Posts Tagged Judgments Regulation
Ordre Public, the ECHR and refusal of recognition under Brussels I: the High Court in Smith v Huertas.
I have reported before on the narrow possibility, within the scope of the Brussels I Regulation, for refusal of recognition of judgments from fellow national courts in the EU (Diageo; Trade Agency). The High Court confirmed the exceptional character of the exercise in Smith v Huertas. Following conviction in a criminal court, Dr Smith had been instructed by the French courts to pay Huertas a considerable sum following fraudulent payments made by a new insolvent company, of which Dr Smith was a director. The argument on ordre public grounds was made viz alleged bias and hostility in one particular court hearing; the long duration of the trial; and one or two alleged procedural inadequacies (in particular, the refusal to interview Dr Smith on a number of occasions).
Most if not all of the complaints were taken by Dr Smith to the ECtHR, which decided not to proceed with the case (such decisions are made in summary manner and one therefore has to guess whether either the claims were found to be manifestly unfounded, or not of a nature as having actually put the applicant at a disadvantage).
Importantly, Cooke J emphasises the responsibility of applicant (seeking refusal of recognition) to raise matters which might conceivably lead to a refusal of recognition, in the Member State of origin: at 21:
Where the factors relied on as being contrary to public policy in England are factors which the court has already considered in the foreign jurisdiction or are factors which could have been raised by way of objection in that jurisdiction, it appears to me self-evident that the foreign jurisdiction must be treated as the best place for those arguments to be raised and determined. To do otherwise would be contrary to the spirit of the Convention and, where issues of unfairness are raised which are capable of being the subject of appeal in the foreign jurisdiction, the court in the enforcing jurisdiction would be much less able to assess them than the original court which was familiar with its own forms of procedure. It is plain that an enforcing court will have much more difficulty in understanding the overall foreign system and its procedures for ensuring that justice is done than the appeal court of the original jurisdiction itself. There is moreover a highly unattractive element in a defendant not raising points which he could have raised in the original jurisdiction, by way of appeal against the judgment and only seeking to raise those matters when the judgment is exported to an enforcing jurisdiction under the Convention as matters of public policy for that court.
Dr Smith’ task therefore was to (at 26) not only … show an exceptional case of an infringement of a fundamental principle constituting a manifest breach of a rule of law regarded as essential in the legal order in this country or of a right recognised as being fundamental within it but that the system of legal remedies in France did not afford a sufficient guarantee of his rights. Dr Smith must overcome the strong presumption that the procedures of the courts of France, another Contracting State, are compliant with Article 6…
A task which in the end Dr Smith failed to accomplish and summary judgment for recognition and enforcement was issued. Review by Cooke J may seem lengthy to some however CJEU case-law emphasises the ad hoc nature of the ordre public exception: that requires some case-specific assessment, of course.
Learn your lines, son!: the (ir)relevance of grammar for choice of court underlined in Global Maritime Investments.
“These general terms and conditions will be governed by and construed in accordance with English law.
With respect to any suit, action or proceedings relating to these general terms and conditions each party irrevocably submits to the jurisdiction of the English courts.”
In Anchorage, the High Court had already dismissed a semantic approach to choice of court agreements in contracts (and choice of court clauses) subject to English law. In Global Maritime Investments Cyprus v O.W., Teare J considered in summary judgment, sought by GMI, whether the aforementioned clause is exclusive, and if not, whether proceedings commenced by GMI in England, block any future proceedings on the same (or wider) contractual issues sought by OW in Denmark. GMI had started proceedings in England following OW’s November 2014 filing for bankruptcy in Denmark. OW had initiated proceedings in Denmark in March 2015. At issue was among others the ‘netting-out’ provisions between parties (effectively, a final settlement of reciprocal dues in different currencies, with derivatives of commodity transactions being the underlying transactions between the parties in this case).
Teare J held that the clause even if not so phrased verbatim, was meant to be exclusive, among others in line with what ‘the reasonable commercial man’ (the bonus mercator, if you like) would have understood the clause to be, especially under the lex contractus, English law. All the more so in light of the use of ‘irrevocably’. At 51 he does offer sound commercial advice to avoid disputes such as the one at issue: it is desirable to employ transitive language, such as in ‘each party agrees to submit all claims’.
I do not think there is justification for the Court not to have considered the impact of the Brussels I (and /or Recast) Regulation on the clause: the judgment keeps entirely shtum about it. Under the rules of the Regulation, all clauses are considered exclusive unless specifically stated. Saying that the clause expressis verbis amounts to non-exclusivity, would be quite a stretch. (I agree it is not clearly worded exclusively – however that is exactly where the Brussels I Regulation is of assistance).
It is quite clear to me that this judgment (issued 17 August – I have delayed reporting for exam reasons) will not be the end of the jurisdictional affair. In particular, parties I am sure will be at loggerheads as to what litigation is to be considered ‘relating to these general terms and conditions’, in particular with OW’s insolvency proceedings in the background.
Kaupthing: the High Court interprets (and rejects) Lugano insolvency exception viz the Icelandic Banking crisis.
Thank you Eiríkur Thorláksson (whose expert report fed substantially into the Court’s findings) for flagging and for additional insight: In Tchenguiz v Kaupthing, the High Court had to review the insolvency exception to the Lugano Convention, combined with Directive 2001/24 on the reorganisation and winding-up of credit institutions. Directive 2001/24 applies to UK /Iceland relations following the EFTA Agreement. See my earlier post on Sabena, for Lugano context. Mr Tchenguiz is a London-based property developer. He claims against Kaupthing; Johannes Johannsson, a member of Kaupthing’s winding-up committee; accountants Grant Thornton; and two of its partners.
While Directive 2001/24 evidently is lex specialis vis-a-vis the Insolvency Regulation, much of the ECJ’s case-law under the Regulation is of relevance to the Directive, too. That is because, as Carr J notes, much of the substantial content of the Regulation has been carried over into the Directive. Carr J does emphasise (at 76) that the dovetailing between the Lugano Convention /the Judgments Regulation, and the Insolvency Regulation, carried over into the 2001 Directive does not extend to matters of choice of law. [A bit of explanation: insolvency was excluded from the Judgments Regulation (and from the Convention before it) because it was envisaged to be included in what eventually became the Insolvency Regulation. Consequently the Judgments Regulation and the Insolvency Regulation clearly dovetail when it comes to their respective scope of application]. That is because neither Lugano nor the Judgments Regulation consider choice of law: they are limited to jurisdiction.
On the substance of jurisdiction, the High Court found, applying relevant precedent (German Graphics, Gourdain, etc.), that the claims against both Kaupthing and Mr Johansson are within the Lugano Convention and not excluded by Article 1(2)(b) of that Convention. That meant that Icelandic law became applicable law by virtue of Directive 2001/24, and under Icelandic law proceedings against credit institutions being wound up come not be brought before the courts in ordinary (rather, a specific procedure before the winding-up committee of the bank applies). No jurisdiction in the UK therefore for the claim aganst the bank. The claim against Mr Johansson can go ahead.
[For the purpose of this blog, the jurisdictional issues are of most relevance. For Kaupthing it was even more important that the Bankruptcy Act in Iceland was found to have extra-territorial effect. The Act on Financial Undertakings implemented the winding-up directive and the Icelandic legislator intented it to have extra-territorial effect].
A complex set of arguments was raised and the judgment consequentially is not an easy or quick read. However the above should be the gist of it. I would suggest the findings are especially crucial with respect to the relation between Lugano /Brussels I, Directive 2001/24, and the Insolvency Regulation.
ECJ broadly confirms Szpunar AG in Diageo: narrow window for refusal of recognition and enforcement.
As reported when Szpunar AG issued his Opinion, key question in Diageo, Case C-681/13 is whether the fact that a judgment given in the State of origin is contrary to EU law (in the case at issue; trademark law) justifies that judgment’s not being recognised in the State in which recognition is sought, on the grounds that it infringes public policy (‘ordre public’) in that Member State. Precedent for Diageo did not look good and indeed the ECJ on Thursday confirmed the views of its AG.
Where the breach concerns infringement of EU law, the ECJ formulates the test as follows: ‘the public-policy clause would apply only where that error of law means that the recognition of the judgment concerned in the State in which recognition is sought would result in the manifest breach of an essential rule of law in the EU legal order and therefore in the legal order of that Member State’ (at 50). The relevant breach of EU trademark law is simply not in that league (at 51).
The Court does (at 54) seem to suggest – although one has to infer that a contrario – that if one were to show that Member State courts deliberately infringe EU law, even if that EU law is not in the ‘essential’ category, such pattern of national precedent (imposed by the higher courts), could lead to refusal of recognition. However this was not the suggestion made in the case at issue.
I have reported elsewhere (In Dutch – I am hoping for some time at some point to write something similar in English; see in particular para 23) on the fact that the conjunctive ‘or’ has been dropped in all language versions of Article 19 of the Brussels I recast:
The provisions of this Section may be departed from only by an agreement:
- which is entered into after the dispute has arisen;
- which allows the consumer to bring proceedings in courts other than those indicated in this Section; or
- which is entered into by the consumer and the other party to the contract, both of whom are at the time of conclusion of the contract domiciled or habitually resident in the same Member State, and which confers jurisdiction on the courts of that Member State, provided that such an agreement is not contrary to the law of that Member State.
This contrast with the similar proviso on choice of court in employment contracts, Article 23:
The provisions of this Section may be departed from only by an agreement:
- which is entered into after the dispute has arisen; or
- which allows the employee to bring proceedings in courts other than those indicated in this Section.
I have suggested, with others, that much as I do not understand why the conjunctive has been dropped, its deletion, combined with its being kept in Article 23, means that for consumer contracts, choice of court pre the dispute are now simply impossible under the Regulation, while being maintained for employment contracts. I was also puzzled as to why such an important change was not discussed at all in the run-up to the recast.
A little bird at the European Commission (one high up the conflicts tree) now tells me that what has happened in reality, is quite different. Reportedly the ‘juristes-linguistes’ took it upon them to correct an apparent linguistic mistake in the previous version of the Regulation (indeed one going back to the Brussels Convention): there ought not to be a conjunctive when listing more than one, non-cumulative alternative. That would also explain the difference with Article 23, where there are only 2 alternatives.
This clears up the legislative intent. It does not to me, at least, clear up the linguistic confusion. We may have been grammatically wrong under the previous format (I cannot judge the correctness of that in all these language versions). However at least we were legally certain. Being fully respectful of grammatical correctness myself (punctuation jokes never fail to amuse me), I am not sure which one to prefer in this instance.
Gazprom. Arbitral anti-suit injunctions and the Judgments Regulation. Grand Chamber holds they are outside the scope, but not therefore invincible.
The ECJ today has held in C-536/13 Gazprom in a matter of factly manner (I had suspected the Court would be brief), that the enforcement of arbitral awards falls outside the Brussels I-Regulation, where that enforcement by the court of that State, effectively prohibits the party concerned from taking the case to a court in that very Member State. Rich was the main formula referred to, among the various precedents: ‘reference must be made solely to the subject-matter of the dispute‘ to assess the scope of Brussels I’s arbitral exclusion.
Importantly, West Tankers was distinguished particularly on the basis that in the facts at issue, there was no competing court in another Member State, hence no scope for the principle of mutual trust to be violated. The AG’s review of the impact of the recitals newly added by the Brussels I recast, was not addressed at all by the Court.
The judgment does not solve all outstanding issues, however. Firstly, the Court’s reasoning seems to suggest that where competition with a court in another Member State is at issue, effet utile of the Brussels I Regulation might take the upper hand, as it did in West Tankers. Recognition of the award arguably in such case would amount to anti-suit. Further, the Court (this was a Grand Chamber judgment) points out that the award still has to go through the national court’s standard recognition and enforcement process, outside the framework of Title III of the Regulation, instead governed by national residual law as well as the New York Convention. Both of these (including through ordre public) might still offer quite a remit for the Lithuanian courts to refuse recognition.
Key question in Diageo, Case C-681/13 is whether the fact that a judgment given in the State of origin is contrary to EU law (in the case at issue; trademark law) justifies that judgment’s not being recognised in the State in which recognition is sought, on the grounds that it infringes public policy (‘ordre public’) in that Member State. Precedent for Diageo did not look good.
‘Public policy in the Member State in which recognition is sought’, is by its very nature a matter for the courts of that Member State to define, however the ECJ has held that the nature of the JR necessarily implies that the ECJ has to exercise a degree of control. It has held that the clause on public policy may be relied on only in exceptional cases. The possibility that the court of the State of origin erred in applying certain rules of EU law, including free movement of goods and competition law, does not qualify as such: per Case C-126/07 Eco Swiss and Case C-38/98 Renault, that these rules concern Union as opposed to national law, does not as such have an impact on the application of the recognition and enforcement title: Union law needs to be looked at just the same as national or indeed international law.
Szpunar AG refers of course to these judgments, distinguishes them where necessary, and concludes that an error in the application of EU trademark law does not suffice to justify a refusal of recognition. All that is left to Diageo is an action in damages against Bulgaria.