Posts Tagged Forum shopping

Algeco: Scheme of arrangements tourism continues, with tenacious questions still outstanding.

Thank you Tom Whitton and Helen Kavanagh  for flagging Algeco Scotsman PIK SA [2017] EWHC 2236 (Ch). Algeco has COMI in Luxembourg.  This was clear when the relevant scheme of arrangement (‘SAR’) was being discussed. To manage potential problems at the jurisdictional stage, Hildyard J at 22 lists the precautions the company and the majority of the lenders took:

‘Accepted by the relevant 75 per cent or more, was first, the amendment of the governing law clause in the PIK Loan Agreement to change the governing law from New York law to English law; secondly, the amendment of the jurisdiction clause to submit the parties to the non-exclusive jurisdiction to the courts of England; and thirdly, a waiver of any restrictions under the PIK loan agreement so as to permit the company to take all steps necessary to confirm or establish sufficient connection with England including, if appropriate, to take steps to ensure that its COMI is in England.’

When the unsuspected reader sees ‘COMI’ of course (s)he is forgiven for immediately pondering application of the EU’s Insolvency Regulation – quod certe non: for it is clear (ia as a result of schemes of arrangement not being included in relevant Annex) that SARs fall under company law. Hildyard J’s jurisdictional kick-off at 43 is telling: ‘Dealing first with jurisdiction, the primary question is whether this Luxembourg company, the subject of the scheme, is a qualifying company so to be subject to section 895 of the Companies Act’. Idem at 45.

At 47 the High Court then applies the jurisdictional test viz the Brussels I Recast Regulation arguendo: if it were to apply (which the English Courts have taken no definitive stance on), would an English court have jurisdiction? Yes, it is held: under Article 8 (anchor defendants) and under Article 25 (choice of court).

Yet this in my view is where recourse to SARS in the English courts continues to be exposed: loan agreements and facilities agreements now routinely adopt choice of court and law in favour of English courts and ditto law. Yet where they do not, or did not, the ‘willing’ creditors consent to a change in the agreement in favour of the English courts, with the unwilling creditors left behind. Whether this holds scrutiny under Rome I is far from certain. As for Article 8, its use here may be seen as a form of abuse, disciplined under the Regulation.

Hildyard J considers the case one of ‘good forum shopping’ (at 57-58), with reference to Apcoa which I review here. The concerns above continue in my view to highlight weaknesses in the construction, which so far have not led to any collapse of this restructuring tourism. At 58 the High Court emphasises that there are cases of inappropriate forum shopping in this context (one of that includes haste) yet the role of Rome I in this context has so far played little of a role.

It is noteworthy that in my view (and I so testified in re Apcoa) even a wrong view of the English courts on Rome I’s impact, would not suffice for jurisdictions outside of the UK to refuse to recognise the scheme under Brussels I – all with the huge Brexit caveat evidently.

Geert.

(Handbook of) EU Private International Law, 2nd edition 2016, Chapter 5.

 

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Campbell v Campbell: A recent guide to worldwide freezing injunctions.

Worldwide freezing injunctions are one of the civil procedure reasons for forum shopping to the English courts. [2017] EWHC 2747 (Ch) Campbell v Campbell is an excellent illustration  of the current state of the law, with Sarah Worthington QC expertly summarising and applying precedent. The application is for a freezing injunction over assets located outside England and Wales, partly in aid of domestic proceedings (partnership dissolution proceedings) and partly in aid of foreign proceedings (proceedings in Jersey re claims for 50% interest in shareholdings).

One for the comparative binder.

Geert.

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The Brussels International Business Court – BIBC: Some initial thoughts.

I was asked yesterday (interview in Dutch) for my thoughts on the Belgian Government’s plans for a Brussels International Business Court. Here goes, in bullet-points format, a slightly extended and more technical version of those preliminary thoughts:

  • Three and more’s a crowd. The Belgian move of course is not the first and neither will it be the last. Even pre-Brexit, Member States (and even individual cities within Member States; see Michiel Poesen recently on Frankfort) were vying for the title of preferred place for litigation.
  • Brexit evidently may be a game-changer. I have flagged repeatedly that post-Brexit and assuming there will be no deal which would roll-over the UK’s engagement with EU civil procedure law, UK courts will become a lot less attractive. This is due to the more cumbersome recognition and enforcement regime that will be the result of decoupling from Brussels I. The same incidentally does not apply to arbitration. Pre and post Brexit, deal or not, free movement of arbitral awards is subject to the New York Convention.
  • Attractiveness as a centre of litigation and legal services is part of regulatory competition. Being known as a place of legal know-how and expedited litigation brings prestige as well as attractive billable hours to the law firms of one’s country.
  • Crucially, in an attempt to prise litigation away from London in particular, the use of English in proceedings is always the eye-catcher for the media. However in reality the language of proceedings is to my experience not the defining issue in client’s forum shopping strategies. Know-how of the bench; speed of proceedings; transparency of case-law; and of course ease of recognition and enforcement, are much more so. The Belgian proposal acknowledges as much by touting in particular the ‘collegiality’ and ‘expertise’ of the pool of (domestic and foreign) commercial law experts that will populate the court.
  • Unwittingly perhaps but without a doubt, the proposal in flagging the benefits of the BIBC, also highlights the well-known disadvantages of the Belgian courts in ordinary: tardiness of proceedings (the ‘Belgian’ torpedo) in particular. However also very much so, intransparency (as I have repeatedly signalled: access to Belgian case law continues to be highly problematic) and lack of collegiality among the bench: being a judge is a lonely professional existence in Belgium. Professional secrecy rules, practicalities (lack of proper office space), and the aforementioned reporting issues work against Belgian jurisprudence presenting itself as coherent.
  • At a technical level, the proposal emphasises repeatedly that the BIBC will be a court. Not an arbitral tribunal. The difference lies particularly in the easy or enforcement. The draft Bill loudly talks the talk in this respect. But does it walk the walk? What a ‘court’ means within the context of EU civil procedure law is of course the prerogative of that EU law: not of the Member States. (I refer to recent blog posts on same). Extensive reference to UNCITRAL’s Model Law on international commercial arbitration is a strange prop to use in the draft, if the idea is to take one’s attention away from arbitration. The BIBC will only take cases in the event of prorogation (choice of court or submission). The pool of judges will mostly be taken from part-timers, not benchers. Most importantly, in my mind: Article 43 of the draft instructs the BIBC, with respect to choice of law, to respect parties’ choice of governing law, and, in the absence of such law, ‘to apply the law determined by the conflict of laws rules which it considers applicable’. This is a copy /paste from Article 28(2) of the Model Law. In footnote the Act suggests that by omitting the third para of said Law (‘The arbitral tribunal shall decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorized it to do so’), the Bill emphasises the nature of the BIBC as court. It does not. Courts are simply subject to Rome I and II when it comes to applicable law. They do not just ‘consider a law applicable’.

Much to chew on. My analysis is based on a draft Bill which a little bird sent me. This is probably not the final say on the BIBC. (On an aside: @BIBC is already taken. I can think of one or two Twitter Handles which the BE government may want to snap up before someone else does).

Geert.

 

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OCEAN Rig: COMI shopping cautiously welcomed by US Bankruptcy Court.

I have often argued that the European Commission and by extension the EU’s Insolvency Regulation is wrong in taking as a starting point that forum shopping in insolvency matters as a rule needs to be discouraged. This aversion towards forum shopping is one of the main reasons for the UK and other Member States to keep Schemes of Arrangement and other restructuring devises well out off the reach of the Regulation. (The Brussels I recast for instance allows for much more strategic choice of court use).

Thank you Debra Dandeneau for flagging the US Bankruptcy Court, Southern District of New York’s decision in Ocean Rig. The Court essentially argues that to use forum shopping in a restructuring /insolvency case is absolutely acceptable provided it is done in good faith, particularly with a view to maximizing chances of survival and /or maximal recovery by the creditors. Note that the Court, in determining COMI for the various companies in the group, pays specific attention to the ascertainability, by third parties, of COMI.

A judgment to be applauded. And this posting, incidentally, is the 500th on this blog. To 1000 and beyond!

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 5, Heading 5.1, Heading 5.4.6.

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

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 howecer 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.

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Celebrity posting to kick off the autumn season. Middleton v Closer.

As I turn my attention to clearing the blog queue, a light posting to begin with. Kind of light, that is, because for the plaintiffs at issue of course the issue is not at all a laughing matter. I am assuming readers will be somewhat aware of the Duke and Duchess of Cambridge having taken action against ‘Closer’ (more precisely, the publishers, SAS Mondadori), for invasion of privacy after photos appeared of the couple relaxing poolside in a French private residence. The photos were taken with sniper lenses some distance away. Like everyone else, I have not seen the photos.

Following an earlier injunction the couple have now been awarded damages. I have not managed to locateactual text of either injunction (going back to 2012) or last week’s judgment on the substance of the matter. If any reader can assist, I would be most obliged.

I often use the case in my very introductory class of private international law for it illustrates a wide plethora of conflicts issues: why did the couple decide to sue in France rather than England where it easily would have standing; how do the injunction proceedings in particular illustrate enforcement issues; where do Gleichlauf, forum shopping etc. come in. I will not reveal all the ifs and buts here for it would spoil the fun for future classes. Conflicts buffs will see the attraction of the case for teaching purposes.

Geert.

 

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An update from the social dumping flightdeck. Saugmandsgaard ØE advises against Ryanair and Crewlink on ‘place where the employee habitually carries out his work’.

Saugmandsgaard ØE this morning Opined in Joined Cases C‑168/16 and C‑169/16, Nogueira et al and Osacar v Ryanair. Reference in the case was made by the Court of Appeal at Mons /Bergen in the Ryanair case I reported on in first instance. The weakest part of that judgment, I noted, was that it looked to the employer’s organisation as the most relevant criterion when deciding upon place of habitual employment. That clearly went against the favor laboris inherent in Article 19 of the Brussels I Recast Regulation.

The Advocate General at 100 in particular agrees with that view. Regular readers will know that I do not tend to paraphrase for the sake of it hence reference is best made to the AG’s Opinion as a whole. In summary:  Saugmandsgaard ØE recalls that CJEU case-law on the matter essentially requires the courts to either identify the ‘place where’ the employee principally carries out his obligations vis-à-vis his employer, or the ‘place from which’ he principally carries out those obligations. The workers at issue were employed as cabin crew on aircraft operated by Ryanair. Those employees performed their work in more than one Member State, namely in Belgium, where the airport of departure (Charleroi) was situated, the Member State of the airport of arrival and any other Member States crossed during the flight.  The AG suggests (at 92) that it is not possible, in such circumstances, to identify a ‘place where’ those employees principally carried out their obligations vis-à-vis their employers, for it is difficult to attach greater weight to the tasks carried out by those employees in the airport of departure, on board the aircraft or in the airport of arrival.

A ‘place from which’ those employees principally carried out their obligations vis-à-vis their employers, however, can be identified.  The referring court had listed a number of factual considerations among which the AG suggests the following as being highly relevant: (97 ff)

First, appellants started and ended their working day at Charleroi Airport. To the AG’s mind, that fact is of overriding importance, which he suggests is confirmed by the Court’s consistent case-law in particular Koelzch and Voogsgeerd.

Second, appellants received the instructions relating to their tasks and organised their work at Charleroi Airport, by consulting their employers’ intranet. (It is on this point that the AG rejects any relevance of the location of organisation of the work schedule by the employer).

Third, the aircraft operated by Ryanair, and on board which appellants worked as cabin staff, were based at Charleroi. Here the AG refers to CJEU case-law that, in the international transport sector, the place where the work tools are located constitutes a relevant indicium for the purposes of determining the place from which the worker principally fulfils his obligations vis-à-vis his employer.

Fourth, appellants were contractually required to live less than one hour from Charleroi Airport. It is noteworthy that this indication refers not to the worker’s actual place of residence but rather to the place of work near which he lives, namely Charleroi Airport in the main proceedings (at 103).

Fifth, the referring court noted that Ryanair and Crewlink jointly had a ‘crew room’ at Charleroi Airport. The existence of an office made available by the employer is another factor the relevance of which has been emphasised in the Court’s case-law. That this is not formally a ‘branch’ of either company, is irrelevant.

Finally, appellants were required to attend Charleroi Airport if they were unfit for work and in the event of disciplinary problems.

The AG points out that on the basis of the criteria, the Court at Mons formally will have to complete the analysis, however he concludes (at 107) that on the basis of the findings of fact communicated by that court in its request for a preliminary ruling, those six indicia unequivocally designate the courts of the place where Charleroi Airport is situated.

A few other issues are worth mentioning. Firstly (at 108) whether the worker is directly employed by Ryanair (Case C‑169/16) or assigned to Ryanair by Crewlink (Case C‑168/16) is irrelevant for the purposes of identifying the place where the work is habitually carried out, within the meaning of Article 19(2)(a) of Regulation No 44/2001. That place, the AG suggests, is independent of the legal link between the worker and the person who benefits from the work done.

Further, the AG suggests that the concept of ‘home base’ has  relevance to the analysis, albeit indirect. ‘Home base’ is a term used in relevant EU civil aviation law. At 109 ff: ‘place where the employee habitually carries out his work’, used in Article 19(2) of Regulation No 44/2001, should not have to depend on a concept in an act of Union law which belongs to a quite different area, namely that of the harmonisation of rules in the civil aviation sector.’ At 116: the relevance of the home base, for the purposes of identifying the place where the contract of employment is habitually carried out, is only indirect. Indeed, it should be taken into account only in so far as it supports the indicia mentioned above as relevant for the purposes of identifying that place.’ (Which it certainly did in casu).

Further and convincingly, the AG emphatically suggests that the nationality of the aircraft is entirely irrelevant for the discussion (118 ff).

Finally, at 73 ff the AG suggests that there ought to be parallel interpretation of the findings on jurisdiction, and the rules on applicable law, among others in the Rome I Regulation. Those rules were not included in the referring court’s request for preliminary ruling.

We have to await the Court’s judgment, of course. However all in al this is a convincing Opinion which, as specifically flagged by the AG (at 101), is instrumental in addressing forum shopping by employers and consequently will be extremely helpful in addressing social dumping in the EU.

Geert.

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

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