No Harry, don’t look at the light! The CJEU in Sharewood on Rome I’s rei sitae exception to consumer protection.

In C-595/20 Sharewood, the CJEU last week held on the extent of Rome I’s rei sitae exception to consumer contracts. In essence, as a result of Article 6 Rome I, for consumer contracts, choice of law is free (in the case at issue this lex voluntatis was Swiss law) except the consumer may always fall back on the mandatory laws of his habitual residence (here, Austrian law).

For a limited selection of contracts, including (A6(4)c) ‘a contract relating to a right in rem in immovable property or a tenancy of immovable property other than a contract relating to (timeshares)’, party  autonomy is restored in full under the terms of Articles 3 and 4 Rome I, hence the consumer loses his protection.

The contract at issue is a tree purchase, lease and service agreement. The trees at issue are grown in Brasil. The ground rent for the lease agreement, which granted the right to grow the trees in question, was included in the purchase price of those trees. The service agreement provided that ShareWood would manage, administer, harvest and sell the trees and would remit the net return on the timber to UE, the (anonymised) consumer. The difference compared to the gross return, expressed as a percentage of the return, was retained by ShareWood as its fee for the provision of those services.

The question in the case at issue is essentially how intensive the link to (foreign) soil needs to be for it to fall under the rei sitae carve-out for consumer contracts. The CJEU does refer to some of its Brussels Ia case-law, including Klein and Kerr, for the ‘tenancy’ element of the question, but not for the ‘rights in rem’ part of the discussion, where it more straightforwardly concludes on the basis of the contractual arrangements that the trees [28]

must be regarded as being the proceeds of the use of the land on which they are planted. Although such proceeds will, as a general rule, share the same legal status as the land on which the trees concerned are planted, the proceeds may nevertheless, by agreement, be the subject of personal rights of which the owner or occupier of that land may dispose separately without affecting the right of ownership or other rights in rem appertaining to that land. A contract which relates to the disposal of the proceeds of the use of land cannot be treated in the same way as a contract which relates to a ‘right in rem in immovable property’, within the meaning of Article 6(4)(c) of the Rome I Regulation

and [37]

the main purpose of the contract at issue in the main proceedings is not the use, in the context of a lease, of the land on which the trees concerned are planted, but… to generate income from the sale of the timber obtained following the harvest of those trees. As is apparent from the order for reference, the lease provided for in that agreement, which includes only the right to allow those trees to grow and has no purpose other than the acquisition of those trees, is intended merely to enable the sales and services elements provided for in the contract to be carried out.

Not caught therefore by the rei sitae exception.

I often refer my students to Harry, in A Bug’s Life, to make the point that both for jurisdictional and for applicable law purposes, the mere presence of real estate does not lead to the rei sitae jurisdictional and governing law implications being triggered. CJEU Sharewood is a good illustration of same.

Geert.

 

Khalifeh v Blom Bank. On implied choice of law and consumer contracts (including ‘direction of activities’ in Rome I.

Khalifeh v Blom Bank SAL [2021] EWHC 3399 (QB) is the second High Court judgment in the space of a few weeks to involve Lebanese Banks and the application of the protective regime for consumers in EU private international law. (See earlier Bitar v Banque Libano-Francaise).

Foxton J explains why there is such activity: difficult financial conditions faced by Lebanese banks and their customers at the current time, and the practical impossibility of transferring foreign currency out of Lebanon, caused acute anguish for those with foreign currency accounts in Lebanese banks. Understandably they have explored every avenue open to them in an effort to access their hard-won savings.

Jurisdiction would seem not to be in dispute (presumably given the presence of non-exclusive choice of court in a general agreement), applicable law is. Even in consumer contracts, Article 6 Rome I allows parties to the contract to chose applicable law – except such choice must not deprive the consumer of the protection of the mandatory elements of the law that would apply had no choice been made: that ‘default law’, per Article 6(1) Rome I, is the law of the consumer’s habitual residence.

Whether choice of law has been made is to be determined in accordance with Article 3, which proscribes that choice of law must be  either nominatim, or ‘clearly demonstrated’ by the circumstances of the case. The latter is often referred to as ‘implicit’ choice of law although there is nothing truly implicit about it: choice of law cannot be made happenstance, it must have been made clearly (even if not in so many words). [47] ff the judge considers whether ‘implicit’ choice has been made, referring to Avonwick,  and holds [66] that there was, namely in favour of Lebanese law. He concludes this as a combined effect of

a jurisdiction clause in a related, general agreement which he found to be exclusive [63] in favour of Beirut; I have to say I do not think the judgment engages satisfactorily with the argument that this hybrid clause itself is questionable under the lex causae (including consumer law) that would have to apply to it;

the express reference to an agreement to comply with and facilitate the enforcement of identified provisions of Lebanese law; and

the express choice of Lebanese law in a closely related and interwoven contract.

Clearly some of this analysis is fact-specific and subjective however in my view the lex causae element of hybrid choice of court has more beef to the bone.

As for the issue of ‘activities directed at’ the UK, this is discussed [68] ff. First up is an interesting discussion on the relevant time at which the habitual residence of the consumer has to be considered. In light ia of CJEU Commerzbank, which presumably was not available at the time of the discussion, I would suggest the conclusion [73] that the temporal element needs to be fixed at the very beginning, to avoid see-sawing and dépeçage, may need revisiting.

In terms of the actual directing of activities, Pammer /Alpenhof of course is discussed as is Emrek. Having discussed the evidence, the conclusion [105] ff is that there was no direction of activities.

As a result, the remainder of the judgment deals with the substantive issues under Lebanese law.

I do not know whether permission to appeal has been sought. There are sections in the judgment that in my view would merit it.

Geert.

EU private international law, 3rd ed. 2021, Heading 2.2.9.2.7, 2.270 ff; Heading 3.2.4, Heading 3.2.5.

 

A4(4) Rome ‘s ‘proper law of the contract’ discussed under retained EU law in Ditto v Drive-Thru.

Ditto Ltd v Drive-Thru Records LLC [2021] EWHC 2035 (Ch) discusses the contract and tort gateways for jurisdiction in England and Wales (they need to be met for claimant to hold onto an earlier granted permission for ‘service out’ of the jurisdiction). The dispute concerns the world of music catalogues, advance royalties and (marketing) services rendered, or not, in regard to the  catalogued artists. Defendants are both based in California, claimant is England-incorporated. Concurrent proceedings are underway in New York.

Of interest to the blog is firstly the contractual gateway, which is to some degree assessed under retained EU law, for as part of its argument, claimant argues the lex contractus is English law.  That determination of the applicable law is done under (retained( EU law and Francis DM holds that it is not English law. No choice of law had been made per Article 3, which (in the absence of any protected categories) brings us into the cascade of A4 Rome I. It is worthwhile to repeat counsel argument in full [56-57]

Ms Lacob [for defendants] contended that the law of the agreements should be determined in accordance with paragraph (2) as being that of the State of California. That was on the basis that the party which was required to effect the characteristic performance of each of the agreements was Drive-Thru and War Road respectively, and their country, or (in this case) territorial unit, of habitual residence, being the place where they had their central administration, was California. She identified the performance which was characteristic of each of the agreements as being Drive-Thru and War Road’s obligations to licence the exploitation of their portfolio works, to remaster and remix their recordings or the release new recordings, as the case may be, and (in the case of War Road) to sign up new bands; in contrast, Ditto’s only obligation was to pay money which was not the performance which was characteristic of the agreements.

Mr Kitson for Ditto [claimant] took issue with this. He pointed to the fact that Drive-Thru and War Road themselves contended in the New York proceedings that Ditto was in breach of its obligations (whether express or implied) under the agreements to take possession of the recordings and to distribute the same so as to earn royalties for the parties’ joint benefit. Thus, he argued, the performance characteristic of the agreement was not all on the side of Drive-Thru and War Road.

The reference to the arguments in the New York proceedings is interesting for it suggests ‘form’. However the judge agreed [58] with defendants that

these agreements are ones under which there were substantial performance obligations (other than simply the payment of money) on both sides. In reality, the agreements were joint ventures for the development and exploitation of Drive-Thru’s and War Road’s existing and future portfolio works for their mutual benefit. They are the type of agreements which Mann J refers to in his judgment in Apple Corps at paragraph 54 where it is not possible to identify a characteristic performance provided by one only of the parties.

Even the centre of gravity rule (recital 19, which the judge does not refer to) does not assist here hence the analysis needs to jump to A4(4)’s ‘proper law of the contract’ rule.  [59]

What then is the country or territorial unit with which the agreements are most closely connected? On the evidence before me, I am satisfied that it is the State of California. That was where Drive-Thru and War Road were based and where for the most part they would perform their obligations under the agreements. In contrast, Ditto’s own obligations relating to the digital distribution of the portfolio works were not ones which, on the evidence, fell to be performed in England to any particular extent, even if Ditto’s central administration was based in England. Instead, Ditto’s rights to exploitation of the portfolio works, and any corresponding obligations relating to the distribution of such works, were worldwide, reflecting the global reach of the Ditto Music brand.

Conclusion is that California law is the lex contractus.

The contractual gateway was however found to have been fulfilled on the basis of CPR PD6B paragraph 3.1 ‘contract made within the jurisdiction’. The judge finds that the contracts were ‘made’ both in CAL and in E&W [54] although he does lament [48] the artificial nature of the issue as the law currently stands: were contracts are ‘made’. I find this is especially relevant in a contemporary context of electronic correspondence, Zoom meetings and the like. Where a contract is ‘made’ seems fairly nugatory these days.

The tort gateway is discussed without reference to UKSC Brownlie for that was en route at the time of the discussions in current case. It is at any rate held to be met [[71] for claimant has quite clearly sustained damage in England as a result of the alleged misrepresentations.

At [72] ff follows an interesting, brief discussion on the location of intellectual property with finally the curtain drawn on English proceedings as a result of forum non [80 ff].

Geert.

 

Silverman v Ryanair. The High Court unconvincingly on the Montreal Convention, lex fori as lex causae for the interpretation of ius gentium, qualifying air carriage claims under Rome I, II, and displacing lex loci damni under the latter.

In Silverman v Ryanair DAC (Rev1) [2021] EWHC 2955 (QB), claimant was injured whilst going down stairs at an airport terminal in England. The claim is subject to EU private international law. Jurisdiction for the English courts in this personal injury claim is not disputed.

Under A5 Rome I, contracts for carriage of goods are subject to the ordinary lex voluntatis rule, while for carriage of passengers, parties can only choose from a limited selection of leges contractus. The standard approach is for  general terms and conditions to select the law of the carrier’s habitual residence or his place of central administration, which is entirely kosher under Rome I. Unless the booking qualifies as package travel, it essentially means that passengers are generally less protected than ordinary consumers under A6 Rome I.

In the case of Ryanair, the default choice inevitably leads to Irish law, except in this case (because Irish law would lead to higher damages), the airline unusually seeks to divert from its default choice of law.  The airline’s relevant clause, reads

8.2.4: Governing Law: “Except as otherwise provided by the Convention or applicable law, your contract of carriage with us, these Terms and Conditions of Carriage and our Regulations shall be governed by and interpreted in accordance with the laws of Ireland and any dispute arising out of or in connection with this contract shall be subject to the jurisdiction of the Irish Courts.”

The Montreal Convention for the Unification of Certain Rules for International Carriage by Air 1999 is unaffected by Rome I as a result of the Regulation’s A25, which gives clear priority to multilateral Conventions at least if the Convention concerned also includes non-EU Member States. The Convention also operates to make the choice of court provision invalid, as discussed ia in CJEU  C-213/18 Adriano Guaitoli et al v Easyjet.

Claimant however argues that assessment of quantum of damages is not regulated by Montreal and therefore remains subject to the lex voluntatis. This is where the second line of Ryanair’s defence comes in, namely an attempt to qualify the claim as one in tort, subject to Rome II’s lex loci damni rule, rather than Rome I’s lex voluntatis.

In essence therefore the question is a matter of Treaty interpretation viz the Montreal Convention (what does it mean to regulate in its provisions on liability and damages), subsequently secondary EU law interpretation viz Rome I and II (qualification: is it a claim in contract or tort, and once that held, does the lex casuae indicated by the relevant Regulation, cover quantum of damages).

Master McCloud turns to international comparison not by way of binding authority but pro inspiratio seeing as the case concerns an international Convention [52]. Scalia J’s ‘Pass-through’ approach to the lex fori’s choice-of-law rules in Zicherman (1996) is the approach also followed in this judgment. The judge uses the formulation by Bader Ginsburg J in El Al Israelthat Warsaw drafters intended to resolve whether there is liability, but to leave to domestic law (the local law identified by the forum under its choice-of-law rules or approaches) determination of the compensatory damages available to the suitor.”

Comparative case-law analysis makes sense. However one would have thought a starting point should have been analysis of the Convention and its travaux itself. Master McCloud does get to that when considering the rather awkward , counsel-inspired idea that there needs to be a discussion of the law that applies to the interpretation of the Convention. Determining the ‘Applicable law to matters of interpretation of the Convention’ might perhaps make sense in a dualist jurisdiction like the UK?

At [59] the judge holds the lex causae for interpretation of the Convention is the lex fori, English law therefore. At [61] he calls this

Convention law as understood by this court, ie the lex fori in that rather special international sense.’

Here I am lost.

The judge then employs the ‘natural language’ approach to determine what parts of the Montreal liability scheme parties can and cannot contractually be negotiated away.

Only the liability issues that have ‘passed through’ to the lex fori are then considered with a view to determining the qualification exercise: is the claim one in contract or one on tort. The judge raises the possibility that the claimant could have construed the claim as being a ‘Convention claim incorporated in the contract’ [64] however he holds that claim is not brought on that footing:

‘the Claim and Particulars are clear: they plead a claim for damages for breach of the Convention, they do not plead a claim in the law of contract’ [64].

That, I would submit, is wrong. The claim is subject to European conflict of laws rules. These require the judge to qualify the claim subject to the autonomous interpretation of ‘contract’ and ‘non-contractual obligation’ as most recently discussed by the CJEU in Wikingerhof. While I am the first to acknowledge claim formulation is a powerful tool to manage qualification (indeed Wikingerhof confirms as much), I do not think deference to claimant may be as large as suggested here.

The judge proceeds with the non-contractual nature (causing injury to the claimant through negligence [65]), points out that the Convention covers both contractual and non-contractual claims [66] and seeks support in his analysis on tort and contract in Prof. Thomas Kadner Graziano’s 2016 paper in the Yearbook of Private International Law. With respect, I do not think Thomas’ paper supports the conclusions in this case.

At [72][73] the judge then rather summarily and using A4(3) Rome II displaces the lex loci damni for the ‘passed through’ claim, in favour of Irish law, the lex contractus to the contract of carriage. Once the Rome II path chosen (of which, per above, I am not convinced), I do not think the lex loci damni may be pushed aside quite as concisely as this.

The relationship between international Conventions and European conflicts rules is not always straightforward. Yet here I think it has been presented a touch too convolutedly.

Geert.

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 case prima facie may not be entirely straightforward under GDPR, BIa and Rome I – one imagines a possible TikTok’s defence to go ia 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.

Update 16 July 2021 the CJEU yesterday held along the exact same lines.

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.

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