Posts Tagged PIL

A new draft Hague ‘Judgments’ project. Where’s Wally?

Update November 2017. See here for the most current draft and here for the draft Alférez-Saumier report. Issues remain much the same.

I reported earlier on the November 2015 draft ‘Judgments project’ of the Hague Conference on private international law, otherwise known as the draft convention on the recognition and enforcement of judgments relating to civil and commercial matters. The working group now has a February 2017 draft out. (The project nota bene has even increased in relevance given Brexit).

I could have titled this post ‘spot the differences’ for of course there are changes in formulation between current and previous version. However my main point of concern remains: the absence of Wally: some type of institutional redress which will assist courts in the interpretation of the Convention. Article 23 now calls for uniform interpretation, and there will, one assumes, be a report accompanying its adoption. (Judging by the size of commentaries on the EU mirror, Brussels I Recast, this could turn out to be a very sizeable report indeed). However without a court system ensuring uniformity of application, the Convention in my view will risk being a dead duck in the water.

Geert. (Not by nature pessimistic. But probably realistic).

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2.

, , , , , , , , , , , ,

Leave a comment

Unjust enrichment under Rome II. The High Court in Banque Cantonale de Genève.

RPC and Sarah Shaul it seems, like me, are hoovering up database backlog – once again thank you to their excellent blog for alerting me to Banque Cantonale de Genève v Polevent. Other than the direct impact for the interpretation of Rome II‘s Article 10, and its relation with Article 4’s general rule, an important lesson from the case to me seems to be, yet again, the relevance of the articulation of claims, for the determination of jurisdiction.

Facts are as follows (at 2 ff). Claimant (“BCGE”) is a bank in Geneva. On 24 March 2104 a man calling himself Mr. Dumas telephoned BCGE and asked to speak to Yvan Nicolet of the accounting department. He was not in the office and so the call was taken by Jacqueline Konrad-Bertherin. Mr. Dumas asked her to send a confidential message to what he said was the private mail address of Eric Bourgeaux, the deputy CEO of BCGE. She did so and received a reply from someone claiming to be Mr. Bourgeaux instructing her to pay Euro 6,870,058 from BCGE to the Natwest Bank in London in favour of Polevent Limited. She did so. She believed she had been instructed to do so by Mr. Bourgeaux; but she had not been. The fraud was discovered and repayment was requested later that day.

Shortly before the fraud Natwest had been advised of a freezing order against Polevent in favour of an Italian company Enoi SpA (“Enoi”). The funds were therefore frozen in Polevent’s account with Natwest. BCGE has claimed damages from Polevent for deceit. BCGE accepts that that claim is governed by the law of Geneva. It has also advanced a claim against Polevent in restitution on the basis that the sum was paid by mistake. It claims that since Polevent must have realised that the sum was paid by mistake the conscience of Polevent was affected such that a constructive trust arises thereby providing BCGE with a proprietary claim in respect of the frozen funds. BCGE says that this proprietary claim is governed by English law.

Enoi is another creditor of Polevent. Enoi maintains that BCGE’s claim for restitution, in common with the claim is in deceit, is governed by the law of Geneva which does not recognise a proprietary claim. The resulting dispute is therefore between two creditors of Polevent. That company is in liquidation and has taken no part in this dispute.

 

The only preliminary issue which the High Court was asked to adjudicate on is worth repeating in full:

“On the basis of the facts as pleaded in the Amended Particulars of Claim and on the basis that the claim set out at paragraph 13 of the Amended particulars of Claim is governed by the law of Geneva, are the claims set out at paragraph 15 of the Amended particulars of Claim governed by English law or by the law of Geneva ? ”

One can appreciate why two different claims were formulated here.

For the claim in damages for deceit, BCGE accept Geneva law applies. The claim for restitution on the basis of unjust enrichment, however, is covered in its view by Article 10(3) Rome II: the law of the place in which the unjust enrichment took place, this being England, hence allowing for the existence of a constructive trust and priority in the pecking order following Polevent’s insolvency.

Enoi argue that the claim in restitution, like the claim in damages, is covered by the law of Geneva: at 9:

The submission of counsel for Enoi is that the law governing the claim in restitution is the law of Geneva by reason of Article 4(1) of Rome II. The claim arises out of the tort/delict of fraud and so the governing law is that of the place in which the damage occurred, namely, Geneva. Alternatively, the governing law is the law of Geneva pursuant to Article 10(1) on the grounds that the unjust enrichment concerns a relationship arising out of a tort/delict such that the governing law is that which governs that relationship, namely, the law of Geneva. In the further alternative the governing law is the law of Geneva pursuant to Article 10(4) on the grounds that the obligation arising out of the unjust enrichment is manifestly more closely connected with Geneva.

Both parties of course reverse engineer their governing law arguments: being aware of the attraction of one State’s laws over the other, counsel brief is to convince the court that the matter is characterised so that it leads to the warranted applicable law.

Enoi suggest that BCGE in reality have one claim only: one in fraud, a tort, it argues, from which the claim in unjust enrichment follows in a dependent fashion. Teare J disagrees (at 13). A claim in restitution need not be fault-based. It is a separate claim, to which Article 10’s regime applies (in the end leading to a finding of English law).

The judgment is in fact quite short. Its crucial implication to me would seem to be that BCGE has won the day by formulating two separate heads of action. Teare J acknowledges that his view may be an ‘unduly English law’ view, in other words, that he read the formulation of two claims at face value, as being two separate claims, because English law recognises non-fault based unjust enrichment. Regardless of the fact that other States, including European States, do so too, the obvious question is whether the EU’s qualification would be the same. The concept of unjust enrichment, like the concept of tort, necessarily needs to be an ‘autonomous’ one. Yet without much guidance in the preparatory works of Rome II on this concept, who can blame national law for filling in the blanks?

Geert.

(Handbook EU Private International Law, 2nd ed 2016, Chapter 4, Heading 4.7).

, , , , , , , , , , , , , , ,

Leave a comment

Consenting to choice of court under the common law. The Privy Council in Vizcaya v Picard.

In Vizcaya v Picard, the Privy Council considered the issue of consent to a choice of court clause in the event no such choice has been made verbatim. It was alleged that choice of court had been made implicitly but clearly by reference to an applicable law agreement in the underlying contract. RPC have a review of the case on their blog and I am grateful to them for bringing it to my attention.

The case is a fall-out of the Bernard Madoff Ponzi scheme, carried out through Mr Madoff’s company Bernard L Madoff Investment Securities LLC (“BLMIS”), a New York corporation. After Madoff’s fraud came to light in 2008, Irving Picard (“the trustee”) was appointed as trustee in BLMIS’s liquidation in the US Bankruptcy Court for the Southern District of New York (“the New York BankruptcyCourt”). The trustee commenced proceedings under the anti-avoidance provisions of the US Bankruptcy Code against investors who had been repaid before the fraud was discovered, including the appellant, Vizcaya Partners Limited (“Vizcaya”), a BVI (British Virgin Islands) company which carried on business as an investment fund, and which invested about US$328m with BLMIS between January 2002 and December 2008, but was repaid US$180m before the fraud was discovered.

The Appeal before the Privy Council concerns primarily the content and scope of the rule in common law that a foreign default judgment is enforceable against a judgment debtor who has made a prior submission to the jurisdiction of the foreign court (as distinct from a submission by appearance in the proceedings).  Brussels I or the Recast was not applicable to the case. In that Regulation (Article 25), the expression of consent with choice of court must take one of thee forms: essentially: written (or oral but confirmed by written agreement); in accordance with lex mercatoria; or in accordance with established business practice simply between the parties.

The question in the case at issue is whether the agreement to submit must be express, or can also be implied or inferred. The Privy Council settled the uncertainty which would seem to have existed for some time in the common law, in favour of an answer in the affirmative. Consent to jurisdiction can be implied. What needs to be shown though is real ‘agreement’, or ‘consent’ (in European private international law with respect to the similar discussion re choice of law (Rome I) I would say the test is one of ‘clearly established’), quod non in casu. Choice of law (here: in favour of New York law) can be a factor but not a solely determinant one. Moreover, choice of court viz one’s business transactions does not imply automatic extension to insolvency proceedings.

Crucial precedent, it would seem. Geert.

European private international law, second ed. 2016, Chapter 2, Heading 2.2.9

, , , , , , , , , , , , , , , , , , , , , , , , , , ,

Leave a comment

The November 2015 draft Hague ‘Judgments’ project. A powerful potion or a cauldron full of jurisdictional spells?

The November 2015 draft ‘Judgments project’ of the Hague Conference on private international law, otherwise known as the draft convention on the recognition and enforcement of judgments relating to civil and commercial matters, is a very ambitious project which at the same time risks exposing some of the inherent weaknesses of the modus operandi of the Hague Conference. This is not the right forum for an exhaustive analysis. Rather, I would like to flag some areas of interest. Inevitably, an obvious point of reference is the European Union’s Brussels I (Recast) regime.

First, the text itself. The Working Group’s report, which accompanies the draft, explains the history and development of the text and the various options taken. No need to repeat it here. The approach of the Convention is the same ‘mission creep’ which the 1968 Brussels Convention had to resort to, to enhance the free movement of judgments between Member States. Given that the most widespread reason for refusal of recognition and enforcement (R&E), are accusations of excessive or inappropriate exercise of jurisdiction, one can only truly co-ordinate R&E if one also co-ordinates jurisdiction. The Hague Convention takes this route in Articles 5-6, (Exclusive) bases for recognition and enforcement. Following this co-ordination of jurisdictional rules, Article 7 then limits the ground upon which R&E may be refused.

Of note is that Article 4(2)’s ban on merits review (when assessing the possibility of recognition and enforcement), probably does not extend to judgments issued by default. The Article is not clear on what is meant exactly: the first para of Article 4(2) rules out ‘review of the merits’. The second para suggests ‘The court addressed shall be bound by the findings of fact on which the court of origin based its jurisdiction, unless the judgment was given by default.’ Not being bound by findings of fact does not necessarily entail a possibility for merits review, and the text can probably do with clarification at this point.

Article 5(e)’s special jurisdictional rule for contracts, has been clarified compared with earlier versions, however the text remains subject to plenty of room for debate.

Article 8’s room for refusing R&E when the exclusive jurisdictional rules of the Convention were infringed, or where matters excluded from the Convention were at issue, could in our view do with tidying up. It currently mingles scope for refusal of R&E as such, in the case of infringement of the exclusive jurisdictional rules, with discussion of excluded matters as ‘preliminary issues’ only – a clear reference to the EU’s experience with arbitration. Without editorial perfection, however, this article, in combination with Article 2’s excluded matters, risks similar and protracted debate as was /is the case under Brussels I (and the Recast).

Further, the modus operandi, and institutional consequences of the Convention. As indicated, an exhaustive review of the Convention is not possible here. That is due in large part to the extensive comments which one could address vis-a-vis each individual entry of the text. Rather like in the case of each individual provision of the Brussels regime. In the case of the latter, the CJEU is exercised on a very regular basis with the determination of the precise meaning of the heads of jurisdiction. In the Hague process, there is no such institution. One has to rely on the application of the Convention by the signatory States. At some point, one has to assess whether it is tenable not to have some kind of review process at The Hague, lest one risks the Convention being applied quite differently in the various signatory States. Coupled with the additional lawyer of complication were the EU to accede (which it is bound to; however would it really be progress to create additional layers of differentiation?), the CJEU itself might have difficulty accepting a body of judicial review, where the text to be reviewed borders so closely unto the Brussels regime.

Geert.

, , , , , , , , , , , ,

Leave a comment

Ordre Public, the ECHR and refusal of recognition under Brussels I: the High Court in Smith v Huertas.

I have reported before on the narrow possibility, within the scope of the Brussels I Regulation, for refusal of recognition of judgments from fellow national courts in the EU (Diageo; Trade Agency). The High Court confirmed the exceptional character of the exercise in Smith v Huertas. Following conviction in a criminal court, Dr Smith had been instructed by the French courts to pay Huertas a considerable sum following fraudulent payments made by a new insolvent company, of which Dr Smith was a director. The argument on ordre public grounds was made viz alleged bias and hostility in one particular court hearing; the long duration of the trial; and one or two alleged procedural inadequacies (in particular, the refusal to interview Dr Smith on a number of occasions).

Most if not all of the complaints were taken by Dr Smith to the ECtHR, which decided not to proceed with the case (such decisions are made in summary manner and one therefore has to guess whether either the claims were found to be manifestly unfounded, or not of a nature as having actually put the applicant at a disadvantage).

Importantly, Cooke J emphasises the responsibility of applicant (seeking refusal of recognition) to raise matters which might conceivably lead to a refusal of recognition, in the Member State of origin: at 21:

Where the factors relied on as being contrary to public policy in England are factors which the court has already considered in the foreign jurisdiction or are factors which could have been raised by way of objection in that jurisdiction, it appears to me self-evident that the foreign jurisdiction must be treated as the best place for those arguments to be raised and determined. To do otherwise would be contrary to the spirit of the Convention and, where issues of unfairness are raised which are capable of being the subject of appeal in the foreign jurisdiction, the court in the enforcing jurisdiction would be much less able to assess them than the original court which was familiar with its own forms of procedure. It is plain that an enforcing court will have much more difficulty in understanding the overall foreign system and its procedures for ensuring that justice is done than the appeal court of the original jurisdiction itself. There is moreover a highly unattractive element in a defendant not raising points which he could have raised in the original jurisdiction, by way of appeal against the judgment and only seeking to raise those matters when the judgment is exported to an enforcing jurisdiction under the Convention as matters of public policy for that court.

Dr Smith’ task therefore was to (at 26) not only … show an exceptional case of an infringement of a fundamental principle constituting a manifest breach of a rule of law regarded as essential in the legal order in this country or of a right recognised as being fundamental within it but that the system of legal remedies in France did not afford a sufficient guarantee of his rights. Dr Smith must overcome the strong presumption that the procedures of the courts of France, another Contracting State, are compliant with Article 6…

A task which in the end Dr Smith failed to accomplish and summary judgment for recognition and enforcement was issued. Review by Cooke J may seem lengthy to some however CJEU case-law emphasises the ad hoc nature of the ordre public exception: that requires some case-specific assessment, of course.

Geert.

 

, , , , , , , , , , , , , , , , , ,

Leave a comment

%d bloggers like this: