Posts Tagged Legal advice

Conflicts, conflicts everywhere? The Hong Kong High Court in Chinachem.

It must be those late nights spent marking exam papers. (Thank goodness there is the World Cup to take the edge off that exercise this year). Either that or generally the twisted mind of a conflicts lawyer. I can see one or two conflicts issues in Chinachem which the Hong Kong High Court did not pick up on: probably because parties did not raise them and /or because the dispute was not ‘international’. In which case, let’s call this blog posting Fantasy Conflicts.

In Chinachem Financial Services v Century Ventures Holdings Ltd, the Hong Kong High Court held on the issue of implied waiver of privilege. Gareth Thomas and Dominic Geiser have a summary of the case here, including a review of its implications in Hong Kong dispute resolution. It is the discussion on waiver of privilege which is of interest to this blog. Both parties to the dispute are PRC (Mainland) based. They entered into an agreement whereby defendant would assist with the appeals stage of a dispute between plaintiff and third party. After a short while, disagreement ensued on the scope of the advice and plaintiff took legal advice from a Hong Kong based law firm but with international roots. This legal advice was later handed over to defendant by Plaintiff’s former CEO, in an alleged breach of his fiduciary duties. Did the hand-over and alleged partial use of the advice in the proceedings amount to waiver of privilege?

Ramanathan SC (at 130 ff) reviewed US, Australian, and English precedent (in particular Paragon v Freshfields and subsequent case-law) and in the end opted for the English approach. In doing so he presumably applied lex fori to the waiver issue, it being procedural? (And without consideration of the intervening nature of the lex causae of the contract between the law firm and plaintiff, or third party effect thereof. Lex contractus of this contract may well have been English given the roots of the firm involved. Lex contractus for the agreement between the parties presumably was ‘Chinese’ or ‘Mainland Chinese’). In this case, the open-minded comparative law approach is commendable (and of particular note, the fact that the judge opted for the English approach citing inter alia human rights impact and related relevance to Hong Kong (at 135)).

Finally, the Hong Kong proceedings were started 7 March 2013. Proceedings by defendant on the mainland, seeking essentially the reverse of plaintiff’s action in Hong Kong, had been initiated ‘early 2013’ (at 21). Yet any form of lis alibi pendens does not seem to have been entertained – presumably because mainland China generally has no structured approach to lis alibi pendens and Hong Kong is not willing to employ one unilaterally.

Fantasy over. Back to marking exams. Geert.

 

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Legal advice and legitimate expectations – The ECJ in Schenker

In Schenker, Case C-681/11, defendants in the main proceedings were members of the Spediteur-Sammelladungs-Konferenz (Freight Forwarding Agents Consolidated Consignment Conference; ‘the SSK’). The SSK was an interest group comprising some of the ordinary members of the Zentralverband der Spediteure (Central Association of Freight Forwarding Agents; ‘the Zentralverband’). The Zentralverband, which was set up as an association, represents the collective interests of freight forwarding agents and of logistics service providers with a forwarding licence.

The SSK pursued the objective of ‘enabling more favourable road/rail consolidated consignment rates to be granted to shippers and to end consumers (compared with the rail tariffs for general cargo) and – through the creation of equal conditions of competition – of promoting fair competition among its members, an objective … to be pursued whilst having particular regard to ensuring compliance with Austrian, [European Union and European Economic Area (EEA)] law on cartels’.

The Austrian competition court confirmed that the arrangement was a ‘minor cartel’, meaning that it could go ahead without the approval of the competition authority. Hence, it would seem – but I am not au fait with the detail of Austrian competition law – putting the ball back in the camp of the cartel: for a finding of mini-cartel does not to me seem to imply a finding of non-breach of competition law.

Advice of counsel had confirmed the existence of a ‘mini cartel’ both at the time of the 1996 agreement and later, in 2006, at the entry into force of a new competition law. In neither instance had counsel advised on the legality or not under EU competition law. The European Commission raided the offices of members of the cartel in 2007, following which the Austrian competition authority pursued the case for breach of EU (as opposed to national) competition law. The courts in first instance held that the finding of a mini-cartel implied the absence of impact on cross-border trade, which is  prerequisite for EU competition law to apply. Upon appeal, questions were referred to the ECJ.

The Court held that an undertaking which has infringed that provision may not escape imposition of a fine where the infringement has resulted from that undertaking erring as to the lawfulness of its conduct on account of the terms of legal advice given by a lawyer or of the terms of a decision of a national competition authority.

In the case of the competition authority, since it does not under EU law have the power to adopt a decision concluding that there is no infringement of EU law, it cannot cause companies to entertain a legitimate expectation that their conduct does not infringe competition rules. Moreover, in the present instance the national authority examined the companies’ conduct on the basis of national competition law only.

In the case of the legal advice, a person may not plead breach of the principle of the protection of legitimate expectations unless he has been given precise assurances by the competent authority (the ECJ referred to its finding in  AJD Tuna, and Agrargenossenschaft Neuzelle). It follows that legal advice given by a lawyer cannot, in any event, form the basis of a legitimate expectation on the part of an undertaking that its conduct does not infringe EU competition law or will not lead to a fine.

The judgment to me it would seem to have important implications: for legal advice is often sought by companies not just to enable them to adapt their behaviour, but also to buy themself an insurance policy.

Geert.

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