Tag: Favor laboratoris

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Merinson v Yukos: Dutch settlement following employment contract. Appeal denied. England has full jurisdiction as domicile of the defendant.

In [2019] 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.

Geert.

 

 

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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 14 May 2021 the Court of Appeal has today confirmed  the lack of subordination [Alta Trading UK Ltd v Bosworth [2021] EWCA Civ 687], with the Master of the Rolls commenting [82]

It seems that the defendants have spared no expense in seeking to challenge the jurisdiction of the English court over them. There have now been no fewer than 6 substantive hearings at different levels from the Commercial Court to the CJEU, and many interlocutory ones. The claim form was issued as long ago as 13 February 2015, now 6¼ years ago, but the defendants have yet even to file a defence to the claimants’ claims for some US$339 million. This, I regret to say, is an indictment of a system that has, in this case, allowed relatively straightforward jurisdictional arguments to expand into an unrestrained litigation extravaganza. Courts at all levels need to keep a close eye on proportionality.

Update 19 October 2020 today the High Court held in [2020] EWHC 2757 (Comm) Arcadia /Bosworth that defendants had a more than negligible ability to influence the Arcadia companies and that therefore there is no relation of employment.

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 [2016] 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.

Geert.

Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.8.2, Heading 2.2.11.2, Heading 2.2.11.2.9.

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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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Heller v Uber at the Ontario Court of Appeal: arbitration clause requiring arbitration in the Netherlands of disputes between drivers and Uber invalid.

Update 30 June 2020 the Supreme Court in 2020 SCC 16 has confirmed the earlier finding of invalidity of the first instance court, as reported here.

Update 30 March 2020 Heller is now before the SC, and the British Colombia  Supreme Court distinguished it in Williams v Amazon [2019] BCSC 1807, holding as McCarthy Tétrault LLP report that the arbitration clause provided for a refund of costs in many cases. Further, the arbitration could be conducted through flexible options, and as such, this was not a substantially unfair bargain so as to meet the test for unconscionability.

Thank you Christopher Burkett for alerting me to Heller v. Uber Technologies Inc., 2019 ONCA 1.  The case is reminiscent of California’s Senate Bill 1241 (review here) and of an article that I co-authored with Jutta Gangsted [‘Protected parties in European and American conflict of laws: a comparative analysis of individual employment contracts]. The starting point of the California, the EU rules, and the Canadian judgment is the same: employees cannot be considered to really consent to either choice of law or choice of court /dispute resolution hence any clause doing same will be subject to mandatory limitations.

Here, an arbitration clause requiring arbitration in the Netherlands of disputes between drivers and Uber was held to be invalid and unenforceable, because it deprives an employee of the benefit of making a complaint to the Ministry of Labour under relevant Ontarian law.

Of note is that the judgment applies assuming the contract is one of employment – which remains to be determined under Ontarian law. Of note is also that the Court of appeal rejected Uber’s position that the validity is an issue for the arbitrator to determine because it is an issue going to the jurisdiction of the arbitrator. Uber invoked the “competence-competence” /kompetenz kompetenz principle (recently illustrated e.g. by the Brisilian Supreme Court in Petrobas) in support of its position.

Geert.

(Handbook of) European Private international law, 2nd ed. 2016. Chapter 2, Heading 2.2.8.3, Chapter 3, Heading 3.2.5.

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

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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Yukos v Merinson: A Brussels I jurisdictional bonanza. Particularly the issue of ‘after the issue has arisen’ for protected categories.

Update 23 January 2020 compare viz arbitration, XPL Engineering v K&J Townmore Construction Ltd [2019] IEHC 665, re ‘when disputes arise’, reviewed here.

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: [2018] 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.

Geert.

 

 

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Commission effectively supplements Rome I using the posted workers Directive. Defines ‘temporary employment’ as not exceeding 24 months.

Update 15 July 2018 The text has now been adopted as Directive 2018/957. References to Rome I have been deleted however recital 9 and Article 1 reach a similar effect, tied to a reduced period of in principle 12 months.

Update 31 May 2017 A quick note by way of interim update: the proposal is stuck in Parliament (awaiting committee decision).

Thank you Fieke van Overbeeke for pointing this out to me. The EC have proposed to amend the posted workers Directive, to address unfair practices and promote the principle that the same work at the same place be remunerated in the same manner.

The amendment essentially relates to Article 8(2) of the Rome I Regulation, which partially corrects choice of law made in the context of contracts for employment. The proposal amounts to Union harmonisation of the concept ‘temporary employment’, as one not exceeding 24 months.

The proposal, if adopted, would insert an Article 2a in the posted workers Directive, 96/71, as follows:

Article 2a
Posting exceeding twenty-four months
1. When the anticipated or the effective duration of posting exceeds twenty-four
months, the Member State to whose territory a worker is posted shall be deemed to
be the country in which his or her work is habitually carried out.
2. For the purpose of paragraph 1, in case of replacement of posted workers
performing the same task at the same place, the cumulative duration of the posting
periods of the workers concerned shall be taken into account, with regard to workers
that are posted for an effective duration of at least six months.

Recitals 6-8 give context:

(6) The Rome I Regulation generally permits employers and employees to choose the law applicable to the employment contract. However, the employee must not be deprived of the protection of the mandatory rules of the law of the country in which or, failing that, from which the employee habitually carries out his work. In the absence of choice, the contract is governed by the law of the country in which or, failing that, from which the employee habitually carries out his work in performance of the contract.
(7) The Rome I Regulation provides that the country where the work is habitually carried out shall not be deemed to have changed if he is temporarily employed in another country.
(8) In view of the long duration of certain posting assignments, it is necessary to provide that, in case of posting lasting for periods higher than 24 months, the host Member State is deemed to be the country in which the work is carried out. In accordance with the principle of Rome I Regulation, the law of the host Member Sates therefore applies to the employment contract of such posted workers if no other choice of law was made by the parties. In case a different choice was made, it cannot, however, have the result of depriving the employee of the protection afforded to him by provisions that cannot be derogated from by agreement under the law of the host Member State. This should apply from the start of the posting assignment whenever it is envisaged for more than 24 months and from the first day subsequent to the 24 months when it effectively exceeds this duration. This rule does not affect the right of undertakings posting workers to the territory of another Member State to invoke the freedom to provide services in circumstances also where the posting exceeds 24 months. The purpose is merely to create legal certainty in the application of the Rome I Regulation to a specific situation, without amending that Regulation in any way. The employee will in particular enjoy the protection and benefits pursuant to the Rome I Regulation.

It would obviously be attractive to ensure the same rule is verbatim included in a future amendment of the Rome I Regulation.

Geert.

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

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‘More closely connected’ in employment contracts – The ECJ in Schlecker emphasises tax and national insurance (social security)

I reported earlier on Wahl AG’s Opinion in C-64/12 Schlecker. The ECJ held last week. Reminder: formally the judgment relates to the application of the similar provision in the predecessor of the Rome I Regulation, the 1980 Rome Convention. The relevant provisions have not materially changed, however. The ECJ in fact refers to the slightly more precise provisions of Rome I in support.

In the case at issue, a closer connection with Germany was suggested by the circumstances as a whole, in particular by the following facts: the employer is a legal person governed by German law; the remuneration was paid in German marks (prior to the introduction of the euro); the pension arrangements were made with a German pension provider; Ms Boedeker had continued to reside in Germany, where she paid her social security contributions; the employment contract referred to mandatory provisions of German law; and the employer reimbursed Ms Boedeker’s travel costs from Germany to the Netherlands.

The Court concurs with the AG that the closer connection test must apply as suggested by its formulation: even if there is a habitual place of performance, this may be trumped by other circumstances. However the Court also held that the sheer amount of ‘other criteria’ in and of itself does not suffice to rebut the presumption: ‘the court called upon to rule in a particular case cannot automatically conclude that the rule laid down in Article 6(2)(a) of the Rome Convention must be disregarded solely because, by dint of their number, the other relevant circumstances – apart from the actual place of work – would result in the selection of another country‘ (at 40).

In other words: the actual place of work has considerable gravity. Nevertheless, among the other criteria, there are two, the Court suggested (however without reference to specific support in preparatory works or otherwise), which are particularly relevant:

‘among the significant factors suggestive of a connection with a particular country, account should be taken in particular of the country in which the employee pays taxes on the income from his activity and the country in which he is covered by a social security scheme and pension, sickness insurance and invalidity schemes. In addition, the national court must also take account of all the circumstances of the case, such as the parameters relating to salary determination and other working conditions.’ (at 41).

As always, much misery may be avoided by inserting a proper choice of law in the contract, in accordance with the Convention (now Regulation).

Geert.

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Schlecker. 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.

 

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