Khalifeh v Blom Bank. On the availability of anti-suit to deter consumer contract proceedings ex-EU.

At issue in  Khalifeh v Blom Bank S.A.L. [2021] EWHC 1502 (QB) is inter alia whether an anti-suit injunction is available to  a claimant who purports to have the protection of Section 4 of the Brussels Ia Regulation. That is the section which protects consumers by granting them a forum actoris and by limiting suits against them to, in principle (limited extensions are possible) their place of domicile. The contract is one in the banking sector, for the opening of 2 USD accounts. Defendant is a Lebanon-incorporated bank. The proceedings which are to be restrained, take place in Lebanon. Current order concerns anti-suit only. Other issues, including applicable law per Rome I (where of course the consumer title also plays a role) are not addressed.

The case is part of my essay questions in a conflicts exam at Leuven today. I would expect students to refer to the discussions in Gray v Hurley and to any reasons for EU courts to exercise, or not, judicial muscle-power in upholding the jurisdiction of courts in the EU as against that of courts outside it.

Claimants calls in support upon Samengo-Turner v J & H Marsh [2007] EWCA Civ 723 and Petter v EMC Europe Ltd [2015] EWCA Civ 828. In those cases, concerning employees, anti-suit was employed viz employers’ potential action outside the EU. Defendant doubts the authority of both (and in particular of Samengo-Turner, a first instance judgment). It refers to both scholarly criticism of the position, and to the Court of Appeal’s recent finding in Gray v Hurley, referred to the CJEU but unfortunately (for reasons of legal certainty) since dropped.

At [38] Freedman J holds he need not make a ‘binary’ decision at this stage, and refuses the application for anti-suit, leaving the discussion for full debate at trial. Part of his reason for doing so is defendant’s commitment not to take the case in Lebanon any further at this stage (no commitment has been made of it to be dropped). At that trial, the ATI debate may continue (this, one imagines, will depend on defendant’s actions in Lebanon), as of course will the applicability of Rome I’s protected categories of consumers.

A trial to look out for.

Geert.

EU Private International Law, 3rd ed. 2021, para 2.24.

Dhir v Flutter. How choice of law takes you via Rome, to DIFC and Dubai.

A quick note on Dhir v Flutter Entertainment Plc (Rev 2) [2021] EWHC 1510 (QB), in which Griffiths J had to consider ia whether choice of law had been made at all and if so (or also if no choice of law had been made), whether this was for the onshore law of the Emirate of Dubai – onshore Dubai law, or for the law of the Dubai International Financial Centre – DIFC.

Claimant (Amarjeet Dhir) is a Dubai-based businessman who advanced money to another businessman in Dubai which he thought would be invested in the local property market. Unknown to him, the man taking his money (Tony Parente) was a gambling addict. As Mr Parente now admits, he applied money he had been given by Mr Dhir (and, it seems, others) to fund his gambling habit. One of the gambling businesses with which he lost a lot of money in a short space of time was the defendant, through that part of its operations branded as Paddy Power. Mr Dhir now seeks to recover from Paddy Power money in its hands which he says represents the money he is entitled to recover from Mr Parente.

The relevant agreement includes express choice of law as follows: 

“This agreement is signed in Dubai and shall be governed and construed in accordance with the laws of Dubai”.

Claimant says that it meant DIFC laws, while defendant says that it means onshore Dubai law). All experts agreed that it had to be one or the other: it could not be both.

[116] jurisdiction before the E&W Courts is by prorogation (A26 Brussels Ia). Both parties agree [129] that the Rome I Regulation guides the search for the lex contractus. The agreement is silent on choice of court: otherwise that could certainly have been a factor in determining choice of law (recital 12 Rome I). In general [118] the judge is cautious in ‘letting the jurisdiction dog wagging the choice of law tail’, and held the many ties of parties and contract with Dubai (including signature at Dubai and not DIFC: a geographically distinct location) pointed to onshore Dubai law as  lex contractus.

Choice of law therefore made not verbatim, yet ‘clearly demonstrated’ (A3(1) Rome I).

Geert.

EU Private International Law, 3rd ed. 2021, Heading 3.2.4.

Suing TikTok: on GDPR and ordinary jurisdiction, as well as applicable law in the Dutch collective claim.

A short note on the claim form for the collective claim by a group of parents based in The Netherlands against TikTok Technology Limited, domiciled at Dublin, Ireland.  It engages Article 79 GDPR, as well as the consumer section of Brussels Ia. At the applicable law level, it suggests application of Article 6 Rome I (consumer contracts; a logical counterpart of the jurisdictional analysis) and, in subsidiary fashion, Article 4 Rome II, each to suggest application of Dutch law.

I wrote on Article 79 here, and the problems which I signalled have in the meantime surfaced in case-law, as I signalled ia here.  Current TikTok claim however prima facie would seem to be more straightforward under both GDPR, BIa and Rome I – one imagines a possible TikTok’s defence to go towards the meaning of ‘establishment’.

Geert.

 

Oeltrans Befrachtungsgesellschaft v Frerichs: the CJEU on the reach of lex contractus as a shield against the lex concursus’ pauliana (avoidance action).

Update 28 April 2021 see Giles Cuniberti’s critique of the implications of A13 EIR (contract law trumps insolvency law) here.

In C-73/20 Oeltrans Befrachtungsgesellschaft v Frerichs the CJEU held yesterday – no AG Opinion had been requested.

Applicant ZM has been the liquidator in the insolvency of Oeltrans Befrachtungsgesellschaft, established in Germany. Insolvency proceedings had been opened in April 2011. The Oeltrans group includes Tankfracht GmbH, also established in Germany. An inland waterway contract (a charter party) existed between Tankfracht and Frerich, established in the Netherlands, under which Tankfracht owed Frerich EUR 8 259.30. Frerich was to transport goods by vessel for Tankfracht from the Netherlands to Germany. In November 2010, Oeltrans paid Frerich the sum owed by Tankfracht,  ‘on the order of Tankfracht’. The application does not give any detail as to the circumstances of that ‘order’.

The liquidator seeks the repayment of that sum on the basis of the lex concursus, German law, insolvency pauliana. Frerichs contend that on the basis of A16 European Insolvency Regulation (‘EIR’) 2015 (in fact, the A13 almost identical version of the EIR 2000), such as applied ia in C-54/16 Vinyls Italia), Dutch law, the charter party’s lex contractus per the Rome I Regulation, shields it from the German Pauliana.

The core question is whether the impact of that lex contractus extends to payments made by third parties. In technical terms: whether effective contractual performance by third parties, is part of A12(1)b Rome I’s concept of ‘performance’ of the contract being within the scope of the lex contractus.

The CJEU, referring to Lutz and Nike, confirms the restrictive scope of A16 EIR. At 31-32 however it upholds the effet utile of A16, which as ia confirmed in Vinyls Italia, is to protect the legitimate expectations of a party contracting with a counterparty who subsequently enters insolvency proceedings, that the contract will continue to be governed by the lex contractus, not the lex concursus. ‘Performance’ per A12 Rome I is held to include performance by a third party. Many scholarly sources support the same conclusion, and e.g. Plender and Wilderspin, as well as McParland refer in support to the Guiliano-Lagarde report to the Rome Convention. I realise the CJEU does not refer to scholarly sources yet surely it could have referred to the Giuliano-Lagarde report to shore up its conclusions so succinctly formulated.

Geert.

EU Private International Law, 3rd ed. 2021, para 3.98, paras 5.132 ff.

Gruber Logistics, Samidani Trans. Sanchez-Bordona AG on true consent and correction of choice of law re minimum wage in employment contracts.

In Joined Cases C‑152/20 and C‑218/20 Gruber Logistics and Samidani Trans (my shortening of the many parties involved, Advocate-General Sanchez-Bordona opined yesterday (no English version available at the time of writing).

The Opinion showcases a number of complex levels in Article 8 Rome I, the protective regime for individual employment contracts. The case also points to the complex task in addressing social dumping in the EU. The two cases involve a classic case of such dumping, namely international freight transport.

The AG first of all reminds the referring judges that they must consider whether Directive 96/71’s provisions on minimum wage for posted workers might not be applicable in the case (the referral decisions suggest they are not and the issue is not part of the preliminary reference).

He then dissects the cascade of Article 8 which, similarly to consumer contracts, gives parties full autonomy for choice of law with however a correction for the mandatory provisions of the default law which would apply if no choice of law is made. Whether provisions are mandatory or not, including for minimum wage and despite CJEU support for them being mandatory (Sähköalojen ammattiliitto, Case C‑396/13) continues to be the subject of national assessment: there is no EU harmonisation on same.

As for whether employees have truly consented, the odd provision of Article 3(5) Rome I means that it is the putative law which determines consent (this is notably different for the issue of consent for choice of court under Article 25 Brussels Ia). He does suggest that the Romanian statute at issue in one of the cases, should it (an issue left for the referring judge to decide) in fact oblige employees to consent to choice of law for Romanian law, negates true consent.

Geert.

European Private International Law, 3rd ed. 2021, 3.36 ff.

 

 

Banco San Juan v Petroleos De Venezuela: Another call for lois de police and sanctions law.

Banco San Juan Internacional Inc v Petroleos De Venezuela SA [2020] EWHC 2937 (Comm) is a lengthy judgment which I report here for its discussion of Rome I Article 9’s provisions on overriding mandatory laws /lois de police. The discussion is similar to the consideration of A9 in Lamesa Investments, to which reference is made.

The Claims comprise two substantial claims in debt by claimant BSJI, a bank incorporated in Puerto Rico, against defendant PDVSA, the Venezuelan state-owned oil and gas company.  PDVSA arue inter alia that payment obligations fall to be performed in the US and contends that US sanctions ought to be regarded as part of the order public (sic) of US law. It is said these are a central component of US foreign policy and its political and economic aims as regards Venezuela. It is argued that the terms of the Executive Orders themselves make clear that they are reactions to perceived political and human rights injustices in Venezuela and describe this as “an unusual and extraordinary threat to the national security and foreign policy of the United States“.

However Article 9(3) Rome I comes with a sizeable amount of discretion: ‘Effect may be given to the overriding mandatory provisions of the law of the country where the obligations arising out of the contract have to be or have been performed, in so far as those overriding mandatory provisions render the performance of the contract unlawful. In considering whether to give effect to those provisions, regard shall be had to their nature and purpose and to the consequences of their application or non-application.’

At 118 Cockerill J decides not to use the discretion for the same reason she had earlier dismissed application of the Ralli Bros principle. That rule was recently discussed in Colt v SGG. (As summarised here by Mrs Justice Cockerill at 77) it ‘provides that an obligation under an English law contract is invalid and unenforceable, or suspended in the case of a payment obligation, insofar as the contract requires performance in a place where it is unlawful under the law of that required place of performance.’ And at 79: ‘The doctrine therefore offers a narrow gateway: the performance of the contract must necessarily involve the performance of an act illegal at the place of performance. Subject to the Foster v Driscoll principle [also discussed in Colt and of no relevance here, GAVC], it is no use if the contract could be performed some other way which is legal; and it is no use if the illegal act has to be performed somewhere else’ and at 84 ‘it is only illegality at the place of performance which is apt to provide an excuse under the Ralli Bros doctrine; it also makes clear that the party relying on the doctrine will in general not be excused if he could have done something to bring about valid performance and failed to do so.’ 

The lex contractus is English law which already has the Ralli Bros rule. At 120 Cockerill J suggest that if the court in question has no equivalent rule of law, Article 9(3) will have a significant impact. But not if the lex contractus is English law.

I have to give this some further thought and I am not sure it would make much difference in practice but could it not be said that A9(3) Rome I exhaustively regulates the use of overriding mandatory law to frustrate a contract? This would mean that where Rome I applies, Ralli Bros and even Foster v Driscoll must not apply and must not be entertained. That is a question of some relevance, even after Brexit albeit with a complication: for to the extent (see discussions elsewhere) the Rome Convention re-applies to the UK post Brexit, that Convention’s Article 7 rule on mandatory rules ordinarly applies – albeit the UK have entered a reservation viz A7(1) on which see also here. That article gives  a lot of freedom for the forum to apply mandatory laws of many more States than the lex loci solutionis [Article 7(1) Rome Convention: ‘ When applying under this Convention the law of a country, effect may be given to the mandatory rules of the law of another country with which the situation has a close connection, if and in so far as, under the law of the latter country, those rules must be applied whatever the law applicable to the contract. In considering whether to give effect to these mandatory rules, regard shall be had to their nature and purpose and to the consequences of their application or non-application’].

At the very least an exhaustive role for A9 Rome I (and again in future for UK courts, potentially A7 Rome Convention; but see the note on reservation) would require from the judge a different engagement of the issues than under Ralli Bros. Again, whether indeed, and per Cockerill J’s suggestion here (she applies both Ralli Bros and A9)  in the case of England that would make much difference in outcome is uncertain. Update 6 November 10:20 AM: see prof Dickinson’s impromptu contribution to the issue here.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 3, Heading 3.2.8, Heading 3.2.8.3.

3rd ed. forthcoming February 2021.

Bank of Baroda v Maniar. The impact of the lex concursus on personal guarantees.

It was a year ago since I started writing up this post – I must have gotten distracted, for I continue to find the issues both relevant and interesting. In Bank of Baroda v Maniar & Anor [2019] EWHC 2463 (Comm) (not appealed to my knowledge),  Pearce J considered the attempt by an Indian Bank (with business activities in the UK) to enforce personal guarantees given in respect of the liability of an Irish-registered company (which had been set up by the guarantors) under a credit facility. The Irish company had entered into examinership under Irish law, and the Irish courts had approved a scheme of arrangement. Of interest to the blog is whether the bank had properly served notice on the guarantors, in accordance with the Companies Act 2014 (Ireland) s.549.

Claimant referred inter alia to the Gibbs rule, which I discussed in my posting on [2018] EWHC 59 (Ch) International Bank of Azerbaijan , since confirmed by the Court of Appeal. Defendants rely ia on Article 4 of the EIR 2000, Regulation 1346/2000, materially applicable to the proceedings:  “(1)…the law applicable to insolvency proceedings and their effects shall be the law of the Member State within the territory of which such proceedings are opened…(2) The law of the State of the opening of proceedings shall determine the conditions of the opening of those proceedings, their conduct and their closure. It shall determine in particular: .. j. The conditions for and the effects of closure of insolvency proceedings, in particular by composition; k. Creditors’ rights after the closure of insolvency proceedings.”

Claimant concedes that law of the State of the opening, namely Irish law, may be required to be given effect under the EIR, however argues that effect is limited to those aspects of Irish insolvency law which are necessary for the insolvency proceedings to fulfil their aim, and that Section 549 of the Irish Company Act (which concerns the preservation of the right to pursue guarantors) does not fall within the ambit of “the law applicable to insolvency proceedings” to which Article 4(1) of EIR applies.

In other words Claimant does not entertain the possibility of what was Article 13 in the 2000 EIR and is now Article 16 in the 2015 EIR, also applied by the CJEU in Nike, Kornhaas and Lutz. Rather, it more straightforwardly argues that relevant sections of the Irish Company Act are simply not within the scope of the lex concursus and that (at 84) the law governing the guarantees is English law per Article 4 Rome I.  At 109 Pearce J ultimately rather concisely holds

The important point here is the potential effect of a Section 549 offer on creditors’ meetings. The fact that the making of such an offer gives rise to the possibility of the guarantor accepting the offer and exercising the voting rights of the creditor at a members’ meeting creates a significant connection between the notice and the conduct of the examinership itself. This brings the procedure within the ambit of Article 4 of EIR. (now Article 7 EIR 2015 – GAVC)

Why the relation with the carve-out of Article 13 (now 16) was not discussed is not clear to me, particularly as at 156 ff there is discussion of Article 15 (now 18)’s provision : The effects of insolvency proceedings on a lawsuit pending concerning an asset or a right of which the debtor has been divested shall be governed solely by the law of the Member State of which that lawsuit is pending.”) 

Claimant not having discussed Article 13 (16), presumably did not raise the possibility of an appeal, either. 

The remainder of the discussion then turns to the validity of service under Irish law,  to be judged by an English judge. With Pearce J at 138 and 143 I see no reason why the EIR would stand in the way of an English judge so applying the lex concursus, even if an Irish judge would do so with an amount of discretion. At 152 and 154, after consideration, service was deemed not to have been valid.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 5, Heading 5.7.

Bauer v QBE Insurance. Brussels IA, Rome I and Rome II in Western Australia.

It is not per se unheard of for European conflict of laws developments to be referred to in other jurisdictions. In Bauer v QBE Insurance [2020] WADC 104 however the intensity of reference to CJEU authority and EU conflicts law is striking and I think interesting to report.

The context is an application to serve out of jurisdiction – no ‘mini trail’ (Melville PR at 20) therefore but still a consideration of whether Western Australia is ‘clearly an inappropriate forum’ in a case relating to an accident in Australia following an Australian holiday contract, agreed between a German travel agent and a claimant resident (see also below) in Germany but also often present in Australia – which is where she was at the time the contract was formed. Defendant contests permission to serve ia on the basis of an (arguable) choice of court and governing law clause referring exclusively to Germany and contained in defendant’s general terms and conditions.

Two other defendants are domiciled in Australia and are not discussed in current findings.

In assessing whether the German courts have exclusive jurisdiction and would apply German law, the Australian judge looks exclusively through a German lens: what would a German court hold, on the basis of EU private international law.

Discussion first turns to the lex contractus and the habitual residence, or not, of claimant (who concedes she is ‘ordinarily’, but not habitually resident in Germany) with reference to Article 6 Rome I’s provision for consumer contracts. This is applicable presumably despite the carve-out for ‘contracts of carriage’ (on which see Weco Projects), seeing as the contract is one of ‘package travel’. Reference is also then made to Winrow v Hemphill.  Melville PR holds that claimant’s habitual residence is indeed Germany particularly seeing as (at 38)

she returned to Germany for what appears to be significant and prolonged  treatment after the accident rather going elsewhere in the world and after only apparently having left her employment in Munich in 2014, is highly indicative of the fact the plaintiff’s state of mind was such that she saw Germany as her home and the place to return to when things get tough, a place to go to by force of habit.

Discussion then turns to what Michiel Poesen has recently discussed viz contracts of employment: qualification problems between contract and tort. No detail of the accident is given (see my remark re ‘mini-trial’ above). Reference to and discussion is of Rome II’s Article 4. It leads to the cautious (again: this is an interlocutory judgment) conclusion that even though the tort per Article 4(3) Rome II may be more closely connected to Australia, it is not ‘manifestly’ so.

Next the discussion gets a bit muddled. Turning to jurisdiction, it is concluded that the exclusive choice of court is not valid per Article 25 Brussels Ia’s reference to the lex fori prorogati.

  • Odd is first that under the lex contractus discussion, reference is made to Article 6 Rome I which as I suggested above presumably applies given that the carve-out for contracts of carriage does not apply to what I presume to be package travel. However in the Brussels Ia discussion the same applies: contracts of carriage are excluded from Section 4’s ‘consumer contracts’ unless they concern (as here) package travel.
  • Next, the choice of court is held to be invalid by reference to section 38(3) of the German CPR, which to my knowledge concerns choice of court in the event neither party has ‘Gerichtsstand’ (a place of jurisdiction’) in Germany.  Whatever the precise meaning of s38(3), I would have thought it has no calling as lex fori prorogati viz A25 BIa for it deals with conditions which A25 itself exhaustively harmonises (this argument might be aligned with that of defendant’s expert, Dr Kobras, at 57). Moreover,  the discussion here looks like it employs circular reasoning: in holding on the validity of a ‘Gerichtsstand’, the court employs a rule which applies when there is no such ‘Gerichtsstand’.
  • Finally, references to CJEU Owusu and Taser are held to be immaterial.

In final conclusion, Western Australia is not held to be a clearly inappropriate forum. The case can go ahead lest of course these findings are appealed.

Geert.

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

The Hungarian Supreme Court on conduct in litigation resulting in implied choice of law.

An overdue post on the Hungarian Supreme Court’s judgment 2020.3.72.a, finding an implied choice of law pro Hungarian law, made by a Serbian and Hungarian party to a contract for agency and business counseling. In the absence of choice of law, per Article 4 Rome I, applicable law would have been Serbian law. Yet the SC held that the conduct of the Serbian business party in the litigation, made for implicit choice of law.

Under Rome I, choice of law may be made and changed at any time during the course of the contract. Whether it can also be made by conduct of litigation is somewhat disputed. Arguments pro rely heavily on a parallel with impromptu choice of court in Brussels Ia, by submission. The Hungarian courts had assessed the merits of the case on the basis of Hungarian law, and the Serbian defendant had engaged in that discussion in a detailed, substantive statement of defence without any objections to Hungarian law being the lex contractus. This, the courts held and the SC agreed, meant parties had made an implied choice of law by their conduct. A change of heart by defendant upon appeal was a unilateral change of law, which cannot bind the parties.

Richard Schmidt sent me the judgment and has additional analysis here– on which I relied for I do not read Hungarian. Scholarship has engaged with the issue and this SC judgment will be highly relevant material for that discussion.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 3, Heading 3.2.4.

 

 

Sodmilab. The Paris Court of Appeal on lois de police, Rome I, II and commercial agency.

Thank you Maxime Barba for flagging the judgment in the Paris Court of Appeal Sodmilab et al. (Text of the judgment in Maxime’s post). The case concerns the ending of a commercial relationship. Part of the contract may be qualified as agency with lex causae determined under the 1978 Hague Convention. On this issue, the Court of Appeal confirmed French law as lex causae.

Things get messy however with the determination of that part of the contract that qualifies as distribution (a mess echoing DES v Clarins), and on the application of Rome II.

The Court of Appeal first (at 59) discusses the qualification of A442-6 of the French Code du commerce, on unfair trading practices (abrupt ending of a commercial relationship), dismissing it as lois de police /overriding mandatory law under Article 9 Rome I. As I noted in my review of DES v Clarins, this is a topsy turvy application of Rome I. The qualification as lois de police is up to the Member States, within the confines of the definition in Rome I. The Court of Appeal holds that A442-6 only serves private interests, not the general economic interest, and therefore must not qualify under Rome I. Hitherto much of the French case-law and scholarship had argued that in protecting the stability of private interests, the Act ultimately serves the public interest.

Next (as noted: this should have come first), the Court reviews the application of A4f Rome I, the fall-back position for distribution contracts – which would have led to Algerian law as lex causae. It is unclear (62 ff) whether the Court reaches its conclusion as French law instead either as a confirmation of circumstantial (the court referring to invoicing currency etc.) but clear choice of law under Article 3, or the escape clause under Article 4(3), for that Article is mentioned, too.

Rome I’s structure is quite clear. Why it is not properly followed here is odd. That includes the oddity of discussing French law under Article 9 if the court had already confirmed French law as lex causae under A3 or 4.

Finally, corners are cut on Rome II, too. Re the abrupt ending of the relationship (at 66ff). French law again emerges victorious even if the general lex locus damni rule leads to Algerian law. The court does not quite clearly hold that on the basis of Article 4(3)’s escape clause, or circumstantial choice of law per A14. The court refers to ‘its findings above’ on contractual choice of law, however how such fuzzy implicit choice under Rome I is forceful enough to extend to choice of law under Rome II must not be posited without further consideration. Particularly seeing as Article 6 Rome II excludes choice of law for acts of unfair trading.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.11.2, Heading 2.2.11.2.9; Chapter 3, Heading 3.2.8, Heading 3.2.8.3; Chapter 4).