Tag: retained eu law

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Harris ea v Environment Agency. The remedy for an Agency’s breach of statutory obligations, with lessons for climate litigation remedies.

Harris ea v Environment Agency [2022] EWHC 2606 (Admin) I fear is another case I let slip on the blog. It is a judgment which discusses to right to an effective remedy following the earlier finding in Harris & Anor v Environment Agency [2022] EWHC 2264 (Admin) that the Agency’s allowing water extraction in three Sites of Special Scientific Interest was in breach of retained EU law, namely Article 6(2) Habitats Directive (measures designed to prevent the deterioration of habitats and species) and of the equally retained EU law precautionary principle.

The issue at stake in current case is the appropriate remedy, a classic challenge in judicial review cases in instances where the authorities have been found in breach of an obligation of effort rather than one of result. Those of us involved in climate litigation will appreciate the difficulty.

The Agency suggests the finding that there was a breach is enough of a remedy. Claimants disagree, seeking an order in the nature of [2018] EWHC 315 (Admin) which the Agency says must be distinguished on the grounds that the regulatory requirements relevant to that order, they argue, is more prescriptive.

Johnson J holds [7] that ‘the claimants have not just a presumptive common law right to a remedy, but also a statutory right’, given Article 19(1) TEU’s right to an effective remedy. A mandatory order that the Environment Agency must formulate a plan is issued [10], a plan which must be produced within 8 weeks [13]; that deadline has passed at the time of posting], disclose that plan to claimants [17] and with the precise formulation of the order [26] being

“The defendant shall, by 4pm on 7 December 2022, provide to the claimants details of the measures it intends to take to comply with its duties under Article 6(2) of the Habitats Directive (“Art 6(2)”) in respect of The Broads Special Area of Conservation. The details shall include an indication as to the time by which the defendant intends to have completed those measures. It shall also include, so far as practicable, the scientific and technical basis for the defendant’s assessment of the measures that are necessary to comply with Art 6(2).”

More on the nature of the kind of orders judges may give to authorities is currently discussed in a wide range of environmental law, including climate law litigation. It is an interesting application of the nature of judicial review and trias politica..

Geert.

Monash University, Law 5478 Strategic and Public Interest Litigation.

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Simon v Tache. Interesting issues on post-Brexit Brussels lis pendens, and on moment of seizure in amended claims.

Simon v Tache & Ors [2022] EWHC 1674 (Comm) is an interesting judgment which one assumes is very appealable given the untested Withdrawal Agreement and other angles.

At issue is i.a. whether Article 67 Withdrawal Agreement requires both sets of proceedings which are a candidate for Brussels Ia’s Article 29-30 lis pendens /related cases provisions, to have been pending prior to Brexit Implementation Date and what date needs to be considered the date of seizing.

Claimants argue, that the Belgian Proceedings, which I outline below, could only have become related on 3 May 2021 by the lodging of the 3 May Submissions, and that the English Court only became seized of the English proceedings after 31 December 2020, either on the making of Service Out Application or on the subsequent issue of the English Proceedings. On this basis it would not be open to the Defendants in the English proceedings to rely upon Article 67 as applying Articles 29 and 30 of Brussels Recast to the English Proceedings.

Claimant is a French national living in London. She is a medical doctor who previously practiced. She now focuses on art and design. Defendants are Belgian nationals, contemporary art dealers with a gallery website in English. This element notably raises issues whether the contract could qualify as a consumer contract. Defendants deny this, citing the very example I often give in class when teaching the relevance of language in the context of the Pammer Alpenhof criteria: the very use of English on websites, particularly in the art, design or hospitality sector in cities like Brussels are hardly an indication of direction of activities outside the location. The contract being a consumer contract seemingly was not flagged in claim form or submissions, it only came up at hearing.

Claimant and defendants having met in Paris, various artworks were delivered to claimant’s Paris address. Lex contractus is disputed [20]. The relationship soured and Belgian libel proceedings by defendants in the E&W proceedings were initiated end of October 2020. End of March 2021 Dr Simon was given permission to serve out. Her application mentioned the Belgian proceedings but argued that these were unrelated, ia in light of the different (non)contractual basis of those proceedings [35]. A claim form was sent to defendants’ lawyers early April 2021 and the claim form was filed 10 May 2021. On 3 May the defendants in the E&W proceedings amended thier Belgian claim, adding a request for declaration of non-liability: in other words they requested the Belgian court to declare that there was no wrongdoing on their part in the contractual relationship.

End of October 2021 the first instance Belgian court held it does have jurisdiction, but that no damage was proven. That court however declined to rule on the claim for a negative declaration because the allegations were before the English court. The Belgian court’s dictum on that issue is very brief, declaring only ‘“Whereas the ensuing dispute was never resolved and is currently the subject of a lawsuit in London, such that this court will refrain from commenting on the merits of that case.” : it did not specify why which clearly is a failure on its part.

[50] it is the Defendants’ case that the Belgian court was first seized on 3 May 2021, before the E&W Court was first seized on 10 May 2021 on the issue of proceedings. On the other hand, it is Dr Simon’s case that the E&W Court was first seized on the making of the Service Out Application and/or the making of the Service Order on 30 March 2021, alternatively on the issue of the Claim Form on 10 May 2021, but that the Belgian court was only seized when the Defendants’ claim for a negative declaration was filed on 5 August 2021.

It is undisputed [52] that as a matter of Belgian procedural law, it would be open to Dr Simon to raise a counterclaim in respect of the causes of action that she seeks to pursue by the English Proceedings in the Belgian Proceedings, and to do so notwithstanding that they are now before the Belgian Appeal Court. Expectations of the Court of Appeal ruling varied between one and five years [54] however in the end that Court surprised all and held after the English judge’s draft judgment had been circulated.

In November 2021 Dr Simon at her turn added a claim to her English claim form, one in dishonesty.

The judge holds [74] that BIa continues to apply to new claims added to proceedings commenced prior to 31 December 2020 and claims against new defendants joined to such proceedings after that date. He refers to  On the Beach Ltd v Ryanair UK Ltd [2022] EWHC 861 (Ch) in support (acknowledging that that case is not authority to him and that the parties in that case were in agreement on the issue).

On the issue of seizure, the judge holds [92] that this must be linked to the formal lodging of a claim form in order to issue proceedings, rather than the taking of some preliminary step to obtain permission with regard to the service of proceedings which might never be issued. I have sympathy with the view [85] that this gives the other party a great opportunity to torpedo proceedings.

‘“the same cause of action, between the same parties” is judged, despite an acknowledgment of EU autonomous interpretation, with reference to Belgian procedural law and expert reports on same [103]. That must be a vulnerable position.

Conclusion on A29 is that a stay must be ordered [114] and obiter [120] that one would have been ordered on A30 grounds.

Service out is discussed [121] in a bit of a vacuum because of course is BIa applies then service out is not required. Here reference is made to Rome I’s applicable law as an element of the gateway requirements (contract governed by English law) (held: no: Belgian law is prima facie lex contractus [134], with discussion ia of the consumer title. As a pudding, forum non conveniens is considered and this is surely where the jurisdictional arguments become excessive per Lord Briggs’ speech in Vedanta.

Then comes the final pousse-café: the Belgian Court of Appeal, unexpectedly fast, found it had no jurisdiction (this may be appealable to the Belgian Supreme Court), leaving the possibility of a negative conflict of jurisdiction which the parties were invited to comment upon.

A case to watch.

Geert.

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Abu Dhabi Commercial Bank v Shetty. Rome II applicable law for fraud, misrepresentation, instructs forum non conveniens stay.

Abu Dhabi Commercial Bank Pjsc v Shetty & Ors [2022] EWHC 529 (Comm) engages Rome II by way of the applicable law to the claim playing a role in the forum non conveniens challenge. (Compare BRG Noal v Kowski for a similar discussion under Rome I). The case confirms the importance of retained Rome I and II discussion. The stage is set at [7]

at the heart of the jurisdiction challenge is an assertion that England is manifestly not the most suitable forum for the resolution of this dispute which all defendants maintain should be resolved by the UAE courts. Unsurprisingly, ADCB places significant reliance for its case that England is the most suitable forum for resolution of this dispute on the fact that Plc was a FTSE 100 quoted company, that the contracts by which the two most important of the Core Facilities were given contractual effect (the Syndicated Facility Agreement and the Club Facility Agreement) were drafted and completed in London by a prominent London law firm and were subject to London arbitration clauses and on its contention that England is the governing law of the dispute. Equally unsurprisingly the defendants emphasise that Plc was a holding company that carried on no active business activity, that the activity in London was essentially administrative in nature, that the lending which it is alleged lies at the heart of the scheme was lending by ADCB (a UAE registered entity trading in the UAE) to entities within the Group including principally Healthcare, all of which were based elsewhere than England and Wales. They maintain that if what is alleged is true then this was from first to last a conspiracy that was conceived and carried into effect in the UAE. They maintain that the governing law is beyond argument UAE law.

I shall limit the post to the Rome II element: Pelling J discusses this [64] ff, with the core element [68-69]:

the damage occurred when a UAE based company drew down against or otherwise benefitted from the Core Facilities offered by a UAE based bank. …ADCB … ultimately acted upon the representations in Abu Dhabi, from where the relevant loan funds were drawn down by NMC Healthcare“.

In the case of a misrepresentation or fraud, the locus damni is held to be the place where that misrepresentation is acted upon. UAE law as lex causae is in fact also and primarily confirmed by A4(2) Rome II: joint place of habitual residence, held [71] to be the UAE. Application of the A4(3) escape clause is dismissed [77], and a passing reference to a potential for A12 Rome II’s culpa in contrahendo leading to English law as the lex contractus, is summarily dismissed [78].

A stay is granted.

Geert.

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BRG NOAL v Kowski. A debatable applicable law consideration under A4 Rome I decides a forum non stay.

BRG NOAL GP SARL & Anor v Kowski & Anor [2022] EWHC 867 (Ch) continues the current trend of forum non conveniens applications galore, following Brexit. In the case at issue, with Luxembourg suggested as the appropriate forum, applicable law determination, under (retained) Rome I’s ‘characteristic performance’ rule plays a core role.

Applicable law needs to be determined essentially viz an undertaking as I understand it, by a, validly removed, investment fund General Partner, not to torpedo the subsequent orderly continuation of the fund. The core commitment reads

“I, [name], hereby acknowledge that [NOAL GP] is the managing general partner (“General partner”) of [the Fund] with effect from 27 August 2021 and unconditionally and irrevocably undertake (a) not to assert otherwise, or to induce or procure an assertion to the contrary or otherwise challenge or question the validity of its appointment or induce or produce such challenge or question, in any applicable forum and (b) to cooperate with and assist the General Partner in completing a full, orderly and timely transfer of the control of the Partnership and all of its assets and any obligations to the General Partner”.

Claimant [57] suggests the specific Undertaking in and of itself meets the CJEU Handte definition of a stand alone contractual obligation, however Smith J does not specifically hold on this for in her view even if this were correct, the overall contractual construction would have an impact on the applicable law consideration, seeing as in her view:

no choice of law was made; no default ‘passe partout’ contract as listed in A4(1) Rome I applies; A4(2) Rome I’s ‘characteristic performance’ test does not lead to an answer ([61]: there is no ‘characteristic performance’] and at any rate even if there were, the judge would have applied A4(3)’s escape clause to lead to Luxembourg law; and the ‘proper law of the contract’ per A4(4) Rome I ‘clearly’ [63-64] leads to Luxembourgish law.

In conclusion, a stay is ordered and the forum non application is successful. In my view the judge jumped too easily to Articles 4(3) and (4), denying Article 4(2)’s or even Article 3 choice of law’s effet utile. It is not unusual for judges to let their predetermination to apply A4(3) and /or (4) determine their A4(2) search for a lex contractus. Yet that frequency does not make the judgment right.

Geert.

EU Private International Law, 3rd ed, 2021, Heading 3.2.6.2.

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ValueLicensing v Microsoft. The High Court, in rejecting forum non conveniens, puts great emphasis on only English courts determining the course of English law post Brexit.

In JJH Enterprises Ltd (Trading As ValueLicensing) v Microsoft Corporation & Ors [2022] EWHC 929 (Comm) Picken J makes a debatable point in his discussion of a forum non conveniens application by defendants, Microsoft.

In the proceedings ValueLicensing claim damages arising from alleged breaches of competition law by Microsoft. The claim is a ‘stand alone’ one, not a ‘follow-on’ one. There is no underlying infringement decision of the European Commission (or any domestic competition regulator) on which ValueLicensing can rely to establish that an infringement of competition law has been committed.

Some of the Microsoft entities firstly seek summary dismissal of the case against them, arguing they cannot be held liable for an alleged infringement of either Article 101 or 102 TFEU as a result of an overall Microsoft ‘campaign’ in which they did not demonstrably take part. Here [31] ff there is interesting discussion ia of Provimi (Roche Products Ltd. & Ors v Provimi Ltd [2003] EWHC 961 (Comm)), which held that an entity that implements an agreement in breach of A101 to which a member of the same undertaking is a party can be held liable for the infringement even though the implementer itself does not know of the infringement. Specifically, whether Provimi was wrongly decided following from Cooper Tire Europe Ltd v Bayer Public Co Ltd [2010] EWCA Civ 864  – this is an issue for which CJEU referral is not possible post Brexit.

The judge however refers to the broader concept of ‘undertaking’ in the A101-102 sense following eg CJEU C-882/19 Sumal SL v Mercedes Benz Trucks Espana SL. Sumal, Picken J holds [44], is relevant authority both pre and post Brexit.

Quite how parties see a difference in the lex causae for the competition law infringement pre and post Brexit is not clear to me. Pre Brexit it is said to be ‘English law’ (held to include 101-102 TFEU prior to Brexit), full stop, while post Brexit that law is said to be determined by (retained) Article 6 Rome II, which for same of the claim will be English law as being one of the ‘affected markets’ per A6 Rome II.

It is in the forum non application that the judge posits [78] that an important consideration of England as the more appropriate forum, is

it is clear that Microsoft UK’s position at trial will be that in certain material respects English law has taken a divergent path from EU law. In such circumstances, it would be wholly inappropriate, and certainly undesirable, for a court in Ireland to be determining whether Microsoft UK is right about this. On the other hand, there would be no difficulty with the Court here applying EU competition law, either as part of English law (in respect of the pre-Brexit period and, if that is what the Court determines is the case, also in respect of the post-Brexit period) or as part of the laws of other EU/EEA member states, since the Court here is very experienced in doing just that.

If it is true that under forum non, only English courts can be held properly to determine the direction of English law post Brexit, the hand of many a claimant in forum non applications will surely be strengthened.

Geert.

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Cryptoassets, non-fungible tokens and consumer protection. The High Court rejects jurisdiction in Soleymani v Nifty, re-igniting the opaqueness of the arbitration exception under Brussels Ia.

In Amir Soleymani v Nifty Gateway LLC [2022] EWHC 773 (Comm) Abrose J largely rejected jurisdiction for the English courts in a claim following auction brought by a UK-based digital artwork collector. Another part of the claim was stayed pending arbitration in New York.

Faced with a clause in Nifty’s general terms and conditions that provide for binding arbitration in New York and for New York law to be the governing law of the contract, claimant seeks a declaration that the arbitration agreement was unenforceable due to it being unfair under the UK Consumer Rights Act 2015. Alternatively, he argued the governing law clause is invalid on the same statutory ground, and that a contract arising from the auction is void for illegality pursuant to the UK Gambling Act 2005.

Of note is that the US based arbitrator, in the proceedings initiated by Nifty, is considering himself (with procedural and discovery orders having been issued) broadly similar issues under consumer protection provisions of the ADR provider.

At [34] the qualification of NFTs as ‘art’ or merely ‘technology’ [‘the nature of NFTs as assets, and whether they are artwork, with the Claimant’s position being that he was trading in digital art whereas the Defendant maintained that an NFT is merely a unique string of code stored on a blockchain ledger that makes a digital artwork accessible, and marks authenticity’] is announced as potentially relevant for substance but not for current application.

The discussion largely takes place under retained EU law (s15b of the Civil Jurisdiction and Judgments Act 1982 (as amended)). The judge holds [55] that the claim falls within the arbitration exception of (retained) Brussels Ia seeing as, as she qualifies it

The principal focus and subject matter of Mr Soleymani’s claim is whether he is legally obliged to arbitrate.

Recital 12 BIa is called upon in support. Claimant ([49]-[50] in particular are a good summary of the position) essentially argues such a view is incompatible with the effet utile of the consumer title. I believe that point has merit and one imagines it will be on this point that appeal will be sought (Bitar v Banque Libano-Francaise was offered in some support).

Whether the contract is a ‘consumer’ contract is still discussed [62] ff viz the claim for declaratory relief regarding the unfairness of the arbitration clause under the Gambling Act. The judge holds [79] that on the evidence put forward, Claimant has the better of the argument as to whether the Defendant was directing commercial activities to England (and the UK more generally). However she decides to grant the defendant a stay (which would not have been possible pre-Brexit) in favour of the unfairness issues being discussed in the New York arbitration. (These issues may later return to a UK court in the shape of an ordre public opposition to enforcement of the award in the UK).

I will of course notify if and when permission to appeal will have been granted.

Geert.

EU Private International Law, 3rd ed. 2021, Heading 2.2.3.2, and 2.2.9.2.

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Open Rights Group. The Court of Appeal on grace periods, the consequences of judicial review and remedies for breach of (supreme) retained EU law.

A posting that is long overdue but over at GAVC law  we have lots of things coming our way and the inevitable consequence is a bit of a queue on the blog. Open Rights Group & Anor, R (On the Application Of) v Secretary of State for the Home Department & Anor [2021] EWCA Civ 1573 was held end of October and discussed remedies for breach of retained EU law, that is in essence, EU law which has force in law in the UK by virtue of the Government’s copy /paste exercise following Brexit.

In April 2021 the CA had held that that the “Immigration Exemption” (which disapplies some data protection rights where their application would be likely to prejudice immigration control) of the UK Data Protection Act 2018 is contrary to Article 23 GDPR and Article 23 of the UK GDPR: [2021] EWCA Civ 800.  However in that judgment the CA had not specified at that stage what form of relief should be granted. It does now.

The claim form sought a declaratory order, the effect of which would be to “disapply” the Immigration Exemption. The Government argue it be granted a grace period to make regulations adding to or varying the provisions. The complicating factor is that even retained EU law enjoys supremacy (not by virtue of EU law but by virtue of the Government’s choice to do so). That means that any conflict between the GDPR and domestic legislation (including primary legislation) must be resolved in favour of the former: the domestic legislation must be overridden, treated as invalid or, in the conventional language, disapplied.

[15] A quashing order would not meet with the UK constitutional understanding and its limits to the rule of judges. However must supremacy, post Brexit, mean the courts must inevitably make an immediately binding order? Warby LJ sets out the principles of EU retained law as they follow from domestic legislation (the ‘EUWA’) at [23]:

(1) A UK court must now decide any question as to the validity, meaning or effect of any retained EU law for itself: it is no longer possible to refer any matter to the CJEU: EUWA s 6(1)(b).

(2) But the general rule is that the court must decide any such question in accordance with any retained case law and any retained general principles of EU law that are relevant: EUWA s 6(3). “Retained EU case law” and “retained general principles” mean principles laid down and decisions made by the CJEU before IP completion day.

(3) When it comes to principles laid down or decisions made by the CJEU after IP completion day, the court is not bound (EUWA s 6(1)) but “may have regard” to them (EUWA s 6(2)).

(4) The position is different in a “relevant court”, which includes the Court of Appeal. Subject to an exception that does not apply here, a relevant court is not absolutely bound by any retained EU case law: EUWA s 6(4)(ba) and Regulations 1 and 4. It can depart from that law; but the test to be applied in deciding whether to do so is “the same test as the Supreme Court would apply in deciding whether to depart from the case law of the Supreme Court”: EUWA 6(5A)(c) and Regulation 5.

(5) The test the Supreme Court applies is the one laid down by the House of Lords in its Practice Statement [1966] 1 WLR 1234, when Lord Gardiner LC said

“Their Lordships regard the use of precedent as an indispensable foundation upon which to decide what is the law and its application to individual cases. It provides at least some degree of certainty upon which individuals can rely in the conduct of their affairs, as well as a basis for orderly development of legal rules. Their Lordships nevertheless recognise that too rigid adherence to precedent may lead to injustice in a particular case and also unduly restrict the proper development of the law. They propose, therefore, to modify their present practice and, while treating former decisions of this House as normally binding, to depart from a previous decision when it appears right to do so. In this connection they will bear in mind the danger of disturbing retrospectively the basis on which contracts, settlements of property and fiscal arrangements have been entered into and also the especial need for certainty as to the criminal law. This announcement is not intended to affect the use of precedent elsewhere than in this House.”

Relevant CJEU authority is Liberty: La Quadrature, A v Gewestelijke Stedenbouwkundige Ambtenaar van het Department ruimte Vlaanderen (Case C-24/19) (“Gewestelijke”), and B v Latvijas Republikas Saeima Case C-439/19, EU-C-2021-504 (“B v Latvia”). [24] Gewestelijke was decided before IP completion day. We are not absolutely bound by them, but we should decide this case in accordance with the principles they set out, unless we think it right to depart from those cases for the reasons set out by Lord Gardiner. B v Latvia was decided after IP completion day, so we can “have regard” to it.

[26] Warby LJ suggests 3 options:

One is to hold that since the power to suspend relief in respect of substantive laws that is identified in Gewestelijke is one that can only be exercised by the CJEU, it cannot be exercised at all in E&W. This is rejected [27] as an unduly mechanistic and literal approach, tending to subvert rather than promote the legal policy that underlies this aspect of the CJEU jurisprudence: it would remove from the judicial armoury a power that is, by definition, essential. 

An alternative would be what Warby LJ called “the Regulation 5 approach”: to apply the principles laid down in the 1966 HoL Practice Statement and depart from the CJEU case-law, holding that the power which, in that jurisprudence, is reserved to the CJEU should now be treated as available to at least some UK Courts. This [28] enable a court to perform one of its essential tasks: averting legal disorder and is an option which Warby LJ suggests is open to the Court of Appeal.

A third option is to follow and apply the CJEU jurisprudence as to the existence and limits of the power to suspend, but not that aspect of the case-law that reserves the exercise of that power to the European Court. That [31] is Warby LJ’s preferred route however he decides (and the other LJs agree) that there is at this time no need to choose between both options for in essence they lead to the same result in the case at issue. The Court concludes that the Government were given time until 31 January 2022 for the Data Protection Act 2018 to be amended so as to remedy the incompatibility. Whether the Government have done so, I leave to data privacy lawyers to verify.

Underhill LJ emphasises one point [57] ‘that, as Warby LJ says at para. 13 of his judgment, our power to suspend our declaration – in practice, to suspend the disapplication of the Immigration Exemption – derives entirely from retained EU law. It was not argued that the Court had any equivalent power at common law.’

This is an important judgment viz the application of retained EU law but also wider, viz the consequences of judicial review which is a hot topic at the moment in more than just the UK.

Geert.

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Easygroup v Beauty Perfectionists. No huge make-over for acquired EU law on trademark jurisdiction.

In Easygroup Ltd v Beauty Perfectionists Ltd & Ors [2021] EWHC 3385 (Ch) defendants argue that even though the proceedings were initiated prior to IP completion day (31 December 2020), the English courts no longer have jurisdiction to grant a pan-EU injunction or other remedies in respect of alleged infringement of EU trade marks (“EUTMs”).  The suggestion is that lack of such jurisdiction post 1 January 2021 is a consequence of the relevant statutory UK instrument, the Trade Marks Amendment etc (EU Exit) Regulations 2019.

The jurisdictional impact  of the EU Trademark Regulation 2017/1001 was previously considered i.a. in another Easygroup case which I discuss here. In current case, defendants argue that as a result of (potentially an omission in) the 2019 UK Statute, the High Court no longer is an ‘EU Trade Mark Court’ and, that EU Regulation 2017/1001 was not part of EU retained law under section 2(1) of the EU Withdrawal Act 2018. Their submission is based entirely on statutory construction, involving ia reading of the EU Withdrawal Agreement Act 2020 and its alleged impact on Withdrawal Agreement rights.

[48] ff Flaux C takes a much shorter approach to siding with claimants, holding [50] that the clear intention of Article 67 of the Withdrawal Agreement, which has full legal effect, is that the High Court should retain the same jurisdiction under EU Regulation 2017/1001 as it had before IP completion day. He finds support in a more common sense reading of the various Statutes in the context of Brexit with arrangements (as opposed to the potential of a no-deal Brexit).

The application for strike-out was therefore dismissed.

I do not know whether appeal has been sought. The case is a good illustration of the many layers of complexity provoked by the presence of the Withdrawal Agreement (with UK commitment to provide direct effect in the same circumstances as would apply under EU law), the Trade and Co-operation Agreement, and all the statutory provisions designed to cater for both a deal and a no-deal Brexit.

Geert.

 

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Kazakhstan Kagazy v Zhunus. Again on qualification and a rather untidy application of Rome II in the context of an assets tracing claim.

Kazakhstan Kagazy Plc & Ors v Zhunus & Ors [2021] EWHC 3462 (Comm), sees Henshaw J unpicking the follow-up to a trial of applications and claims made by the Claimants for the purpose of enforcing an unsatisfied judgment for approximately US$300 million, handed down in December 2017.

The relevant part of the complex judgment, for the purposes of the blog, is a ‘tracing claim’: claimant argue that monies stolen from them by one of the defendants can be traced or followed into a variety of assets said to be held by companies within Cypriot trusts structures for the benefit of said defendant and his family. What is being traced are shares in Exillon, an oil company which Mr Arip developed after he fled Kazakhstan for Dubai. The proceeds of the shares went partially into the purchase of real estate, with another (substantial) part remaining liquid in a Swiss bank account.

Defendants submit that the tracing claim is governed by Kazakh law, and that that law does not recognise the concept of tracing. The judge, with respect, and perhaps he was echoing submissions, takes a rather unstructured approach to the conflict of laws analysis from which the judgment subsequently never recovers. Many first instance judgments in the UK intuitively start by quoting a relevant section from Dicey (whose 16th ed I am told might be out end of 2022), and then somehow engineer the analysis around it. In the case at issue, the Dicey rule that is zoomed in on [85], is disputes over real property, which are subject to lex situs (lex rei sitae). At [88] the judge then refers to Akers v Samba in which the Supreme Court, albeit at the jurisdictional level, held “the situs or location of shares and of any equitable interest in them is the jurisdiction where the company is incorporated or the shares are registered”. [89]:

It would follow that, insofar as relevant, questions of title to the Exillon shares, whose proceeds (a) were used to purchase the Properties and (b) remain in the form of the £72 million in the BJB account in Switzerland, would be likely to be governed by Manx law, Exillon having been incorporated in the Isle of Man.  A possible alternative would be English law on the basis that the shares were traded on the London Stock Exchange.  The parties have in any event agreed that, so far as relevant to these claims, Manx law is the same as English law.

[91] some role for Kazakh law is suggested to still exist when considering whether the English law preconditions for a tracing claim are met.  ‘It is generally a pre-condition of tracing in equity that there be a fiduciary relationship which calls the equitable jurisdiction into being’. [92] The law applicable to a cause of action or issue determines whether a person is required to hold property on constructive or resulting trust, hence it is necessary to consider whether duties imposed by the relevant foreign law are to be regarded as fiduciary.

Only in an afterthought [94] does the judge consider the lex causae governing unjust enrichment, equitable claims and negotiorum gestio, per Rome II as retained in UK law (and in Dicey). [The judgment is not in fact clear on when the claim was introduced and therefore might be subject to acquired as opposed to retained EU law].

The lex causae for the qualification of the current claims (proprietary restitution) as one of these entries in Rome II [96] is matter of factly presented as English law. [99] the judge dismisses the relevance of the succinct Rome II analysis for, harking back to his first reference to Dicey, the fundamental nature of the Claimants’ claim in the present case is held to be a proprietary one hence Dicey’s lex situs rule is said to apply without a need to consider Rome II.

Surely the right order is to qualify the claim, using autonomous EU interpretation, under (retained) Rome I cq Rome II and with reference to CJEU authority- with of course some of the recent qualification issues following CJEU Hrvatske Sume thrown in. Subsequently to only consider the English common law to the extent statutorily retained EU law does not govern the issue. The approach in the judgment is unsatisfactory and in that respect joins Fetch.AI Lrd & Anor v Persons Unknown Category A & Ors [2021] EWHC 2254 (Comm) , which Amy Held and Matthias Lehmann discuss critically this morning.

Geert.

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Adferiad. Diverging opinions on the status of general principles of EU law in UK law post Brexit.

Adferiad Recovery Ltd v Aneurin Bevan University Health Board [2021] EWHC 3049 (TCC) is a procurement case in which a below-threshold procurement is challenged on the basis of general principles of EU law. Post Brexit, that  is. The judgment is of note for its contrast with Lipton. Particularly [117] ff are crucial paras, in which Keyser J (in, he acknowledges, some contrast with Lipton) holds that the Withdrawal Agreement implies that general principles of EU law do not ground a cause of action in domestic private or public law.

Lipton on this point ([64] in particular) implies that all general principles of EU law are part of domestic UK law as a result of the Withdrawal Agreement, provided they were so recognised by EU law on Brexit Implementation Day, and provided of course subsequent UK law has not changed their status.

Should Adferiad stand (which is a big if), EU principles as a result of the WA  would continue interpretatively to guide claims made under retained EU law, however cannot by themselves ground such claim. I.e. a claim solely based on alleged violation of EU law principles, fails. The judge in Adferiad takes a more limiting view on general principles of EU law than Lipton where the judge held these are part of domestic law provided they were recognised in relevant case law prior to Brexit completion day.

The case, and the contrast with Lipton, shows the importance of statutory construction of the EU (Withdrawal) Act 2018, and as Jonathan Mills points out, this is in the absence of a constitutional document to provide guidance. The result I fear is a Walhalla of statutory construction which might make lawyers happy, but may leave the subjects of law confused.

Geert.

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