Posts Tagged Reflexive application
End of exam season (sadly not yet of marking marathon). In the next few weeks I shall be posting on judgments issued a little or longer while ago, which I was pondering to use in exams. (I did for some of them).
In  EWHC 1216 (Pat) Chugai Pharmaceutical v UCB the issue at stake was to what degree a suit seeking to establish absence of liability under a patent license, in reality provokes argument on the validity of the patent. Carr J has excellent review of precedent, much of which has passed in one way or another on this blog. Please do refer to judgment for proper reading.
Claimant (“Chugai”) seeks a declaration against the Defendants (collectively “UCB”) that it is not obliged to continue to pay royalties under a patent licence (“the Licence”) granted by the First Defendant (“UCB Pharma”). UCB Pharma is a Belgian company with an English branch which entered into the Licence with Chugai in respect of a portfolio of patents. Chugai claims that its products, which are, in part, manufactured and sold in the USA, fall outside the scope of the claims of the Patent concerned. Accordingly, Chugai seeks a declaration that it owes no royalties for the manufacture and sale of these drugs manufactured after a certain date.
UCB alleges that, although framed as a claim for a declaration relating to a contract, a part of these proceedings, in substance, concerns not only the scope but also the validity of the Patent. UCB submits that the validity of a US patent is non-justiciable, since the English court has no power to determine the validity of a foreign patent. Accordingly, it submits that those parts of Chugai’s pleading which are said to raise issues of invalidity fall outside the subject matter jurisdiction of the English court.
European private international law as readers will know lays greats emphasis on exclusive jurisdiction in the case of validity of patents. The CJEU’s holding in C-4/03 Gat v Luk that nullity actions against a national part of a certain European patent can only be conducted in the jurisdiction for which that patent was registered, regardless of whether the nullity argument is raised in the suit or by way of defence, is now included verbatim in Article 24(4) Brussels I Recast. The EU’s take is rooted in the idea that the grant of a national patent is “an exercise of national sovereignty” (Jenard Report on the Brussels Convention (OJ 1979 C59, pp 1, 36)). The rule therefore engages the Act of State doctrine, and suggests that comity requires the courts of States other than the State of issue, to keep their hands off the case.
Particularly in cases where defendant is accused of having infringed a patent, this rule gives it a great possibility to stall proceedings. Where the action is ‘passive’, with plaintiff aiming to establish no infringement, the argument that the suit really involves validity of patent is less easily made.
The possibility of ‘torpedo’ abuse, coupled with less deference to the jurisdictional consequences of the Act of State doctrine [particularly its contested extension to intellectual property rights], means the English courts in particular are becoming less impressed with the exclusivity. (Albeit Carr J on balance decides per curiam (at 73-74) that direct challenges to the validity of foreign patents should not be justiciable in the English courts). Where the EU Regulation applies, they do not have much choice. Carr J refers to  EWHC 1722 (Pat) Anan where claimant sought to carve out issues of validity by seeking a declaration that the defendant’s acts infringed a German patent “if the German designation is invalid (which is to be determined by the German courts)“. EU law meant this attempt could not be honoured. Carr J however suggests that EU rules have no direct application in the present case because the Patent at stake is a United States patent. That is spot on, on the facts of the case: choice of court having been made in favour of the English courts, the case does not fall under the amended lis alibi pendens rule of the Brussels I Recast. In Article 33 juncto recital 24, reflexive effect is suggested for the Regulation’s exclusive jurisdictional rules, leaving a Member State court in a position (not: under an obligation) to give way to pending litigation in third countries, if its own jurisdiction is based on a non-exlusive jurisdictional rule (Articles 4, 7, 8 or 9) and not within the context of the protected categories.
Allow me to lean on 20 Essex Street’s conclusion in their review of the case: Carr J held that the case before him was not a direct challenge to validity. He accepted Chugai’s submissions that its claim was contractual. Disputed parts of the patent were incidental to the essential nature of its claim, which was a claim for determination of its royalty obligations. In his view, this claim fell within the exclusive jurisdiction clause, in favour of the English courts, which parties had agreed.
Essential reading for IP litigators.
Update 12 November 2015: the Belgian case has been held up due to the language regime in Belgium’s civil procedure rules.
I have reported previously on this action, when it was launched. The Court at The Hague held late June. For good (and impressive) measure, it immediately released an English translation of the judgment. Jolene Lin has excellent overview here, I will simply add the one or two things which I thought were particularly striking.
Firstly, this judgment was not written by a bunch of maverick ‘environmental’ judges. It is the commercial court at The Hague which issued it (see the reference to ‘team handel’, ‘handel’ meaning commerce, or trade).
The judgment hinges on the State’s duty of care which the court established. Urgenda, applicant, had suggested that regardless of the individual behaviour of Dutch citisens and corporations, the Government carries overall or ‘systemic’ responsibility (‘systeemverantwoordelijkheid’), as the representative of the sovereign Dutch nation, to ensure that it controls emissions emanating from The Netherlands. Article 21 of the Dutch Constitution and the international no harm (sic utere tuo) principle featured heavily in the court’s acceptance of the State duty of care. That the Dutch action might only be a drop in the ocean, did not impress the judge: plenty of pennies make a pound, and at any rate, The Netherlands, as a developed nation, were found to have increased responsibility.
At 4.42 and 4.43, the Court then applies what in EU law is known as the Marleasing principle.
‘From an international-law perspective, the State is bound to UN Climate Change Convention, the Kyoto Protocol (with the associated Doha Amendment as soon as it enters into force) and the “no harm” principle. However, this international-law binding force only involves obligations towards other states. When the State fails one of its obligations towards one or more other states, it does not imply that the State is acting unlawfully towards Urgenda. It is different when the written or unwritten rule of international law concerns a decree that “connects one and all”. After all, Article 93 of the Dutch Constitution determines that citizens can derive a right from it if its contents can connect one and all. The court – and the Parties – states first and foremost that the stipulations included in the convention, the protocol and the “no harm” principle do not have a binding force towards citizens (private individuals and legal persons). Urgenda therefore cannot directly rely on this principle, the convention and the protocol. (….)
This does not affect the fact that a state can be supposed to want to meet its international-law obligations. From this it follows that an international-law standard – a statutory provision or an unwritten legal standard – may not be explained or applied in a manner which would mean that the state in question has violated an international-law obligation, unless no other interpretation or application is possible. This is a generally acknowledged rule in the legal system. This means that when applying and interpreting national-law open standards and concepts, including social proprietary, reasonableness and propriety, the general interest or certain legal principles, the court takes account of such international-law obligations. This way, these obligations have a “reflex effect” in national law.‘
In this respect the court also referred extensively to the European Court of Human Rights’ case-law on the duty of a State to put into place a legislative and administrative framework to address the challenges posed by dangerous activities.
The Court also, with reference to international scientific consensus, concluded that climate mitigation, rather than adaptation, is the more effective, efficient and least expensive way to address climate change.
Eventually it settles for a finding of duty of care and ensuing responsibility to reduce the emission of greenhouse gases by at least 25% viz 1990 levels, by 2020. This 25% is the floor of what the international scientific community suggests is needed properly to address the dangers of climate change. (The court, in deference to trias politica, therefore did not want to go higher than that floor).
Next up (other than appeal, one might imagine): the Belgian courts, which have been seised of a similar action.
Declaration of interest: I advice the Belgian litigation pro bono.
There is an obvious downside to the European Court of Justice’s judicial economy. The Court often leaves unanswered many questions asked by national courts without an answer to them being strictly necessary for the case at hand. Evidently quite a few of those resurface in later practice. Owusu is a case in point. Many postings on this blog have entertained the unanswered questions left by the ECJ’s seminal rejection of Forum Non Conveniens. UK courts in particular have leapt on the opportunity to distinguish Owusu, effectively now leading to a fairly narrow context in which Owusu is applied. As recently as Jong v HSBC on which I reported last week, the High Court professed sympathy for vacating a case pending in the UK and having it joined to proceedings in Monaco, on ‘case management’ grounds.
In Plaza v The Law Debenture Trust, Proudman J dealt with a UK fallout of longstanding litigation inter alia in Australia, following the insolvency of the Australian Bell group in the 1990s. Curacao is COMI. Secondary or ancillary proceedings were opened in Australia. A variety of litigation mostly concerning priority of claims and timely (or not) execution of securities, led among others to a 2013 Deed of Settlement between parties to the current litigation. The Law Debenture trust (LDTC) is trustee for a number of bonds issued by Bell, some of which are held by Plaza (these bonds contain a non-exclusive choice of court in favour of England). Others are held inter alia by the Insurance Commission of Western Australia (ICWA).
The 2013 Deed contains an exclusive choice of court clause in favour of Western Australia. Plaza, incorporated in Curacao, sues LDTC, domiciled in the UK, in England, basically questioning its suitability as a trustee for the bonds, citing alleged conflicts of interest (LDTC may or may not be acting under instruction of ICWA).
Proudman J essentially had to decide whether Article 23 (now Article 25) of the Jurisdiction Regulation in its original version (the recast does not apply) ought to be applied reflexively (protecting choice of court in favour of non-EU courts); alternatively, whether Article 28 of the same Regulation (the lis alibi pendens rule) may be so applied; and what the impact of the ECJ’s rejection of forum non conveniens is on this all.
Ferrexpo in particular assisted her in holding that reflexive application of Article 23 (now 25) of the Brussels I Regulation is not barred by Owusu. The main argument for this approach lies in the judicial economy which I cite above: the ECJ was asked but did not entertain the question. Moreover Article 23 is a more dominant rule in the Regulation than Article 2 (now 4)’s rule referring to domicile of the defendant: a mandatory exception to the rule of Article 2 rather than, in the words of Proudman J, a discretionary exception such as forum non conveniens.
Subsidiarily, the High Court also suggests Article 28’s lis alibi pendens rule ought to apply reflexively, although it expressly suggests more discussion of that point is needed and the Article need not be laboured in the case at issue, given its finding on Article 23.
To heap further pressure on the Owusu pile, a further potential for undermining finding in Owusu is suggested in the shape of ‘case management powers’, also suggested in Jong and hinted at as potentially introducing forum non conveniens through the back door.
With Plaza v Debenture, application of Owusu by the English courts now is so distinguished, arguably little is left of the ECJ’s original intentions. One assumes: for as I noted above, judicial economy allowed national courts to be creative in their application of the rule. The issue is bound to end up again at the ECJ at some point.
In Bank St Petersburg, the High Court issued an anti-enforcement injunction on 14 May. The Bank had obtained a number of Russian judgments in their favour (in interlocutory proceedings), which they aimed to have enforced in France and Bulgaria. Following the Russian judgments however parties agreed to have their core dispute (the control over a Russian company against the background of a restructuring operation of the Arkhangelskys’ financial interest) judged exclusively by the English courts. The anti-enforcement injunction bans the Bank from having the judgments enforced in France, Bulgaria, or anywhere else.
Prima facie the injunction escapes all attention under the Brussels I Regulation: the judgments, enforcement of which is sought, originate from outside the EU. The choice of court clause is agreed between two parties domiciled outside of the EU, whence also falling outside the Regulation in its current version (this will change following the Brussels I-recast). (Notwithstanding Article 23(3)’s limited protection by instructing courts not named in the clause to desist – however Article 27’s lis alibi pendens rule would still protect the courts who despite this instruction hear the case anyway). Of particular note is also the subject-matter of the underlying dispute, which might be caught, if the Regulation were applied reflexively (such as the High Court did in Ferrexpo), by reflexive application in favour of the Russian courts of the exclusive Jurisdictional rule of Article 22(2).
These are altogether not very forceful points of entry for the Brussels I-Regulation to have a calling in the matter. Therefore this also rules out that the injunction might be caught by the ECJ’s general aversion vis–a-vis ‘anti-suit’ injunctions.
Where are all the dead pigeons? Proposed amendment to the Brussels I-Regulation prepares the ground for the Unified Patent Court
Pre-script posted 6 June: the amending Regulation was adopted in April (and published as Regulation 542/2014). The assets rule which it includes prima facie only applies for damage taking place outside the EU resulting from non-doms’ infringement. How and whether the assets rule applies vis-a-vis damage inside the EU caused by non-doms is still not clear. You may want to read the ‘comments’ section under this posting for clarification.
The proposal to amend Regulation 1215/2012 is due to be adopted by the European Parliament before its election recess. It forms part of the rather complex set of arrangements to introduce the Unified Patents Court – an oxymoron indeed. Leaving aside the complex set of arrangements at the substantive law level, I just wanted to highlight one or two interesting charachteristics at the pure conflicts /jurisdiction level.
The proposed amendment has a twofold objective. Firstly, to ensure compliance between the UPC Agreement and the recast Brussels I Regulation. So far so uncontested. These revisions concern in particular the clear inclusion of the UPC (as well as the Benelux Court) within the Regulation’s definition of a ‘court’; and the revision of the (rather complex) regime of Article 71 with respect to international agreements and their relationship with the Brussels I Regulation.
The second objective however is misleadingly represented as necessarily forming part of the UPC package: the issue of jurisdiction vis-a-vis defendants not domiciled in the EU (see inter alia here for earlier postings on non-EU domiciled defendants). The newly inserted Article 71b essentially and as a rule lets the ‘common courts’ (i.e. the UPC and the Benelux Court) usurp national jurisdiction (for those States that have subscribed to the common court – remember this is an instrument of enhanced co-operation):
1. The common court shall have jurisdiction where, under this Regulation, the courts of a Member State party to an agreement establishing a common court have jurisdiction in a matter governed by that agreement.
It then prima facie at least suggests that all jurisdictional rules of the Regulation apply regardless of third State domicile:
2. Where the defendant is not domiciled in a Member State, and this Regulation does not otherwise confer jurisdiction over him, the provisions of Chapter II shall apply as if the defendant was domiciled in a Member State. Article 35 shall apply even if the courts of non-Member States have jurisdiction as to the substance of the matter.
Chapter II includes all jurisdictional rules: including the basic rule of domicile of the defendant (the new Article 4, previously Article 2).
This prima facie conclusion is supported by the (proposed) newly inserted sentence in recital 14:
“Uniform jurisdiction rules should also apply regardless of the defendant’s domicile in cases where courts common to several Member States exercise jurisdiction in matters coming within the scope of application of this Regulation”
The newly proposed Article 71b (3) however then would seem to contradict this by stating
3. Where the defendant is not domiciled in a Member State and no court of a Member State has jurisdiction under this Regulation, the defendant may be sued in the common court if:
a) property belonging to the defendant is located in a Member State party to the agreement establishing the common court;
b) the value of the property is not insignificant compared to the value of the claim;
c) the dispute has a sufficient connection with any Member State party to the agreement establishing the common court.
Now I am getting very confused: if, per Article 71b (2), jurisdiction shall be determined ‘as if the defendant was domiciled in a Member State’, how then can there still be a calling for Article 71b (3)? Is it because the proposal aims to introduce a reflexive application (meaning one which also works where the exclusive jurisdictional ground points away from the EU) of Article 22(4) [Article 24(4) in the new Regulation] – i.e. the exclusive jurisdictional ground for registration or validity of intellectual property rights?
Interestingly, Article 71b(3) (proposed) reinstates, for the common courts and whence for patent disputes only, the ‘assets’ rule vis-a-vis third State defendants which the European Commission had failed to introduce as a general rule in the recast Regulation (these are the dead pigeons of the title of current posting).
It is also noteworthy that the proposal acknowledges that courts in third States may have jurisdiction, and that in that case EU (common) courts may still issue provisional measures.
No doubt there may be some kind of explanation for my confusion. I should be glad to hear it.
In Ferrexpo, the High Court applied a so-called ‘reflexive’ or ‘mirror’ application of the exclusive jurisdictional rules of Article 22 of the Brussels I Regulation. The case was held in April 2012 – it has only recently come to my attention.
Mr Babakov, a Russian, trading through a variety of companies with registered office in England (collectively known as ‘Gilson’), has a long-running litigation against Mr Zhevago, of Ukrainian nationality, equally trading through a variety of companies, with registered office in Switserland (collectively known as ‘Ferrexpo’). At the core of the dispute lies the control over a Ukrainian mining company named OJSC.
In 2005, Babakov files in the Ukraine, with a view to having a number of shareholder resolutions declared void. These were taken in 2002 and had decided that Gilson’s shares in OJSC were invalid and had to be transferred to Ferrexpo. In 2010 a Ukrainian court held that the shareholder resolutions were indeed invalid. Babakov subsequently initiated new proceedings in the Ukraine, with a view to having the Gilson shares in OJSC restored. On 23 November 2011 the Ukrainian court ordered for Ferrexpo to be joined to this proceeding.
Ferrexpo started a procedure against Gilson in England on 22 November 2011, with a view to declaring that the Ferrexpo shares in OJSC were valid. Gilson argued that the English court had no jurisdiction, for a reflexive application of Articles 22(2) and 28 (part of the lis alibi pendens rule) of the Brussels I Regulation required it to desist. Article 22(2) reads
‘The following courts shall have exclusive jurisdiction, regardless of domicile: (…)
2. in proceedings which have as their object the validity of the constitution, the nullity or the dissolution of companies or other legal persons or associations of natural or legal persons, or of the validity of the decisions of their organs, the courts of the Member State in which the company, legal person or association has its seat. In order to determine that seat, the court shall apply its rules of private international law;’
Ferrexpo argued that 1) the English Courts had jurisdiction on the basis of Article 2 of the Brussels I Regulation, and Gilson’s domicile in the UK; 2) it would not receive a fair trial in the Ukraine, the issue would be resolved fast in an English court, and the English courts enjoy “trust and confidence“.
In Owusu, the Court of Justice famously held that where the (in that case also English) national court had jurisdiction by reason of Article 2 of the Jurisdiction Regulation, it could not decline such jurisdiction on the basis that a Court of another state was a more appropriate forum: forum non conveniens has no place in the Brussels regime. However what Owusu did not resolve, was whether this also applies where the European court wishing to decline jurisdiction, does so because the issue at stake is one of the interests listed in Article 22 of the Regulation (exclusive jurisdictional rules), which just so happens to be located outside of the EU (in the case at issue: shareholder resolutions of a Ukrainian company are the core of the dispute).
The High Court held that Article 22 should so apply: jurisdiction was denied. The decision is problematic, for preparatory works of the Brussels I Regulation indicate quite clearly that the interests that are being protected, are only those located inside the EU (or Lugano States if the application of the Lugano Convention is at stake). The Court could not have been clearer as to the application of Article 2 in Owuso. Granted and as noted, Owusu did not entertain the reflexive application of Article 22, however direction in Owuso is clear. Reference to the ECJ in Ferrexpo would have been merited – although the English courts are reluctant to do so, having burnt their fingers so badly in Owusu.