Tag: lex rei sitae

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No Harry, don’t look at the light! The CJEU in Sharewood on Rome I’s rei sitae exception to consumer protection.

In C-595/20 Sharewood, the CJEU last week held on the extent of Rome I’s rei sitae exception to consumer contracts. In essence, as a result of Article 6 Rome I, for consumer contracts, choice of law is free (in the case at issue this lex voluntatis was Swiss law) except the consumer may always fall back on the mandatory laws of his habitual residence (here, Austrian law).

For a limited selection of contracts, including (A6(4)c) ‘a contract relating to a right in rem in immovable property or a tenancy of immovable property other than a contract relating to (timeshares)’, party  autonomy is restored in full under the terms of Articles 3 and 4 Rome I, hence the consumer loses his protection.

The contract at issue is a tree purchase, lease and service agreement. The trees at issue are grown in Brasil. The ground rent for the lease agreement, which granted the right to grow the trees in question, was included in the purchase price of those trees. The service agreement provided that ShareWood would manage, administer, harvest and sell the trees and would remit the net return on the timber to UE, the (anonymised) consumer. The difference compared to the gross return, expressed as a percentage of the return, was retained by ShareWood as its fee for the provision of those services.

The question in the case at issue is essentially how intensive the link to (foreign) soil needs to be for it to fall under the rei sitae carve-out for consumer contracts. The CJEU does refer to some of its Brussels Ia case-law, including Klein and Kerr, for the ‘tenancy’ element of the question, but not for the ‘rights in rem’ part of the discussion, where it more straightforwardly concludes on the basis of the contractual arrangements that the trees [28]

must be regarded as being the proceeds of the use of the land on which they are planted. Although such proceeds will, as a general rule, share the same legal status as the land on which the trees concerned are planted, the proceeds may nevertheless, by agreement, be the subject of personal rights of which the owner or occupier of that land may dispose separately without affecting the right of ownership or other rights in rem appertaining to that land. A contract which relates to the disposal of the proceeds of the use of land cannot be treated in the same way as a contract which relates to a ‘right in rem in immovable property’, within the meaning of Article 6(4)(c) of the Rome I Regulation

and [37]

the main purpose of the contract at issue in the main proceedings is not the use, in the context of a lease, of the land on which the trees concerned are planted, but… to generate income from the sale of the timber obtained following the harvest of those trees. As is apparent from the order for reference, the lease provided for in that agreement, which includes only the right to allow those trees to grow and has no purpose other than the acquisition of those trees, is intended merely to enable the sales and services elements provided for in the contract to be carried out.

Not caught therefore by the rei sitae exception.

I often refer my students to Harry, in A Bug’s Life, to make the point that both for jurisdictional and for applicable law purposes, the mere presence of real estate does not lead to the rei sitae jurisdictional and governing law implications being triggered. CJEU Sharewood is a good illustration of same.

Geert.

 

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The lex causae for transfer of title in movable property. A gem of an award by the Iran-US claims tribunal, generally discussing choice of law in arbitration.

I am most grateful to Hans Baron van Houtte, my predecessor in the conflicts chair at Leuven, for alerting me to the partial award of the Iran-US claims tribunal of 10 March last (case No. A15 (II:A)). Hans is a former President of the tribunal, which was established by the ‘Algiers declarations’ following the 1979 Tehran hostage crisis.

The award (a mere 691 pages) and separate opinions can best be accessed here. In the 10 March award, the Tribunal discussed at length the issue of the applicable law for transfer of title in movable property. In doing so, however, it also gives scholars a most wonderful insight and expose on the private international law /choice of law process in arbitration.

The issue is relevant for under the Algiers Declarations, the US is obliged to transfer to Iran, ‘Iranian properties’ subject to the jurisdiction of the United States on 19 January 1981. Hence what exactly constitutes ‘Iranian properties’?

From p.67 (para 135) onwards of the main award, the Tribunal discusses the general process of choice of law in arbitration, referring to a wealth of scholarship on the issue, going back to the mixed arbitral tribunals of the early 20th century etc. For anyone interested in the issue, this is most compelling reading. Many greats of PIL are cited, including the late prof Francois Rigaux (pictured here at Leuven in 2010 with profs Weizuo Chen, Jacques Herbots, Marc Fallon, and myself).

The Tribunal’s conclusion on the issue is that under the ‘general principles of private international law’, the lex rei sitae of the movable governs the passing of title in movable property.

The Tribunal does not hide the further complexities of this rule, including of course the very determination of that situs, and the role of lex contractus.

Indeed for instance on p.272 ff (para 967 ff) the Award discusses one particular claim concerning a case where, under the default rule of the lex rei sitae —- here, the goods were manufactured by, and in the possession of, Zokor, which was situated in the State of Illinois, United States. The applicable lex rei sitae is therefore the law of Illinois  —-property is passed by delivery, and where, under the default rule of the lex contractus –– here arguably Iranian law –– title is already passed by the conclusion of the sales contract or as soon as the goods are manufactured.

At 973 the Tribunal notes the choice of law pro Iranian law, made by the parties, However, it holds ‘the situs was and remained, during all relevant points in time, Illinois. Consequently, according to the general principle of private international law, as identified earlier in this Partial Award, it was for Section 2-401(2) UCC in connection with other contract law of the situs to determine whether the parties had agreed to derogate from the fallback rule.’ (which the Tribunal found, they had not).

That is not entirely crystal clear, and indeed in his separate Opinion prof van Houtte, while generally happy with the Tribunal’s approach, points out some inadequacies:

At 13: ‘The Parties assumed for years that the determination of whether property was “Iranian” as between the seller and the buyer was a contractual issue between those parties governed, inter alia, by the proper law of the contract (lex contractus). It was only at the Hearing session on 9 October 2013 that – in response to a question from the bench – the Parties’ argumentation focused on the lex rei sitae; from that point on, the lex contractus was virtually no longer considered. (…) I regret that the contractual aspects of the transfer of property rights inter partes and the impact of the law of the contract thereupon were not further explored at the Hearing’.

at 15: ‘I observe that the Parties could also have further elaborated on the extent to which the legal situs necessarily coincides with the geographical location of assets in export sales or turn-key contracts.’

And at 18, specifically with respect to the Zokor case that I mention above, ‘One may wonder, de lege ferenda, whether in Claim G-111 (Zokor) it was necessary for the Tribunal to construe and apply its own “general principles of international private law”’ and whether it should not instead adopt the approach which Iranian courts would have applied. These would have had jurisdiction pre the 1979 agreement and the transfer of jurisdiction to the Tribunal, van Houtte argues, does not imply it should settle contractual disputes under different principles than the Iranian courts would have applied’.

A most, most interesting read.

Geert.

 

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No Bauhaus, but certainly some building blocks. EP study on looted works of art and cultural goods.

Appreciation of the title of this piece of course depends on how one as an individual likes Bauhaus, or not. A November 2017 European Parliament Study on looted works of art and cultural goods is something of  a treasure trove for public and private international lawyers alike. The study looks at substantive law on the issue in the Member States (not the cup of tea for this blog) but kicks off with good overview of the challenges of sovereign immunity; applicable law (particularly with respect to choice of law; with inspiration being sought in the Belgian Private International Law Act, Article 90 (lex furti as a principle – the place from which the object was removed, but with corrections), and the issue of the application of foreign public international law by the courts.

Parliament is quite active on this issue. In May 2016 it had already published a study with more focus on the specific issue of art looted in times of conflict, and alternatives to court litigation but nevertheless with a short forray into conflict of laws (and reference to one or two interesting national cases).

Together the two studies are a good exercise for the conflicts mind.

Geert.

 

 

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