Posts Tagged Lugano
A case title which sounds a bit like a Scandinavian crimi – that’s because it almost is. In  EWHC 2570 (Pat) Parainen Pearl et al v Jebsen Skipsrederi et al the facts amounted to claimants, who had purchased a vessel containing a pneumatic cement system patented by defendant (a company domiciled in Norway), seeking a declaration of non-infringement (DNI) of said patent. The purchase was somewhat downstream for the vessel had been sold a number of times before.
Claimants suggested jurisdiction for the UK courts for DNIs relating effectively to the whole of the EEA (at least under their reasoning; the specific countries sought were Sweden and Finland). For the English (and Welsh side of things jurisdiction is established without discussion under Article 5(3) Lugano, forum delicti. Reference was made to Wintersteiger and to Folien Fischer.
Claimants suggested that by the first sale to the original owner, defendants had ‘exhausted’ their intellectual property thus rendering the vessel into a good free to sold across the EEA. Should the court agree with that view, that finding of exhaustion would have to be accepted, still the argument went, across the EEA. Hence, an initial finding of exhaustion, given the need to apply EEA law the same in all EEA Member States, would have to be accepted by all other States and conversely this would give the English courts jurisdiction for pan-EEA DNIs.
Arnold J refers to among others Roche, Actavis v Eli Lilly, Marzillier. He holds that a potential finding by an English court of exhaustion may not necessarily be recognised and enforced by other courts in the EU or indeed EEA: it is not for the UK courts to presume that this will be so (despite their being little room for others in the EEA to refuse to enforce): ‘(Counsel for claimant) argued that.., on a proper application of European law, there could only be one answer as to whether or not the Defendants’ rights under the Patent in respect of the Vessel had been exhausted. In my view, however, it does not follow that it would be proper for this Court to exercise jurisdiction over matters that, under the scheme of the Lugano Convention, lie within the province of the courts of other Contracting States.’
Article 5(3) which works for UK jurisdiction, can then as it were not be used as a joinder-type (Article 6(1) Lugano; Article 8(1) Brussels I Recast) bridgehead for jurisdiction on further claims.
Conclusion: UK courts have no jurisdiction in so far as the DNIs extend beyond the UK designation of the Patent.
(Handbook of) EU Private international law, 2nd ed. 2016, Chapter 2, Heading 188.8.131.52.4, Heading 184.108.40.206.
A concise note (I am currently tied up mostly in writing research grants. And and and… I hope to return to the blog in earnest later in the week) to signal prof Hess’ excellent short paper on Brexit and judicial co-operation. Prof Hess focuses on the possibility to use the Lugano Convention. (See here for a draft of Michiel Poesen’s overview). I agree that Lugano would not be a good route if one’s intention is to safeguard as much as possible co-ordination between the UK’s common law approach to private international law, and the EU’s. Neither evidently if one aims to facilitate smooth cross-border proceedings.
Prof Hess has an interesting side consideration on schemes of arrangements. (Including reference to Apcoa). Again I agree that the English courts’ approach to same is not entirely without question marks (particularly jurisdictional issues in the event of opposing creditors: see here). I do not though believe that they would justify hesitation at the recognition and enforcement stage in continental Europe – even after Brexit. At least: not in all Member States. For of course post Brexit, UK judgments become those of a ‘third country’, for which, subject to progress at The Hague, we have no unified approach.
(Handbook of) EU Private International Law, 2nd edition 2016, Chapter 5.
Szpunar AG in Schlömp on the concept of ‘court’ (and lis alibi pendens) in the Lugano Convention. Caution: tongue-twister (Schlichtungsbehörde).
Update 4 January 2018 the CJEU held late December and confirmed the functional approach at 53 juncto 57.
I was delighted to learn something I had not been aware of in Szpunar AG’s Opinion in C-467/16 Brigitte Schlömp: namely the slightly diverging approach to the notion of ‘court’ in Brussels cq Lugano.
The AG also opines on the question of lis alibi pendens, suggesting (at 48) that since the conciliation procedure before the Behörd constitutes an integral part of proceedings before a(n) (ordinary) court, the moment of seizure of the Schlichtungsbehörde is the determining moment under the lis alibi pendens provisions of Articles 27 and 30 of the Lugano II Convention. [He also refers to  EWHC 2782 (Ch) Lehman Brothers Finance AG v Klaus Tschira Stiftung GmbH & Anor which followed the same approach].
Is the Swiss ‘Schlichtungsbehörde’ or conciliation authority, intervening in disputes between local councils and relatives with respect to maintenance and social care payments, a ‘court’ under Lugano?
Ms Schlömp, who resides in Switzerland, is the daughter of Ms H.S., who receives supplementary social assistance from the Landratsamt Schwäbisch Hall (administrative authority of the district of Schwäbisch Hall) in Germany because of her care requirements. Under German law (indeed similarly in many a Member State), benefits handed out by social welfare bodies, are claim back from children of recipients, subject to ability to pay. To assert its claim for recovery, the German welfare body lodged an application for conciliation in regard to Ms Schlömp with the conciliation authority (‘Schlichtungsbehörde’), competent under Swiss law. What follows is a series of procedures left, right, even centre. Their exact order is outlined by the AG, they matter less for this post: what is relevant to my own insight, is whether a Schlichtungsbehörde under Swiss law is covered by the term ‘court’ within the scope of Articles 27 and 30 of the Lugano II Convention.
Here comes my moment of surprise: at 58: ‘the concept of ‘court’ in the Lugano II Convention differs from that in Regulations No 44/2001 and No 1215/2012, as that Convention contains an article which has no parallel in the latter two instruments: Article 62 of the Lugano II Convention states that the expression ‘court’ is to include any authorities designated by a State bound by that convention as having jurisdiction in the matters falling within the scope of that convention.’ Like in recent case-law under the Brussels I Recast, bodies which prima facie are outside the judicial system, may be considered ‘courts’. A confirmation of the functional as opposed to the formal classification approach.
(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 220.127.116.11.1.
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.
Swiss ‘Sabena’ judgment interprets Lugano insolvency exception. Eventual recognition not impossible.
Update 22 January 2016 An amendment to the relevant parts of the Swiss PIL code is being suggested, which would make recognition of foreign insolvency proceedings less cumbersome.
In SAirLines AG v Masse en faillite ancillaire de Sabena SA, the Swiss Bundesgericht (Federal High Court) held that the request by the liquidators of Sabena (the former Belgian national carrier) to have a Brussels Court of appeal judgment recognised and enforced in Switserland, falls within the ‘insolvency’ exception of the Lugano Convention (2007). It cannot therefore enjoy the swift recognition procedure included in that Convention. Instead, a claim under standard Swiss private international law in my view is still possbible (although, going by the Court’s obiter, see below, not promising).
The Brussels Court of Appeal in 2011 held SAirLines AG ( the holding company of the former Swiss Air Group) responsible for the insolvency of Sabena, by the misapplication of a number of crucial investment agreements (I summarise; that however is the gist of the dispute). SAirlines AG is itself being liquidated in Switserland. The Bundesgericht relied heavily on precedent in C-111/08 Alpenblumme where the insolvency exception of the Brussels I-Regulation was held as as applying to a judgment of a court of Member State A regarding registration of ownership of shares in a company having its registered office in Member State A, according to which the transfer of those shares was to be regarded as invalid on the ground that the court of Member State A did not recognise the powers of a liquidator from a Member State B in the context of insolvency proceedings conducted and closed in Member State B.
It also referred to Gourdain. Per Gourdain, an action is related to bankruptcy only if it derives directly from the bankruptcy and is closely linked to proceedings for realising the assets or judicial supervision. It is the closeness of the link, in the sense of the case-law resulting from Gourdain, between a court action and the insolvency proceedings that is decisive for the purposes of deciding whether the exclusion in Article 1(2)(b) of the JR is applicable.
The mere fact that the liquidator is a party to the proceedings is not sufficient to classify the proceedings as deriving directly from the insolvency and being closely linked to proceedings for realising assets.
(Incidentally, for a Lugano-bound court to rely on the ECJ’s case-law on the insolvency exception may in my view in future be less obvious, at least as far as the ECJ’s case-law post the entry into force of the insolvency Regulation is concerned: the ECJ’s judgment on the respective scope of both Regulations is now obviously subject to there being the other, closely related Regulation. The Insolvency Regulation however does not apply to Switserland whence arguably the scope of the stand-alone Lugano insolvency exception need not necessarily evolve alongside that of the Brussels I-Insolvency exception).
In the case at hand, it might indeed be difficult to argue that the Belgian liquidators’ action while having an impact on the insolvency and the division of the assets, does not directly derive from the bankruptcy and would have existed even without such insolvency occurring.
The judgment does not mean that recognition and enforcement of the judgment is now totally out of the question (even the official court’s press release suggests as much in its title). Rather the Bundesgericht has simply held on the applicability of the Lugano Convention. As far as my legal German reaches (that may be an important caveat hence I would like to hear from Swiss, German or Austrian lawyers) the judgment does not prejudice enforceability under general Swiss private international law. (Although, with the same caveat, the language at para 10 of the judgment does not sound promising:
‘ Das belgische Urteil fällt aus den dargelegten Gründen nicht in den sachlichen Anwendungsbereich des Lugano-Übereinkommens. Dass das Urteil unter diesen Umständen nach den Regeln des IPRG anzuerkennen wäre, wird nicht geltend gemacht und ist aufgrund der insolvenzrechtlichen Natur der Streitsache auch nicht ersichtlich (vgl. BGE 139 III 236 E. 5.3). Bei dieser Sachlage kommt eine Anerkennung und Vollstreckbarerklärung von vornherein nicht in Frage, und es erübrigt sich, darüber zu befinden, ob die Anerkennungsvoraussetzungen gemäss dem LugÜ gegeben wären und ob die Beschwerdegegnerin überhaupt ein genügendes Rechtsschutzinteresse an einer selbstständigen Anerkennungsfeststellung und Vollstreckbarerklärung gemäss Art. 33 Abs. 2 und Art. 38 Abs. 1 LugÜ hätte, wie die Vorinstanz annahm, die Beschwerdeführerinnen hingegen bestreiten.).
To be continued, therefore?
Schmid v Hertel: ECJ confirms ‘extraterritorial’ reach of insolvency Regulation’s Seagon extension – Actio Pauliana
(Postscript April 2015: The ECJ confirmed these principles in C-295/13, H v HK).
Less is more, I know – Apologies for the long title and thank you to Matthias Storme for highlighting the case. In Case C-328/12 Ralph Schmid v Lilly Hertel, Schmid was the German liquidator of the debtor’s assets, appointed in the insolvency proceedings opened in her regard in Germany on 4 May 2007. The defendant, Ms Hertel, resides in Switzerland. Mr Schmid brought an action against Ms Hertel before the German courts to have a transaction set aside, seeking to recover EUR 8 015.08 plus interest as part of the debtor’s estate.
In Case C-339/07 Seagon the ECJ had ruled that the courts of the Member State within the territory of which insolvency proceedings have been opened have jurisdiction to decide an action to set a transaction aside (actio pauliana) that is brought against a person whose registered office is in another Member State. However does Seagon also apply where insolvency proceedings have been opened in a Member State, but the place of residence or registered office of the person against whom the action to have a transaction set aside is brought is not in a Member State, but in a third country?
The ECJ held that it does. Bob Wessels has a very good analysis here and I am happy to refer. Let me just add one or two things. The Brussels I Regulation, the overall Regulation on jurisdiction on civil and commercial matters, displays bias in favour of the defendant: actor sequitur forum rei. The overall jurisdictional angle of the Insolvency Regulation is different: avoiding forum shopping to the detriment of creditors is its main aim, and its insistence on verifiable and predictable criteria to determine COMI (which in turns determines jurisdiction) needs to be seen in that light. That non-EU domiciled defendants get caught up in EU proceedings on the basis of COMI is not generally seen as problematic within the context of the Regulation.
The ECJ is rather realistic with respect to the potential recognition and enforcement problems associated with judgments under the Regulation held against non-domicileds. In the absence of assets in the EU held by the non-dom (if there were, enforcement would be straightforward), classic bilateral treaties may come to the rescue and if there is no such treaty, so be it: the Regulation’s jurisdictional rules should not be held up by potential problems end of pipe.
An important judgment for the reach of the Insolvency Regulation.