Kazakhstan Kagazy v Zhunus. Again on qualification and a rather untidy application of Rome II in the context of an assets tracing claim.

Kazakhstan Kagazy Plc & Ors v Zhunus & Ors [2021] EWHC 3462 (Comm), sees Henshaw J unpicking the follow-up to a trial of applications and claims made by the Claimants for the purpose of enforcing an unsatisfied judgment for approximately US$300 million, handed down in December 2017.

The relevant part of the complex judgment, for the purposes of the blog, is a ‘tracing claim’: claimant argue that monies stolen from them by one of the defendants can be traced or followed into a variety of assets said to be held by companies within Cypriot trusts structures for the benefit of said defendant and his family. What is being traced are shares in Exillon, an oil company which Mr Arip developed after he fled Kazakhstan for Dubai. The proceeds of the shares went partially into the purchase of real estate, with another (substantial) part remaining liquid in a Swiss bank account.

Defendants submit that the tracing claim is governed by Kazakh law, and that that law does not recognise the concept of tracing. The judge, with respect, and perhaps he was echoing submissions, takes a rather unstructured approach to the conflict of laws analysis from which the judgment subsequently never recovers. Many first instance judgments in the UK intuitively start by quoting a relevant section from Dicey (whose 16th ed I am told might be out end of 2022), and then somehow engineer the analysis around it. In the case at issue, the Dicey rule that is zoomed in on [85], is disputes over real property, which are subject to lex situs (lex rei sitae). At [88] the judge then refers to Akers v Samba in which the Supreme Court, albeit at the jurisdictional level, held “the situs or location of shares and of any equitable interest in them is the jurisdiction where the company is incorporated or the shares are registered”. [89]:

It would follow that, insofar as relevant, questions of title to the Exillon shares, whose proceeds (a) were used to purchase the Properties and (b) remain in the form of the £72 million in the BJB account in Switzerland, would be likely to be governed by Manx law, Exillon having been incorporated in the Isle of Man.  A possible alternative would be English law on the basis that the shares were traded on the London Stock Exchange.  The parties have in any event agreed that, so far as relevant to these claims, Manx law is the same as English law.

[91] some role for Kazakh law is suggested to still exist when considering whether the English law preconditions for a tracing claim are met.  ‘It is generally a pre-condition of tracing in equity that there be a fiduciary relationship which calls the equitable jurisdiction into being’. [92] The law applicable to a cause of action or issue determines whether a person is required to hold property on constructive or resulting trust, hence it is necessary to consider whether duties imposed by the relevant foreign law are to be regarded as fiduciary.

Only in an afterthought [94] does the judge consider the lex causae governing unjust enrichment, equitable claims and negotiorum gestio, per Rome II as retained in UK law (and in Dicey). [The judgment is not in fact clear on when the claim was introduced and therefore might be subject to acquired as opposed to retained EU law].

The lex causae for the qualification of the current claims (proprietary restitution) as one of these entries in Rome II [96] is matter of factly presented as English law. [99] the judge dismisses the relevance of the succinct Rome II analysis for, harking back to his first reference to Dicey, the fundamental nature of the Claimants’ claim in the present case is held to be a proprietary one hence Dicey’s lex situs rule is said to apply without a need to consider Rome II.

Surely the right order is to qualify the claim, using autonomous EU interpretation, under (retained) Rome I cq Rome II and with reference to CJEU authority- with of course some of the recent qualification issues following CJEU Hrvatske Sume thrown in. Subsequently to only consider the English common law to the extent statutorily retained EU law does not govern the issue. The approach in the judgment is unsatisfactory and in that respect joins Fetch.AI Lrd & Anor v Persons Unknown Category A & Ors [2021] EWHC 2254 (Comm) , which Amy Held and Matthias Lehmann discuss critically this morning.

Geert.

Indigenous rights and qualification under conflict of laws. Newfoundland and Labrador v Uashaunnuat (Canada) and Love v Commonwealth (Australia).

Fasken alerted me to, and have good review of Newfoundland and Labrador (Attorney General) v Uashaunnuat (Innu of Uashat and of Mani‑Utenam) 2020 SCC 4. The Canadian Supreme Court held that Quebec has jurisdiction over aboriginal rights claims in a neighburing province. This assertion of jurisdiction hinges on the qualification of rights under section 35 of the Constitution Act, 1982 (the section which deals with aboriginal and treaty rights) as rights sui generis. A qualification as rights in rem erga omnes, as the dissenting opinion suggested, would have kept the case outside of Quebec jurisdictional reach.

The case came a week after the decision of the High Court of Australia in Love v Commonwealth[2020] HCA 3 which as Michael Douglas analyses here, is a case about personal status and whether an aboriginal may be considered an ‘alien’ for immigration purposes. Judges split as to the required approach to the issue.

Indigenous rights and conflict of laws for sure will continue to exercise one or two minds (ia in view of the UNSDGs) and these two cases seem to anchor a number of issues. Not something a short blog post can do justice to.

Geert.

Committeri v Club Med. The Court of Appeal parades CJEU precedent to distinguish contract from torts.

[2018] EWCA Civ 1889 Committeri v Club Med , appeal against Dingeman J’s findings in [2016] EHWC 1510 (QB) featured in a recent resit exam of mine, slightly later reporting therefore. Dingeman J’s analysis was confirmed by the Court of Appeal.

Mr Committeri lived and worked in London. He was injured when climbing an ice wall in Chamonix in France in 2011. He brought proceedings in England against Club Med and their insurers: they had provided the relevant travel and accommodation pursuant to a ‘team-building’ contract with the appellant’s employers, a Bank. The claim is pleaded by reference to that contract and Article L211-16 of the French Code de Tourisme (which imposes strict (safety) liability upon the providers of tourist accomodation: une obligation de résultat); contrary to English law which foresees in une obligation de moyens).

French law has considered that “proper performance of the contract” in a package holiday setting requires the absolute safety of the consumer, so that (unless the exceptions in the Code apply) when there is an injury on a package holiday the organiser will be liable.

The central issue is the proper characterisation of that claim. If it is a contractual claim then English law applies (the lex contractus agreed between the Bank and Club Med) and it is common ground that it will fail. If it is properly characterised as a non-contractual claim, French law applies and it is agreed that it will succeed.

CJEU authorities considered by Coulson LJ were in particular Brogsitter, ErgoVerein Fur Konsumenteninformation v Amazonand flightright

At 52 Coulson LJ summarises the modus operandi per the European precedents as follows:

‘(a) The mere fact that a contracting party brings a civil liability claim against the other party does not by itself mean that the claim concerns “matters relating to a contract” but it will be sufficient if the conduct complained of may be considered a breach of contract (Brogsitter [24]) or if the purpose of the claim is to seek damages, the legal basis for which can reasonably be regarded as a breach of the rights and obligations set out in the contract (Brogsitter [26]).

(b) Only an obligation freely consented to by one person towards another and on which the claimant’s action is based is a ‘matter relating to contract’ (Ergo [44]).

(c) The classification of an obligation for the purposes of Rome I or Rome II depends on the (contractual or non-contractual) source of that obligation (Amazon, AG’s opinion [48]). A contractual obligation implies at the very least an actual and existing commitment (Amazon [50]).’

I would have added what I called Sharpston AG‘s ‘pedigree’ (one of my students seems to have mistakenly noted this down as ‘Paddy Pee’), ‘ancestry’, or ‘centre of gravity’ test in Ergo.

At 53: ‘On an application of all or any of those principles, it is clear that the pleaded strict liability claim can only be characterised as a contractual claim. …That contract is the source of the relevant obligations and imposed the necessary commitments. To put it another way, to use Judge Waksman’s words in AXA ([2015] EWHC 3431 (Comm), the contract was not “a stepping stone to the ultimate liability of [the respondent but] the basis for the obligation actually relied upon…”.

A very useful reminder of the relevant precedents.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.11.1.

On the qualification of limitation periods in Rome I and II. PJSC Tatneft v Bogolyubov.

Update 2 October 2018 the Court of Appeal on 26 September 2018 in [2018] EWHC 2499 (Comm) had to hold again on allowing a re-amended claim in the case.

In [2017] EWCA Civ 1581 Tatneft v Bogolyubov the Court of Appeal held that an English court can allow addition of a claim which is time barred by the governing law identified by Rome I or Rome II. At 72 Longmore J notes ‘Under Article 12.1(d) of Rome I and Article 15(h) of Rome II, the applicable foreign law governs limitation of actions.’ However neither Rome I nor Rome II apply to matters of procedure (Article 1(3) in both of the Rome Regulations).

The Court of Appeal clearly takes Article 1(3) at face value by allowing amendment of the claim even if it thence includes a claim time barred under the lex causae: not to do so would endanger the consistent application of English procedural law. Article 12 cq 15 do not sit easily with Article 1(3). That has been clear from the start and it is an issue which needs sorting out. In the absence of such clarification, it is no surprise that the English courts should hold as Longmore J does here.

Geert.

(Handbook of) EU Private international law, 2nd ed. 2016, Chapter 3, Chapter 4.

 

Christmas Crums part I – The ECJ holds on ‘contracts’ in Corman-Collins

One or two interesting developments have been held up in my end of year queue. I shall report on them over the next week and a half or so. First up: judgment of the ECJ in Corman-Collins Case 9/12 – I reported on the Opinion of the AG here. The Court, like the AG, holds in favour of ‘services’: such is the diverse nature of the various obligations in the contractual relationship.

Given its confirmation of the contract falling under Article 5(1)(b), first indent, of the Brussels I-Regulation, the Court did not answer the final, subsidiary, question, which questioned the amount of European harmonisation of ‘place of performance of the obligation in question’ under Article 5(1)(a). As I flagged earlier, the AG had suggested the ECJ confirm its deference to national law on this issue, per Tessili Dunlop.

Geert.

‘Sale of Goods’ or ‘delivery of services’? Jaaskinen AG in Corman-Collins

In Case C-9/12 Corman-Collins, the questions referred are as follows:

Should Article 2 of Regulation No 44/2001,where appropriate in conjunction with Article 5(1)(a) and (b), be interpreted as precluding a rule of jurisdiction, such as that set out in Article 4 of the Belgian Law of 27 July 1961, which provides for the jurisdiction of Belgian courts where the exclusive distributor has its registered office in Belgian territory and where the distribution agreement covers all or part of that territory, irrespective of where the grantor of the exclusive distribution rights has its registered office, where the latter is the defendant?
Should Article 5(1)(a) of Regulation No 44/2001 be interpreted as meaning that it applies to an exclusive distribution of goods agreement, pursuant to which one party purchases goods from another party for resale in the territory of another Member State?
If Question 2 is answered in the negative, should Article 5(1)(b) of Regulation No 44/2001 be interpreted as meaning that it refers to an exclusive distribution agreement, such as that at issue between the parties?
If Questions 2 and 3 are answered in the negative, is the contested obligation in the event of the termination of an exclusive distribution agreement the obligation of the seller-grantor or that of the buyer-distributor?

Corman-Collins is registered in Belgium; La Maison du Whisky in France.  Jaaskinen AG justifiably replies to the first question in succinct fashion: where defendant is domiciled in a Member State other than the Member State of the forum, the Brussels I Regulation has priority over national jurisdictional rules (such as here: the 1961 Act on ‘concession’ agreements).

The 2nd and 3rd question are rephrased by the AG however also re-ordered: Article 5(1) b) of the Regulation, being the more specific, has priority over Article 5(1) a). Jaaskinen then points to an important difficulty: ‘concession’ agreements are not a concept known in EU law (in contrast, for instance, with ‘agency’). In view of the need for autonomous interpretation by the ECJ, the qualification or not of a contract as a ‘sale of goods’ cq ‘provision of services’ (two distinct categories employed by the Regulation), must not be left to national law (and ditto courts) to decide. The AG opts for ‘services’: sale of ‘goods’ is not the core distinguishing element in a ‘concession’ agreement – it is more than that: the holder of the concession rights is explicitly allowed by the other party, to distribute their goods in a given territory, indeed often this right is an exclusive right; holder and grantor often agree common sales techniques (indeed in the case at issue, use by the holder of a domain name indicating the grantor’s trading name); the concession agreement usually is a framework agreement, followed by individual sales agreements. Moreover, the holder commits to holding stock; to having an after sales service; frees the grantor from the requirement to have to establish their own distribution network in the territory; the grantor organises specific training sessions for the holder’s staff, etc. The holder therefore effectively provides a ‘service’, and jurisdiction has to be determined by Article 5(1) b), second indent.

Proof of whether such elements are present in the contractual relationship between parties, needs to be furnished by the party invoking the jurisdictional rule based on ‘services’; qualifications in accordance with lex fori are not relevant for such determination (European Law in other words harmonises qualification).

The final question, which the AG only entertains in subsidiary fashion, concerns the issue of what part of the contractual relationship needs to be withheld as ‘the obligation in question’ of Article 5(1)(a): ‘in matters relating to a contract, in the courts for the place of performance of the obligation in question;’ The concession holder in the case at issue (Corman-Collins) argues that where the grantor’s obligation entails delivery of the exclusive right for the holder to exercise an exclusive right of sale in a given territory, the suit for damages needs to be introduced in that territory.

‘The obligation in question’ was left undefined in both the Brussels Convention and the preparatory works. Indeed the Jenard Report is very brief on the special jurisdictional clause for contracts. In De Bloos the Court specified ‘For the purpose of determining the place of performance within the meaning of Article 5 (…) the obligation to be taken into account is that which corresponds to the contractual right on which the plaintiff’s action is based’. Plantiff’s suit inevitably leans upon defendant’s contractual obligations: it is the latter which determines ‘the obligation in question’. Where that place of performance lies, however, remains subject to national law: the Court in Tessili v Dunlop held that it was in no position to impose a European definition. Jaaskinen AG does not venture to give one, either: outside of the specific categories of Article 5(1)(b), European conflicts law has no grip on the qualification of contracts and their ‘place of performance’ by national courts.

Geert.

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