Posts Tagged New York
Bitcoin online resolution award refused recognition and enforcement at Amsterdam (ordre public exception of New York Convention).
I tweeted it earlier yet was asked to put a review up on the blog (which also suits my archiving purposes) of ECLI:NL:GHAMS:2019:192 X v Y (I know that does not help much) at the Amsterdam Court of Appeal, 29 January 2019. The case came to me courtesy of Freshields who have review here.
The case illustrates some of the issues involving online alternative dispute resolution, including those manned by artificial intelligence (albeit the latter was not directly at stake here).
Using an online trading platform, X provided three loans to Y, all in bitcoins at an interest rate of 5% per month. To borrow these bitcoins, Y had to agree on the conditions of the online bitcoin-trading platform applicable to the loans. These conditions included the following dispute resolution mechanism clause:
If you fail to pay principal and/or interest on the date on which the loan falls due, you will be considered in default of the Registration Agreement… Should your loan become 90 days past due (“Defaulted”) the loan will be sent to Dhami Law Firm (“Arbitrator”), an independent, international arbitration firm whose awards are recognized internationally under The United Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
I understand that in the event that I want to appear in the arbitration by email to contest the potential issuance of an award in favor of the lenders, I must send a written request to firstname.lastname@example.org and pay a $ 99.00 fee. Such request must be within 7 calendar days from the date of the Notice of Default. The Arbitrator’s decision shall be final and legally binding. In the event that the Arbitrator issues an award in favor of the investor, an investor may enforce that judgment in a court of competent jurisdiction.
The conditions further contained the following arbitration clause:
All claims and disputes arising under or relating to this agreement are to be settled by binding arbitration in the state of California or another location mutually agreeable to the parties. An award of arbitration may be confirmed in a court of competent jurisdiction.
Default ensued, as did ADR, and Y sought enforcement in The Netherlands. The Courts have now refused proprio motu (Y had signalled he had no objection), for the following reasons summarised by Freshfields: First, the court took issue with the circumstance that – in its view – online arbitral proceedings automatically become pending after 90 days. Second, a defendant wishing to defend itself in these arbitral proceedings had been required to write an email within seven days from receiving a notice of default. Third, the arbitral tribunal had failed to inform Y that a dispute was pending against him or of the legal grounds of the action.
At 3.5 is it is clear that the principle of audi alteram partem is the main stumbling block for the Dutch Courts. Ordre public violated. A clear flashpoint for ADR, including of the algorithmic variety.
OHADA law and arbitration at the Paris Court of appeal. A tale of overriding mandatory laws /lois de police and ordres publics.
Thank you Thomas Kendra and Thibaud Roujou de Boubée for signalling 16/25484 Cameroon v Projet Pilote Garoubé at the Paris Court of Appeal end of December 2018. The essence of the case is the Court confirming an arbitral award applying OHADA law. OHADA stands for ‘Organisation pour l’harmonisation en Afrique du droit des affaires’ – ie the Organisation for the Harmonization of Corporate Law in Africa.
Thomas and Thibaud analyse excellently – of note for this blog are the issue of non-State law as lex contractus (compare with Rome I), the recognition of same as trumping Cameronese law essentially as overriding mandatory law, and the rejection of the Cameronese argument that its wildlife laws qualify themselves as lois de police /overriding mandatory law and that the lack of recognition of same violates ordre public.
Interesting arbitration /conflicts material.
Many thanks to Filbert Lam for alerting me to Menon CJ’s most exquisite 2018 speech on cross-border insolvency law. His honour’s talk addresses forum shopping (including for cram down reasons), the Model Law, a most enlightening comparison between international commercial arbitration (particularly: the New York Convention’s role) and insolvency, and of course modified universalism (on which see also this recent post by Bob Wessels, with ia analysis of the EU position). A delightfully sharp observation of key elements of international insolvency practice and policy.
(Handbook of) EU Private International Law, 2nd edition 2016, Chapter 5.
Update 22 February 2019 for a most excellent and critical paper by Ronald Brand calling for the 2019 Judgments Project Conference to be aware of all options for international harmonisation in the area see here.
Kraft Foods v Bega Cheese  FCA 549 was signalled to me by Michael Mitchell back in early May – now seems a good opportunity briefly to report on it. The Federal Court of Australia issued an anti-arbitration injunction to restrain a multinational food conglomerate from pursuing arbitration in New York. Kraft had pursued litigation in Australia which not only sought to restrain the respondent from certain radio and television advertising, but also sought final relief including damages.
Parties had agreed to mediate and arbitrate under the dispute resolution provisions of a Master Agreement for licensing of IP. Bega had acquired certain rights from Mondelez (a company in the Kraft group), including certain trademark rights that Kraft had licensed to Mondelez pursuant to the Master Agreement.
Of interest to the blog is the myriad number of issues that led the Court to issue the injunction, among others the fact that what was sought included interim relief, the position of which when it comes to enforcement is not entirely clear in the New York Convention. Throw intellectual property, mediation as well as arbitration, common law doctrine principles such as the Aldi rule in the mix, and the jurisdictional soup becomes quite attractive as well as complex. Precisely why intellectual property is hotly debated in the Hague Judgments project and likely to be excluded from it.
That latter brings me to the second part of the blog title: the HCCH have issued a Revised Draft Explanatory Report, and a document on the possible exclusion of anti-trust matters from the Convention as reflected in Article 2(1)(p) of the 2018 draft Convention. Both signal the continuing difficulty of the roll-out of the Hague Process, as well as continued intent to let the train roll into its end destination; although one wonders how many wagons will have been left behind en route.
(Handbook of) EU Private International Law, 2nd ed. 2016. Chapter 2.
Looking over the fence in re B.C.I Fins. Pty Ltd. (In Liquidation). The rollercoaster world of conflict of laws.
In re B.C.I Fins. Pty Ltd. (In Liquidation) (thank you Daniel Lowenthal for flagging) illustrates to and fro exercise, hopping between laws, and the use of choice of law rules to establish (or not) jurisdiction. This method is often called the ‘conflicts method’ or ‘looking over the fence’: to establish whether one has jurisdiction a judge has to qualify his /her district as a place of performance of an obligation, or the situs of a property, requires the identification of a lex causae for the underlying obligation, application of which will in turn determine the situs of the obligation, property etc.
As Daniel points out, Bankruptcy Code section 109(a), says that “only a person that resides or has a domicile, a place of business, or property in the United States, or a municipality may be a debtor under this title.” Lane J considers the issue in Heading B and concludes that the Debtors’ Fiduciary Duty Claims against Andrew and Michael Binetter constitute property in the United States to satisfy Section 109(a).
There is no federal conflicts rule that pre-empts. New York conflict of law rules therefore apply. New York’s “greatest interest test” pointed to Australian substantive law to determine the situs of the fiduciary duties claims: “[t]he Liquidators were appointed by an Australian court, and are governed by Australian law, and Andrew Binetter is an Australian citizen. Perhaps even more importantly, the Fiduciary Duty Claims arose from acts committed in Australia and exist under Australian law, and any recovery will be distributed to foreign creditors through the Australian proceeding.’
Lane J then applies Australian substantive law eventually to hold on the situs of the fiduciary duty: considering the (competing) Australian law experts, he is most swayed by the point of view that under Australian law ‘not only debts, but also other choses in action, are for legal purposes localised and are situated where they are properly recoverable and are properly recoverable where the debtor resides.’ The Binetters reside in New York.
In summary: New York conflict of law rules look over the fence to locate the situs of a fiduciary debt to be in New York, consequently giving New york courts jurisdiction. A neat illustration of the conflicts method.
(Handbook of) EU private international law, Chapter 3, Heading
It is one of the pinnacle theories of conflict of laws and when first introducing students to it, they almost invariably respond glassy-eyed. Renvoi has an unlimited ability to surprise parties and courts alike. It is best excluded, either by Statute, or by the parties, but frankly to be on the safe side: always and everywhere best by both. (Lest there are well considered arguments not to do so in a specific instance. As readers of my book know, the Brussels I Recast provisions on renvoi for choice of court (complicating less fori prorogati) is not such an instance: Handbook 2016, p.128-129, Heading 184.108.40.206.2).
At issue in Dankor [Dancor Construction, Inc. v. FXR Construction, Inc., 2016 IL App (2d) 150839] was the choice of court and governing law clause cited by the court at 44:
“The parties agree that this agreement was executed in Kane County, Illinois and shall be governed by the law of the State of Illinois. Any claims, lawsuits, disputes or claims arising out of or relating to this agreement shall be litigated in Kane County, Illinois.”
This clause could be a boilerplate or midnight clause except those routinely do exclude renvoi. ‘The law of the State of Illinois’ in the clause would then be followed by ‘excluding its choice of law rules’ or something of the kind. Why it was dropped here is entirely unclear. As Clifford Shapiro writes ‘So what happens when an Illinois general contractor fires a New York subcontractor who was working on a New York project under a subcontract that required Illinois law to apply and litigation to take place in Illinois? Unfortunately for litigants, what can happen is nearly three years of jurisdictional litigation in both New York and Illinois, and then dismissal of the Illinois case less than 60 days before trial with an order directing the case to be re-filed in New York.’
As the court notes (at 69) choice of court and choice of governing law are separate issues (for that reason they are als best dealt with in clearly separated contractual clauses). Relevant precedent for the validity of the former is Rieker 378 Ill. App. 3d 77, 86 (2007). Applying Rieker, and following Section 187(2) of the Restatement (Second) of Conflict of Laws, the Court held (reference is best made to Clifford’s summary or to the judgment itself) that New York law applied to the validity of the clause, leading to its being void: New York law mandatorily prohibits application of another State’s law or litigation outside of the State for New York construction projects (Illinois incidentally has a mirror provision).
Need one say more? Renvoi is always best excluded. It would not necessarily have made this clause enforceable: ordre public discussions could always still be raised. However it sure as anything would have made the validity of the clause much more likely.
(Handbook of) EU Private international law, 2nd ed. 2016, Chapter 1, Heading 1.4).
Update 3 May 2019 on 12 March 2019 the Brussels Court of Appeal replicated the High Court’s decision, and referred generally to the CJEU on the authority nay obligation of Member States to refuse to recognise awards of this kind.
I have written this blog post with in my mind a rather bibliographical purpose: having collated all sources I would rather like finding them all back again. In  EWHC 31 (Comm) Micula and others v Romania and the European Commission, the High Court effectively halted the enforcement of an ICSID award, pending a Court of Justice Ruling (in Case T-694/15) on the legality of an EC finding of State Aid. The Award arose out of the Romania-Sweden BIT and as such got caught up in the maelstrom (this could have been an intended pun however etymologically the word is Dutch, not Swedish) of discussions surrounding EU competencies in intra-EU Bilateral Investment Treaties (for background on that issue see here).
Not quite following the rabbit down the hole however nevertheless quite a wonderland of colliding legal regimes.