of time of habitual residence in Germany, and subsequent continuing residence in that country (inter alia for follow-up treatment). In the former, Dingemans J did reach a conclusion of applying A4(3) hence lex causae being French law on the grounds I discuss in my post on the case. Here, Linden J discusses the various factors at issue in Winrow v Hemphill and in Marhsall and reaches a conclusion of French law:

In my view it is clear that the tort/delict in the present case is manifestly more closely connected with France. France is where the centre of gravity of the situation is located and the preponderance of factors clearly points to this conclusion. This conclusion also accords with the legitimate expectations of the parties.

The reasons for that are essentially listed at (75  ff)

The tort/delict occurred in France, as I have noted. This is also where the injury or direct damage occurred. The dispute centres on a property in France and it concerns structural features of that property and how the First, Second and Fourth Defendants dealt with works on a swimming pool there. Although these defendants deny that there was fault on the part of any of them, the First and Second Defendants say that the Fourth Defendant was responsible if the pool presented a danger and the Fourth Defendant says that they were. The allegations of contributory negligence/fault also centre on the Claimant’s conduct whilst at the Villa in France.

The First and Second Defendants also had a significant and long-standing connection to France, the accident occurred on their property and the works were carried out by a French company pursuant to a contract with them which is governed by French law. Their insurer, the Third Defendant, is a French company and they are insured under a contract which is governed by French law. The contract was to insure a property in France albeit one which, I accept, applied to claims under English and French law. It is also common ground that the claim against the Fourth Defendant, and therefore against the Fifth Defendant, also a French company, is entirely governed by French law and will require the court to decide whether the Fourth Defendant or, at least by implication, the First and Second Defendants were “custodians” of the property for the purposes of French law.

Whilst it cannot be said at this stage that, by analogy with Marshall, the accident was entirely caused by the Fourth Defendant in particular, the situation in relation to the swimming pool which is said to have been the cause of the accident was firmly rooted in France and it resulted from works which were being carried out by the Fourth Defendant as a result of it being contracted to do so by the First and Second Defendants. The liability of the First and Second Defendants, if any, will be affected by how they dealt with that situation, including by evidence about their dealings with the Fourth Defendant. That situation had no significant connections with England other than the nationality and habitual place of residence of the First and Second Defendants.

The core counterarguments which were dismissed, are (78 ff)

I take the point that the Claimant and the First and Second Defendants were habitually resident in England at the relevant time, that there was a pre-existing relationship between them, and that the Claimant and his family came to be at the Villa as a result of an agreement which was made in England. But, applying an objective test (see Chitty on Contract Volume 1 at paragraph 2-171 in particular), I am not satisfied that this agreement, on the information available at this stage, was contractual in nature. Part of the difficulty in relation to this aspect of the First to Third Defendants’ argument is that there is very little information before the court as to what precisely happened. Looking at the agreed facts in the context of the statements of case and the other materials which I have been shown, however, it appears that the agreement resulted from a casual conversation between social acquaintances in the context of mutual favours having been done in the past. It was informal in nature and it appears that the Claimant offered to do the work as a favour and the First and Second Defendant invited him and his family to the Villa to return that favour.

If I had found that there was a contract, I would also likely have found that it was governed by French law. Although it was entered into in England between British parties, it related entirely to a property in France. Performance of the contract on both sides could only be effected at a particular property in France and was very strongly connected to France in that it involved work on a villa there and a family holiday there. This and the other features of the case would have led me to conclude that [A4(3) Rome I] indicated that there was a manifestly closer connection between the contract and France, although I acknowledge that there is a degree of circularity in this approach. ….

Mr Doherty understandably emphasised that, even if there was no contract with the Claimant, the relationship and the agreement which led to the Claimant and his family being in France were based and made in England. I was also initially attracted by his argument that in effect the Claimant’s complaint is about the way in which the First and Second Defendants fulfilled their side of that agreement. But that is not the claim which he makes, and, in any event, their performance of the agreement was in the form of allowing the Claimant and his family to occupy a villa in France. Nor is this a case in which, for example, the injury occurred whilst the Claimant was carrying out work on the Villa and potential tortious and contractual duties (if the relationship was contractual) therefore arose directly out of the relationship between the parties.

To my mind the tort/delict in this case is much more closely connected to the state of the swimming pool which, as I have said, was part of a property in France and resulted from the French law contract between the First and Second Defendants and the Fourth Defendant. If any of the Defendants is liable, that liability will be closely connected with this contract. This point, taken in combination with the other points to which I have referred, in my view clearly outweighs the existence of any contract with the Claimant relating to the Villa, even if I had found there to be a contractual relationship and even if it was governed by English law.

Similarly, although I have taken into account the nationality and habitual place of residence of the Claimant and the First and Second Defendants, these do not seem to me to alter the conclusion to which I have come. I have also taken into account the fact that the consequences of the accident have to a significant extent been suffered by the Claimant whilst he was in England, but in my view the other factors to which I have referred clearly outweigh this consideration.

Of particular note for future direction on Rome II, is the discussion on existing pre-contractual relations.

This is of course a fact-specific and to a certain extent, discretionary assessment. I also agree there is no limit to the kinds and amount of factors which a judge may take into account when applying the A4(3) exception.

I am minded to disagree with the conclusion reached here, however.  The judge’s assessment is one that echoes a proper law of the tort approach, starting from scratch. But that is not what A4(3) is about: it does not start from scratch; it starts from the clearly stated rule of A4(1) or A4(2), which require a lot of heavy lifting to be dislodged. The arguments pro upholding the A4(2) presumption listed in 78ff in my view give the finding for sustaining its consequence and hence English law as lex causae, strong foundations indeed which I believe, respectfully of course, the judge did not show enough deference to.

Geert.

European Private International Law, 3rd ed. 2021, Heading 4.5.

 

Sodmilab. The Paris Court of Appeal on lois de police, Rome I, II and commercial agency.

Thank you Maxime Barba for flagging the judgment in the Paris Court of Appeal Sodmilab et al. (Text of the judgment in Maxime’s post). The case concerns the ending of a commercial relationship. Part of the contract may be qualified as agency with lex causae determined under the 1978 Hague Convention. On this issue, the Court of Appeal confirmed French law as lex causae.

Things get messy however with the determination of that part of the contract that qualifies as distribution (a mess echoing DES v Clarins), and on the application of Rome II.

The Court of Appeal first (at 59) discusses the qualification of A442-6 of the French Code du commerce, on unfair trading practices (abrupt ending of a commercial relationship), dismissing it as lois de police /overriding mandatory law under Article 9 Rome I. As I noted in my review of DES v Clarins, this is a topsy turvy application of Rome I. The qualification as lois de police is up to the Member States, within the confines of the definition in Rome I. The Court of Appeal holds that A442-6 only serves private interests, not the general economic interest, and therefore must not qualify under Rome I. Hitherto much of the French case-law and scholarship had argued that in protecting the stability of private interests, the Act ultimately serves the public interest.

Next (as noted: this should have come first), the Court reviews the application of A4f Rome I, the fall-back position for distribution contracts – which would have led to Algerian law as lex causae. It is unclear (62 ff) whether the Court reaches its conclusion as French law instead either as a confirmation of circumstantial (the court referring to invoicing currency etc.) but clear choice of law under Article 3, or the escape clause under Article 4(3), for that Article is mentioned, too.

Rome I’s structure is quite clear. Why it is not properly followed here is odd. That includes the oddity of discussing French law under Article 9 if the court had already confirmed French law as lex causae under A3 or 4.

Finally, corners are cut on Rome II, too. Re the abrupt ending of the relationship (at 66ff). French law again emerges victorious even if the general lex locus damni rule leads to Algerian law. The court does not quite clearly hold that on the basis of Article 4(3)’s escape clause, or circumstantial choice of law per A14. The court refers to ‘its findings above’ on contractual choice of law, however how such fuzzy implicit choice under Rome I is forceful enough to extend to choice of law under Rome II must not be posited without further consideration. Particularly seeing as Article 6 Rome II excludes choice of law for acts of unfair trading.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.11.2, Heading 2.2.11.2.9; Chapter 3, Heading 3.2.8, Heading 3.2.8.3; Chapter 4).

 

It does not get more The Hague than this. Footballing around jurisdiction, applicable law and corporate finance in ADO Den Haag v United Vansen (PRC)

Thank you Bob Wessels for alerting me to ADO Den Haag v United Vansen (of China). ADO Den Haag NV (the corporate vehicle of a Dutch Premier League club) domiciled at The Hague, sue United Vansen International Sports Co. Ltd, domiciled at Beijing, essentially for the latter to pay a deposit on the premium due for the shares it acquired in the club. Vansen did not appear.

First of all, were Vansen properly summoned in accordance with the Hague Service Abroad Convention (which both China and The Netherlands have ratified)? The court holds that it cannot yet decide that this has actually happened (relevant steps taken via the Dutch judicial authorities only recently having taken place) however it applies Article 15(3)’s provisions for extreme urgency: ‘Notwithstanding the provisions of the preceding paragraphs the judge may order, in case of urgency, any provisional or protective measures.

Next up: do the Dutch courts have jurisdiction? Given the defendant’s domicile outside of the EU and the non-applicability of any of Brussel I’s rules where domicile is irrelevant, the Court applied Dutch residual rules of private international law. These grant it jurisdiction essentially in respect of urgent proceedings of attachment.

Of more interest to this blog is the court’s consideration of applicable law, which the Court conducts with reference to Rome I. The share purchase agreement seemingly did not contain choice of law, either implicit or explicit: at 2.15, the court suffices with a mere observation of the absence of choice of law. None of the standard contracts of Article 4(1) Rome I applies [there is some discussion in scholarship whether share purchase is covered by Article 4(1)a’s ‘contract for the sale of goods’], hence the relevance of Article 4(2)’s ‘characteristic performance’ test. Here, the Court declared unequivocally that the characteristic performance is the transfer of the share premium. The habitual residence of the party required to carry out that performance is the relevant connecting factor. In casu therefore, Chinese law in principle is the applicable law.

This in fact is not as straightforward as it may sound. Other legal regimes may find perhaps entry in the shareholder registry following payment, to be the characteristic performance; or the initiation of negotiations to pay a share premium; etc.

However the Dutch court finally settles for Dutch law after all, employing Article 4(3)’s escape clause. It holds that all circumstances of the case indicate that Dutch law is more closely connected: at 2.15: the agreement originated in The Netherlands; the performance has to be carried in The Netherlands (transfer of the sums into a Dutch bank account), and the transfer of the premium will benefit a Dutch company. Although the judgment does not give much detail on the contract, its origins etc., it would seem that in finally opting for Dutch law, the court does make proper application of the rather strict conditions of Article 4(3).

A good illustration of Article 4’s waterfall /cascade.

Geert.

(Handbook of) European private international law, 2nd ed. 2016, Chapter 3, Heading 3.2.6.

 

 

Wahl AG offers substantive criteria for ‘closer connection’ test for contracts of employment

In his Opinion in Schlecker v Boedeker, Wahl AG offers a number of substantive criteria for national courts to apply the ‘closer connection’ test of Article 8(4) of the Rome I Regulation on the law applicable to contracts – albeit formally his Opinion is on the application of the similar provision in its predecessor, the 1980 Rome Convention (the relevant provisions have not materially changed). The Convention reads in relevant part

Article 6 – Individual employment contracts

1. Notwithstanding the provisions of Article 3, in a contract of employment a choice of law made by the parties shall not have the result of depriving the employee of the protection afforded to him by the mandatory rules of the law which would be applicable under paragraph 2 in the absence of choice.

2. Notwithstanding the provisions of Article 4, a contract of employment shall, in the absence of choice in accordance with Article 3, be governed: (a) by the law of the country in which the employee habitually carries out his work in performance of the contract, even if he is temporarily employed in another country ; or

(b) if the employee does not habitually carry out his work in any one country, by the law of the country in which the place of business through which he was engaged is situated;

 unless it appears from the circumstances as a whole that the contract is more closely connected with another country, in which case the contract shall be governed by the law of that country.

In the case at issue, Schlecker is a company governed by German law which is active in the retailing of beauty and health products. Although Schlecker is established in Germany, it has many branches in several Member States of the European Union. Under an initial employment contract, Mrs Boedeker – a German national and resident – was employed by Schlecker and performed her duties in Germany from 1 December 1979 to 1 January 1994. Under a further contract, concluded on 30 November 1994, Mrs Boedeker was appointed by Schlecker, with effect from 1 March 1995 until the summer of 2006, as distribution manager (‘Geschäftsführerin/Vertrieb’) for the entire territory of the Netherlands. In that capacity, Mrs Boedeker in fact performed her duties in the Netherlands. By letter of 19 June 2006, Schlecker informed Mrs Boedeker that her position as manager for the Netherlands would be abolished with effect from 30 June 2006 and invited her to take up, under the same contractual conditions, the post of head of accounts (‘Bereichsleiterin Revision’) in Dortmund (Germany), with effect from 1 July 2006. Although Mrs Boedeker lodged an objection on 4 July 2006 against that notice of amendment (‘Änderungskündigung’), she took up her post as regional manager in Dortmund. On 5 July 2006, Mrs Boedeker declared herself unfit for work on medical grounds. As from 16 August 2006, she received benefits from a German health insurance fund (‘Krankenkasse’). Subsequently, various actions were brought both by Mrs Boedeker and by Schlecker before the courts.

In the absence of explicit choice of law by the parties to the contract, the connecting factors sub a) and b) need to be looked at consecutively: i.e. with the ‘habitual’ workplace having priority. Both have been looked in detail by previous case-law. The ‘escape clause’ of the final part of the Article, however has so far not been interpreted by the ECJ.

Wahl AG takes the opportunity to firstly set out the overall logic of the choice of law process under Article 6 (now 8), with an important insight (and the helpful use of moot examples; often used by us in class but not often in Opinions of the AG) into the issue of favor laboratoris. Article 6(1) obliges the national court to test any express choice against the laws which would apply in the absence of choice, and to have the strictest of these (i.e. the most favourable towards the employee) – albeit only for those stricter provisions –  trump even express choice of law. In the absence of choice, however, this comparison need no longer be made: whichever law is identified by Article 6(2) applies in full, even if it is not the most protective towards the employee.

He subsequently advises in favour of giving the escape clause the widest possible remit, trumping the presumptions of Article 6(1) a) and b), also in the particular situation in which an employee has performed an employment contract habitually, for a lengthy period and without interruption, in a single country. In determining what the AG calls the  ‘centre of gravity of the employment relationship’, it is suggested that inter alia the following criteria are relevant: place of habitual performance; the fact that the employee pays taxes and contributions in a particular country, relating to the income from his activity and the fact that he is covered by the social security scheme there and the various pension, sickness insurance and invalidity schemes; In each of these, the AG suggests, the court has to review in fact whether these particular choices were not imposed on the employee, but rather chosen consensually.

As always, one has to wait and see what the Court says – however this case is certain to be very relevant to employment law practice.

Geert.