Motacus Constructions v Castelli. Choice of court, English lois de police and interim measures under the Hague process, post Brexit.

Motacus Constructions Ltd v Paolo Castelli SpA [2021] EWHC 356 (TCC)  to my knowledge is the first case post-Brexit that shows how a jurisdictional discussion that might have been settled swiftly under Brussels Ia, leads to a lot more chewing over under 2005 Hague Convention (on choice of court) principles. It may not be ‘important‘ in terms of its impact on authority (this is a first instance judgment; and it may be overly enthusiastic in engaging with the issues) yet it nevertheless is a good illustration of what was left behind.

The Private International Law (Implementation of Agreements) Act 2020 has given the 2005 Convention force of law in the UK.

The ‘Governing Law & Dispute Resolution’ clause (clause 19) of a contract between contractor and subcontractor re a London hotel provided ‘This Agreement shall be governed by and construed in accordance with the laws of Italy’ and for all disputes to ‘submitted to the exclusive jurisdiction of the Courts of Paris, France’. A payment issue ensued and the contractor started classic English construction sector adjudication proceedings despite the aforementioned clause: the Housing Grants, Construction and Regeneration Act 1996 is overriding mandatory law /loi de police /loi d’application immédiate in England and Wales [3]. To address cash flow problems in the construction industry, and the shortcomings of the traditional litigation process in serving the needs of the construction industry, Parliament decided there should be a short-form process of adjudication producing binding, and readily enforceable, decisions [25].

The UK has not made a reservation under Hague 2005 viz contracts in the construction sector  [18] (compare the EU’s reservation viz insurance contracts).

Sub-contractor actively took part, yet declined to make the necessary payment which the adjudicator’s decision had instructed. Adjudication enforcement proceedings were started on 12 January 2021. Sub-contractor challenged the enforcement proceedings, arguing the proceedings could only be commenced in Paris under the choice of court.

Claimant’s case is that the High Court should accept jurisdiction and enforce the adjudicator’s decision, notwithstanding the exclusive jurisdiction clause, in light of the provisions in either A6(c) or A7 Hague 2005. It submits that it would be manifestly contrary to the public policy enshrined in the 1996 Act, or alternatively it would be manifestly unjust, to refuse to enforce an otherwise enforceable adjudicator’s decision in reliance on clause 19 of the contract. In any event, it is argued, the enforcement of an adjudicator’s decision is the enforcement of an interim measure of protection. It falls outside the scope of Hague 2005 and so the defendant cannot rely on its provisions.

A6(c) Hague 2005 provides that a court of a contracting state (in this case the UK) other than that of the chosen court (in this case Paris, France), “… shall suspend or dismiss proceedings to which an exclusive choice of court agreement applies unless – (c) giving effect to the agreement would lead to a manifest injustice or would be manifestly contrary to the public policy of the State of the court seised. 

A7 provides that: “Interim measures of protection are not governed by [the Hague] Convention. [That] Convention neither requires nor precludes the grant, refusal or termination of interim measures of protection by a court of a Contracting State and does not affect whether or not a party may request or a court should grant, refuse or terminate such measures.”

Spiliada, Fiona Trust, The Eleftharia etc. are all discussed in what looks like a bonfire of the CJEU authorities. The impact of Italian law as lex contractus, for the construction of the choice of court clause (under BIa this would have to be French law) is also signalled, but not entertained for this is an application for summary judgment in which, in the absence of proof of Italian law, its contents are presumed to be the same as English law [51].

Hodge J at 54 declines the suggestion of A6(c) ordre public. ‘Manifest’ requires a high burden of proof, no reservation has been made and there is no good reason why the parties should not be held to the bargain that they freely made when they incorporated clause 19 into their construction contract.

At 56 ff however claimant’s arguments on interim measures having been carved out, does lead to success: it is held that an application for summary judgment to enforce an adjudicator’s decision is an interim measure of protection within A7 Hague 2005. ‘The concept extends to any decision that is not a final and conclusive decision on the substantive merits of the case…The function of the adjudicator’s decision is to protect the position of the successful party on an interim basis pending the final resolution of the parties’ dispute through the normal court processes (or by arbitration).’ [57] The summary judgment application before the High Court has that same DNA: ‘What is before this court is not the underlying dispute between these parties but whether an interim procedure and remedy have been followed and granted.’

Interesting. Geert.

Brexit in transit. Bournemouth, Christchurch and Poole Council v KC et al. Exequatur insisted on.

Update II 8 April 2020 : just after my earlier update, Lecta Paper’s scheme of arrangement sanction hearing was published on BAILII: Trower J considers the end of the transition period at 40.

Update 8 April 2020 compare Crossley & Ors v Volkswagen Aktiengesellschaft & Ors [2020] EWFC 28 in which Waksman J succinctly holds at 12

‘On 31 January 2020, shortly after the conclusion of the trial, the UK withdrew from the EU. I asked the parties whether this would make any difference to any of the arguments made before me. I received written submissions on that topic on 4 and 9 March 2020. It is clear from those submissions that it is common ground that Brexit makes no difference here because EU Law (including the jurisdiction of the CJEU) will continue to have effect as if the UK was still a Member State until the end of the “transition period” which is 31 December 2020. This includes the general obligations which the UK owes qua Member State. Accordingly, for the purpose of this judgment, the position is as it was before 31 January 2020.’

(update ctd) and note VB v TR [2020] EWFC 28 where Mostyn J at 6 refers to the (until the end of the transition period) exclusive EU external competence to recognise (on the basis of reciprocity) countries as being on the accession list for the Hague 1980 Hague Convention on the Civil Aspects of International Child Abduction – which Bermuda is not even if the UK itself had recognised it as being part of the Hague regime. At 12: ‘In my judgment the law needs to be changed as between the United Kingdom and its overseas territories to provide that the 1980 Hague Convention operates between them. It is an embarrassment that if a child were taken from Bermuda to United States of America the Convention would apply, but if the child is brought here it does not. Alternatively, the law needs to be changed so that the automatic recognition of orders within the United Kingdom under the Family Law Act 1986 is extended to orders made in the Overseas Territories and the Crown Dependencies.’

 

In Bournemouth, Christchurch and Poole Council v KC et al [2020] EWFC 20, Dancey J at  62 ff is the first UK judge to my knowledge to discuss the implications of the UK’s separation from the EU’s civil procedure /justice and home affairs agenda, particularly in the transition period. It includes a discussion of the UK’s Brexit (EU Exit) Regulations 2019/2003, reg 3, and the European Commission notice on transition provisions.

The care proceedings concern W, a girl aged 9, nearly 10. W’s parents, who were married, are Polish nationals and W was born there. Following the separation of the parents in Poland in April 2016, contested contact proceedings there resulted in an order providing that W live with the mother with contact to the father. The father’s parental responsibility was limited to decisions about medical treatment and education. Following the breakdown of the father’s contact with W, the mother brought her to the UK in June 2018 where they have remained since. That was done without the father’s agreement, although he was aware the mother planned to relocate and acquiesced once the move had taken place. The mother did not tell the father of her and W’s location within the UK.

The legal framework, therefore, is Brussels IIa, Regulation 2201/2003. Dancey J at 63 concedes that by reg 8 of 2019/2003, dealing with saving/transitional provisions, the UK’s revocation from Brussels IIa does not apply to proceedings before a court in a Member State seised before 31 December 2020. However he then refers to the EC Notice to Stakeholders: Withdrawal of the United Kingdom and EU Rules in the Field of Civil Justice and Private International Law: 18/1/2019, and suggests it means that EU rules on recognition and enforcement will not apply to a UK judgment, even if the judgment was given, or enforcement proceedings started, before 1 January 2021 unless the judgment has been exequatured (declared enforceable by the courts of the Member State where recognition or enforcement is required) before 1 January 2021. Support for his opinion is found I suspect mostly in Heading 2.2 of that Notice – although I should warn against the matter of factly nature of that notice without much justification given for the positions it takes. Update 29 03 2020 and as Xavier Lewis has pointed out to me, the notice was put out there in the eventuality of a no deal – Dancey J does not refer to the Withdrawal Agreement at all.

At 66 Dancey J suggests in practice the consequence should not be too dramatic in the case at issue for ‘one or other of the parents should apply promptly in Poland for a declaration recognising this judgment and the order that will follow (exequaturing the judgment).’ That absence of real delay in the case at issue may well be true (it is confirmed by a letter from the Polish consulate) however the  implications are already clear and no surprise. Enforcement of UK judgments will be a lot less smooth post Brexit.

Geert.

Parentnapping by children of their vulnerable father: The Court of Protection in QD on the Hague Convention and habitual residence.

IN [2019] EWCOP 56 QD, Cobb J in the Court of Protection applied the Hague Convention on the International Protection of Adults to a removal from Spain by the children of his first marriage, of an adult father suffering from Lewy Body Dementia, a progressive neurodegenerative dementia, without consent of the new wife. Following the removal the children seek an order that he reside at a care home in England, that he not return to Spain, and that he have only supervised contact with his wife.

Cobb J decided that the English courts do not have jurisdiction given that in his judgment the father is habitually resident in Spain, with at 28-29 a list of the reasons leading to his conclusion (it includes a negative view on the removal ‘by stealth’, as well as particular emphasis on the father’s expressed will to live in Spain when he was not yet incapacitated). The common law doctrine of necessity does not alter this as alternative, less drastic measures could and should have been sought first (such as alerting Spanish social services; at 29).

The judge did make use of his limited urgency jurisdiction to issue a ‘protective measures’ order which provides for the father to remain at and be cared for at home he resides in, and to continue the authorisation of the deprivation of his liberty there only until such time as the national authorities in Spain have determined what should happen next. It is for the Spanish administrative or judicial authorities to determine the next step, which may of course be to confer jurisdiction on the English courts to make the relevant decision(s).

Geert.

 

SM: Kafala and migration before the European Court of Justice.

Case C-129/18 SM v Entry Clearance Officer, UK Visa Section was held last Tuesday in Grand Chamber. It concerns the application of the EU’s main migration Directive, 2004/38 and essentially addresses the fear of the Member States (many of whom appeared before the court, all arguing a rather restrictive interpretation) that the islamic system of Kafala or Kefala hands human traffickers a means to support their trade.

As I flagged in an earlier post, in which I also referred to the case involving SM, kafala is clearly not equivalent to adoption. It is more akin to guardianship or custody in advance of adoption, or in the case of the Middle East, is even used as a form of visa et al sponsorship for migrant workers (hence leading to issues of slavery and the like).

In SM’s case, Mr and Ms M are two French nationals who married in the UK in 2001. They travelled to Algeria in 2009 to be assessed as to their suitability to become guardians of a child under Algerian kafala and were deemed ‘suitable’. SM, who was born in Algeria in June 2010, was abandoned by her biological parents at birth. In October 2011, Mr M returned to the UK where he has a permanent right of residence, for professional reasons. For her part, Ms M remained in Algeria with SM. In May 2012, SM applied for entry clearance for the UK as the adopted child of an EEA national. Her application was refused by the Entry Clearance Officer on the ground that guardianship under Algerian kafala was not recognised as an adoption under UK law and that no application had been made for intercountry adoption.

The Court essentially agrees with the Member States that the case does not fall under directive 2004/38’s heading on ‘direct descendants’ (‘blood’ relatives in e.g. the Dutch version) which the Court interprets (as do the Member States) as both biological and adopted direct descendants. This is a consequence of the qualification by the lex fori itself: unlike adoption, which is prohibited by Algerian law, the placing of a child under kafala does not mean that the child becomes the guardian’s heir. In addition, kafala comes to an end when the child attains the age of majority and may be revoked at the request of the biological parents or the guardian.

Yet the Court also finds that the Member States’ concerns over human trafficking are properly addressed by the Directive’s provisions for ‘other family Members’. Unlike the right to entry for direct descendants, other family members’ visa applications must be processed taking into account an extensive examination of their personal circumstances. At 69: in the case of minors, that assessment must take into consideration, inter alia, the age at which the child was placed under Algerian kafala system, whether the child has lived with its guardians since its placement under that system, the closeness of the personal relationship which has developed between the child and its guardians and the extent to which the child is dependent on its guardians, inasmuch as they assume parental responsibility and legal and financial responsibility for the child.

That the Algerian system of kafala guardian’s assessment clearly does not meet with the 1996 Hague Convention requirements for assessment of prospective adoptive parents and the interests of the child (to which Algeria is not a party but the Member States are) is not material: such assessment must be weighed against the factual elements identified by the Court at 69, see above.

Hague and Kafala at Kirchberg. Not an everyday occurrence.

Geert.

 

 

Akers v Samba (Court of Appeal). Hague Trust Convention’s rocket launcher fails to ignite, for now.

Update 1 February 2017. The stay was reinstated [2017] UKSC 6 (to the degree that is still effective) by the Supreme Court.

The Hague Trust Convention arguably is of limited (not obviously irrelevant) ambition only. It gives trusts a passport, so to speak, which ensures them entry into other jurisdictions. However such entry does not guarantee fuss-free onward travel. Some trusts for that reason often prefer not to travel, keeping assets etc, domestic. For once on a journey, all sorts of mishaps might happen. For others, the prospect of foreign shores is simply too enticing to resist. Evidently, residents of countries which do not traditionally employ trust-like concepts, likewise are often tempted to use common law trusts to surpass limitations in their own national property etc. law.

A common foreign element in the life of a trust is its holding of foreign assets, often real estate or shares in foreign corporations.

The analogy often used in describing the Convention’s approach to applicable law is that of the rocket-launcher v the rocket (the latter, as the Court of Appeal held in [2014] EWCA Civ 1516 Akers v Samba, ‘presumably when the rocket is in orbit’): Its provisions are obviously aimed in part at establishing the law applicable to trusts (see articles 6 and 7 that relate to identifying that law, and article 8 that defines what the law specified shall govern). But article 4 acknowledges that there are some preliminary issues to which the Convention and its applicable law rules will not apply.’

In Akers v Samba, the trusts concerned arose from transactions which took place between 2002 and 2008. In each of the transactions, Mr Maan Al-Sanea (“Mr Al-Sanea”), who is a citizen of and resident in Saudi Arabia, declared himself a trustee of certain Saudi Arabian shares for one of the claimant companies, SICL, a Cayman Islands company which is now in liquidation (and massively insolvent). SICL was Mr Al-Sanea’s family investment vehicle, which was managed in Geneva. SICL’s liquidators seek to challenge the validity of a disposition to Samba of the shares that were the subject of the 6 transactions, made just before SICL’s winding up order was made. The effect of the disposition, if the liquidators are right, was to deprive SICL’s creditors of shares to which it was entitled worth some US$318 million. The underlying issue, put shortly, is whether it was at least arguable that the shares were indeed held on trust for SICL.

The Court of Appeal at this stage is not concerned with whether the liquidators will ultimately prove to be entitled to a declaration that the Transfer was void. Nor with whether Samba might be entitled to a validation order in respect of the Transfer on the grounds that Samba was a good faith purchaser of the Shares: it is ‘simply’ concerned with whether or not to confirm a stay of proceedings in England, granted earlier. Reasons given for that stay were that each of the relevant trusts was governed by either Saudi Arabian law or Bahraini law, neither of which will enforce foreign (trust) laws or recognise any division of the legal and beneficial interests in shares. Sir Terence Etherton at the High Court [2014] EWHC 540 (Ch) had held that these proceedings should be stayed on the grounds that the courts of Saudi Arabia were clearly and distinctly a more appropriate forum.

Lord Vos leading, the Court of Appeal lifted the stay after complete yet somehow fairly concise review of the most relevant existing scholarship on the implications of the various articles of the Hague Convention. (including the most recent by prof Hayton in the Recueil des cours). It was held:

i) On the assumption that the governing law of the declarations of trust is Cayman Islands law, article 4 does not operate to exclude the application of the Convention to the declarations of trust under the 6 transactions. Whilst Saudi Arabian law as the lex situs would still govern the question of whether Mr Al-Sanea had capacity to alienate the Shares at all, Cayman Islands law would govern the capacity of Mr Al-Sanea to alienate an interest in the Shares by way of declaration of trust, and the transfer of the beneficial interest effected by the declarations of trust.

ii) It was not appropriate in this case to determine on a stay or summary judgment application whether article 15 applied to the transfer of the equitable interests under the declarations of trust, because (i) the mandatory nature of the Saudi Arabian law rules was not explored in the expert evidence, and (ii) it would be better for the interaction between the application of the governing law of the trust to the validity, construction and effects of the trust under article 8, and the application of article 15(d) to the transfer of the beneficial interest in the Shares to SICL, to be decided after a full evidential hearing.

iii) It is at least arguable that it is to be implied from the terms of the declarations of trust in the later transactions that they were to be governed by Cayman Islands law under article 6. In that event, article 7 would not be engaged for those later declarations of trust. It would be better for all questions under articles 5, 6 and 7 to be determined after a full evidential hearing in the light of all the circumstances of the case.

Both counsel had argued that the case had monumental consequences: at 35: ‘There must be large numbers of trusts established under the laws of common law jurisdictions, onshore or offshore, that comprise registered shares in civil law countries amongst their assets. Mr Mark Howard QC, counsel for the liquidators, opened this appeal by pointing out that it would be remarkable if all those trusts were to be held to be ineffective. Mr Mark Hapgood QC, counsel for Samba, responded by pointing out that there was nothing to stop people purporting to put shares registered in civil law jurisdictions into common law trusts; it was just that the trusts would create only personal remedies in those jurisdictions and not proprietary remedies against third parties to whom the shares were transferred or in the event of the trustee’s bankruptcy’. It would seem the High court for now would seem to side with the need to ensure effectiveness of those many trusts which are a staple part of international finance and assets management.

To be continued, however. Geert.