First analysis of the European Parliament’s draft proposal to amend Brussels Ia and Rome II with a view to corporate human rights due diligence.

Update 12 October 2020 Jan von Hein has weighed in on the debate here. Update 9 October 2020 Giesela Ruhl has further review of the Rome II elements here.

Thank you Irene Pietropaoli for alerting me to the European Parliament’s draft proposal for a mandatory human rights due diligence Directive. The official title proposed is a Directive on Corporate Due Diligence and Corporate  Accountability). Parliament also proposes insertions in both Brussels Ia and Rome II. For the related issues see a study I co-authored on the Belgian context, with links to developments in many jurisdictions.

I do not in this post go into all issues and challenges relating to such legislation, focusing instead on a first, preliminary analysis of the conflicts elements of the proposal.

A first issue of note in the newly proposed Directive is the definitional one.  The proposal’s full title as noted uses ‘corporate due diligence and corporate accountability’. However in its substantive provisions it uses ‘duty to respect human rights, the environment and good governance’ and it defines each (but then with the denoter ‘risk’) in Article 3. For human rights risks and for governance risks these definitions link to a non-exhaustive list of international instruments while for the environment no such list is provided.

The proposed Directive points out the existence of sectoral EU due diligence legislation e.g. re timber products and precious metals, and suggests ‘(i)n case of insurmountable incompatibility, the sector-specific legislation shall apply.’ This is an odd way to formulate lex specialis, if alone for the use of the qualifier ‘insurmountable’. One assumes the judge seized will eventually be the arbitrator of insurmountability however from a compliance point of view this is far from ideal.

As for the proposed amendment to Brussels Ia, this would take the form of a forum necessitatis as follows:

Article 26a
Regarding business-related civil claims on human rights violations within the value chain of a company domiciled in the Union or operating in the Union within the scope of Directive xxx/xxxx on Corporate Due Diligence and Corporate Accountability, where no court of a Member State has jurisdiction under this Regulation, the  courts of a Member State may, on an exceptional basis, hear the case if the right to a fair trial or the right to access to justice so requires, in particular: (a) if proceedings cannot reasonably be brought or conducted or would be impossible in a third State with which the dispute is closely related; or (b) if a judgment given on the claim in a third State would not be entitled to recognition and enforcement in the Member State of the court seised under the law of that State and such recognition and enforcement is necessary to ensure that the rights of the claimant are satisfied; and the dispute has a sufficient connection with the Member State of the court seised.

This proposal is a direct copy paste (with only the reference to the newly proposed Directive added) of the European Commission’s proposed forum necessitatis rule (proposed Article 26) at the time Brussels I was amended to Brussels Ia (COM (2010) 748). I discussed the difficulty of such a forum provision eg here (for other related posts use the search string ‘necessitatis’). The application of such a rule also provokes the kinds of difficulty one sees with A33-34 BIa (including the implications of an Anerkennungsprognose).

Coming to the proposed insertion into Rome II, this text reads

Article 6a
Business-related human rights claims
In the context of business-related civil claims for human rights violations within the value chain of an undertaking domiciled in a Member State of the Union or operating in the Union within the scope of Directive xxx/xxxx on Corporate Due Diligence and Corporate Accountability, the law applicable to a non-contractual obligation arising out of the damage sustained shall be the law determined pursuant to Article 4(1), unless the person seeking  compensation for damage chooses to base his or her claim on the law of the country in which the event giving rise to the  damage occurred or on the law of the country in which the parent company has its domicile or, where it does not have a domicile in a Member State, the law of the country where it operates.

I called this a choice between lex locus damni; locus delicti commissi; locus incorporationis; locus activitatis. Many of the associated points of enquiry of such a proposal are currently discussed in Begum v Maran (I should add I have been instructed in that case).

A first obvious issue is that the proposed Article 6a only applies to the human rights violations covered by the newly envisaged Directive. It does not cover the environmental rights. These presumably will continue to be covered by Rome II’s Article 7 for  environmental damage. This will require a delineation between environmental damage that is not also a human rights issue, and those that are both. Neither does the proposed rule apply to the ‘good governance’ elements of the Directive. These presumably will continue to be covered by the general rule of A4 Rome II, with scope for exception per A4(3).

My earlier description of the choice as including ‘locus incorporationis’ is not entirely correct, at least not if the ‘domicile’ criterion is the one of Brussels Ia. A corporation’s domicile is not necessarily that of its state of incorporation and indeed Brussels Ia’s definition of corporate domicile may lead to more than one such domicile. Does the intended rule imply claimant can chose among any of those potential domiciles?

Locus delicti commissi in cases of corporate due diligence (with the alleged impact having taken place abroad) in my view rarely is the same as locus damni, instead referring here to the place where the proper diligence ought to have taken place, such as at the jurisdictional level in CJEU C-147/12 OFAB, and for Rome II Arica Victims. This therefore will often co-incide with the locus incorporationis.

Adding ‘locus activitis’ as I called it or as the proposal does, the law of the country where the parent company operates, clearly will need refining. One presumes the intention is for that law to be one of the Member States (much like the proposed Directive includes in its scope ‘limited liability undertakings governed by the law of a non-Member State and not established in the territory of the Union when they operate in the internal market selling goods or providing services’). Therefore it would be be best to replace ‘country where it operates’ with ‘Member State’ where it operates. However clearly a non-EU domiciled corporation may operate in many Member States, thereby presumably again expanding the list of potential leges causae to pick from. Moreover, the very concept of ‘parent’ company is not defined in the proposal.

In short, the European Parliament with this initiative clearly hopes to gain ground quickly on the debate. As is often the case in such instances, the tent pegs have not yet been quite properly staked.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 8, Heading 8.3.

(3rd ed forthcoming February 2021).

 

 

 

Impromptu Admiralty forum necessitatis in Trafigura v Clearlake.

Update 7 May 2020 for further specifications followign disagreement between parties, see order made a good week after the first one, in [2020] EWHC 1073 (Comm).

In [2020] EWHC 995 (Comm) Trafigura v Clearlake, Teare J essentially has created a forum necessitatis rule in admiralty, to accomodate the slower availability of the Singapore courts due to Covid19. At 29 ff:

In normal circumstances an Admiralty Court, faced with an application to release a valuable vessel from arrest, would determine whether the security offered was such as to allow the release of the vessel from arrest without delay. In such circumstances there would usually be no need for the court upon which the owner and charterer have conferred jurisdiction to determine disputes between them to find as a fact what security would be judged adequate by the court of the place of arrest to allow the release of the vessel from arrest. For that would in practice be determined by the court of the place of arrest.

But these are not normal circumstances. There is a worldwide Covid 19 pandemic which has disrupted normal life, including the justice system. As a result I was told that the court in Singapore is not able to hear the application to determine the adequacy of the security offered until 18 May 2020. In those circumstances the question arises, or may arise, whether this court should find as a fact whether the security which has been offered to secure the release of the vessel matches that which would be required by the court of the place of arrest or not. That is what this court would have to do, and would have jurisdiction to do, if, unusually, there was no appropriate application before the court of the place of arrest. Those are not the circumstances of this case. There is an appropriate application in Singapore but the result will not be known for almost a month.

At 31 he re-emphasises that comity would ordinarily restrain any jurisdictional temptation. However at 32 he concludes that ‘on the other hand there is a dispute between the owner and charterer. The charterer owes an obligation to the owner to provide security which will secure the release of a valuable vessel from arrest. The owner wishes to enforce that obligation and so to mitigate the losses it is suffering by reason of its inability to trade the vessel. There is therefore a powerful reason for this court, in circumstances where the court of arrest, for understandable reasons, is unable to determine the application for release until 18 May 2020, to exercise the jurisdiction the parties have conferred on it to resolve disputes between owner and charterer.’

Not a jurisdicitional claim out the blue therefore; the choice of court does give England a powerful link to the case.

Geert.

 

 

Dutch Court denies jurisdiction in Chief of the Israeli General Staff case.

The judgment (in first instance; expect appeal) dismissing jurisdiction in Ismail Ziada v Benjamin Gantz is out in Dutch here and in English here. Gilles Cuniberti has reviewed the immunity issues here. I shall focus on the consideration of forum necessitatis, and can so do very briefly for the court does, too.

In essence the judgment on this point means that civil procedure rules on forum necessitatis do not set aside sovereign immunity based on public international law, and that the ECtHR judgment in Naït-Liman does not alter that finding. In that case, the ECtHR nudged States to consider a forum necessitatis rule:

‘“Nonetheless, given the dynamic nature of this area, the Court does not rule out the possibility of developments in the future. Accordingly, and although it concludes that there has been no violation of Article 6 § 1 in the present case, the Court invites the States Parties to the Convention to take account in their legal orders of any developments facilitating effective implementation of the right to compensation for acts of torture, while assessing carefully any claim of this nature so as to identify, where appropriate, the elements which would oblige their courts to assume jurisdiction to examine it.

In Ismail Ziada v Benjamin Gantz the Court simply remarked that ECtHR authority on the issue all concerns immunity of international organisations not, as here, State sovereign immunity, in which consequently (in the court’s view) forum necessitatis does not have a role to play.

Geert.

 

Suing the Chief of the Israeli General Staff in The Netherlands. Ismail Ziada v Benjamin Gantz tests Dutch forum necessitatis rules.

Update 10 February 2020 judgment (dismissing jurisdiction) out in NL here and in EN here.

Since the news broke in Mid-September of a Dutch claimant of Palestinian descent, suing former Chief of the General Staff Benjamin Gantz in The Netherlands, I have regularly checked ECLI NL for any kind of judgment. So far to no avail. I report the case now summarily, for it will be good to have a judgment (presumably first interlocutory: on the jurisdiction issue) to chew on.

The claim invokes the Dutch forum necessitatis rule (Article 9 CPR; other European States have similar rules), often also known as ‘universal jurisdiction’ however clearly the rule has its constraints. Claimant’s lawyer, Meester Liesbeth Zegveld, argues the application of the rule here. The piece includes assessment of sovereign immunity, and the involvement of Article 6 ECHR. Its outcome will also play a role in issues of corporate social responsibility and jurisdiction.

Clearly the moment I have a court opinion I shall post more.

Geert.

 

Petrobas securities class action firmly anchored in The Netherlands. Rotterdam court applying i.a. forum non conveniens under Brussels Ia.

Many thanks to Jeffrey Kleywegt and Robert Van Vugt for re-reporting Stichting Petrobas Compensation Foundation v PetrÓleo Brasilieiro SA – PETROBRAS et al. The case, held in September (judgment in NL and in EN) relates to a Brazilian criminal investigation into alleged bribery schemes within Petrobras, which took place between 2004 and 2014. the Court had to review the jurisdictional issue only at this stage, and confirmed same for much, but not all of the claims.

The Dutch internal bank for Petrobas, Petrobas Global Finance BV and the Dutch subsidiary of Petrobas, Petrobas Oil and Gas BV are the anchor defendants. Jurisdiction against them was easily established of course under Article 4 Brussels Ia.

Issues under discussion, were

Firstly, against the Dutch defendants: Application of the new Article 34 ‘forum non conveniens’ mechanism which I have reported on before re English and Gibraltar courts. At 5.45: defendants request a stay of the proceedings on account of lis pendens, until a final decision has been given in the United States, alternatively Brazil, about claims that are virtually identical to those brought by the Foundation. They additionally argue a stay on case management grounds. However the court finds

with respect to a stay in favour of the US, that

the US courts will not judge on the merits, since there is a class settlement; and that

for the proceedings in which these courts might eventually hold on the merits (particularly in the case of claimants having opted out of the settlement), it is unclear what the further course of these proceedings will be and how long they will continue. For that reason it is also unclear if a judgment in these actions is to be expected at ‘reasonably short notice’: delay of the proceedings is a crucial factor in the Article 34 mechanism.

with respect to a stay in favour of Brasil, that Brazilian courts unlike the Dutch (see below) have ruled and will continue to rule in favour of the case having to go to arbitration, and that such awards might not even be recognisable in The Netherlands (mutatis mutandis, the Anerkennungsprognose of Article 34).

Further, against the non-EU based defendants, this of course takes place under residual Dutch rules, particularly

Firstly (Dutch CPR) Article 7(1)’s anchor defendants mechanism such as it does in Shell. The court here found that exercise of jurisdiction would not be exorbitant, as claimed by Petrobas: most of the claims against the Dutch and non-Dutch defendants are so closely connected as to justify a joint hearing for reasons of efficiency, in order to prevent irreconcilable judgments from being given in the event that the cases were heard and determined separately: a clear echo of course of CJEU authority on Article 8(1). The court also rejects the suggestion that application of the anchor mechanism is abusive.

It considers these issues at 5.11 ff: relevant is inter alia that the Dutch defendants have published incorrect, incomplete, and/or misleading financial information, have on the basis of same during the fraud period issued shares, bonds or securities and in that period have deliberately and wrongly raised expectations among investors. Moreover, at 5:15: Petrobras has itself stated on its website that it has a strategic presence in the Netherlands.

Against two claims ‘involvement’ of the NL-based defendants was not upheld, and jurisdiction denied.

Further, a subsidiary jurisdictional claim for these two rejected claims on the basis of forum necessitatis (article 9 of the Duch CPR) was not upheld: Brazilian authorities are clearly cracking down on fraud and corruption (At 5.25 ff).

Finally  and again for these two remaining claims, are the Netherlands the place where the harmful event occurred (Handlungsort) and /or the place where the damage occurred (Erfolgsort)? Not so, the court held: at 5.22: the Foundation has not stated enough with regard to the involvement of the Dutch defendants in those claims, for the harmful event to be localised in the Netherlands with some sufficient force. As for locus damni and with echos of Universal Music: at 5.24: that the place where the damage has occurred is situated in the Netherlands, cannot be drawn from the mere circumstance that purely financial damage has directly occurred in the Dutch bank accounts of the (allegedly) affected investors – other arguments (see at 5.24) made by the Foundation did not convince.

Finally, an argument was made that the Petrobas arbitration clause contained in its articles of association, rule out recourse to the courts in ordinary. Here, an interesting discussion took place on the relevant language version to be consulted: the Court went for the English one, seeing as this is a text which is intended to be consulted by persons all over the world (at 5.33). The English version of article 58 of the articles of association however is insufficiently clear and specific: there is no designated forum to rule on any disputes covered by the clause. Both under Dutch and Brazilian law, the Court held, giving up the constitutional right of gaining access to the independent national court requires that the clause clearly states that arbitration has been agreed. That clarity is absent: the version consulted by the court read

“Art. 58 -It shall be resolved by means of arbitration [italics added, district court], obeying the rules provided by the Market Arbitration Chamber, the disputes or controversies that involve the Company, its shareholders, the administrators and members of the Fiscal Council, for the purposes of the application of the provision contained in Law n° 6.404, of 1976, in this Articles of Association, in the rules issued by the National Monetary Council, by the Central Bank of Brazil and by the Brazilian
Securities and Exchange Commission, as well as in the other rules applicable to the functioning of the capital market in general, besides the ones contained in the agreements eventually executed by Petrobras with the stock exchange or over-the-counter market entity, accredited by the Brazilian Securities and Exchange Commission, aiming at the adoption of standards of corporate governance established by these entities, and of the respective rules of differentiated practices of corporate governance, as the case may be.”

A very relevant and well argued case – no doubt subject to appeal.

Geert.

(Handbook of) EU private international law, 2nd ed.2016, Chapter 2, almost in its entirety.

 

Cook v 1293037 Alberta Ltd. Forum necessitatis in Canada.

Thank you Dentons for flagging 2016 ONCA 836 Cook v 1293037 Alberta Ltd, on the application of the forum of necessity or forum necessitatis doctrine in the Canadian courts. A doctrine which in some way or another allows a court to be used as court of last resort, should no other court be reasonably be available to plaintiff. Those States which do have it (Belgium, for instance: In Article 11 of its Statute; readers of the blog will also remember the EC suggested its introduction in the Brussels I Recast (Article 26 of COM(2010)748), but failed) all insist the jurisdictional trigger can only be exercised in the most exceptional of circumstance.

Cook v 129…Alberta is a good illustration of this exceptional nature. The Canadian Supreme Court set out the conditions in 2012 SCC 17 Van Breda v Village Resorts LtdAppellants had made a tactical decision not to bring their action in Alberta, the natural forum of the case. The limitation period for bringing the action in Alberta has now expired. They should under the circumstance not be allowed to bring the action in Ontario.

Does someone somewhere have an (undoubtedly slim) catalogue of those forum necessitatis actions which did succeed?

Geert.

(Handbook of) European private international law, 2nd ed.2016, Chapter 2, Heading 2.2.4 (p.68.)