Posts Tagged Regulatory competition
I was asked yesterday (interview in Dutch) for my thoughts on the Belgian Government’s plans for a Brussels International Business Court. Here goes, in bullet-points format, a slightly extended and more technical version of those preliminary thoughts:
- Three and more’s a crowd. The Belgian move of course is not the first and neither will it be the last. Even pre-Brexit, Member States (and even individual cities within Member States; see Michiel Poesen recently on Frankfort) were vying for the title of preferred place for litigation.
- Brexit evidently may be a game-changer. I have flagged repeatedly that post-Brexit and assuming there will be no deal which would roll-over the UK’s engagement with EU civil procedure law, UK courts will become a lot less attractive. This is due to the more cumbersome recognition and enforcement regime that will be the result of decoupling from Brussels I. The same incidentally does not apply to arbitration. Pre and post Brexit, deal or not, free movement of arbitral awards is subject to the New York Convention.
- Attractiveness as a centre of litigation and legal services is part of regulatory competition. Being known as a place of legal know-how and expedited litigation brings prestige as well as attractive billable hours to the law firms of one’s country.
- Crucially, in an attempt to prise litigation away from London in particular, the use of English in proceedings is always the eye-catcher for the media. However in reality the language of proceedings is to my experience not the defining issue in client’s forum shopping strategies. Know-how of the bench; speed of proceedings; transparency of case-law; and of course ease of recognition and enforcement, are much more so. The Belgian proposal acknowledges as much by touting in particular the ‘collegiality’ and ‘expertise’ of the pool of (domestic and foreign) commercial law experts that will populate the court.
- Unwittingly perhaps but without a doubt, the proposal in flagging the benefits of the BIBC, also highlights the well-known disadvantages of the Belgian courts in ordinary: tardiness of proceedings (the ‘Belgian’ torpedo) in particular. However also very much so, intransparency (as I have repeatedly signalled: access to Belgian case law continues to be highly problematic) and lack of collegiality among the bench: being a judge is a lonely professional existence in Belgium. Professional secrecy rules, practicalities (lack of proper office space), and the aforementioned reporting issues work against Belgian jurisprudence presenting itself as coherent.
- At a technical level, the proposal emphasises repeatedly that the BIBC will be a court. Not an arbitral tribunal. The difference lies particularly in the easy or enforcement. The draft Bill loudly talks the talk in this respect. But does it walk the walk? What a ‘court’ means within the context of EU civil procedure law is of course the prerogative of that EU law: not of the Member States. (I refer to recent blog posts on same). Extensive reference to UNCITRAL’s Model Law on international commercial arbitration is a strange prop to use in the draft, if the idea is to take one’s attention away from arbitration. The BIBC will only take cases in the event of prorogation (choice of court or submission). The pool of judges will mostly be taken from part-timers, not benchers. Most importantly, in my mind: Article 43 of the draft instructs the BIBC, with respect to choice of law, to respect parties’ choice of governing law, and, in the absence of such law, ‘to apply the law determined by the conflict of laws rules which it considers applicable’. This is a copy /paste from Article 28(2) of the Model Law. In footnote the Act suggests that by omitting the third para of said Law (‘The arbitral tribunal shall decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorized it to do so’), the Bill emphasises the nature of the BIBC as court. It does not. Courts are simply subject to Rome I and II when it comes to applicable law. They do not just ‘consider a law applicable’.
Much to chew on. My analysis is based on a draft Bill which a little bird sent me. This is probably not the final say on the BIBC. (On an aside: @BIBC is already taken. I can think of one or two Twitter Handles which the BE government may want to snap up before someone else does).
Update 21 April 2017 many thanks to Gordon Nardell QC for alerting me to the Bar Council’s Brexit papers which includes one on jurisdiction and enforcement.
The House of Commons’ report on ‘negotiating priorities for the justice system’ reviews more than conflict of laws, indeed it is a tour d’horizon of most (if not all) issues relevant to Justice and Home Affairs in the EU. Martha Requejo makes a number of valid points on the report and indeed plenty of these, and others, have been made by a number of conflicts commentators: I will not review all here. There is a scholarly cottage industry on post-Brexit issues and the area of private international law is no exception.
The report mentions among others that a role for the CJEU in respect of essentially procedural legislation concerning jurisdiction, applicable law, and the recognition and enforcement of judgments, is a price worth paying to maintain the effective cross-border tools of justice discussed throughout our earlier recommendations. That is a very sensible approach, not just within the overall context of UK /continent judicial co-operation: it is also an obvious lifeline for London’s legal services market. Without proper integration into the EU’s civil procedure corpus, judgments from UK courts will immediately lose a lot of their appeal. The Government however have manoeuvred itself into a cul-de-sac by rejecting a role for the European Court of Justice post Brexit. The report’s call, and many with it, therefore is likely to fall upon deaf ears. Both for the UK and for EU conflicts rules, this will be a great loss. Few continental courts live up to the same standards as their UK counterparts when it comes to applying the intricate detail of conflict of laws, whether EU based or not.
The Pfizer /Allergan collapse: An end to Celtic Cash and a source of inspiration for EU rules on outgoing corporate mobility?
I shall keep this post short for otherwise it risks developing into a book. In a week which also saw the Panama papers blow a hole in the use of tax havens for individuals, the collapse of the Pfizer Allergan merger may be the beginning of the end for the Irish (and similar) corporate tax Nirvana. The US treasury’s new rules on outgoing corporate mobility mean re-incorporation in Ireland has become an awful lot less attractive.
I realise there are caveats and one may be comparing cheese and chalk. Also, tax lawyers no doubt will have to chew over this, yet: may this not also be the moment for the EC to reconsider similar issues in EU law, kicked off some time back by the Daily Mail case?
(Handbook of) European Private International Law 2nd ed 2016 Chapter 7.
Schemes of arrangement: No scheming, and no hastily arranging, please. The High Court adjourns hearing in Indah Kiat.
I have reported before on various schemes of arrangement which the English Courts gave the go-ahead even when they concerned non-English companies (I should flag that in two of those, Apcoa and Van Gansewinkel, I acted as expert). Thank you Arie van Hoe for bringing Indah Kiat to my attention some weeks ago.
Indah Kiat is a Dutch BV seeking an order convening a single meeting of its scheme creditors to consider and if thought fit approve a scheme of arrangement pursuant to Part 26 of the Companies Act 2006. The application is strenuously opposed by one of the Scheme Creditors, APP Investment Opportunity LLC (“APPIO”), which contests the jurisdiction of the court to entertain or sanction the Scheme. Such opposition is different from the other schemes which I mention in my previous postings.
In the first instance, APPIO simply seeks an adjournment of the Scheme Company’s application on the grounds that inadequate notice has been given to Scheme Creditors. However, it also raises a significant number of other issues concerning the adequacy of the evidence and disclosure by the Scheme Company, together with questions concerning the procedure and scope of the court’s jurisdiction to sanction creditor schemes for foreign companies in relation to debts governed by foreign law.
The Scheme Company is a special purpose vehicle which was incorporated for financing purposes in the Netherlands. It sought the COMI way to enable English courts to obtain jurisdiction over the scheme. English jurisdiction, required to carry out the Scheme, usually rests on either one of two legs: COMI, or making English law the governing law of the underlying credit agreements (if necessary by changing that governing law en route).
The COMI route to jurisdiction in many ways defies the proverbial impossibility of having one’s cake and eating it. For the establishment of a company’s centre of main interests, the courts and practice tend to refer to the EU’s Insolvency Regulation. Yet that schemes of arrangement do not fall under the Insolvency Regulation is a crucial part of the forum shopping involved in attracting restructuring advice to the English legal market. This is especially so for the aforementioned second route to jurisdiction (a change in governing law). however it is also true for the first form. Snowden J refers to that at para 85-86 of his judgment.
Indah Kiat has effected its change of COMI (rebutting the presumption of COMI being at its registered seat) by notifying its creditors via a number of clearing houses for the Notes concerned. APPIO contest that this notification sufficed for change in COMI. There are not enough relevant facts in the judgment to consider this objection thoroughly, however APPIO’s misgivings would not seem entirely implausible.
Snowden J notes that whilst protesting the jurisdiction, in the first instance APPIO simply seeks an adjournment of the convening hearing on the grounds that inadequate notice has been given of it to Scheme Creditors. It contends that given the complex nature of the Scheme and the factual background, there is no justification for an urgent hearing of the application. The Court agreed and the convening hearing (different from the sanction hearing, which follows later) was adjourned until 3 March. Snowden J further gave extensive argument obiter as to why the Scheme’s information was insufficient in the form as it stood at the hearing.
He then revisits (82 ff) the jurisdictional issue, which I have already signalled above: what role exactly COMI should play, how the Brussels I recast intervenes, what the impact is of likely recognition of the sanction (if any) in Indonesia, The Netherlands, and the US; and what if any role the relevant US judgments in the case should play: there will be plenty of points for discussion at the convening and sanction hearing. (I mentioned above that the convening hearing was scheduled around 3 March; I have not heard from the case since however if anyone has, please do let me know).
I do not think Indah Kiat has made the jurisdictional hurdle higher for Schemes of Arrangement involving foreign companies. Rather, the fierce opposition of an important creditor has brought jurisdictional issues into sharper perspective than had been the case before.
(Handbook of) EU Private International Law, Chapter 5, Heading 5.4.2).
Anti-suit once again climaxes outside the Brussels I (Recast) context. The High Court in Crescendo Maritime.
As I have reported before, English practice is to continue using anti-suit injunctions outside of the Brussels I Regulation, in particular to support arbitration. Recent application was made in Crescendo Maritime, restraining litigation in China. Teare J confirmed among others (per Toepfer v Cargill) that forum non conveniens (Chine was the natural forum for litigation in ordinary) has little relevance in the context of arbitration clauses.
Kennedys have background to the case (essentially, backdating of a shipbuilding contract to avoid newly introduced international rules on tank coatings). The considered use of anti-suit once again underlines the importance of tools of civil procedure to support global arbitration practices.
European private international law, second ed. 2016, Chapter 2, Heading 18.104.22.168
Travel is a wonderful opportunity to catch up on reading back issues of The Economist. Now I have made a valiant effort in recent years to reduce the pile. I am now only a few months behind. (I read the magazine diagonally when it comes out. Properly a little later). In the issue of 28 February of this year, there is a report on the town of Windsor, New York, along with 14 other towns along New York’s border with Pennsylvania, wanting to secede and join Penn. I have not been able to get an update on the state of affairs, and I am not sure whether the idea got much traction.
It is the ultimate answer to regulatory competition: to move an entire slice of territory into what is perceived as a preferable regulatory regime. The cause? New York’s strict (some might say: cautious) policy on fracking /shale gas. Penn State is fracking friendly. New York has banned it.
The Economist also flag that State secession in the US has only ever succeeded in 1777: when a chunk of New York became Vermont. Now, that’s a State where others pack and move to in upwards harmonisation fashion: for Vermont is arguably the top of the regulatory curve when it comes to environment and food regulation.