Tag: privity

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Who is bound by Choice of Court Agreements in Bills of Lading? Guest blog on CJEU Maersk by Dr Mukarrum Ahmed.

This guest post was authored by Dr Mukarrum Ahmed, Barrister (Lincoln’s Inn), and Lecturer in Business Law & Director of PG Admissions at Lancaster University Law School. I am most grateful to Dr Ahmed for complementing my earlier post on the CJEU case discussed, Joined Cases C‑345/22 and C‑347/22 Maersk.

 

According to the doctrine of privity of contract, only parties to a choice of court agreement are subject to the rights and obligations arising from it. However, there are exceptions to the privity doctrine where a third party may be bound by or derive benefit from a choice of court agreement, even if it did not expressly agree to the clause. A choice of court agreement in a bill of lading which is agreed by the carrier and shipper and transferred to a consignee, or third-party holder is a ubiquitous example.

Article 25 of the Brussels Ia Regulation does not expressly address the effect of choice of court agreements on third parties. However, CJEU jurisprudence has laid down that the choice of court agreement may bind a third party in some contexts even in the absence of the formal validity requirements. Effectively, this is a context specific harmonised approach to developing substantive contract law rules to regulate the effectiveness of choice of court agreements.

Article 25 of the Brussels Ia Regulation prescribes formal requirements that must be satisfied if the choice of court agreement is to be considered valid. Consent is also a necessary requirement for the validity of a choice of court agreement. (Case C-322/14 Jaouad El Majdoub v CarsOnTheWeb.Deutschland GmbH EU:C:2015:334, [26]; Case C‐543/10 Refcomp EU:C:2013:62, [26]).

Although formal validity and consent are independent concepts, the two requirements are connected because the purpose of the formal requirements is to ensure the existence of consent (Jaouad El Majdoub, [30]; Refcomp, [28]). The CJEU has referred to the close relationship between formal validity and consent in several decisions. The court has made the validity of a choice of court agreement subject to an ‘agreement’ between the parties (Case C-387/98 Coreck EU:C:2000:606, [13]; Case C-24/76 Estasis Salotti di Colzani Aimo e Gianmario Colzani s.n.c. v Rüwa Polstereimaschinen GmbH EU:C:1976:177, [7]; Case C-25/76 Galeries Segoura SPRL v Société Rahim Bonakdarian EU:C:1976:178, [6]; Case C-106/95 Mainschiffahrts-Genossenschaft eG (MSG) v Les Gravières Rhénanes SARL EU:C:1997:70, [15]). The Brussels Ia Regulation imposes upon the Member State court the duty of examining whether the clause conferring jurisdiction was in fact the subject of consensus between the parties, which must be clearly and precisely demonstrated (ibid). The court has also stated that the very purpose of the formal requirements imposed by Article 17 (now Article 25 of Brussels Ia) is to ensure that consensus between the parties is in fact established (Case 313/85 Iveco Fiat v Van Hool EU:C:1986:423, [5]).

In similar vein, the CJEU has developed its case law as to when a third party may be deemed to be bound by or derive benefit from a choice of court agreement. In the context of bills of lading, the CJEU has decided that if, under the national law of the forum seised and its private international law rules, the third-party holder of the bill acquired the shipper’s rights and obligations, the choice of court agreement will also be enforceable between the third party and the carrier (C 71/83 Tilly Russ EU:C:1984:217, [25]; C-159/97 Castelletti EU:C:1999:142, [41]; C‑387/98 Coreck EU:C:2000:606, [24], [25] and [30], C‑352/13 CDC Hydrogen Peroxide EU:C:2015:335, [65]; Cf. Article 67(2) of the Rotterdam Rules 2009). There is no separate requirement that the third party must consent in writing to the choice of court agreement. On the other hand, if the third party has not succeeded to any of the rights and obligations of the original contracting parties, the enforceability of the choice of court agreement against it is predicated on actual consent (C‑387/98 Coreck EU:C:2000:606, [26]; C‑543/10 Refcomp EU:C:2013:62, [36]). A new choice of court agreement will need to be concluded between the holder and the carrier as the presentation of the bill of lading would not per se give rise to such an agreement (AG Slynn in Tilly Russ).

Article 17 of the Brussels Convention and Article 23 of the Brussels I Regulation did not contain an express provision on the substantive validity of a choice of court agreement. The law of some Member States referred substantive validity of a choice of court agreement to the law of the forum whereas other Member States referred it to the applicable law of the substantive contract (Heidelberg Report [326], 92). However, Article 25(1) of the Brussels Ia Regulation applies the law of the chosen forum (lex fori prorogatum) including its choice of law rules to the issue of the substantive validity of a choice of court agreement (‘unless the agreement is null and void as to its substantive validity under the law of that Member State’).

The CJEU recently adjudicated on whether the enforceability of English choice of court agreements in bills of lading against third party holders was governed by the choice of law rule on ‘substantive validity’ in Article 25(1) of the Brussels Ia Regulation. (Joined Cases C‑345/22 and C‑347/22 Maersk A/S v Allianz Seguros y Reaseguros SA and Case C‑346/22 Mapfre España Compañía de Seguros y Reaseguros SA v MACS Maritime Carrier Shipping GmbH & Co.) The CJEU held that the new provision in Article 25(1) referring to the law of the Member State chosen in the choice of court agreement including its private international law rules is not applicable. A third-party holder of a bill of lading remains bound by a choice of court agreement, if the law of the forum seised and its private international law rules make provision for this. Notwithstanding, the principle of primacy of EU law precludes Spanish special provisions for the subrogation of a choice of court agreement that undermine Article 25 as interpreted by CJEU case law.

In the three preliminary references under Article 267 TFEU, the enforceability of English choice of court agreements between Spanish insurance companies and maritime transport companies was at issue. The insurance companies exercised the right of subrogation to step into the shoes of the consignees and sued the maritime transport companies for damaged goods. The central issue in the proceedings was whether the choice of court agreements concluded in the original contracts of carriage evidenced by the bills of lading between the carrier and the shipper also bound the insurance companies. The transport companies objected to Spanish jurisdiction based on the English choice of court agreements. The Spanish courts referred questions to the CJEU on the interpretation of choice of court agreements under the Brussels Ia Regulation.

At the outset, the CJEU observed that the Brussels Ia Regulation is applicable to the disputes in the main proceedings as the proceedings were commenced by the insurance companies before 31 December 2020. (Article 67(1)(a), Article 127(1) and (3) of the EU Withdrawal Agreement)

The CJEU proceeded to consider whether Article 25(1) of the Brussels Ia Regulation must be interpreted as meaning that the enforceability of a choice of court clause against the third-party holder of the bill of lading containing that clause is governed by the law of the Member State of the court or courts designated by that clause. The CJEU characterised the subrogation of a choice of court agreement to a third party as not being subject to the choice of law rule governing substantive validity in Article 25(1) of the Brussels Ia Regulation. (C‑519/19 DelayFix EU:C:2020:933, [40]; C‑543/10 Refcomp EU:C:2013:62, [25]; C‑366/13 Profit Investment SIM EU:C:2016:282, [23])

The CJEU relied on a distinction between the substantive validity and effects of choice of court agreements (Maersk, [48]; AG Collins in Maersk, [54]-[56]). The latter logically proceeds from the former, but the procedural effects are governed by the autonomous concept of consent as applied to the enforceability of choice of court agreements against third parties developed by CJEU case law.

Although Article 25(1) of the Brussels Ia Regulation differs from Article 17 of the Brussels Convention and Article 23(1) of the Brussels I Regulation, the jurisprudence of the CJEU is capable of being applied to the current provision (Maersk, [52]; C‑358/21 Tilman, EU:C:2022:923, [34]; AG Collins in Maersk, [51]-[54]).

The CJEU concluded that where the third-party holder of the bill of lading has succeeded to the shipper’s rights and obligations in accordance with the national law of the court seised then a choice of court agreement that the third party has not expressly agreed upon can nevertheless be relied upon against it (C 71/83 Tilly Russ EU:C:1984:217, [25]; C-159/97 Castelletti EU:C:1999:142, [41]; C‑387/98 Coreck EU:C:2000:606, [24], [25] and [30], C‑352/13 CDC Hydrogen Peroxide EU:C:2015:335, [65]; Maersk, [51]; Cf. Article 67(2) of the Rotterdam Rules 2009).

In this case, there is no distinct requirement that the third party must consent in writing to the choice of court agreement. The third party cannot extricate itself from the mandatory jurisdiction as ‘acquisition of the bill of lading could not confer upon the third party more rights than those attaching to the shipper under it’ (C 71/83 Tilly Russ EU:C:1984:217, [25]; C-159/97 Castelletti EU:C:1999:142, [41]; C‑387/98 Coreck EU:C:2000:606, [25]; Maersk, [62]). Conversely, where the relevant national law does not provide for such a relationship of substitution, that court must ascertain whether that third party has expressly agreed to the choice of court clause (C‑387/98 Coreck EU:C:2000:606, [26]; C‑543/10 Refcomp EU:C:2013:62, [36]; Maersk, [51]).

According to Spanish law, a third-party to a bill of lading has vested in it all rights and obligations of the original contract of carriage but the choice of court agreement is only enforceable if it has been negotiated individually and separately with the third party. The CJEU held that such a provision would undermine Article 25 of the Brussels Ia Regulation as interpreted by the CJEU case law (Maersk, [60]; AG Collins in Maersk, [61]). As per the principle of primacy of EU law, the national court has been instructed to interpret Spanish law to the greatest extent possible, in conformity with the Brussels Ia Regulation (Maersk, [63]; C‑205/20 Bezirkshauptmannschaft Hartberg-Fürstenfeld (Direct effect) EU:C:2022:168) and if no such interpretation is possible, to disapply the national rule [65].

The choice of law rule in Article 25(1) is not an innovation without utility. A broad interpretation of the concept of substantive validity would encroach upon the autonomous concept of consent developed by CJEU case law yet it could avoid the need for a harmonised EU substantive contract law approach to the enforceability of choice of court agreements against third parties. The CJEU in its decision arrived at a solution that upheld the choice of court agreement by the predictable application of its established case law without disturbing the status quo. In practical terms, the application of the choice of law rule in Article 25(1) would have led to a similar outcome. However, the unnecessary displacement of the CJEU’s interpretative authorities on the matter would have increased litigation risk in multi-state transactions.

By distinguishing substantive validity from the effects of choice of court agreements, the CJEU does not extrapolate the choice of law rule on substantive validity to issues of contractual enforceability that are extrinsic to the consent or capacity of the original contracting parties. On balance, a departure from the legal certainty provided by the extant CJEU jurisprudence was not justified. It should be observed that post-Brexit, there has been a resurgence of English anti-suit injunctions in circumstances such as these where proceedings in breach of English dispute resolution agreements are commenced in EU Member State courts.

Mukarrum.

 

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Maersk. The CJEU on the scope of ‘substantive validity’ in Article 25 Brussels Ia (enforceability of choice of court in bills of lading against third party holders of the bill).

The CJEU held last week in Joined Cases C‑345/22 and C‑347/22 Maersk A/S v Allianz Seguros y Reaseguros SA and Case C‑346/22 Mapfre España Compañía de Seguros y Reaseguros SA v MACS Maritime Carrier Shipping GmbH & Co.

The case concerns enforceability of choice of court (in the cases at issue: pro a court in England) included in bills of lading against third party holders of the bills. Each case was brought prior to Brexit Implementation day and as a result of the UK-EU Withdrawal Agreement (A127(3)) fully subject to Brussels Ia. Mukkarum Ahmed had earlier signalled Collins AG’s Opinion in which his scholarship was justifiably cited.

Relevant Spanish law is not amongst those national laws which accept with relative ease that choice of court and law has binding effect on third party acquirers of the bill, seeing as it provides:

In Section XI( of the preamble to Ley 14/2014 de Navegación Marítima (Shipping Law 14/2014) of 24 July 2014 (BOE No 180 of 25 July 2014, p. 59193; ‘the LNM’) it states:

‘… [Chapter I of Title IX] contains the special rules of jurisdiction and competence and, proceeding on the basis of the preferential application in this matter of the rules in international agreements and the law of the European Union, seeks to prevent the abuses identified, by declaring void clauses which provide for submission to a foreign jurisdiction or to arbitration abroad, contained in contracts for the use of a ship or in ancillary shipping contracts, if those clauses have not been individually and separately negotiated. …’

 Under Article 251 of the LNM, headed ‘Effectiveness of transfer’:

‘Delivery of a bill of lading shall have the same effects as delivery of the goods represented by the bill, without prejudice to the criminal and civil actions open to a person who has been unlawfully dispossessed of those goods. The acquirer of the bill of lading shall acquire all the transferor’s rights and actions over the goods, with the exception of agreements on jurisdiction and arbitration, which shall require the consent of the acquirer in accordance with Chapter I of Title IX.’

The first paragraph of Article 468 of the LNM, entitled ‘Clauses on jurisdiction and arbitration’, which appears in Chapter I of Title IX of that law, provides:

‘Without prejudice to the provisions of the international agreements applicable in Spain and to the rules of EU law, clauses which provide for submission to a foreign jurisdiction or to arbitration abroad, contained in contracts for the use of a ship or in ancillary shipping contracts, shall be void and deemed not to exist if those clauses have not been individually and separately negotiated.

Relevant authority is of course CJEU C‑387/98 Coreck Maritime) where the Court held that a jurisdiction clause incorporated in a bill of lading may be relied on against a third party to that contract if that clause has been adjudged valid between the carrier and the shipper and provided that, by virtue of the relevant national law, the third party, on acquiring the bill of lading, succeeded to the shipper’s rights and obligations.

CJEU DelayFix as Collins AG put it (45) “appears to adopt the same approach when, citing paragraph 65 of the judgment in CDC Hydrogen Peroxide, which in turn refers to paragraph 30 of the judgment in Coreck, it refers to ‘national substantive law’”.

The CJEU in the cases at issue firstly [48] holds

.. although it is clear from [A25(1) BIa] that the substantive validity of a jurisdiction clause is to be assessed in the light of the law of the Member State of the court or courts designated by that clause, the fact remains that the enforceability of such a clause against a third party to the contract, such as a third-party holder of the bill of lading, is concerned not with the substantive validity of that clause, as the Advocate General observed in points 54 to 56 of his Opinion, but with its effects, the assessment of which necessarily comes after the assessment of its substantive validity, that latter assessment having to be carried out by reference to the relationship between the original parties to the contract.

[50] with reference to Case 71/83 Tilly Russ and C‑543/10 Refcomp (itself borrowing from Correck Maritime, see above), the Court also reminds us

a jurisdiction clause incorporated in a bill of lading may be relied on against a third party to the contract if that clause has been adjudged valid between the shipper and the carrier and provided that, by virtue of the relevant national law, the third party, on acquiring the bill of lading, succeeded to the shipper’s rights and obligations. In such a case, there is no need for the court seised of the matter to ascertain whether that third party agreed to that clause [emphasis added]

In other words in such case the important step of establishing factual consent, ordinarily always required for choice of court under A25, is no longer needed.

Further, [56], does A25 BIa preclude the Spanish legislation at issue “under which a third party to a contract for the carriage of goods concluded between a carrier and a shipper, who acquires the bill of lading evidencing that contract and thereby becomes a third-party holder of that bill of lading, is subrogated to all of the shipper’s rights and obligations, with the exception of those arising under a jurisdiction clause incorporated in the bill of lading, where that clause is enforceable against that third party only if the third party has negotiated it individually and separately”?

Here, the CJEU [58] repeats that if “third-party holders of bills of lading  [are]…subrogated [under the relevant applicable law] to all of the rights and obligations of the shippers concerned…there is no need to ascertain whether each of those third parties actually accepted those clauses.”

[59] The relevant Spanish law in essence has the effect that the acquirer of the bill of lading acquires all of the transferor’s rights and actions over the goods, with the exception of jurisdiction clauses, which under that Spanish law require the actual consent of the acquirer. The result of the Spanish law is that those clauses are to be void and deemed not to exist if they have not been individually and separately negotiated. This, the CJEU holds [60] circumvents A25 as interpreted in Coreck Maritime, Tilly Russ, Refcomp etc. and cannot be so allowed. The national court is instructed as a result of the primacy of EU law to interpret the Spanish law as much as possible in line with the Regulation (reference [63] ex multi to CJEU Bezirkshauptmannschaft Hartberg-Fürstenfeld) and if no such interpretation other than one contra legem is possible, [65] to disapply the national rule seeing as A25 BIa as a provision in a Regulation (cf. a Directive) is directly applicable.

In conclusion:

1.      Article 25(1) [BIa]

must be interpreted as meaning that the enforceability of a jurisdiction clause against the third-party holder of the bill of lading containing that clause is not governed by the law of the Member State of the court or courts designated by that clause. That clause is enforceable against that third party if, on acquiring that bill of lading, it is subrogated to all of the rights and obligations of one of the original parties to the contract, which must be assessed in accordance with national substantive law as established by applying the rules of private international law of the Member State of the court seised of the dispute.

2.      Article 25(1) [BIa]

must be interpreted as precluding national legislation under which a third party to a contract for the carriage of goods concluded between a carrier and a shipper, who acquires the bill of lading evidencing that contract and thereby becomes a third-party holder of that bill of lading, is subrogated to all of the shipper’s rights and obligations, with the exception of those arising under a jurisdiction clause incorporated in the bill of lading, where that clause is enforceable against that third party only if the third party has negotiated it individually and separately.

An important judgment for the transport sector specifically and for the meaning of ‘substantive validity’ in A25 BIa.

Geert.

EU private international law, 4th ed. 2024, 2.373 ff.

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Clifford Chance v Soc Gen: The makings of a jurisdictional stalemate between the English and French courts.

In Clifford Chance LLP v Societe Generale SA [2023] EWHC 2682 (Comm), Henshaw J has held on a jurisdiction challenge in a claim for professional negligence claim brought by SocGen against Clifford Chance alleging that they negligently handled a dispute between SocGen and Goldas Kuyumculuk Sanayi Ithalat Ihracat AS and other companies in the same group.

Clifford Chance’s claim is one for negative declaration of contractual liability: it seeks declarations that they are not liable to SocGen in professional negligence, and that CC Europe was not retained by SocGen at all. SocGen has subsequently commenced proceedings against CC LLP and CC Europe in the High Court of Paris, seeking damages in excess of €140 million. The first hearing in that court is due to take place in March 2024.

SocGen challenged the jurisdiction of the E&W courts with reference to its framework agreement with Clifford Chance, which includes French choice of court and French choice of law. As was to be expected, Clifford Chance argue that that agreement does not apply to the work at issue (given the interference of various Clifford Chance legal entities, it was inevitable that issues of privity would arise; see also the discussion [103] ff on agency). The judge, applying French principes of contractual interpretation, holds [90] ff that on the facts, the framework agreement does not apply to the retainer at issue. As a result of the Rome Convention (as discussed at [67], Rome I not applying ratione temporis), English law applies to that retainer as a result of E&W being the habitual residence of the service provider.

[112] ff deal succinctly with (and reject)  the subsidiary issue of forum non conveniens: [120] it is not shown

that the courts of France are clearly and distinctly the more appropriate forum. To the contrary, this court is that forum.

I wonder whether Clifford Chance in the French proceedings will now be arguing Article 33-34 lis pendens, seeing as the English proceedings were instituted first, however that would depend on the exact parties to the proceedings and the basis for jurisdiction against them: if the French courts find there is a legally binding choice of court in the claim, Articles 33-34 cannot apply and we will find ourselves in an interesting post-Brexit competition between courts.

Geert.

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Club La Costa: The CJEU on timeshare agreements: Applicable law, jurisdiction. Confirms privity of contract at least with the business as defendant.

Case C-821/21 NM v Club LA Costa UK, sucursal en España et al (I shall shorten it to ‘Club La Costa’), in which the CJEU held the other week, first of all confirms privity of consumer contracts at least from the point of view of the business as the defendant. The case was heard without AG Opinion which at first sight is a bit odd for the claim does raise interesting and not necessarily acte clair issues.

NM, a British consumer resident in the UK, concluded, through the branch in Spain of Club La Costa (UK), established in the UK (‘Club La Costa’), a timeshare contract in respect of tourist accommodation (‘the contract at issue’), which, the referring court states, does not concern either a right in rem in immovable property or a tenancy right (cue CJEU C-73/04 Klein v Rhodos Management and see generally Zhen Chen on Timeshare and Brussels Ia /Rome I).  NM sued that company and other companies belonging to the same group, with which so the facts state without further detail, he was also contractually linked, but which were not parties to that contract. All the defendant companies in the main proceedings are established in the UK, with the exception of European Resorts & Hotels, which is established in Spain. Furthermore, the referring court states that Club La Costa directs its commercial activity not only to Spain, but also to other countries, in particular the UK. The contract at issue contains English (exclusive) choice of court and law.

The CJEU first of all holds that  the expression ‘other party to a contract’ in Article 18 Brussels Ia on consumer contracts, is to be understood as referring only to the natural or legal person who is a party to the contract in question. It does not also encompass other persons, not parties to that contract, but who are connected with that person. It refers [45] to the need for restrictive interpretation of the consumer title, as well as [56] a contrario to the express provision in the Regulation for branch jurisdiction, and to the repeated wording (“the other party to the contract”, emphasis on the singular) as it also had done in CJEU C-215/18 Libuše Králová v Primera Air Scandinavia. The Court itself [54] distinguishes CJEU Maletic for in that case the consumer was from the outset contractually linked, inseparably, to two contracting partners.

The judgment nota bene may also indicate a direction of travel albeit not direct authority for the question whether on the side of the consumer as claimant, the contractual net may be cast wide: see Bonnie Lackey.

[63] the Court confirms that A63 BIa does not establish any hierarchy between the three criteria for a corporation’s ‘domicile’ and that therefore it is for the consumer to choose between them. It also holds [66] that A63 does not lay down rebuttable presumptions: it imposes autonomous definitions.

Finally, the CJEU confirmed that the the consumer protection provision of A6 Rome I is not only specific but also exhaustive, as it also held in Diamond Resorts of the same day.

Geert.

 

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Banca Intesa v Venezia: An excellent illustration of the relevance of characterisation. (And of the application of the ‘purely domestic contracts’ rule, with a pudding of the ‘consideration’ theory as lois de police)).

Update 14 December 2023 the Bank successfully appealed: ia on grounds that the judge made errors of principle in applying Italian law re the speculative nature of financial transactions: Banca Intesa Sanpaolo Spa & Anor v Comune Di Venezia [2023] EWCA Civ 1482.

Banca Intesa Sanpaolo SPA & Anor v Comune Di Venezia [2022] EWHC 2586 (Comm) is an excellent illustration of the relevance of characterisation and of the international harmonisation of same. It also discusses the application of the ‘purely domestic contracts’ rule of Article 3(3) Rome Convention, carried over into the Rome Regulation.

Background is long-running litigation involving derivative transactions used by Italian municipalities to hedge their interest rate risk, as Sarah Ott summarises the context here (she discusses Dexia Crediop SpA v Provincia di Pesaro e Urbino [2022] EWHC 2410 (Comm), a case with many similar issues).

Venice contends that, for various reasons, it lacked the substantive power to enter into the Transactions as a matter of Italian law, and that, applying English conflict of law principles, that means that it did not have capacity to enter into the Transactions and that they are not valid. It also contends that the Transactions breached various rules of Italian law which have the status of “mandatory rules of law” for the purposes of A3(3) Rome Convention 1980 (which is applicable and not the Rome I Regulation) and that as a result the Transactions are void and/or unenforceable.

The Banks deny that the entry into the Transactions contravened any provisions of Italian law, on the basis of arguments as to the effect of Italian law and its application to the facts of this case, and further deny that any such contravention would deprive Venice of capacity to contract as a matter of English conflict of laws principles in any event.

Capacity to enter into contractual relationship itself is not caught by the Rome Convention as a result of the Convention’s carve-out of Article 1(2) f and /or g (most legal systems make such capacity subject to the lex incorporationis, and [115] is determined by reference to the law in force when the Transactions were entered into). Foxton J refers as authority to Credit Suisse International v Stichting Vestia Groep [2014] EWHC 3103 (Comm) [185].

Who then is to decide whether a particular issue of Italian law raises a question of capacity, or authority, or some other kind of legal challenge to the validity and efficacy of the Transactions? Here Foxton J wrongly in my view simply refers to lex fori, English law. In reality of course it is the Rome Convention that does so, although as I have pointed out before, neither the Rome Convention nor Rome I excels at clarifying.

[129] ff then follows lengthy analysis of the issues of capacity under Italian law as the lex causae, with the conclusion being that Venice did indeed so lack capacity under Italian law.

The issue of mandatory Italian law replacing the English lex contractus as a result of Article 3(3) Rome Convention’s ‘purely domestic contracts’ rule, is dealt with obiter. It fails at the first hurdle with Foxton J holding [341] that the scenario is not purely domestic. He does not much entertain the issue of whether under Italian law (lack of) a theory of contractual consideration might be of mandatory nature, referring [356] to the similar issues of consideration and privity of contracts under English law (which in effect might subsequently become relevant under the overriding mandatory rules of the forum).

An interesting judgment.

Geert.

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Royal Carribean v Browitt. On agency, consumer consent and choice of court Down Under.

Update 28 07 2023 In Langford v RCL Cruises Ltd t/as Royal Caribbean Cruises [2023] FCA 626, a ‘holding claim’ following the same events was stated by Jackman J pending the outcome of proceedings in Florida (where claims are being met by a jurisdictional challenge on grounds of choice of court, and forum non conveniens). Application for a stay was made by the claimants. The Florida proceedings were held to be legitimate avenues for forum shopping and the stay required in the interest of justice.

Royal Caribbean Cruises Ltd v Browitt [2021] FCA 653 is a great addition to the comparative conflicts binder, particularly from the angle of ‘consent’ in business to consumer contracts. It also engages a classic tripartite relation between the consumer, signing a contract with a travel agent, whose GTCS in turn incorporate the GTCS of the carrier.

The case follows on from the December 2019 volcanic eruption at Whakaari.  (Mrs Browitt), for herself and as representative of the deceased estates of her late husband Paul and late daughter Krystal, and Stephanie (Ms Browitt), a daughter who survived the eruption with horrific injuries, are suing Royal Caribbean Cruises Ltd (RCCL), a Liberian registered company headquartered and operating in Miami, Florida, in the courts at Miami. There are applicable law and procedural advantages (incl discovery and trial (both on culpability and level of damages) by jury).

RCL Cruises Ltd (RCL) and RCCL apply for anti-suit in the FCA arguing that the Browitts were passengers on the Ovation of the Seas pursuant to a contract of carriage between the Browitts and RCL as the disponent owner and operator of the vessel. They seek a declaration that it was a term of the contract, signed at Flight Centre in Victoria, Australia, that any disputes between the parties would be subject to the exclusive jurisdiction of the courts of New South Wales.

The list of issues to be determined is long but I repeat it here anyways for they highlight the complexity of issues following a routine purchase of a cruise:

(1)    Was Flight Centre the agent of Mrs Browitt, RCL or both?

(2)    Were the RCL AU terms, including the exclusive jurisdiction clause, incorporated into the contract of carriage by: (a)    reference in the Flight Centre terms and conditions signed by Mrs Browitt on 14 February 2019? (b)    the text of a Royal Caribbean brochure? (c)    links on the RCL AU website? (d)    links in emails? (e)    links in the electronic guestbook?

(3)    As to the construction of the RCL AU terms: (a)    is RCL entitled to invoke the exclusive jurisdiction clause to restrain the Florida proceedings? (b)    is RCCL entitled to rely on the exclusive jurisdiction clause? (c)    did the purchase of insurance exclude the operation of the terms (cl 1)? (The respondents later dropped reliance on the purchase of insurance as excluding the operation of the exclusive jurisdiction clause, so this issue fell away.) (d)    does the contract of carriage apply to shore excursions (cl 25)? If not, does the exclusive jurisdiction clause nonetheless operate to restrain the Florida proceedings? (e)    does the exclusive jurisdiction clause permit a proceeding to be brought in the Federal Court of Australia sitting in New South Wales, and if not, what consequence follows from the commencement of this proceeding (cl 1, cl 37/38)? (f)    does the exclusive jurisdiction clause cover the Florida proceeding?

(4)    Is RCCL entitled to relief on the basis of the RCL AU terms?

(5)    Is the Florida proceeding vexatious and oppressive such that RCL and RCCL are entitled to an anti-suit injunction?

The judge held that although the Browitts were bound by the RCL AU terms, the Florida proceeding is not in breach of the exclusive jurisdiction agreement in those terms because RCCL is not a party to the agreement and RCCL does not enjoy the benefit of it. Also, there is no basis for the alternative case that the Florida proceeding is in any event vexatious and oppressive such as to justify an order restraining Mrs Browitt and Ms Browitt from pursuing it.

Terms and conditions were available on relevant websites and brochures, shown to and browsed by Mrs Browitt but not for the purposes of terms and conditions. Rather, as one would expect, for details of the journey, vessels etc. Unlike a quote, the eventual invoice included as part of the document three pages of booking terms and conditions. Some of those were highlighted in the copy made available to Mrs Browitt  Mrs Browitt could have read the GTCS but there was no inidcation she had or had been specifically pointed to them. Nothing in either version of the invoice, i.e., that which was printed for and signed by Mrs Browitt and that which was emailed by the agency, identifies which of RCCL and RCL was offering the cruise or operating the vessel.

The judgment, which I would invite readers to consult, eventually boils down to limitations of ‘agency’, privity of contract, and clear determination of contractual clauses. It does not decide for the Browitts on the basis of a particular concern for the weaker party in a classic B2C transaction, rather on the need for parties clearly to think through their spaghetti bowl of overlapping arrangements and GTCs when hoping to rely on them in court.

Geert.

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Trappit v American Express Europe. On choice of court in NDAs, privity, and lis pendens viz provisionally closed Spanish proceedings.

Trappit SA & Ors v American Express Europe LLC & Anor [2021] EWHC 1344 (Ch) confirms an application to strike out or stay proceedings claiming infringement of intellectual property rights in a computer programme called ARPO (relevant to fare re-booking), and breach of non-contractual obligations of confidence that are said to have arisen when ARPO was made available by claimants (Panamanian and Spanish special purpose vehicles of 2 software engineers) to first Defendant AmEx (a Delaware corporation with a registered branch in England), for assessment. AmEx after inspection declined to take a licence. AmEx reorganised and second defendant GBT UK (a joint AmEx and private equity venture) acquired AmEx Europe’s travel management services business in the UK. GBT use an alternative software which claimants argue is effectively an ARPO rip-off facilitated by AmEx’ consultation of ARPO.

The application is made by the Defendants, who argue Claimants are contractually bound to litigate the claims in Spain rather than England (an A25 Brussels Ia argument), or that in light of proceedings that have already been brought and provisionally determined against the Second Claimant in Spain, the E&W  should decline jurisdiction (A29 BIa) or strike out the English proceedings as an abuse of process.

First on the issue of choice of court and privity under A25 BIa. Relevant authority discussed includes CJEU CDC and UKSC AMT Futures v Marzillier. At 6 ff the genesis of choice of court and law provisions in the NDA is mapped (drafts had been sent to and fro). As Snowden J notes at 76,

it is the parties related to Trappit SA who are the claimants, who sought the NDA before making ARPO available to AmEx Europe, and who asked for a Spanish law and jurisdiction clause. However, it is those parties who now contend that the jurisdiction clause does not bind them and that they are free to issue proceedings in England for breach of confidence and copyright infringement arising (so they say) from the unauthorised copying of the source code to ARPO. In contrast, it was the parties related to AmEx Europe who would most naturally be the defendants to any claim under the NDA and who originally proposed an English law and jurisdiction clause. But it is those parties who are now contending that the jurisdiction clause in the NDA binds all parties and requires all of the claims made in the English Proceedings to be litigated in Spain.

The eventual clause reads “18. Governing law and jurisdiction. This Agreement (including any non-contractual obligations arising out of or in connection with the same) shall be governed in all respects by the laws of Spain without regard to conflict of law principles. Any dispute or controversy arising in connection with this Agreement shall be submitted before the courts of the city of Madrid, Spain.”

At 77 the judge notes that the scope and the circumstances in which persons other than Trappit SA and AmEx Europe might become a party to the NDA are matters to be determined in accordance with Spanish law as the governing law of the NDA. This underestimates the impact of A25 itself and discussion of in particular CJEU Refcomp rather than the tort /contract discussion in CDC would have been appropriate. Snowden J relies on expert reports on Spanish law with respect to (i) the proper approach to contractual construction, and (ii) the circumstances in which third parties can be bound by contracts.

Conclusion on these report is that a narrow construction of the clause must be rejected: [94] ‘all types of claims arising from misuse of the information which the NDA envisaged would be provided by one party to the other. This would include claims based upon unauthorised copying and infringement of intellectual property rights as well as claims for breach of confidence,..’ (At 97-98 a side-argument based on A8 Rome II is dismissed).

As for the privity element, Snowden J finds there was no contractual intention for other corporate entities also to be parties entitled to enforce the agreement and there was no indication that any other company was intended to acquire rights (or be bound) under the NDA. Spanish (statutory) law on assignment, subrogation and the like does not alter this.

Conclusion [138]: ‘the jurisdiction clause in the NDA applied to all the claims in the English Proceedings, but that it only binds AmEx Europe and Trappit SA as the original signatories to the NDA. The effect of Article 25 is that the English courts therefore have no jurisdiction over the claims brought by Trappit SA against AmEx Europe in the English Proceedings.’ Proceedings against GBT on that basis may continue on a A4 BIa basis (neither of the UK Defendants were named defendants to the Spanish Proceedings, hence an A29 ff lis alibi pendens argument against them has no object).

Obiter viz AmEx Europe yet of relevance to the UK defendants, on Article 29 lis pendens, of note is first of all that the Spanish proceedings are criminal ones, with an embedded civil liability claim. The English Proceedings were issued prior to the provisional dismissal of the Spanish Proceedings but after the delivery of the Expert Report in those proceedings whose findings were part incorporated into the Spanish judge’s provisional dismissal.

The first, threshold issue on A29 is whether the Spanish courts are still seised of the Spanish Proceedings seeing as there is a provisional dismissal in the Spanish criminal proceedings. Authority discussed was Easygroup v Easy Rent a Car [2019] EWCA Civ 477 and Hutchinson v Mapfre was also referred to. A29 only applies where there are concurrent proceedings before the courts of different member states at the time when the court second seised makes its determination [147]. Following the reasoning in Hutchinson, the judge decides  that the Spanish courts are no longer seized of the case: experts are agreed that the case has been closed and archived, and that it is unlikely in the extreme that any new evidence would come to light so as to justify reopening the case after more than five years of extensive investigatory proceedings in Spain [158].

A final set of arguments by the defendants, based on issue estoppel (the Expert Report had found that there had been no plagiarism or copying of the ARPO source code by the Defendants), Henderson v Henderson abuse, and vexatious ligation (all under an ‘abuse of process‘ heading) is dismissed.

Conclusion [195]: no jurisdiction to entertain any of the claims made in the English proceedings between Trappit SA and AmEx Europe by reason of the application of A25 BIa. The case against the UK defendants may continue.

Geert.

EU Private International Law, 3rd ed. 2021, 2.296 ff (2.355 ff), 2.532 ff.

 

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ING v Banco Santander. Deferring to extensive discussion of national law on the insolvency exception, and a bit too rich a pudding on privity of choice of court.

The critical point in Monday’s judgment in  ING Bank N.V. & Anor v Banco Santander S.A. [2020] EWHC 3561 (Comm), an application for lack of jurisdiction, is whether this is a case about claims which a syndicate of eight lenders, including ING, had against Marme Inversiones 2007 S.L.U (“Marme”) under a loan agreement and related swap agreements (together “the Marme Agreements”) which were entered into between the lenders and Marme in September 2008, or whether it is about the effect of the ongoing liquidation of Marme in Spain on those claims. The Defendant Applicant says the latter, the Claimant Respondents say the former.

Of note is that on 2 January 2020, Sorlinda, whose agreements are at issue, merged into Santander. As a consequence of the merger, Santander assumed all of Sorlinda’s rights and liabilities.

At 4 Cockerill J summarises ‘the field of battle’ (at 4) as follows:

Santander contends that the court should refuse to exercise jurisdiction or order a stay because:

i) The claim falls within the EU Insolvency Regulation on insolvency proceedings (the “Insolvency Regulation”) and is excluded from the scope of the recast Regulation (EU) No. 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the “Brussels Regulation”) pursuant to Article 1(2)(b) of the Brussels Regulation.

ii) Even if the Claim does not fall within the exception under Article 1(2)(b), ING cannot rely upon Article 25 of the Brussels Regulation.

iii) As a matter of Spanish law, ING has not established that Sorlinda became liable to ING for Marme’s liabilities.

iv) There are in any event grounds for the Court to refuse to exercise its jurisdiction and/or to order a stay.

ING contends that:

i) The bankruptcy/winding up exclusion in Article 1(2)(b) of the Brussels Regulation does not apply. The Claim is between two solvent entities in relation to contractual payment obligations under the Marme Agreements, and has no effect on Marme or any of its other creditors. The Claim does not derive directly from Marme’s winding up nor is it closely connected with that winding up.

ii) The question of whether or not Santander is bound by the Marme Agreements is a question of English law having appropriate regard to the effect of the relevant “assumption” of Marme’s obligations by Sorlinda (now Santander) as a matter of Spanish law.

iii) There is (at least) a good arguable case that as a consequence of the “assumption” Santander has a direct liability to ING under the Marme Agreements which are subject to the exclusive jurisdiction of the English courts.

iv) There are no grounds for the Court to refuse to exercise its jurisdiction and/or to order a stay. (GAVC underlining)

She holds that the jurisdictional challenge succeeds on the A25 BIa point, and also on the Insolvency Regulation point. The other grounds (assumption in Spanish Law and case management stay) would have failed.

Arguments in essence concern Brussels Ia’s insolvency exception. Per CJEU 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. Valach and F-Tex is CJEU authority also discussed.

In general, it is the closeness of the link between a court action and the insolvency proceedings that is decisive for the purposes of deciding whether the insolvency exclusion is applicable (CJEU German Graphics). In the absence of substantive EU insolvency law, the CJEU does not push an autonomous interpretation of the concept and defers largely to national insolvency law.

Whether the action is within the scope of BIa therefore requires examination of the national laws at issue, and that is done at length (featuring ia prof Virgós,  whose expert report clearly impressed Mrs Justice Cockerill).

Core of the decision on the insolvency exception, is at 197:

..the nature of the claim is one which is defined by something which took place in the liquidation, and the dispute effectively cannot be expressed without reference to the conduct of the liquidation. Although there is no challenge to the validity of the liquidator’s actions, the proceedings do necessarily require a consideration of the ambit of those powers and the ambit of actions done as part of those powers. The question of to what extent Sorlinda assumed the relevant liability can only be answered by looking at the deal which was struck in the context of the Liquidation Plan (governed by Spanish insolvency law) and the statutory insolvency framework.

The claim is not covered by BIa. English courts do not have jurisdiction over it.

Article 25 BIa is discussed first in fact, at 113 ff. However I would have thought (although Cockerill J suggest quite the reverse) that the A25 arguments must be obiter, with the insolvency exception findings logically coming first. This may be at issue when this judgment is appealed and /or referred to later.

On A25, ING must demonstrate a good arguable case either as to succession to choice of court, or as to specific consent. It was clear that the latter was not established hence discussion focused on novation /succession.  Authority discussed was of course Refcomp, Coreck Maritime, Tilly Russ etc.

This section of the judgment does not have the same clarity as the discussion on insolvency. Much reference is made to the relevance of either Spanish or English law on the issue of privity of choice of court, however this seems to be mostly done with reference to those laws being potential lex contractus (of the underlying contract). Even if the issue is not completely dealt with autonomously by EU law (which is arguable; and would have ended reference to any national laws), discussion of national law arguably should be to lex fori prorogati per the new rule in Brussels Ia (even a putative lex fori prorogati). At any rate, no succession or novation is established.

Something to clear out in my head over the end of year break.

This was most probably my last posting for the year.

Merry Christmas, everyone, and Guten Rutsch. Be safe, and remember this nice thought.

 

Geert.

European Private International Law, 3rd ed., 2021, Heading 2.2.3.1 (2.73 ff) and Heading 2.2.10.7 (2.355 ff).

 

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Ryanair v DelayFix. The CJEU dots some i’s on choice of court and unfair terms in consumer contracts; defers to national law on the assignment issue; and keeps schtum on renvoi in Article 25 Brussels Ia.

Update 18 November 2022 see application by Advocate-General Vlas to the Dutch Supreme Court, in ECLI:NL:PHR:2022:453 Netjets Management (UK) v [Pilot].

In C-519/19 Ryanair v DelayFix, the CJEU held yesterday. The case echoes the facts in Happy Flights v Ryanair at the Belgian Supreme Court.

Following inter alia  CJEU Jana Petruchova, the (absence of) impact of substantive European consumer protection rules on the consumer section of European private international law is now fairly settled. The separation between the two sets of laws seems quite clear for the application of the consumer section itself.

However under A25 BIa, EU consumer law might still play a role in those circumstances where the conditions of the consumer Section are not met (dual-use contracts, contracts for transport (such as here) etc.) yet where one of the parties may qualify as a consumer under substantive EU consumer protection law.

A core issue of contention is the consideration of the EU unfair terms in consumer contracts Directive 2019/2161 and its predecessor Directive 93/13 , which was applicable in Ryanair v DelayFix. Via Article 25’s lex fori prorogati rule on substantive validity for choice of court, the Directive plays an important role.

In the case at issue at the CJEU, Passenger Rights, now DelayFix, a company specialised in the recovery of air passengers’ claims under the EU Regulation on air passenger rights, has requested the courts at Warsaw to order Ryanair,  to pay EUR 250 in compensation, a passenger on the relevant flight having assigned DelayFix their claim with respect to that airline.

The CJEU first of all looks at the issue from the limited extent of what is actually materially regulated by A25: the requirement of ‘consent’ (as well as the formal expression of that consent. It holds, not surprisingly, that in principle of course a jurisdiction clause incorporated in a contract may produce effects only in the relations between the parties who have given their agreement to the conclusion of that contract (referring ex multi to Refcomp).  In the case at issue,  a jurisdiction clause incorporated in the contract of carriage between a passenger and that airline cannot, in principle, be enforced by the latter against a collection agency to which the passenger has assigned the claim.

However, at 47, there is a gateway for the choice of court nevertheless to extend to third parties, namely when the third party not privy to the original contract had succeeded to an original contracting party’s rights and obligations, in accordance with national substantive law. At 49, referring to A25(1), that law is the lex fori prorogati. Here: Irish law.

Recital 20 BIa in fact instructs to include the lex fori prorogati’s conflict of laws rules (in other words: an instruction for renvoi) to be part of the referral. In the aforementioned Belgian SC ruling in Happy Flights, renvoi was simply ignored. Here, the CJEU does not mention renvoi, even if it does not expressly exclude it.

The CJEU does point out that Directive 93/13 on unfair terms in consumer contracts of course is part of the Irish lex fori prorogati, as it is of all the Member States. In making that reference it would seem to have answered in the negative the question whether the ‘consent’ provisions of that Directive have not been superseded in the context of the ‘consent’ requirements of Article 25 Brussels Ia, as recently discussed obiter in Weco Projects.

Per previous case-law, the capacity of the parties to the original agreement at issue is relevant for the application of the Directive, not the parties to the dispute.  Further, a jurisdiction clause, incorporated in a contract between a consumer and a seller or supplier, that was not subject to an individual negotiation and which confers exclusive jurisdiction to the courts in whose territory that seller or supplier is based, must be considered as unfair under Article 3(1) of Directive 93/13 if, contrary to requirement of good faith, it causes significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer. Reference is made in particular to Joined Cases C‑240/98 to C‑244/98 Océano Grupo (at 58).

It will be up to the national courts seised of a dispute, here: the Polish courts, to draw legal conclusions from the potential unfairness of such a clause (at 61). DelayFix therefore are not quite yet home and dry.

Geert.

European Private International Law, 3rd ed. February 2021, Chapter 2, para 2.240.

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Idemia. Interrelated contracts (including issues of privity) and choice of court.

I was thinking of using [2019] EWHC 946 (Comm) Idemia v Decatur for exam purposes hence beyond an initial Tweet, I am a bit late with reporting. However the judgment consists of 144 paras of pure jurisdictional argument – hence making it useful for oral exam but not for a written one: for where does one start?
This is a typical case of reverse engineering: Decatur (which is an English company) and Tiger (which is incorporated in Bangladesh) have brought an action for the Discount Sums against Idemia in the courts of Bangladesh. Idemia (which is a French company) claims that that action (“the Bangladesh Action”) has been brought in breach of the jurisdiction provisions in the underlying contracts, which confer exclusive jurisdiction upon the competent courts of Geneva, Switzerland. Decatur and Tiger disagree, claiming that the subject matter of the Bangladesh Action is not covered by the jurisdiction provisions on which Idemia relies.
Idemia says that its contractual right to be sued in Switzerland (and nowhere else) means that it cannot be forced to litigate in Bangladesh. As for the courts of Switzerland, Idemia says that the Swiss courts do not have power to issue the anti-suit injunction which it needs to restrain the further prosecution of the Bangladesh Action.
Idemia claims to be entitled indirectly to enforce the jurisdiction provisions on which it relies by enforcing guarantees which Idemia claims that Decatur and Tiger have each given for the other’s obligations under the relevant contracts, and which contain English law and jurisdiction clauses.
At 143 Salter DJ helpfully summarises the lengthy discussions in the judgment:
1 Decatur’s challenge to the jurisdiction succeeds. Idemia’s claim to found jurisdiction upon Decatur’s domicile in England fails, because Decatur has the better of the argument that jurisdiction on that basis (in relation both to the contractual and the tortious claims asserted in the present action) has been prorogued to the courts of Geneva by the jurisdiction provisions of the Decatur Agreement. Idemia has failed to establish a good arguable case that it can found jurisdiction against Decatur on the jurisdiction provisions of the Schedule 6 Document annexed to the Tiger Agreement.
2 Tiger’s challenge to the jurisdiction succeeds. Idemia has failed to establish a good arguable case that it can found jurisdiction against Tiger on the jurisdiction provisions of the Schedule 6 Document annexed to the Decatur Agreement. Idemia has also failed to establish a good arguable case that it can rely upon Decatur as an “anchor defendant”, so as to establish jurisdiction over Tiger as a necessary or proper party.
3 Mr Rahman’s challenge to the purported service on him at York Way succeeds. York Way was not his “last known residence” within the meaning of CPR 6.9 at the material time, since Idemia had been told that he no longer lived there.
4 Mr Rahman’s challenge to the service on him at Morris Place fails. He was validly and effectively served there at his registered “service address”, pursuant to the Companies Act 2006 s 1140, even though he was not at the material time present, domiciled or resident within the jurisdiction. Idemia has therefore succeeded in establishing that the English court has jurisdiction over Mr Rahman on the basis of that service.
5 Mr Rahman’s application for a stay of this action against him on forum non conveniens grounds succeeds. No sufficient factors link the claims made against Mr Rahman in the present action to England. There are, however, substantial connections with Bangladesh. Bangladesh is therefore the forum in which Idemia’s claims against Mr Rahman can most suitably be tried for the interests of all the parties and for the ends of justice.
Geert.
(Handbook of) European private international law, 2nd ed. 2016, much of Chapter 2.