Posts Tagged Regulatory competition
‘Like Dassonville on steroids’. Bobek AG in Rheinland on personality v territoriality, the nature of EU harmonisation, and its links with (as well as historic roots of) conflict of laws and regulatory competition.
In advising on a territorial restriction in an insurance clause earlier this month, I studied the CJEU judgment in C-581/18 Rheinland, important for the (limitations to the) reach of Article 18 TFEU, the general non-discrimination requirement on the basis of nationality. Bobek AG had earlier opined, and the Court followed, that in the absence of harmonisation and in a scenario with no EU links, Article 18 TFEU is not engaged. I had missed the AG’s earlier opinion – forgive me if I am late to this party.
It is important to sketch the context: Bobek AG had summarised the facts as
A German patient received, in Germany, defective breast implants manufactured by Poly Implant Prothèse SA (‘PIP’), a French undertaking that is now insolvent. The patient seeks compensation before the German courts from Allianz IARD SA, the French insurer of PIP. In France, manufacturers of medical devices are under a statutory obligation to be insured against civil liability for harm suffered by third parties arising from their activities. That obligation led PIP to conclude an insurance contract with Allianz, which contained a territorial clause limiting the cover to damage caused on French territory only. Thus, PIP medical devices that were exported to another Member State and used there were not covered by the insurance contract.
In this context, the Oberlandesgericht Frankfurt am Main (Higher Regional Court, Frankfurt am Main, Germany) enquires whether the fact that PIP was insured by Allianz for damage caused by its medical devices on French territory only, to the exclusion of that potentially caused in other Member States, is compatible with Article 18 TFEU and the principle of non-discrimination on grounds of nationality contained therein.
This post is not on Article 18 TFEU. Rather, consider the excellent (and eloquent) discussion by Bobek AG at 109 ff. Does the imperative of equal protection of all European citizen-consumers, in the absence of EU harmonising law on the issue, preclude a national rule that, in effect, limits insurance cover to persons who undergo surgery on the territory of the Member State, thus indirectly limiting the cover to citizens of that Member State? Bobek AG emphatically and despite moral sympathy for the victims, says no. The alternative would be ‘like Dassonville on steroids’ (at 111), it would ‘turn regulatory competence within the internal market on its head’ (at 109).
Consider his link with conflict of laws at 114-115:
In other words, the fact that goods once came from another Member State is not a sufficient reason to suggest that any matter later concerning those goods is covered by EU law. If that logic were to be embraced, by a questionable interpretation of Article 18 TFEU, the movement of goods in Europe would become (once again) reminiscent of medieval legal particularism, [at footnote 78 he refers to the excellent work by my legal history colleague Randall Lesaffer] whereby each product would, like a person, carry its own laws with it. Goods would be like snails, carrying their homes with them in the form of the legislation of their country of origin, to be applicable to them from their production to their destruction.
Such a consequence would not only displace any (normal) territoriality in the application of laws, but would also generate conflicts of regulatory regimes between the Member States. Indeed, such an expansionist interpretation of Article 18 TFEU could make the legislation of any of the Member States potentially applicable on the same territory without any clear and objective criteria as to which legislation should prevail in a given dispute, with the victim being able to choose the most favourable legislation.’
Most delightful analysis.
Update 27 May 2020 for the French view on the nature of Bitcoin, see the decision of the courts at Nanterre of February 2020.
Update 21 January 2020 for the cryptoassets issue, see AA v Persons Unknown & Ors, Re Bitcoin  EWHC 3556.
Happy 2020 reading, all!
At the back of my mind I have a number of interesting examples of the English Courts and English law’s awareness of the relevance of courts and substantive law in regulatory competition. I post them here together by way of illustration.
Sir Vos’ speech on how English law on cryptoassets should develop so as to boost the
confidence of would-be parties to ‘smart’ legal contracts; a further analysis of same by the ‘UK jurisdiction taskforce’, and Outer Temple’s reaction to ditto.
Also however RPC’s review of Davey v Money  EWHC 997 (Ch), in which Snowden J declined to cap a litigation funder’s liability for adverse costs at the amount of funding provided: essentially adding a potential risk to be considered by third-party litigation funders and illustrating that attractive as England may be as a forum for litigation, the sector is not a free for all.
Finally, the English courts are not of course alone in the realisation of the issues: witness this 2017 report by the French Supreme Court: ‘”Le juge et la mondialisation”.
Canadian recognition of Syncreon Group English Scheme of Arrangement underscores new markets for restructuring tourism.
An essentially Dutch group employs English restructuring law and has the resulting restructuring recognised in Canada. Need one say more to show that regulatory competition is alive and well and that the UK, England in particular need not fear a halt to restructuring forum shopping post Brexit.
Blakes first alerted me to the case, the Initial recognition order 2019 ONSC 5774 is here (I have not yet managed to locate the final order). Insolvency trustee PWC have a most informative document portal here. See also the Jones Day summary of the arrangements here. The main issue of contention was the so-called third party release in favour of Syncreon Canada which could have bumped into ordre public hurdles in Ontario as these clearly have an impact on the security of underlying debt. The way in which the proceeding are conducted (fair, transparent, with due consideration of minority holders etc.) clearly have an impact on this exercise.
(Handbook of) EU Private International Law, 2nd edition 2016, Chapter 2, Chapter 5.
Arcelor Mittal v Essar. The High Court races ahead in its support for arbitration. On comity, fraud, and worldwide freezing orders.
 EWHC 724 (Comm) ArcelorMittal USA LLC v Essar Steel Limited and others is quite the highlight in worldwide regulatory competition for championing arbitration.
As 20 Essex Street note, Jacobs J refused to vary an earlier worldwide freezing order (WFO), despite the award being foreign, Claimant and Defendant companies being foreign, there being no significant assets within the jurisdiction, and the courts at Mauritius (defendant is Mauritius-incorporated, defendant to the Arbitration Claim, and the debtor under the ICC award) potentially feeling gazumped by their English colleagues.
Of note over and above Essex Street’s analysis is
- the defendants urging the Court on the grounds of comity (no need for the English courts to act at policeman for assets located abroad: at 72, referring to Popplewell J. in Conocophillips China Inc v Greka Energy (International) BV.  EWHC 2733) to resist the call for a WFO. This was rejected (at 81) with the argument ‘I consider that I am entitled to proceed on the basis of the evidence that the Mauritian courts would not regard the WFO as offensive in some way.’; and ‘The WFO does not presently conflict with any order of the Mauritian courts, and this is not a case where the Mauritian courts have refused equivalent relief or where there is evidence that those courts would be likely to do so.’ Jacobs J therefore does consider comity quite carefully.
- the Court’s sense of urgency in what it sees as a case of fraus: At 45:
‘There is no precise definition of what is meant by the phrase “international fraud” found in the case-law, but I do not consider that it is confined to cases where the underlying cause of action is a claim in deceit or a proprietary claim relating to the theft of assets. If there is a strong case of serious wrongdoing comprising conduct on a large or repeated scale whereby a company, or the group of which it is a member, is acting in a manner prejudicial to its creditors, and in bad faith, then I see no reason why the English court should not be willing to intervene rather than to stand by and allow the conduct to continue and, to put the matter colloquially, to let the wrongdoer get away with it. In the present case, I would regard the attempted dissipation of Essar Steel’s US$ 1.5 billion asset, in the face of the commencement of arbitration proceedings, as sufficient in itself potentially to warrant intervention under the “international fraud” exception, or as constituting “exceptional circumstances”.’
- and the rejection at 73 of a CJEU C-391/95 Van Uden type of restraint, requiring a real connecting link between the subject matter of the measures sought and the territorial jurisdiction of the English court.
Update 21 March 2019 the proposal has now been torpedoed by one of the parties formerly serving in Belgium’s government – the BIBC will not be created for the time being.
Update 12 December 2018. The most recent proposal, the one actually adopted in Committee, is here. Note i.a. (Article 20) that the Committee has thankfully (see below) not followed the silly rules on languages. Whether the proposal will lead to law, remains to be seen: as we speak, the Belgian Government has turned into a minority government and not much is certain to go ahead before the next elections (May 2019).
I have reported twice before on the BIBC – once viz the initial version and a second time with my short report for the Parliamentary Hearing. I have now had a minute to review the Council of State’s comments on the amended version – among others with a view to preparing for next week’s conference on hybrid courts in Doha. Note that the Council of State here acts in its advisory function: essentially its opinions aim to improve draft statute so as to avoid future litigation.
What is clear from these recent comments is that the Council does not at all embrace the regulatory competition incentives which lie at the heart of the proposal, in particular in its view on how a matter may be made ‘international’ so as to justify engagement of the BIBC. Its view (let alone the Justice Council’s fear for forum shopping?!: encouraging such shopping being the very raison d’etre of the Act) contradicts the CJEU’s flexible stance on the issue as apparent eg in Vinyls Italia. As I noted in my comments before the Committee, it is a rather odd indeed parochial requirement to insist on parties having used English in their correspondence, before they can validly engage the BIBC. Even the suggested amendment that the use of languages other than Belgium’s three official ones (French, Dutch, German) should suffice, is not convincing to the Council. One hopes the drafters will ignore the Council’s hesitation at this point.
The Council does not of course engage in the political discussions surrounding the proposal: in particular, whether in a country in which the court system arguably does not operate to satisfaction, the creation of an international commercial court may compound, rather than remedy issues.
Is the end of discovery in Ireland nigh? The Irish Court of Appeal is very critical in Tobin v MOD. (And Hogan J reminds us of great potential for PhDs).
Given that discovery plays an important factor in forum shopping, Hogan J’s very critical comments on the extensive possibilities in Ireland are quite relevant. Arthur Cox have good analysis of  IECA 230 Tobin v MOD here and I am in general happy to refer. Those of you interested in comparative litigation really should take a moment to read the Judge’s comments in full. Yet again, it seems to me, a topic for serious PhD (in comparative civil procedure) analysis.
Update 6 August 2018 the report of the hearing in Dutch and French is here.
I was at the Belgian Parliament yesterday for a hearing on the BIBC, following publication of the Government’s draft bill. For those of you who read Dutch, my notes are attached. We were limited to two pages of comments – the note is succinct.
An important change vis-a-vis the initial version (on which I commented here) is that the Court will now be subject to Belgian private international law (including primacy of EU instruments) for choice of law, rather than being able to pick the most appropriate law (arbitration panel style). That brings the court firmly within Brussels I. Also note my view and references on the Court being able to refer to the CJEU for preliminary review.
In BDO Cayman v Argyle Funds, reported by Harneys, the Grand Court of the Cayman Islands followed English and Australian authority in having an anti-suit injunction followed by a cost order against the party that had infringed choice of court. Costs including not just the domestic proceedings (that would be obvious) but also the foreign proceedings (here: in the US).
It is this type of measure which makes jurisdictions stand out and be noticed in civil procedure regulatory competition – not, as I flagged earlier, half-baked attempts to add some gloss via international business courts.
A short post (my diary is clearing up ever so slightly – I may finally have time for a proper cuddle of the blog next week onwards) to flag my Rotterdam colleague prof Xandra Kramer’s conference on International business courts, on 10 July.
I unfortunately am already expected elsewhere hence I will not be able to ask this question in person, hence here’s one for someone else out there to ask: why are all these States busying themselves touting ad hoc special courts – when what they really ought to be doing is making their civil procedure system as a whole more attractive? : for surely it is not only the English language that attracts litigation to London.
A conference warmly recommended!