Posts Tagged New York Convention
Update 9 Mach 2018 for the rules of procedure of the International Commercial
Chambers of the Amsterdam District Court (Netherlands Commercial Court) and the
Amsterdam Court of Appeal (Netherlands Commercial Court of Appeal) (The NCC Rules) see here.
I was asked yesterday (interview in Dutch) for my thoughts on the Belgian Government’s plans for a Brussels International Business Court. Here goes, in bullet-points format, a slightly extended and more technical version of those preliminary thoughts:
- Three and more’s a crowd. The Belgian move of course is not the first and neither will it be the last. Even pre-Brexit, Member States (and even individual cities within Member States; see Michiel Poesen recently on Frankfort) were vying for the title of preferred place for litigation.
- Brexit evidently may be a game-changer. I have flagged repeatedly that post-Brexit and assuming there will be no deal which would roll-over the UK’s engagement with EU civil procedure law, UK courts will become a lot less attractive. This is due to the more cumbersome recognition and enforcement regime that will be the result of decoupling from Brussels I. The same incidentally does not apply to arbitration. Pre and post Brexit, deal or not, free movement of arbitral awards is subject to the New York Convention.
- Attractiveness as a centre of litigation and legal services is part of regulatory competition. Being known as a place of legal know-how and expedited litigation brings prestige as well as attractive billable hours to the law firms of one’s country.
- Crucially, in an attempt to prise litigation away from London in particular, the use of English in proceedings is always the eye-catcher for the media. However in reality the language of proceedings is to my experience not the defining issue in client’s forum shopping strategies. Know-how of the bench; speed of proceedings; transparency of case-law; and of course ease of recognition and enforcement, are much more so. The Belgian proposal acknowledges as much by touting in particular the ‘collegiality’ and ‘expertise’ of the pool of (domestic and foreign) commercial law experts that will populate the court.
- Unwittingly perhaps but without a doubt, the proposal in flagging the benefits of the BIBC, also highlights the well-known disadvantages of the Belgian courts in ordinary: tardiness of proceedings (the ‘Belgian’ torpedo) in particular. However also very much so, intransparency (as I have repeatedly signalled: access to Belgian case law continues to be highly problematic) and lack of collegiality among the bench: being a judge is a lonely professional existence in Belgium. Professional secrecy rules, practicalities (lack of proper office space), and the aforementioned reporting issues work against Belgian jurisprudence presenting itself as coherent.
- At a technical level, the proposal emphasises repeatedly that the BIBC will be a court. Not an arbitral tribunal. The difference lies particularly in the easy or enforcement. The draft Bill loudly talks the talk in this respect. But does it walk the walk? What a ‘court’ means within the context of EU civil procedure law is of course the prerogative of that EU law: not of the Member States. (I refer to recent blog posts on same). Extensive reference to UNCITRAL’s Model Law on international commercial arbitration is a strange prop to use in the draft, if the idea is to take one’s attention away from arbitration. The BIBC will only take cases in the event of prorogation (choice of court or submission). The pool of judges will mostly be taken from part-timers, not benchers. Most importantly, in my mind: Article 43 of the draft instructs the BIBC, with respect to choice of law, to respect parties’ choice of governing law, and, in the absence of such law, ‘to apply the law determined by the conflict of laws rules which it considers applicable’. This is a copy /paste from Article 28(2) of the Model Law. In footnote the Act suggests that by omitting the third para of said Law (‘The arbitral tribunal shall decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorized it to do so’), the Bill emphasises the nature of the BIBC as court. It does not. Courts are simply subject to Rome I and II when it comes to applicable law. They do not just ‘consider a law applicable’.
Much to chew on. My analysis is based on a draft Bill which a little bird sent me. This is probably not the final say on the BIBC. (On an aside: @BIBC is already taken. I can think of one or two Twitter Handles which the BE government may want to snap up before someone else does).
Tobias Gosch and Venus Valentina Wong have excellent overview of T v O (why o why do States feel the need the hide the identity of companies in commercial litigation) in which the Austrian Supreme Court (Oberster Gerichtshof) ruled on whether potential claims under the Austrian Commercial Agents Act (Handelsvertretergesetz) can be brought before an Austrian court even if the underlying agency agreement contains an arbitration clause and is governed by the laws of New York.
The contested part of the litigation, as Tobias writes, concerns the following: the Agent conducted the procurement of sea freight business in Austria and other countries of the European Union for the Principal. Whilst the territorial scope of the Agent’s activities complies with the conditions for the international overriding mandatory applicability of the compensation provisions of the Directive as set out by the ECJ in Ingmar, the procurement of business is not covered by the relevant definition in the Directive, which only refers to the sale or purchase of goods. Including the procurement of business therefore is a form of gold-plating and the national law’s decision to do so does not uncontestedly fall under the protection of overriding mandatory law. In other words it does not necessarily override parties’ choice of law and ensuing choice of court.
The judgment refers inter alia to Unamar to justify its direction. Rather like, as I reported at the time, the Belgian Supreme Court, the Austrian Supreme Court, too, fails properly to assess whether the Austrian legislator intended the Austrian provisions to be of overriding mandatory law character per Rome I: “1. Overriding mandatory provisions are provisions the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organisation, to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract under this Regulation.
The European Court of Justice’s general statement in Unamar that gold-plated provisions may fall under overriding mandatory law, looks set by national courts to be turned into a matter of fact priority. That surely at some point ought to be disciplined by the CJEU.
As Valentina points out, the judgment betrays lack of confidence in commercial arbitration. ‘It is arguable whether the arbitration agreement is really ineffective or inoperable (under Article II(3) NYC or section 584 ACCP respectively) just because it provides for arbitration in New York and New York law as applicable substantive law. A prudent arbitral tribunal seated in New York may very well be able to decide a matter in compliance with (mandatory) EU or national law on commercial agents, in particular if the future award will have to be enforced in a EU member state.’
(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 3, Heading 126.96.36.199.
Sinocore International Co Ltd v RBRG Trading: The commercial court on fraus, ordre public and arbitration.
Fraus omnia corrumpit (fraud corrupts all; alternatively formulated as ex turpi causa non oritur actio) is not easily applied in conflict of laws. See an earlier post here. In  EWHC 251 (Comm) Sinocore International Co Ltd v RBRG Trading , the Commercial Court granted permission for the enforcement of a foreign arbitral award despite allegations that the transaction in question had been “tainted” by fraud: this is how the case is summarised by Mayer Brown and I am happy broadly to refer to their overview and analysis.
The Commercial Court’s relaxed attitude is another sign of strong support of the English courts for the New York Convention and its narrow application of ordre public.
An interesting case for comparative conflicts /arbitration classes.
Something to digest quietly, to start this new year: in Gaz de France v STS the French Conseil d’Etat annuled an arbitral award for breach of ordre public. The Conseil objected in particular to the panel’s denial of mandatory French (administrative) law. Reed Smith have analysis here, including of the issue on jurisdiction (Conseil d’Etat or Court de Cassation).
Upon reading the judgment, my question is this (just putting it in the group, as it were): does the Conseil have terminology right where it seems to classify breach of mandatory law as a violation of ordre public (it is the latter only which justifies annulment under the New York Convention)? Incidentally (at 5) it also refers to the possibility of mandatory EU law being part of this interpretation of ordre public. This structure is clearly inspired by the Rome I Regulation where, as I have noted before, the presence of mandatory law, overriding mandatory law, and ordre public, is causing confusion.
Happy New Year, happy reading, Geert.
Travel is a wonderful opportunity to catch up on reading back issues of The Economist. Now I have made a valiant effort in recent years to reduce the pile. I am now only a few months behind. (I read the magazine diagonally when it comes out. Properly a little later). In the issue of 28 February of this year, there is a report on the town of Windsor, New York, along with 14 other towns along New York’s border with Pennsylvania, wanting to secede and join Penn. I have not been able to get an update on the state of affairs, and I am not sure whether the idea got much traction.
It is the ultimate answer to regulatory competition: to move an entire slice of territory into what is perceived as a preferable regulatory regime. The cause? New York’s strict (some might say: cautious) policy on fracking /shale gas. Penn State is fracking friendly. New York has banned it.
The Economist also flag that State secession in the US has only ever succeeded in 1777: when a chunk of New York became Vermont. Now, that’s a State where others pack and move to in upwards harmonisation fashion: for Vermont is arguably the top of the regulatory curve when it comes to environment and food regulation.
Hague principles on Choice of law in international commercial contracts. A quick and dirty comparison with Rome I.
I have delayed reporting on the Hague Principles on choice of law in international commercial contract for exam reasons. The principles (and accompanying commentary) have not taken the form of a classic Hague convention, rather, it is hoped that they inspire practice. Bottom-up harmonisation, in other words. For the EU, the Rome I Regulation evidently already harmonises choice of law hence the principles must not be followed where Rome I applies. However in particular given the principles’ ambition to be applied by arbitral tribunals, they may have some effect in the EU, too.
I asked my students to compare the Principles with the Rome I Regulation. Such quick and dirty scan, without wishing to be complete, reveals the following: (I take a bullet-point approach such one might follow in an exam setting. = refers to similarities; ≠ to differences
- ≠ The Hague principles concern choice of law principles only. Rome I covers applicable law in the wider sense (it also determines applicable law if no choice of law has been made).
- ≠: The Principles apply to courts and arbitral tribunals. General consensus is that arbitral panels subject to the laws of an EU Member State as the lex curia are not bound by Rome I.
- ≠The Hague principles only apply B2B, not B2C. They deal with international ‘commercial’ contracts only. Famously Rome I includes and indeed pampers B2C contracts.
- Purely domestic contracts are covered by Rome I, with choice of law being corrected to a considerable degree. ≠ Hague principles: these do not cover purely domestic contracts because they are not ‘international’.
- = party autonomy and depecage are supported in both.
- = universal character: Parties may choose any law, they or the contract need not have any material link with that law.
- ≠ rules of law. Rome I probably allows choice of State law only (its recitals are inconclusive, as is its legislative history). Hague Principles: allows parties to opt for non-State law.
- Tacit choice of law is effectively dealt with the same in both.
- Scope of the chosen law: while more or less similar, one obvious ≠ is that the Hague Principles cover culpa in contrahendo. In the EU, this is subject to the Rome II Regulation.
- Article 11 of the Hague Principles allow for a wider remit for courts and tribunals to apply overriding mandatory law that is not that of the forum.
- Article 9(2): formal validity of the contract may be established by many a law that might have a bearing on it. Favor negoti, in other words: as in Rome I.
A fun exercise, all in all. I for one am curious how arbitral tribunals will approach the principles.
Update 21 March 2016 (these updates seem to follow an equinox pattern) NML Capital Ltd reportedly are contesting the legality of the Act before the Belgian Constitutional Court. (Update 24 March the Constitutional Court has the case down under three seperate actions, 6371, 6372, 6373).
Update 21 September 2015: the Act was adopted in July and enters into force today.
I have delayed reporting on this initiative for exam reasons. The Belgian Parliament is currently debating a private members’ proposal for statute to address so-called ‘vulture funds’. These funds are described by the financial dictionary as ‘A fund that buys distressed debt of commercial companies or sovereign nations at a cheap price and then often sues them for the entire value of the debt. The resemblance to vultures is because these funds profit from the debt of failing companies or poor nations.‘
The text of the proposal (in Dutch and French) is available here. Vulture funds litigation is generally called immoral in the proposal. Reference is made to a number of high-profile recent judgments where vulture funds have been given approval by various courts worldwide, to seek redress against assets held by the sovereign nations concerned, or indeed their creditors. Particularly sore is the enforcement sought against funds destined for development aid.
The proposal essentially defines ‘vulture funds’ and then suggests that recognition and enforcement of relevant judgments or arbitral awards, regardless of the law applicable to the underlying relationship with the government concerned, is considered to be contrary to Belgian ordre public international, hence unenforceable. The proposal as it stands now adds (probably superfluously) that relevant EU (read: the Brussels I recast Regulation) and international (read especially: the 1958 New York Convention) law takes priority.
The part of the proposal that is bound to attract attention is the attempt at defining the ‘vulture’ in vulture funds. Frits Bolkestein for instance (former EU Commissioner) has remarked that buying up ‘bad debt’ need not always be morally reprehensible (I would suggest it is not that part of the fund’ activities which has attracted the Belgian Parliament’s attention). The enforcement /recognition part of the proposal is interesting because it applies ordre public in a categorical manner, rather than in the ad hoc application which both EU law and residual Belgian conflicts law (the Belgian Private International Law Act) ordinarily call for. For residual Belgian law, this is probably Parliament’s prerogative. However for EU law (and the New York convention), a general apprehension against vulture funds may not qualify as a proper exercise of the ordre public exception. Courts at the least may wish formally to disregard the act when the judgment /award concerned is covered by Brussels I cq. New York; however they can point to the sentiment expressed in the Act, to support incompatibility with Belgian ordre public when tested against an individual case.
The drafters are aware that this initiative may be a drop in the ocean. Reference is made to other, national initiatives (France, UK, US) which may point to an emerging pattern of anti-vulture funds sentiment. Indeed the realities of forum shopping mean that vulture funds action will migrate away from the Belgian legal order. On the other hand, Belgium’s safe harbour may also mean that relevant assets will seek refuge there. All of course, presuming the initiative will actually be adopted by Parliament.
Geert. Disclosure: I advised the MPs concerned on the technical aspects of the recognition and enforcement leg of the proposal. [My advice may or may not have been followed ].