Posts Tagged Regulation 1215/2012

National Bank of Kazakhstan v Bank of New York Mellon. Branches’ activities, Article 7(5) Brussels I Recast and engagement of Article 30.

In [2017] EWHC 3512 (Comm)  National Bank of Kazakhstan v Bank of New York Mellon, Article 7(5) makes a rarish appearance, as does (less rarely) Article 30. Popplewell J summarises the main facts as follows.

‘The Second Claimant is the Republic of Kazakhstan (“ROK”). The First Claimant is the National Bank of Kazakhstan (“NBK”). The Defendant is a bank incorporated in Belgium with a branch in, amongst other places, London. Through its London branch it provides banking and custody services to NBK in respect of the National Fund of Kazakhstan (“the National Fund”), pursuant to a Global Custody Agreement dated 24th December 2001, (“the GCA”). The National Fund has been the target of proceedings brought by Mr. Anatolie Stati and others, (“the Stati Parties”), who are seeking to enforce a Swedish arbitration award against ROK for a sum, including interest and costs, in excess of US$ 500 million. The Stati Parties obtained attachment orders from the Dutch court and the Belgian court, which were served on the Defendant (“BNYM”). BNYM, after taking legal advice, decided to freeze all the assets comprising the National Fund, which it holds under the GCA, on the basis that it was bound to comply with the Belgian and Dutch orders, breach of which would expose it to the risk of civil liability for the amount of the Stati Parties’ claims and criminal liability in Belgium and the Netherlands.’

Effectively therefore the London Branch of a Belgian domiciled bank, has frozen claimant’s assets which it holds in London (although the exact situs is disputed), on the basis that it wishes to prevent exposure to BE and NL criminal proceedings.

Parties arguments on jurisdiction are included at 41 and 42 of the judgment. Core to the Brussels I Recast jurisdictional discussions is Article 7(5) which provides

“A person domiciled in a Member State may be sued in another Member State: […]

(5) as regards a dispute arising out of the operations of a branch, agency or other establishment, in the courts for the place where the branch, agency or other establishment is situated;’

Beyond Case 33/78 Somafer, to which the High Court refers, there is little CJEU precedent – C‑27/17 flyLAL is currently underway. Popplewell J at 53 refers to Lord Phillips’ paraphrasing of Somafer in [2003] EWCA Civ 147  as a requirement of ‘sufficient nexus’ between the dispute and the branch as to render it natural to describe the dispute as one which has arisen out of the activities of the branch.

At 54 he holds there is such nexus in the case at issue, particularly given the management of the frozen assets by the London branch, and the very action by that branch to freeze them. This is quite a wide interpretation of Article 7(5) and not one which I believe is necessarily supported by the exceptional nature of Article 7.

As to whether the English and Belgian proceedings are ‘related’, providing an opportunity for the English proceedings to be halted under Article 30 of the Recast (lis alibi pendens), the High Court refers at 57 ff to C-406/95 The Tatry to hold that there is no risk of conflicting decisions in this case: the argument specifically being that even if the issues addressed are the same, they are addressed in the respective (English, Dutch, Belgian) proceedings under different applicable laws (in each case the lex fori on sovereign immunity). I do not find that very convincing. The risk of irreconcilable outcome is the issue; not irreconcilability or not of reasoning. In the same para 60 in fine in fact Popplewell J advances what I think is a stronger argument: that the issue whether the National Fund was used or intended to be used for commercial purposes, requires to be determined or addressed in the English proceedings, with the result that there is no risk of conflict.

Article 30 not being engaged for that reason, obiter then follows an interesting discussion on whether there can be lis alibi pendens if the court originally seized had no jurisdiction under the Regulation: here: because the Belgian and Dutch proceedings are arbitration proceedings.

Does Article 30 apply to Regulation claims where there was a related action in a Member State in which the related action did not itself come within the Regulation? Referring to the new Article 34 lis alibi pendens rule for proceedings pending ex-EU, ex absurdum, would there not be an odd lacuna if Article 34 required a stay where there were related non-Regulation foreign proceedings in a third party State and the position were not to be the same for equivalent foreign proceedings in a Member State? I do not believe there would be such lacuna: the Article 34 rule applies to concurrent proceedings which are in fact in-Regulation, except international comity requires the EU to cede to foreign proceedings with a strong (typically exclusive) jurisdictional call. For intra-EU proceedings, the comity argument holds no sway – mutual trust does.

Like Poplewell J however I reserve final judgment on that issue for another occasion.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.11, Heading 2.2.14.

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Kaifer Aislimientos: the limits of Brussels I’s rules on choice of court.

[2017] EWHC 2598 (Comm) Kaifer Aislimientos, is a good illustration of the limits of Article 25 juncto recital 20’s lex fori prorogati rule.

Claimant argues that the Court has jurisdiction pursuant to Article 25 Brussels I Recast because the relevant contract contains an English exclusive jurisdiction clause and further contends that the relevant contract was concluded by AMS Mexico and/or AMS on behalf of AT1 and Ezion as undisclosed principals and that, as undisclosed principals, the contract – together with the jurisdiction agreement – was binding on AT1 and Ezion.

That is the only part of the judgment to feature the Brussels Regulation at all. Peter MacDonald Eggers DJ could have referred to CJEU precedent pro inspiratio, including Refcomp for instance. He could certainly also have referred to recital 20, and equally failed to do so.

In substance he applies the Brussels I Recast rule by applying lex fori prorogati (here: English law) to all but the formation of consent questions relevant to the validity of choice of court (here: under what circumstance undisclosed principals are subject to choice of court).

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.9.4.

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Belo Horizonte: Court at Rotterdam (using English as language of the oral procedure): Access to seized documents is no provisional measure under Brussels I Recast.

Arnold van Steenderen and Milan Simić have complete and concise review here of judgment of the Rotterdam court of December 2017 in re the Belo Horizonte (officially Cefetra et al v Ms ‘IDA’ Oetker Schiffahrtsgesellschaft MbH & Co KG et al). The case is a follow-up to 2015 proceedings. In these the Rotterdam court had first sanctioned seizure, and then rejected further action for claimant had not formally requested access to the documents.

Arnold and Milan summarise the facts very very helpfully – I am much obliged for the judgment is in Dutch (although as the judgment shows, the proceedings were actually conducted in English: a nice example of the use of regulatory competition in civil procedure) and their efforts have saved me a lot of translation time:

The decisions of the Rotterdam Court are a result of the carriage under bill of lading
of soya beans on behalf of Cefetra B.V. (Netherlands based) on board of the “Belo
Horizonte” from Argentina to the United Kingdom. Cefetra supplies raw materials to
the feed, food, and fuel industries. Cefetra Ltd. (UK based) was the holder of the
b/l’s and English law applied to the b/l’s. The vessel is owned by MS ‘IDA’ Oetker
and is time chartered by Rudolf A Oetker (both German based, together addressed
as Oetker). MS ‘IDA’ Oetker is the carrier under the b/l’s. London arbitration is
agreed upon for any dispute rising from the contract of carriage and the b/l’s.

Following engine failure, ‘(d)uring the voyage, experts commissioned by both Cefetra and Oetker visited the “Belo Horizonte” to preliminary assess the condition of the vessel and its engines. Further investigation was conducted upon arrival in England. Oetker, however, only granted permission for inspection of the engine room and refused to disclose the documents on board. Crew interviews were not allowed as well. Subsequently, Cefetra obtained leave to attachment for the purpose of preserving evidence in the Netherlands on 27 October 2015. The leave was effected by the bailiff on 28 October 2015 on board of the “Belo Horizonte”. Several documents were seized and handed over to a sequestrator. Cefetra initiated proceedings’ to gain access to the seized documents.

The dispute in the main is arbitrable in London.

Oetker disputes jurisdiction of the court at Rotterdam on the basis of defendants’ domicile in Germany. Cefetra argue in favour of jurisdiction on the basis of Article 7(1), alternatively 7(2) or indeed Article 35 Brussels I Recast:

  • 7(1) forum contractus: for, it is argued, the main agreement between the two parties implies an obligation to provide any relevant evidence; the place of performance for that ‘obligation in question’ lies in The Netherlands since that is where the sequestrator holds them.
  • 7(2) forum delicti: Oetker’s obstruction of truth finding is a tort which is located (locus delicti commissi) at Rotterdam since that is where Oetker opposes disclosure.
  • 35 provisional, including protective measures.

The Court does not at all entertain Cefetra’s arguments on the basis of 7(1) or 7(2). Wrongly so: plenty of not at all obvious contracts or torts could qualify as same under these provisions, to not address them at all does not make them simply go away.

The court first of all (5.7 in fine) rejects relevance of the arbitration exclusion on the basis of C-391/95 Van Uden Deco-Line. It then sticks to a very restrictive approach to Article 35, with the classic provisionary (not covered by Article 35) v provisional (covered) nature of measures, as also discussed in C-104/03 St. Paul Dairy/Unibel (to which the Court refers). In the words of the court: seizure of evidence is provisional; actual access, copy or extract is not (5.8): the court suggests this is not provisional since it allows the party to gauge the evidentiary position of the party and hence is irreversible.

I disagree -and I have at least a shelf in my library to support the discussion.

Ireversibility in fact (once the evidence seen, the party can never wipe it from its memory, so to speak) does not equate ireversibility in law. The court takes a very limited view of Article 35 and I do not believe it is the right one.

There are not that many national judgments covering Article 35 quite so expressly. This is one to treasure.

Geert.

(Handbook of) EU Private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.15.

 

 

 

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Schrems v Facebook. Consumer class actions and social media.

I reported on Bobek AG’s Opinion in Schrems v Facebook when it came out last year. The CJEU held this morning (judgment so far in FR and DE only) and largely confirms the AG’s Opinion.

As I noted at the time, the long and the short of the case is whether the concept of ‘consumer’ under the protected categories of Brussels I (and Recast) is a dynamic or a static one; and what kind of impact assignment has on jurisdiction for protected categories.

On the first issue, Mr Schrems points to his history as a user, first having set up a personal account, subsequently, as he became the poster child for opposition to social media’s alleged infringement of privacy, a Facebook page. Each of those, he suggests, are the object of a separate contract with Facebook. FB suggests they are part of one and the same, initial contractual relationship. This one assumes, would assist FB with its line of argument that Herr Schrems’ initial use may have been covered by the forum consumentis, but that his subsequent professional use gazumps that initial qualification.

The Court suffices at 36 with the simple observation that the qualification as a single or dual contract is up to the national court (see inter alia the Gabriel, Engler and Ilsinger conundrum: Handbook, Chapter 2, Heading 2.2.11.1.a and generally the difficulties for the CJEU to force a harmonised notion of ‘contract’ upon the Member States), yet that nevertheless any such qualification needs to take into account the principles of interpretation of Brussels I’s protected categories: in particular, their restrictive interpretation. Whence it follows, the Court holds, that the interpretation needs to be dynamic, taking into account the subsequent (professional or not) use of the service: at 37-38: ‘il y a notamment lieu de tenir compte, s’agissant de services d’un réseau social numérique ayant vocation à être utilisés pendant une longue durée, de l’évolution ultérieure de l’usage qui est fait de ces services. Cette interprétation implique, notamment, qu’un requérant utilisateur de tels services pourrait invoquer la qualité de consommateur seulement si l’usage essentiellement non professionnel de ces services, pour lequel il a initialement conclu un contrat, n’a pas acquis, par la suite, un caractère essentiellement professionnel.’

The Court does add at 39-40 that acquired or existing knowledge of the sector or indeed the mere involvement in collective representation of the interests of the service’s users, has no impact on the qualification as a ‘consumer’: only professional use of the service does. (The Court in this respect refers to Article 169(1) TFEU’s objective to assist consumers with the representation of their collective interest).

On this point therefore the Court unlike the AG attaches more weight to restrictive interpretation than to predictability. (Bobek AG’s approach to the issue of dynamic /static was expressed more cautiously).

As for the assignment issue, the Court sides squarely with its AG: the assigned claims cannot be pursued in the jurisdiction which is the domicile of the assignee. That in my view de lega lata makes perfect sense.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.8.2.

 

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Wathelet AG in Dědouch: Interpretation of the exlusive jurisdictional rule for corporate issues in the case of squeeze-out.

This is effectively my second posting today on Article 24(2) Brussels I Recast.

In C-560/16 Dědouch, Wathelet AG Opined last week, on the scope of the exclusive jurisdictional rule of (now) Article 24(2) of Regulation 1215/2012. The issue arose in proceedings between Michael Dědouch et al, a group of minority shareholders on the one hand, and Jihočeská plynárenská a.s. (established in the Czech Republic) and E.ON Czech Holding AG (‘E.ON’) [established in Germany] on  the other, concerning the reasonableness of the sum which, in a procedure for removing minority shareholders (‘squeeze-out’), E.ON was required to pay Mr Dědouch et al following the compulsory transfer of their shares in Jihočeská plynárenská.

Mr Dědouch et al are suing both companies and are asking the Regional Court, České Budějovice, Czech Republic to review the reasonableness of the sum. In those proceedings E.ON raised an objection that the Czech courts lacked jurisdiction. E.ON argue that, in view of the location of its seat /domicile, only the German courts had international jurisdiction per (now) Article 4.

The regional court initially accepted jurisdiction on the basis of (now) Article 8(1): the anchor defendant mechanism (one of the two defendant companies being a Czech company). Eventually the High Court, Prague found that the Czech courts had jurisdiction under (old) Article 5(1)(a) of the Brussels I Regulation: the special jurisdictional rules for contracts.

Wathelet AG suggests the case raises the complex issue of litigation in intra-company disputes. At 21 he writes that the facts highlight a structural problem in the Regulation, namely ‘the absence of a basis of jurisdiction dedicated to the resolution of internal disputes within companies, such as disputes between shareholders or between shareholders and directors or between the company and its directors.’ That is not quite correct: it is not because the Regulation has no tailor-made regime for this type of dispute that is has no jurisdictional basis for it. That a subject-matter is not verbatim included in the Regulation does not mean it is not regulated by it.

The AG then (at 23) considers that the issue under consideration is complicated by the difficulty of applying (now) Articles 7(1) and (2), ‘since the removal of the minority shareholders and the consideration decided by a resolution of the general meeting are neither a contract nor a tort, delict or quasi-delict.’ I am not so sure. Is there no ‘obligation freely assumed’ between minority and other shareholders of the same company? Are they not bound by some kind of ‘contract’ (in the broad, Jakob Handte sense) when becoming shareholders of one and the same company? That (at 24) ‘The principle of a procedure for squeezing out the minority shareholders is that the principal shareholder can start it without their consent‘ I do not find convincing in this respect. Plenty of contractual arrangements do not limit contracting parties’ freedom to act: except, their actions may have contractual consequences. The AG in my view focuses too much on the squeeze out being one-sided. An alternative view may see a wrongful deployment of squeeze-out a breach of an earlier contractual, indeed fiduciary duty between /among shareholders.

Unlike the AG (at 26), neither do I see great obstacle in the difficulty in determination of a specific place of performance of such contractual duties between shareholders in the company law context. They may not fit within the default categories of Article 7(1), however I can see many a national judge not finding it impossible to determine a place of performance.

On the basis of these perceived difficulties the AG dismisses application of Articles 7(1) and (2) and then considers, and rejects, a strict application of Article 24(2). In other words in the AG’s view Article 24(2) is engaged here.

This is a tricky call. Justified reference is made by the AG to C‑372/07 Hassett, in which (then) Article 22(2) was held no to apply to a decision made by the Board of the Health Organisation not to indemnify two of their members in cases of medical negligence: this was found by the CJEU to be an action relating to the way in which a company organ exercises its functions – not covered by Article 24(2). In Dědouch, the action relates to the amount which the General Meeting of the company fixed as the compensation E.ON was required to pay the minority shareholders following the transfer of the shares. Notwithstanding Czech company law being the lex causae in assisting the GM in that decision, I am not convinced this engages Article 24(2) (hence reserving jurisdiction to the Czech courts).

In summary, I believe the Court should reject application of Article 24(2), and instruct the national courts to get on with the determination of jurisdiction per Article 7, or indeed 8.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.6.5, Heading 2.2.11.1, Heading 2.2.12.1.

 

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Qualifying ‘consumers’ on social media and in the case of assignment. Bobek AG in Schrems v Facebook.

Bobek AG must have picked up his knack for colourful language at Teddy Hall. His Opinion last week in C-498/16 Schrems v Facebook is a delight and one does best service to it by simply inviting one reads it. Now, that must not absolve me of my duty to report succinctly on its contents – the Court itself I imagine will be equally short shrift with claimant’s arugments.

When I asked my students in the August exam to comment on the case, I simply gave them the preliminary questions and asked them how the CJEU should answer them:

1 Is Article 15 of Regulation 44/2001 to be interpreted as meaning that a ‘consumer’ within the meaning of that provision loses that status, if, after the comparatively long use of a private Facebook account, he publishes books in connection with the enforcement of his claims, on occasion also delivers lectures for remuneration, operates websites, collects donations for the enforcement of his claims and has assigned to him the claims of numerous consumers on the assurance that he will remit to them any proceeds awarded, after the deduction of legal costs?

2. Is Article 16 of Regulation (EC) No 44/2001 to be interpreted as meaning that a consumer in a Member State can also invoke at the same time as his own claims arising from a consumer supply at the claimant’s place of jurisdiction the claims of others consumers on the same subject who are domiciled

a. In the same Member State, b. In another Member State: or c. In a non-Member State,

if the claims assigned to him arise from consumer supplies involving the same defendant in the same legal context and if the assignment is not part of a professional or trade activity of the applicant, but rather serves to ensure the joint enforcement of claims?

 

The long and the short of the case is whether the concept of ‘consumer’ under the protected categories of Brussels I (and Recast) is a dynamic or a static one; and what kind of impact assignment has on jurisdiction for protected categories.

On the first issue, I expected my students to point to the CJEU’s precedent of applying the Regulation with a view to predictability and legal certainty; specifically for consumers, to Gruber and the burden of proof in cases of dual use; and to the Court’s judgment in Emrek. Other than the last issue, the AG points to all. Predictability points to a static approach: I would suggest the AG is right. Bobek AG does leave the door ajar for a dynamic interpretation: at 39: in exptional cases, a ‘dynamic’ approach to consumer status should not be entirely excluded. This could be potentially relevant in the event that a contract does not specify its aim, or it is open to different uses, and it lasts a long period of time, or is even indeterminate. It is conceivable that in such cases, the purpose for which a certain contractual service is used might change — not just partially, but even completely. Social media contracts may lead to such circumstances, one imagines, however there would be many ifs and buts to such analysis: including, I would suggest, the terms of the contract wich the service provider initially drew up.

On the issue of assignment the AG’s approach is entirely logical and not surprising: evidently Herr Schrems cannot have claims assigned to him and then exercise those claims using any other jurisdictional prerogatives then present in the original claim. While these may allow him to sue in the forum actoris of the original consumer, there is no valid argument whatsoever to suggest he could join them to his own domicile. The arguments made de lege ferenda (need for forum shopping in collective consumer redress) are justifiably rejected.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.8.2.

 

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Koza v Akcil: The Court of Appeal on exclusive jurisdiction for company matters.

Thank you Angharad Parry for flagging  [2017] EWCA Civ 1609 Koza v Akcil – Angharad has excellent factual background. The case concerns the application of Article 24(2) of the Brussels I Recast Regulation, which assigns exclusive jurisdiction to the Courts of the Member State of the seat in matters relating to the life and death of companies and of the validity of decisions made by their organs:

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;

Referring particularly to C-144/10 BVG and to C-372/07 Hassett, the Court of Appeal at 28 correctly suggests Article 24’s exclusive jurisdictional rules need to be interpreted with their limited purpose in mind: ‘when article 24(2) speaks of proceedings having an “object” it is not referring to the purpose of the proceedings. Rather that phrase is to be interpreted as “proceedings which are principally concerned with” one of the types of subject matter within the article.’ At 37: ‘The task for the court in each case is therefore to determine whether the proceedings relate principally to the validity of the decisions of an organ of the company. A mere link to a decision of the company, or an issue raised which is ancillary to the heart of a contractual or some other dispute, is insufficient to bring the proceedings within the exclusive jurisdiction.’

Floyd LJ at 46 summarises the direction for courts: ‘I do not take from the English or European authorities which were cited to us any suggestion that one is required in all cases to disentangle issues which are interlinked in this way and apply Article 24(2) to each issue separately. On the contrary, faced with such proceedings, the court is required to form an overall evaluative judgment as to what the proceedings are principally concerned with. The position is obviously different from a case where two quite independent claims are made in the same proceedings. Exclusive jurisdiction in relation to each claim would, in those circumstances, have to be determined separately.’ In the case at hand the case was found overall and fundamentally to concern one and the same issue of the validity of decisions of the organs of the company

Consequently the issue is one of looking beyond the particulars of form and into the true nature of the proceedings. Not a decision always made with ease.

Geert.

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

 

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