I have reported before on the jurisdictional consequences of CJEU Vereniging van Effectenbezitters v BP. In this post for the European Association of Private International Law, I give my views on the impact for applicable law.
When I flagged the Dutch SC reference to the CJEU in C‑709/19 Vereniging van Effectenbezitters, asking for clarification of the Universal Music case-law on purely economic damage, I signalled the specificities of this case: the case concerns a class action, not that of an individual shareholder; no prospectus was specifically addressed at Dutch investors, who instead feel they received incomplete and misleading information that was made public through press releases, websites and public statements by directors; finally the Dutch Supreme Court questions the CJEU on an e-Date accessibility type jurisdictional basis.
BP plc, defendant, is domiciled in the UK.
Sanchez-Bordona AG Opined last Thursday (apologies I did not make the Twitter-promised Friday review). He kicks off his Opinion with calling into question the very premise of the Universal Music case-law: at 24
the fact that the applicant’s account is located in that Member State is a relevant consideration in any non-contractual action for damage suffered by investments as a result of defective information, even when supplemented by other factors. While noting that the Court of Justice has inclined towards that view, in my opinion it is an open question.
That is a bold proposition not borne out by either CJEU or national case-law. Arguably better formulated is the position at 28 that the interest of the location of the bank account ‘should not be overstated’.
At 32 ff the AG repeats his call (joining a list of AG’s) to abandon the Bier Handlungsort Erfolgort distinction which he also expressed in his Opinion in Volkswagen. He emphasises again that in cases like these, the procedural decision on jurisdiction requires the judge too intensive an engagement with the substance of the case, consequently (at 36) ‘the very nature of the criterion may well create uncertainty among legal practitioners and encourage procedural delaying tactics, as well as divergent interpretations in Member States and further requests to the Court of Justice for preliminary rulings.’
At 37 (and with reference to national case-law) follows a repeat of the call to ‘ruling out the place where the investment account is located’. However the AG himself then acknowledges that call is likely to fall on deaf CJEU ears (at 39):
having regard to the wording of the questions referred, I shall answer them in accordance with their own premisses, that is to say, in the light of the existing case-law of the Court of Justice
hence he continues the Opinion taking Universal Music and its descendants into account:
at 46: ‘the fact that the financial damage took place in an investment account located in the Netherlands cannot be accepted as a ‘sufficient connecting factor for the international jurisdiction’ of the courts of that State.’ – I agree.
Again with reference to his Opinion in Volkswagen, and using the initial justification of the CJEU in Bier to put forward locus damni, the AG at 49-50 reiterates that
the ‘specific circumstances’ relevant to attributing jurisdiction are those which demonstrate the proximity between the action and the jurisdiction, and the foreseeability of that jurisdiction, .. Those circumstances must include: factors that facilitate the sound administration of justice and the smooth operation of proceedings; and factors that may have helped the parties to determine where they should institute proceedings or where they might be sued as a result of their actions.
He then rejects, for reasons succinctly explained in the Opinion, as being relevant: BP’s settlement with other shareholders; the status as consumer of some of the shareholders; BP’s information about its shares.
He concludes on this point at 60 ff that there simply is not a locus damni that meets with A7(2) Brussels Ia’s conditions. He refers as he did in Volkswagen pro inspiratio to the CJEU’s similar holding viz A7(1) forum contractus in C-56/00 Besix: that we are dealing with an obligation which ‘is not capable of being identified with a specific place or linked to a court which would be particularly suited to hear and determine the dispute relating to that obligation’.
Finally the AG deals with the question whether the nature of the action brought by VEB (the fact that it is a collective action) and the fact that it is purely an action for a declaratory judgment, should have an impact. The referring court fears that extending the CJEU rule of CDC, that the transfer of claims by each original creditor to the applicant does not affect the determination of the court having jurisdiction under Article 7(2), would make collective action ineffective.
The AG points out first of all that following ia Folien Fischer, the courts of the Member State in which either the causal event took place or the harm occurred or may occur may lawfully accept jurisdiction by virtue of A7(2) in actions in which specific damages have not (yet) been sought.
He then suggests at 79 that he sees ‘no difficulty in applying [A7(2)] to declaratory actions such as that brought by VEB, in advance of subsequent actions for damages which may be brought only by the individual injured parties, whose identity and residence are unknown at the time of the (first) action.’ Here I do not quite follow. The questions asked by VEB are not merely provisional in an A35 sense (indeed that Article is not discussed). VEB are asking the court to hold
that the courts in the Netherlands have international jurisdiction to hear the claims for compensation brought by the BP shareholders; that the rechtbank Amsterdam (District Court, Amsterdam) has territorial jurisdiction to hear those claims; that BP acted unlawfully towards its shareholders inasmuch as it made incorrect, incomplete and misleading statements about: (i) its safety and maintenance programmes prior to the oil spill on 20 April 2010; or (ii) the extent of the oil spill; or (iii) the role and responsibility of BP in regard to the oil spill; that, had it not been for the unlawful conduct on the part of BP, the purchase or sale of BP shares by the BP shareholders would have been effected at a more favourable market price, or not at all; that there is a conditio sine qua non link between BP’s unlawful conduct and the loss suffered by the BP shareholders due to the fall in the share price in the period between 16 January 2007 and 25 June 2010.
Surely these kinds of questions can only be entertained by court that has A7(2) jurisdiction which, the AG had just opined, is highly unlikely (although the referring court will have the last word on that). That he sees ‘no difficulty in applying [A7(2)] to declaratory actions such as that brought by VEB’ either then contradicts what he just advised (unlikely) or reinforces it cynically (as in ‘no difficulty in applying it, meaning there is no such jurisdiction’) – also perhaps unlikely. Am I missing something?
Finally at 95 the AG (not further discussing Qs 3 and 4) concurs with Bobek AG in Schrems: on the issue of assignment, it is not up to the CJEU to write the law.
EU Private International Law, 3rd ed. 2021, para 2.459.
Forum non conveniens featured not just in Municipio de Mariana at the High Court yesterday but also in Qatar Airways Group QCSC v Middle East News FZ LLC & Ors  EWHC 2975 (QB).
Twenty Essex have good summary of the background and decision. Context is of course the blockade on Qatar, led by Saudi Arabia and the UAE. Qatar Airways Group (QAG) sue on the basis of tort, triggered by a rather chilling clip aired by Al Arabiya which amounted to a veiled threat against the airline.
Saini J at 27 notes what Turner J also noted in Municipio de Mariana and what Briggs LJ looked at in horror in Vedanta, namely the spiralling volume and consequential costs in bringing and defending a jurisdictional challenge. (Although at least for Vedanta and Municipio de Mariana the issues discussed are matters of principle, which may eventually settle once SC (and indeed CJEU) authority is clear).
The judgment recalls some principles of international aviation law under the Chicago Convention (with noted and utterly justifiable reference a 77 ff to an article on the opiniojuris blog by prof Heller) which is important here because (at 61) it is the starting point of QAG’s case that anyone who had taken steps to inform themselves of the legal position would have known that contrary to what (it argues) is the message of the Video, there was no real risk of any internationally legitimate interception, still less legitimate shooting at or down, of a QAG scheduled service in flight along one of the defined air corridors. At 88 Saini J concludes on that issue that there is an arguable case as to meaning and falsity.
At 164 ff the judge discusses the issue of pleading foreign law at the jurisdictional threshold of making a good arguable case. Here, Saini J holds on the basis of the assumption that malicious falsehood is not covered by Rome II, which is the higher threshold for the purposes of establishing jurisdiction. He does suggest that it is likely that in fact malicious falsehood is covered by Rome II and not by the exception for infringement of personality rights (at 166: ‘Malicious falsehood is not a claim for defamation, and what is sought to be protected is not Qatar Airways’ reputation or privacy rights, but its economic interests’).
As for applicable law for conspiracy, that is clearly within the scope of Rome II and poses the difficulty of determining locus damni in a case of purely economic loss. Here, at 169 Saini J suggests preliminarily that parties agreed “damage” for the purposes of Article 4(1) of Rome II to have been suffered in the place where the third parties (that is, potential passengers) failed to enter into contracts with QAG (which they otherwise would have done) as a result of the video. Location of purely economic damage under Rome II as indeed it is under Brussel Ia is however not settled and I doubt it is as simple as locating it in the place of putative (passenger) contract formation.
Of long-term impact is the judge’s finding that for jurisdictional threshold purposes, he is content for claimant to proceed with a worldwide claim for tort on the basis of any foreign law that might be applicable having the same content as English law.
Of note in the forum non analysis is that not just the obvious alternative of the UAE was not good forum, but neither would the DIFC be. At 374:’the UAE is not an appropriate forum is what I would broadly call “access to justice” considerations in what has clearly become a “hostile environment” for Qataris in the UAE.’ And at 379, re the DIFC: ‘The DIFC courts are a sort of “litigation island” within the UAE, created to attract legal business by their perceived superior neutrality, and higher quality, compared to the local courts. But as such, they have no superiority compared to the English courts, also a neutral forum. The English courts have the other connections to the case, which the DIFC courts do not.’
In Avonwick Holdings Ltd v Azitio Holdings Ltd & Ors  EWHC 1844 (Comm), Picken J among quite a few other claims, at 146 ff discussed a suggested defrauding by misrepresentation of the best available market price for a bundle of stocks. Toss-up was between Ukranian law and English law and, it was suggested, was only relevant with respect to the issue of statute of limitation. Counsel for both parties agreed that the material differences between Ukranian and English law were minor.
They omitted, it seems, to discuss the relationship between statute of limitations and the carve-out in Rome II for procedural issues.
It was not in dispute…that the default applicable law under Article 4(1) is the law of Cyprus in that this was the country in which the event giving rise to the damage occurred since, although Avonwick was incorporated in the BVI and its entry into the Castlerose SPA was formally authorised in Ukraine, Avonwick’s directors were based in Cyprus and the steps necessary to transfer its shares in Castlerose to Azitio and Dargamo would, therefore, have been taken by those directors in Cyprus.
Here I am simply lost. A4(1) does not suggest locus delicti commissi (‘country in which the event giving rise to the damage occurred’) rather it instructs specifically to ignore that. Even if a locus damni consideration was at play, for purely economic loss as readers will know, there is considerable discussion on that exact location. How the judgment could have ended up identifying locus delicti commissi is a bit of a mystery.
At 153 then follows a discussion of a displacement of Cypriot law by virtue of A4(3)’s ‘manifestly more closely connected’ rule, including interesting analysis of any role which Article 12’s culpa in contrahendo provision might play.
For the reasons listed at 166 ff, the judge agrees that A4(3) applies to replace Cypriot law with Ukranian (not: English) law. Those reasons do seem to make sense – yet despite this, the A4(1) analysis should have been carried out properly.
(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 4, Heading 4.5.2.
Thank you Matthias Lehmann for flagging and reviewing the Rotterdam Court’s judgment late in January on applicable law in the Petrobas case. I had earlier reviewed the jurisdictional issues, particularly the application of Brussels Ia’s Article 33-34.
The case relates to a Brazilian criminal investigation into alleged bribery schemes within Petrobras, which took place between 2004 and 2014. The court first, and of less interest for the blog, deals with a representation issue, holding that Portuguese speakers cannot be represented in the class, for the Portuguese version of the relevant dispute settlement provisions, unlike the English translation, was not faulty.
Turning then to applicable law at 5.39 ff. Events occurring on or after 12 January 2009 are subject to the Rome II Regulation. For those before that date, Dutch residual PIL applies which the Court held make Brazilian law lex causae as lex loci delicti commissi: for that is where the alleged fraud, bribery and witholding of information happened.
For the events which are covered by Rome II, the court does not wait for the CJEU finding in VEB v BP and squarely takes inspiration from the CJEU case-law on purely financial damage and jurisdiction: Kronhofer, Kolassa, Universal Music. The court notes that the CJEU in these cases emphasised a more than passing or incidental contact with a State (such as: merely the presence of a bank account) as being required to establish jurisdiction as locus damni. At 5.47 it rejects the place of the investor’s account as relevant (for this may change rapidly and frequently over time and may also be easily manipulated) and it identifies the place of the market where the financial instruments are listed and traded as being such a place with a particular connection to the case: it is the place where the value of the instruments is impacted and manifests itself. It is also a place that meets with the requirements of predictability and legal certainty: neither buyer nor seller will be surprised that that location should provide lex causae.
Conclusion therefore is one of Mozaik: Brasil, Argentina, Germany, Luxembourg are lex causae as indeed may be other places where Petrobas financial instruments are listed. (At 5.49: Article 4(2)’s joint domicile exception may make Dutch law the lex causae depending on who sues whom).
(Handbook of) EU private international law, 2nd ed.2016, Chapter 4, Heading 4.4.
Uppdate 4 October 2017 for the eventual Dutch judgment (Hoge Raad) see here. Thank you Michiel Poesen for flagging. UM had not invoked other factual elements linking the case to The Netherlands, than the payment of the settlement from a Dutch bank account.
As I had feared /as was to be expected, the CJEU did not follow Szpunar AG’s lead in formally letting go of Case 21/76 Bier‘s Erfolgort /Handlungsort distinction, even if it did accept the AG’s rejection in the case at issue, of the mere presence of a bank account triggering jurisdiction for tort under (now) Article 7(2) Brussels I Recast.
Kolassa upheld jurisdiction in favour of the courts for the place of domicile of the applicant by virtue of where the damage occurred, if that damage materialises directly in the applicant’s bank account held with a bank established within the area of jurisdiction of those courts. In Universal Music the CJEU distinguished Kolassa: for in the latter case there where ‘circumstances contributing to attributing jurisdiction to those courts.’ In general, the Court held in Universal Music, ‘purely financial damage which occurs directly in the applicant’s bank account cannot, in itself, be qualified as a ‘relevant connecting factor’‘ (at 38) . ‘ It is only where the other circumstances specific to the case also contribute to attributing jurisdiction to the courts for the place where a purely financial damage occurred, that such damage could, justifiably, entitle the applicant to bring the proceedings before the courts for that place.‘ (at 39).
The Court at 38 flags a rather interesting and relevant argument for dismissing pure presence of a bank account as a determining connecting factor (a student of mine, Tony Claes, had made the same argument earlier this ac. year): a company such as Universal Music may have had the choice of several bank accounts from which to pay the settlement amount, so that the place where that account is situated does not necessarily constitute a reliable connecting factor. What the Court is essentially saying is that in such circumstance the applicant can manipulate jurisdiction and hence shop for a forum: which is not part of the jurisdictional rule for tort.
Crucially of course we are left having to ponder what exactly ‘other circumstances’ than location of bank account may imply.
(Handbook of) European private international law, second ed. 2016, Chapter 2, Headings 188.8.131.52, 184.108.40.206.7
I have earlier reported on the referral in Universal Music, Case C-12/15. Szpunar AG opined today, 11 March (the English text of the Opinion is not yet available at the time I write this post) and suggests (at 37) that the Court not apply its Erfolgort /Handlungsort distinction per Case 21/76 Bier /Minnes de Potasse. He reminds the Court of Bier’s rationale: a special link between the Erfolgort and the case at hand, so as to make that place, the locus damni, the place where the damage arises, well suited to address the substantive issues raised by the claim. (He also reminds the Court, at 30, that the language of what is now Article 7(2) only refers to the harmful event; not in the slightest to damage).
In cases where the only damage that arises is purely economic damage, the locus damni is a pure coincidence (in the case of a corporation suffering damage: the seat of that corporation), bearing no relation to the facts of the case at all (lest it be entirely coincidental). The Advocate General skilfully distinguishes all relevant CJEU precedent and in succinct yet complete style comes to his conclusion.
The Court itself embraces its Bier ruling more emphatically than its AGs do (see the similar experience of Cruz Villalon AG in Hejduk). That Universal Music is quite clearly distinguishable from other cases may sway it to follow the AG in the case at issue. However its fondness of Bier (judgment in 1976; it had been a hot summer that year) may I fear lead it to stick to its fundamental twin track of Erfolg /Handlungsort no matter the circumstances of the case.
European private international law, second ed. 2016, Chapter 2, Headings 220.127.116.11, 18.104.22.168.7
(Thank you to Vincent Dogan and Freerk Vermeulen for flagging the case). In Universal, Case C-12/15, the Dutch Hoge Raad has asked the ECJ for assistance in determining whether and /or how Article 5(3) of the Brussels I Regulation (now Article 7(3) in the recast) needs to be applied to cases of purely economic loss (also known as purely financial loss).
Haven’t we seen that before? Yes, we have: in Zuid-Chemie, Case C-189/08, the same Hoge Raad asked essentially the same question, however the ECJ did not answer it, for there was also physical damage (with the same victim).
Universal Music International Holding BV is the mother company of among others a Czech group of companies, who acquired a target company in the Czech Republic. A calculation error by one of the lawyers advising the parties (Ouch. All us, lawyers, sympathise), led to Universal having to pay five times what it thought it was going to pay. Arbitration and settlement ensued. This included agreement that the holding company, plaintiff in the current proceedings, would pay the amount settled for. It duly did, from a Dutch bank account. It now sues the Czech lawyers who wrongly advised the Czech subsidiary and does so in The Netherlands, as the alleged Erfolgsort in its tortious relationship with these lawyers, is The Netherlands.
Questions referred, are whether purely economic loss sustained in the Erfolgort (and without direct loss, economic or otherwise, elsewhere) lead to jurisdiction for that Erfolgort; and if so, how one determines whether the damage is direct or indirect (‘follow-up’), and where that economic loss is to be located.
I have aired my unhappiness with the Erfolgort /Handlungsort distinction on this blog before. Most recently viz Hejduk. I blame Bier (the judgment. Not the (at least as it is spelled in Dutch) drink): extension of Article 5(3) seemed good in principle but led to a continuing need to massage the consequences. The court advisors to the Hoge Raad have sympathy for the view that Bier’s main justification for accepting jurisdiction for the Erfolgort (a close link with the case leading to suitability from the point of view of evidence and conduct of the proceedings) is not present in the case of purely economic loss, particularly where events for the remainder are entirely Handlungsort related. The ECJ may well follow this reasoning, although in doing so it might yet again create another layer of distinguishing in the Bier rule.