Posts Tagged Governing law
Update 26 May 2020 for a Greek SC judgment discussing choice of court v choice of law in agency, and applying CJEU C-159/97 Trasporti Castelleti, see here.
In GDE LLC & Anor v Anglia Autoflow Ltd  EWHC 105 (Comm) (31) the Rome I Regulation does not apply ratione temporis; the Agency Agreement was concluded on about 9 April 2009 which is a few months before the kick-off date of the Regulation (note there is no default rule for agency in Article 4 Rome I in the event of lack of lex voluntatis). Dias DJ therefore turns to the 1980 Rome Convention.
Parties are in dispute as to the governing law of the Agency Agreement by which the claims should be determined. AAL alleges that the governing law is that of Ontario while the Claimants allege that the Agency Agreement is governed by English law. The point is of critical importance because the Claimants concede that, if AAL is correct, their claim is time-barred under Ontario law: although this, as readers know, assumes statutes of limitation are subject to the governing law – which is far from certain: see Jabir v KIK and Spring v MOD.
Parties’ arguments are at 10 and 11 and of course they reverse engineer. In essence (at 20) claimants say that there was an implied choice of English law. Alternatively, if that is not correct, the presumption in Article 4(2) of the Rome Convention, which would otherwise point to Georgia law, falls to be disapplied in favour of English law. The Defendant says that there was no implied choice and that application of Article 4(2) leads to Ontario law. Alternatively, if (which it denies) the presumption in Article 4(2) leads to any other governing law, the presumption is to be disapplied in favour of Ontario.
At 21 ff follows a rather creative (somewhat linked to the discussion of ex officio Rome Convention application in The Alexandros), certainly unexpected (yet clearly counsel will do what counsel must do) argument that essentially puts forward that under the common law approach of foreign law = fact hence must be proven, any discussion of a law as governing law, not suggested by the parties (here: the laws of (the US State of) Georgia) that is not English law (which clearly the English curia does ‘novit’), cannot go ahead. At 22 Dias DJ already signals that ‘once the wheels of the Convention had been put in motion, they could not be stopped short of their ultimate destination. The idea that the process dictated by the Convention should be hijacked halfway, as it were, on the basis of a pleading point was, to my mind, deeply unattractive.’
At 31 she sinks the argument. I think she is right.
Having at length considered the facts relevant to the contract formation, discussion then turns again to the Rome Convention with at 105 ff a debate on the role to be played by factors intervening after contract formation with a view to establishing [implicit, but certain: see at 117 with reference to the various language versions of the Convention and the Regulation essentially confirming the French version] choice of law or closest connection. (Dias J refers to the Court of Appeal in Lawlor v Sandvik Mining and Construction Mobile Crushers and Screens Ltd,  EWCA Civ 365;  2 Lloyd’s Rep 98 where, at paragraphs 21-27, it pointed out that the common law approach frequently blurred the distinction between the search for the parties’ inferred intention and the search for the system of law with which the contract had its closest and most real connection).
At 120: the hurdle is high: choice of law implicitly made must have nevertheless been made: ‘The court is not looking for the choice that the parties probably would have made if they had turned their minds to the question.’ at 122: In the present case the evidence established that there was no reference by the parties to the question of governing law at all. Choice of court for England (discussed ia with reference to Rome I and to Brussels Ia Article 25) does not change that. At 160 ff therefore follows the discussion of Article 4 of the Rome Convention, leading to a finding of the laws of Ontario as the lex contractus under Article 4(1). Article 4(5) does not displace it.
(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 3, Heading 3.2.4, Heading 3.2.6.
Apple v eBizcuss. CJEU leaves open all options on choice of court and anti-trust, particularly for abuse of dominant position.
Update 12 February 2019 Thank you Hélène Péroz for flagging that the French Supreme Court held on 30 January last (case number 16-25259)and upheld the choice of court in favour of Irish courts: ‘Qu’il s’avère que les pratiques anticoncurrentielles alléguées, qui se seraient matérialisées dans les relations contractuelles nouées entre les sociétés eBizcuss et Apple Sales International, au moyen des conditions contractuelles convenues avec elle, ne sont donc pas étrangères au rapport contractuel à l’occasion duquel la clause attributive de juridiction a été conclue ; que cette clause doit, donc, recevoir application.’ The Court holds that given that the very contractual terms and conditions form the means by which Apple has allegedly infringed competition law, that infringement is not foreign to the contract and therefore the contractual choice of court must stand.
My review of Wahl AG’s Opinion gives readers necessary detail on C-595/17 Apple v eBizcuss. In 2012 eBizcuss started suing Apple for alleged anti-competitive behaviour, arguing Apple systematically favours its own, vertically integrated distribution network. Can choice of court in their original contract cover the action (meaning the French courts would not have jurisdiction).
The Court says it can, both for Article 101 TFEU (cartels) and for 102 TFEU actions (abuse of dominant position), but particularly for the latter. In both cases the final say rests with the national courts who are best placed to appreciate the choice of court provisions in their entire context.
For Article 101 TFEU actions, the window is a narrow one (at 28: ‘the anti‑competitive conduct covered by Article 101 TFEU, namely an unlawful cartel, is in principle not directly linked to the contractual relationship between a member of that cartel and a third party which is affected by the cartel’). For Article 102 TFEU, as noted by other, it is wider (‘the anti‑competitive conduct covered by Article 102 TFEU, namely the abuse of a dominant position, can materialise in contractual relations that an undertaking in a dominant position establishes and by means of contractual terms’). The overall context of appreciation is that of predictability: at 29 (referring to CDC): ‘in the context of an action based on Article 102 TFEU, taking account of a jurisdiction clause that refers to a contract and ‘the corresponding relationship’ cannot be regarded as surprising one of the parties.’
(Handbook of) European Private International Law. 2nd ed. 2016, Chapter 2, Heading 2.2.12, Heading 18.104.22.168.
Apple v eBizcuss. Wahl AG on choice of court, anti-trust (competition law; clarifying CDC) and ‘corresponding relationships’.
Those of us who are familiar with the issue of multilingualism and international courts, will enjoy the discussion of contractual terms in Wahl AG’s Opinion in C-595/17 Apple v eBizcuss. Not only does the issue entre around the precise implications of the wording of a choice of court provision. The Opinion (not yet available in English) also highlights the difficulty of translating the original English of the contractual term, into the languages at the Court.
Current litigation is a continuation of the earlier spats between Apple and eBizcuss, which led to the Cour de Cassation’s 2015 reversed stance on the validity of unilateral choice of court – which I discussed at the time.
The 2002 Apple Authorized Reseller Agreement (in fact the 2005 version which applied after continuation of the contract) included a governing law and choice of court clause reading
„This Agreement and the corresponding relationship between the parties shall be governed by and construed in accordance with the laws of the Republic of Ireland and the parties shall submit to the jurisdiction of the courts of the Republic of Ireland. Apple reserves the right to institute proceedings against Reseller in the courts having jurisdiction in the place where Reseller has its seat or in any jurisdiction where a harm to Apple is occurring.” (emphasis added)
Footnote 3 displays the translation difficulty which I refer to above: parties disagree as to the translation of the contractual clause in French: applicant suggest this should read „et la relation correspondante”, defendant proposes „et les relations en découlant”. The AG suggest to include both for the purposes of his analysis „Le présent contrat et la relation correspondante (traduction de la requérante)/et les relations en découlant (traduction de la défenderesse) entre les parties seront régis par et interprétés conformément au droit de l’Irlande et les parties se soumettent à la compétence des tribunaux de l’Irlande. Apple se réserve le droit d’engager des poursuites à l’encontre du revendeur devant les tribunaux dans le ressort duquel est situé le siège du revendeur ou dans tout pays dans lequel Apple subit un préjudice.” In Dutch: „De door partijen gesloten onderhavige overeenkomst en de bijbehorende betrekking (vertaling van verzoekster)/de hieruit voortvloeiende betrekkingen (vertaling van verweerster) tussen partijen zullen worden beheerst door en worden uitgelegd volgens het Ierse recht, en partijen verlenen bevoegdheid aan de Ierse rechter. Apple behoudt zich het recht voor om vorderingen jegens de wederverkoper aanhangig te maken bij het gerecht in het rechtsgebied waar de wederverkoper is gevestigd of in een land waar Apple schade heeft geleden.”
This translation issue however highlights precisely the core of the discussion: ‘the corresponding relationship’ suggest a narrow reading: the relationship corresponding to the contractual arrangements. Infringement of competition law does not correspond, in my view. ‘La relation correspondante’ displays this sentiment. ‘(L)es relations en découlant’ suggests a wider reading.
In 2012 eBizcuss started suing Apple for alleged anti-competitive behaviour, arguing Apple systematically favours its own, vertically integrated distribution network.
The Cour de Cassation had rebuked the Court of Appeal’s finding of lack of jurisdiction. In its 2015 decision to quash, (the same which qualified the Court’s stance on unilateral jurisdiction clauses) it cited C-352/13 CDC, in which the CJEU held that choice of court clauses are not generally applicable to liability in tort (the clause would have to refer verbatim to tortious liability): the specific para under consideration is para 69 of that judgment in CDC:
‘the referring court must, in particular, regard a clause which abstractly refers to all disputes arising from contractual relationships as not extending to a dispute relating to the tortious liability that one party allegedly incurred as a result of its participation in an unlawful cartel’.
At issue in Apple /eBizcuss is essentially what kind of language one needs for choice of court to include infringement of competition law (for Dutch readers, I have an earlier overview in Jacques Steenbergen’s liber amicorum here).
Wahl AG emphasises (at 56) that it would not be in the spirit of Article 25 Brussels I Recast (which he analyses in extenso in the previous paras) to require parties to include the exact nature of the suits covered by the choice of court agreement. He is right of course – except those suits in my view do need to be contractual unless non-contractual liability has been clearly included: that in my view is the clear instruction of the CJEU in CDC.
The AG then continues the discussion (which will be redundant should the CJEU not follow his lead) as to whether the clause covers both follow-on (a suit for tort once a competition authority has found illegal behaviour) as well as stand-alone (private enforcement: a party claiming infringement of competition law in the absence of an authority’s finding of same) suits. He suggests there should be no distinction: on that I believe he is right.
(Handbook of) European Private International Law. 2nd ed. 2016, Chapter 2, Heading 2.2.9, Heading 2.2.12, Heading 22.214.171.124.
Comparative conflict of laws is often a useful source for exam (essay) questions. I used People of State of New York v. PriceWaterhouseCoopers, LLP, No. 3685N (N.Y. App. Div. May 23, 2017) to ask my students to surmise how an EU-base court would judge the issue raised.
Keith Goldberg over at LAw360 has the following great summary:
A New York appellate court [.. ] upheld a decision to force ExxonMobil’s outside auditor PricewaterhouseCoopers LLP to comply with New York Attorney General Eric Schneiderman’s demand for documents in his probe of whether the oil giant lied to investors about the climate change risks to its business.
The Appellate Division backed state Supreme Court Judge Barry Ostrager’s Nov. 26 order that PwC turn over documents related to its audit of Exxon subpoenaed by Schneiderman, saying the judge correctly held that New York law, not the law of Texas, where Exxon is headquartered, applies to questions of evidentiary privilege and that the Empire State doesn’t recognize accountant-client privilege.
Mr Ostrager’s decision is here – it has more choice of law considerations than the appelate court’s order. Eversheds have excellent analysis here of the overall issue of considering applicable law for privilege under the first and second restatement of the law. In the case at issue, ExxonMobil as well as the documents disclosure of which is sought (such as projected carbon costs and their application to Exxon’s capital allocation decisions, as well as documents provided to Exxon by PwC concerning the auditor’s role in compiling Exxon’s submissions about greenhouse gas emissions for the Carbon Disclosure Project, a nonprofit that collects information on greenhouse gas emissions) are based at Texas. But the trial is underway in New York.
Now, to the essay Q: how would an EU-based court hold on the issue? (For the purpose of last week’s exam I had a Belgian court rule on the issue, with the oil company based at Belgium, and the accountant at England, with the agreement between company and accountants subject to English law.
I am marking these exams later this week and hope to read some or all of the following: reference to overall principle that procedure is subject to lex fori; that statement being of little use in a system (like the EU) that thrives on predictability: for what is procedure to one, is substantive law to another; arguments existing both pro this being procedure (closely tied up with evidence, clear links with public policy) as well as substantive (privilege despite its public nature also protecting private, including commercial interest; parties wishing to manage the issue of sensitive information and forum); need for autonomous interpretation and tendency within the EU to define the ‘scope of the law applicable’ (eg both in Rome I and II); no trace in said Regulations of privilege being included in the scope of law applicable.
As always, I am hoping for students to surprise me. Undoubtedly they will.
Banco Santander Totta: the High Court upholds snowball interest rate swaps under English law. The ‘purely domestic contracts’ provision of Article 3(3) Rome I is not engaged.
Update December 2016 the Court of Appeal has confirmed in  EWCA Civ 1267.
A longer title than readers are used to from this blog. However judgment itself is also an unusually long 163 pages. In  EWHC 465 Banco Santander Totta, the High Court was asked whether snowball interest rates swaps in loan agreements between a Portuguese Bank and four Portuguese public transport companies, should be declared invalid under Portuguese ‘mandatory’ law, applicable by use of the corrective mechanism of Article 3(3) Rome I.
The Transport Companies do not assert that BST wrongly advised them to enter into the swaps, or misrepresented the swaps to them. Rather, defences raised by the Transport Companies are that:
(1) under Portuguese law, each company lacked capacity to enter the swaps which are therefore void; this is on the basis (among other reasons) of an assertion that the swaps were speculative transactions; this defence applies regardless of the law applicable to the swaps; it is common ground that, if correct, it is a complete answer to the claim;
(2) although English law governs the Master Agreements, this is subject to Art. 3(3) of the Rome Convention; this provides that where all the elements relevant to the situation at the time of the choice of law are connected with one country only, the choice does not prejudice the application of rules of the law of that country which cannot be derogated from by contract (“mandatory rules”). Portuguese mandatory rules apply to the swaps, giving rise to two defences: a) under rules dealing with gaming and betting and ordre public, the swaps are void for being unlawful “games of chance”, alternatively speculations; b) seven of the nine swaps are liable to be terminated under rules dealing with an “abnormal change of circumstances” (which termination takes effect as though the swaps were void); this is on the basis that since 2009 (following the financial crisis), the reference interest rates relating to the swaps (EURIBOR and LIBOR) have been close to zero (and remain so at the time of this judgment);
(3) in presenting the swaps to the Transport Companies, the bank acted in breach of its duties under provisions of the Portuguese Securities Code which implement relevant European Union legislation; these apply to the bank as a financial intermediary and relate to the protection of the legitimate interests of the Transport Companies as clients, and to conflicts of interest; the breach is said to entitle the Transport Companies to damages thereby extinguishing their liabilities under the swaps.
Blair J reviews precedent (European (limited, mostly related to the preparatory works), English and Portuguese (likewise limited) and decides against the engagement of Article 3(3). I will not regurgitate all of the analysis: readers are best referred to the judgment, in particular p.65 onwards, and the decision at 411, where Blair J concludes
because of the right to assign to a bank outside Portugal, the use of standard international documentation, the practical necessity for the relationship with a bank outside Portugal, the international nature of the swaps market in which the contracts were concluded, and the fact that back-toback (sic) contracts were concluded with a bank outside Portugal in circumstances in which such hedging arrangements are routine, the court’s conclusion is that Art. 3(3) of the Rome Convention is not engaged because all the elements relevant to the situation at the time of the choice were not connected with Portugal only. In short, these were not purely domestic contracts. Any other conclusion, the court believes, would undermine legal certainty.
The latter element is quite important. Referring in particular to Briggs (at 374), the Court holds that the uncertainty of the rule of Article 3(3) should lead to its narrow interpretation. I agree. With party autonomy the core consideration of the Regulation, standard recourse to Article 3(3) [or 3(4) for that matter) under the pretext for instance of a general campaign against fraus legis is most definitely not warranted.
Permission was granted to appeal the issues on the Rome Convention (thank you to Ali Malek QC for pointing that out).
(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 3, Heading 3.2.8, Heading 126.96.36.199
Martrade Shipping: choice of law means that law can decide the limits to which it wishes to be applied. Including to promote forum shopping.
In  EWHC 1884 (Comm) Martrade Shipping v United Enterprises Corporation, the High Court considered the appeal against an arbitration award in relation to the applicability of the Late Payment of Commercial Debts (Interest) Act 1998 to charterparties providing for English law and London arbitration.
The vessel was owned by the Defendant, a Marshall Islands company. The vessel was registered in Panama and managed by a Liberian company registered in Greece. The vessel was chartered by the Owners to the Claimant charterers for a time charter trip via the Mediterranean/Black Sea under a charterparty on an amended NYPE form dated 2 July 2005. The Charterers are a German company. The vessel was to be placed at the disposal of the Charterers on passing Aden, and was to be redelivered at one safe port or passing Muscat outbound/Singapore range in Charterers’ option. In the event the vessel loaded cargoes of steel products at Tuapse (Russia), Odessa (Ukraine) and Constanza (Romania) and discharged them at Jebel Ali (UAE), Karachi (Pakistan) and Mumbai (India). Hire was payable in US$ to a bank account in Greece. The broker named in the charterparty as entitled to commission was Optima Shipbrokers Ltd who arre Greek. The charterparty recorded that it was made and concluded in Antwerp.
Consequently, contact with England other than the governing law and arbitration clause was non-existent.
A number of disputes between the parties were referred to arbitration, including a claim by the Owners for unpaid hire, in respect of which the Charterers claimed to be entitled to deduct sums for alleged off-hire, bunkers used during off-hire, and a bunker price differential claim. By the Award the tribunal held that Owners were entitled to an award in respect of hire in the sum of US$ 178,342.73. The tribunal further held that the Owners were entitled to interest on that sum calculated at the rate of 12.75% per annum from 23 September 2005 until the date of payment under the 1998 Act.
The appeal is against the award of interest under the 1998 Act. The Charterers contended before the tribunal, and contend on the appeal, that the 1998 Act has no application by reason of s. 12(1) which provides:
“This Act does not have effect in relation to a contract governed by a law of a part of the United Kingdom by choice of the parties if –(a) there is no significant connection between the contract and that part of the United Kingdom; and (b) but for that choice, the applicable law would be a foreign law.’
Section 12 of the Act therefore provides that where parties to a contract with an international dimension have chosen English law to govern the contract, the choice of English law is not of itself sufficient to attract the application of the Act. Section 12 mandates the application of the penal interest provisions only if one or both of two further requirements are fulfilled. There must be a significant connection between the contract and England (s. 12(1)(a)); or the contract must be one which would be governed by English law apart from the choice of law (s. 12(1)(b)). Either is sufficient. Popplewell J suggests this provision has two objectives:
– the Act reflects domestic policy considerations which are not necessarily apposite to contracts with an international dimension. What is required by the significant connecting factor(s) is something which justifies the extension of a deterrent penal provision rooted in domestic policy to an international transaction. And
– subjecting parties to a penal rate of interest on debts might be a discouragement to those who would otherwise choose English law to govern contracts arising in the course of international trade, and accordingly does not make such consequences automatic.
‘The s.12(1)(a) criterion of “significant connection” must connect the substantive transaction itself to England. Whether they provide a significant connection, singly or cumulatively, will be a question of fact and degree in each case, but they must be of a kind and a significance which makes them capable of justifying the application of a domestic policy of imposing penal rates of interest on a party to an international commercial contract. They must provide a real connection between the contract and the effect of prompt payment of debts on the economic life of the United Kingdom. (at 17).
‘Such factors may include the following:
(1) Where the place of performance of obligations under the contract is in England. This will especially be so where the relevant debt falls to be paid in England. But it may also be so where other obligations fall to be performed in England or other rights exercised in England. If some obligations might give rise to debts payable in England, the policy considerations underlying the Act are applicable to those debts; and if some debts under the contract are to carry interest at a penal rate, it might be regarded as fair and equitable that all debts arising in favour of either party under the contract should do so.
(2) Where the nationality of the parties or one of them is English. If it is contemplated that debts may be payable by an English national under the contract, the policy reasons for imposing penal rates of interest may be engaged; and if only one party is English, fairness may again decree that the other party should be on an equal footing in relation to interest whether he is the payer or the payee.
(3) Where the parties are carrying on some relevant part of their business in England. It may be thought that persons or companies who carry on business in England should be encouraged to pay their debts on time and not use delayed payment as a business tool even in relation to transactions which fall to be performed elsewhere. Moreover a supplier carrying on business in England may fall within the category identified in s.6(2)(a) of those whose financial position makes them particularly vulnerable to late payment of their debts, although these are not the only commercial suppliers for whose benefit the Act is intended to apply. The policy of the Act may be engaged in the protection of suppliers carrying on business in England, whether financially vulnerable or not, even where the particular debts in question fall to be paid by a foreign national abroad.
(4) Where the economic consequences of a delay in payment of debts may be felt in the United Kingdom. This may engage consideration of related contracts, related parties, insurance arrangements or the tax consequences of transactions.’ (at 20).
By contrast, a mere London arbitration or English jurisdiction clause cannot be a relevant connecting factor for the purposes of s.12(1)(a).
Popplewell J therefore expressly links the non-applicability of relevant domestic English law (where such as here that law itself suggests the need for there to be a connection between the case, and England) to the need to maintain the attraction of England as a seat of international commercial arbitration or indeed litigation. Exactly the kind of attitude in which competing courts fall short.
It’s not the grammar, stupid! The High Court in Anchorage on exclusive (or not) choice of court, anti-suit injunctions, Rome, Brussels and much more
In Anchorage (BNP Paribas v Anchorage Capital Europe et al). a bank and a hedge fund are at odds as to whether a handful of instant message communications resulted in a binding contract or contracts and if so, between which parties and on what terms. The issue for decision at the High Court was whether the disputes should be determined in London (home to the London Branch of BNP Paribas and allegedly identified as the exclusive – or not – court of choice in the alleged contracts), New York (home to the hedge fund which however also has a separate LLP domiciled in London) or possibly Luxembourg (home to two funds within Anchorage Group).
For review of the facts reference is best made to the text of the judgment, for there are many framework agreements etc at stake. The High Court’s review of the case though is most interesting for highlighting the limits to what Article 23 of the Brussels I Regulation harmonises. The Article aims to ensure a non-formalistic deference to parties’ agreement to have their disputes adjudicated in a particular court. As Males J notes (and the ECJ acknowledges), one should not be overly formalistic in applying Article 23.
Article 23 though does not harmonise the underlying contractual (or not) issues: with whom were contracts made, especially in an agent /principal context; what law applies to the (alleged) choice of court agreement (an issue more or less resolved in the new Brussels I Regulation). Males J applies English law to the issue of validity of the clause, on the basis it would seem of lex contractus (which arguably will no longer be possible come January 2015, as a result of the new Brussels I Regulation): either because of the express determination of such by the parties, or because the lex contractus of the agreement of which it forms part is English law by virtue of the Rome I Regulation (contract for the sale of goods; I am not sure though whether the underlying contract truly is a sale of a good). Arguments for the alternative (in particular, application of New York law to the choice of court agreement) are dismissed on the basis that they represent the kind of semantic approach to such clauses which English law has left firmly behind. Surely a poster-argument indeed for the use of English law in international commerce and an approach which is to be commended.
Even were the validity of the clause not to be upheld, the High Court outlines other jurisdictional grounds: Article 5(1) of the Jurisdiction Regulation on the basis of the place of performance of the obligation in question; Article 5(5) on the basis of a contractual dispute closely connected to the operation of a branch; Article 6(1) on the basis of the cases being closely connected. (Use of Anchorage London as an anchor defendant (lousy pun intended I fear) against the investment funds).
Forum non conveniens (potentially applicable should none of the jurisdictional grounds be valid and given the possibility of New York proceedings) was dismissed; the anti-suit injunction was granted. Here, Males J reviews the rather grammatical arguments made vis-a-vis the choice of court agreement being used transitively or not: again, the Court takes a non-formalistic approach and (respectfully) dismisses the grammatical argument as being elusive.
This is the kind of case upon which one could build an entire conflicts course. If you happen to be preparing one over the holidays period: good luck and enjoy. To all readers past, current and future: Merry Christmas and /or applicable and appropriate season’s greetings. Geert.