Posts Tagged Regulation 1215/2015

Consenting to choice of court under the common law. The Privy Council in Vizcaya v Picard.

In Vizcaya v Picard, the Privy Council considered the issue of consent to a choice of court clause in the event no such choice has been made verbatim. It was alleged that choice of court had been made implicitly but clearly by reference to an applicable law agreement in the underlying contract. RPC have a review of the case on their blog and I am grateful to them for bringing it to my attention.

The case is a fall-out of the Bernard Madoff Ponzi scheme, carried out through Mr Madoff’s company Bernard L Madoff Investment Securities LLC (“BLMIS”), a New York corporation. After Madoff’s fraud came to light in 2008, Irving Picard (“the trustee”) was appointed as trustee in BLMIS’s liquidation in the US Bankruptcy Court for the Southern District of New York (“the New York BankruptcyCourt”). The trustee commenced proceedings under the anti-avoidance provisions of the US Bankruptcy Code against investors who had been repaid before the fraud was discovered, including the appellant, Vizcaya Partners Limited (“Vizcaya”), a BVI (British Virgin Islands) company which carried on business as an investment fund, and which invested about US$328m with BLMIS between January 2002 and December 2008, but was repaid US$180m before the fraud was discovered.

The Appeal before the Privy Council concerns primarily the content and scope of the rule in common law that a foreign default judgment is enforceable against a judgment debtor who has made a prior submission to the jurisdiction of the foreign court (as distinct from a submission by appearance in the proceedings).  Brussels I or the Recast was not applicable to the case. In that Regulation (Article 25), the expression of consent with choice of court must take one of thee forms: essentially: written (or oral but confirmed by written agreement); in accordance with lex mercatoria; or in accordance with established business practice simply between the parties.

The question in the case at issue is whether the agreement to submit must be express, or can also be implied or inferred. The Privy Council settled the uncertainty which would seem to have existed for some time in the common law, in favour of an answer in the affirmative. Consent to jurisdiction can be implied. What needs to be shown though is real ‘agreement’, or ‘consent’ (in European private international law with respect to the similar discussion re choice of law (Rome I) I would say the test is one of ‘clearly established’), quod non in casu. Choice of law (here: in favour of New York law) can be a factor but not a solely determinant one. Moreover, choice of court viz one’s business transactions does not imply automatic extension to insolvency proceedings.

Crucial precedent, it would seem. Geert.

European private international law, second ed. 2016, Chapter 2, Heading 2.2.9

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Proposed EU e-commerce rules further reduce choice for consumer contracts.

I have referred repeatedly in the past to an inevitable attraction which some find in harmonising private, incuding contract law, in the Member States. The Common European Sales Law (CESL) proposal is dead, and for good reason. Its demise however has not led to the European Commission leaving the path of harmonisation in contract law. The EC has now selected bits and pieces of the CESL approach which it reckons might pass Member States objections. The proposed ‘fully harmonised’ rules on e-commerce formally do not close the door on party autonomy in the contracts under their scope of application. Yet in forcing regulatory convergence top-down, the aim is to make choice of law for these contracts effectively nugatory.

The EC itself formulates it as follows (COM(2015)634, p.1:

“This initiative is composed of (i) a proposal on certain aspects concerning contracts for the supply of digital content (COM(2015)634 final), and (ii) a proposal on certain aspects concerning contracts for the online and other distance sales of goods (COM(2015)635 final). These two proposals draw on the experience acquired during the negotiations for a Regulation on a Common European Sales Law. In particular, they no longer follow the approach of an optional regime and a comprehensive set of rules. Instead, the proposals contain a targeted and focused set of fully harmonised rules.”

Consequently the same proposal reads in recital 49 ‘Nothing in this Directive should prejudice the application of the rules of private international law, in particular Regulation (EC) No 593/2008 of the European Parliament and of the Council and Regulation (EC) No 1215/2012 of the European Parliament and the Council‘: that is, respectively, Rome I and Brussels I Recast’.

Consequently and gradually, choice of law for digital B2C contracts becomes redundant, for the content of national law converges. Support for this in my view is not rooted in fact (the EC’s data on the need for regulation have not fundamentally changed since its doomed CESL proposal), neither is it a good development even for the consumer. National consumer law is able to adapt, often precisely to the benefit of the consumer, through national Statute and case-law. Turning the EU regulatory tanker is much more cumbersome. The circular economy, recently often debated, is a case in point. Many national authorities point to limitations in contract law (incuding warranty periods and design requirements) as an obstacle to forcing manufacturers, including for consumer goods, to adopt more sustainable manufacturing and distribution models. The EC’s current proposals do no meet those challenges, rather, they obstruct them.

Geert.

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